AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 8, 1997

REGISTRATION NO. 333-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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

FORM S-1

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933

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

CREDENTIALS SERVICES INTERNATIONAL, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

DELAWARE 7320 13-3784792
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)

333 CITY BOULEVARD WEST, 10TH FLOOR
ORANGE, CALIFORNIA 92868
(714) 704-6400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)

MR. DAVID C. THOMPSON
President and Chief Executive Officer
CREDENTIALS SERVICES INTERNATIONAL, INC.
333 CITY BOULEVARD WEST, 10TH FLOOR
ORANGE, CALIFORNIA 92868
(714) 704-6400
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)

Copies to:

JAMES M. MCLAUGHLIN, JR., ESQ. MELVIN KATZ, ESQ. WILLIAM H. HINMAN, JR., ESQ.
PATRICIA F. YOUNG, ESQ. MALONEY, MEHLMAN & KATZ SHEARMAN & STERLING
PILLSBURY MADISON & SUTRO LLP 405 LEXINGTON AVENUE 555 CALIFORNIA STREET
520 MADISON AVENUE, 40TH FLOOR NEW YORK, NEW YORK 10174 SAN FRANCISCO, CALIFORNIA 94104
NEW YORK, NEW YORK 10022

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

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, check the following box. [ ]

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 delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]

CALCULATION OF REGISTRATION FEE

====================================================================================================
PROPOSED MAXIMUM
AGGREGATE OFFERING AMOUNT OF
TITLE OF EACH CLASS OF SECURITIES TO BE REGISTERED PRICE(1) REGISTRATION FEE
- ----------------------------------------------------------------------------------------------------

Common Stock, $.01 par value............................ $40,000,000 $12,121
====================================================================================================

(1) Estimated solely for the purpose of calculating the registration fee.

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.
================================================================================
2

INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR
MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR
THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE
SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OF SALE WOULD BE
UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS
OF ANY SUCH STATE.

SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED OCTOBER 8, 1997

[LOGO]

CREDENTIALS SERVICES INTERNATIONAL, INC.

COMMON STOCK
------------------------

Of the shares of Common Stock offered hereby, shares are being
offered by Credentials Services International, Inc. (the "Company") and
shares are being offered by certain stockholders of the Company (the "Selling
Stockholders"). See "Principal and Selling Stockholders." The Company will not
receive any proceeds from the sale of shares by the Selling Stockholders.

Prior to this offering, there has been no public market for the Common
Stock of the Company. It is currently anticipated that the initial public
offering price per share of the Common Stock will be between $ and
$ per share. See "Underwriting" for a discussion of the factors to be
considered in determining the initial public offering price. The Company intends
to make application to have the Common Stock approved for quotation on the
Nasdaq National Market under the symbol "CRSR."
------------------------

THESE SECURITIES INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5 OF THIS PROSPECTUS FOR INFORMATION THAT SHOULD BE CONSIDERED
BY PROSPECTIVE INVESTORS.
------------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.

==================================================================================================
Underwriting Proceeds to
Price to Discounts and Proceeds to Selling
Public Commissions(1) Company(2) Stockholders
- --------------------------------------------------------------------------------------------------

Per Share................. $ $ $ $
- --------------------------------------------------------------------------------------------------
Total..................... $ $ $ $
- --------------------------------------------------------------------------------------------------
Total Assuming Full
Exercise of Over-
Allotment Option(3)..... $ $ $ $
==================================================================================================

(1) See "Underwriting."
(2) Before deducting expenses estimated at $ , which are payable by the
Company.
(3) Assuming exercise in full of the 30-day option granted by the Selling
Stockholders to the Underwriters to purchase up to additional
shares, on the same terms, solely to cover over-allotments. See
"Underwriting."
------------------------

The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about
, 1997.
------------------------

PAINEWEBBER INCORPORATED HAMBRECHT & QUIST
------------------------

THE DATE OF THIS PROSPECTUS IS , 1997.
3

Credentials(R) is a trademark of Credentials Services International, Inc.
This prospectus includes trademarks and tradenames of other companies.

CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK. SUCH
TRANSACTIONS MAY INCLUDE THE PURCHASE OF THE COMMON STOCK TO STABILIZE ITS
MARKET PRICE, THE PURCHASE OF THE COMMON STOCK TO COVER SYNDICATE SHORT
POSITIONS AND THE IMPOSITION OF PENALTY BIDS. FOR A DESCRIPTION OF THESE
ACTIVITIES, SEE "UNDERWRITING."
4

PROSPECTUS SUMMARY

The following summary is qualified in its entirety by the more detailed
information and Financial Statements and related notes appearing elsewhere in
this Prospectus. Except as set forth in the Financial Statements and notes
thereto or as otherwise specified herein, all information in this Prospectus (i)
assumes no exercise of the Underwriters' over-allotment option, (ii) reflects a
-for- split of the Common Stock to be effected prior to the commencement of
this offering and (iii) assumes the exercise of warrants to purchase the
equivalent of shares of Common Stock prior to the closing of this
offering. See "Description of Capital Stock" and "Underwriting." Investors
should carefully consider the information set forth under the heading "Risk
Factors."

This Prospectus contains, in addition to historical information,
forward-looking statements that involve risks and uncertainties. The Company's
actual results could differ materially from the results discussed in the
forward-looking statements. Factors that could cause or contribute to such
differences include those discussed under the heading "Risk Factors" below, as
well as those discussed elsewhere in this Prospectus.

THE COMPANY

Credentials Services International, Inc. is a leading direct marketer of
credit information and monitoring membership programs to consumers. The Company
believes that it provides value-added programs that enable consumers to monitor
the accuracy of their personal credit data that is collected and held by credit
reporting bureaus. This information allows consumers to respond on an informed
basis to credit decisions made by providers of credit such as mortgage lenders,
consumer finance companies, auto loan providers, credit card providers, banks
and other lending institutions. Through its relationship with Experian Inc., one
of the three major credit reporting bureaus, the Company provides this
information to its members in a readily understandable, readable format and
offers members notification of significant events, such as credit inquiries and
the entry of negative credit data in the member's credit file, which might
affect their ability to obtain credit.

The Company markets its membership programs to consumers using direct
marketing techniques, primarily by direct mail and telemarketing campaigns
conducted through endorsed co-marketing relationships with major credit card
issuers that have a large customer base, such as banks, retailers and oil
companies. Through its co-marketing relationships, the Company markets its
programs to the customer bases of nationally-known organizations such as The
Chase Manhattan Bank USA, N.A., Bank One, N.A. and its affiliates (including the
recently merged First USA Bank credit card customer base), PNC National Bank,
N.A., Service Merchandise and Sun Company, Inc. (Sunoco). During the nine-month
period ended June 27, 1997, the Company increased the number of its co-marketers
to 24 from 13 at September 27, 1996. During this period, the Company's
membership base increased to approximately 1.3 million members from
approximately 828,000 members.

The consumer credit information and monitoring business conducted by the
Company was started in 1986 by a division of TRW, Inc. In October 1994, the
Company purchased certain assets of the business from TRW, Inc. In September
1996, TRW, Inc., sold its credit bureau and credit reporting business, and that
business was subsequently renamed Experian Inc. At the time of the Company's
acquisition in 1994, it entered into a ten-year contract with TRW, Inc. pursuant
to which the Company has access to Experian Inc.'s credit reports and daily
access to the national Experian Inc. credit file. The Company's information
systems are integrated with Experian Inc.'s database and systems, enabling the
Company to immediately and automatically notify a member when an inquiry is made
into the member's personal credit file. The Company believes that it is the only
company which currently offers this unique feature to consumers and that this
feature constitutes a substantial competitive advantage with respect to
developing co-marketing relationships and building its membership base.

1
5

The Company seeks to become the leading provider of credit information and
monitoring programs to consumers and to continue to build its membership base
with its core programs and the introduction of new programs. The key elements of
the Company's strategy are as follows:

Expand Distribution Channels. The Company intends to expand its network of
co-marketing relationships to include additional major banks, retailers and oil
companies, as well as to aggressively develop innovative new distribution
channels. Potential co-marketing partners may include mortgage servicing
companies, insurance companies and utility companies, such as regional telephone
companies. The Company also believes the World Wide Web may become a viable
distribution channel for its membership programs and is exploring that potential
distribution opportunity.

Develop New Programs. The Company intends to continue to develop and
market new programs to current and new members. The Company has test marketed
and is continuing to develop a program targeted to small businesses which would
provide those businesses with credit information and monitoring services to
enable them to better evaluate and monitor their own credit as well as the
credit of other businesses, particularly their vendors, suppliers and customers.
In addition, the Company is presently test marketing a number of other
consumer-oriented membership programs.

The Company was incorporated in Delaware in 1993 and commenced operations
in October 1994. The Company's executive offices are located at 333 City
Boulevard West, 10th Floor, Orange, California 92868, and its telephone number
is (714) 704-6400.

2
6

THE OFFERING

Common Stock Offered by the Company.......... shares
Common Stock Offered by the Selling
Stockholders............................... shares
Common Stock to be Outstanding after the
Offering................................... shares(1)
Use of Proceeds.............................. The net proceeds to the Company from the
offering are estimated to be approximately
$ . The Company intends to apply the
net proceeds of the offering to repay certain
outstanding indebtedness in the aggregate
principal amount of approximately $15.0
million, plus accrued interest. The balance of
the net proceeds of the offering, if any, will
be used for general corporate purposes. The
Company will not receive any proceeds from the
sale of shares by the Selling Stockholders.
See "Use of Proceeds."
Proposed Nasdaq National Market Symbol....... CRSR

- ---------------
(1) Based upon the number of shares of Common Stock outstanding at October ,
1997. See "Capitalization" and "Principal and Selling Stockholders."
Excludes shares of Common Stock issuable upon exercise of options
issued under the Company's 1997 Stock Option Plan. See "Management --
Executive Compensation."

3
7

SUMMARY FINANCIAL INFORMATION

The following summary financial information for each of the two fiscal
years in the period ended September 27, 1996 and at June 27, 1997 and for the
nine-month period ended June 27, 1997 has been derived from the financial
statements of the Company that have been audited by Coopers & Lybrand L.L.P.,
independent auditors, included herein. The summary financial information for the
nine-month period ended June 28, 1996 has been derived from unaudited financial
statements prepared on the same basis as the audited financial statements and
contain, in the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of the financial
position at such date and the operating results and cash flows for such period.
The results of operations for the nine months ended June 27, 1997 are not
necessarily indicative of results to be expected for any future period. The
summary financial information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes included elsewhere in this
Prospectus.

FISCAL YEARS NINE-MONTH PERIODS
ENDED SEPTEMBER(1) ENDED JUNE(1)
------------------ -------------------------
1995 1996 1996 1997
------- -------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND
NUMBER OF MEMBERS)

STATEMENT OF OPERATIONS DATA:
Revenues............................................. $12,540 $ 24,556 $ 17,091 $28,208
Operating income (loss).............................. (4,544) (20,629) (14,492) 2,552
Interest expense..................................... 1,239 1,818 893 1,052
Income (loss) before provision for income taxes and
extraordinary item................................. (5,783) (22,447) (15,385) 1,500
Income (loss) before extraordinary item.............. (5,783) (22,447) (15,385) 1,439
Income (loss) per share before extraordinary item....
Weighted average common and common equivalent shares
outstanding........................................

OTHER DATA:
Total members at end of period....................... 613,000 828,000 714,000 1,257,000

JUNE 27, 1997
------------------------------
ACTUAL AS ADJUSTED(2)
----------- --------------
(UNAUDITED)

BALANCE SHEET DATA:
Cash and cash equivalents.......................................... $ 299 $
Total assets....................................................... 37,696
Total liabilities.................................................. 57,378
Total stockholders' deficit........................................ (19,682)

- ---------------
(1) The Company's fiscal year ends on the last Friday of September of each year.
The Company's quarterly periods are each comprised of 13 weeks and end on a
Friday. The first month of each quarter is comprised of five weeks, and each
of the two remaining months of the quarter is comprised of four weeks.

(2) Adjusted to reflect (i) the sale by the Company of shares of
Common Stock offered hereby at an assumed initial public offering price of
$ per share; and (ii) the application of the estimated net proceeds
of this offering. See "Use of Proceeds" and "Capitalization."

4
8

RISK FACTORS

In addition to the other information in this Prospectus, the following risk
factors should be considered carefully in evaluating the Company, its current
business and its future prospects before purchasing shares of the Company's
Common Stock offered hereby.

LIMITED OPERATING HISTORY

The Company commenced operations in October 1994. It has a limited
operating history and is at an early stage of development. While the Company's
business of direct marketing credit information and monitoring programs was
started by a division of TRW, Inc. ("TRW") in 1986, the Company has operated as
an independent business organization for approximately three years and,
therefore, its future results of operations are subject to the uncertainties,
including those concerning continuity of management and business relationships,
customarily encountered by new businesses.

HISTORY OF OPERATING LOSSES

For the nine-month period ended June 27, 1997, the Company generated net
income of approximately $1.3 million; however, as of June 27, 1997, the Company
had an accumulated deficit of approximately $26.9 million. For fiscal years 1996
and 1995, the Company incurred net losses of approximately $22.4 million and
$5.8 million, respectively. Management believes that the net loss for the year
ended September 27, 1996 was a result primarily of failed direct marketing and
telemarketing campaigns that were conducted on an unendorsed basis (i.e.,
without the benefit of co-marketer endorsements). The fiscal year 1996 losses
resulted in a severe liquidity shortfall which impaired the Company's ability to
undertake new marketing programs. Management of the Company has since taken a
variety of actions, including the investment of additional capital in the
Company, the replacement of certain key executive officers and the
implementation of new operational and financial control procedures, in an effort
to remedy the problems that led to the Company's financial difficulties in
fiscal year 1996. There can be no assurance, however, that these or any other
steps taken by management in the future will be sufficient to allow the Company
to maintain profitability or avoid liquidity problems and operating losses such
as those recently experienced by the Company.

FLUCTUATIONS IN QUARTERLY OPERATING RESULTS

The Company's quarterly revenues, expenses and operating results have
varied significantly in the past and are likely to vary significantly from
quarter to quarter in the future. Factors which may affect the Company's
financial results include: response to membership solicitations; cancellations
and renewals of memberships; market acceptance of the Company's and the
co-marketers' existing and new programs; the demand for credit monitoring
services such as those offered by the Company; the timing of the Company's
investments in program development; unanticipated customer service
interruptions; unanticipated increased costs associated with maintenance and
expansion of operations; and competitive pressures on the Company's business
generally. Many of these factors (including postage and telephone rates for
direct mail and telemarketing campaigns) are beyond the Company's control. For
example, the U.S. Postal Service has proposed a postage rate increase to become
effective in mid-1998. In addition, any delay in the offering of a new program
by the Company, its co-marketers or otherwise, or slower than anticipated
consumer acceptance of such program, could adversely affect the Company's
margins in a given period. Due to the foregoing and other factors, the Company
believes that its quarterly operating results are likely to vary significantly
in the future, that period-to-period comparisons of its operating results are
not necessarily meaningful and that such comparisons cannot be relied upon as
indicators of future performance. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations."

DEPENDENCE ON CO-MARKETERS; CO-MARKETER CONCENTRATION

The Company obtains substantially all of the information necessary for
conducting the Company's endorsed marketing efforts from customer lists supplied
by its co-marketers. Co-marketers provide the lists to the Company solely for
use in marketing specified products. As a result, the Company's ability to
market an

5
9

existing program to potential new members or a new program to its existing
members is dependent on its ability to develop and maintain relationships with
co-marketers and to obtain approval for its marketing efforts from the relevant
co-marketer.

Approximately 42% of the Company's revenues for the nine-month period ended
June 27, 1997 were attributable to members solicited from customer lists
provided by its two largest co-marketers. The number of new members attributable
to any individual co-marketer fluctuates from period to period depending on
whether the Company has initiated a product marketing cycle for that co-marketer
during the relevant period. Accordingly, the percentage of the Company's total
revenue generated by each individual co-marketer has varied over time although
memberships and the associated revenue derived from endorsed marketing campaigns
conducted with The Chase Manhattan Bank USA, N.A. ("Chase") and Bank One, N.A.
and its affiliates (including the recently merged First USA Bank credit card
customer base) ("Bank One") have historically constituted a significant portion
of the Company's total revenues and membership base. For the nine-month period
ended June 27, 1997, approximately 37% of the Company's revenues were generated
from members who were originally solicited with the co-marketer endorsement of
Bank One (the "Bank One Endorsement"), and approximately 5% of the Company's
revenues were generated from members who were originally solicited with the
co-marketer endorsement of Chase (the "Chase Endorsement"). At June 27, 1997,
approximately 18% of the Company's members consisted of members who were
originally solicited with the Chase Endorsement and approximately 26% of the
Company's members consisted of members who were originally solicited with the
Bank One Endorsement. The Company is currently engaged in expanding the number
of its co-marketing partners (which has grown to 24 at June 27, 1997 from 13 at
September 27, 1996) and anticipates that, as a result, it will, over time,
become less dependent on individual co-marketers. There can be no assurance,
however, that such expansion efforts will succeed or that the Company will,
accordingly, be able to lessen its dependence on individual co-marketers.
Certain of these co-marketer relationships are governed by agreements which may
be terminated without cause by either party upon 60 to 90 days' notice without
penalty and upon 30 days' notice in the event of an uncorrected material breach.
Upon such termination, the Company has the right to continue its relationship
with the co-marketer's customers that have become members prior to the
termination. There can be no assurance that one or more of the Company's
significant co-marketers will not terminate its relationship with the Company or
that co-marketers will continue to provide additional customer lists to the
Company for use in future marketing of new or existing membership programs. The
loss of any significant co-marketer could have a material adverse effect on the
Company's business, financial condition and results of operations. See
"Business."

DEPENDENCE ON MEMBERSHIP RENEWALS

Fees generated by renewals of memberships are a significant contributor to
the Company's net income. The initial year of a membership is less profitable to
the Company than renewal years due primarily to the marketing costs associated
with acquiring new members. In addition, during the initial year of a
membership, a member may cancel his or her membership in the program for a
complete refund of the membership fee for that year. Accordingly, the
profitability of the Company is substantially dependent upon its membership
renewals. Renewal rates are uncertain and are subject to several factors, many
of which are beyond the Company's control, including changing member
preferences, competitive price pressures, general economic conditions, customer
satisfaction and credit card holder turnover. In addition, due to the rapid
growth of the Company's membership base during fiscal year 1997, the membership
renewal rates historically experienced by the Company are not necessarily
indicative of future renewal rates. There can be no assurance that the Company
will continue to generate sufficient membership renewals to maintain
profitability or that memberships, if renewed, will not be cancelled. Failure of
the Company to generate a high rate of membership renewals would have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Sales and Marketing."

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10

COMPETITION

The Company's principal competitor is CUC International Inc. ("CUC") which
offers credit reporting membership programs with certain features similar to
those provided by the Company's programs. In addition to this direct
competition, the Company also encounters competition for co-marketer
endorsements from other direct marketing businesses. Because agreements between
co-marketers and program providers are often exclusive with respect to a
particular service, potential co-marketers may be prohibited from entering into
agreements with the Company to promote a program if the features provided by the
Company's program are similar to, or overlap with, the features offered by an
existing program of a competitor. There can be no assurance that the Company's
competitors will not increase their emphasis on programs similar to those
offered by the Company and more directly compete with the Company, that new
competitors will not enter the market, that competitors will not increase the
compensation they provide to co-marketers to induce such co-marketers to enter
into agreements, or that other businesses will not themselves introduce
competing programs. Such potential competitors include major credit card
issuers, including the Company's co-marketers. Potential competitors also
include major credit reporting bureaus, including Experian Inc. ("Experian"),
which would have significant competitive advantages such as access to credit
data at minimal cost. There can be no assurance that the Company's current or
potential competitors will not provide programs comparable or superior to those
provided by the Company at lower membership prices or adapt more quickly than
the Company to evolving industry trends or changing market requirements. In
addition, alliances among competitors may emerge and rapidly acquire significant
market share. Many of the Company's current and prospective competitors,
including CUC, have substantially larger customer bases and greater financial
and other resources than those available to the Company. Increased competition
may result in price reductions, increased fees payable to co-marketers, reduced
profitability and loss of market share, any of which could materially adversely
affect the Company's business, financial condition and results of operations.
There can be no assurance that the Company will be able to compete effectively
against future and current competitors. See "Business -- Competition."

Experian provides substantially all of the credit information which the
Company furnishes to its members. Although neither Experian nor the other credit
reporting bureaus provide the credit monitoring services currently offered by
the Company, Experian and the other credit bureaus currently provide a credit
report directly to any consumer at the consumer's request at the rate of
approximately $8.00 per report (except in states where local legislation
provides that consumers are entitled to a free credit report upon their written
request). See "-- Government Regulation; Adverse Publicity -- State Fair Credit
Reporting Acts." There can be no assurance that Experian or the other credit
bureaus will not begin to more aggressively market their services to consumers
by initiating price reductions or advertising campaigns targeted to consumers
and that such actions will not adversely affect the Company's business,
financial condition and results of operations or require the Company to reduce
prices for certain of its programs in order to remain competitive. On August 13,
1997, Experian launched a program to offer consumers the opportunity to receive
their credit reports directly over the Internet. Although two days later
Experian announced that it was suspending this program due to certain
operational and security problems, there can be no assurance that this, or
similar programs, will not be implemented by Experian or other credit reporting
bureaus or that competition from such programs will not adversely affect the
Company's business, financial condition and result of operations. Experian and
the other credit reporting bureaus would have significant competitive advantages
over the Company in providing such reports or services, such as access to credit
data at minimal cost. See "-- Dependence on Third Parties -- Relationship with
Experian."

In addition, the introduction or announcement by competitors of the Company
of new programs similar to those offered by the Company could render the
Company's existing programs uncompetitive or obsolete, or result in a delay or
decrease in orders for the Company's existing programs as co-marketers or
customers evaluate new programs or select new programs as an alternative to the
Company's existing programs. Therefore, the announcement or introduction of new
programs by competitors of the Company could have a material adverse effect on
the Company's business, financial condition and results of operations. See
"Business -- Competition."

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11

Providers of membership programs also compete for the limited access
provided by co-marketers to their customers against other businesses engaged in
direct marketing activities, such as telemarketing and direct mail. In recent
years, there have been significant advances in new forms of direct marketing,
such as the development of interactive shopping and data collection through
television, the Internet and other media. Many industry experts predict that
electronic interactive commerce, such as shopping and information exchange
through the World Wide Web, will proliferate significantly in the foreseeable
future. To the extent it occurs, such proliferation could materially change the
economics of acquiring members for membership programs. Although the Company is
exploring the potential of what it believes are the most promising new forms of
direct marketing, there can be no assurance that the Company would be able to
adapt to a material change in the economics of its business or that such change
would not have a material adverse effect on the Company's business, financial
condition or results of operations. See "Business -- Competition."

DEPENDENCE ON CREDIT CARD INDUSTRY

Programs marketed through the Company's credit card issuer co-marketers
accounted for substantially all of the Company's revenues in fiscal year 1996
and the nine-month period ended June 27, 1997. A significant downturn in the
credit card industry or a trend in that industry to reduce or eliminate its use
of direct marketing programs would have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the Company is obligated under the terms of its agreement with credit card
issuers and merchant processors under rules promulgated by credit card
associations such as Visa International and MasterCard to maintain certain
standards of commercial conduct relating generally to the protection of credit
card holders and consumers. While the Company believes it has been in compliance
with such standards to date, violations of such standards could jeopardize the
Company's ability to utilize such associations to collect payment of membership
fees, which could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business -- Credit Card
Enhancement Industry Background" and "-- Sales and Marketing."

DEPENDENCE ON THIRD PARTIES

Relationship with Experian. The Company receives substantially all of its
credit reports and credit information from Experian. In connection with the
acquisition of the Company's business in October 1994, the Company entered into
a ten-year contract with TRW (the predecessor to Experian) pursuant to which the
Company has access to Experian's credit reports and daily access to the national
Experian credit file. The Company is dependent upon access to Experian's data
base, which enables the Company to offer the credit monitoring feature of its
programs to its members. The Company's information systems are integrated with
and dependant upon Experian's database and systems. The Company's agreement with
Experian provides that either party may request a modification of the pricing
terms after October 1999, the fifth anniversary of the agreement. In the event
such a request is made and the Company and Experian are unable to agree upon new
pricing terms within a specified period, either party may terminate the
contract. In addition, if the Company fails to comply with various regulations
applicable to the Company, Experian may terminate the contract. There can be no
assurance that, in the event Experian ceases operations, or terminates, breaches
or chooses not to renew its agreement with the Company, a replacement source for
credit reports and information could be retained on a timely basis, if at all.
Any such termination, breach or nonrenewal could have a material adverse effect
on the Company's business, financial condition and results of operations. See
"-- Government Regulation; Adverse Publicity" and "Business -- Overview" and
"-- Credit Information and Monitoring Programs."

Direct Marketing. The Company solicits members for its programs primarily
through direct mail and telemarketing. The Company outsources its direct mail
and telemarketing activities to third party contractors. The third party
contractors operate pursuant to agreements with the Company that may be
terminated with limited prior notice. There can be no assurance that, in the
event any such third party contractor ceases operations, or terminates, breaches
or chooses not to renew its agreement with the Company, a replacement direct
mailer or telemarketer could be retained on a timely basis, if at all. In
addition, as third party contractors, the level and quality of services provided
by direct mailers and telemarketers is beyond the control

8
12

of the Company. Any service interruptions or quality problems could result in
negative publicity, customer dissatisfaction and membership cancellations which
could have a material adverse effect on the Company's business, financial
condition and results of operations. See "Business -- Sales and Marketing."

Printing and Fulfillment Outsourcing. The Company outsources its printing
and membership fulfillment processes, and is dependent on printers and mailing
houses for prompt and accurate production of mailing inserts and initial
customer fulfillment packages. In the event that one of the printing or mailing
houses is unable or unwilling to provide materials on a timely basis or
terminates its relationship with the Company, there can be no assurance that the
Company would be able to replace such services without an interruption in its
marketing and customer service operations. Any such interruption could
materially and adversely affect the Company's business, financial condition and
results of operations. See "Business -- Fulfillment."

MANAGEMENT OF GROWTH

The Company has recently experienced a period of rapid growth that has
placed significant demands on its management and other resources. Continued
growth, if any, could continue to place significant demands on such resources.
For example, the Company's membership base increased to approximately 1.3
million members at June 27, 1997 from approximately 828,000 members at September
27, 1996. Revenues have also increased significantly since the inception of the
Company. The Company's ability to compete effectively and to manage future
growth, if any, will depend on its ability to continue to implement and improve
operational, financial and management information systems on a timely basis and
to expand, train, motivate and manage its employees. There can be no assurance
that the Company's personnel, systems, procedures and controls will be adequate
to support the Company's operations, and the failure to effectively support the
Company's operations could have a material adverse effect on the Company's
business, financial condition and results of operations. See "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

POTENTIAL NEGATIVE IMPACT OF COMPETING DISTRIBUTION CHANNELS; RESISTANCE TO
TELEMARKETING

In recent years, there have been significant advances in new forms of
direct marketing, such as the development of interactive shopping and data
collection through television, the Internet and other media. Electronic
interactive commerce, such as shopping and information exchange via the World
Wide Web, may proliferate significantly in the foreseeable future. To the extent
it occurs, such proliferation could materially change the economics of acquiring
members for membership service programs. Such change could have a materially
adverse effect on the Company's business, financial condition and results of
operations. Furthermore, as the telemarketing industry continues to grow, the
effectiveness of telemarketing, which is one of the two principal means by which
the Company markets its programs, as a direct marketing method may decrease as a
result of increased consumer resistance to telemarketing in general. See
"Business -- Credit Card Enhancement Industry Background," "-- Sales and
Marketing" and "-- Competition."

RELIANCE ON COMMUNICATIONS AND INFORMATION SYSTEMS; TECHNOLOGY RISKS

The Company's business is highly dependent on its computer and
telecommunications systems and any temporary or permanent loss of either system,
for whatever reason, could have a material adverse effect on the Company's
business, financial condition and results of operations. In addition, the
technologies on which the Company is dependent to effectively compete and meet
its co-marketers' needs are rapidly evolving and in many instances are
characterized by short product life cycles or innovation. There can be no
assurance that the Company will be successful in anticipating or adapting to
technological changes or in selecting and developing new and enhanced technology
on a timely basis. See "Business -- Management Information Systems."

9
13

DEPENDENCE ON KEY PERSONNEL

The Company is highly dependent on the members of its management and
marketing staff, the loss of one or more of whom could have a material adverse
effect on the Company. In addition, the Company believes that its future success
will depend in large part upon its ability to attract and retain highly skilled
managerial and marketing personnel, particularly as the Company expands its
activities. The Company faces significant competition for such personnel, and
there can be no assurance that the Company will be successful in hiring or
retaining the personnel it requires for continued growth. The failure to hire
and retain such personnel could materially and adversely affect the Company's
business, financial condition and results of operations. See "Management" and
"Certain Transactions."

GOVERNMENT REGULATION; ADVERSE PUBLICITY

Federal Telephone Consumer Protection Act; Federal Telemarketing and
Consumer Fraud and Abuse Prevention Act. One of the principal methods the
Company uses to market its programs is telemarketing. The telemarketing industry
has become subject to an increasing amount of Federal and state regulation as
well as general public scrutiny in the past several years. The Federal Telephone
Consumer Protection Act of 1991 limits the hours during which telemarketers may
call consumers and prohibits the use of automated telephone dialing equipment to
call certain telephone numbers. The Federal Telemarketing and Consumer Fraud and
Abuse Prevention Act of 1994, and Federal Trade Commission ("FTC") regulations
promulgated thereunder, prohibit deceptive, unfair or abusive practices in
telemarketing sales. Both the FTC and state attorneys general have authority to
prevent telemarketing activities that constitute "unfair or deceptive acts or
practices." In addition, some states have enacted laws and others are
considering enacting laws targeted directly at telemarketing practices, and
there can be no assurance that any such laws, if enacted, will not adversely
affect or limit the Company's current or future telemarketing activities.
Although the Company does not control the telemarketing firms which it engages
to market the Company's programs, compliance with these regulations is generally
the responsibility of the Company, and the Company could be subject to a variety
of enforcement or private actions for any failure to comply with such
regulations. The risk of noncompliance by the Company with any rules and
regulations enforced by a Federal or state consumer protection authority may
subject the Company or its management to fines or various forms of civil or
criminal prosecution, any of which could have a material adverse effect on the
Company's business, financial condition and results of operations.

Federal Fair Credit Reporting Act. The Fair Credit Reporting Act ("FCRA")
became effective in 1971. Extensive amendments which became effective October 1,
1997 were recently enacted into law. The FCRA establishes a set of requirements
that "consumer reporting agencies" must follow in the conduct of their business.
A "consumer reporting agency" means any person who regularly engages in
assembling consumer credit information for the purpose of furnishing consumer
reports to third parties. The FCRA imposes numerous requirements on consumer
reporting agencies including restrictions on the permissible uses of consumer
reports and the contents of consumer reports, as well as requirements relating
to disclosures of reports to consumers, the form of and charges for such
disclosures, and the reinvestigation procedure that must be followed when a
consumer disputes an item contained in his or her report. While the Company is
not a "consumer reporting agency" within the meaning of the FCRA and therefore
is not subject to the FCRA, the Company is required by its contract with
Experian to comply with the FCRA and the interpretations rendered by the FTC.
Should the Company become subject to the FCRA and fail to comply with its
provisions, the Company could be subject to various civil and administrative
sanctions, the imposition of which could have a material adverse effect on the
Company. The Company could also be subject to administrative enforcement actions
initiated by the FTC. Violations of the FCRA may constitute unfair or deceptive
acts or practices in commerce in violation of the Federal Trade Commission Act
and the Company could be subject to penalties thereunder. In addition, if the
Company were found to have committed a knowing violation of the FCRA which
constitutes a pattern or practice of violations, the FTC may institute an action
to recover a civil penalty of up to $2,500 per violation. Finally, actions for
injunctions or for damages may also be initiated under the FCRA by the state
attorneys general.

10
14

from the FCRA. An example of such a state statute was enacted in Colorado in
April 1997 through the adoption of the Colorado Fair Credit Reporting Act (the
"Colorado Act") which went into effect August 1, 1997. The Colorado Act
increases the notification requirements for credit reporting agencies and
lenders upon the addition of adverse items to, or three inquiries into, an
individual's credit report. The law provides that Colorado consumers are
entitled to a free credit report upon their written request and mandates an
annual mailing from each of the national systems and Colorado reporting agencies
alerting consumers to that fact. The Company is not in a position to know the
number of Colorado consumers who will request a free copy of their credit
report, or if consumers will regard such reports as substitutes for the
Company's services. There are five other states (Vermont, Maryland, Georgia,
Massachusetts and New Jersey) that have also enacted legislation requiring the
issuance of free credit reports to consumers upon request. The Company derives
approximately 15% of its members from states with such legislation. Other states
(including California) are currently considering the enactment of such
legislation. There can be no assurance that other states in which more of the
Company's members reside will not adopt similar legislation. In the event that
other states enact legislation requiring issuance of free credit reports, the
value to consumers of the programs the Company provides could be materially
reduced. Legislation requiring free issuance of credit reports could materially
and adversely affect the Company's business, financial condition and results of
operation. See "Business -- Government Regulation."

Adverse Publicity. The media often publicizes perceived non-compliance
with consumer protection regulations and violations of notions of fair dealing
with consumers, and the membership programs industry is susceptible to widely
publicized charges by the media of regulatory noncompliance and unfair dealing.
Any such publicity is potentially damaging to the Company's reputation, its
co-marketer relationships and consumer acceptance and loyalty.

NO PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE; ABILITY TO RAISE
ADDITIONAL CAPITAL

Prior to this offering, there has been no public market for the Company's
Common Stock, and there can be no assurance that an active trading market will
develop or be sustained after this offering or that the market price of the
Common Stock will not decline below the initial public offering price. The
initial public offering price will be determined by negotiations among the
Company, the Selling Stockholders and the Representatives of the Underwriters.
Factors such as fluctuations in the Company's operating results, announcements
of product or service innovations or new agreements with co-marketers by the
Company or its competitors, and market conditions for stocks of companies
similar to the Company and the condition of the capital markets generally could
have a significant impact on the market price of the Common Stock. See
"Underwriting" for information relating to the method of determining the initial
public offering price.

The Company believes that the net proceeds to the Company of this offering,
funds generated from operations and borrowings available under the Company's
revolving bank line of credit will be sufficient to meet its capital
requirements for the foreseeable future. However, in the event that the Company
were to seek additional financing, its ability to raise equity capital on terms
that would be acceptable to the Company may be adversely affected if options to
purchase a substantial portion of the shares of Common Stock reserved
for issuance under the Company's 1997 Stock Option Plan were outstanding.

SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS

Sales of substantial amounts of shares of Common Stock in the public market
following this offering could adversely affect the market price of the Common
Stock. Upon closing of this offering, based upon the number of shares
outstanding at October , 1997 and assuming no exercise after October , 1997
of outstanding stock options, there will be shares of Common Stock of
the Company outstanding. Of these shares, the shares offered hereby
( shares if the Underwriters' over-allotment option is exercised in
full) will be freely tradable without restriction or further registration under
the Securities Act of 1933, as amended (the "Securities Act"), unless purchased
by "affiliates" of the Company, as that term is defined in Rule 144 ("Rule 144")
under the Securities Act ("Affiliates"). The remaining shares of
Common Stock are deemed "restricted securities" as that term is defined in Rule
144. Of the restricted securities, shares of Common Stock are subject
to certain lock-up agreements (the "Lock-Up

11
15

Agreements"). See "Underwriting." Upon expiration of the Lock-Up Agreements 180
days after the date of this Prospectus ( , 1998), approximately
shares of Common Stock will be available for sale in the public
market, subject to the provisions of Rule 144. The remaining shares
will be eligible for sale thereafter upon expiration of their respective holding
periods under Rule 144. See "Shares Eligible for Future Sale" and "Description
of Capital Stock -- Registration Rights."

CONTROL BY AFFILIATES

Upon completion of this offering, CSI Investment Partners II, L.P., a
Delaware limited partnership ("CSI Partners II"), will own approximately % of
the Company's outstanding Common Stock. That stockholder will, therefore, have
the ability to control the election of the Company's directors and also may have
the ability to determine the outcome of corporate actions requiring stockholder
approval. This concentration of ownership also may have the effect of delaying
or preventing a change in control of the Company. See "Management" and
"Principal and Selling Stockholders."

ANTI-TAKEOVER PROVISIONS

The Company's Amended and Restated Bylaws (the "Bylaws") provide that any
action required or permitted to be taken by stockholders of the Company must be
effected at a duly called annual or special meeting of stockholders and may not
be effected by any consent in writing, and requires reasonable advance notice by
a stockholder of a proposal or director nomination which such stockholder
desires to present at any annual or special meeting of stockholders. Special
meetings of the stockholders may be called only by the Chairman of the Board,
the Chief Executive Officer or, if none, the President of the Company or by the
Board of Directors. The Company's Amended and Restated Certificate of
Incorporation (the "Charter") provides for a classified Board of Directors, and
that members of the Board of Directors may be removed only for cause upon the
affirmative vote of holders of at least two-thirds of the shares of capital
stock of the Company entitled to vote. In addition, shares of the Company's
Preferred Stock may be issued in the future without stockholder approval and
upon such terms and conditions, and having such rights, privileges and
preferences, as the Board of Directors may determine. The rights of the holders
of Common Stock will be subject to, and may be adversely affected by, the rights
of any holders of Preferred Stock that may be issued in the future. The Company
has no present plans to issue any shares of Preferred Stock.

In addition, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law which prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner or meets other criteria. These provisions, and other
provisions of the Charter, may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices. In addition, these provisions
may limit the ability of stockholders to approve transactions that they may deem
to be in their best interests. See "Description of Capital Stock -- Delaware
Anti-Takeover Law and Certain Charter and Bylaw Provisions."

DILUTION

Purchasers of shares of Common Stock in this offering will suffer an
immediate and substantial dilution in the net tangible book value per share of
the Common Stock of $ from the initial public offering price. To the
extent that options to purchase shares of Common Stock granted under the
Company's 1997 Stock Option Plan are exercised, there will be further dilution.
See "Dilution."

LACK OF DIVIDENDS

The Company does not anticipate paying any cash dividends on its Common
Stock in the foreseeable future. See "Dividend Policy."

12
16

USE OF PROCEEDS

The net proceeds to the Company from the sale of the shares of
Common Stock being offered by the Company hereby are estimated to be
$ , assuming an initial public offering price of $ per share
and after deducting estimated underwriting discounts and commissions and
offering expenses. The Company intends to apply the net proceeds of the offering
to be received by the Company to: (i) repay approximately $6.9 million principal
amount of outstanding term indebtedness at an average interest rate of 8.43% and
an estimated $2.1 million principal amount of revolving indebtedness at an
average interest rate of 9.50%, together with interest accrued thereon, arising
under a Credit Agreement, dated January 14, 1997, between the Company and
LaSalle National Bank, and having a maturity date of September 30, 1999; (ii)
repay approximately $3.0 million principal amount of indebtedness at an average
interest rate of 9.31%, together with interest accrued thereon, pursuant to a
Subordinated Promissory Note due December 1999 issued by the Company, and
payable to TRW; and (iii) repay approximately $3.0 million principal amount of
indebtedness at an average interest rate of 12.00%, together with interest
accrued thereon, arising under a Subordinated Loan Agreement, dated as of March
10, 1997, as amended, between the Company and Canterbury Mezzanine Capital, L.P.
("Canterbury Capital") incurred in connection with Canterbury Capital's
investment in the Company. See "Certain Transactions." The balance of the net
proceeds to the Company of the offering, if any, will be utilized for working
capital and general corporate purposes. Pending application for the foregoing
uses, the net proceeds will be invested in short-term U.S. Treasury securities,
certificates of deposit, commercial paper, investment grade, interest-bearing
securities and/or other short-term investments.

The Company will not receive any proceeds from the sale of the shares of
Common Stock by the Selling Stockholders. See "Principal and Selling
Stockholders."

DIVIDEND POLICY

The Company has never declared or paid dividends on its capital stock and
currently intends to retain all future earnings, if any, for use in the
operations of its business and does not anticipate paying any cash dividends in
the foreseeable future. The Company's future dividend policy will be determined
by its Board of Directors on the basis of various factors, including the
Company's results of operations, financial condition, capital requirements and
investment opportunities. The Company's existing senior and subordinated loan
agreements prohibit the payment of cash dividends, but, as noted under "Use of
Proceeds", except for the Company's revolving facility, all outstanding
indebtedness under such existing senior and subordinated loan agreements is to
be repaid upon consummation of this offering.

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17

CAPITALIZATION

The following table sets forth the short-term debt and capitalization of
the Company as of June 27, 1997, adjusted to reflect (i) the sale by the Company
of shares of Common Stock offered hereby at an assumed initial public
offering price of $ per share; (ii) the exercise of warrants to
purchase the equivalent of shares of Common Stock in September 1997;
(iii) the application of the estimated net proceeds to be received by the
Company from the sale of the Common Stock offered by the Company hereby; and
(iv) repayment of a part of the current portion of certain long-term debt
subsequent to June 27, 1997 but prior to consummation of this offering. See "Use
of Proceeds."

JUNE 27, 1997
------------------------
ACTUAL AS ADJUSTED
-------- -----------
(IN THOUSANDS)

Short-term debt:
LaSalle Credit Agreement -- revolving facility....................... $ 2,097 --
Current portion of long-term debt(1)................................. 2,350 --
-------- ------
Total short-term debt........................................ $ 4,447 --
======== ======
Long-term debt:
TRW Subordinated Promissory Note..................................... $ 3,000 --
Canterbury Junior Subordinated Note Payable(2)....................... 2,815 --
LaSalle Credit Agreement............................................. 5,600 --
-------- ------
Total long-term debt......................................... 11,415 --
Stockholders' deficit:
Preferred Stock, Cumulative Series A, $.10 par value; 2,000 shares
authorized; no shares issued and outstanding...................... -- --
Common Stock, $.01 par value; 50,000 shares authorized, actual;
shares authorized, as adjusted; 40,000 shares issued and
outstanding, actual; shares issued and outstanding, as
adjusted(4)....................................................... 1
Common stock purchase warrants (3)................................... 200
Additional paid-in capital........................................... 6,999
Accumulated deficit(5)............................................... (26,882)
Total stockholders' deficit.................................. (19,682)
-------- ------
Total capitalization......................................... $ (8,267) $
======== ======

- ---------------
(1) See Note 6 of the Notes to Financial Statements.

(2) Includes unamortized discount of $185,000.

(3) On September 26, 1997, all of the warrants were exercised.

(4) Excludes shares of Common Stock issuable upon exercise of options
issued under the Company's 1997 Stock Option Plan. See "Management -- Stock
Option Plan."

(5) In connection with the repayment of long-term debt, unamortized discount and
unamortized debt issuance costs aggregating approximately $1.4 million at
June 27, 1997 will be written off in the quarter in which the offering is
completed as an extraordinary item -- loss on early extinguishment of debt.

14
18

DILUTION

The net tangible book value of the Company as of June 27, 1997 was
$ , or $ per share. Net tangible book value per share
represents the amount of total tangible assets less total liabilities of the
Company, divided by the number of shares of Common Stock outstanding after
giving effect to (i) the sale of the shares of Common Stock offered by
the Company hereby (at an assumed initial public offering price of $
per share and after deduction of estimated underwriting discounts and
commissions and offering expenses), and (ii) the exercise of warrants to
purchase the equivalent of shares of Common Stock prior to the closing of
this offering. After giving effect to the application of the estimated net
proceeds to the Company from the initial public offering, the pro forma net
tangible book value of the Company at June 27, 1997 would have been $ ,
or $ per share. This represents an immediate increase in such net
tangible book value of $ per share to existing stockholders and an
immediate dilution of $ per share to new investors purchasing shares in
this offering. The following table illustrates this per share dilution:

Assumed initial public offering price per share................ $
----
Net tangible book value per share before offering............ $
Increase attributable to new investors.......................
----
Pro forma net tangible book value per share after the
offering(1)..................................................
----
Dilution per share to new investors............................ $
====

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

(1) Excludes shares of Common Stock issuable upon exercise of options
issued under the Company's 1997 Stock Option Plan. See "Management -- Stock
Option Plan."

The following table summarizes, on a pro forma basis as of June 27, 1997,
the differences between existing stockholders and new investors with respect to
the number of shares of Common Stock purchased from the Company, the total
consideration paid to the Company, and the average consideration paid per share
(based upon an assumed initial public offering price of $ per share and
before deduction of the estimated underwriting discounts and commissions and the
expenses of the offering payable by the Company).

SHARES PURCHASED(1) TOTAL CONSIDERATION
------------------- ------------------- AVERAGE PRICE
NUMBER PERCENTAGE AMOUNT PERCENTAGE PER SHARE
------ ---------- ------ ---------- -------------

Existing stockholders................. % $ % $
New investors.........................
------ ---------- ------ ----------
Total....................... 100.0% $ 100.0%
====== ======== ====== ========

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

(1) Sales by the Selling Stockholders in this offering will reduce the number of
shares of Common Stock held by existing stockholders to , or
approximately % ( , or approximately %, if the
Underwriters' over-allotment option is exercised in full), of the total
number of shares of Common Stock outstanding, and will increase the number
of shares of Common Stock held by new investors to , or
approximately % ( , or approximately %, if the
Underwriters' over-allotment option is exercised in full), of the total
number of shares of Common Stock outstanding after this offering.

15
19

SELECTED FINANCIAL DATA

The following selected financial information at September 30, 1995 and
September 27, 1996 and for each of the two fiscal years in the period ended
September 27, 1996 and at June 27, 1997 and for the nine-month period ended June
27, 1997 has been derived from the financial statements of the Company that have
been audited by Coopers & Lybrand L.L.P., independent auditors, included herein.
The selected financial information for the nine-month period ended June 28, 1996
has been derived from unaudited financial statements prepared on the same basis
as the audited financial statements and contain, in the opinion of management,
all adjustments consisting only of normal recurring adjustments necessary for a
fair presentation of the Company's financial position at such date and the
Company's operating results and cash flows for such period. The results of
operations for the nine months ended June 27, 1997 are not necessarily
indicative of results to be expected for any future period. The revenue
information for each of the two fiscal years in the period ended December 31,
1993 and the revenue information for the six-month period ended June 30, 1994
(collectively, the "Predecessor Financial Information") was provided to the
Company by TRW at the time that the Company purchased certain of the assets of
TRW's credit reporting and monitoring business in October 1994 (the
"Acquisition"). The Predecessor Financial Information is unaudited, was not
prepared on the same basis as the post-Acquisition financial information for the
Company and in the opinion of management may not include all adjustments
necessary under generally accepted accounting principles ("GAAP") for a fair
presentation of the Company's operating results for the periods covered thereby.
The selected financial information set forth below should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and Notes included elsewhere in this
Prospectus.

PREDECESSOR COMPANY COMPANY
---------------------------------------- ----------------------------------------------
NINE-MONTH
FISCAL YEARS ENDED SIX-MONTH FISCAL YEARS PERIODS ENDED
DECEMBER 31,(1)(2)(3) PERIOD ENDED ENDED SEPTEMBER(1) JUNE(1)
------------------------- JUNE 30, ------------------ -------------------------
1992 1993 1994(2)(3) 1995 1996 1996 1997
----------- ----------- ------------ ------- -------- ----------- -----------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND NUMBER OF MEMBERS)

STATEMENT OF OPERATIONS DATA:
Revenues
Membership fees................ $27,759 $24,976 $ 11,022 $12,540 $24,556 $ 17,091 $28,208
Operating expenses
Marketing...................... 4,854 22,605 15,899 10,254
Membership servicing........... 4,128 12,999 8,768 8,419
General and administrative..... 8,102 9,581 6,916 6,983
------- ------- ------- ------- ------- ------- -------
Total operating
expenses............... 17,084 45,185 31,583 25,656
------- ------- ------- ------- ------- ------- -------
Operating income (loss).......... (4,544) (20,629) (14,492) 2,552
Interest expense................. 1,239 1,818 893 1,052
------- ------- ------- ------- ------- ------- -------
Income (loss) before provision
for income taxes and
extraordinary item............. (5,783) (22,447) (15,385) 1,500
------- ------- ------- ------- ------- ------- -------
Provision for income taxes....... -- -- -- 61
Income (loss) before
extraordinary item............. (5,783) (22,447) (15,385) 1,439
------- ------- ------- ------- ------- ------- -------
Extraordinary item: Loss on early
extinguishment of debt, net of
income tax benefit............. -- -- -- 91
------- ------- ------- ------- ------- ------- -------
Net income (loss)................ $(5,783) $(22,447) $ (15,385) $ 1,348
======= ======= ======= ======= ======= ======= =======
Net income (loss) per share......
Weighted average common and
common equivalent shares
outstanding....................
OTHER DATA:

Total members at end of period... (4) (4) (4) 613,000 828,000 714,000 1,257,000

16
20

COMPANY
-----------------------------------------------
SEPTEMBER 30, SEPTEMBER 27,
1995(1) 1996(1) JUNE 27, 1997
------------- ------------- -------------

BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 7,970 $ 1,613 $ 299
Total assets.......................................... 33,093 27,552 37,696
Total liabilities..................................... 34,876 51,782 57,378
Stockholders' deficit................................. (1,783) (24,230) (19,682)

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

(1) The Company's fiscal year ends on the last Friday of September of each year.
The Company's quarterly periods are each comprised of 13 weeks and end on a
Friday. The first month of each quarter is comprised of five weeks, and each
of the two remaining months of the quarter is comprised of four weeks. In
1992, 1993 and 1994, TRW's fiscal year ended on December 31 of each such
year.

(2) The Company has provided revenue data for certain periods prior to the
Acquisition as set forth in the table above; however, revenue and other data
for the period from June 30, 1994 to the date of Acquisition is unavailable
to the Company. Furthermore, for the reasons discussed below, the Company
believes that the revenue data presented above does not provide a basis for
evaluating any trend material to the Company's financial condition or
results of operations, is not comparable to the revenue data presented for
the periods after the Acquisition and may not be indicative of the Company's
future financial condition or results of operations. GAAP requires the
Company to defer revenue received from members upon their becoming members
or renewing their memberships and to recognize revenue over the term of the
memberships. The Company's understanding, based upon the information
obtained by the Company from TRW at the time of the Acquisition, is that TRW
did not produce separate balance sheets in conducting the consumer credit
reporting and monitoring membership business under the name Consumer
Information Services (the "CIS Business"). The Company believes, based upon
its own experience in conducting its business, that regular periodic
analysis of balance sheet data, including deferred revenue and cash
balances, is essential to assuring that revenues are accurately calculated
in accordance with GAAP. Furthermore, since the Company does not have
deferred revenue amounts available for the beginning and ending balance
sheet dates corresponding to the periods prior to the Acquisition, the
Company is unable to assess the comparability of the revenue data for those
periods. Moreover, the Company has no information regarding and is unable to
determine the manner in which TRW treated important revenue recognition
matters such as amortization of multi-year memberships, treatment of
membership cancellation allowances and recognition of revenue for
memberships that commence mid-month. Finally, it is the Company's
understanding that, for the pre-Acquisition periods shown above, TRW
operated the business in a manner that was intended to maximize cash flow by
focusing on revenues from membership renewals, while reducing marketing
costs by not actively seeking to acquire new members. The Company believes
that, because its strategy is to increase its membership base, the revenue
data for the pre-Acquisition period is not indicative of any trend material
to its business and is not comparable to the revenue data presented above
for post-Acquisition periods.

(3) The Company purchased certain assets of its credit reporting and monitoring
business from TRW in October 1994. Accordingly, the Company does not have
accounting records pertaining to the business prior to October 1994. Based
upon information obtained by the Company from TRW at the time of the
Acquisition, the Company believes that: the CIS Business was operated as a
relatively small part of a division of TRW; the CIS Business was not treated
as a separate accounting entity by TRW; TRW did report, for internal TRW
management purposes, data concerning direct revenues, direct expenses,
certain allocated expenses and numbers of members; however, a number of
material expenses were not charged to the CIS Business and such omitted
expenses included interest expenses, the expenses of the credit reports
provided to members, pre-screening marketing expenses, executive office
expenses, finance and accounting function expenses, bonuses, benefits
administration expenses, insurance expenses and legal expenses, and may
include other omitted expenses of which the Company is unaware; and the
foregoing omitted expenses could not at the time of the Acquisition be
separately compiled. Based upon the

17
21

foregoing, the Company believes that it cannot provide data regarding
pre-Acquisition income or expenses that is meaningful to investors.

(4) The Company has no membership data for 1992. The membership data provided to
the Company by TRW at the time of the Acquisition indicated membership
levels of 968,000, 798,000 and 648,000 at January 1993, July 1993 and July
1994, respectively. In connection with the Acquisition, TRW represented to
the Company that there were no fewer than 620,000 members as of August 8,
1994. The Company is unable to determine the methodology used by TRW to
generate this data and therefore is unable to verify the accuracy of this
data. As discussed above, it is the Company's understanding that TRW
operated the business in a manner that was intended to maximize cash flow by
focusing on revenues from membership renewals while reducing marketing costs
by not actively seeking to acquire new members. The Company's strategy is to
increase its membership base and therefore the Company believes that the
membership data presented in this footnote does not reflect any trends
material to the Company's business, is not comparable to post-Acquisition
membership data and is not indicative of the Company's future financial
condition or results of operations.

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22

MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

BACKGROUND

The consumer credit information and monitoring business conducted by the
Company was started in 1986 by a division of TRW. In October 1994, the Company
commenced operations when it purchased certain assets of that business from TRW.
During the course of the fiscal year ended September 30, 1995, the Company
focused its efforts on establishing the Company's infrastructure, including
rental and relocation of the Company's headquarters, the establishment of
management systems and procedures and the hiring of additional customer service
representatives and related expenditures to expand the customer service center.
During such period, the Company did not actively pursue new membership
acquisitions to the extent necessary to offset the loss of non-renewing members.
As a result, its membership base remained flat at approximately 600,000 members.
During the fiscal year ended September 27, 1996, the Company engaged in a
strategy of unendorsed marketing, which entailed soliciting new members without
the benefit of a co-marketer endorsement. Management believes this strategy was
not successful and yielded poor consumer response rates because it lacked the
benefit of a co-marketer's brand name and endorsement and the associated credit
card billing and collection mechanism.

In October 1996, the Company hired a new management team which redirected
the Company's efforts toward an endorsed marketing strategy. Implementation of
this new strategy has resulted in more effective marketing campaigns, a
significant increase in the number of the Company's co-marketing relationships
and in its membership base. At June 27, 1997, the Company had 24 co-marketers,
as compared to 13 at September 27, 1996. During this same period, the Company's
membership base increased to approximately 1.3 million members from
approximately 828,000 members. As a result, for the nine-month period ended June
27, 1997, the Company generated net income of $1.3 million as compared to a net
loss of $15.4 million for the nine-month period ended June 28, 1996 and a net
loss of $22.4 million for the fiscal year ended September 27, 1996. See
"-- Results of Operations".

The low consumer response rate resulting from the unendorsed marketing
campaigns conducted by the Company during fiscal year 1996 resulted in
significant losses for the Company. Under GAAP, the direct cost of a successful
marketing program is generally amortized over the initial membership term of the
members solicited in that campaign. However, because the costs of the unendorsed
marketing campaigns exceeded the revenues generated, the Company was required by
GAAP to write off such excess costs during fiscal year 1996. Further
contributing to the Company's losses for that fiscal year were increased
expenditures for facilities, equipment and personnel incurred in anticipation
that the unendorsed marketing campaigns would increase the Company's membership
base and revenues to levels significantly higher than those actually achieved.

OVERVIEW

The Company's revenues are principally derived from the sale of new
memberships and the renewal of existing memberships. New memberships are
typically offered with a free 30-day trial period. The Company's programs are
offered at prices ranging from $29 to $99 per year, depending upon the features
offered. The Company receives payment of the membership fees at or near the
beginning of the membership period, but recognizes revenue with respect to the
payment ratably over the membership period beginning at the end of the free
30-day trial period.

If the membership is not cancelled during the trial period, the member is
charged the annual membership fee. During the course of the first year of
membership, a member is free to cancel his or her membership in the program for
a complete refund of the membership fee. Subsequently, the member may cancel his
or her renewed membership at any time for a pro rata refund of the membership
fee. If multi-year members elect to cancel, they receive a full refund during
the first year of their membership, a 50% refund during the second year of
membership and no refund if they cancel their membership during the third year
of membership. The Company provides allowances for membership cancellations and
recognizes revenue net of such allowances.

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23

The Company's allowance policies are based on historical results and are
reviewed periodically. The Company's cancellation rates, including cancellations
occurring during the trial period, have generally ranged between 45% and 60%
since the Company's inception. There can be no assurance that these cancellation
rates will remain constant in the future.

A substantial portion of the Company's total operating expenses consist of
costs incurred in connection with the acquisition of new members. These costs,
including the cost of commissions payable to co-marketers, the costs of printing
and mailing membership solicitation materials for each program and the costs of
providing new member fulfillment kits, are amortized ratably over the program's
initial one- or three-year membership period, respectively. Accordingly, since
the majority of the Company's costs associated with a membership are generally
recognized during the initial membership period, the Company generates higher
gross margins on revenue generated by renewal memberships. The Company
calculates its membership renewal rate for any period by dividing the number of
members who renew their membership during that period (and who remain as members
90 days after such renewal) by the total number of members whose memberships are
due for renewal in that period. Since the Company's inception in 1994, its
renewal rate has remained relatively constant at approximately 70%. There can be
no assurance that this renewal rate will continue in the future.

The Company's membership base has grown significantly in the last year. At
June 27, 1997, the Company had approximately 1.3 million members, as compared to
approximately 828,000 members at September 27, 1996. The size of the Company's
membership base is a significant factor in determining anticipated membership
renewal income.

In addition to overall economic and industry factors which can affect the
Company, the profitability of the Company's business depends in large part upon
(i) the net response rate for direct mail solicitations of new memberships, (ii)
the net sales per hour for telemarketing solicitations of new memberships, (iii)
the costs associated with direct mail and telemarketing solicitations, (iv) the
costs associated with the fulfillment of new memberships, (v) the adequacy of
reserves against membership cancellations, (vi) the continued renewal rate of
memberships in accordance with historical experience, and (vii) the maintenance
of selling, general and administrative expenses at acceptable levels relative to
the Company's revenues and income.

RESULTS OF OPERATIONS

The following table sets forth, for the periods indicated, certain items on
the Company's Statement of Operations as a percentage of revenues:

FISCAL YEARS NINE-MONTH PERIODS
ENDED
SEPTEMBER ENDED JUNE
------------- ------------------
1995 1996 1996 1997
---- ---- ----------- ----
(UNAUDITED)

STATEMENT OF OPERATIONS DATA
Revenues
Membership fees..................................... 100% 100% 100% 100%
Operating expenses
Marketing........................................... 39 92 93 36
Membership servicing................................ 33 53 51 30
General and administrative.......................... 65 39 40 25
--- --- --- ---
Total operating expenses.............................. 137 184 184 91
--- --- --- ---
Operating income (loss)............................... (37) (84) (84) 9
Interest expense...................................... 10 7 5 4
--- --- --- ---
Income (loss) before provision for taxes.............. (47) (91) (89) 5
Provision for income taxes............................ -- -- -- --
--- --- --- ---
Income (loss) before extraordinary item............... (47)% (91)% (89)% 5 %
=== === === ===

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24

NINE-MONTH PERIODS ENDED JUNE 1997 AND 1996

Revenue. Revenue increased by 65% to $28.2 million for the nine-month
period ended June 27, 1997 from $17.1 million for the comparable period in the
prior year. The increase resulted from a net increase in the Company's
membership base and, to a lesser extent, from an increase in the price charged
by the Company for its Credentials program. The Company's membership base
increased to approximately 1.3 million members at June 27, 1997 from
approximately 714,000 members at June 28, 1996. The increase was due to an
increase in the number of solicitations through existing co-marketers and the
addition of new co-marketers, principally Chase and PNC National Bank, N.A.
("PNC"). Approximately 49% of the increase in the Company's membership base
resulted from solicitations made to credit card holders of Chase and Bank One.
During this period, the Company mailed approximately 23.9 million pieces of mail
solicitations (excluding inserts and envelope attachments mailed along with a
co-marketer's correspondence) compared to approximately 12.3 million pieces
mailed during the comparable period in the prior year. Revenue derived from
membership renewals increased by 25% to $16.6 million for the nine-month period
ended June 27, 1997 from $13.3 million for the comparable period in the prior
year. As a percentage of revenues, revenues derived from renewals decreased to
60% for the nine-month period ended June 27, 1997 from 78% for the comparable
period in the prior year.

Marketing Expenses. Marketing expenses consist of membership solicitation
costs, including direct mail expenses such as printing and postage,
telemarketing expenses and commissions paid to co-marketers. Marketing expenses
decreased by 36% to $10.3 million for the nine-month period ended June 27, 1997
from $15.9 million for the comparable period in the prior year. As a percentage
of revenues, marketing expenses decreased to 36% for the nine-month period ended
June 27, 1997 from 93% for the comparable period in the prior year. This
decrease was due to the fact that, in accordance with GAAP, certain marketing
expenses associated with unprofitable, unendorsed marketing campaigns were
written off during the nine-month period ended June 28, 1996 rather than
amortized over the initial membership term. In addition, the decrease was caused
by operating costs and severance costs incurred during the nine-month period
ended June 28, 1996 related to an in-house telemarketing department which the
Company began during early fiscal year 1996 and subsequently discontinued in
late fiscal year 1996. This decrease was also due to lower per member
solicitation costs resulting from reductions achieved in per unit mailing and
printing costs and more favorable response rates.

Membership Servicing Expenses. Membership servicing expenses consist of
the costs of providing customer service, data processing costs, and the costs of
providing members with inquiry notices, newsletters, additional credit reports
and new member fulfillment kits. Membership servicing expenses decreased by 4%
to $8.4 million for the nine-month period ended June 27, 1997 from $8.8 million
for the comparable period in the prior year. As a percentage of revenues,
membership servicing expenses decreased to 30% for the nine-month period ended
June 27, 1997 from 51% for the comparable period in the prior year. This
decrease was due to the fact that certain expenses associated with the provision
of new member fulfillment kits related to the unprofitable unendorsed marketing
campaigns were written off during the nine-month period ended June 28, 1996
rather than amortized over the initial membership term.

General and Administrative Expenses. General and administrative expenses
consist of personnel and facilities expenses associated with the Company's
executive, sales, marketing, finance, program and co-marketing account
functions, costs associated with new product development, as well as
depreciation of fixed assets and amortization of intangibles, including
memberships purchased from TRW. General and administrative expenses increased to
$7.0 million for the nine-month period ended June 27, 1997 from $6.9 million for
the comparable period in the prior year. As a percentage of revenue, general and
administrative expenses decreased to 25% for the nine-month period ended June
27, 1997 from 40% during the comparable period in the prior year. This decrease
is largely attributable to the increase in revenues for the nine-month period
ended June 27, 1997.

Interest Expense. Interest expense consists of financing charges related
to notes payable, the Company's revolving bank loan facility, a new subordinated
loan facility and equipment leases, as well as amortization of deferred
financing costs. Interest expense increased 18% to $1.1 million for the
nine-month period ended June 27, 1997 from $0.9 million during the comparable
period in the prior year. The increase reflects higher

21
25

utilization of the revolving bank loan to fund new marketing campaigns,
amortization of deferred financing costs relating to the Company's debt
refinancing, offset by a lower effective interest rate.

Provision for Income Taxes. For the nine-month period ended June 27, 1997,
the Company reported a provision for income taxes of $61,000 (the amount
equivalent to the income tax benefit of the extraordinary loss on early
extinguishment of debt). No additional income tax provision was made during this
period due to the utilization of net operating loss carryforwards. The Company
did not record a provision for income taxes for the nine-month period ended June
28, 1996 due to the incurrence of a net loss. The Company did not record a
benefit for income taxes during this period since the Company provided a full
valuation allowance on the related deferred income tax asset.

FISCAL YEARS ENDED SEPTEMBER 1996 AND 1995

Revenue. Revenues increased by 96% to $24.6 million in fiscal year 1996
from $12.5 million in fiscal year 1995 due primarily to the effect of accounting
for the Company's purchase of the membership base from TRW. For fiscal year
1995, the Company was not able to recognize any portion of the membership fees
collected by TRW prior to the Acquisition relating to memberships that continued
after the Acquisition. Ordinarily, the Company would have recognized the revenue
over the full membership period. This increase in the Company's revenue was also
due to an increase in the Company's membership base primarily resulting from an
increase in new marketing programs. The Company's membership base increased to
approximately 828,000 members at September 27, 1996 from approximately 613,000
members at September 30, 1995. During fiscal year 1996, the Company mailed
approximately 20.4 million pieces of mail solicitations compared to
approximately 7.0 million pieces mailed during fiscal year 1995. Revenue derived
from membership renewals increased to $18.1 million in fiscal year 1996 from
$10.5 million in fiscal year 1995. As a percentage of revenues, revenues derived
from renewals decreased to 74% in fiscal year 1996 from 83% in fiscal year 1995.

Marketing Expenses. Marketing expenses increased by 366% to $22.6 million
in fiscal year 1996 from $4.9 million in fiscal year 1995. As a percentage of
revenues, marketing expenses increased to 92% in fiscal year 1996 from 39% in
fiscal year 1995. This increase was due to the fact that, in accordance with
GAAP, certain expenses related to the unprofitable unendorsed marketing programs
were written off during fiscal year 1996 rather than amortized over the initial
membership term. The increase is also attributable to operating costs and
severance costs incurred in fiscal year 1996 related to an in-house
telemarketing department which the Company began during early fiscal year 1996
and subsequently discontinued in late fiscal year 1996. In addition, this
increase was due to an increase in both costs associated with the solicitation
of new members through direct mail and telemarketing channels as well as
commissions paid to co-marketers.

Membership Servicing Expenses. Membership servicing expenses increased by
215% to $13.0 million in fiscal year 1996 from $4.1 million in fiscal year 1995.
In fiscal year 1995, these expenses did not reflect the full cost of servicing
the membership base as a result of the effect of the accounting for the purchase
of the membership base acquired from TRW. Since the Company was obligated to
service these members for the remaining portions of their respective membership
terms, a provision relating to these costs was established and $4.2 million of
related expenses were charged to this provision. As a percentage of revenues,
membership servicing expenses increased to 53% in fiscal year 1996 from 33% in
fiscal year 1995. This increase was due to the fact that certain expenses
associated with the provision of new member fulfillment kits related to the
unendorsed marketing campaigns were written off during fiscal year 1996 rather
than amortized over the initial membership term. In addition, this increase was
due to an increase in the Company's membership base during fiscal year 1996.

General and Administrative Expenses. General and administrative expenses
increased by 18% to $9.6 million in fiscal year 1996 from $8.1 million in fiscal
year 1995. This increase was primarily the result of hiring additional personnel
in connection with implementation of the Company's endorsed marketing strategy
as well as an increase in the related facility costs. As a percentage of
revenues, general and administrative expenses decreased to 39% in fiscal year
1996 from 65% in fiscal year 1995. This decrease was due to better leveraging of
expenses over a larger revenue base.

Interest Expense. Interest expense increased by 47% to $1.8 million in
fiscal year 1996 from $1.2 million in fiscal year 1995 due to an increased level
of borrowing by the Company in fiscal year 1996.

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26

Provision for Income Taxes. The Company made no provision for income taxes
for fiscal years 1996 and 1995, respectively, due to its incurrence of net
losses in such fiscal years. The Company did not record a benefit for income
taxes in either year since it provided a full valuation allowance for the
related deferred income tax asset.

SELECTED QUARTERLY RESULTS OF OPERATIONS

The following table sets forth certain unaudited quarterly statements of
operations data for each of the seven quarters in the period ended June 27, 1997
and the percentage of the Company's revenues represented by each item in the
respective quarter. In the opinion of the Company's management, this unaudited
information has been prepared on a basis consistent with the audited Financial
Statements appearing elsewhere in the Prospectus and includes all adjustments
(consisting only of normal recurring adjustments) necessary to present fairly
the information set forth therein when read in conjunction with the Financial
Statements and related Notes thereto. The operating results for any quarter are
not necessarily indicative of results for any future period.

QUARTER ENDED
-----------------------------------------------------------------------------
FISCAL YEAR 1996 FISCAL YEAR 1997
------------------------------------- -------------------------------------
DEC. 29 MAR. 29 JUNE 28 SEP. 27 DEC. 27 MAR. 29 JUNE 27 SEP. 26
1995 1996 1996 1996 1996 1997 1997 1997
------- ------- ------- ------- ------- ------- ------- -------
(IN THOUSANDS)

Statement of Operations Data:
Revenues............................. $4,630 $5,528 $6,933 $ 7,465 $8,418 $9,524 $10,266
Operating income (loss).............. (4,353) (5,428) (4,711) (6,137) 930 1,005 617
Net income (loss).................... (4,653) (5,730) (5,002) (7,062) 461 627 260

QUARTER ENDED
------------------------------------------------------------------------------
FISCAL YEAR 1996 FISCAL YEAR 1997
-------------------------------------- -------------------------------------
DEC. 29 MAR. 29 JUNE 28 SEP. 27 DEC. 27 MAR. 29 JUNE 27 SEP. 26
1995 1996 1996 1996 1996 1997 1997 1997
------- ------- ------- -------- ------- ------- ------- -------

Statement of Operations Data:
Revenues........................... 100% 100% 100% 100% 100% 100% 100%
Operating income (loss)............ (94) (98) (68) (82) 11 11 6
Net income (loss).................. (100) (104) (72) (95) 5 7 3

LIQUIDITY AND CAPITAL RESOURCES

Net cash used in operating activities was $5.4 million and $4.4 million for
the nine-month period ended June 27, 1997 and fiscal year 1996, respectively.
For the nine-month period ended June 27, 1997, the use of cash reflected
increased member solicitations and increases in receivables. For fiscal year
1996, the use of cash reflected the results of unprofitable unendorsed marketing
programs. The Company's capital expenditures for the nine-month period ended
June 27, 1997 and fiscal year 1996 were $1.7 million and $2 million,
respectively. These expenditures, for both periods, primarily resulted from the
implementation of the Company's new computer system. The Company has budgeted
approximately $0.8 million in capital expenditures for fiscal year 1998. The
Company intends to expand its telecommunications and computer capabilities to
service an expanding membership base.

The Company had cash and cash equivalents of approximately $0.3 million at
June 27, 1997. The Company has a $2.5 million revolving bank line of credit. The
line of credit bears interest based upon LIBOR/prime rate and expires on
September 30, 1999. At June 27, 1997, $2.1 million was outstanding under

23
27

the line of credit. Borrowings on the Company's revolving line of credit are
based upon the level of eligible accounts receivable.

In connection with the repayment of long-term debt, unamortized discount
and unamortized debt issuance cost aggregating approximately $1.4 million at
June 27, 1997 will be written off in the quarter in which the offering is
completed as an extraordinary item -- loss on early extinguishment of debt.

The Company intends to use its existing cash balances, funds generated from
operations and borrowing available under the Company's revolving bank line of
credit to address its cash requirements, and to fund the development of new
membership programs and new marketing channels. The Company intends to use the
net proceeds to the Company from this offering to repay certain outstanding
indebtedness. The Company believes that, as the volume of revenues attributable
to renewal members increases, such increase will help to generate net cash from
operating activities, and thereby minimize its need for financing from outside
sources. The Company believes that the net proceeds to the Company from this
offering, together with its cash balances following completion of the offering,
funds generated from operations, and borrowing available under the Company's
revolving bank line of credit, will be sufficient to meet its capital
requirements for the foreseeable future.

NET OPERATING LOSS CARRYFORWARDS

As of June 27, 1997, the Company had net operating loss carryforwards for
Federal and state purposes of approximately $19,366,000 and $17,241,694,
respectively. The net operating loss carryforwards begin expiring after the
years ended 2011 and 2004, respectively. Because of the "Change in Ownership"
provisions of the Tax Reform Act of 1986, the loss carryforwards will be subject
to an annual limitation regarding their utilization against future taxable
income.

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28

BUSINESS

OVERVIEW

The consumer credit information and monitoring business conducted by the
Company was started in 1986 by a division of TRW. In October 1994, the Company
purchased certain assets of the business from TRW. In September 1996, TRW sold
its credit bureau and credit reporting business, and that business was
subsequently renamed Experian Inc. At the time of the Company's acquisition in
1994, it entered into a ten-year contract with TRW pursuant to which the Company
has access to Experian's credit reports and daily access to the national
Experian credit file. The Company's information systems are integrated with
Experian's database and systems, enabling the Company to immediately and
automatically notify a member when an inquiry is made into the member's personal
credit file. The Company believes that it is the only company which currently
offers this unique feature to consumers and that this feature constitutes a
substantial competitive advantage with respect to developing co-marketing
relationships and building its membership base.

CREDIT CARD ENHANCEMENT INDUSTRY BACKGROUND

The Company believes that membership service programs can be of substantial
value to members who purchase the programs, to credit card issuer businesses
which co-market these programs and to the vendors whose services are offered
through the program. Benefits to co-marketers include the ability to build
consumer loyalty with existing customers, as well as to generate additional,
predictable revenues such as commission and fee income. For product and service
vendors, membership service programs represent an opportunity to generate
additional revenue with minimal incremental marketing costs for products and
service.

Historically, a substantial number of the businesses which utilized
membership service programs have been issuers of credit cards. More recently,
however, other businesses, including banks, retailers, insurance companies,
mortgage servicing companies, utility companies, regional telephone companies,
cable operators and non-profit organizations have also begun to offer service
programs as a means of offering value-added products and services to their
customers. In many cases, these businesses lack the core competency to
successfully design, market and manage membership programs. As a result, these
businesses seek to outsource such functions to companies which specialize in
such membership programs and can apply advanced database

25
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systems to capture, process and store consumer and market information, and that
can provide effective programs.

Based upon industry statistics, the Company estimates that in the United
States there are over 800 million credit, debit and retail credit cards issued
and over 115 million consumers who own a credit card. Of these credit card
holders, the Company estimates that approximately 88 million currently subscribe
to a credit card enhancement product or service. In addition to membership
programs such as those provided by the Company, credit card enhancement products
and services include various types of insurance sold to credit card holders,
memberships in discount purchasing clubs and organizations, credit card
registration services, travel clubs, dining clubs, shopping clubs and auto
clubs. The Company also estimates, based upon its own membership data and
industry statistics, that currently there are over three million consumers who
have purchased membership programs which provide credit information and
monitoring services, such as those offered by the Company and its competitors.
The Company believes that the size of the credit card holder population
represents a potential opportunity for continued growth of its membership base
because less than 3.0% of credit card holders have purchased a credit
information membership program. The Direct Marketing Association, the largest
trade association in the direct marketing field, estimates that revenues derived
from the consumer direct marketing segment are expected to grow by 7.4% per year
from 1996 to 2001, as compared to 5.0% per year for overall U.S. consumer sales
growth during the comparable period. Moreover, the Company believes that
long-term growth in consumer credit potentially should cause growth in the
Company's core business in two distinct ways, first by providing additional
channels by which the Company's products may be marketed to consumers, and
second by increasing consumer demand for credit-related information.

BUSINESS STRATEGY

Grow and Maintain Membership Base By Offering Premium Quality
Programs. The Company's goal is to build and maintain its membership base by
continuing to provide its core value-added consumer credit programs. The Company
believes that its card programs are superior to the programs offered by its
competitors because it provides its members with: (i) immediate notification of
inquiries into the member's credit file; (ii) free unlimited credit reports; and
(iii) additional credit reports in a manner that avoids a credit inquiry being
reported in a consumer's credit file which may adversely affect the consumer's
creditworthiness.

Expand Distribution Channels. The Company intends to expand its network of
co-marketing relationships to include additional major banks, retailers and oil
companies, as well as to aggressively develop innovative new distribution
channels. The Company believes that its strategy of focusing its marketing
efforts on endorsed co-marketing channels enables the Company to achieve higher
rates of consumer response to its new membership solicitations by leveraging the
considerable brand equity and goodwill enjoyed by major co-marketers.
Furthermore, the Company believes that there are additional distribution
channels that offer the opportunity to expand the base of potential members
beyond the scope of consumer credit card holders. Potential co-marketing
partners may include mortgage servicing companies, insurance companies and
utility companies, such as regional telephone companies. The Company also
believes the World Wide Web may become a viable distribution channel for its
membership programs and is exploring that potential distribution opportunity. In
addition, the Company currently monitors the international expansion efforts of
its vendor partners to seek opportunities to expand its membership base
internationally.

Develop New Programs. The Company intends to continue to develop and
market new programs to current and new members. The Company has test marketed
and is continuing to develop a program targeted to small businesses which would
provide those businesses with credit information and monitoring services to
enable them to better evaluate and monitor their own credit as well as the
credit of other businesses, particularly their vendors, suppliers and customers.
This program, named Business Credentials, was tested in July and August 1997 and
preliminary response rates have been favorable. The Company anticipates that it

26
30

will continue to invest in further development and refinement, and the marketing
of this program in fiscal year 1998. In addition, the Company is presently test
marketing a number of consumer-oriented membership programs.

Provide Superior Levels of Customer Service. The Company is committed to
maintaining what it believes is a superior level of customer service, as
reflected by membership renewal rates and satisfaction among members and
co-marketers. The Company believes that its high level of customer satisfaction
is driven primarily by three principal factors: (i) convenience, consisting of
the timeliness and frequency of communications from the Company, and
accessibility of its customer service representatives ("CSRs"); (ii) the
professionalism of its CSRs, consisting of their courtesy, expertise and
helpfulness; and (iii) report functionality, consisting of the usability of the
reports, enhanced by clean, jargon-free plain English. The Company believes that
this customer satisfaction is also evidenced by the Company's relatively high
renewal rates as compared to its competitors and that this level of customer
satisfaction reinforces its relationships with its co-marketers. The Company's
highly-trained CSRs are available to customers via toll-free telephone service
during extended business hours, and members may order additional credit reports
via an interactive voice response unit seven days a week and 24 hours a day. The
Company carefully monitors benchmarks such as call response time and length of
telephone calls.

Develop and Use State-of-the-Art Technical Solutions. The Company intends
to continue developing and using advanced technological methods to solicit new
members, collect and market credit data and provide membership services.
Currently, the Company, through its membership database management system, can
model and analyze co-marketer lists to identify likely members. The Company
utilizes proprietary software which integrates the information collected from
Experian, its co-marketers and its membership data base. In addition, the
Company's strategy includes investing in state-of-the-art technology in other
key areas of its business, such as data base modeling and image processing for
the Company's membership service center.

CREDIT INFORMATION AND MONITORING PROGRAMS

The Company's program portfolio currently includes Credentials(R), Monitor,
VIP, Business Credentials and other related products. The Company's programs had
approximately 1.3 million members at June 27, 1997.

The Company's principal program, a one-year Credentials membership, is sold
for $49.00. The Company also offers certain variations of its core Credentials
program at prices ranging from $29.00 to $99.00 per membership and a three-year
Credentials membership for $98.00.

The Company's principal program, Credentials, provides subscribing members
with:

- personalized, easy-to-read Experian credit reports, presented in a plain
English format;

- immediate automatic notification of credit inquiries directed to
Experian;

- quarterly notice of any negative information submitted to the customer's
Experian credit file;

- a quarterly newsletter covering credit related and personal finance
issues;

- ongoing informational assistance from the Company's trained service
representatives;

- unlimited additional copies of the member's Experian credit report via
mail or facsimile; and

- upon request, a personal financial profile.

The Company believes that this information is useful to a significant
segment of the consumer population, including those who are interested in the
status of their personal creditworthiness as well as those concerned about the
accuracy of their credit reports. For example, consumers seeking a home mortgage
may want to review their credit history before applying for a mortgage loan. In
addition, the credit monitoring feature of the Credentials program is an
effective tool for detecting certain types of credit fraud.

The Company also offers certain variations to its core Credentials program.
The Monitor program offers personalized credit reports as well as the daily
automatic notification of credit inquiries, and quarterly notice of

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any negative information submitted to a customer's Experian credit file. The
Company encourages the sale of Monitor memberships to spouses of current
Credentials members. The Company also offers an enhanced program entitled VIP
for consumers interested in receiving a credit report which includes credit data
from all three of the major credit reporting bureaus.

The Company believes that its core programs are superior to the programs
offered by its competitors for the following reasons: (i) immediate inquiry
notification service -- the integration of the Company's information systems
with Experian's systems enables the Company to automatically and immediately
notify members when inquiries into their credit file are made. The Company
believes that its competitors are not currently able to provide consumers with
this feature and that this feature represents a substantial competitive
advantage to the Company; (ii) free unlimited additional credit report
requests -- unlike its competitors, the Company does not limit the number of
credit reports a member may receive; (iii) classification of credit report
requests -- when members first join the Credentials program and later request
additional copies of their Experian credit reports, these requests are not
recorded as credit inquiries which may adversely affect a consumer's
creditworthiness, whereas the Company believes that such requests made through
services offered by competitors of the Company are recorded in other areas of
the credit report and may be counted as credit inquiries in the evaluation of a
consumer's creditworthiness; and (iv) superior customer service -- members have
access to trained Company representatives through a toll-free telephone service
to discuss information that appears in their personal credit file. The Company's
customer service representatives have the ability to transfer a member directly
to the Experian Premier Service group for immediate assistance, and in the event
that a member suspects fraudulent activity, the Company's customer service
representatives notify Experian's fraud group, which initiates an investigation.
The Company's competitors do not have this direct transfer capability.

Members generally subscribe for renewable one- or three-year memberships in
the Company's programs. The multi-year memberships are sold on a discounted
basis. When consumers agree to enroll in a program, in most instances they
receive a 30-day trial membership. During this time, the member may use the
program's services without obligation, as outlined in a membership brochure
received by mail along with a membership card and membership identification
number. The brochure outlines in detail the benefits which the service offers
and contains toll-free numbers which may be called to access service benefits
and information. In the event that a consumer elects not to participate in the
service, he or she can call a toll-free number during the trial period to cancel
the service without charge. If the membership is not cancelled during the trial
period, the consumer's credit card is charged the annual membership fee. During
the course of the first year of membership, a member is free to cancel a
membership in the program for a complete refund. In subsequent years, the member
may cancel his or her membership and receive a pro rata refund of his or her
annual membership fees. Multi-year members receive a full refund in year one, a
50% refund in year two and no refund if they cancel their membership in year
three.

CO-MARKETING RELATIONSHIPS

The Company's strategy is to establish and maintain long-term relationships
with co-marketers that have a large customer base. The Company seeks to
understand co-marketer business objectives and to determine how those objectives
can be addressed by the membership service programs which the Company offers.
The Company arranges with co-marketer financial institutions, retailers and
other credit card issuers to market membership programs to such co-marketers'
individual customers. Co-marketers generally receive commissions on initial and
renewal memberships. The Company's agreements with these co-marketers typically
grant the Company the right to continue providing membership services directly
to such co-marketers' individual account holders even if the co-marketer
terminates the contract, provided that the co-marketer is still entitled to
receive its commission. The Company generally may not re-solicit those members
who cancel or fail to renew their membership. At June 27, 1997, the Company had
24 credit card issuer co-marketers, comprised of 17 banks, 4 retailers and 3 oil
companies.

Approximately 42% of the Company's revenues for the nine-month period ended
June 27, 1997 was attributable to members solicited from the customer lists
provided by its two largest co-marketers: approximately 37% from customer lists
provided by Bank One (including the recently merged First USA customer base) and
approximately 5% from customer lists provided by Chase. No other co-marketer

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represented more than 5% of the Company's revenues. At June 27, 1997,
approximately 18% of the Company's members consisted of members who were
originally solicited with the co-marketer endorsement of Chase and approximately
26% of the Company's members consisted of members who were originally solicited
with the co-marketer endorsement of Bank One. For the nine-month period ended
June 27, 1997, no other co-marketer with whom the Company conducted membership
solicitation campaigns accounted for more than 5% of the Company's members.
Certain of these and other co-marketer relationships are governed by agreements
which generally may be terminated without cause by either party upon 60 to 90
days' notice without penalty and upon 30 days' notice in the event of an
uncorrected material breach.

SALES AND MARKETING

The Company solicits members for its programs primarily through direct
marketing methods, including direct mail and telemarketing. The Company
outsources its direct marketing and telemarketing activities to third party
vendors. During the nine-month period ended June 27, 1997, approximately 23.9
million pieces of direct mail (excluding inserts and envelope attachments mailed
along with a co-marketer's correspondence) were mailed and approximately 1.1
million telemarketing calls were completed.

The Company's membership base is predominantly comprised of members
acquired through endorsed marketing channels, such as credit card issuers. The
Company believes this marketing methodology represents the most effective way of
increasing the Company's membership base for two reasons. First, the
co-marketers' endorsement helps sell the Company's programs by leveraging the
co-marketers' brand equity with its pre-existing customers. Endorsed direct mail
solicitations are conducted using stationery that bears the co-marketer's name
and logo and include an introductory letter signed by the co-marketer offering
the product, which are mailed either with the co-marketer's billings to its
credit card holders or by separate mailings that bear the co-marketer's name and
endorsement. Endorsed telemarketing solicitations are conducted by using the
co-marketer's name to offer the program. Second, billing membership fees to a
member's credit card issued by the co-marketer is an efficient billing and
collection mechanism.

The Company obtains substantially all of the information necessary to its
marketing efforts from customer lists provided by its co-marketers. The Company
inputs these customer lists into its management system database to model,
analyze and identify likely members. Co-marketers provide the lists to the
Company for use in marketing a specific program that has been pre-approved by
the co-marketer. As a result, the Company's ability to market a new program to
an existing customer base or an existing program to a new customer base is
dependent on obtaining approval from the co-marketer.

FULFILLMENT

The Company receives consumer responses to its program solicitations from
its telemarketers and, for direct mail, from consumers. The data provided by the
consumer is entered into the Company's data systems and a membership file is
established. This data, consisting of the member's name, address, social
security number and date of birth, is used to access the member's credit file
contained in Experian's consumer database and to generate the member's credit
report. This credit report data then is converted into a readable format by
Experian and transmitted back to the Company. The Company provides its data in a
tape format to its print vendor who prints the consumer credit reports, prepares
the new member fulfillment kit and mails it to the member via first-class mail.
Typically, this process takes between four and seven business days.

MEMBER SERVICES

The Company believes that providing high quality service to its members is
an important component in encouraging membership renewals, creating goodwill
with the public sufficient to generate increased new members and strengthening
the member's affinity for the relevant co-marketer. This customer satisfaction
enhances the Company's relationship with key co-marketers. Accordingly, the
Company maintains state-of-the-art customer service systems designed to maximize
customer satisfaction through rapid and efficient provision of member services.

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The Company maintains a membership service facility in Plano, Texas, with a
total of approximately 87 customer service representatives at June 27, 1997 who
are available to answer members' inquiries. For the convenience of its members,
the Company maintains toll-free telephone service during extended business hours
and provides an interactive voice response system so members may order
additional credit reports 24 hours a day, seven days a week. The Company has
implemented procedures to ensure that an inquiring member will be able to speak
with a customer service representative within approximately 20 seconds of having
placed a call. Furthermore, customer service representatives have the ability to
transfer a member directly to the Experian Premier Service group for immediate
assistance and, in the event that a member suspects fraudulent activity, the
Company's customer service representatives notify Experian's fraud group, which
initiates an investigation. Management believes that the Company's competitors
do not have the ability to directly transfer their members to any of the major
credit reporting bureaus. Prior to working with members, all customer service
representatives are required to complete a classroom training course covering
topics on the credit industry, related regulation, credit reporting, the
Company's programs and services and its systems and techniques for working with
members. Upon successful completion of this classroom work, each new customer
service representative begins to work with members while an experienced customer
service representative monitors his or her performance, offering guidance and
advice. The performance of customer service representatives is regularly
monitored by management.

Through its training programs, its telecommunications systems and its
software, the Company seeks to provide members with friendly, prompt and
effective answers to questions relating to its products. The Company also works
closely with the customer service staffs of its co-marketers to ensure that
their representatives are knowledgeable in matters relating to the programs
offered by the Company.

MANAGEMENT INFORMATION SYSTEMS

The Company has made substantial investments in its management information
systems to allow it to operate its business more efficiently and productively.
The Company utilizes an IBM AS/400 computer system to process and manage its
membership data. The Company has also developed proprietary software that is
designed to accept its co-marketers' customer databases for review, analysis and
modeling in order to identify potential members and implement effective
marketing programs. The Company's data processing and order fulfillment
processes, as well as its links with vendors, enables the Company to mail member
fulfillment kits to new members within seven business days of a customer
request. The system also receives confirmation of billing data from the
Company's merchant processors on a regular basis, permitting the Company to
update the status of each member.

COMPETITION

The Company's principal competitor is CUC which offers credit reporting
membership programs with certain features similar to those provided by the
Company's programs. CUC is a direct marketing company primarily engaged in
providing shopping, travel, discount and related types of benefits to its
customers. Based on industry data, credit programs accounted for approximately
3.0% of CUC's membership base. Additionally, CUC competes with many potential
co-marketers in its various business lines, such as travel-related services.

In addition to this direct competition, the Company also encounters
competition for co-marketer endorsements from other direct marketing businesses.
Because agreements between co-marketers and program providers are often
exclusive with respect to a particular service, potential co-marketers may be
prohibited from entering into agreements with the Company to promote a program
if the features provided by the Company's program are similar to, or overlap
with, the features offered by an existing program of a competitor. There can be
no assurance that the Company's competitors will not increase their emphasis on
programs similar to those offered by the Company and more directly compete with
the Company, that new competitors will not enter the market, that competitors
will not increase the compensation they provide to co-marketers to induce such
co-marketers to enter into agreements, or that other businesses will not
themselves introduce competing programs. Such potential competitors include
major credit card issuers, including the Company's co-marketers. Potential
competitors also include major credit bureau reporting services, including
Experian, which would have significant competitive advantages such as access to
credit

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data at minimal cost. There can be no assurance that the Company's current or
potential competitors will not provide programs comparable or superior to those
provided by the Company at lower membership prices or adapt more quickly than
the Company to evolving industry trends or changing market requirements. In
addition, alliances among competitors may emerge and rapidly acquire significant
market share. Many of the Company's current and prospective competitors,
including CUC, have substantially larger customer bases and greater financial
and other resources than those available to the Company. Increased competition
may result in price reductions, increased fees payable to co-marketers, reduced
profitability and loss of market share, any of which could materially adversely
affect the Company's business, financial condition and results of operations.
There can be no assurance that the Company will be able to compete effectively
against future and current competitors.

Experian provides substantially all of the credit information which the
Company furnishes to its members. Although neither Experian nor the other credit
reporting bureaus provide the credit monitoring services currently offered by
the Company, Experian and the other credit bureaus currently provide a credit
report directly to any consumer at the consumer's request at the rate of
approximately $8.00 per report (except in states where local legislation
provides the consumers are entitled to a free credit report upon their written
request). See "-- Government Regulation; Adverse Publicity -- State Fair Credit
Reporting Acts." There can be no assurance that Experian or the other credit
bureaus will not begin to more aggressively market their services to consumers
by initiating price reductions or advertising campaigns targeted to consumers
and that such actions will not adversely affect the Company's business,
financial condition and results of operations or require the Company to reduce
prices for certain of its programs in order to remain competitive. On August 13,
1997, Experian launched a program to offer consumers the opportunity to receive
their credit reports directly over the Internet. Although two days later
Experian announced that it was suspending this program due to certain
operational and security problems, there can be no assurance that this, or
similar programs, will not be implemented by Experian or other credit reporting
bureaus or that competition from such programs will not adversely affect the
Company's business, financial condition and result of operations. Experian and
the other credit reporting bureaus would have significant competitive advantages
over the Company in providing such reports or services, such as access to credit
data at minimal cost.

Currently, management believes that the Company enjoys several competitive
advantages, including (i) the high entry costs associated with starting a
competing business; (ii) the fact that none of the Company's competitors offers
daily monitoring of a member's credit file; and (iii) the Company's unique
contractual relationship with Experian.

The Company believes that the principal competitive factors in the
membership service industry include the ability to identify, develop and offer
innovative service programs, the quality of service programs offered, price and
marketing expertise. The Company believes that its ability to compete also
depends in part on a number of competitive factors outside its control,
including the ability to hire and retain employees, the development by others of
service programs that are competitive with the Company's service programs, the
price at which such competitors offer comparable service programs and the extent
to which such competitors are responsive to customer needs. In addition, the
introduction or announcement by competitors of the Company of new programs
similar to those offered by the Company could render the Company's existing
programs uncompetitive or obsolete, or result in a delay or decrease in orders
for the Company's existing programs as co-marketers or customers evaluate new
programs or select new programs as an alternative to the Company's existing
programs. Therefore, the announcement or introduction of new programs by
competitors of the Company could have a material adverse affect on the Company's
business, financial condition and results of operations.

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programs. Although the Company is exploring the potential of what it believes
are the most promising forms of direct marketing, there can be no assurance that
the Company would be able to adapt to a material change in the economics of its
business or that such change would not have a material adverse effect on the
Company's business, financial condition or results of operations. See "Risk
Factors -- Competition" and "-- Reliance on Communications and Information
Systems; Technology Risks."

GOVERNMENT REGULATION

State Fair Credit Reporting Acts. Slightly over half of the states have
enacted statutes governing the operations of consumer reporting agencies, and
some of the state statutes contain provisions that are different from the FCRA.
An example of such a state statute was enacted in Colorado in April 1997 through
the adoption of the Colorado Fair Credit Reporting Act (the "Colorado Act")
which went into effect August 1, 1997. The Colorado Act increases the
notification requirements for credit reporting agencies and lenders upon

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the addition of adverse items to, or three inquiries into, an individual's
credit report. The law provides that Colorado consumers are entitled to a free
credit report upon their written request and mandates an annual mailing from
each of the national systems and Colorado reporting agencies alerting consumers
to that fact. The Company is not in a position to know the number of Colorado
consumers who will request a free copy of their credit report, or if consumers
will regard such reports as substitutes for the Company's services. There are
five other states (Vermont, Maryland, Georgia, Massachusetts and New Jersey)
that have also enacted legislation requiring the issuance of free credit reports
to consumers upon request. The Company derives approximately 15% of its members
from states with such legislation. Other states (including California) are
currently considering the enactment of such legislation. There can be no
assurance that other states in which more of the Company's members reside will
not adopt similar legislation. In the event that other states enact legislation
requiring issuance of free credit reports, the value to consumers of the
programs the Company provides could be materially reduced. Legislation requiring
free issuance of credit reports could materially and adversely affect the
Company's business, financial condition and results of operation.

Credit Repair Organization Regulations. Both Federal and state laws
regulate the activities of "credit repair organizations." While the Company is
not currently a credit repair organization and has no present plans to become a
credit repair organization, it is possible that credit repair laws may be
amended at some time in the future to include organizations such as the Company.
Under the Federal Credit Repair Organizations Act (the "Credit Repair Act"), a
credit repair organization is generally defined as any person who uses any
instrumentality of interstate commerce or the mails to sell, provide, or perform
any service, in return for money for the express or implied purpose of improving
any consumer's credit record, credit history, or credit rating, or providing
advice or assistance to any consumer with regard to any such activity or
service.

The Credit Repair Act imposes certain restrictions on the activities and
contracts of credit repair organizations and requires that specific disclosures
be made to consumers. Any credit repair organization that fails to comply with
the Credit Repair Act can be subject to civil liability for both actual and
punitive damages and attorney's fees and can be subject to an enforcement action
by the FTC. Additionally, state attorneys general have the authority to bring
actions against credit repair organizations who violate the Credit Repair Act.

In addition to the Credit Repair Act, at least 36 states and the District
of Columbia have their own statutes regulating "credit services organizations."
Most of the state statutes define credit services organizations similarly. For
example, the Delaware statute, which is representative of most of the other
state statutes, generally defines a credit services organization as any person
who, with respect to the extension of credit by others and in return for the
payment of money, provides any of the services, advice or assistance with
respect to improving a buyer's credit record, history or rating or obtaining an
extension of credit for a buyer. The requirements imposed by the state statutes
generally include a prohibition against charging the buyer a service fee until
the credit services organization has performed all of the services it agreed to
perform, unless it posted a surety bond with the state; certain disclosure and
contractual requirements; and, in some states, a mandatory surety bond and
registration.

In general, a credit services organization that violates a state statute
can be subject to an injunction, civil actions for damages and civil and
criminal penalties. For example, in Delaware, a credit services organization
that violates that state's statute can be subject to an action for damages by an
injured buyer and can be prosecuted for a Class B misdemeanor. Additionally, a
buyer or the attorney general may bring an action to enjoin the credit services
organization's activities. In the District of Columbia, a "consumer credit
service organization" that violates the District's law may be fined not more
than $500 per violation and/or imprisoned for not more than a year. In addition,
civil fines, penalties and fees may be imposed. A consumer injured by a
violation may also bring an action for actual damages, including reasonable
attorney's fees and costs, against the consumer credit service organization.
Awards may also be entered for punitive damages. In addition, at least one
state, Georgia, makes merely operating a "credit repair services organization" a
misdemeanor.

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EMPLOYEES

As of June 27, 1997, the Company employed 152 persons on a full-time basis
and nine persons on a part-time basis. None of the Company's employees are
represented by a labor union. The Company believes that its employee relations
are good.

FACILITIES

The Company leases its 20,740 square foot headquarters facility in Orange,
California. The Company also leases its 15,452 square foot membership service
facility in Plano, Texas, which is primarily a call center for customer service
representatives and operations. These leases expire in December 1998 and
September 2001, respectively.

LEGAL PROCEEDINGS

From time to time, the Company may be involved in litigation or in
settlement proceedings relating to claims arising out of its operations in the
normal course of business. Except as described below, the Company is not
currently a party to, nor is any of its property the subject of, any legal
proceedings, the adverse outcome of which, individually or in the aggregate,
could have a material adverse effect on the Company's business, financial
condition and results of operations.

The Company is a party to a lawsuit pending in the United States District
Court for the Central District of California, Southern Division, entitled
Credentials Services International, Inc., et. al. v. John P. Ferry, et. al.,
USDC Case No. SACV 96-960 AHS (EEx) (the "Federal Action"). The lawsuit arose
out of the August 15, 1996 dismissal for cause of the Company's then President
and Chief Executive Officer, John P. Ferry, and its then Chief Financial
Officer, John N. Rees. In September 1996, Messrs. Ferry and Rees filed an
arbitration demand against the Company with the American Arbitration Association
(the "AAA") under the AAA Employment Dispute Arbitration Rules, each asserting a
breach of their respective employment agreements (the "Arbitration"). On or
about October 11, 1996, the Company filed a complaint against Messrs. Ferry and
Rees initiating the Federal Action. A first amended complaint was filed on
November 20, 1996, asserting claims for relief for breach of fiduciary duty,
constructive fraud, violation of California Corporations Code Section 309,
negligence, conversion, injunctive relief and interference with prospective
economic advantage. In February 1997, the court denied a motion by Messrs. Ferry
and Rees seeking to compel arbitration, and the Arbitration was stayed. On or
about April 7, 1997, Messrs. Ferry and Rees filed a cross-complaint in the
Federal Action alleging 22 causes of action against the Company, as well as
eight other cross-defendants. The Company subsequently filed a motion to dismiss
Messrs. Ferry and Rees' cross-complaint, and on or about July 22, 1997, the
court dismissed Messrs. Ferry and Rees' entire cross-complaint, giving them 30
days to file an amended complaint. On or about August 14, 1997, Messrs. Ferry
and Rees filed a first amended counter-complaint asserting 19 causes of action
against the Company and the other cross-defendants, including breach of
employment agreement, breach of the covenant of good faith and fair dealing,
breach of statutory obligation, fraud, constructive fraud, negligent
misrepresentation, wrongful termination in violation of public policy,
defamation, conversion, abuse of process, breach of fiduciary duty and
negligence, seeking unspecified damages, an accounting, declaratory relief and
certain injunctive relief. The causes of action arise out of alleged breaches of
the respective employment agreements of Messrs. Ferry and Rees, alleged
defamatory statements made by certain executive officers and directors of the
Company about Messrs. Ferry and Rees, an alleged breach of fiduciary duty
arising out of their status as limited partners in CIS Acquisition Partners,
L.P. and the 1996 refinancing of the Company and alleged breaches of good faith
and other duties owed to Messrs. Ferry and Rees by the Board of Directors of the
Company in connection with the termination of their employment and the conduct
of the business prior thereto. On or about August 29, 1997, the Company filed a
motion to dismiss the first amended counter-complaint. This motion is currently
pending before the Court. Discovery is continuing in the matter. The Company
believes that it has valid defenses to all of the causes of action alleged in
the first amended counter-complaint of Messrs. Ferry and Rees, and it intends to
vigorously prosecute and defend this action. The Federal Action is at an early
stage of proceedings; however, the Company presently believes that this action
will not have a material adverse effect upon the Company or its financial
condition or results of operations.

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The Company, among others, is a party to a lawsuit in the Superior Court
for the State of California, County of Orange, against Steven Richards, James O.
Saloma and Joyce Richards entitled Lincolnshire Equity Fund, L.P., et. al. v.
Steven Richards, et. al., Case No. 781247 (the "State Court Action") which was
instituted by the Company, Lincolnshire Equity Fund, L.P., a privately held
Delaware limited partnership, and Lincolnshire Management, Inc. on or about July
2, 1997. The complaint in the State Court Action alleges causes of action for
libel, slander of title, trade libel, intentional interference with contract,
indemnity, breach of fiduciary duty, breach of contract and unjust enrichment.
Messrs. Richards and Saloma were employees and officers of the Company whose
employment was terminated for cause in September 1996. The complaint also
alleges that Joyce Richards, Mr. Richards' wife, was an executive search
consultant retained by the Company without disclosure of the conflict of
interest (her relationship to an officer of the Company) to the Company's Board
of Directors. On or about August 4, 1997, Messrs. Richards and Saloma filed a
cross-complaint in the State Court Action asserting causes of action for breach
of contract, breach of statutory obligations, indemnity, conversion and
declaratory relief, all directed to issues concerning their Company
compensation. The Company believes that it has valid defenses to all of the
causes of action alleged in the cross-complaint, and it intends to vigorously
prosecute and defend this action. The State Court Action is at an early stage of
proceedings; however, the Company presently believes that this action will not
have a material adverse effect upon the Company or its financial condition or
results of operations.

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MANAGEMENT

DIRECTORS, EXECUTIVE OFFICERS AND KEY EMPLOYEES

The directors, executive officers and key employees of the Company are as
follows:

NAME AGE POSITION
- ------------------------------------- --- -----------------------------------------------------

Thomas J. Maloney.................... 44 Chairman and Director(1)
Charles Caudle....................... 68 Honorary Vice Chairman
David C. Thompson.................... 42 President, Chief Executive Officer and Director(1)
John Adams........................... 52 Executive Vice President, Member Services
Michael Cossel....................... 55 Executive Vice President, Operations
M. Gerard Keehan..................... 58 Executive Vice President, Marketing and Director
Vineet Pruthi........................ 52 Executive Vice President and Chief Financial Officer
James M. Rothe....................... 55 Executive Vice President, Sales
Donald J. Shea, Jr. ................. 39 Senior Vice President, New Products
C. Kenneth Clay...................... 33 Director(2)
Nicholas Dunphy...................... 49 Director(2)
William A. Hall...................... 65 Director

- ---------------
(1) Member of Compensation Committee of the Board of Directors.

(2) Member of Audit Committee of the Board of Directors.

Thomas J. Maloney has served as a director of the Company since July 1995.
In August 1996, Mr. Maloney was elected Chairman, President and Chief Executive
Officer of the Company. He served as President and Chief Executive Officer of
the Company until July 1997 and continues as Chairman of the Company. Mr.
Maloney has been a Managing Director of Lincolnshire Management, Inc., since
April 1993. Mr. Maloney is a founding partner of the law firm of Maloney,
Mehlman & Katz, counsel to the Company and to CSI Partners II. See "Certain
Transactions." Mr. Maloney holds a B.A. degree from Boston College and a J.D.
from Fordham University.

Charles Caudle has been Honorary Vice Chairman of the Company since July
1997. Prior to his appointment as Honorary Vice Chairman, Mr. Caudle served as
Chief Operating Officer of the Company from August 1996 to December 1996 and as
Executive Vice President and National Sales Manager of the Company from July
1995 to August 1996. From 1994 to 1996, Mr. Caudle served as Executive Vice
President of MBNA in special sales. From 1984 to 1994, Mr. Caudle served in
various operational and marketing management capacities at Visa, USA.
Previously, he was Chief Executive Officer of Barnett Credit Services
Corporation, the revolving credit arm of Barnett Banks of Florida. Mr. Caudle
has served as a director of several industry groups. Mr. Caudle attended West
Virginia University.

David C. Thompson joined the Company in October 1996 as Chief Financial
Officer. From November 1996 to July 1997, Mr. Thompson served as the Company's
Chief Operating Officer. In July 1997, he was elected President and Chief
Executive Officer of the Company. Mr. Thompson was elected a member of the Board
of Directors in December 1996. Prior to joining the Company, Mr. Thompson served
in various senior financial management positions, most recently as Senior Vice
President and Chief Financial Officer of SafeCard Services, Inc., a subsidiary
of the Ideon Group, from 1994 to 1996. From 1992 to 1994, Mr. Thompson was Vice
President and Chief Financial Officer of the bank card division of Fidelity
Investments. From 1983 to 1992, Mr. Thompson served in various senior financial
management positions at American Express. Mr. Thompson began his career as a
C.P.A. with Price Waterhouse from 1977 to 1983. Mr. Thompson holds a B.S. degree
in Accounting from Florida State University and an M.B.A. from New York
University.

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John Adams joined the Company as Executive Vice President, Member Services,
in October 1996. Prior to joining the Company, Mr. Adams worked in various
senior operating positions in the credit industry, including for 16 years at TRW
where he assisted in establishing the CIS Business with responsibility for
developing systems, customer service and fulfillment capabilities, and two years
at Equifax. From 1992 to 1996, Mr. Adams founded and operated a direct mail
servicing company. Mr. Adams attended Claremont College.

Michael Cossel has been Executive Vice President, Operations, of the
Company since September 1996. Prior to joining the Company, from 1993 to 1994,
he served as a management consultant with Coopers & Lybrand's Financial Advisory
Services Group in the Washington, D.C. area. From 1988 to 1993, Mr. Cossel
served as the Chief Financial Officer and Administrative Officer of Beverage
Capital Corporation, a major Baltimore-based producer of private label and
national brand beverages. Previously, Mr. Cossel performed the dual roles of
Chief Financial Officer and Chief Operating Officer at Credit Card Services
Corporation. Mr. Cossel has a B.S. degree in Economics from Villanova University
and an M.B.A. from American University.

M. Gerard Keehan has been Executive Vice President, Marketing, of the
Company since January 1997, and a member of the Board of Directors of the
Company since July 1997. Prior to that time, Mr. Keehan was Director of
Marketing at TRW from 1985 to 1994, where he assisted in establishing the CIS
Business. Prior to joining TRW, Mr. Keehan was Senior Vice President and Chief
Administrative Officer for Transamerica Assurance in Southern California.

Vineet Pruthi joined the Company in November 1996 as Chief Financial
Officer. Prior to joining the Company, from 1991 to 1996, Mr. Pruthi was an
independent consultant in financial, due diligence and international business
matters. From 1982 to 1991, Mr. Pruthi served in various senior financial
management positions, including as Chief Financial Officer at Murjani, a
privately owned international group of companies. Mr. Pruthi is a Chartered
Accountant and has an M.B.A. from Rutgers Graduate School of Management.

James M. Rothe has been Executive Vice President, Sales, of the Company
since 1995. From 1991 to 1995, Mr. Rothe was President of Membership Development
Inc., which developed and sold the CreditWatch credit reporting service in
partnership with Trans-Union Corporation. From 1986 to 1991, Mr. Rothe was Vice
President of Sales for the CIS Business of TRW. Previously, Mr. Rothe was
Regional Manager for Dun & Bradstreet in Southern California. Mr. Rothe attended
the University of Nebraska.

Donald J. Shea, Jr., has been Senior Vice President, New Products, of the
Company since December 1996. From 1994 to 1996, Mr. Shea was Vice President,
Client Services, of Eire Partners, Inc. From 1990 to 1994, while he was an
Account Supervisor at DDB Needham Worldwide, Mr. Shea worked with many national
consumer goods companies, such as Frito-Lay and S.C. Johnson Wax, advertising a
variety of established products and services and launching new products. Mr.
Shea holds a B.A. degree from Georgetown University and an M.B.A. from
Northwestern University (Kellogg Graduate School of Management).

C. Kenneth Clay has served as a director of the Company since September
1997. Mr. Clay is a Director of Lincolnshire Management, Inc., and has been
employed at Lincolnshire since 1995. From 1992 to 1995, Mr. Clay was the Chief
Financial Officer of LINQ Industrial Fabrics, Inc., a manufacturer and marketer
of polypropylene-based industrial fabrics. Prior to that time, he was an officer
of the Bank of New York Commercial Corporation. Mr. Clay is also an officer and
director of Peripheral Computer Support, Inc., a company in which Lincolnshire
Equity Fund, L.P., is the controlling shareholder. Mr. Clay holds a B.S. degree
from Brigham Young University and an M.B.A. from The University of Texas at
Austin.

Nicholas Dunphy has served as a director of the Company since March 1997.
Mr. Dunphy is the co-founder and managing partner of Canterbury Capital, LLC,
which is the general partner of Canterbury Mezzanine Capital, L.P. Mr. Dunphy
was employed by Barclays Bank from 1980 to 1995. Prior to founding the Barclays
Mezzanine Group in 1989, Mr. Dunphy held a number of senior executive positions
in Barclays Project Finance, Utility and Leveraged Finance groups. Before
joining Barclays, Mr. Dunphy qualified as a Chartered Accountant in Canada and
subsequently spent five years with Toronto Dominion Bank.

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Mr. Dunphy received a B.Sc. degree from Manchester University in England and an
M.B.A. from York University in Canada.

William A. Hall has served as a director of the Company since July 1997.
Mr. Hall is the President and Chief Executive Officer of Sight & Sound
Distributing Company, an audio and video software distributor, having founded
this company in 1984. Since 1988, Mr. Hall has also been the owner of W.A.H.
Management/Consulting, consultants in strategic management to companies in the
home entertainment industry. Since April 1993, Mr. Hall has also been Vice
Chairman of, and a majority stockholder in, U.S. Animation, Inc., which provides
digital colorization and composition of animation for feature films, television,
commercials and interactive video games. Mr. Hall is a shareholder of
Lincolnshire Management, Inc. Mr. Hall is also a director of 3DO, an
international computer software company, Northward Press, a manufacturer of
music software, and Chromium Graphics, a specialty printing company.

The Company's Board of Directors currently consists of six directors.
Following completion of the offering, the Company's Board of Directors intends
to appoint at least one additional director who will not be an officer or an
employee of the Company or its affiliates. The Company's Board of Directors
consists of six directors. Each of the Company's directors serve three-year
terms which are staggered to provide for the election of approximately one-third
of the board members each year.

The Board of Directors is divided into three classes, with two to three
directors in each class. The Class I directors are Messrs. Maloney and Hall, the
Class II directors are Messrs. Thompson and Keehan, and the Class III directors
are Messrs. Clay, Dunphy and the additional directors to be appointed following
the completion of this offering. The terms of the Class I directors expire in
2000, the terms of the Class II directors expire in 1999, and the terms of the
Class III directors expire in 1998. Directors hold office until their terms
expire and their successors have been elected and qualified. Executive officers
of the Company are appointed by, and serve at the discretion of, the Board of
Directors. There are no family relationships among any of the directors or
executive officers of the Company.

Directors do not receive any fees for service on the Board of Directors.
Directors are reimbursed for their expenses for each meeting attended.

EXECUTIVE COMPENSATION

The following table summarizes all compensation paid to the Company's Chief
Executive Officer and to the Company's five other most highly compensated
executive officers other than the Chief Executive Officer whose total annual
salary and bonus exceeded $100,000, for services rendered in all capacities to
the Company during the fiscal year ended September 26, 1997.

SUMMARY COMPENSATION TABLE

LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------- ------------
OTHER RESTRICTED
NAME AND ANNUAL STOCK ALL OTHER
PRINCIPAL POSITION SALARY BONUS COMPENSATION AWARDS COMPENSATION
- --------------------------------------------- -------- ------- ------------- ------------ ------------

David C. Thompson............................ $164,400 -- -- (2) $ 63,952(3)
President and Chief Executive Officer(1)
Charles Caudle............................... 250,000 -- -- (2) 33,478(3)
Honorary Vice Chairman
Thomas J. Maloney............................ 240,000 -- -- -- 3,000(5)
Chairman(4)
Michael Cossel............................... 152,470 -- -- (2) 11,098
Executive Vice President, Operations
James M. Rothe............................... 126,540 $32,225 -- (2) 1,807
Executive Vice President, Sales
Vineet Pruthi................................ 124,808 -- -- (2) 18,284(5)
Executive Vice President and Chief
Financial Officer

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- ---------------
(1) Mr. Thompson served as Chief Financial Officer of the Company from October
1996 to November 1996 and as Chief Operating Officer from November 1996 to
July 1997.

(2) Under the terms of the Amended and Restated Agreement of Limited Partnership
of CSI Investment Partners II, L.P., dated as of October 7, 1997 (the "CSI
II Partnership Agreement"), the officers named in the table above (other
than Mr. Maloney) hold Class B limited partnership interests in that
partnership representing indirect interests in the Common Stock held by the
partnership as follows: Mr. Thompson holds a 3.25% interest; Mr. Caudle
holds a 0.10% interest; Mr. Cossel holds a 0.75% interest; Mr. Rothe holds a
0.95% interest; and Mr. Pruthi holds a 1.45% interest. The foregoing
interests were granted pursuant to agreements reached with each such officer
in October 1996. Under the terms of the CSI II Partnership Agreement, each
of the above-named officer's interest vests in accordance with a schedule
which provides that one-third of such interest vests in April 1998, an
additional one-third vests in April 1999 and the remaining one-third vests
in April 2000, contingent upon each individual's continued employment with
the Company. Upon vesting of an individual's interest, the Company Common
Stock underlying that interest will be distributed to the individual.
Assuming full vesting of all such interests for all of the individuals named
in the table above, the number of restricted shares that would be
distributed is as follows: Mr. Thompson, shares; Mr. Caudle,
shares; Mr. Cossel, shares; Mr. Rothe, shares;
and Mr. Pruthi, shares. The Company estimates that the value of
the above-described equity interests at September 27, 1997, was as follows:
Mr. Thompson, $ ; Mr. Caudle, $ ; Mr. Cossel, $ ;
Mr. Rothe, $ ; and Mr. Pruthi, $ . Any dividends paid on
the Company's Common Stock are not payable to the holders of the Class B
limited partnership interests. See "Certain Transactions."

(3) Includes relocation expenses consisting of selling expenses relating to the
sale of their prior residences and temporary living costs for Mr. Thompson
and Mr. Caudle in the amounts of $63,410 and $25,000, respectively, paid by
the Company.

(4) Mr. Maloney served as Chief Executive Officer of the Company from August
1996 to July 1997.

(5) Includes temporary living expenses for Mr. Maloney and Mr. Pruthi in the
amounts of $3,000 and $12,000, respectively, paid by the Company.

The Company anticipates that it may increase the base salary of the
above-named executives during the 1998 fiscal year; however, the Company does
not expect that in the aggregate such increases will materially increase the
Company's general and administrative expenses in fiscal year 1998. Mr. Maloney's
annual salary will be reduced to $150,000 per year following completion of this
offering.

EMPLOYMENT AGREEMENTS

The following summary descriptions of the material provisions of the
employment agreements between the Company and the named executive officers are
qualified in their entirety by reference to such agreements, a copy of each of
which is filed as an exhibit to the Registration Statement of which this
Prospectus forms a part.

David C. Thompson, President and Chief Executive Officer, and the Company
entered into an Employment Agreement dated as of May 9, 1997. Under this
agreement, the Company has agreed to pay Mr. Thompson an annual base salary of
$180,000, plus an annual bonus of $25,000 and a special bonus dependent upon
attainment of certain business goals. This agreement expires May 9, 2000. The
Company may terminate the agreement earlier for cause without penalty or,
without cause, upon payment of an amount equal to Mr. Thompson's base salary for
the lesser of twelve months or the remainder of the employment term. Mr.
Thompson has agreed not to compete with the Company during the employment term
and for 18 months thereafter.

Charles Caudle, Honorary Vice Chairman, and the Company entered into an
Employment Agreement dated as of August 15, 1996. Under this agreement, the
Company has agreed to pay Mr. Caudle an annual base salary of $250,000, plus an
annual bonus dependent upon the attainment of certain business goals. This
agreement expires August 15, 1999 and is automatically renewed for a one-year
period unless either party provides the other with 60 days' written notice. The
Company may terminate the agreement earlier for cause without penalty or,
without cause, upon payment of an amount equal to Mr. Caudle's base salary for
the lesser

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of twelve months or the remainder of the employment term. Mr. Caudle has agreed
not to compete with the Company during the employment term and for two years
thereafter.

Michael Cossel, Executive Vice President, Operations, and the Company
entered into a Letter Agreement dated August 16, 1995. Under this agreement, the
Company has agreed to pay Mr. Cossel an annual salary of $140,000, plus an
annual bonus of up to $45,000 based on the performance of the Company. The
Company has agreed to pay to Mr. Cossel a severance package of up to one year's
salary if he is terminated without cause, which severance may be extended
another six months at the Company's discretion. Mr. Cossel has agreed not to
compete with the Company in any manner for twelve months after any payment is
made to him by the Company.

James M. Rothe, Executive Vice President, Sales, and the Company entered
into a Letter Agreement dated September 5, 1995 which was amended by memorandum
on January 6, 1997. Under this agreement, as amended, the Company has agreed to
pay Mr. Rothe an annual base salary of $140,000, plus a commission package based
on the attainment of certain business goals. In the event of termination without
cause, twelve months salary and benefits will be paid.

Vineet Pruthi, Executive Vice President and Chief Financial Officer, and
the Company entered into an Employment Agreement dated as of December 3, 1996.
Under this agreement, the Company has agreed to pay Mr. Pruthi an annual base
salary of $155,000, plus an annual bonus of $25,000 and a special bonus
dependent upon the attainment of certain business goals. The agreement expires
December 2, 1999. The Company may terminate the agreement earlier for cause
without penalty or, without cause, upon payment of an amount equal to Mr.
Pruthi's base salary for the lesser of twelve months or the remainder of the
employment term. Mr. Pruthi has agreed not to compete with the Company during
the employment term and for two years thereafter.

STOCK OPTION PLAN

The Company's 1997 Stock Option Plan (the "Stock Option Plan") was adopted
by the Board of Directors and approved by the Company's stockholders in
September 1997. Under the Stock Option Plan, a total of shares of
Common Stock have been reserved for issuance upon the exercise of stock options
and related stock appreciation rights ("SARs"). As of the date of this
Prospectus, options to purchase , , and
shares of Common Stock have been granted under the Stock Option Plan
to Messrs. , , and . See
"-- Executive Compensation." The following description of the material
provisions of the Stock Option Plan is qualified in its entirety by reference to
the Stock Option Plan, a copy of which is filed as an exhibit to the
Registration Statement of which this Prospectus forms a part.

The Stock Option Plan provides that the number of shares of Common Stock
subject thereto and the number of outstanding stock options and their exercise
prices are to be appropriately adjusted in the event of a reorganization,
consolidation, reclassification, recapitalization, combination or exchange of
shares of Common Stock, stock split, reverse split, stock dividend or rights
offering. Shares of Common Stock allocated to options and/or SARs which have
expired or been terminated may be reallocated to other options and/or SARs under
such plan.

Pursuant to the Stock Option Plan, the Company may grant (i) incentive
stock options ("ISOs"), as that term is defined in the Internal Revenue Code of
1986, as amended (the "Code"), (ii) nonqualified stock options ("NSOs"), and
(iii) SARs to officers, directors and key employees of the Company. The Stock
Option Plan provides for administration by the Board of Directors of the Company
or by a Committee of the Board of Directors which selects the optionees,
authorizes the grant of options and determines the exercise price and other
terms of the options, including the vesting schedule thereof, if any, provided,
however, that the vesting schedule will be no less than three years from the
date of grant. Currently, the Stock Option Plan is administered by the
Compensation Committee of the Board of Directors.

The per share exercise price of each ISO granted under the Stock Option
Plan must be at least 100% of the fair market value of a share of Common Stock
(and not less than 110% of the fair market value in the case

40
44

of any optionee of an ISO who beneficially owns more than 10% of the total
combined voting power of the Company) on the date such option is granted. The
Stock Option Plan provides that the per share exercise price of an NSO must be
at least 85% of the fair market value of a share of Common Stock on the date
such option is granted. Each option granted under the Stock Option Plan may be
exercisable for a period determined by the Board of Directors or the Committee
administering the Stock Option Plan, not to exceed ten years (or five years in
the case of any optionee of an ISO who beneficially owns more than 10% of the
total combined voting power of the Company) from the date of grant. Options
issued under the Stock Option Plan will be exercisable as the Committee
administering such plan may determine, but in no event shall an option be
exercisable prior to after the date of grant.

ISOs granted under the Stock Option Plan are non-transferable, except upon
death, by will or by operation of the laws of descent and distribution, and may
be exercised during the employee's lifetime only by the optionee. The aggregate
fair market value of the stock with respect to which ISOs are exercisable for
the first time by an employee during any calendar year (under all such plans of
the Company and any parent and subsidiary companies of the Company) may not
exceed $100,000.

Options granted under the Stock Option Plan may be exercised within twelve
months after the date of an optionee's termination of employment by reason of
his death or disability, or within 90 days after the date of termination by
reason of retirement, voluntary termination approved by the Board of Directors
or involuntary termination by the Company other than for Cause (as defined in
the Stock Option Plan), but, in any such case, not later than the expiration
date of such option and only to the extent the option was otherwise exercisable
at the date of termination. In the event an optionee's employment is terminated
by the Company for Cause or voluntarily terminated by the optionee without the
approval of the Board of Directors, such optionee's option shall terminate
immediately upon the date of such termination.

The Stock Option Plan also provides for the grant of SARs, which may be
granted on a stand-alone basis or in tandem with stock options, which may be
surrendered to the Company in exchange for cash, shares of Common Stock or a
combination thereof, as determined by the Committee administering the Stock
Option Plan, having a value equal to the dollar amount obtained by multiplying
(x) the number of shares subject to the surrendered SAR or option by (y) the
amount by which the fair market value per share of Common Stock exceeds the
exercise price per share specified in the agreement governing the surrendered
SAR or option.

The Stock Option Plan expires on September , 2007 unless terminated
earlier by the Board of Directors. The Stock Option Plan is subject to amendment
by the Board of Directors without stockholder approval, except that no amendment
which increases the maximum aggregate number of shares which may be issued under
the Stock Option Plan or changes the class of eligible participants in the Stock
Option Plan will be effective without the approval of the stockholders of the
Company. The Board of Directors may terminate the Stock Option Plan at any time.

LIMITATION OF LIABILITY AND INDEMNIFICATION MATTERS

The Company has adopted provisions in its Certificate of Incorporation that
limit the liability of its directors for monetary damages for breach of their
fiduciary duty as directors, except for liability that cannot be eliminated
under the Delaware General Corporation Law ("Delaware Law"). The Delaware Law
provides that directors of a company will not be personally liable for monetary
damages for breach of their fiduciary duty as directors, except for liability
(i) for any breach of their duty of loyalty to the Company or its stockholders,
(ii) for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) for unlawful payment of dividend
or unlawful stock repurchase or redemption, as provided in Section 174 of the
Delaware Law, or (iv) for any transaction from which the director derived an
improper personal benefit.

The Company's Certificate of Incorporation and ByLaws also provide that the
Company shall indemnify its directors and officers to the fullest extent
permitted by the Delaware Law. The Company has entered into separate
indemnification agreements with its directors and officers that could require
the Company, among other things, to indemnify them against certain liabilities
that may arise by reason of their status or service as directors and to advance
their expenses incurred as a result of any proceeding against them as to which
they

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could be indemnified. The Company believes that the limitation of liability
provision in its Certificate of Incorporation and the indemnification agreements
will facilitate the Company's ability to continue to attract and retain
qualified individuals to serve as directors and officers of the Company.

CERTAIN TRANSACTIONS

In October 1994, CIS Acquisitions Partners, L.P., a Delaware limited
partnership ("CIS Acquisition Partners"), invested $4.0 million in the Company
in connection with the acquisition by the Company of its credit information and
monitoring direct marketing business from TRW. In consideration of that
investment, the Company issued 100 shares of Common Stock to CIS Acquisition
Partners. At the time of the Acquisition, two former members of management
purchased minority limited partnership interests in CIS Acquisition Partners.
See "Business -- Legal Proceedings."

Under the terms of the CSI II Partnership Agreement, a group of eleven
officers and key employees of the Company hold Class B limited partnership
interests in CSI Investment Partners II, L.P. ("CSI Partners II"), a Delaware
limited partnership, representing indirect interests in the Company Common Stock
held by that partnership. The interests held by those eleven officers and key
employees aggregate a 10% interest in CSI Partners II. The foregoing interests
were granted pursuant to agreements reached with each such officer in October
1996. Under the terms of the CSI II Partnership Agreement, the interests of each
of the eleven individuals vests in accordance with a schedule which provides
that one-third of such interest vests in April 1998, an additional one-third
vests in April 1999, and the remaining one-third vests in April 2000, contingent
upon such individual's continued employment with the Company. Upon vesting of an
individual's interest, the Company Common Stock underlying that interest will be
distributed to such individual. Assuming full vesting of all such interests for
all of the eleven individuals, the number of such restricted shares that would
be distributed would be . See "Management -- Executive Compensation."

From November 1996 through January 1997, CSI Investment Partners II, L.P.,
a Delaware limited partnership ("CSI Partners II"), invested a total of $3.0
million in the Company in consideration of the issuance by the Company of 3,000
shares of Series A Cumulative Preferred Stock (the "Series A Preferred Stock")
and warrants to acquire shares of its Common Stock. In March 1997, as
a condition of a $3.0 million subordinated loan to the Company made by
Canterbury Mezzanine Capital, L.P., a Delaware limited partnership ("Canterbury
Capital"), CSI Partners II exchanged its 3,000 outstanding shares of Series A
Preferred Stock for 30,000 shares of the Company's Common Stock and exercised
its warrants (at a nominal exercise price) for 9,900 shares of Common Stock.

In January 1997, in connection with the refinancing of the Company's then
outstanding senior secured indebtedness, Lincolnshire Equity Fund, L.P., a
privately held Delaware limited partnership ("LEF"), agreed, subject to certain
conditions, to make available to the Company up to $4.25 million in additional
capital through the purchase of additional debt or equity securities of the
Company by not later than April 30, 1998. The Company's right to require such
additional investment by LEF was assigned by the Company to its senior secured
bank lender. By amendment in September 1997 to the agreement governing such
senior indebtedness, that lender relinquished the right to cause LEF to make
that additional investment, and the corresponding securities purchase agreement
between the Company and LEF pertaining to such investment has been cancelled. In
March 1997, as a condition to the subordinated loan made by Canterbury Capital
to the Company, LEF also agreed that, subject to certain triggering events, it
would purchase additional shares of Common Stock for up to $1.5 million. That
commitment on the part of LEF was assigned by the Company to Canterbury Capital,
but Canterbury Capital will relinquish the right to cause LEF to purchase such
additional shares upon the repayment by the Company of the outstanding
subordinated loan owing to Canterbury Capital at the time of completion of this
offering, and the corresponding agreement between the Company and LEF to
purchase these additional shares of Common Stock will thereupon be cancelled.
See "Use of Proceeds."

In connection with its $3.0 million subordinated loan to the Company in
March 1997, Canterbury Capital acquired warrants to purchase a total of
shares of Common Stock of the Company. The warrants were subject to
customary anti-dilution provisions and were exercisable at a nominal price. In
September

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1997, Canterbury Capital exercised all of those warrants and thereby purchased
shares of Common Stock, of which shares are being sold by
Canterbury Capital in the offering being made hereby. See "Principal and Selling
Stockholders."

Eighty-five percent of the total outstanding limited partnership interests
of CIS Acquisition Partners, and 100% of the total outstanding limited
partnership interests of CSI Partners II, are held by LEF which invests in
various business entities through investment partnerships or other entities. LEF
also indirectly holds the equity interests in the general partners of both of
these partnerships. Thomas J. Maloney, Chairman of the Board of the Company, C.
Kenneth Clay, a director of the Company, and William A. Hall, a director of the
Company, are all limited partners of LEF. Mr. Maloney is an officer and director
of (i) the corporate general partner of LEF, (ii) Credentials G.P., (which is
the corporate general partner of Credentials G.P., L.P., which is in turn the
general partner of CIS Acquisition Partners), and (iii) Credentials II G.P.,
Inc. (which is the corporate general partner of Credentials II G.P., L.P., which
is in turn the general partner of CSI Partners II), and holds direct and
indirect equity interests in each of these partnerships and corporations. Mr.
Maloney is an officer and director and a stockholder in Lincolnshire Management,
Inc. ("LMI"), an affiliate of LEF which renders management consulting services
to business entities in which LEF invests, including the Company. Mr. Hall is a
stockholder in LMI, and Mr. Clay is an employee of LMI. Messrs. Hall and
Maloney's stock holdings in LMI each constitute less than 10% of the total
issued and outstanding capital stock of LMI.

Since October 1994, the Company has been a party to a consulting agreement
with LMI, an affiliate of the limited partnerships which own the outstanding
Common Stock of the Company. Pursuant to this agreement, as amended in December
1996, LMI has rendered and is rendering management and financial consulting
services to the Company. These services have included assisting the Company in
refinancing and reorganizing its operations during the past year. For its
services, the Company paid LMI annual consulting fees and expenses of $259,000
in fiscal year 1995, $368,000 in fiscal year 1996 and $300,000 in fiscal year
1997. LMI and the Company terminated the Consulting Agreement effective at the
end of the 1997 fiscal year.

During the year ended September 30, 1995, LMI was paid $1.25 million for
professional services related primarily to the negotiations of the acquisition
from TRW, the negotiation of bank debt agreements and the negotiation of the
subordinated debt agreement. In addition, in March 1997, Lincolnshire
Management, Inc., was paid $300,000 for professional services relating primarily
to the negotiations of the bank debt agreements. In addition, the Company
incurred a one-time transaction fee of $500,000 on September 27, 1997 for LMI's
consulting services in connection with the successful reorganization and
recapitalization program effected by the Company during the 1997 fiscal year.

Mr. Maloney is a partner of the law firm of Maloney, Mehlman & Katz, which
has rendered legal services to the Company and collected fees from the Company
aggregating approximately $212,000 for legal services rendered during the 1997
fiscal year.

For information concerning indemnification of directors and officers, see
"Management -- Limitation of Liability and Indemnification Matters."

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of October , 1997, and as adjusted
to reflect the sale by the Company and the Selling Stockholders of the shares
offered hereby (assuming no exercise of the Underwriters' over-allotment
option), by: (i) each person who is known by the Company to own beneficially
more than 5% of the Company's Common Stock, (ii) each of the Company's directors
and officers named in the Summary Compensation Table set forth under
"Management" and (iii) all directors and executive officers of the Company, as a
group.

SHARES SHARES
BENEFICIALLY BENEFICIALLY
OWNED PRIOR OWNED AFTER
TO OFFERING NUMBER OF OFFERING(1)
------------------- SHARES -------------------
NUMBER PERCENTAGE BEING OFFERED NUMBER PERCENTAGE
------ ---------- ------------- ------ ----------

CSI Investment Partners II, L.P.(1)....... 89.2 % %
Canterbury Mezzanine Capital, L.P.(2)..... 10.8 %
David C. Thompson......................... (3)
Charles Caudle............................ (3)
Thomas J. Maloney......................... --
Michael Cossel............................ (3)
James M. Rothe............................ (3)
Vineet Pruthi............................. (3)
All executive officers and directors as a
group (11 persons)...................... (3)
------ -----

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

(1) Consists of shares of Common Stock held by CSI Investment Partners
II, L.P. Credentials II G.P., L.P. is the managing general partner of CSI
Investment Partners II, L.P. For a description of the relationship between
CSI Investment Partners II, L.P. and the Company, see "Certain
Transactions." The sole limited partner of Credentials II G.P., L.P. is
Lincolnshire Equity Fund, L.P. ("LEF"). The general partner of Credentials
II G.P., L.P. is Credentials II G.P., Inc., a corporation which is
wholly-owned by LEF. The address for CSI Investment Partners II, L.P. is c/o
Lincolnshire Management, Inc., 780 Third Avenue, 45th Floor, New York, N.Y.
10017.

(2) Includes shares of Common Stock issued upon the exercise in
September 1997 of warrants held by Canterbury Mezzanine Capital, L.P.
Canterbury Capital LLC, is the managing general partner of Canterbury
Mezzanine Capital, L.P. For a description of the relationship between
Canterbury Mezzanine Capital, L.P. and the Company, see "Certain
Transactions." The address for Canterbury Mezzanine Capital, L.P. is 600
Fifth Avenue, 23rd Floor, New York, N.Y. 10020.

(3) Under the terms of the CSI II Partnership Agreement, a group of eleven
officers and key employees of the Company hold Class B limited partnership
interests in CSI Investment Partners II, L.P. ("CSI Partners II"), a
Delaware limited partnership, representing indirect interests in the Company
Common Stock held by that partnership. The interests held by those eleven
officers and key employees aggregate a 10% interest in CSI Partners II. The
foregoing interests were granted pursuant to agreements reached with each
such officer in October 1996. Under the terms of the CSI II Partnership
Agreement, the interests of each of the eleven individuals vests in
accordance with a schedule which provides that one-third of such interest
vests in April 1998, an additional one-third vests in April 1999, and the
remaining one-third vests in April 2000, contingent upon such individual's
continued employment with the Company. Upon vesting of an individual's
interest, the Company Common Stock underlying that interest will be
distributed to such individual. Assuming full vesting of all such interests
shares for all of the eleven individuals, the number of restricted shares
that would be distributed would be . See "Certain Transactions."

44
48

DESCRIPTION OF CAPITAL STOCK

Upon the closing of this offering, the authorized capital stock of the
Company will consist of shares of Common Stock, $.01 par value, and
shares of Preferred Stock, $.10 par value. The following summary
description of the capital stock of the Company is qualified in its entirety by
reference to the Amended and Restated Certificate of Incorporation of the
Company and the Bylaws of the Company, a copy of each of which is filed as an
exhibit to the Registration Statement of which this Prospectus forms a part.

COMMON STOCK

As of October , 1997, there were shares of Common Stock
outstanding held by stockholders of record.

The holders of Common Stock are entitled to one vote for each share held of
record on all matters submitted to a vote of the stockholders, including the
election of directors, and do not have cumulative voting rights. Accordingly,
the holders of a majority of the shares of Common Stock entitled to vote in any
election of directors can elect all of the directors standing for election, if
they so choose. Subject to preferences that may be applicable to any then
outstanding Preferred Stock and applicable law, holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefor. See "Dividend
Policy." In the event of any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary, the holders of Common Stock will be
entitled to share ratably in the net assets legally available for distribution
to such stockholders after the payment or the provision for payment of all debts
and other liabilities of the Company and the preferential amounts to which the
holders of any outstanding shares of Preferred Stock shall be entitled. Holders
of Common Stock have no preemptive or conversion rights or other subscription
rights and there are no redemption or sinking fund provisions applicable to the
Common Stock. All outstanding shares of Common Stock are, and the Common Stock
to be outstanding upon completion of this offering will be, fully paid and
nonassessable.

PREFERRED STOCK

The Board of Directors has the authority, without further action by the
stockholders, to issue from time to time additional Preferred Stock in one or
more series and to fix the number of shares, designations, preferences, powers,
and relative, participating, optional or other special rights and the
qualifications or restrictions thereof. The preferences, powers, rights and
restrictions of different series of such Preferred Stock may differ with respect
to dividend rates, amounts payable on liquidation, voting rights, conversion
rights, redemption provisions, sinking fund provisions, purchase funds and other
matters. The issuance of additional Preferred Stock could decrease the amount of
earnings and assets available for distribution to holders of Common Stock or
adversely affect the rights and powers, including voting rights, of the holders
of Common Stock, and may have the effect of delaying, deferring or preventing a
change in control of the Company. The Company has no present plan to issue
additional shares of Preferred Stock.

REGISTRATION RIGHTS

The outstanding shares of Common Stock owned by CSI Partners II and
Canterbury Capital (other than the shares being offered by such parties pursuant
to this Prospectus) are not registered under the Securities Act, and,
accordingly, may not be re-offered or re-sold in the United States absent
registration under the Securities Act or an applicable exemption from the
registration requirements under the Securities Act. Under a Registration Rights
Agreement among the Company, CSI Partners II and Canterbury Capital (the
"Registration Rights Agreement"), any Holder (as defined below) of the Common
Stock has the right to request that the Company register their shares of Common
Stock and any Common Stock which may be issued or distributed in respect thereof
by way of recapitalization, reclassification, stock dividend, stock split or
other distribution ("Registrable Securities"). Any stockholder owning
Registrable Securities that have not been sold to the public has the right,
after , 199 , to require the Company to use its best efforts to
register under the Securities Act at least shares of Registrable
Securities for resale in up to two

45
49

registrations upon demand. In addition, the Company has agreed to include in
unlimited incidental ("piggyback") registrations shares of Common Stock held by
CSI Partners II and Canterbury Capital or by any transferee of the registration
rights as permitted under the Registration Rights Agreement (any of which is a
"Holder"), provided that the number of shares of Common Stock that such Holder
requests to be included is not less than . If the Company qualifies
for the use of Form S-3 as promulgated by the Securities and Exchange
Commission, then at any time after , 199 any Holder has the right to
cause the Company to use its best efforts to effect a registration of at least
shares of the Registrable Securities on behalf of such Holder and
other Holders. The registration rights are assignable by any Holder to any
transferee acquiring at least Registrable Securities. The Company will
pay all registration expenses in connection with each registration of
Registrable Securities pursuant to the Registration Rights Agreement. See "Risk
Factors -- Shares Eligible for Future Sale; Registration Rights" and "Shares
Available for Future Sale."

DELAWARE ANTI-TAKEOVER LAW AND CERTAIN CHARTER AND BYLAW PROVISIONS

Furthermore, the Company is subject to the anti-takeover provisions of
Section 203 of the Delaware General Corporation Law which prohibit the Company
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless the business combination is approved in
a prescribed manner or meets other criteria. These provisions, and other
provisions of the Charter, may have the effect of deterring hostile takeovers or
delaying or preventing changes in control or management of the Company,
including transactions in which stockholders might otherwise receive a premium
for their shares over then current market prices. In addition, these provisions
may limit the ability of stockholders to approve transactions that they may deem
to be in their best interests. See "Risk Factors -- Anti-Takeover Provisions."

TRANSFER AGENT AND REGISTRAR

The Company has appointed LaSalle National Bank, Chicago, Illinois, as the
Transfer Agent and Registrar for the Common Stock.

46
50

SHARES ELIGIBLE FOR FUTURE SALE

Prior to this offering, there has been no public market for the Common
Stock of the Company, and no predictions can be made regarding the effect, if
any, that market sales of shares or the availability of shares for sale will
have on the market price prevailing from time to time. As described below, only
a limited number of shares will be available for sale shortly after this
offering due to certain contractual and legal restrictions on resale.
Nevertheless, sales of substantial amounts of Common Stock of the Company in the
public market after the restrictions lapse could adversely affect the prevailing
market price.

Upon completion of this offering, the Company will have outstanding
shares of Common Stock. The shares of Common Stock being
sold hereby will be freely tradable (other than by an "affiliate" of the Company
as such term is defined in the Securities Act) without restriction or
registration under the Securities Act. All remaining shares were issued and sold
by the Company in private transactions ("Restricted Shares") and are eligible
for public sale if registered under the Securities Act or sold in accordance
with Rule 144.

The Company's directors, executive officers and certain stockholders, who
collectively hold an aggregate of shares of Common Stock, have
agreed pursuant to certain agreements that they will not sell any Common Stock
owned by them without the prior written consent of PaineWebber Incorporated for
a period of 180 days from the date of this Prospectus (the "Lock-Up Period").
Following the expiration of the Lock-Up Period, approximately shares of
Common Stock, will be available for sale in the public market subject to
compliance with Rule 144. See "Underwriting."

In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this Prospectus, an affiliate of the Company, or a holder of
Restricted Shares who beneficially owns shares that were not acquired from the
Company or an affiliate of the Company within the previous one year, would be
entitled to sell within any three-month period a number of shares that does not
exceed the greater of 1% of the then outstanding shares of Common Stock
(approximately shares immediately after this offering), or the
average weekly trading volume of the Common Stock during the four calendar weeks
preceding the date on which notice of the sale is filed with the Securities and
Exchange Commission (the "Commission"). Sales under Rule 144 are subject to
certain requirements relating to manner of sale, notice and availability of
current public information about the Company. However, a person (or persons
whose shares are aggregated) who is not deemed to have been an affiliate of the
Company at any time during the 90 days immediately preceding the sale and who
beneficially owns Restricted Shares is entitled to sell such shares under Rule
144(k) without regard to the limitations described above; provided that at least
two years have elapsed since the later of the date the shares were acquired from
the Company or from an affiliate of the Company. The foregoing is a summary of
Rule 144 and is not intended to be a complete description of it.

The Company intends to file a registration statement on Form S-8 covering
the shares underlying the options available for grant under the Company's 1997
Stock Option Plan. See "Management -- Stock Option Plan."

47
51

UNDERWRITING

The Underwriters named below, acting through PaineWebber Incorporated and
Hambrecht & Quist LLC (the "Representatives"), have severally agreed, subject to
the terms and conditions set forth in the Underwriting Agreement by and among
the Company, the Selling Stockholders and the Representatives (the "Underwriting
Agreement"), to purchase from the Company and the Selling Stockholders, and the
Company and the Selling Stockholders have agreed to sell to the Underwriters
shares and shares, respectively, of the Company's Common
Stock, which in the aggregate equals the number of shares of Common Stock set
forth opposite the names of such Underwriters below:

NUMBER OF
UNDERWRITER SHARES
----------- ---------

PaineWebber Incorporated..........................................
Hambrecht & Quist LLC.............................................

Total...................................................
=========

The Underwriting Agreement provides that the obligation of the Underwriters
to purchase all of the shares of Common Stock is subject to certain conditions.
The Underwriters are committed to purchase, and the Company and the Selling
Stockholders are obligated to sell, all of the shares of Common Stock offered by
this Prospectus, if any of the shares of Common Stock being sold pursuant to the
Underwriting Agreement are purchased.

The Company and the Selling Stockholders have been advised by the
Representatives that the Underwriters propose to offer the shares of Common
Stock to the public at the public offering price set forth on the cover page of
this Prospectus, and to certain securities dealers at such price less a
concession not in excess of $ per share. The Underwriters may allow, and
such dealers may re-allow, a discount not in excess of $ per share. After
the initial public offering, the public offering price and the concessions and
discounts may be changed by the Representatives.

The Selling Stockholders have granted an option to the Underwriters,
exercisable during the 30-day period after the date of this Prospectus, to
purchase up to additional shares of Common Stock at the public
offering price less the underwriting discount and commissions set forth on the
cover page of this Prospectus. The Underwriters may exercise such option only to
cover over-allotments in the sale of the shares that the Underwriters have
agreed to purchase. To the extent that the Underwriters exercise such option,
each of the Underwriters will become obligated, subject to certain conditions,
to purchase approximately the same percentage of such additional shares as the
percentage of shares of Common Stock that each such Underwriter is obligated to
purchase pursuant to the Underwriting Agreement and as shown in the table set
forth above.

The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.

The Company, its directors and executive officers and certain stockholders
have agreed not to offer, sell, contract to sell or grant any option to purchase
or otherwise dispose of any shares of Common Stock owned by them prior to the
expiration of 180 days from the date of this Prospectus, except (i) for shares
of Common Stock offered hereby, (ii) with the prior written consent of
PaineWebber Incorporated; and (iii) in the case of the Company, for the issuance
of shares of Common Stock upon the exercise of options or the grant of options
to purchase shares of Common Stock.

Prior to the offering, there has been no established trading market for the
shares of Common Stock. The initial public offering price for the Common Stock
offered hereby has been determined by negotiation among the Company, the Selling
Stockholders and the Underwriters. Among the factors considered in making such
determination were the history of and the prospects for the industry in which
the Company competes, an

48
52

assessment of the Company's management, the past and present operations of the
Company, the historical results of operations of the Company and the trend of
its revenues and earnings, the prospects for future earnings of the Company, the
general condition of the securities markets at the time of the offering, the
prices of similar securities of generally comparable companies and other
relevant factors. There can be no assurance that an active trading market will
develop for the Common Stock or that the Common Stock will trade in the public
market subsequent to the offerings at or above the initial public offering
price.

In order to facilitate the offering of the Common Stock, the Underwriters
may engage in transactions that stabilize, maintain or otherwise affect the
price of the Common Stock. Specifically, the Underwriters may over-allot in
connection with this offering, creating a short position in the Common Stock for
their own account. In addition, to cover overallotments or to stabilize the
price of the Common Stock, the Underwriters may bid for, and purchase, shares of
the Common Stock in the open market. The Underwriters may also reclaim selling
concessions allowed to an underwriter or a dealer for distributing the Common
Stock in transactions to cover their short positions, in stabilization
transactions or otherwise. Finally, the Underwriters may bid for, and purchase,
shares of the Common Stock in market making transactions and impose penalty
bids. These activities may stabilize or maintain the market price of the Common
Stock above market levels that might otherwise prevail. The Underwriters are not
required to engage in these activities, and may end any of these activities at
any time.

LEGAL MATTERS

Certain legal matters with respect to the validity of the Common Stock
offered hereby will be passed upon for the Company by Maloney, Mehlman & Katz,
New York, New York, counsel to the Company and to CSI Partners II. Certain other
legal matters will be passed upon for the Company by Pillsbury Madison & Sutro
LLP, New York, New York, special securities counsel to the Company, and for the
Underwriters by Shearman & Sterling, San Francisco, California. Thomas J.
Maloney, Chairman of the Board of the Company, is a partner of Maloney, Mehlman
& Katz, and Mr. Maloney and another partner of that firm hold indirect
beneficial equity interests in the Company's Common Stock.

EXPERTS

The financial statements of Credentials Services International, Inc. at
September 30, 1996 and June 27, 1997 and for each of the two years in the period
ended September 27, 1996 and for the nine-month period ended June 27, 1997,
included in this Prospectus have been audited by Coopers & Lybrand L.L.P.,
independent public accountants, as stated in their report appearing herein, and
have been so included in reliance upon the report of such firm given upon its
authority as experts in accounting and auditing.

ADDITIONAL INFORMATION

The Company has filed with the Securities and Exchange Commission (the
"Commission") a Registration Statement under the Securities Act with respect to
the Common Stock offered hereby. This Prospectus does not contain all of the
information set forth in the Registration Statement and the exhibits and
schedules thereto. For further information with respect to the Company and the
Common Stock offered hereby, reference is hereby made to such Registration
Statement, exhibits and schedules. Statements contained in this Prospectus
regarding the contents of any contract or other document are not necessarily
complete; with respect to each such contract or document filed as an exhibit to
the Registration Statement, reference is made to the exhibit for a more complete
description of the matter involved, and each such statement shall be deemed
qualified in its entirety by such reference. A copy of the Registration
Statement, including the exhibits and schedules thereto, may be inspected
without charge at the principal office of the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, and copies of such material may be obtained from
such office upon payment of the fees prescribed by the Commission.

In addition, the Commission maintains a World Wide Web site on the Internet
at http://www.sec.gov that contains reports, proxy and information statements
and other information regarding registrants that file electronically with the
Commission.

49
53

CREDENTIALS SERVICES INTERNATIONAL, INC.

INDEX TO THE FINANCIAL STATEMENTS

Report of Independent Accountants...................................................... F-2
Balance Sheets as of September 27, 1996 and June 27, 1997.............................. F-3
Statements of Operations for the fiscal years ended September 30, 1995 and September
27, 1996, and the nine-month periods ended June 28, 1996 (unaudited) and June 27,
1997................................................................................. F-4
Statements of Stockholders' Equity for the fiscal years ended September 30, 1995 and
September 27, 1996, and the nine-month period ended June 27, 1997.................... F-5
Statements of Cash Flows for the fiscal years ended September 30, 1995 and September
27, 1996 and the nine-month periods ended June 28, 1996 (unaudited) and June 27,
1997................................................................................. F-6
Notes to Financial Statements.......................................................... F-7

F-1
54

REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors
of Credentials Services International, Inc.

We have audited the accompanying balance sheets of Credentials Services
International, Inc. (the "Company") as of September 27, 1996 and June 27, 1997,
and the related statements of operations, accumulated deficit, and cash flows
for the years ended September 30, 1995 and September 27, 1996 and the nine-month
period ended June 27, 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 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 these 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 Credentials Services
International, Inc. as of September 27, 1996 and June 27, 1997, and the results
of its operations and its cash flows for the years ended September 30, 1995 and
September 27, 1996 and the nine-month period ended June 27, 1997 in conformity
with generally accepted accounting principles.

/s/ COOPERS & LYBRAND L.L.P.
----------------------------------

Los Angeles, California
October 3, 1997

F-2
55

CREDENTIALS SERVICES INTERNATIONAL, INC.

BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

ASSETS

SEPTEMBER 27, JUNE 27,
1996 1997
------------- -------------

Current assets
Cash and cash equivalents........................................... $ 1,613 $ 299
Accounts receivable, net of allowance for uncollectible accounts of
$147 (1996) and $559 (1997)...................................... 707 2,950
Current portion of deferred member solicitation costs and related
commissions...................................................... 5,826 10,520
Prepaid member solicitation costs................................... 766 2,333
Other............................................................... 184 162
------- --------
Total current assets........................................ 9,096 16,264
------- --------
Deferred member solicitation costs and related commissions, net of
current portion..................................................... 2,825
Property and equipment, net of accumulated depreciation of $381 (1996)
and $798 (1997)..................................................... 3,265 4,922
Purchased memberships, net of accumulated amortization of $4,265
(1996) and $5,864 (1997)............................................ 7,581 5,982
Goodwill, net of accumulated amortization of $1,063 (1996) and $1,462
(1997).............................................................. 6,909 6,511
Deferred financing costs, net of accumulated amortization of $467
(1996) and $689 (1997).............................................. 701 1,192
------- --------
Total assets................................................ $27,552 $ 37,696
======= ========
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities
Accounts payable.................................................... $ 5,671 $ 4,775
Accrued expenses.................................................... 1,692 3,390
Current portion of note payable to bank............................. 2,200 4,447
Current portion of deferred revenue................................. 21,074 22,202
Allowance for cancellations......................................... 1,216 1,565
Current portion of capital lease obligations........................ 222 306
Other current liabilities........................................... 387 --
------- --------
Total current liabilities................................... 32,462 36,685
------- --------
Deferred revenue, net of current portion.............................. 9,205 8,940
Capital lease obligations, net of current portion..................... 265 338
Note payable to bank, net of current portion.......................... 6,850 5,600
Subordinated notes payable............................................ 3,000 5,815
------- --------
Total liabilities........................................... 51,782 57,378
======= ========
Stockholders' deficit
Series A Cumulative Preferred Stock, par value $0.10 per share;
2,000 shares authorized; no shares issued or outstanding......... -- --
Common stock, par value $.01 per share; 1,000 (1996), 50,000 (1997)
shares authorized; 100 (1996), 40,000 (1997) shares issued and
outstanding...................................................... 1 1
Common stock purchase warrant....................................... -- 200
Additional paid-in capital.......................................... 3,999 6,999
Accumulated deficit................................................. (28,230) (26,882)
------- --------
Total stockholders' deficit................................. (24,230) (19,682)
------- --------
Total liabilities and stockholders' deficit................. $27,552 $ 37,696
======= ========

The accompanying notes are an integral part of these financial statements.

F-3
56

CREDENTIALS SERVICES INTERNATIONAL, INC.

STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

FOR THE NINE-MONTH
PERIODS ENDED
FOR THE YEARS ENDED ---------------------------
------------------------------- JUNE 28,
SEPTEMBER 30, SEPTEMBER 27, 1996 JUNE 27,
1995 1996 (UNAUDITED) 1997
------------- ------------- ----------- -----------

REVENUES
Membership fees........................... $ 12,540 $ 24,556 $ 17,091 $28,208
OPERATING EXPENSES
Marketing................................. 4,854 22,605 15,899 10,254
Membership servicing...................... 4,128 12,999 8,768 8,419
General and administrative................ 8,102 9,581 6,916 6,983
------- -------- -------- -------
Total operating expenses.......... 17,084 45,185 31,583 25,656
Operating income (loss)..................... (4,544) (20,629) (14,492) 2,552
Interest expense.......................... 1,239 1,818 893 1,052
------- -------- -------- -------
Income (loss) before provision for income
taxes and extraordinary item.............. (5,783) (22,447) (15,385) 1,500
Provision for income taxes.................. -- -- -- 61
------- -------- -------- -------
Income (loss) before extraordinary item..... (5,783) (22,447) (15,385) 1,439
Extraordinary item: Loss on early
extinguishment of debt, net of income tax
benefit of $61............................ -- -- -- 91
------- -------- -------- -------
Net income (loss)........................... $ (5,783) $ (22,447) $ (15,385) $ 1,348
======= ======== ======== =======
Net income (loss) per common and common
equivalent share.......................... $ (128.96) $ (500.57) $ (343.09) $ 30.06
======= ======== ======== =======
Weighted average common and common
equivalent shares......................... 44,843 44,843 44,843 44,843
======= ======== ======== =======

The accompanying notes are an integral part of these financial statements.

F-4
57

CREDENTIALS SERVICES INTERNATIONAL, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)

SERIES A COMMON
COMMON STOCK PREFERRED STOCK STOCK ADDITIONAL
--------------- --------------- PURCHASE PAID-IN ACCUMULATED
SHARES AMOUNT SHARES AMOUNT WARRANTS CAPITAL DEFICIT TOTAL
------- ------ ------ ------ -------- ---------- ----------- --------

For the years ended September 30, 1995
and September 27, 1996:
- -----------------------------------------
Issuance of common stock............... 100 $ 4,000 $ 4,000
Net loss............................... $ (5,783) (5,783)
------ ---------- ----------
Balances at September 30, 1995......... 100 4,000 (5,783) (1,783)
Net loss............................... (22,447) (22,447)
---------- ----------
Balances at September 27, 1996......... 100 4,000 (28,230) (24,230)
------ --------- ---------- ----------
For the nine-month period ended
June 27, 1997:
- -----------------------------------------
Issuance of preferred stock and common
stock purchase warrant............... 3,000 $ 1 $ 1 2,998 3,000
Exercise of common stock purchase
warrant.............................. 9,900 (1) 1
Issuance of common stock in exchange
for preferred stock.................. 30,000 $1 (3,000) (1)
Issuance of common stock purchase
warrant in connection with
subordinated note payable............ 200 200
Net income............................. 1,348 1,348
------ --- ------- ---- - ----- --------- ---------- ----------
Balances -- June 27, 1997................ 40,000 $1 -- -- $ 200 $ 6,999 $ (26,882) $(19,682)
====== === ======= ===== ===== ========= ========== ==========

The accompanying notes are an integral part of these financial statements.

F-5
58

CREDENTIALS SERVICES INTERNATIONAL, INC.

STATEMENTS OF CASH FLOWS
(IN THOUSANDS)

FOR THE YEAR ENDED FOR THE NINE-MONTH
------------------------------- PERIODS ENDED
SEPTEMBER 30, SEPTEMBER 27, -------------------------------
1995 1996 JUNE 28, 1996 JUNE 27, 1997
------------- ------------- ------------- -------------
(UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)................................. $ (5,783) $ (22,447) $ (15,385) $ 1,348
Adjustments to reconcile net income (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................... 3,095 3,062 2,247 2,857
Deferred member solicitation costs and related
commissions paid.............................. (10,181) (22,889) (16,025) (18,097)
Deferred member solicitation costs and related
commissions charged to expense................ 5,474 21,770 15,350 10,578
Extraordinary item: Loss on early extinguishment
of debt....................................... -- -- -- 91
Decrease (increase) in accounts receivable...... 57 (431) (102) (2,243)
Increase in prepaid member solicitation costs... -- (766) (1,396) (1,567)
(Increase) decrease in other current assets..... (169) (15) (512) 22
Increase (decrease) in accounts payable......... 652 4,277 3,046 (896)
Increase (decrease) in accrued expenses......... 2,078 (386) (751) 1,698
Increase in deferred revenue.................... 17,840 12,439 8,761 863
Decrease in membership servicing liability...... (4,173) -- -- --
Increase (decrease) in allowance for
cancellations................................. 627 589 1,221 349
Increase (decrease) in other current
liabilities................................... -- 387 (387)
-------- -------- -------- --------
Net cash provided by (used in) operating
activities...................................... 9,517 (4,410) (3,546) (5,384)
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of equipment........................... (837) (1,430) (1,013) (1,713)
Purchase of assets from TRW..................... (12,822) -- -- --
-------- -------- -------- --------
Net cash used in investing activities............. (13,659) (1,430) (1,013) (1,713)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from notes payable to bank............. 11,000 1,350 -- 12,379
Capital lease payments.......................... (69) (217) (185) (205)
Proceeds from sale of common stock.............. 4,000 -- -- --
Proceeds from junior subordinated note
payable....................................... -- -- -- 2,800
Proceeds from common stock purchase warrant..... -- -- -- 200
Proceeds from sale of preferred stock........... -- -- -- 3,000
Repayment of note payable -- bank............... (1,650) (1,650) (1,100) (11,382)
Financing costs paid............................ (1,169) (1,009)
-------- -------- -------- --------
Net cash provided by (used in) financing
activities...................................... 12,112 (517) (1,285) 5,783
-------- -------- -------- --------
Net increase (decrease) in cash................... 7,970 (6,357) (5,844) (1,314)
Cash and cash equivalents at beginning of
period.......................................... -- 7,970 7,970 1,613
-------- -------- -------- --------
Cash and cash equivalents at end of period........ $ 7,970 $ 1,613 $ 2,126 $ 299
======== ======== ======== ========
SUPPLEMENTAL DISCLOSURES
Cash paid for interest............................ $ 1,166 $ 1,026 $ 710 $ 673
Leased asset additions and related obligations.... $ 656 $ 117 $ 117 $ 361
Subordinated note payable to TRW.................. $ 3,000
Preferred stock exchanged for common stock........ -- -- -- $ 3,000

The accompanying notes are an integral part of these financial statements.

F-6
59

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS

1. ORGANIZATION

Credentials Services International, Inc. (the "Company"), is a Delaware
corporation which provides credit report monitoring services to consumers. The
services include provision of Experian credit reports to members, prompt
notification of inquiries made into a member's Experian credit record, a
quarterly newsletter about significant credit related issues, and various other
notifications to members principally related to activity within their Experian
credit record. The Company sells primarily one- and three-year memberships to
the Credentials(R) Monitoring Service which automatically renew unless canceled
by the subscriber. New members are generally provided with one month of free
service as a trial period. The Company markets its membership programs to
consumers using direct marketing techniques, primarily by direct mail and
telemarketing campaigns conducted through endorsed co-marketing relationships
with credit card issuers and other businesses that have a large customer base,
such as banks, retailers and oil companies. The Company's headquarters are
located in Orange, California and it maintains a customer service facility in
Plano, Texas.

Prior to November 1996, the Company was wholly-owned by CIS Acquisition
Partners, L.P., a Delaware limited partnership. As discussed more fully in Note
11, through a series of equity transactions in November 1996 through March 1997,
CSI Investment Partners II, L.P., a Delaware limited partnership ("CSI Partners
II"), acquired ownership of approximately 99.75% of the Company and became the
Company's parent. CIS Acquisition Partners, L.P. and CSI Partners II are related
partnerships whose principal limited partner is Lincolnshire Equity Fund, L.P.

2. MANAGEMENT'S PLAN

The Company incurred substantial net losses for the years ended September
30, 1995 and September 27, 1996. In addition, as of June 27, 1996, the Company
had a significant stockholders' deficit and a large working capital deficit.
Management believes that the prior year losses were primarily attributable to
the startup of the Company's operations (1995) and failed marketing programs
(1996). In 1996, the losses caused a severe liquidity shortfall thereby
affecting the Company's ability to undertake new programs and enter into new co-
marketer relationships. In August 1996, the Company's Board of Directors
appointed a new management team.

In November 1996 and January 1997, the Company received equity infusions
aggregating $3,000,000 and, in January 1997, the bank loan was refinanced to
provide additional liquidity to the Company. The Company also received a
$3,000,000 subordinated term loan in March of 1997.

The Company's marketing strategy since September 27, 1996, has been to
rebuild the Company's core distribution channel i.e. marketing through financial
institutions followed by expansion to other card issuing organizations (such as
oil companies and retailers) and then to other membership type organizations.
Management believes that this strategy will enable the Company to build a larger
membership base that should yield consistent and high margin renewal income.

Management believes that its existing cash balances, funds generated from
operations and borrowing available under the Company's bank revolving line of
credit are sufficient to provide for the Company's future cash needs.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Fiscal Year -- The Company has a 52-week fiscal year, which ends on the
last Friday of September.

Basis of Presentation and Use of Estimates -- The accompanying financial
statements have been prepared in accordance with generally accepted accounting
principles. The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.

F-7
60

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Reclassifications -- Certain reclassifications have been made in prior
period financial statements to conform to the current presentation.

Cash and Cash Equivalents -- Cash and cash equivalents include
cash-on-hand, demand deposits and short term investments with original
maturities of three months or less.

Revenue Recognition -- Initial and renewal membership fees are generally
billed to members credit cards. An allowance for cancellation is established
based on the Company's historical cancellation experience. Deferred membership
fees are recorded, net of estimated cancellations, when the free one-month trial
period has elapsed and are amortized as membership fees on a straight-line basis
over the membership period, generally 12 to 36 months. During an initial
membership period, a member may cancel his or her membership generally for a
complete refund of the membership fee. At September 27, 1996 and June 27, 1997,
the Company had memberships in the amount of $2,142,000 and $7,351,000,
respectively (before consideration of cancellations and refunds which have
generally ranged from 45% to 60%), which were in their 30-day trial period and
for which revenue had not been recognized as of the respective period end.

Commission Expense -- The Company has co-marketing agreements with credit
card issuers and pays commissions under the terms of these agreements based
principally on a percentage of billings. Such commissions are deferred,
consistent with the associated revenue, and amortized to expense ratably over
the subscription period of the membership.

Deferred Member Solicitation Costs -- Member solicitation costs relate
primarily to the acquisition of new members through direct response type
marketing promotions and include payments for postage, printing, the purchase of
contact lists, telemarketing, and other direct costs incurred to acquire or
retain members. These costs are deferred and amortized to expense on a
straight-line basis over the term of the initial membership period.

Prepaid member solicitation costs include new member acquisition costs
pertaining to solicitation promotions that were in process at the end of the
fiscal year. Accordingly, no membership fees have been received or recognized.
These costs are generally accumulated over a three- to four-month promotional
period and begin to amortize when related revenues are recognized.

The Company periodically compares deferred member solicitation costs to
related membership fees (net of related estimated direct membership servicing
costs for the membership period) generated by each marketing effort and, when
necessary, records an adjustment to recognize any impairment.

Property and Equipment -- Property and equipment are stated at cost less
accumulated depreciation. Depreciation and amortization is provided using the
straight-line method over the estimated useful lives of the related assets,
which vary from four to ten years. Expenditures for major renewals and
betterment are capitalized, while minor replacements, maintenance and repairs
which do not extend the asset lives are expensed as incurred. When assets are
sold or otherwise disposed of, the cost and related accumulated depreciation or
amortization is removed from the respective accounts, and any resulting gain or
loss is recognized.

The Company capitalizes various costs of computer software developed and
obtained for internal use including external direct costs of materials and
services and certain direct, payroll and related costs.

Purchased Memberships -- Purchased memberships represents the cost of the
purchased membership base at October 1, 1994, the date the business was
purchased by the Company from TRW, Inc.. The amount was determined based upon
the discounted estimated future net cash flows to be generated from the
purchased memberships assuming renewal rates based upon historical experience.
Purchased memberships are amortized on a straight-line basis over a period of
five years. Periodically, the Company compares actual member

F-8
61

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

renewal rates to the estimated renewal rates used in establishing the initial
cost of the purchased membership base to determine if any provision for
impairment is necessary.

Goodwill -- Goodwill represents the difference between the purchase price
of the assets acquired from TRW, Inc. and the value of the net assets acquired.
Such goodwill is being amortized on a straight-line basis over 15 years.
Periodically, the Company evaluates the actual and projected future undiscounted
cash flows of the Company to determine if any provision for impairment is
necessary.

Deferred Financing Costs -- Costs associated with obtaining long-term debt
financing have been capitalized and are amortized over the repayment term of the
related debt using a method that approximates the effective interest method.

Income Taxes -- The Company uses the liability method of accounting for
income taxes, which requires the recognition of deferred tax liabilities and
assets for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
income taxes are recognized for the tax consequences in future years of
differences between the tax bases of assets and liabilities and their financial
reporting amounts at each year-end based on enacted tax laws and statutory tax
rates applicable to the periods in which the differences are expected to affect
taxable income. Valuation allowances are established, when necessary, to reduce
deferred tax assets to the amount expected to be realized. The provision for
income taxes represents the tax payable for the period and the change during the
year in deferred tax assets and liabilities.

Net Income (loss) Per Common Share -- Net income (loss) per share has been
computed in accordance with Securities and Exchange Commission Staff Accounting
Bulletin (SAB) No. 83. The SAB requires that common shares issued by the Company
in the twelve months immediately preceding a proposed public offering plus the
number of common equivalent shares which became issuable during the same period
pursuant to the grant of warrants and stock options (using the treasury stock
method) at prices substantially less than the initial public offering price be
included in the calculation of common stock and common stock equivalent shares
as if they were outstanding for all periods presented.

Recently Issued Accounting Pronouncements -- In February 1997, the
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards No. 128, "Earnings Per Share" ("FAS 128"). FAS 128 will change the
computation, presentation and disclosure requirements for earnings per share.
FAS 128 requires presentation of "basic" and "diluted" earnings per share, as
defined, on the face of the income statement for all entities with complex
capital structures. FAS 128 is effective for financial statements issued for
periods ending after December 15, 1997 and requires restatement of all prior
period earnings per share accounts. Management does not believe that this
restatement will have a material impact on its earnings per share statements
when adopted in fiscal 1998.

In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards Nos. 130, "Comprehensive Income" ("FAS 130") and
131, "Disclosures About Segments of an Enterprise and Related Information" ("FAS
131"). FAS 130 establishes standards for reporting and display of comprehensive
income and its components in a full set of general purpose financial statements.
FAS 131 establishes standards for the way that public business enterprises
report information about operating segments in annual financial statements and
requires that those enterprises report selected information about operating
segments in interim financial reports issued to shareholders. It also
establishes standards for related disclosures about products and services,
geographic areas, and major customers.

F-9
62

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

4. ACCOUNTS RECEIVABLE

The Company's accounts receivable represent in process credit card billings
for new members that were submitted upon the expiration of the free trial
period, in process credit card billings for renewal members, and amounts owed to
the company by certain co-marketers who billed and collected membership fees on
behalf of the Company.

5. PROPERTY AND EQUIPMENT

The Company's property and equipment as of September 27, 1996 and June 27,
1997 was as follows (in thousands):

SEPTEMBER 27, JUNE 27,
1996 1997
------------- -------------

Office furniture................................ $ 63 $ 191
Office equipment................................ 458 447
Computer equipment.............................. 1,454 1,840
Leasehold improvements.......................... 156 220
Capitalized software............................ 1,515 3,022
------ ------
Total................................. 3,646 5,720
Less, accumulated depreciation.................. (381) (798)
------ ------
Net property and equipment...................... $ 3,265 $ 4,922
====== ======

The Company's depreciation expense for the periods ended September 30,
1995, September 27, 1996 and June 27, 1997, was $217,000, $164,000 and $417,000,
respectively.

6. NOTES PAYABLE

Principal balances of notes payable at September 27, 1996 and June 27, 1997
consist of the following (in thousands):

SEPTEMBER 27, JUNE 27,
1996 1997
------------- -------------

Term note payable to bank....................... $ 9,050 $ 7,950
Revolving line of credit........................ -- 2,097
------- -------
9,050 10,047
Less: Current maturities........................ (2,200) (4,447)
------- -------
$ 6,850 $ 5,600
======= =======

The principal balance on the note payable to bank at September 27, 1996 was
$9,050,000. The loan agreement required that the Company make quarterly interest
payments at a variable interest rate based, at the Company's option, on Prime,
the Federal Funds rate, or LIBOR. The interest rate in effect at September 27,
1996 was approximately 9.75%.

Substantially all of the Company's assets and a pledge of all of the
Company's outstanding common stock collateralized the note. The note payable
agreement contained various restrictive covenants, including provisions for
minimum debt service, cash flow, and deferred revenue to deferred costs ratios.
Additionally, such provisions prohibited the incurrence of additional
indebtedness without lender approval.

In January 1997, the note payable to bank was re-financed with another bank
which provided an $11,000,000 line of credit consisting of an $8,500,000 Term
Note and a $2,500,000 maximum amount revolving line of credit. Principal on the
Term Note is payable in eleven quarterly installments commencing March 31, 1997.
Interest is payable monthly at a variable rate based, at the Company's option,
on Prime, the Federal Funds rate or LIBOR. The interest rate in effect at June
27, 1997 was approximately 8.43%. Substantially all of the Company's assets and
a pledge of all outstanding common stock collateralize the note.

F-10
63

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

6. NOTES PAYABLE (CONTINUED)

The note payable agreement contains various restrictive covenants, including
provisions for minimum EBITDA requirements, the maintenance of minimum
subscriber levels, and debt to cash flow coverage ratios. Additionally, such
provisions prohibit the incurrence of additional indebtedness without lender
approval and restrict the Company's ability to pay dividends.

Borrowings on the Company's revolving line of credit are formula-based. The
formula is based upon the level of eligible accounts receivable, as defined in
the credit agreement, with a maximum borrowing limit of $2,500,000. The balance
borrowed on the revolving line of credit is due on September 30, 1999. Interest
is payable monthly at a variable rate based, at the Company's option, on Prime,
the Federal Funds rate or LIBOR. The interest rate in effect at June 27, 1997
was approximately 9.50%. The revolving line of credit is collateralized by
current assets, therefore the Company classifies the obligation due under the
line as a current liability.

Future minimum principal payments due on notes payable as of June 27, 1997
are as follows (in thousands):

YEARS TO END JUNE
-----------------

1998............................................. $ 4,447
1999............................................. 2,975
2000............................................. 2,625
-------
$10,047
=======

In January 1997, the Company refinanced its prior note payable to a bank
and wrote-off the remaining unamortized debt issuance costs related to that note
payable ($91,054, net of related income tax benefit of $60,702) as an
extraordinary item in the accompanying statement of operations.

7. SUBORDINATED NOTES PAYABLE

Subordinated notes payable at September 27, 1996 and June 27, 1997 consist
of the following (in thousands):

SEPTEMBER 27, JUNE 27,
1996 1997
------------- --------

Subordinated note payable to TRW, Inc................... $ 3,000 $3,000
Junior subordinated note payable to Canterbury, net of
unamortized discount of $185,000...................... -- 2,815
------ ------
$ 3,000 $5,815
====== ======

In conjunction with the acquisition of "TRW Credentials", the Company
entered into a subordinated debt agreement with TRW, Inc. The principal amount
of the note is $3,000,000 due in full on December 31, 1999, with interest, based
on LIBOR, payable quarterly. As of September 27, 1996 and June 27, 1997, the
interest rates that were in effect were 9.0625% and 9.31%, respectively. The
agreement includes a mandatory prepayment based on a percentage of excess cash
as defined in the agreement.

In March 1997, Canterbury Mezzanine Capital L.P. ("Canterbury") loaned to
the Company $3,000,000 represented by a junior subordinated note payable.
Principal on the note is payable in two equal installments on March 10, 2001 and
March 10, 2002. Interest is payable semi-annually in arrears at a fixed rate per
annum equal to 12% per annum. The note payable agreement contains several
restrictive covenants, including provisions for minimum debt to cash flow
coverage ratios, limitations on number of mailings and telemarketing activity
and restrictions on the incurrence of additional indebtedness, subject to the
terms of the loan agreement.

F-11
64

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

7. SUBORDINATED NOTES PAYABLE (CONTINUED)

In accordance with the provisions of the note payable to Canterbury, the
Company granted a warrant to Canterbury to purchase 4,843.05 shares of the
Company's Common Stock. The warrant is exercisable at a price of $.10 per share
and has a term of ten years expiring in March 2007. The number of shares and
exercise price per share subject to the warrant are subject to anti-dilution
provisions.

The Company allocated a portion of the proceeds received from the
Canterbury subordinated note payable to the warrant and recorded the amount
($200,000) as a discount on the Canterbury note payable. The discount is being
amortized on a straight line basis (which approximates the effective interest
method) over the term of the Canterbury note payable. The amount allocated to
the warrant was based on management's estimate of the relative fair values of
the warrants and the subordinated note payable (exclusive of the warrant
feature) at the date of issuance.

Future minimum principal payments due on subordinated notes payable as of
June 27, 1997 are as follows (in thousands):

YEARS TO END JUNE
-----------------

1998.............................................. --
1999.............................................. --
2000.............................................. $ 3,000
2001.............................................. 1,500
2002.............................................. 1,500
------
$ 6,000
======

8. COMMITMENTS AND CONTINGENCIES

Operating Leases -- The Company leases office space in Plano, Texas for its
customer service facility. The lease agreement requires monthly rent payments of
$16,000 that expire on September 2001. The Company also leases office facilities
in Orange, California, which house its corporate offices. The leases require
monthly payments of $2,927 and $23,334, respectively, which expire in July 14,
1997 and December 31, 1998, respectively. Rent expenses plus taxes, insurance,
maintenance and utilities for these leases was $381,000, $516,000 and $380,000
for the periods ended September 30, 1995, September 27, 1996 and June 27, 1997,
respectively. The Company also leases equipment under operating leases expiring
through 2001. Rent expenses, including taxes, repair and maintenance cost
associated with these leases for the years ended September 30, 1995 and
September 27, 1996 and June 27, 1997, was approximately $73,000, $85,000 and
$135,000, respectively. Future minimum rent and lease payments for each of the
five succeeding years are as follows (in thousands):

YEARS TO END JUNE
-----------------

1998.............................................. $ 582
1999.............................................. 353
2000.............................................. 263
2001.............................................. 263
2002.............................................. 108

F-12
65

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

8. COMMITMENTS AND CONTINGENCIES (CONTINUED)

The Company leases computer equipment under several agreements that expire
in June and November 1998. Future minimum lease payments (net of interest) under
the Company's capitalized leases on computer equipment are as follows (in
thousands):

YEARS TO END JUNE
-----------------

1998........................................................ $341
1999........................................................ 287
2000........................................................ 81
2001........................................................ 0
2002........................................................ 0
----
Total minimum payments........................................ 709
Less amount representing interest............................. (65)
----
$644
Less Current Portion.......................................... (306)
----
$338
====

Concentration of Credit Risk -- The Company maintains its cash accounts in
commercial banks. At September 27, 1996 and June 27, 1997, cash on deposit
exceeded the federally insured limit of $100,000 by $910,000 and $125,000,
respectively.

Litigation -- Various legal proceedings have arisen in the course of the
Company's business. While it is not possible to predict the outcome of any
litigation, management believes, based in part on advice from outside legal
counsel, that the resolution of these matters will not have a material adverse
effect on the Company's financial position or results of operations.

9. 401K RETIREMENT PLAN

The Company has a 401K salary reduction plan for the benefit of its
employees. Employees are eligible to participate after 30 days of employment.
The Company will make a matching contribution equal to 50% on the first 6% that
the employee contributes to the plan. The employer's matching portions for the
years ended September 30, 1995, September 30, 1996 and June 27, 1997 were
$35,000, $88,000 and $53,000, respectively.

10. RELATED PARTY TRANSACTIONS

In October 1994, the Company entered into a consulting agreement with
Lincolnshire Management, Inc. ("LMI"), an affiliate of CSI Partners II and CIS
Acquisition Partners, L.P. Pursuant to the agreement, LMI renders management and
financial consulting services to the Company. During fiscal year 1996, these
services included assisting the Company in refinancing and reorganizing its
operations. For the services provided, the Company paid LMI annual management
and consulting fees and expenses of $259,000 in fiscal year 1995, $368,000 in
fiscal year 1996 and $312,000 in the nine-month period ended June 27, 1997.

During the year ended September 30, 1995, Lincolnshire Management, Inc.,
was paid $1,250,000 for professional services relating primarily to the
negotiations of the acquisition from TRW, Inc., the negotiation of bank debt
agreements and the negotiation of the Subordinated Debt Agreement.

The Warrant Agreement, as discussed in Note 7, contains a provision such
that if, prior to a period of time specified in the Warrant Agreement, the note
payable and all other amounts due under the note payable agreement have been
repaid in full, and Canterbury has received in excess of $3,000,000 in cash by
reason of

F-13
66

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

10. RELATED PARTY TRANSACTIONS (CONTINUED)
the sale or any other disposition of all or any portion of the Warrant and
Warrant shares, Canterbury is required to pay to Lincolnshire Management, Inc.,
an affiliate of CSI Partners II, an amount equal to 25% of the amount it
receives in excess of $3,000,000.

In March 1997, Lincolnshire Management, Inc., was paid $300,000 for
professional services relating primarily to the negotiations of the bank debt
agreements.

11. INCOME TAXES

The provision for income taxes for the periods ended September 30, 1995,
September 27, 1996 and June 27, 1997 consists of:

SEPTEMBER 30, SEPTEMBER 27, JUNE 27,
1995 1996 1997
------------- ------------- --------

Current:
Federal................................... $ 0 $ 0 $ 44
State..................................... 0 0 17
--- --- ---
$ 0 $ 0 $ 61
Deferred:
Federal................................... $ 0 $ 0 $ 0
State..................................... 0 0 0
--- --- ---
$ 0 $ 0 $ 0
--- --- ---
Provision for income taxes................ $ 0 $ 0 $ 61
=== === ===

The provision (benefit) for income taxes differs from the amount that would
result from applying the Federal statutory rate as follows:

SEPTEMBER 30, SEPTEMBER 27, JUNE 27,
1995 1996 1997
------------- ------------- --------

Tax provision (benefit) at the statutory
rate.................................. (34.00%) (34.00%) 34.00%
Change in valuation allowance........... 33.98 34.00 (30.78)
Other................................... 0.02 0.00 1.10
------- ------- -------
0.00% 0.00% 4.32%
======= ======= =======

The components of the deferred tax asset and (liability) as of September
27, 1996 and June 27, 1997 are as follows (in thousands):

SEPTEMBER 27, JUNE 27,
1996 1997
------------- -------------

Allowance for doubtful accounts........... $ 64 $ 242
Property and equipment.................... (307) (231)
Purchased membership amortization......... 1,163 1,513
Capitalized marketing costs and
commissions............................. (2,505) (2,484)
Deferred revenue.......................... 3,942 5,328
Other..................................... 84 85
Goodwill.................................. (918) (1,503)
Net operating losses...................... 10,311 8,188
-------- --------
11,834 11,138
Valuation allowance....................... (11,834) (11,138)
-------- --------
Net deferred income taxes................. $ 0 $ 0
======== ========

F-14
67

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

11. INCOME TAXES (CONTINUED)
The Company has established a valuation allowance against its deferred tax
assets due to the uncertainty surrounding the realization of such assets.
Management periodically evaluates the recoverability of the deferred tax assets.
At such time as it is determined that it is more likely than not that deferred
tax assets are realizable, the valuation allowance will be reduced.

As of June 27, 1997, the Company had net operating loss carryforwards for
Federal and state purposes of approximately $19,366,000 and $17,241,694,
respectively. The net operating loss carryforwards begin expiring after the
years ending 2011 and 2004, respectively. In the event of a "Change in
Ownership" the utilization against future taxable income of the loss
carryforwards will be subject to an annual limitation pursuant to the provisions
of the Tax Reform Act of 1988.

12. STOCKHOLDERS' DEFICIT

In 1996, the Company amended its Certificate of Incorporation to increase
the total number of shares of capital stock which the Company has authority to
issue to 55,000 shares, consisting of (i) 50,000 shares of Common Stock, par
value $.01 per share (the "Common Stock"); and (ii) 5,000 shares of Series A
Cumulative Preferred Stock, par value $.01 per share (the "Series A Stock"). (As
discussed below, in March 1997, the Company retired 3,000 shares of Series A
Stock thereby reducing the number of such shares authorized to 2,000.)

Preferred Stock

Each share of Series A Stock entitles its holder to receive, when and as
declared by the Board of Directors, preferential dividends which accrue
cumulatively at a compound rate of 12% per annum from the date of issuance of
each share of Series A Stock. Dividends payable with respect to each share of
Series A Stock shall be payable in cash or in shares of Series A Stock of the
Company at the issue value, at the option of the Company. In the event of
liquidation, the holders of shares of Series A Stock shall be entitled to an
amount equal to the sum of $1,000 per share of Series A Stock. The Series A
Stock is redeemable at the option of the Company at a price equal to or above
the Series A Redemption Price as outlined in the Company's Certificate of
Incorporation.

In November 1996, the Company issued 2,000 shares of Series A Stock and a
warrant for 9,900 shares of Common Stock in exchange for a $2,000,000
contribution by CSI Partners II to the capital of the Company. In January 1997,
the Company issued an additional 1,000 shares of Series A Stock in exchange for
an additional contribution of $1,000,000 to the capital of the Company by CSI
Partners II. In March 1997, CSI Partners II exchanged the 3,000 shares of Series
A Stock for 30,000 shares of Common Stock and exercised its warrant for 9,900
shares of Common Stock. Subsequent to the exchange, the 3,000 shares of Series A
Stock were retired.

Common Stock

At June 27, 1997, the Company had reserved 4,843.05 shares of its Common
Stock for issuance upon the exercise of the common stock purchase warrant issued
to Canterbury in connection with the junior subordinated note payable as
discussed in Note 7. On September 26, 1997, the warrant was exercised and the
related 4,843.05 shares of Common Stock were issued.

Management Equity

F-15
68

CREDENTIALS SERVICES INTERNATIONAL, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

12. STOCKHOLDERS' DEFICIT (CONTINUED)
held by that partnership. The interests held by those eleven officers and key
employees aggregate a 10% interest in CSI Partners II. The foregoing interests
were granted pursuant to agreements reached with each such officer in October
1996. Under the terms of the CSI II Partnership Agreement, the interests of each
of the eleven individuals vests in accordance with a schedule which provides
that one-third of such interest vests in April 1998, an additional one-third
vests in April 1999, and the remaining one-third vests in April 2000, contingent
upon such individual's continued employment with the Company. Upon vesting of an
individual's interest, the Company Common Stock underlying that interest will be
distributed to such individual. Based on the capital structure of the Company at
June 27, 1997, assuming full vesting of all such restricted shares for all of
the eleven individuals, the number of restricted shares that would be
distributed would be 3,990 shares. The CSI II Partnership Agreement requires
that the eleven individuals make a capital contribution to the partnership in
the aggregate amount of $660,000 in the year 2000.

F-16
69

============================================================

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION AND
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. NEITHER THE DELIVERY OF
THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES,
CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE
COMPANY SINCE THE DATE HEREOF OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS
OF ANY TIME SUBSEQUENT TO ITS DATE. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH IT RELATES. THIS PROSPECTUS DOES NOT CONSTITUTE
AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY SUCH SECURITIES IN ANY
CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.

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

TABLE OF CONTENTS
PAGE
----

Prospectus Summary......................... 1
Risk Factors............................... 5
Use of Proceeds............................ 13
Dividend Policy............................ 13
Capitalization............................. 14
Dilution................................... 15
Selected Financial Data.................... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations............................... 19
Business................................... 25
Management................................. 36
Certain Transactions....................... 42
Principal and Selling Stockholders......... 44
Description of Capital Stock............... 45
Shares Eligible for Future Sale............ 47
Underwriting............................... 48
Legal Matters.............................. 49
Experts.................................... 49
Additional Information..................... 49
Index to Financial Statements.............. F-1

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

UNTIL , 199 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATIONS OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.

============================================================

CREDENTIALS SERVICES
INTERNATIONAL, INC.

COMMON STOCK

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

PROSPECTUS

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

PAINEWEBBER INCORPORATED

HAMBRECHT & QUIST

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

, 1997

============================================================
70

PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION

The following table sets forth the various expenses expected to be incurred
by the Registrant and the Selling Stockholders in connection with the sale and
distribution of the securities being registered hereby, other than underwriting
discounts and commissions. All amounts are estimated except the Securities and
Exchange Commission registration fee and the Nasdaq National Market filing fee.

PAYABLE BY
REGISTRANT
----------

SEC registration fee.............................................. $ 12,121
Nasdaq National Market filing fee.................................
Blue Sky fees and expenses........................................
Accounting fees and expenses......................................
Legal fees and expenses...........................................
Printing and engraving expenses...................................
Registrar and Transfer Agent's fees...............................
Miscellaneous fees and expenses...................................
------
Total................................................... $
======

ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS

Section 145 of the Delaware General Corporation Law provides for the
indemnification of officers, directors, and other corporate agents in terms
sufficiently broad to indemnify such persons under certain circumstances for
liabilities (including reimbursement for expenses incurred) arising under the
Securities Act of 1933, as amended (the "Securities Act"). Article Seventh of
the Registrant's Certificate of Incorporation (Exhibit 3.1(i) hereto) and
Article VI of the Registrant's Amended and Restated Bylaws (Exhibit 3.2 hereto)
provides for indemnification of the Registrant's directors, officers, employees
and other agents to the extent and under the circumstances permitted by the
Delaware General Corporation Law. The Registrant has also entered into
agreements with its directors and officers that will require the Registrant,
among other things, to indemnify them against certain liabilities that may arise
by reason of their status or service as directors or officers to the fullest
extent not prohibited by law.

The Underwriting Agreement (Exhibit 1.1) provides for indemnification by
the Underwriters of the Registrant, its directors and officers, and by the
Registrant of the Underwriters, for certain liabilities, including liabilities
arising under the Securities Act, and affords certain rights of contribution
with respect thereto.

ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES

(a) In October 1994, the Registrant issued shares of its Common
Stock to CIS Acquisitions Partners, L.P., for aggregate cash
consideration of $4.0 million. The Registrant relied on the exemption
provided by Section 4(2) of the Securities Act.

(b) Under the terms of the CSI II Partnership Agreement, a group of eleven
officers and key employees of the Company hold Class B limited
partnership interests in CSI Investment Partners II, L.P. ("CSI
Partners II"), a Delaware limited partnership, representing indirect
interests in the Company Common Stock held by that partnership. The
interests held by those eleven officers and key employees aggregate a
10% interest in CSI Partners II. The foregoing interests were granted
pursuant to agreements reached with each such officer in October 1996.
Under the terms of the CSI II Partnership Agreement, the interests of
each of the eleven individuals vests in accordance with a schedule
which provides that one-third of such interest vests in April 1998, an
additional one-third vests in April 1999, and the remaining one-third
vests in April 2000, contingent upon such individual's continued
employment with the Company. Upon vesting of an individual's interest,
the Company Common Stock underlying that interest will be distributed
to such individual. Based on the capital structure of the Company at
June 27, 1997, assuming full vesting of all such restricted

II-1
71

shares for all of the eleven individuals, the number of restricted
shares that would be distributed would be 3,990 shares. The CSI II
Partnership Agreement requires that the eleven individuals make a
capital contribution to the partnership in the aggregate amount of
$660,000 in the year 2000.

(c) From November 1996 through January 1997, the Registrant issued 3,000
shares of Series A Cumulative Preferred Stock (the "Series A Preferred
Stock") and granted warrants to acquire shares of its Common
Stock to CSI Investment Partners II, L.P. ("CSI Partners II"), for
aggregate cash consideration of $3.0 million. The Registrant relied on
the exemption provided by Section 4(2) of the Securities Act. In March
1997, as a condition of a $3.0 million subordinated loan to the Company
made by Canterbury Mezzanine Capital, L.P. ("Canterbury Capital"), CSI
Partners II exchanged its 3,000 outstanding shares of Series A
Preferred Stock for shares of the Registrant's Common Stock and
exercised its warrants (at a nominal exercise price) for shares of
Common Stock.

(d) In March 1997, the Registrant granted warrants to purchase a total of
shares of its Common Stock to Canterbury Capital in
connection with Canterbury Capital's $3.0 million subordinated loan to
the Registrant. The Registrant relied on the exemption provided by
Section 4(2) of the Securities Act.

ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS SCHEDULES

(a) EXHIBITS

EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------------ ---------------------------------------------------------------------------

II-2
72

EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------------ ---------------------------------------------------------------------------

10.11* Credential Services International, Inc. 1997 Stock Option Plan.
10.12(i) Credit Agreement, dated as of January 14, 1997, between the Registrant and
LaSalle National Bank.
10.12(ii) Revolving Note, dated January 14, 1997, of the Registrant payable to
LaSalle National Bank.
10.12(iii) Term Note, dated January 14, 1997, of the Registrant payable to LaSalle
National Bank.
10.12(iv) Security Agreement, dated as of January 14, 1997, between the Registrant
and LaSalle National Bank.
10.12(v) Patent, Trademark and Copyright Security Agreement, dated as of January 14,
1997, between the Registrant and LaSalle National Bank.
10.12(vi) Collateral Assignment of Contracts, dated as of January 14, 1997, between
the Registrant and LaSalle National Bank.
10.12(vii) Pledge Agreement, dated as of January 14, 1997, made by CSI Investment
Partners II, L.P., in favor of LaSalle National Bank.
10.12(viii) Pledge Agreement, dated as of January 14, 1997, made by CIS Acquisition
Partners, L.P., in favor of LaSalle National Bank.
10.13* Amended and Restated Credit Agreement between the Registrant and LaSalle
National Bank.
10.14* Form of Director and Officer Indemnification Agreement.
10.15 Amended and Restated Agreement of Limited Partnership of CSI Investment
Partners II, L.P., dated as of October 7, 1997.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Maloney, Mehlman & Katz (included in its opinion filed as
Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.

- ---------------
* To be filed by amendment.

+ Confidential treatment has been requested with respect to certain portions of
this agreement.

(b) FINANCIAL STATEMENT SCHEDULES

Financial statement schedules other than those referred to above have been
omitted because they are not applicable or not required or because the
information is included elsewhere in the Financial Statements or the notes
thereto.

ITEM 17. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (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.

II-3
73

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.

(3) It will provide to the underwriters at the closing(s) specified in
the underwriting agreement certificates in such denominations and
registered in such names as required by the underwriters to permit prompt
delivery to each purchaser.

II-4
74

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 City of Orange, State of
California, on the 8th day of October, 1997.

CREDENTIALS SERVICES INTERNATIONAL, INC.

By /s/ DAVID C. THOMPSON
----------------------------------------
David C. Thompson
President and Chief Executive Officer

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints David C. Thompson and Vineet Pruthi, and each of
them, his true and lawful attorneys-in-fact and agents, each with full power of
substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign any and all amendments, including post-effective
amendments, to this Registration Statement, and any registration statement
relating to the offering covered by this Registration Statement and filed
pursuant to Rule 462(b) under the Securities Act of 1933, and to file the same,
with exhibits thereto and other 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 requisite and necessary to be done, as fully to all intents
and purposes as he might or could do in person, hereby ratifying and confirming
all that each of said attorneys-in-fact and agents or their substitute or
substitutes 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 below by the following persons in the
capacities and on the dates indicated.

NAME TITLE DATE
- --------------------------------------------- --------------------------- ------------------

/s/ DAVID C. THOMPSON President, Chief Executive October 8, 1997
- --------------------------------------------- Officer and Director
David C. Thompson (Principal Executive
Officer)

/s/ VINEET PRUTHI Executive Vice President October 8, 1997
- --------------------------------------------- and Chief Financial Officer
Vineet Pruthi (Principal Financial and
Accounting Officer)

/s/ THOMAS J. MALONEY Chairman and Director October 8, 1997
- ---------------------------------------------
Thomas J. Maloney

/s/ C. KENNETH CLAY Director October 8, 1997
- ---------------------------------------------
C. Kenneth Clay

/s/ NICHOLAS DUNPHY Director October 8, 1997
- ---------------------------------------------
Nicholas Dunphy

/s/ WILLIAM A. HALL Director October 8, 1997
- ---------------------------------------------
William A. Hall

/s/ M. GERARD KEEHAN Director October 8, 1997
- ---------------------------------------------
M. Gerard Keehan

II-5
75

EXHIBIT INDEX

EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------------ ---------------------------------------------------------------------------

1.1 Form of Underwriting Agreement.
3.1(i) Certificate of Incorporation of the Registrant, as amended.
3.1(ii)* Amended and Restated Certificate of Incorporation of the Registrant.
3.2 Amended and Restated Bylaws of the Registrant.
4.1* Specimen Common Stock Certificate.
4.2* Registration Rights Agreement among the Registrant, CSI Investment Partners
II, L.P., and Canterbury Mezzanine Capital, L.P.
5.1* Opinion of Maloney, Mehlman & Katz.
10.1+ Consumer Credit Subscriber Service Agreement, dated October 18, 1994,
entered into by TRW Inc., and the Registrant.
10.2 Office Lease, dated as of June 13, 1995, by and between TGALMA Limited and
the Registrant, as amended.
10.3 SubLease Agreement, dated as of December 6, 1994, by and between
Cal-Surance Associates and the Registrant; Office Lease dated August 23,
1988, by and between Metropolitan Tishman Tower Venture and Cal-Surance
Associates, Inc., as amended.
10.4 Employment Agreement, dated as of May 9, 1997, by and between David C.
Thompson and the Registrant.
10.5 Employment Agreement, dated as of August 15, 1996, by and between Chuck
Caudle and the Registrant.
10.6 Letter Agreement, dated August 16, 1995, by and between Mike Cossel and the
Registrant.
10.7 Letter Agreement, dated September 5, 1995, by and between James Rothe and
the Registrant.
10.8 Employment Agreement, dated as of December, 1996, by and between Vineet
Pruthi and the Registrant.
10.9 Letter Agreement, dated October 1, 1994, by and between Gerry Keehan and
the Registrant.
10.10 Employment Agreement, dated as of December 3, 1996, by and between Donald
J. Shea, Jr., and the Registrant.
10.11* Credential Services International, Inc. 1997 Stock Option Plan.
10.12(i) Credit Agreement, dated as of January 14, 1997, between the Registrant and
LaSalle National Bank.
10.12(ii) Revolving Note, dated January 14, 1997, of the Registrant payable to
LaSalle National Bank.
10.12(iii) Term Note, dated January 14, 1997, of the Registrant payable to LaSalle
National Bank.
10.12(iv) Security Agreement, dated as of January 14, 1997, between the Registrant
and LaSalle National Bank.
10.12(v) Patent, Trademark and Copyright Security Agreement, dated as of January 14,
1997, between the Registrant and LaSalle National Bank.
10.12(vi) Collateral Assignment of Contracts, dated as of January 14, 1997, between
the Registrant and LaSalle National Bank.

EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
------------ ---------------------------------------------------------------------------

10.12(vii) Pledge Agreement, dated as of January 14, 1997, made by CSI Investment
Partners II, L.P., in favor of LaSalle National Bank.
10.12(viii) Pledge Agreement, dated as of January 14, 1997, made by CIS Acquisition
Partners, L.P., in favor of LaSalle National Bank.
10.13* Amended and Restated Credit Agreement between the Registrant and LaSalle
National Bank.
10.14* Form of Director and Officer Indemnification Agreement.
10.15 Amended and Restated Agreement of Limited Partnership of CSI Investment
Partners II, L.P., dated as of October 7, 1997.
23.1 Consent of Coopers & Lybrand L.L.P.
23.2* Consent of Maloney, Mehlman & Katz (included in its opinion filed as
Exhibit 5.1 to this Registration Statement).
24.1 Power of Attorney (see page II-5).
27.1 Financial Data Schedule.

- ---------------
* To be filed by amendment.

+ Confidential treatment has been requested with respect to certain portions of
this agreement.