<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 11, 2000
REGISTRATION NO. 333-85079
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 3
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 JANUARY 11, 2000
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 American Stock Exchange under the symbol
"APS." No assurance can be given that our common stock will be approved for
listing on the American Stock Exchange.
On January 10, 2000, the last reported sale price of our common stock on
the OTC Bulletin Board was $7.375.
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
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<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 392,500 shares of common stock to cover over-allotments. Also, five
of our stockholders have granted the underwriters a 45-day option to purchase up
to 57,500 shares of common stock to cover over-allotments. The underwriters have
agreed to exercise in full the over-allotment option granted to them by us
before exercising the over-allotment option granted to them by our stockholders.
------------------------------
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
The date of this Prospectus is , 2000
<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 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 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 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 215,000 students at about 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. To date, approximately 25,000
high school students from over 500 high schools nationwide have registered with
Online Scouting Network.
OUR RELATIONSHIPS
We have entered into agreements and developed relationships with more than
900 colleges and universities to 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 agreement with The College Board(R) to be the exclusive provider
of 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 13.8 million high school students in the United States.
According to the National Center for Education Statistics, this number will
increase to more than 15.5 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 freshman to undergraduate colleges and
universities. The remaining students apply to continuing education programs of
various sorts.
Each year about 3.2 million applicants submit more than seven million
applications for undergraduate admission to nearly 3,400 U.S. colleges and
universities. About 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 2,500 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. and others to establish CollegeLink.com as a
leading Internet hub and e-commerce site.
Capitalize on our strong high school presence. Last year, The College
Board(R) distributed 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 about 900 high schools and junior colleges and
Online Scouting Network registered athletes from over 500 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 websites 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 applying to more than one college to enter general information only
once and still deliver to each
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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.
Our executive offices are located at 55 Hammarlund Way, Middletown, Rhode
Island 02842 and our telephone number is (401) 845-8800. Our website is located
at http://www.collegelink.com. Information contained on our website 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 American Stock Exchange
symbol(2)........................... APS
- ---------------
(1) The number of shares of common stock to be outstanding after the offering
excludes (a) 392,500 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 January 11, 2000, to
purchase 1,886,185 shares of common stock, and 1,980,065 shares reserved for
future grants under our option plans at January 11, 2000, (d) 1,140,000
shares of common stock issuable upon conversion of 1,140,000 shares of
Series A Convertible Preferred Stock outstanding at January 11, 2000, (e)
550,369 shares of common stock issuable upon conversion of 279,771 shares of
Series B Convertible Preferred Stock outstanding at January 11, 2000
(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
January 11, 2000, and (g) warrants to purchase 940,283 shares of common
stock outstanding at January 11, 2000.
(2) We have applied to have our shares of common stock approved for quotation on
the American Stock Exchange under the symbol "APS." No assurance can be
given that our common stock will be approved for listing on the American
Stock Exchange.
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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 3,106 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 8,165 9,495 10,821
====== ======= ======= ======= =======
Net Loss Per Share........................ $(0.18) $ (0.40) $ (0.75) $ (0.14) $ (0.16)
====== ======= ======= ======= =======
</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 $ 1,988
Total Assets.............................. 358 1,807 21,619 13,181 21,297
Stockholders' Equity (Deficit)............ (69) 1,377 19,232 12,202 19,051
Shares Outstanding........................ 3,482 9,152 10,378 9,846 10,821
</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 cumulative pro forma net loss of $6,122,899,
and as of September 30, 1999 we had a cumulative pro forma net loss of
$7,856,899. 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 MAY NEED TO RAISE ADDITIONAL CAPITAL.
If the funds raised in this offering together with our other resources are
not sufficient to finance our business, we may need to raise more capital
through public or private financing. We do not know if additional financing will
be available to us when we need it or, if it is available, whether it will be
available on attractive terms. If we do raise more capital in the future, it
could result in dilution to our stockholders. If we need to raise more capital
but cannot, we may need to curtail our business activities.
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.
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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 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 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 AN
ACCEPTABLE ONLINE FILING SERVICE.
Various colleges and universities may not wish to establish a 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
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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.
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
website, 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)
9
<PAGE> 12
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
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 Middletown, 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 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 suppliers about their progress in
identifying and addressing problems that their computer systems may face in
correctly interrelating and processing date information in the year 2000. We
have ascertained that several of these parties are in compliance, but there can
be no assurance that we have identified all such year 2000 problems in the
computer systems of our suppliers or that we will be able to remedy any problems
that are discovered.
10
<PAGE> 13
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
$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 by students 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. Kevin J. High, our former President and Chief
Executive Officer, 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 AND
CHIEF EXECUTIVE OFFICER, 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 high
school 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 have agreed to 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
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<PAGE> 16
offering. To the extent any such statements are inconsistent with, or conflict
with, the information 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 AND PRESIDENT.
On November 16, 1999, Mr. High resigned his positions as Chief Executive
Officer and President 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 4,671,291 shares or about
47 percent of our common stock prior to this offering and following this
offering will own more than 36 percent of our common stock. In addition, our
officers and directors have currently exercisable options to purchase 485,884
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
acquisitions 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 2,826,468 shares and 2,690,369
shares issuable upon conversion of our preferred stock (assuming the maximum
number of shares to be issued upon conversion and assuming the over-allotment
option is not exercised). Of these shares, 8,871,444 shares of common stock and
5,516,837 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, 1,951,918 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 October 26, 2000.
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
common 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, will be about $
million, or about $ million if the underwriters exercise their over-allotment
option in full. Five of our stockholders have granted the underwriters a 45-day
option to purchase up to 57,500 shares to cover over-allotments. We will not
receive any proceeds from such sales.
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 was publicly traded on the Over-the-Counter Electronic
Bulletin Board under the symbol "CYTA." Since November 26, 1999, our common
stock has been 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)..................................................... $ 7.125 $6.000
Fourth Quarter ending June 30, 1999......................... $ 9.750 $6.250
FISCAL 2000:
First Quarter ending September 30, 1999..................... $ 6.750 $4.375
Second Quarter ending December 31, 1999..................... $12.500 $5.000
Third Quarter ending March 31, 2000 (through January 10,
2000)..................................................... 7.625 6.813
</TABLE>
On January 10, 2000 the closing price of our common stock as quoted on the
Over-the-Counter Electronic Bulletin Board was $7.375. 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 $6.00 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 $ 4,534,980 $ 4,534,980
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(2).................................. 4,175,000 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 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;
10,821,340 shares issued and outstanding, pro
forma; 13,821,340 shares issued and outstanding,
pro forma as adjusted(3)........................ 9,846 10,821 13,821
Additional paid-in capital........................ 6,035,664 11,883,689 27,511,672
Retained earnings (accumulated deficit)........... (5,553,359) (5,553,359) (5,553,359)
----------- ----------- ------------
Total stockholders' equity.............. 12,202,131 19,051,131 34,682,114
----------- ----------- ------------
Total capitalization.................... $12,202,131 $19,051,131 $ 34,682,114
=========== =========== ============
</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.
(2) For the purposes of this table we have assumed the Series B Convertible
Preferred Stock will be converted at $6.00 per share of common stock.
(3) Does not give effect to an aggregate of up to 7,971,902 shares of common
stock as follows: (a) 392,500 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) 940,283 shares of common stock
reserved for issuance upon exercise of outstanding warrants, (e) 1,140,000
shares of common stock issuable upon conversion of 1,140,000 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 $298,000, or $.03 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 10,821,340 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 $6.00 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 $15,928,983 or $1.15 per share.
This represents an immediate increase in pro forma net tangible book value
of $1.12 per share to existing shareholders, and an immediate dilution in net
pro forma tangible book value of $4.85 per share to new investors in this
offering, as illustrated in the following table:
<TABLE>
<S> <C> <C>
Assumed offering price per share(1)................................ $6.00
Net tangible book value per share at September 30, 1999... $ .03
Increase per share attributable to new investors.......... $1.12
-----
Pro forma net tangible book value per share after this
offering(2)...................................................... $1.15
-----
Dilution per share to new investors(3)............................. $4.85
=====
</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 7,971,902 shares of common
stock as follows: (a) 392,500 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) 940,283
shares of common stock reserved for issuance upon exercise of outstanding
warrants, (e) 1,140,000 shares of common stock issuable upon conversion of
1,140,000 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 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 81% to purchasers of the shares of common stock
in this offering.
18
<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 $6 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......... 10,821,340 78.3% $11,714,905 39.4% $1.08
New Investors................. 3,000,000 21.7% $18,000,000 60.6% $6.00
---------- ----- ----------- -----
Total(1)............ 13,821,340 100.0% $29,714,905 100.0%
========== ===== =========== =====
</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
Website 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
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 1,751,881 883,197
---------- ---------- ---------- ----------- -----------
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 2, 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 2,832,345 221,232 883,137
Amortization of goodwill..... -- -- -- 1,887,416 -- 91,990
----------- ----------- ----------- ----------- --------- -----------
Total operating expenses..... $(1,342,438) $(1,866,636) $(3,106,293) $(7,667,936) 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) $(6,122,899) $(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. After
the quarter ended March 31, 1999, we did not receive any revenue from either
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
$7,667,936. Of the $1,887,416 attributable to amortization of goodwill,
$827,907, $804,550, 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 $580,166, $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. On October 26,
1999, we received $1,000,000 through a private placement of preferred stock to
an accredited investor.
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 $58,000 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 $2,097,809 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 $11,870 and $78,551 for the fiscal year
ended June 30, 1999 and June 30, 1998, respectively. Financing activities
provided
23
<PAGE> 26
$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 cash 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. 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 a money market
account. 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 have agreed to 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 215,000 students at about
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. To date, approximately 25,000
high school students from over 500 high schools nationwide have 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 agreement with The College Board(R) to be the exclusive provider
of 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 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.
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<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 215,000 students at about 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. To date, approximately 25,000 high school athletes
from 500 high schools nationwide have 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 13.8 million high school students in the United States.
According to the National Center for Education Statistics, this number will
increase to more than 15.5 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 freshman to undergraduate colleges
and universities. The remaining students apply to continuing education programs
of various sorts.
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<PAGE> 29
Each year about 3.2 million students submit more than seven million
applications for undergraduate admission to nearly 3,400 U.S. colleges and
universities. About 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 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 2,500 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 team 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. Last year, The College
Board(R) 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 websites 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 we have addressed equal consideration issues by providing
student applications in each college's own format.
27
<PAGE> 30
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 that have agreed
to accept 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
Berea College
Berry College
Bethany College
Bethel College
Bethel College and Seminary
Biola University
Birmingham Southern College
Bloomfield College
Boston University
</TABLE>
28
<PAGE> 31
<TABLE>
<S> <C> <C>
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
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
</TABLE>
29
<PAGE> 32
<TABLE>
<S> <C> <C>
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
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
</TABLE>
30
<PAGE> 33
<TABLE>
<S> <C> <C>
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
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
</TABLE>
31
<PAGE> 34
<TABLE>
<S> <C> <C>
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
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
</TABLE>
32
<PAGE> 35
<TABLE>
<S> <C> <C>
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 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 "clickwrap" licenses that are not signed by the end
user and, therefore, may be unenforceable under the laws of certain
jurisdictions.
33
<PAGE> 36
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 two 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 an affiliate 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 January 11, 2000, we employed 44 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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FACILITIES
Our headquarters and all of our operations are located in Middletown, Rhode
Island, where we lease a total of 14,700 square feet of space pursuant to two
leases. 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.
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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
Ann Marie Gleason........................ 43 Vice President -- College Relations
Kevin J. High............................ 34 Director
Jeff 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. 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 management
and marketing at The Procter & Gamble Company, serving as brand manager of Crest
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<PAGE> 39
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 and chief technology officer 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 of 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 an information technology consultant for
the United States Navy Information Technology Department. Mr. Fink is a
co-founder of our predecessor and served as its president 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, 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) and
various operating system platforms. Mr. Fink also teaches "Connecting Businesses
to the Internet" for International Learning Tree International, Inc.
ANN 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.
JEFF 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 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).
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<PAGE> 41
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).
JAI N. GUPTA, PH.D. Dr. Gupta was one of our directors from February 1999
to January 4, 2000 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., which
is a principal shareholder of the Company.
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 director is Bert Hensley, who will serve until our
next annual meeting or until his successor is 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 is currently one vacancy on
the board of directors for a Class I director.
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 on May 7,
1999. The audit committee consists of Mr. Cunningham 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. Cunningham. 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 the closing bid price of the
stock on the date of our annual meeting. As of June 30, 1999, we had 20,000
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<PAGE> 42
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 $126,040 -- 414,412 --
President June 30, 1998 90,865 -- -- --
June 30, 1997 54,928 -- -- --
</TABLE>
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<PAGE> 43
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth grants of stock options to each of the Named
Executive Officers during the fiscal year ended June 30, 1999. No stock
appreciation rights were granted during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE
----------------------------------------------------------- VALUE AT ASSUMED ANNUAL
NUMBER OF PERCENT OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE APPRECIATION FOR
UNDERLYING GRANTED TO OR BASE OPTION TERM (2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION -----------------------
NAME GRANTED FISCAL YEAR(1) PER SHARE DATE 5%($) 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, 2009 1,006,231 2,549,988
Kevin J. High........ 14,412 1.24 2.50 June 30, 2008 22,659 57,423
400,000 34.30 4.00 February 11, 2009 1,006,231 2,549,988
</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.......... -- -- 86,937 327,475 228,181 855,368
Kevin J. High.............. -- -- 86,937 327,475 228,181 855,368
</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 four
years of employment commencing February 11, 1999 at an annual salary of
$175,000. Each employment agreement will automatically be renewed for an
additional three-year term unless we or the employee give notice of an intent
not to renew the agreement at least 60 days before the initial four-year term
ends. 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
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<PAGE> 44
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.
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 either two
years after the date of termination in the case of Mr. High or one year after
the date of termination in the case of Mr. Fisher. 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 18 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 1999) 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 1986, as amended, 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.
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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 so long as such action does not adversely affect the rights of
holders of previously granted options. All actions taken and 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 216,185 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 fiscal 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.
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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 795,000 shares of our
common stock have been granted under the 1999 plan.
CERTAIN RELATIONSHIPS AND 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 former directors, Dr. Jai Gupta, is the president of EER Systems. These
loans have since been repaid in full.
On August 10, 1999, we entered into a consulting agreement with Mr. Gerald
Paxton, one of our stockholders. The consulting agreement provides for an annual
salary of $133,900, and expires on December 31, 2000. Mr. Paxton was formerly
the president of ECI, Inc., CollegeLink Corporation's predecessor.
On October 13, 1999, we entered into a consulting agreement with the
Honorable Bruce Sundlun. The consulting agreement provides for a monthly salary
of $5,000, an option to purchase 25,000 shares of our common stock at a per
share exercise price of $5.00 per share, and a cash payment of $75,000 upon the
execution of an agreement by The College Board and us making us the exclusive
provider of electronic and on-line college applications for The College Board.
The consulting agreement expires on October 13, 2000.
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.
On May 10, 1999 we entered into an agreement with the Interactive Business
Channel ("IBC") pursuant to which IBC was to provide certain investor relations
services to us. On January 3, 2000 we received a letter from IBC's attorneys
making a claim for issuance of 25,000 shares of common stock and 150,000
warrants to purchase shares of common stock. According to the agreement the
warrants are exercisable at exercise prices ranging from $10 to $24.50 per
share. We do not believe this claim has merit and we intend to defend against
this claim.
On April 15, 1999 we entered into a contract with Genesis Communications
Group, Inc., ("Genesis") to provide investor relations services to us. Genesis
has made a claim for issuance of 35,000 shares of common stock under this
agreement. We believe the claim is without merit and we intend to defend against
it.
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PRINCIPAL STOCKHOLDERS AND STOCKHOLDERS GRANTING
OVER-ALLOTMENT OPTION
The following table sets forth the beneficial ownership of our outstanding
common stock on January 11, 2000 by
- each of our directors and executive officers,
- all of our directors and executive officers as a group,
- each stockholder who was known by us to be the beneficial owner of more
than five percent (5%) of our outstanding shares, and
- each stockholder who has granted the underwriters a 45-day option to
cover over-allotments.
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)......................... 1,386,506 10.82 1,386,506 8.77
Richard A. Fisher(3)..................... 1,024,421 8.0 1,024,421 6.48
William Fink............................. 671,636 5.34 671,636 4.31
Ann Marie Gleason........................ 319,958 2.55 319,958 2.06
Mark Rogers.............................. 161,420 1.28 161,420 1.04
Thomas J. Burgess(4)..................... 92,889 * 92,889 *
Jeff 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(5)........................... 1,500,345 11.94 1,500,345 9.64
All Directors and Officers as a Group.... 3,656,830 28.02 3,656,830 22.78
NAME OF STOCKHOLDER GRANTING
OVER-ALLOTMENT OPTION(6)(7)
- -----------------------------------------
Frank Fernandez, Jr. .................... 10,000 * 10,000 *
Chelverton Fund, Ltd. ................... 30,000 * 30,000 *
John Sununu.............................. 43,750 * 43,750 *
BMJ Partnership.......................... 6,250 * 6,250 *
Carribean Investors Group Ltd. .......... 25,000 * 25,000 *
</TABLE>
- ---------------
* Less than 1%.
(1) Beneficial ownership is determined in accordance with the rules of the SEC.
485,884 shares of common stock issuable by us pursuant to options which may
be exercised within 60 days after January 11, 2000 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
January 11, 2000; (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 1,143,564 shares of common stock and 242,942 shares of common
stock issuable pursuant to currently exercisable options.
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<PAGE> 48
(3) Includes 781,479 shares of common stock held by Karen B. Fisher, the wife
of Richard A. Fisher, and 242,942 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) The address for EER Systems is 3750 Centerview Drive, Chantilly, VA 20151.
(6) The underwriters have agreed to exercise in full the over-allotment option
granted to them by us before exercising the over-allotment options granted
to them by our stockholders.
(7) The shares of common stock subject to the over-allotment option are
issuable upon conversion of shares of Series A Preferred Stock owned by
these individuals.
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<PAGE> 49
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 an 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> 50
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 any Distribution, the holders of the issued and outstanding
Series A Preferred Stock are entitled to receive $4.00 per share (subject to
adjustment) plus all accrued and unpaid distributions declared thereon, without
interest, before any distribution of the Company's assets is made to the holders
of any other capital stock. After such payment is made to the holders of the
issued and outstanding Series A Preferred Stock, then, before any further
distribution of the Company's assets is made, a dollar amount equal to that
already distributed to the holders of the Series A Preferred Stock will be
distributed pro-rata to the holders of the Company's other issued and
outstanding capital stock, subject to the rights of any other class of capital
stock set forth in the Company's certificate of incorporation, as amended. After
such payment is made to the holders of such other issued and outstanding capital
stock, the holders of the issued and outstanding Series A Preferred Stock are
entitled to participate with the holders of all other classes of issued and
outstanding capital stock in the final distribution of the Company's remaining
assets, and, subject to any rights of any other class of capital stock set forth
in the Company's certificate of incorporation, as amended, the remaining assets
of the Company will be divided and distributed ratably among the holders of both
the Series A Preferred Stock and the other capital stock then issued and
outstanding.
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 April 2, 2000 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
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<PAGE> 51
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 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 any Distribution, the holders of the issued and outstanding
Series C Preferred Stock are entitled to receive $4.00 per share (subject to
adjustment) plus all accrued and unpaid distributions whether or not earned or
declared thereon, without interest, before any distribution of the Company's
assets is made to the holders of any other class of capital stock, except for
holders of the Series A Convertible Preferred Stock. After payments have been
made to all holders of any series of the Company's issued and outstanding
preferred stock, then, before any further distribution of the Company's assets
is made, a dollar amount equal to that already distributed to the holders of any
series of the Company's issued and outstanding preferred stock will be
distributed pro-rata to the holders of the Company's issued and outstanding
classes of capital stock, subject to the rights of any other class of capital
stock set forth in the Company's certificate of incorporation, as amended. After
such payment is made to the holders of such other issued and outstanding capital
stock, the holders of the issued and outstanding Series C Preferred Stock will
be entitled to participate with the holders of all other classes of issued and
outstanding capital stock in the final distribution of the Company's remaining
assets.
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.
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<PAGE> 52
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 September 30, 2000 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.
WARRANTS
We have outstanding warrants to purchase an aggregate of 940,283 shares of
common stock at a weighted average exercise price of $1.87 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 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 have agreed not to, directly
or indirectly, sell or otherwise dispose of their shares for a period of 180
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 consideration of this agreement we have agreed to issue
warrants to purchase up to 73,400 shares of common stock at $8.00 per share.
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. The Principals of Brennan Dyer have agreed not to, directly
or indirectly, sell or otherwise dispose of its shares for a period of 180 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 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. Mr. Burgess and Mr. Paxton have also agreed, in such
Registration Agreement, to sign any lock-up agreement with respect to all of
their ECI Common Shares which an underwriter for a public offering of our stock
may require such holder and our senior management to sign.
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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 July 28, 1999. Pursuant to this
Agreement, if we propose to register any of our securities under the Securities
Act for our own account or for the accounts of other stockholders 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.
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 180
days after the effective date of this offering.
On December 22, 1999, we agreed to include the shares of common stock
(other than shares sold pursuant to the over-allotment option) held by Frank
Fernandez, Jr., Chelverton Fund Ltd., John Sununu, BMJ Partnership, and
Caribbean Investors Group Ltd. in a registration statement on Form S-3 promptly
after we become eligible to file such a registration statement with the SEC.
These persons have agreed not to directly or indirectly offer for sale, contract
to sell, sell, grant to 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.
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.
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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 time that such stockholder became an
interested stockholder.
Section 203 does not apply if:
- prior to such time, 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 time, the business combination is approved by
the board of directors and authorized at an annual or special meeting of
stockholders, and not by written consent, by the 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 the 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
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<PAGE> 55
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. 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. 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 directors may be removed by a majority of our stockholders only for
"cause."
53
<PAGE> 56
"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.
54
<PAGE> 57
UNDERWRITING
Under the terms and subject to the conditions set forth in an underwriting
agreement dated January , 2000, 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 Company and the underwriters may agree prior to executing the
underwriting agreement to a sale of a lesser number of shares.
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 392,500 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. Also, five of our stockholders have granted the
underwriters a 45-day option to purchase up to 57,500 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 these options 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 these options, 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 to
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
55
<PAGE> 58
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 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 American Stock Exchange 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 has been made for quotation of the common stock on the American
Stock Exchange System under the symbol "APS."
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.
For a period of one year following the effective date of this offering the
representatives' warrants may not be sold, assigned, transferred, pledged or
hypothecated except to officers or partners of the underwriters and members of
the selling group and/or their officers or partners. 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 stockholders. 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.
The Company had an agreement with Gerard Klauer Mattison & Co., Inc.
("GKM") pursuant to which the Company had engaged GKM to act as lead investment
banker to the Company in connection with a proposed public offering by the
Company (the "GKM Engagement"). On November 24, 1999, the Company and GKM
entered into an agreement pursuant to which the GKM Engagement and the agreement
with GKM were terminated (the "Settlement Agreement"). The Settlement Agreement
56
<PAGE> 59
provides, among other things, that (1) in consideration of GKM releasing a right
of first refusal to act as lead underwriter, the Company pay to GKM an amount
equal to 1% of the gross proceeds raised in this offering, (2) the Company
reimburse GKM for its out-of-pocket expenses, including its legal fees,
associated with the GKM Engagement, amounting to $115,359.74 and (3) the Company
pay GKM a fee of $50,000 for past advisory services and the release by GKM of
its right to act as sole and exclusive financial advisor to the Company in
connection with any business combination involving the Company. The Company has
reimbursed GKM for its out-of-pocket expenses.
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.
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.
57
<PAGE> 60
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 website 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.
58
<PAGE> 61
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59
<PAGE> 62
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> 63
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> 64
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> 65
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> 66
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> 67
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> 68
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> 69
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> 70
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> 71
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> 72
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> 73
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> 74
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> 75
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> 76
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 (including Other
Acquired Assets)............. -- -- -- -- 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....................... 9,152,211 550,809 225,000 750,000 -- -- 10,678,000
----------- ----------- ----------- -------- -----------
</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> 77
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................. $ (0.75)
===========
WEIGHTED AVERAGE NUMBER OF SHARES
USED IN COMPUTATION.............. 8,165,158
===========
</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> 78
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 (INCLUDING OTHER ACQUIRED ASSETS)
The financial statements of CollegeLink will include the operations of ECI,
OSN and SSI from the date of each actual acquisition. The excess of purchase
price over designated assets has been temporarily classified as Goodwill
(including Other Acquired Assets). CollegeLink intends to allocate these amounts
to the specific assets acquired such as software, customer lists, customer
agreements or goodwill when evaluations of such assets become available. Such
allocations will be made within one year of the dates of acquisitions. Pending
such allocations, for the purpose of the pro forma statements, amortization has
been computed assuming a ten-year life.
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> 79
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
$6.00 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> 80
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> 81
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> 82
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> 83
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> 84
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> 85
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> 86
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> 87
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> 88
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> 89
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> 90
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
$152,750 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> 91
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> 92
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> 93
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> 94
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> 95
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> 96
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> 97
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> 98
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> 99
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> 100
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> 101
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> 102
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> 103
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> 104
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> 105
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> 106
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> 107
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> 108
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> 109
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> 110
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> 111
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> 112
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 (including Other Acquired Assets), 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
100,000,000 shares, issued and outstanding 9,846,340
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> 113
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> 114
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............... -- -- 34,836 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 9,846,340 $9,846 $6,035,664 $(5,553,359) $12,202,131
========= =========== ========= ====== ========== =========== ===========
</TABLE>
See notes to financial statements.
F-53
<PAGE> 115
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> 116
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.
c. Goodwill (including Other Acquired Assets)
The financial statements of CollegeLink will include the operations of
ECI, OSN and SSI from the date of each actual acquisition. The excess of
purchase price over designated assets has been temporarily classified as
Goodwill (including Other Acquired Assets). CollegeLink intends to
allocate these amounts to the specific assets acquired such as software,
customer lists, customer agreements or goodwill when evaluations of such
assets become available. Such allocations will be made within one year of
the dates of acquisitions. Pending such allocations, for the purpose of
the pro forma statements, amortization has been computed assuming a
ten-year life.
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
F-55
<PAGE> 117
COLLEGELINK.COM INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
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.
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> 118
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> 119
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> 120
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> 121
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> 122
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> 123
[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> 124
[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 and
Stockholders Granting Over-allotment
Options............................. 45
Description of Capital Stock.......... 47
Underwriting.......................... 55
Legal Matters......................... 57
Experts............................... 57
Where You Can Find More Information... 58
Index to Financial Statements......... F-1
</TABLE>
3,000,000 SHARES
COMMON STOCK
--------------------
PROSPECTUS
--------------------
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
, 2000
<PAGE> 125
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 American Stock Exchange 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
American Stock Exchange listing fee......................... 50,000
Printing and engraving expenses............................. 125,625
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
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<PAGE> 126
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.
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<PAGE> 127
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 750,000 shares of Series A Convertible
Preferred Stock for an aggregate consideration of $3,000,000.
On June 11, 1999, we issued and sold 25,000 shares of Series A Convertible
Preferred Stock to an accredited investor for an aggregate consideration of
$100,000.
In September 1999, we issued and sold 115,000 shares of Series A
Convertible Preferred Stock to five accredited investors for an aggregate
consideration of $460,000.
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
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<PAGE> 128
engaged in connection with the foregoing issuances of securities, and no
underwriting discounts or commissions were paid.
ITEM 16. EXHIBITS AND FINANCIAL SCHEDULES.
(a) EXHIBITS
<TABLE>
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Representatives' Warrant Agreement
1.3 Form of Consulting Agreement between the Company and
Cruttenden Roth Incorporated
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
</TABLE>
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<PAGE> 129
<TABLE>
<S> <C>
**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
**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
10.27 Amendment dated as of November 11, 1999, to Employment Agreement between Cytation.com Incorporated and
Richard A. Fisher
10.28 Amendment dated as of November 11, 1999, to Employment Agreement between Cytation.com Incorporated and
Kevin J. High
10.29 Consulting Agreement dated October 13, 1999, between Cytation.com Incorporated and Bruce Sundlun
*10.30 Series A Lock-Up Agreement
**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.
*** Filed under application for confidential treatment.
(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.
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<PAGE> 130
(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 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.
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<PAGE> 131
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 11TH DAY OF JANUARY, 2000.
COLLEGELINK.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 January 11, 2000
- ------------------------------------------ Executive Officer)
Richard A. Fisher
* Vice President -- Finance (Principal January 11, 2000
- ------------------------------------------ Financial and Accounting Officer)
Edward F. Hayes
* Director January 11, 2000
- ------------------------------------------
Kevin J. High
* Director January 11, 2000
- ------------------------------------------
Jeff Cunningham
* Director January 11, 2000
- ------------------------------------------
Bert Hensley
</TABLE>
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<PAGE> 132
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- --------- ----- ----
<S> <C> <C>
* Director January 11, 2000
- ------------------------------------------
Mark Rogers
*By: /s/ EDWARD F. HAYES January 11, 2000
------------------------------------
Attorney-in-fact
</TABLE>
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<PAGE> 133
INDEX OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<C> <S>
1.1 Form of Underwriting Agreement
1.2 Form of Representatives' Warrant Agreement
1.3 Form of Consulting Agreement between the Company and
Cruttenden Roth Incorporated
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>
<PAGE> 134
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
- ------- -----------
<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
10.27 Amendment dated as of November 11, 1999, to Employment
Agreement between Cytation.com Incorporated and Richard A.
Fisher
10.28 Amendment dated as of November 11, 1999, to Employment
Agreement between Cytation.com Incorporated and Kevin J.
High
10.29 Consulting Agreement dated October 13, 1999, between
Cytation.com Incorporated and Bruce Sundlun
*10.30 Series A Lock-Up Agreement
**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.
*** Filed under application for confidential treatment.
(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 1.1
3,000,000 SHARES(1)
COLLEGELINK.COM INCORPORATED
COMMON STOCK
UNDERWRITING AGREEMENT
----------------------
__________________, 1999
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
As Representatives of the several Underwriters
c/o CRUTTENDEN ROTH INCORPORATED
18301 Von Karman, Suite 100
Irvine, California 92715
Ladies and Gentlemen:
CollegeLink.com Incorporated, a Delaware corporation (the "Company"),
addresses you as the Representatives of each of the persons, firms and
corporations listed in Schedule A hereto (herein collectively called the
"Underwriters") and hereby confirms its agreement with the several Underwriters
as follows:
1. DESCRIPTION OF SHARES.
The Company proposes to issue and sell 3,000,000 shares of its
authorized and unissued Common Stock, $0.001 par value per share (the "Firm
Shares"), to the several Underwriters. The Company also proposes to grant to the
Underwriters an option to purchase up to 450,000 additional shares of the
Company's Common Stock, $0.001 par value per share (the "Option Shares") solely
for the purpose of covering over-allotments, as provided in Section 7 hereof. As
used in this Agreement, the term "Shares" shall include the Firm Shares and the
Option Shares. All shares of Common Stock, $0.001 par value per share, of the
Company to be outstanding after giving effect to the sales contemplated hereby,
including the Shares, are hereinafter referred to as "Common Stock."
2. REPRESENTATIONS, WARRANTIES AND AGREEMENTS OF THE COMPANY.
The Company represents and warrants to, and agrees with, each
Underwriter that:
(a) A registration statement on Form S-1 (File No. 333-85079) with
respect to the Shares, including a prospectus, has been prepared by the Company
in conformity with the
- -----------------
(1) Plus an option to purchase up to 450,000 additional shares to
cover over-allotments.
<PAGE> 2
requirements of the Securities Act of 1933, as amended (the "Act"), and the
applicable rules and regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Act and has been filed with
the Commission; such amendments to such registration statement, such
prospectuses and abbreviated registration statements pursuant to Rule 462(b) of
the Rules and Regulations (a "462 Registration Statement") as may have been
required prior to the date hereof have been similarly prepared and filed with
the Commission; and the Company will file such additional amendments to such
registration statement, such amended prospectuses and such abbreviated
registration statements as may hereafter be required. Copies of such
registration statement and amendments together with each exhibit filed
therewith, of each related prospectus contained or filed as part of any
pre-effective amendment to such registration statement or filed pursuant to Rule
424(a) (the "Preliminary Prospectuses") and of any abbreviated 462 Registration
Statement have been delivered to you.
If the registration statement relating to the Shares has been declared
effective under the Act by the Commission, the Company will prepare and promptly
file with the Commission the information omitted from the registration statement
pursuant to Rule 430A(a) or, if the Representatives, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the information required to be included in any term sheet filed
pursuant to Rule 434(b) or (c), as applicable, of the Rules and Regulations
pursuant to subparagraph (1), (4) or (7) of Rule 424(b) of the Rules and
Regulations or as part of a post-effective amendment to the registration
statement (including a final form of prospectus). If the registration statement
relating to the Shares has not been declared effective under the Act by the
Commission, the Company will prepare and promptly file an amendment to the
registration statement, including a final form of prospectus, or, if the
Representatives, on behalf of the several Underwriters, shall agree to the
utilization of Rule 434 of the Rules and Regulations, the information required
to be included in any term sheet filed pursuant to Rule 434(b) or (c), as
applicable, of the Rules and Regulations. The term "Registration Statement" as
used in this Agreement shall mean such registration statement, including
financial statements, schedules and exhibits (including exhibits incorporated by
reference), in the form in which it became or becomes, as the case may be,
effective (including, if the Company omitted information from the registration
statement pursuant to Rule 430A(a) or files a term sheet pursuant to Rule 434 of
the Rules and Regulations, the information deemed to be a part of the
registration statement at the time it became effective pursuant to Rule 430A(b)
or Rule 434(d) of the Rules and Regulations) and, in the event of any amendment
thereto or the filing of any 462 Registration Statement after the effective date
of such registration statement, shall also mean (from and after the
effectiveness of such amendment or the filing of any 462 Registration Statement)
such registration statement as so amended, together with any such abbreviated
registration statement. The term "Prospectus" as used in this Agreement shall
mean the prospectus relating to the Shares as included in such Registration
Statement at the time it becomes effective (including, if the Company omitted
information from the Registration Statement pursuant to Rule 430A(a) of the
Rules and Regulations, the information deemed to be a part of the Registration
Statement at the time it became effective pursuant to Rule 430A(b) of the Rules
and Regulations); PROVIDED, HOWEVER, that if in reliance on Rule 434 of the
Rules and Regulations and with the consent of the Representatives, on behalf of
the several Underwriters, the Company shall have provided to the Underwriters a
term sheet pursuant to Rule 434(b) or (c), as applicable, prior to the time that
a confirmation is sent or given for purposes of Section 2(10)(a) of the Act, the
term "Prospectus" shall mean the "prospectus
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<PAGE> 3
subject to completion" (as defined in Rule 434(g) of the Rules and Regulations)
last provided to the Underwriters by the Company and circulated by the
Underwriters to all prospective purchasers of the Shares (including the
information deemed to be a part of the Registration Statement at the time it
became effective pursuant to Rule 434(d) of the Rules and Regulations).
Notwithstanding the foregoing, if any revised prospectus shall be provided to
the Underwriters by the Company for use in connection with the offering of the
Shares that differs from the prospectus referred to in the immediately preceding
sentence (whether or not such revised prospectus is required to be filed with
the Commission pursuant to Rule 424(b) of the Rules and Regulations), the term
"Prospectus" shall refer to such revised prospectus from and after the time it
is first provided to the Underwriters for such use. If in reliance on Rule 434
of the Rules and Regulations and with the consent of the Representatives, on
behalf of the several Underwriters, the Company shall have provided to the
Underwriters a term sheet pursuant to Rule 434(b) or (c), as applicable, prior
to the time that a confirmation is sent or given for purposes of Section
2(10)(a) of the Act, the Prospectus and the term sheet, together, will not be
materially different from the prospectus in the Registration Statement.
(b) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus or instituted proceedings for that
purpose, and each such Preliminary Prospectus has conformed in all material
respects to the requirements of the Act and the Rules and Regulations and, as of
its date, has not included any untrue statement of a material fact or omitted to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and at the time
the Registration Statement became or becomes, as the case may be, effective and
at all times subsequent thereto up to and on the Closing Date (hereinafter
defined) and on any later date on which Option Shares are to be purchased, (i)
the Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained and will contain all material information required to be
included therein by the Act and the Rules and Regulations and will in all
material respects conform to the requirements of the Act and the Rules and
Regulations, (ii) the Registration Statement, and any amendments or supplements
thereto, did not and will not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and (iii) the Prospectus, and any
amendments or supplements thereto, did not and will not include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; PROVIDED, HOWEVER, that none of the representations and
warranties contained in this subparagraph (b) shall apply to information
contained in or omitted from the Registration Statement or Prospectus, or any
amendment or supplement thereto, in reliance upon, and in conformity with,
written information relating to any Underwriter furnished to the Company by such
Underwriter specifically for use in the preparation thereof.
(c) If the Company has elected to rely on Rule 462(b) and the Rule 462
Registration Statement has not been declared effective (i) the Company has filed
a Rule 462 Registration Statement in compliance with, and that is effective upon
filing pursuant to, Rule 462(b) and has received confirmation of its receipt and
(ii) the Company has given irrevocable instructions for transmission of the
applicable filing fee in connection with the filing of the Rule 462 Registration
Statement, in compliance with Rule 111 promulgated under the Act or the
Commission has received payment of such filing fee.
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<PAGE> 4
(d) Each of the Company and its direct and indirect subsidiaries
(hereinafter, the "Subsidiaries") is duly incorporated and validly existing as a
corporation in good standing under the laws of the jurisdiction of its
incorporation with full power and authority (corporate and other) to own, lease
and operate its properties and conduct its business as described in the
Prospectus; each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and in good standing in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its business
requires such qualification, except where the failure to be so qualified or be
in good standing would not have a material adverse effect on the condition
(financial or otherwise), earnings, operations, business or business prospects
of the Company and its Subsidiaries taken as a whole, (hereinafter, a "Material
Adverse Effect"); no proceeding has been instituted in any such jurisdiction
revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such
power and authority or qualification; each of the Company and the Subsidiaries
is in possession of and operating in compliance with all authorizations,
licenses, certificates, consents, orders and permits from state, federal and
other regulatory authorities that are material to the conduct of its business,
all of which are valid and in full force and effect. Neither the Company nor any
of its Subsidiaries is in violation of its charter or bylaws and no event has
occurred which, with notice or lapse of time or both, would constitute a breach
or violation of any of the terms and provisions of, or constitute a default
under, any obligation, agreement, covenant or condition contained in any bond,
debenture, note or other evidence of indebtedness, or in any lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which either the Company or any of its Subsidiaries
is a party or by which their properties may be bound. Neither the Company nor
any of its Subsidiaries is in violation of any law, order, rule, regulation,
writ, injunction, judgment or decree of any court, administrative agency,
regulatory body, government or governmental agency or body, domestic or foreign,
having jurisdiction over the Company or its properties except where such
violation would not have a Material Adverse Effect.
(e) Each of the Company and its Subsidiaries has full legal right,
power and authority to enter into this Agreement and perform the transactions
contemplated hereby including the Warrant Agreement as defined in Section 2(g)
hereof. Each of the Company and its Subsidiaries had full legal right, power and
authority to enter into a Consulting Agreement dated _________ with Cruttenden
Roth Incorporated (the "Consulting Agreement"). Each of this Agreement, the
Consulting Agreement and the Warrant Agreement has been duly authorized,
executed and delivered by the Company and is a valid and binding agreement on
the part of the Company, enforceable in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to or affecting
creditors' rights generally or by general equitable principles and rules of law
governing specific performance, estoppel, waiver, injunctive relief, and other
equitable remedies (regardless of whether enforcement is sought in a proceeding
at law or in equity). The making, execution and performance of this Agreement by
the Company and the consummation of the transactions herein contemplated
including the Warrant Agreement and the Consulting Agreement will not conflict
with or result in a breach or violation of any of the terms and provisions of,
or constitute a default under, (i) any bond, debenture, note or other evidence
of indebtedness, or under any lease, contract, indenture, mortgage, deed of
trust, loan agreement, joint venture or other agreement or instrument to which
the Company is a party or by which its properties may be bound, (ii) the charter
or bylaws of the Company or (iii) any law, order, rule, regulation, writ,
injunction, judgment or decree of any court, administrative
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<PAGE> 5
agency, regulatory body, government or governmental agency or body, domestic or
foreign, having jurisdiction over the Company or its properties. No consent,
approval, authorization or order of or qualification with any court, government
or governmental agency or body, domestic or foreign, having jurisdiction over
the Company or its properties is required for the execution and delivery of this
Agreement and the consummation by the Company of the transactions herein
contemplated, including the Warrant Agreement and the Consulting Agreement
except such as may be required under the Act, by the National Association of
Securities Dealers, Inc. (the "NASD"), or under state or other securities or
Blue Sky laws, all of which requirements have been satisfied in all material
respects.
(f) There is not pending or, to the Company's knowledge, threatened,
any action, suit, claim or proceeding against either the Company or any of its
Subsidiaries, any of Company's or any of its Subsidiaries' officers, any of its
properties, assets or rights before any court, administrative agency, regulatory
body, government or governmental agency or body, domestic or foreign, having
jurisdiction over the Company or any of its Subsidiaries, its officers, its
properties, or otherwise which (i) might, individually or in the aggregate,
result in any material adverse change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company or its
Subsidiaries, taken as a whole (a "Material Adverse Change"), or, (ii) might
prevent consummation of the transactions contemplated hereby or (iii) is
required to be disclosed in the Registration Statement or Prospectus and is not
so disclosed. There are no agreements, contracts, leases or documents of the
Company of a character required to be described or referred to in the
Registration Statement or Prospectus or to be filed as an exhibit to the
Registration Statement by the Act or the Rules and Regulations which have not
been accurately described in all material respects in the Registration Statement
or Prospectus or filed as exhibits to the Registration Statement. Neither the
Company nor its Subsidiaries is a party or subject to the provisions of any
injunction, judgment, decree or order of any court, administrative agency,
regulatory body, government or governmental agency or body domestic or foreign,
that could be expected to result in a Material Adverse Change. Each of the
Company and its Subsidiaries has conducted and is conducting its business in
compliance with all applicable Federal, State, local and foreign statutes, laws,
rules, regulations, ordinances, codes, decisions, decrees, directives and
orders, except where the failure to do so would not, singly or in the aggregate,
have a Material Adverse Effect on the Company.
(g) All outstanding shares of capital stock of each of the Company and
its Subsidiaries have been duly authorized and validly issued and are fully paid
and nonassessable, have been issued in compliance with all federal and state
securities laws, were not issued in violation of or subject to any preemptive
rights or other rights to subscribe for or purchase securities. The Company has
an authorized, issued and outstanding capitalization as set forth in the
Prospectus under the caption "Capitalization." The capital stock of the Company
conforms to the description thereof contained in the Registration Statement and
the Prospectus (and such statements correctly state the substance of the
instruments defining the capitalization of the Company). The Shares to be issued
and sold by the Company hereunder have been duly authorized for issuance and
sale to the Underwriters pursuant to this Agreement, and, when issued and
delivered by the Company against payment therefor in accordance with the terms
of this Agreement, will be duly and validly issued and fully paid and
nonassessable, and will be sold free and clear of any pledge, lien, security
interest, encumbrance, claim or equitable interest. Except as set forth in the
Prospectus, no preemptive right,
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<PAGE> 6
co-sale right, registration right, right of first refusal or other similar right
of shareholders exists with respect to any of the Shares or the issuance and
sale thereof other than those that have been satisfied or expressly waived prior
to the date hereof and those that will automatically expire upon and will not
apply to the consummation of the transactions contemplated on or before the
Closing Date. No further approval or authorization of any shareholder, the Board
of Directors of the Company or others is required for the issuance and sale or
transfer of the Shares except as may be required under the Act or under state or
other securities or Blue Sky laws. The Company shall at all times reserve for
issuance under the Warrants (the "Warrants") sold to Cruttenden Roth
Incorporated ("CRI") pursuant to that Warrant Agreement of even date herewith
between CRI and the Company (the "Warrant Agreement") sufficient shares of
common stock and the shares of common stock issuable thereunder, upon issuance,
delivery and payment therefor in the manner therein described, will be duly
authorized, validly issued, fully paid and non-assessable. Except as disclosed
in the Registration Statement, Prospectus and the financial statements of the
Company, and the related notes thereto included in the Prospectus, the Company
has no outstanding options to purchase, or any preemptive rights or other rights
to subscribe for or to purchase, any securities or obligations convertible into,
or any contracts or commitments to issue or sell, shares of its capital stock or
any such options, rights, convertible securities or obligations. The description
of the Company's stock option, stock bonus and other stock plans or
arrangements, and the options or other rights granted and exercised thereunder,
set forth in the Prospectus fairly and accurately presents, in all material
respects, the information required to be shown with respect to such plans,
arrangements, options and rights. All outstanding options of the Company have
been duly authorized and issued in compliance with the option plan pursuant to
which such option was granted and with all federal and state securities laws and
the Delaware General Corporation Law.
(h) Subsequent to the respective dates as of which information is given
in the Registration Statement and Prospectus, there has not been (i) any
Material Adverse Change, (ii) any transaction that is material to either the
Company or any of its Subsidiaries, (iii) any obligation, direct or contingent,
incurred by either the Company or any of its Subsidiaries, except obligations
incurred in the ordinary course of business, (iv) any change in the capital
stock or outstanding indebtedness of either the Company or any of its
Subsidiaries, (v) any dividend or distribution of any kind declared, paid or
made on the capital stock of either the Company or any of its Subsidiaries, (vi)
any default in the payment of principal of or interest on any outstanding debt
obligations, or (vii) any loss or damage (whether or not insured) to the
property of either the Company or any of its Subsidiaries which has been
sustained or will have been sustained which has a Material Adverse Effect.
(i) Except as set forth in the Registration Statement and Prospectus,
(i) each of the Company and its Subsidiaries has good and marketable title to
all properties and assets described in the Registration Statement and Prospectus
as owned by it, free and clear of any pledge, lien, security interest,
encumbrance, claim or equitable interest, other than such as would not have a
Material Adverse Effect, (ii) the agreements to which either the Company or any
of its Subsidiaries is a party described in, or filed as exhibits to, the
Registration Statement and Prospectus are valid agreements, enforceable by the
Company or its Subsidiaries, as the case may be, except as the enforceability
thereof may be limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to or affecting creditors' rights
generally or by general
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<PAGE> 7
equitable principles and rules of law governing specific performance, estoppel,
waiver, injunctive relief and other equitable remedies (regardless of whether
enforcement is sought in a proceeding at law or in equity) and, to the Company's
knowledge, the other contracting party or parties thereto are not in breach or
default under any of such agreements, and (iii) either the Company or its
Subsidiaries has valid and enforceable leases for all properties described in
the Registration Statement and Prospectus, except as the enforcement thereof may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or
other similar laws relating to or affecting creditors' rights generally or by
general equitable principles and rules of law governing specific performance,
estoppel, waiver, injunctive relief and other equitable remedies (regardless of
whether enforcement is sought in a proceeding at law or in equity). Except as
set forth in the Registration Statement and Prospectus, the Company and its
Subsidiaries own or lease all such properties as are necessary to its operations
as now conducted or as proposed to be conducted.
(j) Radin, Glass & CO., LLP, Independent Auditors ("Radin, Glass"),
Independent Auditors, which has examined the financial statements of the
Company, together with the related schedules and notes, as of June 30, 1999 and
1998, and for the years ended June 30, 1999, 1998 and 1997, filed with the
Commission as a part of the Registration Statement, which are included in the
Prospectus, are independent accountants within the meaning of the Act and the
Rules and Regulations. The audited financial statements of the Company, together
with the related schedules and notes, and the unaudited financial information,
forming part of the Registration Statement and Prospectus, fairly present the
financial position and the results of operations of the Company at the
respective dates and for the respective periods to which they apply; and all
audited financial statements of the Company, together with the related schedules
and notes, and the unaudited financial information, filed with the Commission as
part of the Registration Statement, have been prepared in accordance with
generally accepted accounting principles consistently applied throughout the
periods involved except as may be otherwise stated therein. The selected and
summary financial and statistical data included in the Registration Statement
fairly present the information shown therein and have been compiled on a basis
consistent with the audited financial statements presented therein. No other
financial statements or schedules are required to be included in the
Registration Statement.
(k) Each of the Company and its Subsidiaries maintains a system of
internal accounting controls sufficient to provide reasonable assurances that
(i) transactions are executed in accordance with management's general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in conformity with generally accepted
accounting principles and to maintain accountability for assets, (iii) access to
assets is permitted only in accordance with management's general or specific
authorization, and (iv) the recorded accountability for assets is compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
(l) The consolidated financial statements and schedules of the Company
included in the Registration Statement and the Prospectus fairly present, in all
material respects, the financial position of the Company and its Subsidiaries
and the results of operations and changes in financial condition, as of the
dates and periods therein specified.
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<PAGE> 8
(m) Each of the Company and its Subsidiaries has timely filed all
necessary federal, state, local and foreign income and franchise tax returns and
have paid all taxes shown thereon as due, and there is no tax deficiency that
has been or, might be asserted against the Company or any of its Subsidiaries
that might have a Material Adverse Effect. All tax liabilities are adequately
provided for on the books of each of the Company and its Subsidiaries.
(n) Each of the Company and its Subsidiaries maintains insurance with
insurers of recognized financial responsibility of the types and in the amounts
generally maintained for its business and consistent with insurance coverage
maintained by similar companies in similar businesses or as otherwise required
by any agreement to which either the Company or a Subsidiary is a party,
including, but not limited to, insurance covering real and personal property
owned or leased by the Company or its Subsidiaries against theft, damage,
destruction, acts of vandalism, products liability, errors and omissions, and
all other risks customarily insured against, all of which insurance is in full
force and effect. The Company has not been refused any insurance coverage sought
or applied for; and the Company does not have any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage from similar insurers as may be necessary
to continue its business at a cost that would not have a Material Adverse
Effect.
(o) No labor disturbance by the employees of the Company or any of its
Subsidiaries exists or, to the Company's knowledge, is imminent. The Company is
not aware of any existing or imminent work stoppage or labor strike by the
employees of any of the Companies' or any of its Subsidiaries' principal
suppliers, subcontractors, distributors (domestic or foreign) that might be
expected to result in a Material Adverse Change. No collective bargaining
agreement exists with any of the Company's employees and, to the Company's
knowledge, no such agreement is imminent.
(p) If any full-time employee identified in the Prospectus has entered
into any non-competition, non-disclosure, confidentiality or other similar
agreement with any party other than the Company or its Subsidiaries, such
employee is neither in violation thereof nor is expected to be in violation
thereof as a result of the business conducted or expected to be conducted by the
Company as described in the Prospectus or such person's performance of his or
her obligations to the Company. Each employee engaged by or on behalf of the
Company or any of its Subsidiaries to render services for the Company or any of
its Subsidiaries has entered into an agreement with the Company or such
Subsidiary, as the case may be, providing for terms and conditions of
non-disclosure and confidentiality in connection with such services
("Confidentiality Agreements"). Assuming due authorization, execution and
delivery of the Confidentiality Agreements by each employee, the Confidentiality
Agreements are the legal, valid, binding and enforceable instruments of the
employees, except as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other similar laws relating to or
affecting rights generally or by general equitable principles and rules of law
governing specific performance estoppel, waiver, injunctive relief, and other
equitable remedies (regardless of whether enforcement is sought in a proceeding
at law or in equity). To the Company's knowledge, no employee of the Company is
in violation of any Confidentiality Agreement. Each Officer of the Company or
any of its Subsidiaries has entered into an agreement with the Company or such
Subsidiary, as the case may be, providing for terms and conditions of
non-disclosure, non-competition and confidentiality ("Officer
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<PAGE> 9
Confidentiality Agreements"). Assuming due authorization, execution and delivery
of the Officer Confidentiality Agreements by each Officer, the Officer
Confidentiality Agreements are the legal, valid, binding and enforceable
instruments of the Officers, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
laws relating to or affecting rights generally or by general equitable
principles and rules of law governing specific performance estoppel, waiver,
injunctive relief, and other equitable remedies (regardless of whether
enforcement is sought in a proceeding at law or in equity). To the Company's
knowledge, no Officer of the Company is in violation of any Officer
Confidentiality Agreement.
(q) The Common Stock is registered pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and is
approved for quotation on the Nasdaq National Market System ("Nasdaq"). The
Company has taken no action designed to, or likely to have the effect of,
terminating the registration of the Common Stock under the Exchange Act or
delisting the Common Stock from Nasdaq, nor has the Company received any
notification that the Commission or Nasdaq is contemplating terminating such
registration or quotation.
(r) Each of the Company and its Subsidiaries owns or possesses
exclusive rights to use all patents, patent rights, patent licenses, inventions,
trade secrets, trademarks, service marks, trade names, copyrights, service
names, mask works, technology, know-how and other proprietary intellectual
rights which are necessary to conduct its business as now conducted and as
described in the Registration Statement and Prospectus. Except as set forth in
the Registration Statement and the Prospectus, the expiration of any patents,
patent rights, trade secrets, trademarks, service marks, trade names or
copyrights would not have a Material Adverse Effect. The Company or its assignor
has duly and properly filed with the U.S. Patent and Trademark Office all
pending patent applications (the "Patent Applications") referred to in the
Registration Statement and Prospectus. The information contained in the
Registration Statement and Prospectus concerning the Patent Applications and
patents owned by or licensed to the Company or its Subsidiaries is accurate in
all material respects. Neither the Company nor any of its Subsidiaries has
received any notice of, nor has it any knowledge of, any infringement of or
conflict with asserted rights of either the Company or any of its Subsidiaries
by others with respect to any patents, patent rights, inventions, trade secrets,
trademarks, service marks, trade names, copyrights, mask works, technology or
know-how. Neither the Company nor any of it Subsidiaries has received any notice
of, nor has it any knowledge of, any infringement of or conflict with asserted
rights of others with respect to any patent, patent rights, inventions, trade
secrets, know-how, trademarks, service marks, trade names or copyrights which,
singly or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, might have a Material Adverse Effect.
(s) The Company has been advised concerning the Investment Company Act
of 1940, as amended (the "1940 Act"), and the rules and regulations thereunder,
and has in the past conducted, and intends in the future to conduct, its affairs
in such a manner as to ensure that it is not and will not become an "investment
company" or a company "controlled" by an "investment company" within the meaning
of the 1940 Act and such rules and regulations.
(t) Each of the Company and its Subsidiaries is conducting business in
compliance with all applicable statutes, rules, regulations and orders
administered or issued by any domestic or foreign administrative agency,
regulatory body, government or governmental agency in
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<PAGE> 10
the jurisdictions in which it is conducting business except where such
noncompliance would not result in a Material Adverse Effect.
(u) Each of the Company and such Subsidiaries has submitted all reports
and other documentation necessary to be submitted in accordance with all foreign
regulatory orders, laws and regulations in jurisdictions in which the Company or
such Subsidiary is conducting business except where such failure would not have
a Material Adverse Effect. Neither the Company nor any such Subsidiaries has
received notification of violation of any applicable statute, rule, regulation
or order administered or issued by any foreign administrative agency, regulatory
body, government or governmental agency in foreign jurisdictions in which it is
conducting business.
(v) Except as set forth in the Registration Statement and Prospectus,
(i) each of the Company and its Subsidiaries is in compliance with all laws,
orders, rules and regulations relating to the use, treatment, storage and
disposal of toxic substances and protection of health or the environment
("Environmental Laws") which are applicable to its business except where failure
to do so would not have a Material Adverse Effect, (ii) neither the Company nor
any of its Subsidiaries has received notice from any administrative agency,
regulatory body, government, governmental authority or third party of an
asserted claim under Environmental Laws, (iii) neither the Company nor any of
its Subsidiaries will be required to make material capital expenditures to
comply or cause its Subsidiaries to comply with Environmental Laws in the
foreseeable future and (iv) no property which is, or has been, owned, leased or
occupied by the Company or an of its Subsidiaries has been designated as a
Superfund site pursuant to the Comprehensive Response, Compensation, and
Liability Act of 1980, as amended, or otherwise designated as a contaminated
site under applicable state or local law.
(w) The Company has not distributed and will not distribute prior to
the later of (i) the Closing Date, or any date on which Option Shares are to be
purchased, as the case may be, and (ii) completion of the distribution of the
Shares, any offering material in connection with the offering and sale of the
Shares other than any Preliminary Prospectuses, the Prospectus, the Registration
Statement and other materials, if any, permitted by the Act.
(x) Neither the Company nor any of its Subsidiaries has at any time
during the last five (5) years (i) made any unlawful contribution to any
candidate for foreign office or failed to disclose fully any contribution in
violation of law, or (ii) made any payment to any federal or state governmental
officer or official, or other person charged with similar public or quasi-public
duties, other than payments required or permitted by the laws of the United
States or any jurisdiction thereof.
(y) The Company has not taken and will not take, directly or
indirectly, any action designed to or that might reasonably be expected to cause
or result in stabilization or manipulation of the price of the Common Stock to
facilitate the sale or resale of the Shares.
(z) Except as otherwise set forth in the Registration Statement and the
Prospectus, each officer and director of the Company, and each person listed on
Schedule 1 attached hereto has agreed in writing that such person will not,
except as described below, for a period beginning on
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<PAGE> 11
the date hereof and ending 180 days after the Closing Date (the "Lock-Up
Period"), sell, offer to sell, solicit an offer to buy, contract to sell, loan,
pledge, grant any option to purchase, or otherwise transfer or dispose of
(collectively, a "Disposition"), any shares of Common Stock, or any securities
convertible into or exercisable or exchangeable for Common Stock (collectively,
"Securities"), now owned or hereafter acquired by such person or with respect to
which such person has or hereafter acquires the power of disposition otherwise
than (i) on exercise (on a cash or cashless basis, whether in a traditional
cashless exercise or in a "brokers" cashless exercise), of Common Stock options
or warrants outstanding, it being understood, however, that the shares of Common
Stock received (net of shares sold by or on behalf of such person in a "brokers"
cashless exercise or shares delivered to the Company in a traditional cashless
exercise thereof) by such person upon exercise thereof shall be subject to the
terms of the Lock-Up Agreement (as defined below), (ii) on the transfer of
shares of Common Stock or Securities during such person's lifetime by BONA FIDE
gift or upon death by will or intestacy, provided that any transferee agrees to
be bound by the Lock-Up Agreement, and (iii) on the transfer or other
disposition of shares of Common Stock or Securities as a distribution to limited
partners or shareholders of such person, provided that the distributees thereof
agree to be bound by the terms of the Lock-Up Agreement. The Company has
provided to counsel for the Underwriters a complete and accurate list of all
securityholders of the Company as of _____________ and the number and type of
securities held by each securityholder. The Company has provided to counsel for
the Underwriters true, accurate and complete copies of all of the agreements
pursuant to which its officers, directors and stockholders have agreed to such
or similar restrictions (the "Lock-up Agreements") presently in effect or
effected hereby.
(aa) There are no outstanding loans, advances (except normal advances
for business expenses in the ordinary course of business) or guarantees of
indebtedness by the Company to or for the benefit of any of the officers or
directors of the Company or any shareholder who owns beneficially more than five
percent (5%) of the Common Stock of the Company or any of the members of the
families of any of them, except as disclosed in the Registration Statement and
the Prospectus.
(bb) Other than the Representatives on behalf of the several
Underwriters, (and Gerard Klauer Mattison & Co., Inc. with respect to an
earlier version of the offering described in the Registration Statement), no
person is or will be owed any finder's fee or commission or similar payment in
connection with the transactions contemplated by this Agreement.
(cc) All sales of capital stock of the Company prior to the date hereof
were at all relevant times duly registered or exempt from the registration
requirements of the Act and were duly registered or subject to an available
exemption from the registration requirements of the applicable state securities
or Blue Sky laws. There are no persons with registration or other similar rights
to have any securities registered pursuant to the Registration Statement or
otherwise registered by the Company under the Act, other than those who have
entered into Lock-up Agreements.
(dd) No relationship, direct or indirect, exists between or among the
Company on the one hand and the directors, officers, stockholders, customers or
suppliers of the Company on the other hand, that is required by the Act or the
1934 Act or the Rules and Regulations to be described in the Registration
Statement and the Prospectus that is not described as so required.
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(ee) The Preliminary Prospectuses and Prospectus delivered to the
Underwriters for use in connection with this offering were identical to the
versions of the Preliminary Prospectuses and Prospectuses created to be
transmitted to the Commission for filing via Electronic Data Gathering Analysis
and Retrieval System ("EDGAR"), except to the extent permitted by Regulation
S-T.
(ff) The Company has complied with all provisions of Section 517.075,
Florida Statutes relating to doing business with the Government of Cuba or with
any person or affiliate located in Cuba.
3. PURCHASE, SALE AND DELIVERY OF SHARES.
On the basis of the representations, warranties and agreements herein
contained, but subject to the terms and conditions herein set forth, the Company
agrees to sell to the Underwriters, and each Underwriter agrees, severally and
not jointly, to purchase from the Company, at a purchase price of $_____ per
share, the respective number of Firm Shares which is set forth opposite the name
of such Underwriter in Schedule A hereto (subject to adjustment as provided in
Section 10).
Delivery of definitive certificates for the Firm Shares to be purchased
by the Underwriters pursuant to this Section 3 shall be made against payment of
the purchase price therefor by the several Underwriters by certified or official
bank check or checks drawn in same-day funds, payable to the order of the
Company or by wire transfer in same day funds, at the offices of Nutter,
McClennen &Fish, LLP, One International Place, Boston, Massachusetts (or at such
other place as may be agreed upon between the Representatives and the Company),
at 10:00 A.M. Eastern Standard Time, (a) on the third (3rd) full business day
following the first day that Shares are traded or (b) if this Agreement is
executed and delivered after 4:30 P.M. Eastern Standard Time, the fourth (4th)
full business day following the day that this Agreement is executed and
delivered or (c) at such other time and date not later than seven (7) full
business days following the first day that Shares are traded as the
Representatives and the Company may determine (or at such time and date to which
payment and delivery shall have been postponed pursuant to Section 11 hereof),
such time and date of payment and delivery being herein called the "Closing
Date;" PROVIDED, HOWEVER, that if the Company has not made available to the
Representatives copies of the Prospectus within the time provided in Section
4(4) hereof, the Representatives may, in their sole discretion, postpone the
Closing Date until no later than two (2) full business days following delivery
of copies of the Prospectus to the Representatives. The certificates for the
Firm Shares to be so delivered will be made available to you at such office or
such other location including, as you may reasonably request for checking at
least one (1) full business day prior to the Closing Date and will be in such
names and denominations as you may request, such request to be made at least two
(2) full business days prior to the Closing Date. If the Representatives so
elect, delivery of the Firm Shares may be made by credit through full fast
transfer to the accounts at The Depository Trust Company designated by the
Representatives.
It is understood that you, individually, and not as the Representatives
of the several Underwriters, may (but shall not be obligated to) make payment of
the purchase price on behalf of any Underwriter or Underwriters whose check or
checks shall not have been received by you prior to the Closing Date for the
Firm Shares to be purchased by such Underwriter or Underwriters. Any
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<PAGE> 13
such payment by you shall not relieve any such Underwriter or Underwriters of
any of its or their obligations hereunder.
After the Registration Statement becomes effective, the several
Underwriters intend to make a public offering (as such term is described in
Section 11 hereof) of the Firm Shares at a public offering price of $_____ per
share.
4. FURTHER AGREEMENTS OF THE COMPANY.
The Company covenants and agrees with each of Underwriters that:
(1) The Company will use its best efforts to cause the
Registration Statement and any amendment thereof, if not effective at the time
and date that this Agreement is executed and delivered by the parties hereto, to
become effective as promptly as possible. The Company will use its best efforts
to cause any 462 Registration Statement as may be required subsequent to the
date the Registration Statement is declared effective to become effective as
promptly as possible. The Company will notify you, promptly after it shall
receive notice thereof, of the time when the Registration Statement, any
subsequent amendment to the Registration Statement or any 462 Registration
Statement has become effective or any supplement to the Prospectus has been
filed. If the Company omitted information from the Registration Statement at the
time it was originally declared effective in reliance upon Rule 430A(a) of the
Rules and Regulations, the Company will provide evidence satisfactory to you
that the Prospectus contains such information and has been filed, within the
time period prescribed, with the Commission pursuant to subparagraph (1) or (4)
of Rule 424(b) of the Rules and Regulations or as part of a post-effective
amendment to such Registration Statement as originally declared effective which
is declared effective by the Commission. If the Company files a term sheet
pursuant to Rule 434 of the Rules and Regulations, the Company will provide
evidence satisfactory to you that the Prospectus and term sheet meeting the
requirements of Rule 434(b) or (c), as applicable, of the Rules and Regulations
have been filed, within the time period prescribed, with the Commission pursuant
to subparagraph (7) of Rule 424(b) of the Rules and Regulations. If for any
reason the filing of the final form of Prospectus is required under Rule
424(b)(3) of the Rules and Regulations, it will provide evidence satisfactory to
you that the Prospectus contains such information and has been filed with the
Commission within the time period prescribed. The Company will notify you
promptly of any request by the Commission for the amending or supplementing of
the Registration Statement or the Prospectus or for additional information.
Promptly upon your request, the Company will prepare and file with the
Commission any amendments or supplements to the Registration Statement or
Prospectus which, in the opinion of counsel for the several Underwriters
("Underwriters' Counsel"), may be necessary or advisable in connection with the
distribution of the Shares by the Underwriters. The Company will promptly
prepare and file with the Commission, and promptly notify you of the filing of,
any amendments or supplements to the Registration Statement or Prospectus which
may be necessary to correct any statements or omissions, if, at any time when a
prospectus relating to the Shares is required to be delivered under the Act, any
event shall have occurred as a result of which the Prospectus or any other
prospectus relating to the Shares as then in effect would include any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading. In case any Underwriter is required to deliver a
prospectus nine (9) months or more after the effective date of the
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<PAGE> 14
Registration Statement in connection with the sale of the Shares, it will
prepare promptly upon request, but at the expense of such Underwriter, such
amendment or amendments to the Registration Statement and such prospectus or
prospectuses as may be necessary to permit compliance with the requirements of
Section 10(a)(3) of the Act. The Company will file no amendment or supplement to
the Registration Statement or Prospectus which shall not previously have been
submitted to you a reasonable time prior to the proposed filing thereof or to
which you shall reasonably object in writing, subject, however, to compliance
with the Act and the Rules and Regulations and the provisions of this Agreement.
(2) The Company will advise you, promptly after it shall
receive notice or obtain knowledge, of the issuance of any stop order by the
Commission suspending the effectiveness of the
Registration Statement or of the initiation or threat of any proceeding for that
purpose; and it will promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal at the earliest possible moment if
such stop order should be issued.
(3) The Company will arrange for qualification (including by
providing full cooperation with Underwriter's Counsel, whose services in this
matter are required and which you and the Company will seek to expedite) of the
Shares for offering and sale under the securities laws of such jurisdictions as
you may designate and to continue such qualifications in effect for so long as
may be required for purposes of the distribution of the Shares, PROVIDED,
HOWEVER, that the Company shall not be required in connection therewith or as a
condition thereof to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction in which it is not otherwise
required to be so qualified or to so execute a general consent to service of
process. In each jurisdiction in which the Shares shall have been qualified as
above provided, the Company will make and file such statements and reports in
each year as are or may be required by the laws of such jurisdiction for such
purpose.
(4) The Company will furnish to you, as soon as available,
and, in the case of the Prospectus and any term sheet or abbreviated term sheet
under Rule 434, in no event later than the first full business day following the
first day that Shares are traded, copies of each Registration Statement (two of
which will be signed and which will include all exhibits), each Preliminary
Prospectus, the Prospectus and any amendments or supplements to such documents,
including any prospectus prepared to permit compliance with Section 10(a)(3) of
the Act, all in such quantities as you may from time to time reasonably request.
Notwithstanding the foregoing, if the Representatives, on behalf of the several
Underwriters, shall agree to the utilization of Rule 434 of the Rules and
Regulations, the Company shall provide to you copies of a Preliminary Prospectus
updated in all respects through the date specified by you in such quantities as
you may from time to time reasonably request.
(5) The Company will make generally available to its
securityholders as soon as practicable, but in any event not later than the
forty-fifth (45th) day following the end of the fiscal quarter first occurring
after the first anniversary of the effective date of the Registration Statement,
an earnings statement (which will be in reasonable detail but need not be
audited) complying with the provisions of Section 11(a) of the Act and covering
a twelve (12) month period beginning after the effective date of the
Registration Statement.
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<PAGE> 15
(6) During a period of five (5) years after the date hereof,
the Company will furnish to its shareholders as soon as practicable after the
end of each respective period, annual reports (including financial statements
audited by independent certified public accountants) and, upon request by a
shareholder, unaudited quarterly reports of operations for each of the first
three quarters of the fiscal year, and will furnish to you and the other several
Underwriters hereunder, upon request (i) concurrently with furnishing such
reports to its shareholders, statements of operations of the Company for each of
the first three (3) quarters in the form furnished to the Company's
shareholders, (ii) concurrently with furnishing to its shareholders, a balance
sheet of the Company as of the end of such fiscal year, together with statements
of operations, of shareholders' equity, and of cash flows of the Company for
such fiscal year, accompanied by a copy of the certificate or report thereon of
independent certified public accountants, (iii) as soon as they are available,
copies of all reports (financial or other) mailed to shareholders, (iv) as soon
as they are available, copies of all reports and financial statements furnished
to or filed with the Commission, any securities exchange or the NASD, (v) every
material press release and every material news item or article in respect of the
Company or its affairs which was generally released to shareholders or prepared
by the Company, and (vi) any additional information of a public nature
concerning the Company, or its business which you may reasonably request. During
such five (5) year period, if the Company shall have active subsidiaries, the
foregoing financial statements shall be on a consolidated basis to the extent
that the accounts of the Company and such subsidiaries are consolidated, and
shall be accompanied by similar financial statements for any significant
subsidiary which is not so consolidated.
(7) The Company will apply the net proceeds from the sale of
the Shares being sold by it in the manner set forth under the caption "Use of
Proceeds" in the Prospectus.
(8) The Company will maintain a transfer agent and, if
necessary under the jurisdiction of incorporation of the Company, a registrar
(which may be the same entity as the transfer agent) for its Common Stock.
(9) If at any time during the ninety (90) day period after the
Registration Statement becomes effective, any rumor, publication or event
relating to or affecting the Company shall occur as a result of which in your
opinion the market price of the Common Stock has been or is likely to be
materially affected (regardless of whether such rumor, publication or event
necessitates a supplement to or amendment of the Prospectus), the Company will,
after written notice from you advising the Company to the effect set forth
above, forthwith consult with you concerning the substance of and whether to
disseminate a press release or other public statement, commenting on such rumor,
publication or event.
(10) During the Lock-up Period, the Company will not, without
the prior written consent of the Representatives, effect the Disposition of,
directly or indirectly, any Securities other than the sale of the Firm Shares
and the Option Shares hereunder and the Company's issuance of options or Common
Stock under the Company's presently authorized stock option and stock purchase
plans described in the Registration Statement and the Prospectus.
(11) The Company will cause the Securities to be included for
quotation on Nasdaq following the Firm Closing Date.
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<PAGE> 16
5. EXPENSES.
(a) The Company agrees with each Underwriter that:
(1) The Company will pay and bear all costs and expenses in
connection with the preparation, printing and filing of the Registration
Statement (including financial statements, schedules and exhibits), Preliminary
Prospectuses and the Prospectus and any amendments or supplements thereto; the
printing of this Agreement, the Agreement Among Underwriters, the Selected
Dealer Agreement, all Blue Sky filing fees and related expenses, the
Underwriters' Questionnaire and Power of Attorney, and any instruments related
to any of the foregoing; the issuance and delivery of the Shares hereunder to
the several Underwriters, including transfer taxes, if any, the cost of all
certificates representing the Shares and transfer agents' and registrars' fees;
the fees and disbursements of counsel for the Company; all fees and other
charges of the Company's independent certified public accountants; the cost of
furnishing to the several Underwriters copies of the Registration Statement
(including appropriate exhibits), Preliminary Prospectus and the Prospectus, and
any amendments or supplements to any of the foregoing; NASD filing fees and the
cost of qualifying the Shares under the laws of such jurisdictions as you may
designate (including filing fees and fees and disbursements of Underwriters'
Counsel in connection with such NASD filings and Blue Sky qualifications); and
all other expenses directly incurred by the Company in connection with the
performance of its obligations hereunder. The provisions of this Section 5(a)(i)
are intended to relieve the Underwriters from the payment of the expenses and
costs which the Company hereby agrees to pay.
(2) In addition to its other obligations under Section 8(a)
hereof, the Company agrees that, as an interim measure during the pendency of
any claim, action, investigation, inquiry or other proceeding described in
Section 8(a) hereof, it will reimburse the Underwriters on a monthly basis for
all reasonable legal or other expenses incurred in connection with investigating
or defending any such claim, action, investigation, inquiry or other proceeding,
notwithstanding the absence of a judicial determination as to the propriety and
enforceability of the Company's obligation to reimburse the Underwriters for
such expenses and the possibility that such payments might later be held to have
been improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Underwriters
shall promptly return such payment to the Company together with interest,
compounded daily, determined on the basis of the prime rate (or other commercial
lending rate for borrowers of the highest credit standing) listed from time to
time in The Wall Street Journal which represents the base rate on corporate
loans posted by a substantial majority of the nation's thirty (30) largest banks
(the "Prime Rate"). Any such interim reimbursement payments which are not made
to the Underwriters within thirty (30) days of a request for reimbursement shall
bear interest at the Prime Rate from the date of such request.
(b) In addition to their other obligations under Section 8(b) hereof,
the Underwriters severally and not jointly agree that, as an interim measure
during the pendency of any claim, action, investigation, inquiry or other
proceeding described in Section 8(b) hereof, they will reimburse the Company on
a monthly basis for all reasonable legal or other expenses incurred in
connection with investigating or defending any such claim, action,
investigation, inquiry or other proceeding, notwithstanding the absence of a
judicial determination as to the propriety and
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<PAGE> 17
enforceability of the Underwriters' obligation to reimburse the Company for such
expenses and the possibility that such payments might later be held to have been
improper by a court of competent jurisdiction. To the extent that any such
interim reimbursement payment is so held to have been improper, the Company
shall promptly return such payment to the Underwriters together with interest,
compounded daily, determined on the basis of the Prime Rate. Any such interim
reimbursement payments which are not made to the Company within thirty (30) days
of a request for reimbursement shall bear interest at the Prime Rate from the
date of such request.
(c) It is agreed that any controversy arising out of the operation of
the interim reimbursement arrangements set forth in Sections 5(a)(2) and 6(b)
hereof, including the amounts of any requested reimbursement payments, the
method of determining such amounts and the basis on which such amounts shall be
apportioned among the reimbursing parties, shall be settled by arbitration
conducted under the provisions of the Constitution and Rules of the Board of
Governors of the New York Stock Exchange, Inc. or pursuant to the Code of
Arbitration Procedure of the NASD. Any such arbitration must be commenced by
service of a written demand for arbitration or a written notice of intention to
arbitrate, therein electing the arbitration tribunal. In the event the party
demanding arbitration does not make such designation of an arbitration tribunal
in such demand or notice, then the party responding to said demand or notice is
authorized to do so. Any such arbitration will be limited to the operation of
the interim reimbursement provisions contained in Sections 5(a)(2) and 6(b)
hereof and will not resolve the ultimate propriety or enforceability of the
obligation to indemnify for expenses which is created by the provisions of
Sections 8(a) and 8(b) hereof or the obligation to contribute to expenses which
is created by the provisions of Section 8(d) hereof.
6. CONDITIONS OF UNDERWRITERS' OBLIGATIONS.
The obligations of the several Underwriters to purchase and pay for the
Shares as provided herein shall be subject to the accuracy, as of the date
hereof and the Closing Date and any later date on which Option Shares are to be
purchased, as the case may be, of the representations and warranties of the
Company herein, to the performance by the Company of its obligations hereunder
and to the following additional conditions:
(a) The Registration Statement shall have become effective not later
than 11:00 A.M., Eastern Standard Time, on the date following the date of this
Agreement, or such later date and time as shall be consented to in writing by
you; and no stop order suspending the effectiveness thereof shall have been
issued and no proceedings for that purpose shall have been initiated or, to the
knowledge of the Company or any Underwriter, threatened by the Commission, and
any request of the Commission for additional information (to be included in the
Registration Statement or the Prospectus or otherwise) shall have been complied
with to the satisfaction of Underwriters' Counsel.
(b) All corporate proceedings and other legal matters in connection
with this Agreement, the form of Registration Statement and the Prospectus, and
the registration, authorization, issue, sale and delivery of the Shares, shall
have been satisfactory to Underwriters' Counsel, and such counsel shall have
been furnished with such papers and information as they may have requested to
enable them to pass upon the matters referred to in this Section.
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<PAGE> 18
(c) Subsequent to the execution and delivery of this Agreement and
prior to the Closing Date, or any later date on which Option Shares are to be
purchased, as the case may be, there shall not have been any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus.
(d) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, the following
opinion of Foley, Hoag & Eliot LLP, counsel for the Company, dated the Closing
Date or such later date on which Option Shares are to be purchased, as the case
may be, addressed to the Underwriters and with reproduced copies or signed
counterparts thereof for each of the Underwriters, to the effect that:
(1) Each of the Company and its Subsidiaries has been duly
incorporated and are validly existing as corporations in good standing under the
laws of the jurisdiction of their incorporation;
(2) Each of the Company and its Subsidiaries has the corporate
power and authority to own, lease and operate its properties and to conduct its
business as described in the Registration Statement and the Prospectus;
(3) Each of the Company and its Subsidiaries is duly qualified
to do business as a foreign corporation and is in good standing in Delaware, New
York and Rhode Island;
(4) Based on a review of the Minute Book and in reliance on
statements of officers duly set forth in certificates attached to the opinion,
the authorized, capital stock of the Company is as set forth in the Prospectus
under the caption "Capitalization" as of the dates stated therein; the issued
and outstanding shares of capital stock of the Company have been duly and
validly issued and are fully paid and nonassessable, and will not have been
issued in violation of the Company's charter or bylaws or in violation of or
subject to any preemptive right, co-sale right, registration right, right of
first refusal or other similar right, and all sales of the Company's capital
stock were exempt from the registration or qualification requirements of the Act
and state securities laws. The Company's outstanding options of the Company as
described in the Prospectus have been duly authorized and shares of Common Stock
have been reserved for issuance pursuant to the terms of the Company's 1996
Stock Plan or 1999 Stock Option Plan;
(5) The Firm Shares or the Option Shares, as the case may be,
to be issued by the Company pursuant to the terms of this Agreement have been
duly authorized and, upon issuance and delivery against payment therefor in
accordance with the terms hereof, will be duly and validly issued and fully paid
and nonassessable and will not have been issued in violation of or subject to
any preemptive right, co-sale right, registration right, right of first refusal
or, to the best of such counsel's knowledge, other similar right contained in
the Company's charter or bylaws or in any other agreement or contract to which
the Company is a party; and the forms of certificates evidencing the Shares
comply with Delaware law;
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<PAGE> 19
(6) The Company has the corporate power and authority to enter
into this Agreement and to issue, sell and deliver to the Underwriters the
Shares to be issued and sold by it hereunder;
(7) Each of this Agreement, the Warrant Agreement and the
Consulting Agreement has been duly authorized by all necessary corporate action
on the part of the Company and has been duly executed and delivered by the
Company and, assuming due authorization, execution and delivery by you, is a
valid and binding agreement of the Company, enforceable in accordance with its
terms, except insofar as indemnification and contribution provisions may be
limited by applicable law and except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or affecting creditors' rights generally or by general equitable principles;
(8) The Registration Statement has become effective under the
Act and no stop order suspending the effectiveness of the Registration Statement
has been issued and no proceedings for that purpose have been instituted or are
pending or, to such counsel's knowledge, threatened under the Act;
(9) The Registration Statement and the Prospectus, and each
amendment or supplement thereto (other than the financial statements (including
supporting schedules), financial data derived therefrom and other financial and
statistical information included therein as to which such counsel need express
no opinion), as of the effective date of the Registration Statement, complied as
to form in all material respects with the requirements of the Act and the
applicable Rules and Regulations;
(10) The information in the Prospectus under the caption
"Description of Capital Stock," the information in the Prospectus concerning the
number of shares of common stock which are restricted shares under the
Securities Act of 1933, the number of restricted shares eligible for sale in the
public market beginning March 5, 2000 and the date when all restricted shares
will be available for sale in the public market described under the caption
"RISK FACTORS - Future sales of common stock by existing security holders could
depress the market price for the common stock." and the information in the
Prospectus under the caption "Business--Legal Proceedings," to the extent that
it constitutes matters of law or legal conclusions, has been reviewed by such
counsel and is a fair summary of such matters and conclusions;
(11) The description in the Registration Statement and the
Prospectus of the charter and bylaws of the Company and of statutes fairly
present in all material respects the information required to be presented by the
Act and the applicable Rules and Regulations;
(12) The performance of this Agreement and the consummation of
the transactions herein contemplated (other than performance of the Company's
indemnification obligations hereunder, concerning which no opinion need be
expressed) will not (a) result in any violation of the charter or bylaws of the
Company or any of its Subsidiaries or (b) to our knowledge, conflict with or
result in a breach or violation of any of the terms and provisions of, or
constitute a default under, any bond, debenture, note or other evidence of
indebtedness, or any lease, contract, indenture, mortgage, deed of trust, loan
agreement, joint venture or other agreement or instrument to
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<PAGE> 20
which the Company or any of its Subsidiaries is a party or by which its
properties are bound, or any applicable statute, rule or regulation generally
applicable to transactions of the type contemplated hereunder or any order, writ
or decree of any court, government or governmental agency or body having
jurisdiction over the Company or any of its properties or operations which such
breach, conflict, violation or default is reasonably likely to have a Material
Adverse Effect;
(13) No consent, approval, authorization or order of or
qualification with any court, government or governmental agency or body having
jurisdiction over the Company or any of its Subsidiaries or any of the Company's
or its Subsidiaries' properties or operations is necessary in connection with
the consummation by the Company of the transactions herein contemplated, except
such as have been obtained under the Act or such as may be required under state
or other securities or Blue Sky laws in connection with the purchase and the
distribution of the Shares by the Underwriters;
(14) To such counsel's knowledge, each of Company and its
Subsidiaries is not in violation of its respective charter or bylaws.
(15) Except as set forth in the Registration Statement and
Prospectus, no holders of Common Stock or other securities of the Company have
registration rights with respect to securities of the Company and, except as set
forth in the Registration Statement and Prospectus, all holders of securities of
the Company having rights to registration of such shares of Common Stock or
other securities, because of the filing of the Registration Statement by the
Company, have, with respect to the offering contemplated hereby and thereby,
entered into the Lock-up Agreements;
(16) Except as set forth in the Registration Statement and the
Prospectus, there is no actual or, to the knowledge of such counsel, threatened
action, suit, claim or proceeding relating to patents, patent rights or
licenses, trademarks or trademark rights, copyrights, collaborative research,
licenses or royalty arrangements or agreements or trade secrets, know-how or
proprietary techniques or technology, including, processes and substances, owned
by or affecting the business operations of the Company or any of its
Subsidiaries which are pending or threatened against the Company or any of its
Subsidiaries and which action, suit, claim or proceeding would, with respect to
any of the foregoing, have a Material Adverse Effect; and
(17) If the Company elects to rely on Rule 434, the Prospectus
is not "materially different," as such term is used in Rule 434, from the
prospectus included in the Registration Statement at the time of its
effectiveness or an effective post-effective amendment thereto (including such
information that is permitted to be omitted pursuant to Rule 430A).
In addition, such counsel shall state that such counsel has acted as
outside corporate legal counsel to the Company and participated in conferences
with officials and other representatives of the Company, the Representatives,
Underwriters' Counsel and the independent certified public accountants of the
Company, at which such conferences the contents of the Registration Statement
and Prospectus and related matters were discussed, and although they have not
verified the accuracy or completeness of the statements contained in the
Registration Statement or the Prospectus, nothing has come to the attention of
such counsel which leads such counsel to believe that, at the time the
Registration Statement became effective and at all times subsequent thereto up
to and on the Closing
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<PAGE> 21
Date and on any later date on which Option Shares are to be purchased, the
Registration Statement and any amendment or supplement thereto (other than the
financial statements including supporting schedules, other financial information
derived therefrom and other financial and statistical information included
therein, as to which such counsel need express no opinion) contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not misleading, or at
the Closing Date or any later date on which the Option Shares are to be
purchased, as the case may be, the Registration Statement, the Prospectus and
any amendment or supplement thereto (except as aforesaid) contained any untrue
statement of a material fact or omitted to state a material fact necessary to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
Counsel rendering the foregoing opinion may rely, as to matters of
fact, to the extent such counsel deems proper, upon certificates of responsible
officers of the Company, of the Company's transfer agent and of government
officials, in which case their opinion is to state that they are so relying and
that they have no knowledge of any material misstatement or inaccuracy in any
such opinion, representation or certificate. References to the Registration
Statement and the Prospectus in this subsection (d) shall include any amendment
or supplement thereto at the date of such opinion. Copies of any opinion,
representation or certificate so relied upon shall be delivered to you, as
Representatives of the Underwriters, and to Underwriters' Counsel.
(e) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, an opinion of
Nutter, McClennen & Fish LLP, in form and substance reasonably satisfactory to
you, with respect to the sufficiency of all such corporate proceedings and other
legal matters relating to this Agreement and the transactions contemplated
hereby as you may reasonably require, and the Company shall have furnished to
such counsel such documents as they may have requested for the purpose of
enabling them to pass upon such matters.
(f) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a letter, or
letters from Radin, Glass, addressed to the Underwriters, dated the Closing Date
or such later date on which Option Shares are to be purchased, as the case may
be (in each case, the "Bring Down Letter"), confirming that they are independent
certified public accountants with respect to the Company within the meaning of
the Act and the applicable published Rules and Regulations and based upon the
procedures described in the letter delivered to you concurrently with the
execution of this Agreement (herein called the "Original Letter"), dated the
date hereof, or such later date on which Option Shares are to be purchased, as
the case may be, (i) confirming, to the extent true, that the statements and
conclusions set forth in the Original Letter are accurate as of the Closing Date
or such later date on which Option Shares are to be purchased, as the case may
be, and (ii) setting forth any revisions and additions to the statements and
conclusions set forth in the Original Letter that are necessary to reflect any
changes in the facts described in the Original Letter since its date, or to
reflect the availability of more recent financial statements, data or
information. The Bring Down Letter shall not disclose any change in the
condition (financial or otherwise), earnings, operations, business or business
prospects of the Company from that set forth in the Registration Statement or
Prospectus, which, in your sole judgment, is material and adverse and that makes
it, in your sole judgment, impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the Prospectus.
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The Original Letter from Radin, Glass shall be addressed to or for the use of
the Underwriters and the Company's Board of Directors in form and substance
satisfactory to the Underwriters and shall (i) represent, to the extent true,
that they are independent certified public accountants with respect to the
Company within the meaning of the Act and the applicable published Rules and
Regulations, (ii) set forth their opinion with respect to their examination of
the balance sheets of the Company as of June 30, 1999 and June 30, 1998,
respectively and related statements of operations, changes in shareholders'
equity (deficit) and cash flows for the twelve (12) months ended June 30, 1999,
June 30, 1998, June 30, 1997, respectively, (iii) state that Radin, Glass has
performed the procedures set out in Statement on Auditing Standards No. 71 ("SAS
71") for a review of interim financial information and providing the report of
Radin, Glass as described in SAS 71 on the financial statements for the periods
ended September 30, 1999, (the "Quarterly Financial Statements"), (iv) state
that in the course of such review, nothing came to their attention that leads
them to believe that any material modifications need to be made to any of the
Quarterly Financial Statements in order for them to be in compliance with
generally accepted accounting principles consistently applied across the periods
presented, (v) state that nothing came to their attention that caused them to
believe that the financial statements included in the Registration Statement and
Prospectus do not comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X and that any adjustments
thereto have not been properly applied to the historical amounts in the
compilation of such statements, and (vi) address other matters agreed upon by
Radin, Glass and you. In addition, you shall have received from Radin, Glass a
letter addressed to the Company and made available to you for the use of the
Underwriters stating that their review of the Company's system of internal
accounting controls, to the extent they deemed necessary in establishing the
scope of their examination of the Company's financial statements as of June 30,
1999, June 30, 1998 and June 30, 1997, and as of September 30, 1999 did not
disclose any weaknesses in internal controls that they considered to be material
weaknesses.
(g) You shall have received on the Closing Date and on any later date
on which Option Shares are to be purchased, as the case may be, a certificate of
the Company, dated the Closing Date or such later date on which Option Shares
are to be purchased, as the case may be, signed by the Chief Executive Officer
and Chief Financial Officer of the Company, to the effect that, and you shall be
satisfied that:
(1) The representations and warranties of the Company in this
Agreement are true and correct in all material respects, as if made on and as of
the Closing Date and such later date on which Option Shares are to be purchased,
as the case may be, and the Company has complied with all the agreements and
satisfied all the conditions on its part to be performed or satisfied at or
prior to the Closing Date or any later date on which Option Shares are to be
purchased, as the case may be;
(2) No stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that purpose have
been instituted or are pending or threatened under the Act;
(3) When the Registration Statement became effective and at
all times subsequent thereto up to the delivery of such certificate, the
Registration Statement and the Prospectus, and any amendments or supplements
thereto, contained all material information required
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<PAGE> 23
to be included therein by the Act and the Rules and Regulations, and in all
material respects conformed to the requirements of the Act and the Rules and
Regulations, the Registration Statement, and any amendment or supplement
thereto, did not and does not include any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, the Prospectus, and any amendment or
supplement thereto, did not and does not include any untrue statement of a
material fact or omit to state a material fact necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and, since the effective date of the Registration Statement, there
has occurred no event required to be set forth in an amended or supplemented
Prospectus which has not been so set forth; and
(4) Subsequent to the respective dates as of which information
is given in the Registration Statement and Prospectus, there has not been (a)
any material adverse change in the condition (financial or otherwise), earnings,
operations, business or business prospects of the Company
or any of its Subsidiaries, (b) any transaction that is material to the Company
or any of its Subsidiaries, except transactions entered into in the ordinary
course of business, (c) any obligation, direct or contingent, that is material
to the Company or any of its Subsidiaries, incurred by the Company or any of its
Subsidiaries, except obligations incurred in the ordinary course of business,
(d) any change in the capital stock or outstanding indebtedness of the Company
or any of its Subsidiaries that is material to the Company or such Subsidiary or
is out of the ordinary course of business of the Company or such Subsidiary ,
(e) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company, or (f) any loss or damage (whether or not insured)
to the property of the Company which has been sustained or will have been
sustained which has a Material Adverse Effect.
(h) The Company shall have obtained and delivered to you a Lock-up
Agreement in the form attached hereto as Exhibit __ from each officer and
director of the Company and each person set forth on Schedule 1 attached hereto.
(i) The Company shall have furnished to you such further certificates
and documents as you shall reasonably request (including certificates of
officers of the Company) as to the accuracy of the representations and
warranties of the Company herein, as to the performance by the Company of its
obligations hereunder and as to the other conditions concurrent and precedent to
the obligations of the Underwriters hereunder.
(j) The Company and CRI shall have executed the Warrant Agreement. The
Warrant Agreement shall provide that the Company shall sell to CRI, for its own
account, five-year, non-transferable (with certain limited exceptions set forth
in the Warrant Agreement) warrants to purchase from the Company 300,000 shares
of common stock (the "Warrants"). The Warrants will be purchased by CRI for an
aggregate purchase price of $250, will not be exercisable until one year after
the Closing Date and will thereafter be exercisable at a per share price equal
to 120% of the public offering price. The Warrant Agreement shall provide, upon
customary terms and conditions and as more particularly described therein,
antidilution provisions and the following registration rights:
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<PAGE> 24
(1) DEMAND REGISTRATION AT COMPANY'S EXPENSE. On one occasion,
at the Company's expense and upon the request of the holders of a majority of
the Warrants or the common stock issuable thereunder, as the case may be, the
Company shall register under the Act the Warrants and/or the common stock
issuable thereunder. This registration right shall become exercisable commencing
on the first anniversary following the Closing Date and shall terminate on the
fifth anniversary following the Closing Date.
(2) PIGGYBACK REGISTRATION RIGHTS. If the Company proposes to
register any securities under the Act, then the Company shall, at the request of
any holders of Warrants or the common stock issuable thereunder, use the
Company's best efforts to register such Warrants or shares or common stock
issuable thereunder. This registration rights shall become exercisable
commencing on the first anniversary following the Closing Date and shall
terminate on the fifth anniversary following the Closing Date.
(3) OTHER REGISTRATION RIGHTS. In addition, at the holders'
expense and upon the request of the holders of the Warrants or the common stock
issuable hereunder, as the case may be, the
Company shall cooperate with the holders in preparing and signing a Registration
Statement needed to register the Warrants and/or the common stock issuable
thereunder under the Act.
(k) The Company and CRI shall have executed the Consulting Agreement.
(l) The Company shall have secured Director and Officer Liability
Insurance in an amount and from an insurer reasonably satisfactory to the
Representatives, provided that the amount of coverage shall not exceed that
which is customary for companies of comparable size and in the same industry as
the Company.
(m) Effective as of the Company's annual meeting of shareholders for
the year ended June 30, 2000, the Company's management will propose a slate of
directors which will at all times permit the Company's Board of Directors to
include at least three independent directors.
All such opinions, certificates, letters and documents will be in
compliance with the provisions hereof only if they are satisfactory to
Underwriters' Counsel. The Company will furnish you with such number of
conformed copies of such opinions, certificates, letters and documents as you
shall reasonably request.
7. OPTION SHARES.
(a) On the basis of the representations, warranties and agreements
herein contained, but subject to the terms and conditions herein set forth, the
Company hereby grants to the several Underwriters, for the purpose of covering
over-allotments in connection with the distribution and sale of the Firm Shares
only, a nontransferable option to purchase up to an aggregate of 450,000 Option
Shares at the purchase price per share for the Firm Shares set forth in Section
4 hereof (the "Option"). The Option may be exercised by the Representatives on
behalf of the several Underwriters on one (1) or more occasions in whole or in
part during the period of forty-five (45) days after the date on which the Firm
Shares are initially offered to the public by giving written
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notice (the "Option Notice") to the Company. The number of Option Shares to be
purchased by each Underwriter upon the exercise of the Option shall be the same
proportion of the total number of Option Shares to be purchased by the several
Underwriters pursuant to the exercise of the Option as the number of Firm Shares
purchased by such Underwriter (set forth in Schedule A hereto) bears to the
total number of Firm Shares purchased by the several Underwriters (set forth in
Schedule A hereto), adjusted by the Representatives in such manner as to avoid
fractional shares.
Delivery of definitive certificates for the Option Shares to
be purchased by the several Underwriters pursuant to the exercise of the Option
granted by this Section 7 shall be made against payment of the purchase price
therefor by the several Underwriters by certified or official bank check or
checks drawn in same day funds, payable to the order of the Company or by wire
transfer in same day funds. In the event of any breach of the foregoing, the
Company shall reimburse the Underwriters for the interest lost and any other
expenses borne by them by reason of such breach. Such delivery and payment shall
take place at the offices of Nutter, McClennen &Fish, LLP, One International
Place, Boston, Massachusetts or at such other place as may be agreed upon
between the Representatives and the Company (i) on the Closing Date, if written
notice of the exercise of such option is received by the Company at least two
(2) full business days prior to the Closing Date, or (ii) on a date which shall
not be later than the third (3rd) full business day following the date the
Company receives written Notice of the Option, if such notice is received by the
Company after the date two (2) full business days prior to the Closing Date.
The certificates for the Option Shares to be so delivered will be made
available to you at such office or such other location, as you may reasonably
request for checking at least one (1) full business day prior to the date of
payment and delivery and will be in such names and denominations as you may
request, such request to be made at least two (2) full business days prior to
such date of payment and delivery. If the Representatives so elect, delivery of
the Option Shares may be made by credit through full fast transfer to the
accounts at The Depository Trust Company designated by the Representatives.
It is understood that each of you, individually, and not as the
Representatives of the several Underwriters, may (but shall not be obligated to)
make payment of the purchase price on behalf of any Underwriter or Underwriters
whose check or checks shall not have been received by you prior to the date of
payment and delivery for the Option Shares to be purchased by such Underwriter
or Underwriters. Any such payment by you shall not relieve any such Underwriter
or Underwriters of any of its or their obligations hereunder.
(b) Upon exercise of any option provided for in Section 7(a) hereof,
the obligations of the several Underwriters to purchase such Option Shares will
be subject (as of the date hereof and as of the date of payment and delivery for
such Option Shares) to the accuracy of and compliance with the representations,
warranties and agreements of the Company herein, to the accuracy of the
statements of the Company and officers of the Company made pursuant to the
provisions hereof, to the performance by the Company of its obligations
hereunder, to the conditions set forth in Section 7 hereof, and to the condition
that all proceedings taken at or prior to the payment date in connection with
the sale and transfer of such Option Shares shall be satisfactory in form and
substance to you and to Underwriters' Counsel, and you shall have been furnished
with all such documents, certificates and opinions as you may request in order
to evidence the accuracy and
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<PAGE> 26
completeness of any of the representations, warranties or statements, the
performance of any of the covenants or agreements of the Company or the
satisfaction of any of the conditions herein contained.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) The Company agrees to indemnify and hold harmless each Underwriter,
and each person, if any, who controls any Underwriter within the meaning of the
Act or the Exchange Act, against any losses, claims, damages or liabilities,
joint or several, to which such Underwriter or such controlling person may
become subject (including, without limitation, in its capacity as an Underwriter
or as a "qualified independent underwriter" within the meaning of Schedule E of
the Bylaws of the NASD), under the Act, the Exchange Act or otherwise,
specifically including, but not limited to, losses, claims, damages or
liabilities (or actions in respect thereof) arising out of or based upon (i) any
breach of any representation, warranty, agreement or covenant of the Company
herein contained, (ii) any untrue statement or alleged untrue statement of any
material fact contained in the Registration Statement or any amendment or
supplement thereto, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, (iii) any untrue statement or alleged untrue statement
of any material fact contained in any Preliminary Prospectus or the Prospectus
or any amendment or supplement thereto, or the omission or alleged omission to
state therein a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading, or
(iv) any untrue statement or alleged untrue statement of any material fact
contained in any audio or visual materials used in connection with the marketing
of the Securities and furnished by the Company, including without limitation,
slides, videos, films and tape recordings, and agrees to reimburse each
Underwriter for any legal or other expenses reasonably incurred by it in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage, liability or
action arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission made in the Registration Statement,
such Preliminary Prospectus or the Prospectus, or any such amendment or
supplement thereto, in reliance upon, and in conformity with, written
information relating to any Underwriter furnished to the Company by such
Underwriter, directly or through the Representatives, specifically for use in
the preparation thereof and, PROVIDED FURTHER, that the indemnity agreement
provided in this Section 8(a) with respect to any Preliminary Prospectus shall
not inure to the benefit of any Underwriter from whom the person asserting any
losses, claims, damages, liabilities or actions based upon any untrue statement
or alleged untrue statement of material fact or omission or alleged omission to
state therein a material fact purchased Shares, if a copy of the Prospectus in
which such untrue statement or alleged untrue statement or omission or alleged
omission was corrected had not been sent or given to such person within the time
required by the Act and the Rules and Regulations, unless such failure is the
result of noncompliance by the Company with Section 4(4) hereof. This indemnity
agreement shall be in addition to any liabilities which the Company may
otherwise have.
(b) Each Underwriter, severally and not jointly, agrees to indemnify
and hold harmless the Company against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Act or otherwise, specifically including, but not limited
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<PAGE> 27
to, losses, claims, damages or liabilities (or actions in respect thereof)
arising out of or based upon (i) any breach of any representation, warranty,
agreement or covenant of such Underwriter herein contained, (ii) any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement or any amendment or supplement thereto, or the omission
or alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, or (iii) any
untrue statement or alleged untrue statement of any material fact contained in
any Preliminary Prospectus or the Prospectus or any amendment or supplement
thereto, or the omission or alleged omission to state therein a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, in the case of subparagraphs (ii)
and (iii) of this Section 8(c) to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
made in reliance upon and in conformity with written information furnished to
the Company by such Underwriter, directly or through the Representatives,
specifically for use in the preparation thereof, and agrees to reimburse the
Company for any legal or other expenses reasonably incurred by the Company in
connection with investigating or defending any such loss, claim, damage,
liability or action.
The indemnity agreement in this Section 8(c) shall extend upon the same
terms and conditions to, and shall inure to the benefit of, each officer of the
Company who signed the Registration Statement and each director of the Company,
and each person, if any, who controls the Company within the meaning of the Act
or the Exchange Act. This indemnity agreement shall be in addition to any
liabilities which such Underwriter may otherwise have.
(c) Promptly after receipt by an indemnified party under this Section 8
of notice of the commencement of any action, such indemnified party shall, if a
claim in respect thereof is to be made against any indemnifying party under this
Section 8, notify the indemnifying party in writing of the commencement thereof,
but the omission so to notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise than under
this Section 8 except to the extent that it has been prejudiced by such
omission. In case any such action is brought against any indemnified party, and
it notified the indemnifying party of the commencement thereof, the indemnifying
party will be entitled to participate therein and, to the extent that it shall
elect by written notice delivered to the indemnified party promptly after
receiving the aforesaid notice from such indemnified party, to assume the
defense thereof, with counsel reasonably satisfactory to such indemnified party;
PROVIDED, HOWEVER, that if the defendants in any such action include both the
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be legal defenses available to it which
are different from or additional to those available to the indemnifying party,
the indemnified party or parties shall have the right to select separate counsel
to assume such legal defenses and to otherwise participate in the defense of
such action on behalf of such indemnified party or parties. Upon receipt of
notice from the indemnifying party to such indemnified party of the indemnifying
party's election so to assume the defense of such action and approval by the
indemnified party of counsel, the indemnifying party will not be liable to such
indemnified party under this Section 8 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless (i) the indemnified party shall have employed separate counsel in
accordance with the proviso to the next preceding sentence (it being understood,
however, that the indemnifying party
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<PAGE> 28
shall not be liable for the expenses of more than one separate counsel (together
with appropriate local counsel) approved by the indemnifying party representing
all the indemnified parties under Section 8(a), 8(b), or 8(c) hereof who are
parties to such action), (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after notice of commencement of the
action or (iii) the indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying party. In no event
shall any indemnifying party be liable in respect of any amounts paid in
settlement of any action unless the indemnifying party shall have approved the
terms of such settlement; PROVIDED that such consent shall not be unreasonably
withheld or delayed. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement of any pending or
threatened proceeding in respect of which any indemnified party is or could have
been a party and indemnification could have been sought hereunder by such
indemnified party, unless such settlement includes an unconditional release of
such indemnified party from all liability on all claims that are the subject
matter of such proceeding.
(d) In order to provide for just and equitable contribution in any
action in which a claim for indemnification is made pursuant to this Section 8
but it is judicially determined (by the entry of a final judgment or decree by a
court of competent jurisdiction and the expiration of time to appeal or the
denial of the last right of appeal) that such indemnification may not be
enforced in such case notwithstanding the fact that this Section 8 provides for
indemnification in such case, all the parties hereto shall contribute to the
aggregate losses, claims, damages or liabilities to which they may be subject
(after contribution from others) in such proportion so that the Underwriters
severally and not jointly are responsible pro rata for the portion represented
by the percentage that the underwriting discount bears to the public offering
price, and the Company is responsible for the remaining portion, PROVIDED,
HOWEVER, that (i) no Underwriter shall be required to contribute any amount in
excess of the amount by which the underwriting discount applicable to the Shares
purchased by such Underwriter exceeds the amount of damages which such
Underwriter has otherwise been required to pay and (ii) no person guilty of a
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who is not guilty of such
fraudulent misrepresentation. The contribution agreement in this Section 8(d)
shall extend upon the same terms and conditions to, and shall inure to the
benefit of, each person, if any, who controls any Underwriter or the Company
within the meaning of the Act or the Exchange Act and each officer of the
Company who signed the Registration Statement and each director of the Company.
(e) The parties to this Agreement hereby acknowledge that they are
sophisticated business persons who were represented by counsel during the
negotiations regarding the provisions hereof including, without limitation, the
provisions of this Section 8, and are fully informed regarding said provisions.
They further acknowledge that the provisions of this Section 8 fairly allocate
the risks in light of the ability of the parties to investigate the Company and
its business in order to assure that adequate disclosure is made in the
Registration Statement and Prospectus as required by the Act and the Exchange
Act.
9. REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS TO SURVIVE
DELIVERY.
All representations, warranties, covenants and agreements of the
Company and the Underwriters herein or in certificates delivered pursuant
hereto, and the indemnity and contribution
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agreements contained in Section 8 hereof shall remain operative and in full
force and effect regardless of any investigation made by or on behalf of any
Underwriter or any person controlling any Underwriter within the meaning of the
Act or the Exchange Act, or by or on behalf of the Company, or any of its
officers, directors or controlling persons within the meaning of the Act or the
Exchange Act, and shall survive the delivery of the Shares to the several
Underwriters hereunder or termination of this Agreement.
10. SUBSTITUTION OF UNDERWRITERS.
If any Underwriter or Underwriters shall fail to take up and pay for
the number of Firm Shares agreed by such Underwriter or Underwriters to be
purchased hereunder upon tender of such Firm Shares in accordance with the terms
hereof, and if the aggregate number of Firm Shares which such defaulting
Underwriter or Underwriters so agreed but failed to purchase does not exceed 10%
of the Firm Shares, the remaining Underwriters shall be obligated, severally in
proportion to their respective commitments hereunder, to take up and pay for the
Firm Shares of such defaulting Underwriter or Underwriters.
If any Underwriter or Underwriters so defaults and the aggregate number
of Firm Shares which such defaulting Underwriter or Underwriters agreed but
failed to take up and pay for exceeds 10% of the Firm Shares, the remaining
Underwriters shall have the right, but shall not be obligated, to take up and
pay for (in such proportions as may be agreed upon among them) the Firm Shares
which the defaulting Underwriter or Underwriters so agreed but failed to
purchase. If such remaining Underwriters do not, at the Closing Date, take up
and pay for the Firm Shares which the defaulting Underwriter or Underwriters so
agreed but failed to purchase, the Closing Date shall be postponed for
twenty-four (24) hours to allow the several Underwriters the privilege of
substituting within twenty-four (24) hours (including non-business hours)
another underwriter or underwriters (which may include any nondefaulting
Underwriter) satisfactory to the Company. If no such underwriter or underwriters
shall have been substituted as aforesaid by such postponed Closing Date, the
Closing Date may, at the option of the Company, be postponed for a further
twenty-four (24) hours, if necessary, to allow the Company the privilege of
finding another underwriter or underwriters, satisfactory to you, to purchase
the Firm Shares which the defaulting Underwriter or Underwriters so agreed but
failed to purchase. If it shall be arranged for the remaining Underwriters or
substituted underwriter or underwriters to take up the Firm Shares of the
defaulting Underwriter or Underwriters as provided in this Section 10, (i) the
Company shall have the right to postpone the time of delivery for a period of
not more than seven (7) full business days, in order to effect whatever changes
may thereby be made necessary in the Registration Statement or the Prospectus,
or in any other documents or arrangements, and the Company agrees promptly to
file any amendments to the Registration Statement, supplements to the Prospectus
or other such documents which may thereby be made necessary, and (ii) the
respective number of Firm Shares to be purchased by the remaining Underwriters
and substituted underwriter or underwriters shall be taken as the basis of their
underwriting obligation. If the remaining Underwriters shall not take up and pay
for all such Firm Shares so agreed to be purchased by the defaulting Underwriter
or Underwriters or substitute another underwriter or underwriters as aforesaid
and the Company shall not find or shall not elect to seek another underwriter or
underwriters for such Firm Shares as aforesaid, then this Agreement shall
terminate.
In the event of any termination of this Agreement pursuant to the
preceding paragraph of this Section 10, then, other than as set forth in the
Letter Agreement, the Company shall not be
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liable to any Underwriter (except as provided in Sections 5 and 8 hereof) nor
shall any Underwriter (other than an Underwriter who shall have failed,
otherwise than for some reason permitted under this Agreement, to purchase the
number of Firm Shares agreed by such Underwriter to be purchased hereunder,
which Underwriter shall remain liable to the Company and the other Underwriters
for damages, if any, resulting from such default) be liable to the Company
(except to the extent provided in Sections 5 and 8 hereof).
The term "Underwriter" in this Agreement shall include any person
substituted for an Underwriter under this Section 10.
11. EFFECTIVE DATE OF THIS AGREEMENT AND TERMINATION.
(a) This Agreement shall become effective at the earlier of (i) 9:30
A.M., Eastern Standard Time, on the first full business day following the
effective date of the Registration Statement, or (ii) the time of the public
offering of any of the Shares by the Underwriters after the Registration
Statement becomes effective. The time of the public offering shall mean the time
of the release by you, for publication, of the first newspaper advertisement
relating to the Shares, or the time at which the Shares are first generally
offered by the Underwriters to the public by letter, telephone, telegram or
telecopy, whichever shall first occur. By giving notice as set forth in Section
11 before the time this Agreement becomes effective, you, as Representatives of
the several Underwriters, or the Company, may prevent this Agreement from
becoming effective without liability of any party to any other party, except as
provided in Sections 4(9) and hereof.
(b) You, as Representatives of the several Underwriters, shall have the
right to terminate this Agreement by giving notice as hereinafter specified at
any time on or prior to the Closing Date or on or prior to any later date on
which Option Shares are to be purchased, as the case may be, (i) if the Company
shall have failed, refused or been unable to perform any agreement hereunder on
its part to be performed, or because any other condition of the Underwriters'
obligations hereunder required to be fulfilled is not fulfilled, including,
without limitation, any change in the condition (financial or otherwise),
earnings, operations, business or business prospects of the Company from that
set forth in the Registration Statement or Prospectus, which, in your sole
judgment, is material and adverse, or (ii) if additional governmental
restrictions, not in force and effect on the date hereof, shall have been
imposed upon trading in securities generally or minimum or maximum prices shall
have been generally established on the New York Stock Exchange or on the
American Stock Exchange or in the over the counter market by the NASD, or
trading in securities generally shall have been suspended on either such
exchange or in the over the counter market by the NASD, or if a banking
moratorium shall have been declared by federal, New York or California
authorities, or (iii) if the Company shall have sustained a loss by strike,
fire, flood, earthquake, accident or other calamity of such character as to
interfere materially with the conduct of the business and operations of the
Company regardless of whether or not such loss shall have been insured, or (iv)
if there shall have been a material adverse change in the general political or
economic conditions or financial markets as in your judgment makes it
inadvisable or impracticable to proceed with the offering, sale and delivery of
the Shares, or (v) if there shall have been an outbreak or escalation of
hostilities or of any other insurrection or armed conflict or the declaration by
the United States of a national emergency which, in the opinion of the
Representatives, makes it impracticable or inadvisable to proceed with the
public offering of the Shares as contemplated by the
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<PAGE> 31
Prospectus. In the event of termination pursuant to subparagraph (i) above, the
Company shall remain obligated to pay costs and expenses pursuant to Sections
5(a)(1) and 8 hereof. Any termination pursuant to any of subparagraphs (ii)
through (v) above shall be without liability of any party to any other party
except as provided in Sections 5(a)(1), and 8 hereof.
If you elect to prevent this Agreement from becoming effective or to
terminate this Agreement as provided in this Section 11, you shall promptly
notify the Company by telephone, telecopy or telegram, in each case confirmed by
letter. If the Company shall elect to prevent this Agreement from becoming
effective, the Company shall promptly notify you by telephone, telecopy or
telegram, in each case, confirmed by letter.
12. NOTICES.
All notices or communications hereunder, except as herein otherwise
specifically provided, shall be in writing and if sent to you shall be mailed,
delivered, or telecopied (and confirmed by letter) to you c/o Cruttenden Roth
Incorporated, 18301 Von Karman, Suite 100, Irvine, California 92715, telecopier
number (714) 852-9603, Attention: General Counsel, with a copy to Nutter,
McClennen & Fish, LLP, One International Place, Boston, MA 02110, telecopier
number (617) 310- 9889, Attention: Gene A. Blumenreich, Esq.; if sent to the
Company, such notice shall be mailed, delivered, telegraphed or telecopied (and
confirmed by letter) to CollegeLink.com Incorporated, 55 Hammarlund Way,
Middletown, Rhode Island 02842, telecopier number ( ) ___-____, Attention:
President, with a copy to Foley, Hoag & Eliot, LLP, One Post Office Square,
Boston, MA 02109, telecopier number (617) 832-7000, Attention: David Broadwin,
Esq.
13. PARTIES.
This Agreement shall inure to the benefit of and be binding upon the
several Underwriters and the Company and their respective executors,
administrators, successors and assigns. Nothing expressed or mentioned in this
Agreement is intended or shall be construed to give any person or entity, other
than the parties hereto and their respective executors, administrators,
successors and assigns, and the controlling persons within the meaning of the
Act or the Exchange Act, officers and directors referred to in Section 8 hereof,
any legal or equitable right, remedy or claim in respect of this Agreement or
any provisions herein contained, this Agreement and all conditions and
provisions hereof being intended to be and being for the sole and exclusive
benefit of the parties hereto and their respective executors, administrators,
successors and assigns and said controlling persons and said officers and
directors, and for the benefit of no other person or entity. No purchaser of any
of the Shares from any Underwriter shall be construed a successor or assign by
reason merely of such purchase.
In all dealings with the Company under this Agreement, you shall act on
behalf of each of the several Underwriters, and the Company shall be entitled to
act and rely upon any statement, request, notice or agreement made or given by
you jointly or by Cruttenden Roth Incorporated on behalf of you.
14. APPLICABLE LAW.
The validity and interpretation of this Agreement, and the terms and
conditions set forth herein, shall be governed by, and construed in accordance
with, the laws of the State of California.
15. CONSENT TO JURISDICTION AND SERVICE OF PROCESS.
All judicial proceedings arising out of or relating to this Agreement
shall be initiated and tried exclusively in the State and Federal
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<PAGE> 32
courts located in the state of California. The aforementioned choice of venue is
intended by the parties to be mandatory and not permissive in nature, thereby
precluding the possibility of litigation between the parties with respect to or
arising out of this Agreement in any jurisdiction other than that specified in
this Section 15. The Company accepts for itself and in connection with its
properties, generally and unconditionally, the nonexclusive jurisdiction of the
aforesaid courts and waives any defense of forum non conveniens and irrevocably
agrees to be bound by any judgment rendered thereby in connection with this
Agreement. Each party hereby authorizes and accepts service of process
sufficient for personal jurisdiction in any action against it as contemplated by
this Section 15 by registered or certified mail, return receipt requested,
postage prepaid, to its address for the giving of notices as set forth in this
Agreement.
16. COUNTERPARTS.
This Agreement may be signed in several counterparts, each of which
will constitute an original.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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<PAGE> 33
If the foregoing correctly sets forth the understanding among the
Company and the several Underwriters, please so indicate in the space provided
below for that purpose, whereupon this letter shall constitute a binding
agreement between the Company and the several Underwriters.
Very truly yours,
COLLEGELINK.COM INCORPORATED
By:
Thomas J. Burgess
President
Accepted as of the date first above written:
CRUTTENDEN ROTH INCORPORATED
PENNSYLVANIA MERCHANT GROUP
On their behalf and on behalf of each of the
several Underwriters named in Schedule A
hereto.
By: CRUTTENDEN ROTH INCORPORATED
By:
Authorized Signatory
For and on behalf of the Representatives
[SIGNATURE PAGE TO UNDERWRITING AGREEMENT]
<PAGE> 34
SCHEDULE A
Number of Firm Shares
Underwriters To Be Purchased
- -------------------------------------- ----------------------------------------
Cruttenden Roth Incorporated..........
Pennsylvania Merchant Group...........
TOTAL........................
A-1
<PAGE> 1
Exhibit 1.2
- --------------------------------------------------------------------------------
WARRANT AGREEMENT
By and Between
COLLEGELINK.COM INCORPORATED
and
CRUTTENDEN ROTH INCORPORATED
Dated as of ____________, 1999
- --------------------------------------------------------------------------------
<PAGE> 2
WARRANT AGREEMENT
-----------------
WARRANT AGREEMENT, dated as of ____________, 1999, by and between
COLLEGELINK.COM INCORPORATED, a Delaware corporation (the "Company"), and
CRUTTENDEN ROTH INCORPORATED (the "Underwriter").
The Company proposes to issue to the Underwriter warrants as
hereinafter described (the "Underwriter Warrants") to purchase up to an
aggregate of 300,000 shares, subject to adjustment as provided in Section 8
hereof (such shares, as adjusted, being hereinafter referred to as the "Shares")
of the Company's common stock, par value $.001 per share (the "Common Shares"),
each Underwriter Warrant entitling the holder thereof to purchase one Common
Share. All capitalized terms used herein and not otherwise defined herein shall
have the same meanings as in that certain underwriting agreement, of even date
herewith, by and between the Company and the Underwriter (the "Underwriting
Agreement"). In this Agreement, the singular includes the plural and the plural
includes the singular.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth and for other good and valuable consideration, the
parties hereto agree as follows:
1. ISSUANCE OF WARRANTS; FORM OF WARRANT. The Company will issue, sell
and deliver the Underwriter Warrants to the Underwriter or its bona fide
officers for an aggregate price of $250.00. The form of the Underwriter Warrants
and the form of election to purchase Shares to be attached thereto shall be
substantially as set forth on EXHIBIT A attached hereto. The Underwriter
Warrants shall be executed on behalf of the Company by the manual or facsimile
signature of the present or any future Chief Executive Officer, President or any
Vice President of the Company, under its corporate seal, affixed or in
facsimile, and attested by the manual or facsimile signature of the present or
any future Secretary or Assistant Secretary of the Company.
2. REGISTRATION. The Underwriter Warrants shall be numbered and shall
be registered in an Underwriter Warrant register (the "Underwriter Warrant
Register"). The Company shall be entitled to treat the registered holder of any
Underwriter Warrant on the Underwriter Warrant Register (the "Holder") as the
owner in fact thereof for all purposes and shall not be bound to recognize any
equitable or other claim to or interest in such Underwriter Warrant on the part
of any other person, and shall not be liable for any registration of transfer of
Underwriter Warrants which are registered or are to be registered in the name of
a fiduciary or the nominee of a fiduciary unless made with the actual knowledge
that a fiduciary or nominee is committing a breach of trust in requesting such
registration of transfer, or with such knowledge of such facts that its
participation therein amounts to bad faith. The Underwriter Warrants shall be
registered initially in the name of "Cruttenden Roth Incorporated" in such
denominations as the Underwriter may request in writing to the Company;
PROVIDED, HOWEVER, that the Underwriter may designate in writing that all or a
portion of the Underwriter Warrants be issued in varying amounts directly to its
bona fide officers, and not to the Underwriter. Such designation will only be
made by the Underwriter if it determines that such issuances would not violate
the interpretation of the Board of Governors of the National Association of
Securities Dealers, Inc. (the "NASD") relating to the review of corporate
financing arrangements.
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<PAGE> 3
3. TRANSFER OF WARRANTS. The Underwriter Warrants will not be sold,
transferred, assigned or hypothecated, in part or in whole (other than by will
or pursuant to the laws of descent and distribution), except to officers of the
Underwriter and thereafter only upon delivery thereof duly endorsed by the
Holder or by his duly authorized attorney or representative, or accompanied by
proper evidence of succession, assignment or authority to transfer. In all cases
of transfer by an attorney, the original power of attorney, duly approved, or an
official copy thereof, duly certified, shall be deposited with the Company. In
case of transfer by executors, administrators, guardians or other legal
representatives, duly authenticated evidence of their authority shall be
produced, and may be required to be deposited with the Company in its
discretion. Upon any registration of transfer, the Company shall deliver a new
Underwriter Warrant or Underwriter Warrants to the persons entitled thereto. The
Underwriter Warrants may be exchanged at the option of the Holder thereof for
another Underwriter Warrant, or other Underwriter Warrants, of different
denominations, of like tenor and representing in the aggregate the right to
purchase a like number of Common Shares upon surrender to the Company or its
duly authorized agent. Notwithstanding the foregoing, the Company shall have no
obligation to cause Underwriter Warrants to be transferred on its books to any
person if such transfer would violate the Securities Act of 1933, as amended
(the "Act").
4. TERM OF WARRANTS, EXERCISE OF WARRANTS. Each Underwriter Warrant
entitles the registered owner thereof to purchase one Share at a purchase price
of $_______ per Share (the "Exercise Price") at any time from the first
anniversary of the effective date of the Registration Statement until 5:00 p.m.,
New York City time, on _____________, 2004) (the "Warrant Expiration Date").
Notwithstanding the foregoing, if at 5:00 p.m. New York time on the Warrant
Expiration Date, any Holder or Holders of the Underwriter Warrants have not
exercised their Underwriter Warrants and the "current market price" (as such
term is defined in Section 8(d) below) for the Common Shares on the Warrant
Expiration Date is greater than the Exercise Price, then each such unexercised
Underwriter Warrant shall automatically be converted into a number of Common
Shares equal to: the number of Common Shares then issuable upon exercise of an
Underwriter Warrant, multiplied by a fraction, the numerator of which is the
difference between (A) the "current market price" for Common Shares on the
Warrant Expiration Date and (B) the Exercise Price, and the denominator of which
is the "current market price" on the Warrant Expiration Date. Prior to the
Warrant Expiration Date, the Company will not take any action which would
terminate the Underwriter Warrants. The Exercise Price and the Shares issuable
upon exercise of the Underwriter Warrants are subject to adjustment upon the
occurrence of certain events pursuant to the provisions of Section 8 of this
Agreement. Subject to the provisions of this Agreement, each Holder shall have
the right, which may be exercised as set forth in such Underwriter Warrants, to
purchase from the Company (and the Company shall issue and sell to such Holder)
the number of fully paid and nonassessable Common Shares specified in such
Underwriter Warrants, upon surrender to the Company, or its duly authorized
agent, of such Underwriter Warrants with the form of election to purchase
attached thereto duly completed and signed, with signatures guaranteed by a
participant in the Medallion Signature Guarantee Program and upon payment to the
Company of the Exercise Price, as adjusted in accordance with the provisions of
Section 8 of this Agreement, for the number of Shares in respect of which such
Underwriter Warrants are then exercised.
2
<PAGE> 4
Payment of such Exercise Price may be made at the Holder's election (i)
by certified or official bank check, (ii) in the event that the Holder holds
Common Shares of the Company and such Common Shares are listed on a domestic
stock exchange or quoted in the domestic over-the-counter market, by
transferring to the Company an amount of such Common Shares which, when
multiplied by, the current market price of the Common Shares at the time of
exercise of such Underwriter Warrant, equals the aggregate amount of the
consideration payable upon such exercise, (iii) by surrendering to the Company
the right to receive a portion of the number of Shares with respect to which
such Underwriter Warrant is then being exercised equal to the product obtained
by multiplying such number of Shares by a fraction, the numerator of which is
the Exercise Price in effect on the date of such exercise and the denominator of
which is the current market price of the Common Shares in effect on such date,
or (iv) by a combination of the foregoing methods of payment selected by the
Holder. For purposes of this paragraph, the current market price of the Common
Shares shall be calculated either (a) on the date which the form of election to
purchase attached hereto is deemed to have been sent to the Company pursuant to
Section 12 hereof ("Notice Date") or (b) as the average of the last reported
sale price for each of the five trading days preceding the Notice Date,
whichever of (a) or (b) is greater. In any case where the consideration payable
upon such exercise is being paid in whole or in part pursuant to the provisions
of clause (ii) or clause (iii) of the preceding sentence, such exercise shall be
accompanied by written notice from the Holder specifying the manner of payment
thereof, and in the case of clause (ii), stating the amount of Common Shares of
the Company to be applied to such payment, and in the case of clause (iii),
containing a calculation showing the number of Shares with respect to which
rights are being surrendered thereunder and the net number of Shares to be
issued after giving effect to such surrender. No adjustment shall be made for
any dividends on any Shares issuable upon exercise of an Underwriter Warrant.
Upon each surrender of Underwriter Warrants and payment of the Exercise Price as
aforesaid, the Company shall issue and cause to be delivered with all reasonable
dispatch to or upon the written order of the Holder of such Underwriter Warrants
and in such name or names as such Holder may designate, a certificate or
certificates for the number of full Shares so purchased upon the exercise of
such Underwriter Warrants, together with cash, as provided in Section 9 of this
Agreement, in respect of any fractional Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any person so designated to be named therein shall be deemed to have become
a holder of record of such Shares as of the date of the surrender of Underwriter
Warrants and payment of the Exercise Price as aforesaid; PROVIDED, HOWEVER, that
if, at the date of surrender of such Underwriter Warrants and payment of such
Exercise Price, the transfer books for the Common Shares or other class of
securities issuable upon the exercise of such Underwriter Warrants shall be
closed, the certificates for the Shares shall be issuable as of the date on
which such books shall next be opened (whether before, on or after the Warrant
Expiration Date) and until such date the Company shall be under no duty to
deliver any certificate for such Shares; PROVIDED, FURTHER, HOWEVER, that the
transfer books of record, unless otherwise required by law, shall not be closed
at any one time for a period longer than twenty (20) days. The rights of
purchase represented by the Underwriter Warrants shall be exercisable, at the
election of the Holders thereof, either in full or from time to time in part
and, in the event that any Underwriter Warrant is exercised in respect of less
than all of the Shares issuable upon such exercise at any time prior to the
Warrant Expiration Date, a new Underwriter
3
<PAGE> 5
Warrant or Underwriter Warrants will be issued for the remaining number of
Shares specified in the Underwriter Warrant so surrendered.
5. PAYMENT OF TAXES. The Company will pay all documentary stamp taxes,
if any, attributable to the issuance of Shares upon the exercise of Underwriter
Warrants; PROVIDED, HOWEVER, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issue or delivery of any certificates for Shares in a name other than that of
the Holder of Underwriter Warrants in respect of which such Shares are issued.
6. MUTILATED OR MISSING WARRANTS. In case any of the Underwriter
Warrants shall be mutilated, lost, stolen or destroyed, the Company may, in its
discretion, issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Underwriter Warrant, or in lieu of and
substitution for the Underwriter Warrant lost, stolen or destroyed, a new
Underwriter Warrant of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence reasonably satisfactory to the
Company of such mutilation, loss, theft or destruction of such Underwriter
Warrant and indemnity, unless mutilated, also reasonably satisfactory to the
Company. An applicant for such substitute Underwriter Warrants shall also comply
with such other reasonable regulations and pay such other reasonable charges as
the Company may prescribe.
7. RESERVATION OF SHARES, ETC. There have been reserved and the Company
shall at all times keep reserved, out of the authorized and unissued Common
Shares, a number of Common Shares sufficient to provide for the exercise of the
rights of purchase represented by the outstanding Underwriter Warrants. American
Securities Transfer & Trust Incorporated, transfer agent for the Common Shares
(the "Transfer Agent"), and every subsequent transfer agent, if any, for the
Company's securities issuable upon the exercise of the Underwriter Warrants will
be irrevocably authorized and directed at all times until the Warrant Expiration
Date to reserve such number of authorized and unissued Common Shares as shall be
required for such purpose. The Company will keep a copy of this Agreement on
file with the Transfer Agent and with every subsequent transfer agent of the
Company's securities issuable upon the exercise of the Underwriter Warrants. The
Company will supply the Transfer Agent or any subsequent transfer agent with
duly executed certificates for such purpose and will itself provide or otherwise
make available any cash which may be distributable as provided in Section 9 of
this Agreement. All Underwriter Warrants surrendered in the exercise of the
rights thereby evidenced shall be canceled, and such canceled Underwriter
Warrants shall constitute sufficient evidence of the number of Shares that have
been issued upon the exercise of such Underwriter Warrants. No Common Shares
shall be subject to reservation in respect of unexercised Underwriter Warrants
subsequent to the Warrant Expiration Date.
8. ADJUSTMENTS OF EXERCISE PRICE AND NUMBER OF SHARES. The Exercise
Price and the number and kind of securities issuable upon exercise of each
Underwriter Warrant shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
(a) In case the Company shall (i) declare a dividend on its
Common Shares in Common Shares or make a distribution of Common Shares,
(ii) subdivide its outstanding
4
<PAGE> 6
Common Shares, (iii) combine its outstanding Common Shares into a
smaller number of Common Shares or (iv) issue by reclassification of
the Common Shares other securities of the Company (including any such
reclassification in connection with a consolidation or merger in which
the Company is the continuing corporation), the number of Shares
purchasable upon exercise of each Underwriter Warrant immediately prior
thereto shall be adjusted so that the Holder of each Underwriter
Warrant shall be entitled to receive the kind and number of Shares or
other securities of the Company which he would have owned or have been
entitled to receive after the happening of any of the events described
above, had such Underwriter Warrant been exercised immediately prior to
the happening of such event or any record date with respect thereto. An
adjustment made pursuant to this paragraph (a) shall become effective
immediately after the effective date of such event retroactive to
immediately after the record date, if any, for such event.
(b) In case the Company shall issue rights, options or
warrants to all holders of its Common Shares, entitling them to
subscribe for or to purchase Common Shares at a price per share that is
lower at the record date mentioned below than the then current market
price per Common Share (as defined in paragraph (d) below), the number
of Shares thereafter purchasable upon exercise of each Underwriter
Warrant shall be determined by multiplying the number of Shares
theretofore purchasable upon exercise of each Underwriter Warrant by a
fraction, of which the numerator shall be the number of Common Shares
outstanding on such record date plus the number of additional Common
Shares offered for subscription or purchase, and of which the
denominator shall be the number of Common Shares outstanding on such
record date plus the number of shares which the aggregate offering
price of the total number of Common Shares so offered would purchase at
the then current market price per Common Share. Such adjustment shall
be made whenever such rights, options or warrants are issued, and shall
become effective retroactively to immediately after the record date for
the determination of shareholders entitled to receive such rights,
options or warrants.
(c) In case the Company shall distribute to all holders of its
Common Shares stock other than Common Shares or evidences of its
indebtedness or assets (excluding cash dividends payable out of
consolidated earnings or retained earnings and dividends or
distributions referred to in paragraph (a) above) or rights, options or
warrants or convertible or exchangeable securities containing the right
to subscribe for or purchase Common Shares (excluding those referred to
in paragraph (b) above), then in each case the number of Shares
thereafter issuable upon the exercise of each Underwriter Warrant shall
be determined by multiplying the number of Shares theretofore issuable
upon the exercise of each Underwriter Warrant, by a fraction, of which
the numerator shall be the current market price per Common Share (as
defined in paragraph (d) below) on the record date mentioned below in
this paragraph (c), and of which the denominator shall be the current
market price per Common Share on such record date, less the then fair
value of the portion of the shares of capital stock other than Common
Shares or assets or evidences of indebtedness so distributed or of such
subscription rights, options or warrants, or of such convertible or
exchangeable securities applicable to one Common Share. Such adjustment
shall be made whenever any such distribution is made, and shall
5
<PAGE> 7
become effective on the date of distribution retroactive to immediately
after the record date for the determination of shareholders entitled to
receive such distribution.
(d) For the purpose of any computation under paragraphs (b)
and (c) of this Section 8, the current market price per Common Share at
any date shall be the greater of (i) the average of the daily closing
prices for five (5) consecutive trading days commencing ten (10)
trading days before the date of such computation and (ii) the last sale
price on the date before the date of such computation. The closing
price for each day shall be the last reported sale price regular way
or, in case no such reported sale takes place on such day, the average
of the closing bid and asked prices regular way for such day, in either
case on the principal national securities exchange on which the shares
are listed or admitted to trading, or if they are not listed or
admitted to trading on any national securities exchange, but are traded
in the over-the-counter market, the closing sale price of the Common
Shares or, in case no sale is publicly reported, the average of the
representative closing bid and asked quotations for the Common Shares
on the Nasdaq SmallCap Market or any comparable system, or if the
Common Shares are not listed on the Nasdaq SmallCap Market or a
comparable system, the closing sale price of the Common Shares or, in
case no sale is publicly reported, the average of the closing bid and
asked prices as furnished by two members of the NASD selected from time
to time by the Company for that purpose.
(e) No adjustment in the number of Shares purchasable
hereunder shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the number of
Shares purchasable upon the exercise of each Underwriter Warrant;
PROVIDED, HOWEVER, that any adjustments which by reason of this
paragraph (e) are not required to be made shall be carried forward and
taken into account in any subsequent adjustment, but not later than
three years after the happening of the specified event or events. All
calculations shall be made to the nearest one thousandth of a share.
Anything in this Section 8 to the contrary notwithstanding, the Company
shall be entitled, but shall not be required, to make such changes in
the number of Shares purchasable upon the exercise of each Underwriter
Warrant, in addition to those required by this Section 8, as it in its
discretion shall determine to be advisable in order that any dividend
or distribution in shares of Common Shares, subdivision,
reclassification or combination of Common Shares, issuance of rights,
warrants or options to purchase Common Shares, or distribution of
shares of capital stock other than Common Shares, evidences of
indebtedness or assets (other than distributions of cash out of
consolidated earnings or retained earnings) or convertible or
exchangeable securities hereafter made by the Company to the holders of
its Common Shares, shall not result in any tax to the holders of its
Common Shares or securities convertible into Common Shares.
(f) Whenever the number of Shares purchasable upon the
exercise of each Underwriter Warrant is adjusted, as herein provided,
the Exercise Price shall be adjusted by multiplying the Exercise Price
in effect immediately prior to such adjustment by a fraction, of which
the numerator shall be the number of Shares purchasable upon the
6
<PAGE> 8
exercise of each Underwriter Warrant immediately prior to such
adjustment, and of which the denominator shall be the number of Shares
so purchasable immediately thereafter.
(g) For the purpose of this Section 8, the term "Common
Shares" shall mean (i) the class of stock designated as the Common
Shares of the Company at the date of this Agreement or (ii) any other
class of stock resulting from successive changes or reclassifications
of such shares consisting solely of changes in par value, or from no
par value to par value, or from par value to no par value. In the event
that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders shall become entitled to purchase any
shares of capital stock of the Company other than Common Shares,
thereafter the number of such other shares so purchasable upon exercise
of each Underwriter Warrant and the Exercise Price of such shares shall
be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the
Shares contained in paragraphs (a) through (f), inclusive, and
paragraphs (h) through (m), inclusive, of this Section 8, and the
provisions of Sections 4, 5, 7 and 10, with respect to the Shares,
shall apply on like terms to any such other shares.
(h) Upon the expiration of any rights, options, warrants or
conversion rights or exchange privileges, if any thereof shall not have
been exercised, the Exercise Price and the number of Common Shares
purchasable upon the exercise of each Underwriter War-rant shall, upon
such expiration, be readjusted and shall thereafter be such as it would
have been had it originally been adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only
Common Shares so issued were the Common Shares, if any, actually issued
or sold upon the exercise of such rights, options, warrants or
conversion rights or exchange privileges and (ii) such Common Shares,
if any, were issued or sold for the consideration actually received by
the Company upon such exercise plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale or grant
of all of such rights, options, warrants or conversion rights or
exchange privileges whether or not exercised; PROVIDED, HOWEVER, that
no such readjustment shall have the effect of increasing the Exercise
Price by an amount in excess of the amount of the adjustment initially
made in respect to the issuance, sale or grant of such rights, options,
warrants or conversion rights or exchange privileges.
(i) The Company may, at its option, at any time during the
term of the Underwriter Warrants, reduce the then current Exercise
Price to any amount deemed appropriate by the Board of Directors of the
Company.
(j) Whenever the number of Shares issuable upon the exercise
of each Underwriter Warrant or the Exercise Price of such Shares is
adjusted, as herein provided, the Company shall promptly mail by first
class mail postage prepaid to each Holder notice of such adjustment or
adjustments. The Company shall retain a firm of independent public
accountants (who may be the regular accountants employed by the
Company) to make any computation required by this Section 8 and shall
cause such accountants to prepare a certificate setting forth the
number of Shares issuable upon the
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<PAGE> 9
exercise of each Underwriter Warrant and the Exercise Price of such
Shares after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by
which such adjustment was made. Such certificate shall be conclusive on
the correctness of such adjustment and each Holder shall have the right
to inspect such certificate during reasonable business hours.
(k) Except as provided in this Section 8, no adjustment in
respect of any dividends shall be made during the term of the
Underwriter Warrants or upon the exercise of the Underwriter Warrants.
(l) In case of any consolidation of the Company with or merger
of, the Company with or into another corporation or in case of any sale
or conveyance to another corporation of the property of the Company as
an entirety or substantially as an entirety, the Company or such
successor or purchasing corporation (or an affiliate of such successor
or purchasing corporation), as the case may be, agrees that each Holder
shall have the right thereafter upon payment of the Exercise Price in
effect immediately prior to such action to purchase upon exercise of
each Underwriter Warrant the kind and amount of shares and other
securities and property (including cash) which he would have owned or
have been entitled to receive after the happening of such
consolidation, merger, sale or conveyance had such Underwriter Warrant
been exercised immediately prior to such action. The provisions of this
paragraph (1) shall similarly apply to successive consolidations,
mergers, sales or conveyances.
(m) Notwithstanding any adjustment in the Exercise Price or
the number or kind of shares purchasable upon the exercise of the
Underwriter Warrants pursuant to this Agreement, certificates for
Underwriter Warrants issued prior or subsequent to such adjustment may
continue to express the same price and number and kind of Shares as are
initially issuable pursuant to this Agreement.
9. FRACTIONAL INTERESTS. The Company shall not be required to issue
fractions of Shares on the exercise of Underwriter Warrants. If more than one
Underwriter Warrant shall be presented for exercise in full at the same time by
the same Holder, the number of Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the number of Shares issuable on
exercise of the Underwriter Warrants so presented. If any fraction of a Share
would, except for the provisions of this Section 9, be issuable on the exercise
of any Underwriter Warrant (or specified portions thereof), the Company shall
purchase such fraction for an amount in cash equal to the same fraction of the
current market price per Common Share (determined as provided in the second
sentence of Section 8(d) of this Agreement) on the date of exercise.
10. REGISTRATION RIGHTS.
(a) DEMAND REGISTRATION RIGHTS. The Company covenants and
agrees with the Underwriter and any other or subsequent Holders of the
Registrable Securities (as defined in paragraph (e) of this Section 10) that,
upon written request of the then Holder(s) of at least a majority of the
aggregate of the Registrable Securities which were originally issued on the date
hereof to the Underwriter or its designees, made at any time within the period
commencing one
8
<PAGE> 10
year and ending five years after the Effective Date, the Company
will file as promptly as practicable and, in any event, within 45 days after
receipt of such written request, at its sole expense, no more than once, a
post-effective amendment (the "Amendment") to the Registration Statement, or a
new Registration Statement or a Regulation A Offering Statement (an "Offering
Statement") under the Act, registering or qualifying the Registrable Securities
for sale. Within fifteen (15) days after receiving any such notice, the Company
shall give notice to the other Holders of the Registrable Securities advising
that the Company is proceeding with such Amendment, Registration Statement or
Offering Statement and offering to include therein the Registrable Securities of
such Holders. The Company shall not be obligated to any such other Holder unless
such other Holder shall accept such offer by notice in writing to the Company
within ten (10) days thereafter. No other securities of the Company shall be
entitled to be included in such Amendment, Registration Statement or Offering
Statement. The Company will use its best efforts, through its officers,
directors, auditors and counsel in all matters necessary or advisable, to file
and cause to become effective such Amendment, Registration Statement or Offering
Statement as promptly as practicable and for a period of two years thereafter to
reflect in the Amendment, Registration Statement or Offering Statement financial
statements which are prepared in accordance with Section 10(a)(3) of the Act and
any facts or events arising that, individually, or in the aggregate, represent a
fundamental and/or material change in the Amendment, Registration Statement or
Offering Statement to enable information set forth in Amendment, Registration
Statement or Offering Statement to enable any Holders of the Underwriter
Warrants to either sell such Underwriter Warrants or to exercise such
Underwriter Warrants and sell Shares, or to enable any holders of Shares to sell
such Shares, during said two-year period. The Holders may sell the Registrable
Securities pursuant to the Amendment, Registration Statement or the Offering
Statement without exercising the Underwriter Warrants. If any registration
pursuant to this paragraph (a) is an underwritten offering, the Holders of a
majority of the Registrable Securities to be included in such registration shall
be entitled to select the underwriter or managing underwriter (in the case of a
syndicated offering) of such offering.
(b) PIGGYBACK REGISTRATION RIGHTS. The Company covenants and
agrees with the Underwriter and any other Holders or subsequent Holders of the
Registrable Securities that if, at any time within the period commencing one
year and ending five years after the Effective Date, it proposes to file a
Registration Statement or Offering Statement with respect to any class of
security (other than in connection with an offering to the Company's employees)
under the Act in a primary registration on behalf of the Company and/or in a
secondary registration on behalf of holders of such securities and the
registration form or Offering Statement to be used may be used for registration
of the Registrable Securities, the Company will give prompt written notice
(which. in the case of a Registration Statement or notification pursuant to the
exercise of demand registration rights other than those provided in Section
10(a) of this Agreement, shall be within ten (10) business days after the
Company's receipt of notice of such exercise, in any event, shall be at least 45
days prior to such filing) to, the Holders of Registrable Securities (regardless
of whether some of the Holders shall have theretofore availed themselves of the
right provided in Section 10(a) of this Agreement) at the addresses appearing on
the records of the Company of its intention to file a Registration Statement or
Offering Statement and will offer to include in such registration statement or
Offering Statement to the maximum extent possible, and limited, in the case of a
Regulation A offering, to the amount of the available exemption, subject
9
<PAGE> 11
to sub-paragraphs (i) and (ii) of this paragraph (b), such number of Registrable
Securities with respect to which the Company has received written requests for
inclusion therein within ten (10) days after the giving of notice by the
Company. All registrations requested pursuant to this Section 10(b) are referred
to herein as "Piggyback Registrations," All Piggyback Registrations pursuant to
this Section 10(b) will be made solely at the Company's expense. This paragraph
is not applicable to a Registration Statement filed by the Company with the
Commission on Forms S-4 or S-8 or any successor forms.
(i) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration includes an underwritten primary registration on behalf of
the Company and the underwriter(s) for the offering being registered by
the Company shall determine in good faith and advise the Company in
writing that in its/their opinion the number of Registrable Securities
requested to be included in such registration exceeds the number that
can be sold in such offering without materially adversely affecting the
distribution of such securities by the Company, the Company will
include in such registration (A) first, the securities that the Company
proposes to sell and (B) second, the Registrable Securities requested
to be included in such registration, apportioned pro rata among the
Holders of Registrable Securities and (C) third, securities of the
holders of other securities requesting registration.
(ii) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration consists only of an underwritten secondary registration on
behalf of holders of securities of the Company (other than pursuant to
Section 10(a)), and the underwriter(s) for the offering being
registered by the Company advise the Company in writing that in
its/their opinion the number of Registrable Securities requested to be
included in such registration exceeds the number which can be sold in
such offering without materially adversely affecting the distribution
of such securities by the Company, the Company will include in such
registration (A) first, the securities requested to be included therein
by the holders requesting such registration and the Registrable
Securities requested to be included in such registration above, pro
rata, among all such holders on the basis of the number of shares
requested to be included by each such holder and (B) second, other
securities requested to be included in such registration.
Notwithstanding the foregoing if any such underwriter shall determine
in good faith and advise the Company in writing that the distribution of the of
the Registrable Securities requested to be included in the registration
concurrently with the securities being registered by the Company would
materially adversely affect the distribution of such securities by the Company,
then the Holders of such Registrable Securities shall delay their offering for
such period ending on the earliest of (1) 90 days following the effective date
of the Company's registration statement, (2) the day upon which the underwriting
syndicate, if any, for such offering shall have been disbanded or, (3) such date
as the Company, managing underwriter and Holders of Registrable Securities shall
otherwise agree. In the event of such delay, the Company shall file such
supplements, post-effective amendments and take any such other steps as may be
necessary to permit such Holders to make their proposed offering and sale for a
period of 120 days immediately following the end of such period of delay. If any
party disapproves of the terms of
10
<PAGE> 12
any, such underwriting, it may elect to withdraw therefrom by written notice to
the Company, the underwriter, and Underwriter. Notwithstanding the foregoing,
the Company shall not be required to file a registration statement to include
Shares pursuant to this Section 10(b) if an opinion of independent counsel,
reasonably satisfactory to counsel for the Company and counsel for Underwriter,
that the Shares proposed to be disposed of may be transferred pursuant to the
provisions of Rule 144 under the Act, shall have been delivered to counsel for
the Company.
(c) OTHER REGISTRATION RIGHTS. In addition to the rights above
provided, the Company will cooperate with the then Holders of the
Registrable Securities in preparing and signing any Registration
Statement or Offering Statement, in addition to the Registration
Statements and Offering Statements discussed above, required in order
to sell or transfer the Registrable Securities and will supply all
information required therefor, but such additional Registration
Statement or Offering Statement shall be at the then Holders' cost, and
expense; PROVIDED, HOWEVER, that if the Company elects to register or
qualify additional Common Shares, the cost and expense of such
Registration Statement or Offering Statement will be pro rated between
the Company and the Holders of the Registrable Securities according to
the aggregate sales price of the securities being issued,
Notwithstanding the foregoing, the Company will not be required to file
a Registration Statement or Offering, Statement at a time when the
audited financial statements required to be included therein are not
available, which time shall be limited to the period commencing 45 days
after the end of a fiscal year and ending 90 days after the end of such
fiscal year.
(d) ACTION TO BE TAKEN BY THE COMPANY. In connection with the
registration of Registrable Securities in accordance with paragraphs
(a), (b), (c) or (g) of this Section 10, the Company agrees to:
(i) Bear the expenses of any registration or
qualification under paragraphs (a), (b) or (g) of this Section
10, including, but not limited to, legal accounting, and
printing fees; PROVIDED, HOWEVER, that in no event shall the
Company be obligated to pay (A) any fees and disbursements of
special counsel for Holders of Registrable Securities, or (B)
any underwriters' discount or commission in respect of such
Registrable Securities, or (C) upon the exercise of any demand
registration right provided for in paragraph (a) of this
Section 10, the cost of any liability or similar insurance
required by an underwriter, to the extent that such costs are
attributable solely to the offering of such Registrable
Securities, payment of which shall, in each case, be the sole
responsibility of the Holders of the Registrable Securities;
(ii) Use its best efforts to register or qualify the
Registrable Securities for offer or sale under state
securities or Blue Sky laws of such jurisdictions as
Underwriter shall reasonably request and to do any and all
other acts and things which may be necessary or advisable to
enable the holders to consummate the proposed sale, transfer
or other disposition of such securities in any jurisdiction;
and
11
<PAGE> 13
(iii) Enter into a cross-indemnity agreement, in
customary form, with each underwriter, if any, and each holder
of securities included in such Amendment, Registration
Statement or Offering Statement,
(e) For purposes of this Section 10, (i) the term "Holder"
shall include holders of Shares, and (ii) the term "Registrable Securities"
shall mean the Underwriter Warrants and the Shares issued or issuable upon
exercise of the Underwriter Warrants.
(f) ALTERNATIVE TO REGISTRATION. The Company shall have no
obligation to include the Underwriter's or any other Holder's Registrable
Securities in a Registration Statement at any time that, in a written opinion of
the Company's counsel addressed to such Holder, all of the Registrable
Securities then held by such Holder may be sold in a public transaction
immediately without registration, including shares of Common Stock which may be
sold within a period of 90 days under Rule 144.
(g) FORM S-3. At any time that the Registrable Securities may
be sold or distributed by, and are included in, a Registration Statement on Form
S-3 which is effective under the Securities Act, the Company shall not be
obligated to file an additional Registration Statement pursuant to Section 10(a)
hereof, nor to include such Registrable Securities in any other Registration
Statement it proposes to file pursuant to Section 10(b) hereof.
11. NOTICES TO HOLDERS.
(a) Nothing contained in this Agreement or in any of the
Underwriter Warrants shall be construed as conferring upon the Holders thereof
the right to vote or to receive dividends or to consent or to receive notice as
shareholders in respect of the meetings of shareholders or the election of
directors of the Company or any other matter, or any rights whatsoever as
shareholders of the Company; PROVIDED, HOWEVER, that in the event that a meeting
of shareholders shall be called to consider and take action on a proposal for
the voluntary dissolution of the Company, other than in connection with a
consolidation, merger or sale of all, or substantially all, or its property,
assets, business and good will as an entirety. then and in that event the
Company shall cause a notice thereof to be sent by first-class mail, postage
prepaid, at least twenty (20) days prior to the date filed as a record date or
the date of closing of the transfer books in relation to such meeting, to each
registered Holder of Underwriter Warrants at such Holder's address appearing in
the Underwriter Warrant Register; but failure to mail or to receive such notice
or any defect therein or in the mailing thereof shall not affect the validity of
any action taken in connection with such voluntary dissolution. If such notice
shall have been so given and if such a voluntary dissolution shall be authorized
at such meeting or any adjournment thereof, then from and after the date on
which such voluntary dissolution shall have been duly authorized by the
shareholders, the purchase rights represented by the Underwriter Warrants and
all other rights with respect thereto shall cease and terminate.
(b) In the event the Company intends to make any distribution
on its Common Shares (or other securities which may be issuable in lieu thereof
upon the exercise of Underwriter Warrants), including, without limitation, any
such distribution to be made in connection with a
12
<PAGE> 14
consolidation or merger in which the Company is the continuing corporation, or
to issue subscription rights or warrants to holders of its Common Shares, the
Company shall cause a notice of its intention to make such distribution to be
sent by first-class mail, postage prepaid, at least twenty (20) days prior to
the date fixed as a record date or the date of closing the transfer books in
relation to such distribution, to each registered Holder of Underwriter Warrants
at such Holder's address appearing, on the Underwriter Warrant Register, but
failure to mail or to receive such notice or any defect therein or in the
mailing thereof shall not affect the validity of any action taken in correction
with such distribution.
12. NOTICES. Any notice pursuant to this Agreement to be given or made
by the Holder of any Underwriter Warrant and/or the holder of any Share to or on
the Company shall be sufficiently given or made if sent by first-class mail,
postage prepaid, addressed as follows or to such other address as the Company
may designate by notice given in accordance with this Section 12, to the Holders
of Underwriter Warrants and/or the holders of Shares:
CollegeLink.com Incorporated
55 Hammarlund Way
Middletown, Rhode Island 02842
Attention: Richard A. Fisher
Chairman
with a copy to: Foley, Hoag & Eliot LLP
One Post Office Square
Boston, Massachusetts 02109
Attention: Robert L. Birnbaum, Esq.
Notices or demands authorized by this Agreement to be given or made by
the Company to or on the Holder of any Underwriter Warrant and/or the holder of
any Share shall be sufficiently given or made (except as otherwise provided in
this Agreement) if sent by first-class mail, postage prepaid, addressed to such
Holder or such holder of Shares at the address of such Holder or such holder of
Shares as shown on the Underwriter Warrant Register or the books of the Company,
as the case may be.
13. GOVERNING LAW. THIS AGREEMENT AND EACH UNDERWRITER WARRANT ISSUED
HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE INTERNAL
LAWS OF THE STATE OF CALIFORNIA WITHOUT REFERENCE TO PRINCIPLES OF CONFLICT OF
LAWS. The Company hereby agrees to accept service of process by notice given to
it pursuant to the provisions of Section 12.
14. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same agreement.
13
<PAGE> 15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the day, month and year first above written.
(Corporate Seal)
Attest: COLLEGELINK.COM INCORPORATED
By:
- -------------------------------------- -------------------------------------
Thomas J. Burgess
Secretary President
Attest: CRUTTENDEN ROTH INCORPORATED
By:
- -------------------------------------- -------------------------------------
Name:
Title:
14
<PAGE> 16
EXHIBIT A
---------
No.___________ 300,000 Warrants
VOID AFTER 5:00 P.M. NEW YORK CITY TIME
ON _____________, 2004
COLLEGELINK.COM INCORPORATED
Warrant Certificate
THIS CERTIFIES THAT for value received Cruttenden Roth Incorporated or
registered assigns, is the owner of the number of warrants set forth above, each
of which entities the owner thereof to purchase at any time from _____________,
2000, until 5:00 p.m., New York City time on ______________, 2004 (the "Warrant
Expiration Date"), one fully paid and nonassessable Common Share, $.001 par
value per share (the "Common Shares"), of CollegeLink.com Incorporated, a
Delaware corporation (the "Company"), at the purchase price of $______ per share
(the "Exercise Price") upon presentation and surrender of this Warrant
Certificate with the Form of Election to Purchase duly executed. The number of
Warrants evidenced by this Warrant Certificate (and the number of shares which
may be purchased upon exercise thereto set forth above) and the Exercise Price
per share set forth above, are the number and Exercise Price as of the date of
original issuance of the Warrants, based on the Common Shares of the Company as
constituted at such date. As provided in the Warrant Agreement referred to
below, the Exercise Price and the number or kind of shares which may be
purchased upon the exercise of the Warrants evidenced by this Warrant
Certificate are, upon the happening of certain events, subject to modification
and adjustment.
This Warrant Certificate is subject to, and entitled to the benefits
of, all of the terms, provisions and conditions of an agreement, dated as of
______________, 1999 (the "Warrant Agreement"), between the Company and
Cruttenden Roth Incorporated, which Warrant Agreement is hereby incorporated
herein by reference and made a part hereof and to which Warrant Agreement
reference is hereby made for a full description of the rights, limitations of
rights, duties and immunities hereunder of the Company and the holders of the
Warrant Certificates. Copies of the Warrant Agreement are on file at the
principal office of the Company.
This Warrant Certificate, with or without other Warrant Certificates,
upon surrender at the principal office of the Company, may be exchanged for
another Warrant Certificate or Warrant Certificates of like tenor and date
evidencing Warrants entitling the holder to purchase a like aggregate number of
Common Shares as the Warrants evidenced by the Warrant Certificate or Warrant
Certificates surrendered entitled such holder to purchase. If this Warrant
Certificate shall be exercised in part, the holder hereof shall be entitled to
receive upon surrender hereof another Warrant Certificate or Warrant
Certificates for the number of whole Warrants not exercised.
A-1
<PAGE> 17
No fractional Common Shares will be issued upon the exercise of any
Warrant or Warrants evidenced hereby, but in lieu thereof a cash payment will be
made, as provided in the Warrant Agreement.
No holder of this Warrant Certificate shall be entitled to vote or
receive dividends or be deemed the holder of Common Shares, any other securities
of the Company which may at any time be issuable on the exercise hereof for any
purpose, nor shall anything contained in the Warrant Agreement or herein be
construed to confer upon the holder hereof, as such, any of the rights of a
stockholder of the Company or any right to vote for the election of directors or
upon any matter submitted to stockholders at any meeting thereof, or to give or
withhold consent to any corporate action (whether upon any recapitalization,
issue of stock, reclassification of stock, change of par value or change of
stock to no par value, consolidation, merger, conveyance, or otherwise) or,
except as provided in the Warrant Agreement, to receive notice of meetings, or
to receive dividends or subscription rights or otherwise, until the Warrant or
Warrants evidenced by this Warrant Certificate shall have been exercised and the
shares shall have become deliverable as provided in the Warrant Agreement.
If this Warrant shall be surrendered for exercise within any period
during which the transfer books for the Company's Common Shares or other class
of stock purchasable upon the exercise of this Warrant are closed for any
purpose, the Company shall not be required to make delivery of certificates for
shares purchasable upon such exercise until the date of the reopening of said
transfer books.
IN WITNESS WHEREOF, CollegeLink.com Incorporated, inc. has caused the
signature (or facsimile signature) of its President and its Secretary to be
printed hereon and its corporate seal (or facsimile) to be printed hereon.
Dated: ________________, 1999
COLLEGELINK.COM INCORPORATED
By:
------------------------------
Thomas J. Burgess
President
(Corporate Seal)
Attest:
- ----------------------------------
Secretary
A-2
<PAGE> 18
FORM OF ELECTION TO PURCHASE
(To be executed if holder desires to exercise the Warrant Certificate.)
TO:
---------------------------------
The undersigned hereby irrevocably elects to exercise Warrants
represented by this Warrant Certificate to purchase the Common Shares issuable
upon the exercise of such Warrants and requests that certificates for such
shares be issued in the name of: (Please insert social security or other
identifying number)
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Please print name and address)
If such number of Warrants shall not be all the Warrants evidenced by this
Warrant Certificate, a new Warrant Certificate for the balance remaining of such
Warrants shall be registered in the name of and delivered to:
Please insert social security number or other identifying number
---------------------------------------------------
---------------------------------------------------
---------------------------------------------------
(Please print name and address)
Dated:
-------------------------------
------------------------------------
Signature
(signature must conform in all
respects to name of holder as
specified on the face of this
Warrant Certificate)
Signature Guaranteed:
- ------------------------------
A-3
<PAGE> 19
FORM OF
ASSIGNMENT
----------
(To be executed by the registered holder if such holder desires to transfer the
Warrant Certificates.)
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto ______________________________________ this Warrant Certificate,
together with all right, title and interest herein, and does hereby irrevocably
constitute and appoint ________________, to transfer the within Warrant
Certificate on the books of the within-named Company, with full power of
substitution.
Dated:
-------------------------
Signature:
-----------------------------
Signature Guaranteed:
- ------------------------------
NOTICE
------
The signature of the foregoing Assignment must correspond to the name
as written upon the face of this Warrant Certificate in every particular,
without alteration or enlargement or any change whatsoever.
A-4
<PAGE> 1
Exhibit 1.3
CRUTTENDEN ROTH INCORPORATED
24 CORPORATE PLAZA
NEWPORT BEACH, CALIFORNIA 92660
CONSULTING AGREEMENT
--------------------
______, 1999
CollegeLink.com Incorporated
55 Hammarlund Way
Middletown, Rhode Island 02842
Attn: Mr. Thomas J. Burgess
President
Dear Sirs:
This will confirm the arrangements, terms and conditions pursuant to
which Cruttenden Roth Incorporated (the "Consultant") has been retained to serve
as consultant and advisor to CollegeLink.com Incorporated, a Delaware
corporation (the "Company"'), for the term set forth in Section 3 below. The
undersigned hereby agree to the following terms and conditions:
1. ENGAGEMENT. The Company hereby retains the Consultant to
perform consulting and advisory services, and the Consultant hereby accepts such
retention and agrees to do and perform consulting and advisory services, upon
the terms and conditions set forth herein.
2. DUTIES OF THE CONSULTANT.
(a) CONSULTING SERVICES. The Consultant will provide
such general financial consulting services and advice pertaining to the
Company's business affairs (as further set forth below), as and when the Company
may from time to time reasonably request upon reasonable notice. Without
limiting the generality of the foregoing, the Consultant will assist the Company
in developing, studying and evaluating financing and capital structure, mergers
and acquisitions activity and corporate financing proposals, prepare reports and
studies thereon when advisable, and assist in negotiations and discussions
pertaining thereto.
(b) FINANCING. The Consultant will assist and represent
the Company in obtaining both short and long-term financing, when so requested
by the Company in the Company's sole discretion. The Consultant will be entitled
to additional compensation under such terms as may be agreed to by the parties
in connection therewith.
(c) WALL STREET LIAISON. The Consultant will, when
appropriate, arrange meetings between representatives of the Company and
individuals and financial institutions in the investment community, such as
security analysts, portfolio managers and market makers.
<PAGE> 2
The services described in this Section 2 shall be rendered by the
Consultant in consultation with the Company at such time and place and in such
manner (whether by conference, telephone, letter or otherwise) as the Consultant
and the Company may reasonably determine.
3. TERM. The term of this Agreement shall commence on the date
hereof and continue for a period of two years from the date hereof (the "Term").
4. COMPENSATION. As compensation in full for the Consultant's
services hereunder during the Term, the Company shall pay to the Consultant the
sum of $517,500, of which $20,000 has been paid and the remainder of $497,500
shall be paid at the closing of the public offering contemplated by the
Underwriting Agreement, dated _______, 1999, between the Company and the
Consultant, as representative of the Underwriters identified therein.
5. EXPENSES. The Company shall pay and reimburse the
Consultant for all reasonable out-of-pocket expenses incurred by the Consultant
and approved in advance in writing by the Company in the performance of its
services under this Agreement.
6. RELATIONSHIP. Nothing herein shall constitute the
Consultant as an employee or agent of the Company. Except as might hereinafter
be expressly agreed, the Consultant shall not have the authority to obligate or
commit the Company in any manner whatsoever.
7. CONFIDENTIALITY. Except in the course of the performance of
its duties hereunder, and in such case, only upon express written consent of the
Company, the Consultant agrees that it shall not disclose any trade secrets,
know-how, or other proprietary information not in the public domain learned as a
result of this Agreement unless and until such information becomes generally
known or is in the public domain.
8. FINDER'S OR BROKER'S FEES. The Company acknowledges and
agrees that, with the written agreement and at the request of the Company, the
Consultant may act as a finder or financial consultant in various business
transactions in which the Company or any of its subsidiaries may be involved,
such as mergers, acquisitions, joint ventures or investments and that the
Consultant may be entitled to receive a finder's fee or brokerage commission or
other rights, profits or payments in connection with such transactions;
provided, however, that the Company and the Consultant have entered into an
agreement prior thereto regarding the services to be performed by and the fee to
be paid to the Consultant.
9. PERMITTED ACTIVITIES. Nothing contained in this Agreement
shall limit or restrict the right of the Consultant or of any officer, director,
shareholder, employee, agent or representative of the Consultant to be a
partner, owner, director, officer, employee, agent or representative of, or
engage in, any other business, whether of a similar nature or not, or limit or
restrict the right of the Consultant to render services of any kind to any other
corporation, firm, individual or other entity.
<PAGE> 3
10. ASSIGNMENT. This Agreement shall not be assignable by any
party except to a successor to all or substantially all of the business of
either party without the prior written consent of the other party, which consent
may be arbitrarily withheld by the party whose consent is required.
11. NOTICES. All notices hereunder shall be in writing and
shall be validly given, made or served if in writing and delivered in person or
when received by facsimile transmission, or five days after being sent first
class certified or registered mail, postage prepaid or one day after being sent
by nationally recognized overnight courier to the party for whom intended at the
addresses as set forth above or at such other address as may be provided.
12. GOVERNING LAW; SUBMISSION TO JURISDICTION. This agreement
shall be interpreted, construed, governed and enforced according to the laws of
the State of California without giving effect to the conflicts of law rules
thereof. The Company and the Consultant hereby agree that any action, proceeding
or claim against it arising out of, or relating in any way to, this Agreement
shall be brought and enforced in the courts of the State of California or of the
United States of America in California, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company and the
Consultant hereby irrevocably waive any objection to such exclusive jurisdiction
or inconvenient forum and also hereby irrevocably waive any right or claim to
trial by jury in connection with any such action, proceeding or claim.
13. AMENDMENTS. No amendment or modification of the terms or
conditions of this Agreement shall be valid unless in writing and signed by the
parties hereto.
14. INDEMNIFICATION. As a consultant for the Company, the
Consultant must at times rely upon the information supplied to the Consultant by
the Company's officers, directors, agents and employees as to accuracy and
completeness. Therefore, the Company agrees to indemnify, hold harmless and
defend the Consultant, its directors, officers, employees and agents from and
against any and all claims, actions, proceedings, losses, liabilities, costs and
expenses (including without limitation, reasonable attorneys' fees) incurred by
any of them in connection with or as a result of any inaccuracy, incompleteness
or omission of information given to the Consultant in writing by the Company's
officers, directors, agents or employees in connection with the rendering of
services by the Consultant requested by the Company hereunder.
<PAGE> 4
15. COUNTERPARTS. This Agreement may be executed in one or
more counterparts which, taken together, shall constitute one and the same
instrument, and this Agreement shall become effective when one or more
counterparts have been signed by each of the parties. It shall not be necessary
in making proof of this Agreement or any counterpart hereof to account for more
than one such counterpart.
Very truly yours,
CRUTTENDEN ROTH INCORPORATED
By:
-----------------------------
Name:
Title:
AGREED AND ACCEPTED:
COLLEGELINK.COM INCORPORATED
By:
-----------------------------
Thomas J. Burgess
President
<PAGE> 1
Exhibit 5.1
FOLEY, HOAG & ELIOT LLP
ONE POST OFFICE SQUARE
BOSTON, MASSACHUSETTS 02109-2170
--------
TELEPHONE 617-832-1000 1747 PENNSYLVANIA AVE., N.W.
FACSIMILE 617-832-7000 WASHINGTON, D.C. 20006
www.fhe.com TEL: 202-223-1200
FAX: 202-785-6687
December 20, 1999
CollegeLink.com Incorporated
55 Hammarlund Way
Middletown, Rhode Island 02842
Ladies and Gentlemen:
We are familiar with the Registration Statement on Form S-1,
Registration No. 333-85079 filed by CollegeLink.com Incorporated, a Delaware
corporation (the "Company"), with the Securities and Exchange Commission under
the Securities Act of 1933, as amended (the "Registration Statement"). The
Registration Statement relates to the proposed public offering by the Company of
3,450,000 shares of Common Stock (the "Shares") to be issued by the Company.
(The foregoing number of Shares assumes exercise in full of the over-allotment
option described in the Registration Statement.)
We are familiar with the Company's Amended and Restated Certificate of
Incorporation and all amendments thereto, its By-Laws and all amendments
thereto, records of meetings and consents of its Board of Directors and of its
stockholders provided to us by the Company, and its stock records. In addition,
we have examined and relied on the originals or copies certified or otherwise
identified to our satisfaction of all such corporate records of the Company and
such other instruments and other certificates of public officials, officers and
representatives of the Company and such other persons, and we have made such
investigations of law, as we have deemed appropriate as a basis for the opinions
expressed below.
Based on the foregoing, it is our opinion that the Company has
corporate power adequate for the issuance of the Shares in accordance with the
Registration Statement. The Company has taken all necessary corporate action
required to authorize the issuance and sale of the Shares. When certificates for
the Shares have been duly executed and countersigned, and delivered against due
receipt of consideration therefor as described in the Registration Statement,
the Shares will be legally issued, fully paid and non-assessable.
<PAGE> 2
CollegeLink.com Incorporated
December 20, 1999
Page 2
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the incorporated reference to us under the heading
"Legal Matters" in the prospectus forming part of the Registration Statement.
Very truly yours,
FOLEY, HOAG & ELIOT LLP
By: /s/ David A. Broadwin
-----------------------------------
A Partner
<PAGE> 1
Exhibit 10.15
Cruttenden Roth Incorporated
As Representative of the Underwriters
24 Corporate Plaza
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 Delaware 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.
Further, during the 180-day period immediately following the Lock-up
Period (i) the undersigned agrees that no sales or other dispositions of Common
Stock will be made in excess of the number of shares which such parties are
permitted to sell pursuant to Rule 144 under the Securities Act, and (ii) in any
event, all sales or other dispositions of Common Stock by such parties will be
made through Cruttenden Roth Incorporated as Representative, subject to the
prior approval of Cruttenden Roth Incorporated, which approval will be based, in
part, on an assessment of then existing market conditions, made by and at the
sole discretion of Cruttenden Roth Incorporated, and that should Cruttenden Roth
Incorporated determine that market conditions will not support the sale or other
disposition of Common Stock at any given time, the undersigned agrees that the
undersigned will not proceed with such sale or other disposition until such time
as Cruttenden Roth Incorporated determines market conditions to be appropriate
to
<PAGE> 2
proceed with such sale or other disposition, or until the expiration of such
180-day period, whichever occurs first.
In the event that the Representative consents to a Transfer, the
undersigned hereby agrees that, during the Lock-up Period and for 180 days
thereafter, the execution of any order relating to a Transfer of Securities
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 Delaware 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 10.25
FastWeb CollegeLink Agreement
This Agreement ("Agreement") is made as of November 22, 1999 between FastWeb.com
LLC, a Delaware Limited Liability Company ("FastWeb"), with a mailing address at
9933 Woods Drive, 5th floor, Skokie, IL 60077, Attention: Tom Lubin and Mark
Rothschild and CollegeLink.com, a Delaware corporation, with a mailing address
at 55 Hammarlund Way, Tech II, Middleton, RI 02842, Attention: Pat O'Brien
("CollegeLink").
For good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties agree as follows:
1. FastWeb will transmit approximately [Redacted Text] e-mails
cumulatively to FastWeb's entire database of permission-based, opt-in
high school seniors on or around November 23, 1999 (approximately
[Redacted Text] e-mails), on or around December 10, 1999 (approximately
[Redacted Text] e-mails) and to all new permission-based, opt-in high
school seniors on or around January 10, 2000 (approximately [Redacted
Text] e-mails). The messages will exclusively promote the Electronic
College Applications powered by CollegeLink. FastWeb will assist
CollegeLink in writing these messages.
2. FastWeb will feature Student Success, Inc and the Electronic
Application Service powered by CollegeLink in the FastWeb Parent
Newsletter on or around November 23, 1999 (approximately [Redacted
Text] e-mails) and on or around December 15, 1999 (approximately
[Redacted Text] e-mails). Copy will be mutually approved.
3. During the term of the Agreement (beginning as promptly as feasible),
FastWeb will (i) feature Electronic College Applications powered by
CollegeLink as the exclusive provider of such services on FastWeb (ii)
mention the Electronic Application Service powered by CollegeLink on
every college directory page for every school in the directory, and
(iii) provide a link on FastWeb's gateway page to a category called
"College Selection and Applications". Students who click on any link to
"College Applications" or "Electronic Applications powered by
CollegeLink" will be sent to a page on CollegeLink in which the frame
set will reside on FastWeb and the content within the frame will be
resident on CollegeLink.
4. During the term of the Agreement, FastWeb will send a "Welcome to
FastWeb" e-mail to each new FastWeb member who is a high school senior
promptly upon registration, which message will include a promotion
specifically highlighting the availability of the Electronic
Application Service powered by CollegeLink.
5. During the term of this Agreement, FastWeb's "Scholarship Message
Center" will contain a message for high school seniors promoting the
Electronic Application Service powered by CollegeLink.
<PAGE> 2
6. During the term of this Agreement, all FastWeb's "Award Notices" sent
to high school seniors announcing newly added awards will promote the
Electronic Application Service powered by CollegeLink.
7. During the term of this Agreement, FastWeb will promote the Electronic
Application Service powered by CollegeLink in one issue of FastWeb's
electronic Educator Newsletter prior to January 10, 2000, and in paper
version, prior to April 15, 2000. Copy will be mutually approved.
8. During the term of this Agreement, CollegeLink will prominently promote
FastWeb as its exclusive scholarship provider.
9. FastWeb will be entitled to a [Redacted Text] revenue share on all
revenue generated in excess of [Redacted Text] from FastWeb users who
use the CollegeLink service as part of this arrangement. FastWeb will
not be entitled to any revenue from the [Redacted Text] in sales
between the date of this Agreement and April 15, 2000.
10. In addition to the revenue share, CollegeLink will pay FastWeb a flat
fee of [Redacted Text] half of which will be paid within 24 hours of
the execution of this Agreement and the remaining half which will be
paid no later than February 1, 2000. CollegeLink shall have the option
to purchase a third email to the original group emailed on November 23,
1999 at a rate of [Redacted Text] prior to April 15, 2000.
11. The term of this Agreement commences on the date hereof and terminates
on April 15, 2000.
12. This Agreement contains the complete agreement between the parties
concerning this subject matter and supersedes all prior communications
and understandings. This Agreement is binding upon and inures to the
benefit of the parties hereto, and their respective successors and
assigns. Each party hereby represents to the other that the execution
and delivery of this Agreement has been approved by appropriate action
on the behalf of such party and that this Agreement is the valid and
legally binding obligation of such party, enforceable in accordance
with its terms. Each party shall indemnify the other for all losses,
costs and expenses (including reasonable attorney's fees) arising out
of the breach of any representations, warranties and/or covenants
contained in this Agreement. If any provision of this Agreement is held
to be unenforceable all other terms shall continue in full force and
effect and shall be construed as if such provision or portion thereof
had not been part of this Agreement. This Agreement shall be governed
by and construed in accordance with the laws of the State of Illinois
without regard to conflict of laws principles.
13. Nothing contained in this Agreement shall be deemed or construed by the
parties hereto or by any third party to create the relationship of
principal and agent or of a partnership or joint venture between
FastWeb and CollegeLink.
14. To facilitate execution of this Agreement, this Agreement may be
executed in one or more counterparts, with each counterpart being
deemed to be an original, but with all counterparts together
constituting one and the same Agreement. For purposes of this
Agreement, signature by facsimile shall be deemed to be an original
signature.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
FastWeb.com LLC CollegeLink.Com
By: /s/ Mark Rothschild By: /s/ Thomas J. Burgess
------------------------------- ------------------------------------
Its: Sr. Vice President Its: President
------------------------------ -----------------------------------
-3-
<PAGE> 1
Exhibit 10.27
AMENDMENT TO EMPLOYMENT AGREEMENT
Reference is made to the Employment Agreement entered into as of
February 11, 1999 between Cytation.com Incorporated and Richard A. Fisher (the
"Employment Agreement"). The Employment Agreement is hereby amended as follows:
1. The definition of "INITIAL TERM" in Section 1 of the Employment
Agreement is hereby amended to read as follows:
"INITIAL TERM" means the four (4) year period beginning on the
Employment Date and ending on the fourth anniversary thereof.
2. The vesting period for the stock options described in Section 3(c)
of the Employment Agreement is hereby amended so that 1/24th of such options
vest each month during the continued employment of Mr. Fisher, commencing as of
the date of the grant of such option.
The Employment Agreement, as amended hereby, is ratified and confirmed.
IN WITNESS HEREOF, the parties hereto have executed this Amendment as
of November 11, 1999.
CYTATION.COM INCORPORATED
By: /s/ Thomas J. Burgess
Name: Thomas J. Burgess
Title: President
/s/ Richard A. Fisher
Richard A. Fisher
<PAGE> 1
Exhibit 10.28
AMENDMENT TO EMPLOYMENT AGREEMENT
Reference is made to the Employment Agreement entered into as of
February 11, 1999 between Cytation.com Incorporated and Kevin J. High (the
"Employment Agreement"). The Employment Agreement is hereby amended as follows:
1. The definition of "INITIAL TERM" in Section 1 of the Employment
Agreement is hereby amended to read as follows:
"INITIAL TERM" means the four (4) year period beginning on the
Employment Date and ending on the fourth anniversary thereof.
2. The vesting period for the stock options described in Section 3(c)
of the Employment Agreement is hereby amended so that 1/24th of such options
vest each month during the continued employment of Mr. High, commencing as of
the date of the grant of such option.
The Employment Agreement, as amended hereby, is ratified and confirmed.
IN WITNESS HEREOF, the parties hereto have executed this Amendment as
of November 11, 1999.
CYTATION.COM INCORPORATED
By: /s/ Thomas J. Burgess
Name: Thomas J. Burgess
Title: President
/s/ Kevin J. High
Kevin J. High
<PAGE> 1
Exhibit 10.29
CYTATION.COM INCORPORATED
In consideration of the agreement of CYTATION.COM INCORPORATED (together
with CollegeLink.com Incorporated, its wholly-owned subsidiary, (the "Company")
to retain Bruce Sundlun as an independent consultant ("Consultant") to provide
the services for the term and at the compensation rate specified below,
Consultant agrees with the Company as follows:
1. Performance of Services. Consultant will perform in a professional and
expeditious manner all services for the Company which the Company and
Consultant mutually agree should be performed by it. Consultant will report the
progress of all such work upon request of the Company. The services to be
performed shall consist generally of utilizing Consultant's relationships
generated during his terms as Governor of the State of Rhode Island and
otherwise in furtherance of the Company's business. In particular in the near
term, the services shall include assisting the Company to improve substantially
and expand its relationship with The College Board and its affiliates
(collectively, "TCB").
2. Term. The term of this Agreement shall be for one year.
3. Compensation. The Company will pay compensation to Consultant at the
rate of $5,000 per month. Consultant will be entitled to reimbursement of
previously approved expenses monthly in arrears upon submission of receipts and
expense vouchers to the Company. In addition, Consultant shall be entitled to a
cash payment of $75,000 upon the execution of an agreement by the company and
TCB which provides that the Company shall be the exclusive provider of
electronic and online college applications for TCB.
Consultant will also be entitled to an option to purchase 25,000 shares of
the Company's common stock at a per share exercise price of $5.00. The option
grant shall be in the form customarily used by the Company and shall be
executed and delivered upon Consultant's execution of this Agreement.
4. Independent Contractor. In furnishing services, Consultant will at all
times be acting as an independent contractor. As such, Consultant will not by
reason this Agreement or its services hereunder be entitled to participate in
or to receive any benefit or right under any of the Company's employee stock,
benefit or welfare plans. Consultant agree to report its compensation from the
Company as income from self employment and to pay all self employment and other
taxes required by law to be paid with respect to such compensation as and when
the same shall become due and payable.
5. Personal Services of Consultant. Consultant agrees to provide his
services exclusively to perform this agreement, except as otherwise agreed to
in writing by the Company.
6. Insurance. Consultant agrees to insure itself, and any consultant or
other person furnished by it, with all necessary insurance, including, but not
limited to, workmen's
Page 1 of 3
<PAGE> 2
compensation, disability, unemployment and general liability insurance, the
amounts and coverage of which shall be in compliance with all the applicable
laws and sufficient adequately to compensate each such person for any and all
injury, loss or damage which may result from or arise out of its performance of
services under this Agreement. Consultant agrees further to indemnify and hold
the Company harmless from and against any such injury, loss or damage and to
defend, at its own expense, any action, claim or proceeding for such injury,
loss or damage brought by any such persons against the Company.
7. Company-Furnished Information, Materials and Equipment. All
information, materials or equipment furnished by the Company to Consultant or
acquired at the Company's expense by Consultant (herein collectively
"Company-furnished information") shall be and remain the sole property of the
Company.
8. Confidentiality. During and after the term of this Agreement, Consultant
shall not, without first obtaining the written consent of the Company, divulge
or disclose to anyone outside the Company, whether by private communication or
by public address or publication, or otherwise, any information not already
lawfully available to the public concerning any and all Company-furnished
information, any or all information acquired by Consultant during the course of
its consulting services from or pertaining to any business or licensors or
customers of the Company, and any and all Consultant work-product which is
maintained in secrecy or confidence by the Company or by any person or entity
affiliated with the Company by employment, ownership, participation in a joint
venture, licensing arrangement, contract or otherwise.
9. Trade Secrets. Consultant will not, during the term of service to the
Company or thereafter, disclose to others or use for its own benefit any trade
secrets acquired from the Company, its customers, suppliers, consultants or
affiliates, except to the extent that the disclosure of such trade secrets is
necessary to perform its duties and fulfill its responsibilities as a consultant
to the Company. (A trade secret is information not generally known to the trade
which gives the Company an advantage over its competitors. Trade secrets can
include, by way of example, products under development, production methods and
processes, sources of supply, materials used in manufacture, customer lists,
costs of parts and materials, business and marketing plans, and information
concerning the filing or pendency of patent applications.)
10. Conflict of Interest. Consultant agrees that it shall be its
responsibility to recognize, disclose and avoid any situation which might,
either directly or indirectly, adversely affect its judgment in acting for the
Company or which might otherwise involve a conflict between personal interest
and the interests of the Company.
11. Entire Agreement and Amendment. This Agreement fully expresses the
entire and only agreement between the Company and Consultant respecting its
services as a consultant. All prior and collateral understandings, agreements
and promises with respect thereto are merged into this Agreement. Consultant
understands that this Agreement may not be modified, waived, or extended unless
agreed to in writing by an authorized officer of the Company.
Page 2 of 3
<PAGE> 3
12. Entire Agreement and Amendment. This Agreement fully expresses the
entire and only agreement between the Company and Consultant respecting its
services as a consultant. All prior and collateral understandings, agreements
and promises with respect thereto are merged into this Agreement. Consultant
understands that this Agreement may not be modified, waived, or extended unless
agreed to in writing by an authorized officer of the Company.
13. Applicable Law. This Agreement shall be construed, interpreted and
applied in accordance with the substantive laws of the State of Rhode Island.
14. Notice. Any written notice to be given under the Agreement must be
delivered in person or given by registered or certified mail:
If to the Company, to: Cytation.com Incorporated
55 Hammarlund Way
Newport, RI 02842
Attention: Richard A. Fisher
If to Consultant, to: Honorable Bruce Sundlun
c/o University of Rhode Island Library
15 Lippitt Road
Kingston, RI 02881
15. Assignment. Consultant agrees not to assign or delegate any right or
obligation under this Agreement.
Dated: October 13, 1999
/s/ Bruce Sundlun
- ------------------------------
Bruce Sundlun 10/14/99
Accepted and agreed to:
CYTATION.COM INCORPORATED
By: /s/ Richard A. Fisher
----------------------------
Chairman and General Counsel
Page 3 of 3
<PAGE> 1
Exhibit 23.2
CONSENTS OF INDEPENDENT AUDITOR
We hereby consent to the use in this Registration Statement for Collegelink.com
Incorporated of our independent auditor's report, dated September 3, 1999,
except as to Note 1, which is dated November 19, 1999, relating to the financial
statements of Collegelink.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
Collegelink.com Incorporated.
We hereby consent to the use in this Registration Statement for Collegelink.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
January 10, 2000
<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
January 10, 2000
<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
January 11, 2000
