-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, BHxPTr/JnG4UEbW1t1UBbhLg33uEsIXIAz+VsnDMaZ9fCiDxZshFWePqejVL0Ro1 Hqk479Wk+qfcV0QZf7HRKg== 0000950112-95-001240.txt : 19950505 0000950112-95-001240.hdr.sgml : 19950505 ACCESSION NUMBER: 0000950112-95-001240 CONFORMED SUBMISSION TYPE: S-2 PUBLIC DOCUMENT COUNT: 7 FILED AS OF DATE: 19950504 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER HORIZONS CORP CENTRAL INDEX KEY: 0000023019 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER PROGRAMMING SERVICES [7371] IRS NUMBER: 132638902 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: S-2 SEC ACT: 1933 Act SEC FILE NUMBER: 033-59103 FILM NUMBER: 95534610 BUSINESS ADDRESS: STREET 1: 49 OLD BLOOMFIELD AVENUE CITY: MOUNTAIN LAKES STATE: NJ ZIP: 07046-1495 BUSINESS PHONE: 2014027400 MAIL ADDRESS: STREET 1: 49 0LD BLOOMFIELD AVE CITY: MOUNTAIN LAKES STATE: NJ ZIP: 07046-1495 S-2 1 COMPUTER HORIZONS CORP. As filed with the Securities and Exchange Commission on May 4, 1995 Registration No. 33- SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ____________ FORM S-2 REGISTRATION STATEMENT Under THE SECURITIES ACT OF 1933 ____________ COMPUTER HORIZONS CORP. (Exact name of registrant as specified in its charter) New York 13-2638902 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 49 Old Bloomfield Avenue Mountain Lakes, New Jersey 07046-1495 (201) 402-7400 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) JOHN J. CASSESE Computer Horizons Corp. 49 Old Bloomfield Avenue Mountain Lakes, New Jersey 07046-1495 (201) 402-7400 (Name, address, including zip code, and telephone number, including area code, of agent for service) COPIES TO: Robert A. Cantone, Esq. Eric D. Martins, Esq. Proskauer Rose Goetz & Mendelsohn LLP Ivan W. Dreyer, Esq. 1585 Broadway Baer Marks & Upham New York, New York 10036 805 Third Avenue New York, New York 10022 Approximate date of commencement of proposed sale of securities to the public: As soon as practicable after the effective date of this Registration Statement. 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 the registrant elects to deliver its latest annual report to security holders, or a complete and legible facsimile thereof, pursuant to Item 11(a)(1) of this form, check the following box: [ ]
CALCULATION OF REGISTRATION FEE Title of Each Amount Proposed Proposed Maximum Amount of Class of Securities to be Maximum Offering Aggregate Registration to be Registered Registered Price Per Share(1) Offering Price(1) Fee Common Stock, par value $.10 (2) 1,265,000 $ 12.75 $16,128,750 $5,561.62
(1) Estimated pursuant to Rule 457(c) solely for the purpose of calculating the registration fee on the basis of the average of the high and low prices for the Common Stock, as reported on the Nasdaq National Market on May 2, 1995, and as adjusted to reflect the three-for-two Common Stock split effected as a dividend to be paid on May 30, 1995 to holders of record on May 9, 1995. (2) Includes 165,000 shares of Common Stock which may be purchased by the Underwriters to cover over-allotments, if any. ____________ 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. COMPUTER HORIZONS CORP.
Cross Reference Sheet Showing Location in Prospectus of Information Required by Items of Form S-2 Registration Statement Item and Heading Location in Prospectus ---------------- ---------------------- 1. Forepart of the Registration Statement and Outside Front Cover Page of Prospectus . . . . Outside Front Cover Page of Prospectus 2. Inside Front and Outside Back Cover Pages of Prospectus . . . . . . . . . . . . . . . . . . Inside Front and Outside Back Cover Pages of Prospectus; Available Information; Documents Incorporated by Reference 3. Summary Information, Risk Factors and Ratio of Earnings to Fixed Charges . . . . . . . . . . . Prospectus Summary; Summary Consolidated Financial Data; Selected Consolidated Financial and Operating Data 4. Use of Proceeds . . . . . . . . . . . . . . . . Prospectus Summary; Use of Proceeds 5. Determination of Offering Price . . . . . . . . Not Applicable 6. Dilution . . . . . . . . . . . . . . . . . . . Not Applicable 7. Selling Security Holders . . . . . . . . . . . Selling Shareholder 8. Plan of Distribution . . . . . . . . . . . . . Outside Front Cover Page of Prospectus; Selling Shareholder; Underwriting 9. Description of Securities to be Registered . . Prospectus Summary; Description of Securities; Underwriting 10. Interests of Named Experts and Counsel . . . . Not Applicable 11. Information with Respect to the Registrant . . Inside Front Cover Page of Prospectus; Prospectus Summary; The Company; Use of Proceeds; Price Range of Common Stock; Dividend Policy; Capitalization; Selected Consolidated Financial and Operating Data; Management's Discussion and Analysis of Financial Condition and Results of Operations; Business; Management; Description of Securities; Consolidated Financial Statements 12. Incorporation of Certain Information by Documents Incorporated by Reference Reference . . . . . . . . . . . . . . . . . . . 13. Disclosure of Commission Position on Indem- nification for Securities Act Liabilities . . . Not Applicable
SUBJECT TO COMPLETION, DATED MAY 4, 1995 PROSPECTUS 1,100,000 Shares [LOGO] COMPUTER HORIZONS CORP. Common Stock __________________ Except as otherwise indicated, all information in this Prospectus has been adjusted to reflect the three-for-two Common Stock split effected as a dividend to be paid on May 30, 1995 to holders of record on May 9, 1995. Of the 1,100,000 shares of Common Stock offered hereby, 1,025,000 are being offered by the Company and 75,000 are being offered by the Selling Shareholder. The Common Stock is traded on the Nasdaq National Market under the symbol "CHRZ." On an unadjusted basis, the closing sales price for the Common Stock on May 2, 1995 as reported on the Nasdaq National Market was $19.125 per share, or $12.75 per share as adjusted. __________________ THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRE- SENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Underwriting Proceeds to Price Discounts and Proceeds to Selling to Public Commissions(1) Company(2) Shareholder Per Share . . . . . . . . . . . . $ $ $ $ Total(3) . . . . . . . . . . . . $ $ $ $
(1) The Company and the Selling Shareholder have agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act of 1933. See "Underwriting." (2) Before deducting expenses payable by the Company, estimated at $ . (3) The Company and the Selling Shareholder have granted the Underwriters a 30-day option to purchase up to 165,000 additional shares of Common Stock on the same terms and conditions as set forth above, solely to cover over- allotments, if any. If the Underwriters exercise the option in whole or in part, the shares of Common Stock purchased thereunder will be sold by the Selling Shareholder to the extent that he, in his discretion, so elects, and the Company will sell the balance, if any, of the shares thereunder. If the option is exercised in full, the total Price to Public and Underwriting Discounts and Commissions will be $ and $ , respectively. If all of the shares covered by the option are sold by the Selling Shareholder, the proceeds to the Selling Shareholder will be $ ; if all of the shares covered by the option are sold by the Company, the total Proceeds to the Company will be $ . See "Selling Shareholder" and "Underwriting." _____________________ The shares of Common Stock are offered by the several Underwriters, subject to prior sale, when, as and if delivered to and accepted by them, and subject to certain other conditions, including the right of the Underwriters to withdraw, cancel, modify or reject any order in whole or in part. It is expected that delivery of the shares will be made on or about , 1995, at the offices of Janney Montgomery Scott Inc., 26 Broadway, New York, New York. _____________________ Janney Montgomery Scott Inc. Robert W. Baird & Co. Incorporated The date of this Prospectus is , 1995 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 or sale would be unlawful prior to registration or qualification under securities laws of any such State. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ IN ACCORDANCE WITH RULE 10b-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934. SEE "PLAN OF DISTRIBUTION." ____________ AVAILABLE INFORMATION The Prospectus omits certain of the information contained in the Registration Statement relating to the securities offered hereby which is on file with the Securities and Exchange Commission (the "Commission"). The Company is subject to the informational requirements of the Securities Exchange Act of 1934 (the "Exchange Act"), and in accordance therewith, files periodic reports, proxy statements, and other information with the Commission. Such Registration Statement, periodic reports, proxy statements, and other information can be inspected, without charge, and copied at the public reference facilities maintained by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549, and at its regional offices located at Seven World Trade Center, Suite 1300, New York, New York 10048 and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60061. Copies of such material can be obtained at prescribed rates from the Public Reference Section of the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Room 1024, Washington, D.C. 20549. DOCUMENTS INCORPORATED BY REFERENCE The Company's Annual Report on Form 10-K for the year ended December 31, 1994, and the Company's Quarterly Report on Form 10-Q for the quarter ended March 30, 1995, which have been filed with the Commission by the Company pursuant to the Exchange Act, are incorporated by reference into this Prospectus and made a part hereof. Any statement contained in a document incorporated or deemed to be incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein modifies, supersedes, or replaces such statement. Any statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. Any person receiving a copy of this Prospectus may obtain without charge, upon written or oral request, a copy of any of the documents incorporated by reference herein, except for exhibits to such documents (unless such exhibits are specifically incorporated by reference into documents which this Prospectus incorporates). Requests should be directed to: Corporate Secretary, Computer Horizons Corp., 49 Old Bloomfield Avenue, Mountain Lakes, New Jersey 07046, telephone number (201) 402-7400. ____________ -2- PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information and consolidated financial statements, including the notes thereto, appearing elsewhere in or incorporated by reference into this Prospectus. Except as otherwise indicated, all information in this Prospectus (i) assumes no exercise of the Underwriters' over-allotment option and (ii) has been adjusted to reflect the three-for-two Common Stock dividends paid on April 13, 1993 and March 22, 1994 and the three-for-two Common Stock split effected as a dividend to be paid on May 30, 1995 to holders of record on May 9, 1995. Unless the context otherwise requires, all references in this Prospectus to the Company refer to Computer Horizons Corp. and its subsidiaries. The Company The Company provides a wide range of information technology services and solutions to major corporations. Historically, a professional services staffing firm, the Company has, over the past four years, developed the technological and managerial infrastructure to offer its clients value added services including client/server systems development and migration, network and facility management and administration, systems and business process re-engineering and outsourcing ("solutions"). The Company markets solutions to both existing and potential clients with the objective of becoming one of such clients' preferred providers of comprehensive information technology services and solutions. Solutions engagements, which represented less than five percent of the Company's consolidated revenues in 1992, accounted for approximately 25% of its consolidated revenues in 1994. The Company believes that the range of services and solutions that it offers, combined with its national network of branch offices, provides it with significant competitive advantages in the information technology marketplace. The Company's clients primarily are Fortune 1,000 companies with significant information technology budgets and recurring staffing or software development needs. In 1994, the Company provided information technology services to 455 clients, including 55 to which it provided solutions. Among the Company's solutions clients were American Telephone & Telegraph Company ("AT&T"), BellSouth Corporation, Citicorp, The Dow Chemical Company, Florida Power & Light Co., Ford Motor Company, International Business Machines Corporation ("IBM"), Merrill Lynch & Co., Inc., NYNEX Corporation and The Prudential Insurance Company of America. The Company believes that its large client base presents excellent opportunities for further marketing of its solutions capabilities. See "Business -- Strategies." The Gartner Group, an industry research firm, estimates that the worldwide information technology services market was approximately $11.8 billion in 1994, and projects that such market will grow to approximately $25.1 billion by 1999. The commercial information technology services industry is highly fragmented and without a dominant company. Competitors vary by market segment and geographic area, and range from national accounting firms, the professional service groups of computer equipment companies and large scale independent firms to small regional and niche firms. The Company believes that a number of factors will cause the demand for information technology services to continue to grow. These factors include global competition, businesses' focus on "core competencies," accelerating technological change and the need for enterprise-wide system integration arising from the rapid growth in the number of software applications and end-users throughout organizations. The principal technology-driven change is the continuing movement by large corporations to open, distributed computer networks using client/server architecture. These technological changes are making it increasingly difficult and expensive for businesses to maintain in-house the necessary technical and management capabilities to handle all of their information technology needs. Information technology service providers such as the Company allow clients to maximize their information technology resources. -3- The Company has 29 branch offices in 22 states across the United States and a staff of approximately 2,200, including approximately 1,900 software professionals. Its solutions engagements are supported, developed and managed by specialized groups thereby assuring that each solutions engagement is performed with the same state-of-the-art methodologies and processes and proven management techniques. The Company's strategy is to continue its growth and further establish its position as a comprehensive provider of information technology services and solutions by (i) increased marketing of solutions to existing clients; (ii) enhancing its solutions capabilities; (iii) acquiring entities that may provide the Company with further competitive advantages and enhanced profitability; and (iv) developing off-shore facilities that give more cost effective alternatives to clients. See "Business -- Strategies." ____________
The Offering Common Stock offered by the Company . . . . . . . . 1,025,000 shares. Common Stock offered by the Selling Shareholder . . 75,000 shares. Common Stock to be outstanding after the offering . 10,018,937 shares (1). Use of Proceeds . . . . . . . . . . . . . . . . . . Repayment of short-term debt, working capital and other general corporate purposes, including possible acquisitions. See "Use of Proceeds." Nasdaq National Market Symbol . . . . . . . . . . . CHRZ
__________________ (1) Does not include 1,072,535 shares subject to outstanding options granted under the Company's stock option and appreciation plans with a weighted average exercise price of $5.40. See Note 4 to Notes to Consolidated Financial Statements. (Prospectus Summary continues on following page.) -4-
Summary Consolidated Financial Data Three Months Ended Year Ended December 31, March 30, ----------------------------------------------- ------------------ 1990 1991 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- ---- ---- (In thousands, except per share data) Income Statement Data: Revenues . . . . . . . . . . . . . . $ 99,432 $ 94,543 $102,206 $121,550 $152,192 $ 33,171 $ 43,867 Income from operations . . . . . . . 6,754 4,777 4,470 7,494 11,011 2,235 3,207 Income before income taxes . . . . . 5,868 4,084 3,892 6,910 10,373 2,085 3,032 Net income . . . . . . . . . . . . . $ 3,334 $ 2,266 $ 2,026 $ 3,704 $ 5,686 $ 1,114 $ 1,682 Net income per share of Common Stock $ .38 $ .26 $ .22 $ .37 $ .60 $ .12 $ .18 Weighted average number of shares of Common Stock outstanding . . 8,676 8,802 9,083 9,996 9,506 9,520 9,502 December 31, March 30, 1995 1994 ----------------------- -------------- Actual As Adjusted(1) ------ -------------- Balance Sheet Data: Working capital . . . . . . . . . . . . . . . . $ 20,484 $ 21,826 $ Total assets . . . . . . . . . . . . . . . . . 49,150 51,461 Notes payable - banks (2) . . . . . . . . . . . 3,200 3,950 -- Long-term debt, including current portion . . . 5,844 5,716 5,716 Shareholders' equity . . . . . . . . . . . . . 29,917 31,723
__________________ (1) Adjusted to give effect to the receipt by the Company of the net proceeds from the offering at an assumed public offering price of $ per share, after deducting estimated offering expenses of $ , and the application of such proceeds. See "Use of Proceeds." (2) Represents amounts outstanding under the Company's lines of credit. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." -5- USE OF PROCEEDS The net proceeds from the sale of the 1,025,000 shares of Common Stock offered by the Company, assuming an offering price of $ per share and after deducting underwriting discounts and commissions and other expenses of the offering estimated at $ ($ if the Underwriters' over- allotment option is exercised in full and the shares are sold by the Company), will be approximately $ ($ if the Underwriters' over- allotment option is exercised in full and the shares are sold by the Company). The Company will not receive any of the proceeds from the sale of the 75,000 shares of Common Stock being offered by the Selling Shareholder. The Company intends to use approximately $6,000,000 of the net proceeds to repay the outstanding indebtedness under its lines of credit with two banks. See "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources." During 1994, the weighted average interest rate under these lines of credit was 6.71%. The Company does not intend to use any of the net proceeds to prepay the Company's outstanding principal amount of long-term debt of $4,300,000 at May 2, 1995 because such prepayment would trigger certain penalties. The Company intends to use the balance of the net proceeds for working capital and other general corporate purposes, including the expansion of its business. The Company may use a portion of the net proceeds to acquire other information technology businesses, although there can be no assurance that any such acquisition will be made. While the Company regularly evaluates acquisition and merger candidates, conducts preliminary discussions and intends to pursue acquisition and merger opportunities available to it, the Company has no present commitments or agreements with respect to any such acquisition or merger. Pending its use, the Company intends to invest the net proceeds in short-term, investment grade securities. PRICE RANGE OF COMMON STOCK The Common Stock is traded in the over-the-counter market and is quoted on the Nasdaq National Market under the symbol CHRZ. The following table sets forth for each period indicated the high and low closing sales prices for the Common Stock as reported on the Nasdaq National Market. Such prices do not include retail markups, markdowns or commissions. The following information has been adjusted to reflect the three-for-two Common Stock split effected as a dividend to be paid on May 30, 1995 to holders of record of Common Stock on May 9, 1995. High Low ---- --- 1993 First Quarter . . . . . . . . . . . $ 3.55 $ 2.74 Second Quarter . . . . . . . . . . . 3.67 3.03 Third Quarter . . . . . . . . . . . 4.95 3.22 Fourth Quarter . . . . . . . . . . . 5.95 4.33 1994 First Quarter . . . . . . . . . . . 8.33 5.17 Second Quarter . . . . . . . . . . . 8.17 5.50 Third Quarter . . . . . . . . . . . 8.00 5.50 Fourth Quarter . . . . . . . . . . . 10.50 7.67 1995 First Quarter . . . . . . . . . . . 12.67 8.83 Second Quarter (through May 2, 1995) 14.00 11.00 On May 2, 1995, the last reported sale price of the Common Stock was $12.75 per share. As of May 1, 1995, the Company had approximately 1,139 stockholders of record. -6- DIVIDEND POLICY The Company has never paid cash dividends on the Common Stock and does not contemplate paying cash dividends on the Common Stock in the foreseeable future. Earnings, if any, will be used to finance the development and expansion of the Company's business. Future dividend policy will depend upon the Company's earnings, capital requirements, financial condition and other factors considered relevant by the Company's Board of Directors. The amount of cash dividends the Company may pay on the Common Stock is limited by the agreement governing its long-term debt. CAPITALIZATION The following table sets forth the Company's short-term and long-term debt, shareholders' equity and total capitalization as of March 30, 1995 and as adjusted to reflect the sale of the 1,025,000 shares of Common Stock offered by the Company at an assumed public offering price of $ per share and the application of the net proceeds therefrom.
March 30, 1995 ----------------------------- Actual As Adjusted (1) ------ ----------- (In thousands) Notes payable - banks (2) . . . . . . . . . . . . . . . . . . . . . $ 3,950 $ -- Long-term debt, including current portion . . . . . . . . . . . . . 5,716 5,716 Shareholders' equity: Preferred Stock, $.10 par value; authorized and unissued, 200,000 shares, including, 50,000 shares of Series A . . -- -- Common Stock, $.10 par value; authorized, 30,000,000 shares; issued, 10,758,320 and 11,783,320 shares, as adjusted(1) 1,076 1,178 Additional paid-in capital . . . . . . . . . . . . . . . . . . 13,762 Retained earnings . . . . . . . . . . . . . . . . . . . . . . 31,533 31,533 -------- --------- 46,371 Less shares held in treasury, at cost, 1,786,883 shares . . . 14,648 14,648 -------- --------- Total shareholders' equity . . . . . . . . . . . . . 31,723 -------- --------- Total capitalization . . . . . . . . . . . . . . . . . . . . . . . $ 41,389 $ ======== =========
___________________ (1) Does not include 1,072,535 shares subject to outstanding options granted under the Company's stock option and appreciation plans with a weighted average exercise price of $5.40. See Note 4 to Notes to Consolidated Financial Statements. (2) Represents amounts outstanding under the Company's lines of credit. -7- SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA The selected financial data as of March 30, 1995 and for the three months ended March 30, 1994 and 1995 have been derived from the unaudited consolidated financial statements of the Company and notes thereto included elsewhere in this Prospectus and should be read in conjunction with those unaudited consolidated financial statements and notes and reflect all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary to present fairly the data as of such date and for such periods. The results for interim periods are not necessarily indicative of results to be expected for the year. The selected financial data as of and for the five-year period ended December 31, 1994 have been derived from the audited consolidated financial statements of the Company. The income statement data for the years ended December 31, 1992, December 31, 1993, and December 31, 1994, and the balance sheet data at December 31, 1993 and December 31, 1994, are derived from, and are qualified by reference to, the audited consolidated financial statements and notes thereto included elsewhere in this Prospectus and should be read in conjunction with those consolidated financial statements and notes. The income statement data for the years ended December 31, 1990 and December 31, 1991, and the balance sheet data at December 31, 1990, December 31, 1991 and December 31, 1992 are derived from audited consolidated financial statements not included or incorporated by reference in this Prospectus.
Three Months Ended Year Ended December 31, March 30, --------------------------------------------- ------------------ 1990 1991 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- ---- ---- (In thousands, except per share data) Income Statement Data: Revenues . . . . . . . . . . . $ 99,432 $ 94,543 $102,206 $121,550 $152,192 $ 33,171 $ 43,867 Costs and expenses: Direct costs . . . . . . . . 71,563 68,098 74,200 87,800 108,189 23,655 31,366 Selling, administrative and general . . . . . . . . . . . 21,115 21,668 22,651 26,256 32,992 7,281 9,294 Merger and related expenses (1) . . . . . . . . . . . . . -- -- 885 -- -- -- -- Income from operations . . . . 6,754 4,777 4,470 7,494 11,011 2,235 3,207 Other income (expense): Interest income . . . . . . . 156 312 312 235 53 35 37 Interest expense . . . . . . (1,042) (1,005) (890) (819) (691) (185) (212) -------- -------- -------- -------- -------- -------- -------- Income before income taxes . . 5,868 4,084 3,892 6,910 10,373 2,085 3,032 Income taxes . . . . . . . . . 2,534 1,818 1,866 3,206 4,687 971 1,350 -------- -------- -------- -------- -------- -------- -------- Net income . . . . . . . . . . $ 3,334 $ 2,266 $ 2,026 $ 3,704 $ 5,686 $ 1,114 $ 1,682 ======== ======== ======== ======== ======== ======== ======== Net income per share: Primary . . . . . . . . . . . $ .38 $ .26 $ .22 $ .37 $ .60 $ .12 $ .18 Fully diluted . . . . . . . . $ .38 $ .26 $ .22 $ .36 $ .60 $ .12 $ .18 Weighted average number of shares outstanding: Primary . . . . . . . . . . . 8,676 8,802 9,083 9,996 9,506 9,520 9,502 Fully diluted . . . . . . . . 8,775 8,828 9,230 10,331 9,534 9,558 9,562 December 31, March 30, ---------------------------------------------------- ---------- 1990 1991 1992 1993 1994 1995 ---- ---- ---- ---- ---- ---- (Dollars in thousands) Balance Sheet Data: Working capital . . . . . . . $ 17,573 $ 18,972 $ 20,317 $ 17,531 $ 20,484 $ 21,826 Total assets . . . . . . . . 36,683 37,220 41,249 40,600 49,150 51,461 Notes payable - banks (2) . . -- -- -- -- 3,200 3,950 Long-term debt, including current portion . . . . . . 10,325 10,000 8,572 7,399 5,844 5,716 Shareholders' equity . . . . 19,010 21,711 26,856 25,689 29,917 31,723 Operating Data: Employees . . . . . . . . . . 1,258 1,251 1,414 1,603 2,150 2,202 Branch offices . . . . . . . 24 24 27 27 29 29
_______________ (1) In 1992, the Company recorded a non-recurring charge of $885,000 resulting from the acquisition of Worldwide Computer Services Inc. The charge consisted of redundant facility and personnel expenses. See Note 2 of Notes to Consolidated Financial Statements. (2) Represents amounts outstanding under the Company's lines of credit. -8- MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion and analysis should be read in conjunction with, and is qualified in its entirety by, the Consolidated Financial Statements, including the Notes thereto, and Selected Consolidated Financial and Operating Data included elsewhere in this Prospectus. Historical results are not necessarily indicative of trends in operating results for any future period. Results of Operations The following table sets forth, for the periods indicated (i) certain income and expense items expressed as a percentage of the Company's consolidated revenues and (ii) the percentage increase in the amount of such items in 1994 compared to 1993 and the first quarter of 1995 compared to the first quarter of 1994, respectively:
Year Ended December 31, Percentage Three Months Ended March 30, Percentage ------------------------ Increase ---------------------------- Increase 1992 1993 1994 1993/1994 1994 1995 1994/1995 ------------------------ ---------- ---------------------------- ---------- Revenues . . . . . . . . 100.0% 100.0% 100.0% 25.2% 100.0% 100.0% 32.2% Direct costs . . . . . . 72.6 72.2 71.1 23.2 71.3 71.5 32.6 Selling, administrative and general . . . . . . . 22.2 21.6 21.7 25.7 21.9 21.2 27.6 Income from operations . 4.4(1) 6.2 7.2 46.9 6.7 7.3 43.5 Interest expense, net . . 0.6 0.5 0.4 9.2 0.5 0.4 16.7 Income before income taxes . . . . . . . . . 3.8 5.7 6.8 50.1 6.3 6.9 45.4 Net income . . . . . . . 2.0 3.0 3.7 53.5 3.4 3.8 51.0
________________________ (1) Reflects a non-recurring charge of $885,000 resulting from the acquisition of Worldwide Computer Services Inc. This charge consisted of redundant facility and personnel expenses. (See Note 2 of Notes to Consolidated Financial Statements.) Revenues Consolidated revenues for the first quarter of 1995 increased 32% compared to the first quarter of 1994. The increase was the result of both the further development of the Company's solutions business and the continued expansion in its core business of providing professional software personnel services. Consolidated revenues in 1994 increased by 25% compared to 1993, and in 1993 consolidated revenues increased by 19% compared to 1992. The increase in 1994 was attributable equally to the expansion of the Company's professional software personnel services business and the continued development of its solutions business. See "Business -- Overview." The increase in consolidated revenues in 1993 was attributable to the acquisition in August 1992 of Worldwide Computer Services Inc. (see Note 2 of Notes to Consolidated Financial Statements) and internal expansion. The Company began the development of its solutions business in 1991. The Company provides its services primarily to businesses in five principal Standard Industrial Classification Code sectors. The largest portion of the Company's consolidated revenues in each of 1994, 1993 and in 1992 was derived from manufacturing sector clients, 28% in each of 1994 and 1993 and 24% in 1992. In dollars, these amounts were $42.9, $34.1 and $24.6 million in 1994, 1993 and 1992, respectively. Revenues were broad-based within this sector, with particular emphasis in transportation, petroleum refining and chemical/allied products manufacturing. Consolidated revenues derived from financial services clients were 26% of Company revenues in each of 1994 and 1993 and 23% in 1992. In dollars, such revenues were $39.9, $31.5 and $23.1 million in 1994, 1993 and 1992, respectively. The increase in consolidated revenues from 1992 to 1994 was experienced across all subsectors, including insurance, brokerage, banking and non-depository credit institutions. -9- Telecommunications/utilities clients represented 23% of the Company's consolidated revenues in 1994, 24% in 1993, and 26% in 1992. In dollars, the 1994, 1993 and 1992 amounts were $35.0, $28.8 and $26.4 million, respectively. The Company's services sector, which includes business services and computer processing services, recognized significantly increased revenues during the three-year period. For 1994, 1993 and 1992, revenues from this sector were 15%, 13% and 13%, respectively, of the Company's consolidated revenues. In dollars, the amounts were $22.5, $16.3 and $13.2 million. Wholesale/retail trade clients contributed revenues of $11.9, $10.9 and $14.9 million in 1994, 1993 and 1992, respectively, representing 8%, 9% and 15% of the Company's consolidated revenues, respectively. But for a large retail project completed in 1992, this sector has been relatively flat. Direct Costs Direct costs as a percentage of consolidated revenues were 71.5% and 71.3% for the first quarters of 1995 and 1994, respectively. Direct costs as a percentage of consolidated revenues were 71.1%, 72.2% and 72.6% for 1994, 1993 and 1992, respectively. The improvements in 1994 and 1993 were attributable to the Company's implementation of tighter controls over pricing, wages, costs and benefits. Selling, Administrative and General Selling administrative and general expenses were 21.2% of consolidated revenues for the first quarter of 1995, compared to 21.9% for the same period in 1994. This decrease is attributable to both tighter cost controls and higher consolidated revenues during the past year. The dollar expenditures were $9.3 million and $7.3 million for the respective periods. Selling, administrative and general expenses have remained essentially stable as a percentage of consolidated revenues: 21.7%, 21.6% and 22.2% for 1994, 1993 and 1992, respectively. In dollars, they were $33.0, $26.3 and $22.7 million, respectively, for these years. Profitability Consolidated income from operations was $3.2 million in the first quarter of 1995, compared to $2.2 million in the first quarter of 1994, representing 7.3% and 6.7% of consolidated revenues, respectively. The gains are primarily attributable to increased revenues and various cost containment initiatives. The Company's business is labor intensive and, as such, is sensitive to inflationary trends, client billing rates, as well as payroll costs. Consolidated income from operations was $11.0 million in 1994, compared to $7.5 million in 1993 and $4.5 million in 1992. As a percentage of consolidated revenues, income from operations were 7.2%, 6.2% and 4.4% for 1994, 1993 and 1992, respectively. The gains are attributable to increased revenues, improved gross margins and containment of selling, administrative and general expenses. The Company's business is labor intensive and, as such, is sensitive to inflationary trends. This sensitivity applies to client billing rates as well as payroll costs. Consolidated net income for the first quarter of 1995 was $1.7 million, or $.18 per share, compared with $1.1 million, or $.12 per share in 1994. The Company's effective tax rate for Federal, state and local income taxes was 44.5% and 46.6% for the first quarter of 1995 and 1994, respectively. The effective rate for the first quarter of 1995 decreased due to profits increasing more than non-tax benefited charges. After accounting for non-tax benefited charges such as goodwill amortization and certain travel and entertainment deduction limitations, the Company's standard marginal income tax rate for these periods was approximately 42%. Consolidated net income for 1994 was $5.7 million, or $.60 per share, compared with $3.7 million, or $.37 per share, in 1993, and $2.0 million, or $.22 per share, in 1992. The Company's effective tax rate for Federal, state and local income taxes was 45.2%, 46.4% and 47.9% for 1994, 1993 and 1992, respectively. -10- Liquidity and Capital Resources As of March 30, 1995, the Company had a current ratio of 2.5 to 1. Available bank lines of credit totaled $8.0 million at March 30, 1995 ($12.0 million less $4.0 million outstanding). As of May 2, 1995, the outstanding borrowings under these facilities was $6.2 million. Borrowings have been used to finance the growth in accounts receivable resulting from increased revenues and, in the first quarter of 1995, the effect of normal year-end purchase order expirations and resultant payment delays. Borrowings also were used to finance the repurchase of shares of Common Stock for approximately $2.8 million from the Company's former Vice Chairman and Executive Vice President, who announced his retirement in October 1994, effective February 15, 1995. During 1994, the average outstanding amount under such lines of credit was $1.1 million and the weighted average interest rate was 6.71%. During 1993, the Company borrowed $4.0 million at the lender's prime lending rate (6%) to finance the purchase of treasury stock. This loan was repaid prior to December 31, 1993. See Note 4 of Notes to Consolidated Financial Statements. The Company's long-term debt consists primarily of notes issued to a financial institution in the outstanding principal amount of $5.7 million as of March 30, 1995. The notes are payable in installments of $1.4 million on April 15th of each year through 1998 and bear interest at the rate of 9.55% per annum. The Company has certain contingent payment obligations over the next several years and will pay an aggregate of approximately $0.5 million in 1995 pursuant to such obligations. See Note 2 of Notes to Consolidated Financial Statements. In April 1995, the Company contributed $0.5 million for its 50% interest in a joint venture with the Birla Group of India, a large multi-national conglomerate. See "Business - Recent Solutions Capability Developments." The Company believes that the net proceeds of this offering, together with its lines of credit and internally generated funds, will permit it to repay the outstanding short-term debt, to continue to meet its working capital obligations and fund the further development of its business for the next 12 months. -11- BUSINESS Overview The Company provides a wide range of information technology services and solutions to major corporations. Historically, a professional services staffing firm, the Company has, over the past four years, developed the technological and managerial infrastructure to offer its clients value added services including client/server systems development and migration, network and facility management and administration, systems and business process re-engineering and outsourcing ("solutions"). The Company markets solutions to both existing and potential clients with the objective of becoming one of such clients' preferred providers of comprehensive information technology services and solutions. Solutions engagements, which represented less than five percent of the Company's consolidated revenues in 1992, accounted for approximately 25% of its consolidated revenues in 1994. The Company believes that the range of services and solutions that it offers, combined with its national network of branch offices, provides it with significant competitive advantages in the information technology marketplace. The Company's clients primarily are Fortune 1,000 companies with significant information technology budgets and recurring staffing or software development needs. In 1994, the Company provided information technology services to 455 clients, including 55 to which it provided solutions. Among the Company's solutions clients were American Telephone & Telegraph Company ("AT&T"), BellSouth Corporation, Citicorp, The Dow Chemical Company, Florida Power & Light Co., Ford Motor Company, International Business Machines Corporation ("IBM"), Merrill Lynch & Co., Inc., NYNEX Corporation and The Prudential Insurance Company of America. The Company believes that its large client base presents excellent opportunities for further marketing of its solutions capabilities. See "Business -- Strategies." The Company has 29 branch offices in 22 states across the United States and a staff of approximately 2,200, including approximately 1,900 software professionals. Its solutions engagements are supported, developed and managed by specialized groups based at the Company's headquarters, thereby assuring that each solutions engagement is performed with the same state-of-the-art methodologies and processes and proven management techniques. The Commercial Information Technology Services Industry The Company competes in the commercial information technology services industry. Commercial information technology services consist of the development, operation and maintenance of computerized information systems. The Gartner Group, an industry research firm, estimates that the worldwide commercial and governmental information technology services market was approximately $11.8 billion in 1994, and projects that such market will grow to approximately $25.1 billion by 1999. The principal buyers of commercial information technology services are large corporations with recurring staffing and solutions needs. The industry is highly fragmented and without a dominant company. Competitors vary by market segment and geographic area, and range from several of the "Big Six" accounting firms, the professional service groups of computer equipment companies and large scale outsourcers such as Electronic Data Systems Corporation, to small regional and niche firms, although there has been a trend in the past decade towards consolidation, with larger companies gaining revenue and expertise by acquiring smaller firms. The Company believes that a number of factors will cause the demand for commercial information technology services to continue to grow. These factors include global competition, businesses' focus on "core competencies," accelerating technological change and the need for enterprise-wide system integration arising from the rapid growth in the number of software applications and end-users throughout organizations. The principal technology-driven change is the continuing movement by large corporations to open, distributed computer networks using client/server architecture. These technological changes are making it increasingly difficult and expensive for businesses to maintain in- house the necessary technical and management capabilities to handle all of their information technology needs. Commercial information technology service providers such as the Company allow clients to maximize their information technology resources. -12- The major technological development in information services in recent years has been the transition to distributed and open computing environments utilizing client/server architectures. Historically, enterprise-wide computing has been conducted on proprietary host-based systems operating on mainframes and minicomputers typically supplied by a single vendor. These host-based systems offered centralized data processing to a small group of users and helped automate tasks such as financial reporting. In the 1980s, the ease-of-use and low cost of personal computers, combined with the increased availability of computer end-user software, such as financial spreadsheets and word processing, led to rapid growth in the number of computer users throughout organizations. Computing environments became increasingly varied and included personal computers and workstations from different vendors as well as traditional minicomputers and mainframes, all of which were interconnected by local area networks ("LANs"). This decentralized, or distributed, computing environment soon required organizations to seek methods of improving communication and information processing across varying computer hardware and software configurations. The resultant move to open, standards based computing environments continues to accelerate today as a result of improvements in price/performance ratios for computer systems and advances in open computing standards and enabling technologies. Strategies The Company's objective is to continue its growth and further establish its position as a comprehensive provider of information technology solutions and services. The Company's principal strategies for achieving these goals are as follows: - - Increased Marketing of Solutions to Existing Clients. The Company has established long-term relationships with many of its clients. During 1994, 1993 and 1992, 93.2%, 91.8% and 88.5%, respectively, of the Company's revenues were derived from clients to which it had provided services or solutions in the preceding year. The Company believes that the access and goodwill these client relationships offer provide it with significant advantages in marketing additional services and solutions to such clients. The Company believes that its long-term client relationships and ability to work in partnership with its clients throughout the life cycle of their information systems, from design and development through testing and implementation to refurbishment and re- engineering, combined with its ability to outsource or staff the operation of such systems, distinguishes it from many of its competitors and provides it with the opportunity to become a preferred provider for a broad range of its existing and new clients' information technology solutions needs. - - Enhancing its Solutions Capabilities. The Company believes that it will be able to increase the revenues that it derives from its existing clients, increase the size of the projects that it undertakes and attract new clients by enhancing the information technology solutions that it offers. The Company has begun to develop proprietary "products": solutions to specific information technology problems consisting of a package of outsourcing, project management and professional services utilizing proprietary software tools and methodologies acquired or developed by the Company. Such solutions products can serve to distinguish the Company and provide it with a significant competitive advantage. See "Business - Recent Solutions Capability Developments." - - Acquiring Entities that May Provide the Company with Further Competitive Advantages and Enhanced Profitability. Given the highly fragmented nature of the information technology marketplace, the Company believes that significant acquisition opportunities exist. The Company continuously evaluates potential acquisition candidates for expanding its branch office network, increasing its technical expertise or providing it with other competitive advantages. The Company, however, has no present agreement or commitment with respect to any such acquisition, and there can be no assurance that any such acquisition will be consummated. - - Developing Off-shore Facilities that Give More Cost Effective Alternatives to Clients. The Company believes that the utilization of off-shore facilities will allow it to offer its clients services and solutions in a more cost effective manner. Off-shore facilities take advantage of lower-cost technical personnel to carry out legacy systems maintenance, client/server systems development and migration, help desk activities and program design and coding. The Company has recently entered into a joint venture with the Birla Group, a major Indian industrial enterprise, to open its first such facility. See "Business - Recent Solutions Capability Developments." -13- Services In addition to its core professional services staffing business, the Company offers its clients a wide range of information technology solutions, including client/server systems development and migration, network and facilities management and administration, and systems and business process re-engineering. The Company can supply each of these solutions alone or together with others as a comprehensive package. The Company augments its ability to provide solutions utilizing state-of-the art technology by entering into arrangements with leading hardware, software and systems vendors. Pursuant to these arrangements, the Company is authorized to incorporate these entities' products in its offerings. The Company can undertake full or shared project responsibility with the client or simply provide software professionals with specified skills to augment the client's staff on an as-needed basis. Projects can be performed at the client's facilities or at the Company's own software facilities. The following is a brief description of certain of the Company's principal services: - - Professional Services Staffing. Providing highly skilled software professionals to augment the internal information management staffs of major corporations remains the Company's primary business, accounting for approximately 75% of the Company's consolidated revenues in 1994. The Company offers its clients centralized vendor management, supplying their staffing needs from among the Company's approximately 1,900 software professionals. The Company is committed to expanding its professional services staffing operations in conjunction with its solutions business. - - Client/Server Systems Development and Migration. The Company has the capability to develop and implement open computer systems using client/server architecture and integrating servers, mini and mainframe systems, workstations, terminals and communication gateways into complete, flexible networks. Such services include project management, selection of viable systems platforms, creation of migration plans, development of customized software applications, and systems and database integration. The Company specializes in integrating local area network ("LAN") environments into single heterogeneous networks and unifying enterprise networks into wide area network ("WAN") environments. - - Network and Facilities Management and Administration. In addition to client/server systems development and migration, the Company provides comprehensive applications development and systems maintenance services for legacy systems. It can also manage, operate and administer data center facilities, including both large and small centralized main frame (or "glass house") data centers, and provide help desk and network administration services. The Company can provide (or "outsource") such services and solutions either at the client's facilities or at state-of-the-art software facilities located at its Mountain Lakes, New Jersey, Pompano Beach, Florida and Minneapolis, Minnesota branch offices and, through its new joint venture with the Birla Group, New Delhi, India. The Company's Pompano Beach facility is fully bilingual, and currently provides data processing services for the Latin American operations of a major United States bank. - - Systems and Business Processing Re-engineering. The Company provides its clients with proven methodologies, software tools, procedures and project management practices to maximize the life span and productivity of their legacy systems. The Company's capabilities in this area extend beyond traditional re- engineering and involve creation of data and process models and the extraction of imbedded business rules. - - Knowledge Transfer and Training. The Company offers both standard curricula and custom-tailored courses for a client's particular environment and needs. Comprehensive courses cover languages, hardware, software, tools, methodologies and management and productivity skills. The Company's offerings include application downsizing, graphical interfaces, open systems, Computer aided software engineering ("CASE") and information engineering technologies, relational technology and personal computer software and hardware. The Company also has reseller and training rights in selected markets to certain development tools used as an aid in building client/server applications. -14- Recent Solutions Capability Developments On March 9, 1995 the Company introduced its first solutions product utilizing an internally developed software tool, CHC's Signature 2000, pursuant to which the Company can identify all of the date occurrences within an application and reformat the date fields to permit the processing of dates after December 31, 1999. Many existing computer systems run software programs permitting only two digit entries for years (e.g., "95" for the year 1995) and, consequently, cannot properly process dates in the next century. The Company believes that its CHC's Signature 2000 product can update applications more quickly and inexpensively than is otherwise possible. The Company was recently awarded its first contract for its CHC's Signature 2000 product. Also in March, the Company announced that it had entered into a joint venture with the Birla Group, a major Indian industrial enterprise with annual sales of approximately $4.5 billion. In April, the Company and the Birla Group each made initial cash contributions of $0.5 million and each received a 50% interest in the joint venture. The Birla Group will also contribute the net assets of its existing information technology company to the joint venture, which will be known as Birla Horizons International, and the Company will provide it with technological and management support. The Company has worked successfully on solution projects with the Birla Group over the last several years and believes that the joint venture will be able to provide clients with solutions such as legacy systems maintenance, client/server systems development and migration, help desk activities and program design and coding through its software facilities in New Delhi, India more cost effectively than can be done domestically. Organization The Company's organizational structure has evolved in conjunction with the development of its solutions capability. It is designed to provide clients across the United States with responsive, efficient service utilizing state-of- the art software standards, methodologies and management techniques applied consistently from engagement to engagement. The Company services its clients through a network of 29 branch offices located in 22 states across the United States. Each branch office is responsible for staffing the professional personnel needs of clients within its assigned geographic region. In addition, the branch offices provide the professional staff for the Company's solutions engagements in that area under the management of the specialized solutions groups described below. The number of software professionals attached to each branch office ranges from approximately 15 to 190, with the average being approximately 70. Twenty-seven of the Company's branch offices are organized into three geographic regions headed by Senior Vice Presidents who report directly to the Company's Chief Executive Officer. An additional two offices constitute the Company's Communications Clients Group, and serve primarily telecommunications companies. Set forth below is a list of the Company's branch offices: Eastern Region Central States Region Midwest/West Region Hartford, CT Atlanta, GA Phoenix, AZ Washington, DC Indianapolis, IN Los Angeles, CA Miami, FL Louisville, KY Colorado Springs, CO Boston, MA Raleigh, NC Denver, CO Mountain Lakes, NJ Cincinnati, OH Cedar Rapids, IA New York, NY Cleveland, OH Chicago, IL Philadelphia, PA Columbus, OH Kansas City, KS Dayton, OH Detroit, MI Memphis, TN Minneapolis, MN Dallas, TX Houston, TX Communications Clients Group Tampa, FL Clark, NJ
-15- The technical and management infrastructure for the Company's solutions capability is provided by three specialized subsidiaries: Horizons Consulting, Inc. ("HCI"), Unified Systems Solutions, Inc. ("USS") and Strategic Outsourcing Services, Inc. ("SOS"). The Company established HCI in June 1992; USS was acquired by the Company in January 1993; and SOS was acquired in June 1994. Both USS and SOS were acquired in the development stage, and in each case the Company had provided initial financing to the founders. See Note 2 of Notes to Consolidated Financial Statements. Each of HCI, USS and SOS possess the technical and management resources to manage a key area of the Company's solutions capabilities: HCI provides applications development, systems maintenance and systems and business process and re-engineering for legacy systems; USS designs, develops and integrates client/server networks, effects mainframe migrations and provides related services, including custom software development and training; and SOS operates and administers glass house data facilities. For biographical information regarding the founders of HCI, USS and SOS, each of which reports directly to the Company's Chief Executive Officer, see "Management." Although treated as separate entities for certain internal corporate purposes, HCI, USS and SOS operate through and with the Company's branch office system. Depending upon the nature of each solutions engagement, project managers from one or more of the subsidiaries will be assigned to design and manage the project, which is staffed through the branch offices. The Company's knowledge transfer and training services are provided through its ComputerKnowledge division ("CKC"). CKC operates training centers in the Company's Mountain Lakes, Cincinnati, Detroit and Minneapolis offices, and provides training at client facilities throughout the United States. Marketing and Clients The Company markets through a combination of account representatives located both at the branch offices and the solutions subsidiaries. Approximately 70 people are engaged in marketing full time. Account representatives are assigned to a limited number of accounts, generally no more than eight, in order to develop an in-depth understanding of each client's information technology needs and form strong client relationships. As noted above, the cross-marketing of multiple services is an important Company strategy. See "Business - Strategies." Commissions constitute a significant portion of the total compensation of account representatives, and are based upon the gross profit from business originated by each representative. Professional services are generally billed to clients on an hourly or daily basis. The Company undertakes solutions engagements on both a fixed price and best efforts basis. In fixed price arrangements, the Company bears the risk that project costs will exceed estimates. Consequently, the analysis of the scope and complexity of a project and the development of a viable, competitive bid is a critical aspect of the Company's solutions business. The Company focuses its marketing efforts on large businesses and institutions with significant information technology budgets and recurring staffing or software development needs. Its clients are engaged in a broad spectrum of industries. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." The following is a selected list of clients for which the Company provided services in 1994: American Express Company Florida Power & Light Co. MCI Communications Corp. AT&T Ford Motor Company Merrill Lynch & Co., Inc. BellSouth Corporation GTE Corporation NYNEX Corporation British Petroleum Company P.L.C. General Electric Company The Prudential Insurance CIGNA Corporation IBM Company of America Citicorp Lehman Brothers, Inc. Time Warner Inc. Eli Lilly and Company
The Company has historically derived, and expects in the future to derive, a significant percentage of its total revenue from a relatively small number of clients. In 1994, the Company's two largest clients, AT&T and IBM, accounted for 9% and 6%, respectively, of consolidated revenues, but the Company provided services through various engagements for a number of different divisions of each of these clients. In accordance with industry practice, most of the Company's contracts are terminable by either the client or the Company on short notice. The Company does not believe that backlog is material to its business. -16- Professional Staff and Recruitment As of March 30, 1995 the Company had a staff of approximately 2,200, including approximately 1,900 software professionals. As of that date, approximately 350 of the Company's software professionals were working on solutions engagements. The Company's success is dependent upon its ability to attract and retain qualified professional computer personnel. In particular, competition for the limited number of qualified project managers and professionals with certain "niche" skills, such as a working knowledge of certain sophisticated computer software, is intense. Although the Company generally has been successful in attracting employees with the skills needed to fulfill customer engagements, demand for qualified professionals conversant with certain technologies may outstrip supply as new and additional skills are required to keep pace with evolving computer technology. Accordingly, the Company devotes significant resources to recruitment, maintaining over 50 recruiters at the branch, regional and corporate levels. Each potential applicant is interviewed, tested and graded by the Company's recruiting personnel, and the applicant's file is scanned into the Company's imaged-based centralized repository. This data base, which may be accessed by appropriate personnel throughout the Company, can be searched by a number of different criteria, including specific skills or qualifications. Competition The commercial information technology services market is highly competitive and served by numerous firms, many of which serve only their respective local markets. The market includes participants in a variety of market segments, including systems consulting and integration firms, professional services companies, application software firms, temporary employment agencies, the professional service groups of computer equipment companies such as Hewlett- Packard Company, Unisys Corporation and Digital Equipment Corporation, facilities management and management information systems ("MIS") outsourcing companies, certain "Big Six" accounting firms, and general management consulting firms. The Company's competitors also include companies such as Andersen Consulting, Technology Solutions Corporation, Cambridge Technology Partners, Inc., SHL Systemhouse Inc., Cap Gemini America, Business System Group, the consulting division of Computer Sciences Corporation, Computer Task Group, Inc., Analysts International Corp. and Keane, Inc. Many participants in the information technology consulting and software solutions market have significantly greater financial, technical and marketing resources and generate greater revenues than the Company. The Company believes that the principal competitive factors in the commercial information technology services industry include responsiveness to client needs, speed of application software development, quality of service, price, project management capability and technical expertise. Pricing has its greatest importance as a competitive factor in the area of professional service staffing. The Company believes that its ability to compete also depends in part on a number of competitive factors outside its control, including the ability of its competitors to hire, retain and motivate skilled technical and management personnel, the ownership by competitors of software used by potential clients, the price at which others offer comparable services and the extent of its competitors' responsiveness to customer needs. Intellectual Property Rights The Company's success is dependent in part upon its software development methodology and other proprietary intellectual property rights. The Company relies upon a combination of trade secret, nondisclosure and other contractual arrangements, technical measures and copyright and trademark laws to protect its proprietary rights. The Company holds no patents or registered copyrights. The Company generally enters into confidentiality agreements with its employees, consultants, clients and potential clients and limits access to and distribution of its proprietary information. There can be no assurance that the steps taken by the Company in this regard will be adequate to deter misappropriation of its proprietary information or that the Company will be able to detect unauthorized use and take appropriate steps to enforce its intellectual property rights. -17- The Company's business includes the development of custom software applications in connection with specific client engagements. Ownership of such software is generally assigned to the client. In addition, the Company also develops object-oriented software components that can be reused in software application development and certain foundation and application software products, or software "tools," most of which remain the property of the Company. Although the Company believes that its services and products do not infringe on the intellectual property rights of others, there can be no assurance that such a claim will not be asserted against the Company in the future. Facilities The Company's principal executive offices, the headquarters of HCI, USS, SOS and CKC, one of its three software/outsourcing facilities are located in two facilities with an aggregate of approximately 56,000 square-feet and are leased at an aggregate current annual rent of approximately $800,000 for terms expiring on December 31, 1999. The Company's remaining 28 offices, including two additional software facilities, aggregate approximately 83,000 square feet and are leased at aggregate current annual rents of approximately $1,146,000 for various terms, with no lease commitment extending past May 15, 2000. -18- MANAGEMENT The following table sets forth certain information with respect to the Company's directors and senior management.
Name Age Position ---- --- -------- John J. Cassese 50 Chairman of the Board and President Thomas J. Berry 70 Director Wilfred R. Plugge 71 Director Bernhard Hubert 50 Executive Vice President Michael Shea, CPA 35 Chief Accounting Officer and Controller Barry D. Olson 46 Senior Vice President Robert J. Palmieri 43 Senior Vice President Terry C. Quinn 38 Senior Vice President David W. Bialick, CPA 52 Vice President and Treasurer Charles J. McCourt 51 Vice President David M. Reingold 47 Vice President - Marketing and Strategic Services Carl T. Bergeman 57 President, ComputerKnowledge Division John A. Sisto 60 President, Horizons Consulting, Inc. Edward D. Williams 62 President, Strategic Outsourcing Services, Inc. Michael Fitton 37 President, Unified Systems Solutions, Inc.
John J. Cassese, a co-founder of the Company, has been its Chairman of the Board and President since 1982. Thomas J. Berry, a director of the Company since 1989, was Executive Advisor and Executive Assistant to the Postmaster General, U.S. Postal Services, from 1986 to 1993. Prior thereto, he was a Vice President of AT&T until his retirement in 1986. Wilfred R. Plugge, a director of the Company since 1983, retired in 1987 as Vice President - International Operations of SRI International, a private research institute. Bernhard Hubert became the Company's Executive Vice President in 1995. Prior thereto, he had been the Company's Senior Vice President and Chief Financial Officer since 1982. Michael Shea became the Company's Controller in March 1995. Prior thereto, he was the Director of Internal Audit, from September 1992 to February 1995, and the Manager of Financial Reporting, from January 1989 to August 1992, at Booz, Allen & Hamilton, Inc., a management consulting company. Barry D. Olson, who became a Senior Vice President of the Company in November 1994, has been in charge of the Company's Midwest/West Region since 1989. Mr. Olson joined the Company in 1984. Robert J. Palmieri became a Senior Vice President of the Company in November 1994. He has directed the Company's Eastern Region since 1992, and for a number of years prior thereto was responsible for other regions of the Company's business. Mr. Palmieri joined the Company in 1972. Terry C. Quinn became a Senior Vice President of the Company in charge of the Central Region in November 1994, a responsibility he had held as Regional Vice President since 1987. Prior thereto, Mr. Quinn, who joined the Company in 1983, had been a branch manager. David W. Bialick, CPA has been a Vice President since 1980 and the Treasurer since 1976. He also served as Controller from 1971 to March 1995. -19- Charles J. McCourt has been a Regional Vice President in charge of the Communications Clients Group since 1992. Mr. McCourt held a number of project manager and marketing positions after joining the Company in 1988. David M. Reingold became Vice President - Marketing and Strategic Services in December 1994. He also serves as Vice Chairman of Birla Horizons International. Mr. Reingold, who joined the Company in 1978, served as the Company's Vice President responsible for corporate staffing and recruitment from 1983 to 1994. Carl T. Bergeman has been President of the Company's ComputerKnowledge Division since 1990. After joining the Company in 1984, he served as a Vice President of the Company responsible for consulting and professional services in the Company's then Mid-Atlantic Region. John A. Sisto has been President of Horizons Consulting, Inc. since its inception in 1992. He joined the Company in October 1991 and served in a sales management capacity until 1992. Prior thereto, Mr. Sisto was the Northeast Regional Manager of IBM's Professional Services Division from 1985 to 1991. Edward D. Williams, the founder of Strategic Outsourcing Services, Inc.'s business, has been its President since 1990. Michael Fitton, the founder of Unified Systems Solutions, Inc., has been its President since 1992. From 1991 to 1992, Mr. Fitton was a Vice President of General Logistics, Inc., an information technology services company. Prior thereto, he was a Director of Technical Services for the Company from 1986 to 1991. The Board of Directors, currently consisting of three members, intends to expand its size by two directors, with one of the newly created directorships to be filled by an outsider. Although no specific date can be given, the Board of Directors anticipates effecting such expansion during 1995. -20- SELLING SHAREHOLDER The following table sets forth certain information with respect to Common Stock beneficially owned by John J. Cassese, the Chairman of the Board and President and a co-founder of the Company (the "Selling Shareholder"), as of the date of this Prospectus and as adjusted to reflect the sale by the Selling Shareholder of 75,000 shares of Common Stock in the offering. The Selling Shareholder may sell up to an additional 165,000 shares of Common Stock in connection with the exercise of the Underwriting over-allotment option. See "Underwriting." Included in the aggregate shares of Common Stock beneficially owned by the Selling Shareholder are 193,125 shares that may be acquired upon the exercise of options granted under the Company's stock option and appreciation plans that either are currently exercisable or will become exercisable within 60 days of the date of this Prospectus.
Beneficial Beneficial Ownership of Ownership of Common Stock Common Stock Prior to the Offering After the Offering --------------------- ------------------ Shares to Number be sold in the Number of Shares Percent(1) Offering of Shares Percent(1) --------- ------- -------- --------- ------- Name - ---- John J. Cassese 1,271,559 13.8% 75,000 1,196,559 11.7% Chairman of the Board and President
_____________________________ (1) The shares subject to options were deemed outstanding for purposes of this calculation. DESCRIPTION OF SECURITIES General The Company is authorized to issue 30,000,000 shares of Common Stock and 200,000 shares of preferred stock, $.10 par value (the "Preferred Stock"). As of May 1, 1995, 8,993,937 shares of Common Stock and no shares of Preferred Stock were outstanding. In addition, as of such date 4,414,685 shares of Common Stock were reserved for issuance under the Company's stock option plans, of which 1,072,535 shares were subject to outstanding options. Common Stock Each outstanding share of Common Stock entitles the holder to one vote on all matters requiring a vote of shareholders. Since the Common Stock does not have cumulative voting rights, the holders of shares having more than 50% of the voting power, if they choose to do so, may elect all the directors of the Company and the holders of the remaining shares would not be able to elect any directors. Under New York law, the approval of the holders of two-thirds of all outstanding stock is required to effect a merger of the Company or disposition of all or substantially all of the Company's assets. Subject to the rights of holders of any series of Preferred Stock that may be issued in the future, the holders of the Common Stock are entitled to receive dividends when, as and if declared by the Board of Directors out of funds legally available therefor. See "Dividend Policy." In the event of a voluntary or involuntary liquidation of the Company, all shareholders are entitled to a pro rata distribution of the assets of the Company remaining after payment of claims of creditors and liquidation preferences of any preferred stock. The transfer agent for the Common Stock is Registrar & Transfer Company, 10 Commerce Drive, Cranford, New Jersey 07016. -21- Preferred Stock The Company is authorized to issue 200,000 shares of Preferred Stock in one or more series, the terms of which may be fixed by the Board of Directors. Except as described below under "Preferred Stock Purchase Rights," the Board of Directors has not created any series of Preferred Stock, and it is not possible to state the actual effect of any issuance of one or more series of preferred stock upon the rights of holders of Common Stock until the Board of Directors of the Company determines the rights of the holders of such series of preferred stock. Such effects might, however, include: (a) reduction of the amount of funds otherwise available for payment of cash dividends on Common Stock; (b) restrictions on the payment of cash dividends on Common Stock; (c) dilution of the voting power of the Common Stock, to the extent that any series of issued preferred stock has voting rights or is convertible into Common Stock; and (d) the holders of Common Stock not being entitled to share in the assets of the Company upon liquidation until satisfaction of liquidation preferences, if any, in respect of any outstanding series of preferred stock. Preferred Stock Purchase Rights Pursuant to a Rights Agreement dated as of July 6, 1989, as amended ("Rights Agreement"), between the Company and Chemical Bank, as Rights Agent, each outstanding share of Common Stock has attached to it one Right which entitles the registered holder of such Share to purchase from the Company 0.0030% of a share of Series A Preferred Stock, par value $.10 per share (the "Series A Preferred"), at a price of $30.00 per one one-hundredth (1/100) of a share (the "Purchase Price"), subject to certain adjustments. The Rights are attached to all certificates representing shares of Common Stock and no separate Right certificates are distributed nor will be distributed until the earlier to occur of (i) 10 days following a public announcement that a person or group of affiliated or associated persons has acquired, or obtained the right to acquire beneficial ownership of 20% or more of the outstanding Common Stock (an "Acquiring Person"), or (ii) 10 business days (or such later day as may be determined by action of the Board of Directors prior to such time as any person or group becomes an Acquiring Person) following the commencement of a tender offer or exchange offer if, upon consummation thereof, any person or group would be the beneficial owner of 20% or more of the outstanding Common Stock (the earlier of such dates being called the "Distribution Date"). The date of announcement of the existence of an Acquiring Person referred to in clause (i) above is hereinafter referred to as the "Share Acquisition Date." The Rights Agreement provides that, until the Distribution Date, the Rights will be transferred with and only with the Common Stock. Until the Distribution Date (or earlier redemption, exchange or expiration of the Rights), all new Common Stock certificates issued upon the transfer or new issuance of shares of Common Stock will contain a notation incorporating the Rights Agreement by reference. Until the Distribution Date (or earlier redemption, exchange or expiration of the Rights), the surrender for transfer of any certificates for Common Stock outstanding will also constitute the transfer of the Rights associated with Common Stock represented by such certificate. As soon as practicable following the Distribution Date, separate certificates evidencing the Rights (the "Rights Certificates") will be mailed to holders of record of the Common Stock on the Distribution Date and, thereafter, such separate Rights Certificates alone will evidence the Rights. The Rights are not exercisable until the Distribution Date and will expire at the close of business on July 16, 1999, unless earlier redeemed or exchanged by the Company as described below. In the event that any person or group of affiliated or associated persons becomes an Acquiring Person, the Rights Agreement provides that proper provisions shall be made so that each holder of a Right, except as provided below, shall thereafter have the right to receive, upon exercise, shares of Common Stock (or, in the Company's option, Common Stock Equivalents, as such term is defined in the Rights Agreement) having a value equal to two times the exercise price of the Right. Upon the occurrence of the event described in the first sentence of this paragraph, any Rights beneficially owned by (i) an Acquiring Person or an Associate or Affiliate (as such terms are defined in the Rights Agreement) of an Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee after the Acquiring Person becomes such, or (iii) a transferee -22- of an Acquiring Person (or of any such Associate or Affiliate) who becomes a transferee prior to or concurrently with the Acquiring Person becoming such and receives such Rights pursuant to either (A) a transfer (whether or not for consideration) from the Acquiring Person to holders of equity interests in such Acquiring Person or to any person with whom the Acquiring Person has any continuing agreement, arrangement or understanding regarding the transferred Rights or (B) a transfer which the Board of Directors of the Company has determined is part of a plan, arrangement or understanding which has a primary purpose or effect the avoidance of the Rights Agreement, shall become null and void without any further action and no holder of such Rights shall have any rights whatsoever with respect to such Rights, whether under any provision of the Rights Agreement or otherwise. In the event that, following the earlier of the Distribution Date and the Share Acquisition Date, (i) the Company engages in a merger or other business combination transaction in which the Company is not the surviving corporation, (ii) the Company engages in a merger or other business combination transaction with another person in which the company is the surviving corporation, but in which the Common Stock are changed or exchanged, or (iii) more than 50% of the Company's assets or earning power is sold or transferred, the Rights Agreement provides that proper provision shall be made so that each holder of a Right (except Rights which previously have been voided as described above) shall thereafter have the right to receive, upon exercise thereof at the then current exercise price of the Right, common stock of the acquiring company having a value equal to two times the exercise price of the Right. The Purchase Price payable, and the number of shares of Series A Preferred or other securities issuable, upon exercise of the Rights are subject to adjustment from time to time to prevent dilution (i) in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A Preferred, (ii) upon the grant to holders of the Series A Preferred of certain rights, options or warrants to subscribe for shares of Series A Preferred or convertible securities at less than the current market price of the Series A Preferred, or (iii) upon the distribution to holders of Series A Preferred of evidences of indebtedness, shares of Preferred Stock, assets or cash (excluding a regular semiannual cash dividend) or of subscription rights, options or warrants (other than those referred to above). The number of outstanding Rights and the number of shares of Series A Preferred issuable upon exercise of each Right are also subject to adjustment in the event of a stock split of the Common Stock or a stock dividend on the Common Stock payable in shares of Common Stock or subdivisions, consolidations or combinations of the Common Stock occurring, in any such case, prior to the Distribution Date. With certain exceptions, no adjustment in the Purchase Price will be required until cumulative adjustments require an adjustment of at least 1% in such Purchase Price. No fractional shares will be issued (other than fractions which are integral multiples of one one-hundredth of a share of Series A Preferred, which may, at the election of the Company, be evidenced by depository receipts) and, in lieu thereof, an adjustment in cash will be made based on the market price of the Series A Preferred on the last trading date prior to the date of exercise. At any time prior to the Share Acquisition Date, the Board of Directors of the Company may redeem the Rights in whole, but not in part, at a price of $.01 per Right (the "Redemption Price"). Before the redemption period expires, it may be extended by the Board. Immediately upon the action of the Board of Directors of the Company ordering the redemption of the Rights, the Rights will terminate and the only right to the holders of Rights will be to receive the Redemption Price. At any time after the time that any person or group of affiliated or associated persons becomes an Acquiring Person, the Board of Directors of the Company may exchange the Rights (except Rights which previously have been voided as described above), in whole, but not in part, at an exchange ratio of one share of Common Stock (or one Common Stock Equivalent) per Right. Until a Right is exercised, the holder thereof, as such, will have no rights as a shareholder of the Company, including, without limitation, the right to vote or to receive dividends. The terms of the Rights may be amended by the Company and the Rights Agent, provided, that, following the earlier of the Share Acquisition Date and the Distribution Date, the amendment does not adversely affect the interests of holders of Rights (other than an Acquiring Person) and provided that no amendment shall be made which decreases the Redemption Price. -23- The Rights have certain anti-takeover effects. The Rights would cause substantial dilution to a person or group that attempts to acquire the Company on terms not approved by the Board of Directors of the Company, except pursuant to an offer conditioned on a substantial number of Rights being acquired. The Rights should not interfere with any merger or other business combination approved by the Board of Directors of the Company at a time when the Rights are redeemable. Certain Provisions of New York Law New York law regulates "business combinations," a term covering a broad range of transactions, between "resident domestic corporations" (as defined, which term includes the Company) and an "interested shareholder", which is defined as any person beneficially owning 20% or more of the outstanding voting stock of the resident domestic corporation or any affiliate or associate of such owner. However, if the interested shareholder has owned at least 5% of such outstanding voting stock at all times from October 30, 1985 to the date on which the interested shareholder first attains 20% ownership (the "Stock Acquisition Date"), the proposed business combination is exempt from this statute. Under the statute, a resident domestic corporation may not engage in any business combination with any interested shareholder unless (a) if the business combination is to occur within five years of the date the shareholder acquired 20% or more ownership, either the business combination or the stock acquisition was previously approved by the board of directors, or (b) the business combination is approved by a majority of outstanding voting shares (not including those shares owned by the interested shareholder) which approval may not be effectively given until approximately five years after the interested shareholder's Stock Acquisition Date, or (c) the business combination occurs after five years after the interested shareholder's Stock Acquisition Date and the consideration paid to the non-interested shareholders meets certain stringent conditions imposed by the statute. The restrictions imposed by the statute will not apply to a corporation which amends its by-laws by the affirmative vote of a majority of its outstanding voting stock (not including those shares held by an interested shareholder) to "opt out" of the statute; provided that such amendment will not be effective for 18 months after such vote and will not apply to any business combination where the Stock Acquisition Date is on or prior to the date of the amendment. The Company has not opted out of the statute and the Board of Directors does not anticipate seeking shareholder approval therefor. UNDERWRITING The Underwriters named below, acting through their representatives, Janney Montgomery Scott Inc. and Robert W. Baird & Co. Incorporated (together, the "Representatives"), have severally agreed, subject to the terms and conditions of the underwriting agreement by and among the Company, the Selling Shareholder and the Underwriters (the "Underwriting Agreement"), to purchase from Company the number of shares of Common Stock set forth below opposite each such Underwriter's name, at the offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus:
Underwriter Number of Shares ----------- ---------------- Janney Montgomery Scott Inc. . . . . . . . . . Robert W. Baird & Co. Incorporated . . . . . . . ------------ Total . . . . . . . . . . . . . . . . . ============
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent, and that the Underwriters will purchase the total number of shares of Common Stock shown above if any of such shares are purchased. -24- The Company has been advised by the Representatives that the Underwriters propose initially to offer the shares of Common Stock directly to the public at the offering price set forth on the cover page of this Prospectus and to certain dealers, including the Underwriters, at such price less concession not in excess of $ per share. The Underwriters may allow, and such dealers may reallow, a concession not in excess of $ per share to certain other dealers. The Company and the Selling Shareholder have granted the Underwriters an over-allotment option, exercisable not later than 30 days after the date of this Prospectus, to purchase up to 165,000 additional shares of Common Stock at the offering price, less the underwriting discounts and commissions set forth on the cover page of this Prospectus. The Underwriting Agreement provides that any shares acquired by the Underwriters pursuant to the over-allotment option will be purchased from the Selling Shareholder to the extent that the Selling Shareholder, in his discretion, so elects, and the balance of the shares, if any, will be purchased from the Company. To the extent that the Underwriters exercise such option, each Underwriter will be committed, subject to certain conditions, to purchase a number of the additional shares of Common Stock proportionate to such Underwriter's initial commitment as indicated in the preceding table. The over-allotment option may be exercised for fewer than all of the shares subject to such option. The Underwriters may exercise this option only to cover over-allotments, if any, made in connection with the sale of the shares of Common Stock offered hereby. If purchased, the Underwriters will sell such additional shares on the same terms as those on which the shares are being offered. The Company and the Selling Shareholder have agreed to indemnify the Underwriters against, or to contribute to losses arising out of, certain liabilities in connection with this offering, including liabilities under the Securities Act of 1933. The Company and each of its directors and executive officers have agreed not to sell, contract to sell or otherwise dispose of any shares of Common Stock (except, in the case of the Company, pursuant to the exercise of currently outstanding options granted under the Company's stock option and appreciation plans) for a period of 180 days from the date of this Prospectus without the prior written consent of Janney Montgomery Scott Inc. ("JMS"). JMS has provided financial advisory services to the Company, including advice on capital raising strategies. The Company will pay JMS $75,000 upon completion of this offering for such services. The foregoing includes a summary of the principal terms of the Underwriting Agreement and does not purport to be complete. Reference is made to the copy of the Underwriting Agreement that is on file as an exhibit to the Registration Statement of which this Prospectus is a part. LEGAL MATTERS The validity of the shares of Common Stock offered hereby is being passed upon for the Company and the Selling Shareholder by Proskauer Rose Goetz & Mendelsohn LLP, 1585 Broadway, New York, New York 10036. Certain legal matters in connection with this Offering will be passed upon for the Representatives by Baer Marks & Upham, a partnership including a professional corporation, 805 Third Avenue, New York, New York 10022. EXPERTS The consolidated financial statements of the Company as of December 31, 1993 and 1994, and for each of the three years in the period ended December 31, 1994 appearing elsewhere in this Prospectus have been audited by Grant Thornton LLP, independent certified public accountants, and have been included herein in reliance upon their authority as experts in accounting and auditing. -25- COMPUTER HORIZONS CORP. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page ---- Independent Auditors' Report . . . . . . . . . . . . . . . . . . . . . . . F-2 Financial Statements: - --------------------- Consolidated Balance Sheets at December 31, 1993 and 1994 and March 30, 1995 (unaudited) . . . . . . . F-3 Consolidated Statements of Income for the years ended December 31, 1992, 1993 and 1994 and for the three months ended March 30, 1994 and March 30, 1995 (unaudited) . . . F-4 Consolidated Statement of Shareholders' Equity for the years ended December 31, 1992, 1993 and 1994 and for the three months ended March 30, 1995 (unaudited) . . . . . . . . . . . . . . . . . . . . F-5 Consolidated Statements of Cash Flows for the years ended December 31, 1992, 1993 and 1994 and for the three months ended March 30, 1994 and March 30, 1995 (unaudited) . . . . . . . . . . F-6 Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . F-7 F-1 INDEPENDENT AUDITORS' REPORT Board of Directors and Shareholders Computer Horizons Corp. We have audited the accompanying consolidated balance sheets of Computer Horizons Corp. and Subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Computer Horizons Corp. and Subsidiaries as of December 31, 1994 and 1993 and the consolidated results of their operations and their consolidated cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Note 1, the Company changed its method of accounting for income taxes in 1993. We have also audited Schedule II of Computer Horizons Corp. and Subsidiaries for each of the three years in the period ended December 31, 1994. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. GRANT THORNTON LLP Parsippany, New Jersey January 31, 1995 F-2
COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) December 31, March 30, -------------------- ----------- Assets 1993 1994 1995 -------- -------- ----------- (unaudited) Current assets: Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . $ 4,370 $ 2,278 $ 234 Accounts receivable, net of allowance for doubtful accounts of $462,000, $566,000 and $542,000 at December 31, 1993, 1994, and March 30, 1995, respectively . . 20,601 30,636 34,525 Deferred income tax benefit . . . . . . . . . . . . . . . . . . . 414 771 516 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 919 1,108 1,380 ------- ------ --------- Total current assets . . . . . . . . . . . . . . . . . . . . . . . . 26,304 34,793 36,655 ------ ------ -------- Property and equipment: Furniture, equipment and other . . . . . . . . . . . . . . . . . 4,675 5,983 6,268 Less accumulated depreciation . . . . . . . . . . . . . . . . . . 2,639 3,348 3,577 ------- ------- --------- 2,036 2,635 2,691 ------- ------- --------- Other assets - net: Goodwill (Note 1) . . . . . . . . . . . . . . . . . . . . . . . . 11,286 11,065 11,337 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 974 657 778 ------- ------- --------- 12,260 11,722 12,115 ------ ------ -------- Total Assets . . . . . . . . . . . . . . . . . . . . . . . . . . $40,600 $49,150 $ 51,461 ====== ====== ======== Liabilities and Shareholders' Equity Current liabilities: Notes payable - banks . . . . . . . . . . . . . . . . . . . . . . $ -- $ 3,200 $ 3,950 Current portion of long-term debt (Note 3) . . . . . . . . . . . 1,556 1,556 1,428 Accrued payroll, payroll taxes and benefits . . . . . . . . . . . 6,017 7,305 6,441 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . 287 560 731 Income taxes payable . . . . . . . . . . . . . . . . . . . . . . 175 880 1,422 Other accrued expenses . . . . . . . . . . . . . . . . . . . . . 738 808 857 ------- ------- --------- Total current liabilities . . . . . . . . . . . . . . . . . . . . . . 8,773 14,309 14,829 ------- ------ -------- Long-term debt (Note 3) . . . . . . . . . . . . . . . . . . . . . . . 5,843 4,288 4,288 ------- ------ --------- Other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 295 636 621 ------- ------- --------- Commitments (Note 7) . . . . . . . . . . . . . . . . . . . . . . . . Shareholders' equity: Preferred stock, $.10 par; authorized and unissued, 200,000 shares, including 50,000 Series A . . . . . . . . . . Common stock, $.10 par; authorized, 30,000,000 shares; issued 10,277,514 shares, 10,715,922 shares and 10,758,320 shares at December 31, 1993, 1994 and March 30, 1995, respectively . . . . . . . . . . . . . . . . 1,028 1,072 1,076 Additional paid-in capital . . . . . . . . . . . . . . . . . . . 11,664 13,642 13,762 Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . 24,165 29,851 31,533 ------ ------ ------ 36,857 44,565 46,371 ------ ------ ------ Less Shares: Shares held in treasury, at cost; 1,437,278 shares at December 31, 1993 and 1,786,883 shares at December 31, 1994 and March 30, 1995 . . . . . . . . . . . . . . . . . . . . . 10,539 14,648 14,648 Notes receivable, officers . . . . . . . . . . . . . . . . . 629 -- -- ------- ------ ------ 11,168 14,648 14,648 ------ ------ ------ Total shareholders' equity . . . . . . . . . . . . . . . . . . . 25,689 29,917 31,723 ------ ------ ------ Total Liabilities and Shareholders' Equity . . . . . . . . . . . $40,600 $49,150 $ 51,461 ====== ====== ========
The accompanying notes are an integral part of these statements. F-3
COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share data) Year Ended Three Months Ended December 31, March 30, ------------------------------------ --------------------------- 1992 1993 1994 1994 1995 -------- -------- --------- ----------- ---------- (unaudited) Revenues (Note 8) $102,206 $121,550 $152,192 $ 33,171 $ 43,867 ------- ------- ------- ---------- --------- Costs and expenses: Direct costs . . . . . . . . . . . 74,200 87,800 108,189 23,655 31,366 Selling, administrative and general 22,651 26,256 32,992 7,281 9,294 Merger and related expenses (Note 2) 885 ---------- ---------- ------------ --------- --------- 97,736 114,056 141,181 30,936 40,660 --------- -------- --------- ------------ --------- Income from operations 4,470 7,494 11,011 2,235 3,207 ---------- --------- ---------- ------------ --------- Other income (expense): Interest income . . . . . . . . . . 312 235 53 35 37 Interest expense . . . . . . . . . (890) (819) (691) (185) (212) ---------- ------- -------- -------------- ---------- (578) (584) (638) (150) (175) ---------- -------- --------- -------------- ---------- Income before income taxes 3,892 6,910 10,373 2,085 3,032 ---------- -------- --------- ------------ ---------- Income taxes (Notes 1 and 5): Current . . . . . . . . . . . . . . 1,809 3,116 5,044 915 1,095 Deferred . . . . . . . . . . . . . 57 90 (357) 56 255 ----------- --------- -------- ------------- ------------ 1,866 3,206 4,687 971 1,350 ---------- -------- -------- ----------- ------------- Net Income $ 2,026 $ 3,704 $ 5,686 $ 1,114 $ 1,682 ========== ========= ======== ============ ========== Earnings per share: Primary . . . . . . . . . . . . . . $ .22 $ .37 $ .60 $ .12 $ .18 ========== ========== ======== ============= ============ Fully diluted . . . . . . . . . . . $ .22 $ .36 $ .60 $ .12 $ .18 ========== ========== ======== ============= ============ Weighted average number of shares outstanding: Primary . . . . . . . . . . . . . . 9,083 9,996 9,506 9,520 9,502 ========== ========= ======== ============ =========== Fully diluted . . . . . . . . . . . 9,230 10,331 9,534 9,558 9,562 ========== ======== ======== ========= ========
The accompanying notes are an integral part of these statements. F-4
COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (Dollars in thousands) Years Ended December 31, 1992, 1993 and 1994 and the Three Months Ended March 30, 1995 Additional Common Stock Treasury Stock Notes --------------------- paid-in Retained ----------------- receivable Shares Amount capital earnings Shares Amount officers --------- ------ -------- -------- ------- -------- ---------- Balance, January 1, 1992 . . 3,378,274 $338 $ 8,167 $18,435 837,578 $ 4,621 $ 608 Shares issued in connection with acquisition . . . . . 330,000 33 3,019 Stock options exercised . . . 12,100 1 87 21 Net income for the year . . . 2,026 ---------- ------ ---------- --------- --------- ---------- --------- Balance, December 31, 1992 . 3,720,374 372 11,273 20,461 837,578 4,621 629 Three-for-two stock split declared March 1993 . . . 1,441,398 144 (144) Stock options exercised . . . 204,500 21 1,026 Purchases of treasury stock . 599,700 5,918 Net income for the year . . . 3,704 ---------- ------ ---------- --------- --------- ---------- --------- Balance, December 31, 1993 . 5,366,272 537 12,155 24,165 1,437,278 10,539 629 Three-for-two stock split declared February 1994 . . 1,964,497 196 (196) Stock options exercised . . . 408,807 41 1,981 Purchases of treasury stock . 349,605 4,109 Repayment of notes receivable, officers . . . (629) Net income for the year . . . 5,686 ---------- ------ ---------- --------- --------- ---------- --------- Balance, December 31, 1994 . 7,739,576 774 13,940 29,851 1,786,883 14,648 --- Three-for-two stock split declared April 1995 (unaudited) . . . . . . . 2,976,346 298 (298) Stock options exercised (unaudited) . . . . . . . 42,398 4 120 Net income for the period 1,682 (unaudited) . . . . . . . ---------- ------ ---------- --------- --------- ---------- --------- Balance, March 30, 1995 (unaudited) . . . . . . . 10,758,320 $1,076 $ 13,762 $ 31,533 1,786,883 $ 14,648 $ --- ========== ====== ========== ========= ========= ========== =========
F-5
COMPUTER HORIZONS CORP. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) Year Ended Three Months Ended December 31, March 30, ------------------------------------ --------------------- 1992 1993 1994 1994 1995 ---------- --------- -------- -------- ------- (unaudited) Cash flows from operating activities Net income . . . . . . . . . . . . . . . . . . $ 2,026 $ 3,704 $ 5,686 $ 1,114 $ 1,682 Adjustments to reconcile net income to net cash provided by operating activities: Deferred taxes . . . . . . . . . . . . . 57 90 (357) 56 255 Depreciation . . . . . . . . . . . . . . 575 693 754 174 229 Amortization of intangibles . . . . . . . 401 521 568 114 117 Changes in assets and liabilities, net of acquisitions: (Increase) decrease in accounts receivable 1,322 (3,564) (9,770) (6,081) (3,889) (Increase) decrease in refundable income taxes . . . . . . . . . . . . . . . . . . . 611 321 (Increase) decrease in other current assets (339) 49 (433) (229) (272) Increase (decrease) in accrued payroll, payroll taxes and benefits . . . . . . . . . (224) 2,088 1,287 774 (864) Increase (decrease) in accounts payable . . 476 (448) 273 602 171 Increase (decrease) in income taxes payable 161 705 750 542 Increase (decrease) in other accrued expenses . . . . . . . . . . . . . . . . . (697) (267) 11 353 (100) Increase (decrease) in other liabilities . 341 (15) ------- ---------- --------- ------- ------------ Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . 4,208 3,348 (935) (2,373) (2,144) ------- -------- --------- ------- ----------- Cash flows from investing activities Purchases of furniture and equipment . . . . . (477) (955) (1,353) (436) (285) Acquisitions, net . . . . . . . . . . . . . . (383) (388) (245) (240) (Increase) decrease in other assets . . . . . (185) (127) 254 11 (121) Loans to officers, net . . . . . . . . . . . . (21) 629 ------- ---------- --------- --------- ---------- Net cash used in investing activities . . (1,066) (1,470) (715) (425) (646) ------- -------- --------- --------- --------- Cash flows from financing activities Increase in notes payable - banks, net . . . . 3,200 200 750 Payments of long-term debt . . . . . . . . . . (1,853) (1,427) (1,555) (127) (128) Stock options exercised . . . . . . . . . . . 88 1,046 2,022 119 124 Purchases of treasury stock . . . . . . . . . (5,918) (4,109) ------- -------- --------- ---------- ---------- Net cash provided by (used in) financing activities . . . . . . . . . . . . . . . (1,765) (6,299) (442) 192 746 ------- -------- ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . . 1,377 (4,421) (2,092) (2,606) (2,044) Cash and cash equivalents at beginning of year or period . . . . . . . . . . . . . . . . . . 7,414 8,791 4,370 4,370 2,278 ------- -------- --------- --------- --------- Cash and cash equivalents at end of year or period . . . . . . . . . . . . . . . . . . $ 8,791 $ 4,370 $ 2,278 $ 1,764 $ 234 ======= ======== ========= ========= ========= Cash paid for: Interest . . . . . . . . . . . . . . . . . . . $ 918 $ 828 $ 713 $ 8 $ 46 Income taxes . . . . . . . . . . . . . . . . . 1,704 2,621 4,269 165 674 In 1992, the Company acquired all of the outstanding capital stock of Worldwide Computer Services Inc. in exchange for approximately 742,500 shares of the Company's common stock. In connection with the acquisition, liabilities were assumed as follows: Fair value of assets acquired . . . . . . . $ 5,092 Stock issued and acquisition costs . . . . 3,533 ------- Liabilities assumed . . . . . . . . . . . . $ 1,559 =======
The accompanying notes are an integral part of these statements. F-6 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1994, 1993 and 1992 (Amounts and Information Applicable to March 30, 1994 and 1995 are unaudited) Note 1 - Summary of Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Computer Horizons Corp. and its wholly-owned subsidiaries (the "Company"). All material intercompany accounts and transactions have been eliminated. Revenue Recognition The Company recognizes revenues as professional services are performed. Recruitment Costs Recruitment costs are charged to operations as incurred. Cash and Cash Equivalents Cash and cash equivalents include highly liquid debt instruments with a maturity of three months or less and consist of the following at:
December 31, March 30, 1993 1994 1995 --------- ----------- ------------- (unaudited) (in thousands) Cash $ 1,435 $ 2,121 $ (96) Commercial paper 1,998 Repurchase agreements 900 119 310 Certificates of deposit 37 38 20 ------- ------- ------ $ 4,370 $ 2,278 $ 234 ======= ======= ======
Concentrations of Credit Risk Financial Accounting Standards Board Statement No. 105 ("FASB No. 105") requires the disclosure of significant concentrations of credit risk, regardless of the degree of such risk. Financial instruments, as defined by FASB No. 105, which potentially subject the Company to concentrations of credit risk, consist principally of cash and cash equivalents and trade accounts receivable. The Company invests the majority of its excess cash in commercial paper, repurchase agreements and certificates of deposit of high credit, high quality financial institutions or companies, with certain limitations as to the amount that can be invested in any one entity. The Company maintains its cash balances in principally two financial institutions located in New Jersey. These balances are insured by the Federal Deposit Insurance Corporation up to $100,000 for each entity at each institution. At December 31, 1994 and March 30, 1995, uninsured amounts held at these financial institutions total approximately $2,010,000 and $908,000, respectively. F-7 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 (continued) The Company's customers are generally very large, Fortune 500 companies in many industries and with wide geographic dispersion. The Company's two largest customers account for approximately 12% of accounts receivable at December 31, 1994. Two customers accounted for approximately 18% of accounts receivable at March 30, 1995. The Company establishes an allowance for doubtful accounts based upon factors surrounding the credit risk of specific customers, historical trends, and other information. Property and Equipment and Depreciation Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Goodwill Goodwill, the cost in excess of the net assets of acquired businesses, is being amortized by the straight-line method over thirty years. Accumulated amortization is $2,363,000 and $2,828,000 at December 31, 1993 and 1994, respectively, and $2,945,000 at March 30, 1995. On an ongoing basis, management reviews the valuation and amortization of goodwill. As part of this review, the Company estimates the value and future benefits of net income generated to determine that no impairment has occurred. Income Taxes Deferred income taxes resulted primarily from differences between income reported for financial and income tax purposes. These temporary differences result primarily from restructuring charges, allowance for doubtful accounts and other accrued expenses which are deductible only when paid. Effective January 1, 1993, the Company adopted the provisions of Statement of Financial Accounting Standards No. 109 ("SFAS No. 109"), "Accounting for Income Taxes." This statement amends the provisions of SFAS No. 96, "Accounting for Income Taxes," which the Company had previously adopted. As of January 1, 1993, the effect of this change was not significant to the consolidated financial statements. Earnings Per Share Earnings per share are based on the weighted average number of common and common equivalent shares outstanding. Primary earnings per share take into account the shares that may be issued upon exercise of stock options, reduced by the shares that may be repurchased with the funds received from the exercise, based on the average price during the year. Fully diluted earnings per share use the higher of the period-end price or the average price. Unaudited Interim Financial Data The accompanying unaudited financial statements as of March 30, 1995 and 1994 have been prepared in accordance with generally accepted accounting principles for interim financial information in accordance with Article 10 of Regulation S-X. In the opinion of the management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. The results for interim periods are not necessarily indicative of results to be expected for the year. F-8 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note (1) continued Reclassifications Certain reclassifications have been made to the prior year's balance sheet to conform to the 1994 presentation. Note 2 - Acquisitions In June 1994, the Company acquired the net assets of Strategic Outsourcing Services, Inc. ("SOS"), a New Jersey-based provider of data processing services, for approximately $250,000. In addition, the acquisition agreement also provides for contingent consideration based on the future performance of SOS, through 1998. The acquisition was accounted for as a purchase. The results of operations of SOS are included in the consolidated financial statements from June 1, 1994. The consolidated results of operations in 1994 would not be materially different had the acquisition taken place at the beginning of the year. In January 1993, the Company acquired Unified Systems Solutions, Inc. ("USS"), a New Jersey-based provider of systems and network integration services, for approximately $750,000. The acquisition agreement also provides for contingent consideration based on the future performance of USS through 1996. The acquisition was accounted for as a purchase. The excess of cash over the fair value of assets acquired, totalling approximately $509,000, was recorded as goodwill. The Company recorded contingent consideration, totalling approximately $245,000 in 1994 and $389,000 in 1995, including $149,000 which was paid on May 1, 1995, as additional goodwill, with certain additional amounts payable subject to future performance. The results of operations of USS are included in the consolidated financial statements from January 15, 1993. The consolidated results of operations in 1993 would not be materially different had the acquisition taken place at the beginning of the year. In August 1992, the Company acquired all of the outstanding capital stock of Worldwide Computer Services Inc. ("WCS"), a New Jersey-based information management services company, in exchange for approximately 1,113,750 shares of the Company's common stock (approximately $3,533,000, including direct acquisition expenses). The acquisition was accounted for as a purchase. The fair value of the assets acquired approximated $5,092,000 and the liabilities assumed approximated $1,559,000. The results of operations of WCS are included in the consolidated financial statements from August 4, 1992. Subsequent to the merger, the Company assessed and integrated the WCS operations, resulting in a charge to earnings of $885,000 in 1992 for redundant facility and personnel expenses. All costs have been incurred and charged to the provision by December 31, 1993. F-9 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 3 - Long-Term Debt and Lines of Credit Long-term debt consists of the following at:
December 31, March 30, 1993 1994 1995 ----------- -------------- ----------- (unaudited) (in thousands) 9.55% senior notes $7,144 $5,716 $5,716 Notes payable at prime 255 128 ------ ------ ------ 7,399 5,844 5,716 Less current maturities 1,556 1,556 1,428 ----- ----- ----- $5,843 $4,288 $4,288 ===== ===== =====
In 1988, the Company issued two senior notes aggregating $10,000,000 bearing interest at 9.55%, payable semiannually. The notes are payable in annual installments of $1,428,000 from April 15, 1992 through 1997 with a final payment of $1,432,000 due April 15, 1998 and are subject to the provisions of the loan agreement, including, among other things, restrictions on additional borrowings, prepayments, dividends and stock purchases (which were waived in connection with certain purchases of treasury stock), and maintenance of a minimum net worth of $13,500,000. The notes payable at prime consist of promissory notes to four individuals payable on January 15, 1995. Such notes arose in connection with the USS acquisition. Long-term debt matures as follows at:
December 31, March 30, 1994 1995 ------------- ------------ (unaudited) (in thousands) 1995 $1,556 $1,428 1996 1,428 1,428 1997 1,428 1,428 1998 1,432 1,432 ----- ----- $5,844 $5,716 ===== =====
At December 31, 1994 and March 30, 1995, the Company had two bank lines of credit totalling $12,000,000 at rates below the banks' prime lending rates, of which approximately $3,200,000 and $3,950,000, respectively, are outstanding. The maximum amount outstanding during the year was $4,900,000. The average debt outstanding and weighted average interest rate under these lines were $1,067,000 and 6.71%, respectively. F-10 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 - Shareholders' Equity Authorized Shares On June 15, 1994, the Company approved an amendment to the Company's Certificate of Incorporation increasing the authorized number of shares of the Company's common stock from 10,000,000 to 30,000,000. Stock Splits On February 17, 1994, the Board of Directors declared a three-for-two common stock split in the form of a 50% stock distribution, payable on March 22, 1994, to shareholders of record on March 1, 1994. On March 10, 1993, the Board of Directors declared a three-for-two common stock split in the form of a 50% stock distribution, payable on April 13, 1993, to shareholders of record on March 23, 1993. On April 25, 1995, the Board of Directors declared a three-for-two common stock split in the form of a 50% stock distribution, payable on May 30, 1995, to shareholders of record on May 9, 1995. Amounts equal to the $.10 par value of the common shares distributed have been retroactively transferred from additional paid-in capital to common stock. All references in the financial statements with regard to number of shares of common stock, except for treasury stock, common stock prices and per share amounts have been restated to reflect the stock splits. Repurchases of Stock In 1994, the Company repurchased 350,000 shares of its common stock from three officers of the Company for approximately $4,109,000. The repurchase of 240,000 shares for $2,792,000 was related to the retirement of the Vice Chairman and Executive Vice President (Note 7). The remaining 110,000 shares were repurchased for $1,317,000 from two other active officers. Approximately $824,000 of the repurchase amount was used by these officers to repay amounts they owed the Company, $629,000 in note repayments and $195,000 in accrued interest. In 1993, the Company repurchased 597,000 shares of its common stock from Compagnie Generale d'Informatique for approximately $5,895,000, including expenses. Stock Options and Notes Receivable, Officers In 1994, the Company adopted a stock option plan which provides for the granting, to officers and key employees, of options for the purchase of a maximum of 3,375,000 shares of common stock and stock appreciation rights (SARs). The exercise price per share on all options and/or SARs granted may not be less than the fair value at the date of the option grant. Options and SARs generally expire five years from the date of grant and become exercisable in specified amounts during the life of the respective options. No SARs have been granted as of December 31, 1994. This plan, which replaces the Company's 1985 Plan, will terminate on June 15, 2004. F-11 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 (continued) Following is summary of option transactions for the:
Three Months Ended Years Ended December 31, March 30, 1992 1993 1994 1995 ---- ---- ---- ---- (unaudited) (in thousands) Shares under option at beginning of period ($2.11 - $9.17) 1,202 1,323 1,184 896 Granted ($2.22 - $10.00) 266 531 326 147 Exercised ($2.11 - $6.33) (41) (459) (614) (42) Cancelled ($2.11 - $3.11) (104) (211) ------- ------ ------- ------- Shares under option at end of period ($2.11 - $10.00) 1,323 1,184 896 1,001 ====== ====== ====== ===== Shares available for option 593 273 3,167 3,019 ======= ====== ====== ===== Shares exercisable 615 644 443 615 ======= ====== ====== =====
Certain officers have the right to borrow from the Company against the exercise price of options exercised. These borrowings, exclusive of accrued interest, are shown as a reduction in shareholders' equity in 1993 and 1992. Such borrowings were repaid in 1994 in connection with the repurchase of common stock from these officers. In 1994, the Company amended the Directors' Stock Option Plan (i) increasing the maximum number of shares of common stock that may be acquired pursuant to the exercise of options granted under the Plan from 168,750 to 375,000 and (ii) providing that each director of the Company who is not an employee of the Company shall receive up to five annual grants to purchase 4,500 shares of its common stock at its then current fair market value. The plan expires on March 4, 2001. There were 85,500 options outstanding at December 31, 1994. In 1993, the Company issued warrants to purchase 10,125 shares of common stock as part of an agreement with an outside business consulting firm. The exercise price is the fair value at the date of grant. Shareholder Rights Plan In July 1989, the Board of Directors declared a dividend distribution of eight preferred stock purchase rights on each twenty-seven outstanding shares of common stock of the Company. The rights were amended on February 13, 1990. Each right will, under certain circumstances, entitle the holder to buy one one-hundredth (1/100) of a share of Series A preferred stock at an exercise price of $30.00 per one one-hundredth (1/100) share, subject to adjustment. Each one one-hundredth (1/100) of a share of Series A preferred stock has voting, dividend and liquidation rights and preferences substantively equivalent to one share of common stock. The rights will be exercisable and transferable separately from the common stock only if a person or group acquires 15%, amended to 20% in 1994, or more, subject to certain exceptions, of the Company's outstanding common stock or announces a tender offer that would result in the ownership of 20% or more of the common stock. If a person becomes the owner of at least 20% of the Company's common shares (an "Acquiring Person"), each holder of a right other than the Acquiring Person is entitled, upon payment of the then current exercise price per right (the "Exercise Price"), to receive shares of common stock (or common stock equivalents) having a market value equal to twice the Exercise Price. F-12 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 4 (continued) Additionally, if the Company subsequently engages in a merger or other business combination with the Acquiring Person in which the Company is not the surviving corporation, or in which the outstanding shares of the Company's common stock are changed or exchanged, or if more than 50% of the Company's assets or earning power is sold or transferred, a right would entitle a Computer Horizon Corp. shareholder, other than the Acquiring Person and its affiliates, to purchase upon payment of the Exercise Price, shares of the Acquiring Person having a market value of twice the Exercise Price. Prior to a person becoming an Acquiring Person, the rights may be redeemed at a redemption price of one cent per right, subject to adjustment. The rights are subject to amendment by the Board. No shareholder rights have become exercisable. The rights will expire on July 16, 1999. Note 5 - Income Taxes The provision for income taxes consists of the following for the:
Three Months Years Ended December 31, Ended March 30, 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- (unaudited) (in thousands) Current Federal $1,275 $2,191 $3,518 $654 $782 State 534 925 1,399 261 313 Deferred Federal 33 63 (102) 40 182 State 24 27 (255) 16 73 ------ -------- ------ ---- --- 1,866 3,206 4,560 971 1,350 Tax benefit from exercise of stock options 127 - - --------- --------- ------ ----- ------ $1,866 $3,206 $4,687 $971 $1,350 ===== ===== ===== === =====
Deferred tax assets and liabilities consist of the following at:
December 31, March 30, 1993 1994 1995 --------- ---------- ---------- (unaudited) (in thousands) Deferred tax assets Accrued insurance $183 $284 $ Accrued payroll and benefits 175 379 381 Deferred lease obligations 124 124 118 Allowance for doubtful accounts 73 103 113 Other 36 70 83 ---- ---- ---- 591 960 695 ---- ---- --- Deferred tax liabilities Depreciation 145 187 177 Other 32 2 2 ---- ----- --- 177 189 179 ---- ---- === Deferred tax assets, net $414 $771 $516 === === ===
F-13 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 5 (continued) Deferred taxes (benefit) for the year ended December 31, 1992, applicable to differences between assets and liabilities for financial statement and tax return purposes, were provided as follows: 1992 ---- (in thousands) Accrued payroll and benefits $ (52) Restructuring charges 171 Allowance for doubtful accounts -- Accrued insurance (54) Other (8) ----- $ 57 ==== A reconciliation of income taxes as reflected in the accompanying statements with the statutory Federal income tax rate of 34% is as follows for the:
Years Ended Three Months Ended December 31, March 30, 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- (unaudited) (in thousands) Statutory Federal income taxes $1,323 $2,349 $3,527 $ 709 $1,031 State and local income taxes, net of Federal tax benefit 311 632 858 165 254 Amortization of goodwill 163 155 158 39 39 Other, net 69 70 144 58 26 ------ ------- ------ ------ ----- $1,866 $3,206 $4,687 $ 971 $1,350 ===== ===== ===== ===== =====
Note 6 - Savings Plan The Company maintains a defined contribution savings plan covering eligible employees. The Company makes contributions up to a specific percentage of participants' contributions. The Company contributed approximately $175,000, $192,000 and $204,000 in 1992, 1993 and 1994, respectively, and $48,000 and $52,000 for the three months ended March 30, 1994 and 1995, respectively. F-14 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 7 - Commitments Leases The Company leases office space under long-term operating leases expiring through 2000. Approximate minimum rental commitments were as follows at:
December 31, 1994 March 30, 1995 ----------------- -------------- (unaudited) Year ending (in thousands) 1995 $1,676 $1,433 1996 1,441 1,705 1997 1,241 1,505 1998 1,067 1,331 1999 729 993 Thereafter 33 33 ----- ----- $6,187 $7,000 ===== =====
Office rentals are subject to escalations based on increases in real estate taxes and operating expenses. Aggregate rent expense for operating leases approximated $1,436,000, $1,595,000 and $1,796,000 for the years ended December 31, 1992, 1993 and 1994, respectively, and $449,000 and $419,000 for the three months ended March 30, 1994 and 1995, respectively. Other In October 1994, the former Vice Chairman and Executive Vice President of the Company announced his resignation effective February 15, 1995 to pursue personal interests. The Company recorded approximately $400,000 of deferred compensation in 1994 to be paid over the next several years as a result of this resignation. The Company also agreed to retain this former officer as a consultant for a three-year period for approximately $75,000 each year and entered into a noncompetition agreement for that period. In connection with this resignation, the Company repurchased approximately 240,000 shares of common stock of the Company from this former officer for approximately $2,792,000. Note 8 - Business and Major Clients The Company offers to its clients a broad range of business and technical data processing platforms that encompass the entire life cycle of contract performance, utilizing its vast reserves of knowledge and experience in leading-edge methodologies, tools and technologies. The Company helps its clients with advanced technology solutions to complex problems in the areas of outsourcing, client/server migration and development, network integration and management, data center and operations' management, and knowledge transfer and training. The Company's two largest clients accounted for 9% and 6%, respectively, of the Company's consolidated revenues in 1994, 13% and 8%, respectively, in 1993, and 11% and 15%, respectively, in 1992. F-15 COMPUTER HORIZONS CORP. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 9 - Selected Quarterly Financial Data (Unaudited) For the years ended December 31, 1993 and 1994, selected quarterly financial data is as follows:
Quarters --------------------------------------------------------------- First Second Third Fourth ----- ------ ----- ------ (in thousands, except per share data) 1993 Revenues $29,413 $29,771 $29,498 $32,868 Income from operations 1,727 1,963 1,709 2,095 Net income 858 988 829 1,029 Earnings per share $ .9 $ .10 $ .8 $ .11 1994 Revenues $33,171 $36,278 $39,136 $43,607 Income from operations 2,235 2,798 2,856 3,122 Net income 1,114 1,459 1,493 1,620 Earnings per share $ .12 $ .15 $ .16 $ .17
Note 10 - Subsequent Event The Company has formed a software development and services joint venture with a large multinational conglomerate located in India. The joint venture will be headquartered in New Delhi, India and will have operations in the United States and the United Kingdom. Operations are anticipated to commence on or about April 1, 1995. The Company is committed to invest $500,000 in this joint venture in the near future. Such payment was made on April 4, 1995. F-16 No dealer, salesperson or other person has been authorized to give any information or to make any representations other than those contained in this Prospectus, and, if given or made, such information or representation must not be relied upon as having been authorized by the Company or the Underwriters. This Prospectus does not constitute an offer to sell, or a solicitation of an offer to buy, any of the securities offered hereby in any jurisdiction in which, or to any person to whom, such offer or solicitation may not lawfully be made. Neither the delivery of this Prospectus nor any sales made hereunder shall, under any circumstances, create any implication that the information contained herein is correct as of any time subsequent to the date hereof. -------------------------- TABLE OF CONTENTS Page ---- Available Information . . . 2 Documents Incorporated by Reference . . . . . . 2 Prospectus Summary . . . . 3 Use of Proceeds . . . . . . 6 Price Range of Common Stock 6 Dividend Policy . . . . . . 7 Capitalization . . . . . . 7 Selected Consolidated Financial and Operating Data . . . 8 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . 9 Business . . . . . . . . 12 Management . . . . . . . 19 Selling Shareholder . . . 21 Description of Securities 21 Underwriting . . . . . . 24 Legal Matters . . . . . . 25 Experts . . . . . . . . . 25 Consolidated Financial Statements . . . . . . . F-1 1,100,000 Shares COMPUTER HORIZONS CORP. Common Stock ------------------- PROSPECTUS ------------------- Janney Montgomery Scott Inc. Robert W. Baird & Co. Incorporated ________ __, 1995 PART II INFORMATION NOT REQUIRED IN PROSPECTUS Item 14. Other Expenses of Issuance and Distribution. The following table sets forth an itemized statement of all expenses in connection with the issuance and distribution of the securities being registered hereby other than the Underwriters' discounts and commissions. SEC registration fee . . . . . . . . . . . . . . . . . . . . . . . . $ 5,561.62 NASD additional registration fee . . . . . . . . . . . . . . . 2,112.88 NASDAQ additional listing fee . . . . . . . . . . . . . . . . 17,500.00 Accounting fees and expenses . . . . . . . . . . . . . . . . . . . . . Legal fees and expenses . . . . . . . . . . . . . . . . . . . . . . . . Blue sky expenses and counsel fees . . . . . . . . . . . . . . . . . . Cost of printing and engraving . . . . . . . . . . . . . . . . . . . . Transfer agent's fees . . . . . . . . . . . . . . . . . . . . . . . . . Miscellaneous . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $_______* ======= * All amounts except the registration fees and Nasdaq additional listing fee are estimated. Items which are not included will be supplied by amendment. __________________ Item 15. Indemnification of Directors and Officers The Company's Certificate of Incorporation, as amended (the "Certificate of Incorporation") provides, as permitted by Section 402(b) of the New York Business Corporation Law (the "BCL"), that no director shall be personally liable to the Company or any shareholder for damages for any breach of duty as a director, provided that the Certificate of Incorporation does not eliminate or limit the liability of any director if a judgment or other final adjudication adverse to him establishes that (i) his acts or omissions were in bad faith or involved intentional misconduct or a knowing violation of law, (ii) he personally gained in fact a financial profit or other advantage to which he was not legally entitled or (iii) his acts violated Section 719 of the BCL. The Certificate of Incorporation also provides, in accordance with Section 722 of the BCL, that each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he, or a person of whom he is the legal representative, (1) is or was a director or officer of the Company or (2) is or was serving at the request of the Company as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans (whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent), shall be indemnified and held harmless by the Company to the fullest extent authorized or permitted by applicable law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Company to provide broader indemnification rights than said law permitted the Company to provide prior to such amendment), against all expense, liability and loss (including attorneys' fees, judgements, fines, ERISA excise taxes or penalties and amounts paid or to be paid in settlement) actually and reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his heirs, executors and administrators, provided, however, that, except for actions brought to enforce such indemnification rights, the Company shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Company. The right to indemnification conferred in the Certificate of Incorporation is a contract right and includes the rights to be paid by the Company the expenses incurred in defending any such proceeding in advance of its final disposition, provided, however, that, if the BCL requires, the payment of such expenses incurred by a director or officer in his capacity as such (and not in any other capacity in which service was or is rendered by such person II-1 while a director or officer, including, without limitation, service with respect to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Company of an undertaking by or on behalf of such director or officer to repay all amounts so advanced as to which it shall ultimately be determined that such director or officer is not entitled to be indemnified. The Certificate of Incorporation further provides, in accordance with the BCL, that the indemnification rights provided therein are not exclusive of any other rights that any person may have, and that the Company may, subject to certain restrictions imposed by the BCL, maintain insurance to protect itself and its officers and directors against expenses, liabilities and losses, whether or not the Company would be permitted to indemnify such person against such expenses, liabilities and losses under the BCL. The Company currently has a $5,000,000 directors' and officers' liability insurance policy. Item 16. Exhibits Exhibit Description Incorporated by Reference to: 1.1 Form of Underwriting Agreement Among the Company and Janney Montgomery Scott Inc. and Robert W. Baird & Co. Incorporated as Representatives of the Underwriters 1.2 Form of Agreement Among Underwriters 1.3 Form of Selected Dealers Agreement 3.1 Certificate of Incorporation Exhibit 3(a) to the of the Company as amended Company's Registration through 1971. Statement on Form S-1, File No. 2-42259. 3.2 Certificate of Amendment Exhibit 3(a-2) to the dated May 16, 1983 to Company's Annual Report on Certificate of Incorporation Form 10-K for the year of the Company. ended February 28, 1983. 3.3 Certificate of Amendment Exhibit 3(a-3) to the dated June 15, 1988 to Company's Annual Report on Certificate of Incorporation Form 10-K for the year of the Company. ended December 31, 1988. 3.4 Certificate of Amendment Exhibit 3(a-4) to the dated July 6, 1989 to Company's Annual Report Certificate of Incorporation Form 10-K for the year of the Company. ended December 31, 1994. 3.5 Certificate of Amendment Exhibit 3(a-4) to the dated February 14, 1990 to Company's Annual Report on Certificate of Incorporation Form 10-K for the year of the Company. ended December 31, 1989. 3.6 Certificate of Amendment Exhibit 3(a-6) to the dated May 1, 1991 to the Company's Annual Report on Certificate of Incorporation Form 10-K for the year of the Company. ended December 31, 1994. 3.7 Certificate of Amendment Exhibit 3(a-7) to the dated July 12, 1994 to the Company's Annual Report on Certificate of Incorporation Form 10-K for the year of the Company. ended December 31, 1994. II-2 Exhibit Description Incorporated by Reference to: 3.8 Bylaws of the Company, as Exhibit 3(b) to the amended. Company's Annual Report on Form 10-K for the year ended December 31, 1988. 4.1 Rights Agreement dated as of Exhibit 1 to the Company's July 6, 1989 between the Registration Statement on Company and Chemical Bank, Form 8-A dated July 7, as Rights Agent ("Rights 1989. Agreement") which includes the form of Rights Certificate as Exhibit B. 4.2 Amendment No. 1 dated as of Exhibit 1 to the Company's February 13, 1990 to Rights Amendment No. 1 on Form 8 Agreement. dated February 13, 1990 to the Company's Registration Statement on Form 8-A. 4.3 Amendment No. 2 dated as of Exhibit 4(c) to the August 10, 1994 to Rights Company's Annual Report on Agreement. Form 10-K for the year ended December 31, 1994. 5* Opinion of Proskauer Rose Goetz & Mendelsohn LLP. 10.1 Employment Agreement dated Exhibit 10(a) to the as of February 16, 1990 Company's Annual Report on between the Company and John Form 10-K for the year J. Cassese. ended December 31, 1989. 10.2 Employment Agreement dated Exhibit 10(c) to the as of February 16, 1990 Company's Annual Report on between the Company and Form 10-K for the year Bernhard Hubert. ended December 31, 1989. 10.3 Employment Agreement dated Exhibit 10(d) to the as of January 1, 1992 Company's Annual Report on between the Company and form 10-K for the year David W. Bialick. ended December 31, 1991. 10.4 Note Agreement dated as of Exhibit 10(i) to the March 15, 1988 between the Company's Annual Report on Company and Massachusetts Form 10-K for the year Mutual Life Insurance ended December 31, 1988. Company 10.5 Lease ("Lease") dated Exhibit 12(a) to the September 21, 1989 between Company's Annual Report on Glen Properties and the Form 10-K for the year Company. ended December 31, 1989. 10.6 Modification to Lease, dated Exhibit 12(b) to the September 28, 1989. Company's Annual Report on Form 10-K for the year ended December 31, 1989. - -------------------- * To be filed by amendment. II-3 Exhibit Description Incorporated by Reference to: 10.7 1991 Directors' Stock Option Exhibit 10(g) to the Plan, as amended Company's Annual Report on Form 10-K for the Year ended December 31, 1994. 10.8 1994 Incentive Stock Option Exhibit 10(h) to the and Appreciation Plan Company's Annual Report on Form 10-K for the Year ended December 31, 1994. 10.9 $5,000,000 Promissory Note Exhibit 10(i) to the payable to The Bank of New Company's Annual Report on York, N.A. Form 10-K for the Year ended December 31, 1994. 10.10 $7,000,000 Commercial Exhibit 10(j) to the Purpose Loan Note payable to Company's Annual Report on Chemical Bank New Jersey Form 10-K for the Year N.A. ended December 31, 1994. 11 Statement regarding computation of per share earnings (for the years ended December 31, 1992, 1993 and 1994) 23.1 Consent of Grant Thornton LLP 23.2* Consent of Proskauer Rose Goetz & Mendelsohn LLP 24 Power of Attorney (included on the signature page of the Registration Statement). 27 Financial Data Schedule ____________________ * To be filed by amendment Item 17. Undertakings Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended (the "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 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 Act and will be governed by the final adjudication of such issue. The undersigned Registrant hereby undertakes that: (1) For purposes of determining any liability under the 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. II-4 (2) For the purpose of determining any liability under the Act, each post- effective amendment that contains a form of prospectus shall be deemed to be a new Registration Statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-5 SIGNATURES Pursuant to the requirements of the Securities Act of 1933, the Registrant certifies that it has reasonable grounds to believe that it meets all of the requirements for filing on Form S-2 and has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized, in the City of Mountain Lakes, State of New Jersey, on the 4th day of May, 1995. COMPUTER HORIZONS CORP. By: /s/ John J. Cassese ---------------------------------------------- John J. Cassese Chairman of the Board and President KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints John J. Cassese and Bernhard Hubert, and either of them, his attorney-in-fact, with full power of substitution, for him in all capacities, to sign any and all amendments (including post-effective amendments) to this Registration Statement, and to file the same, with exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, hereby ratifying and confirming all that said attorneys-in-fact, or either of them, or their substitutes, may do or cause to be done by virtue hereof. Pursuant to the requirements of the Securities Act of 1933, this Registration Statement has been signed by the following persons in the capacities indicated on May 4, 1995. /s/ John J. Cassese Chairman of the Board and President ----------------------------- John J. Cassese /s/ Bernhard Hubert Executive Vice President and ----------------------------- Chief Financial Officer Bernhard Hubert (Principal Financial Officer) /s/ Michael Shea, CPA Chief Accounting Officer ------------------------------ and Controller Michael Shea, CPA (Principal Accounting Officer) /s/ Thomas J. Berry Director ----------------------------- Thomas J. Berry /s/ Wilfred R. Plugge Director ------------------------------ Wilfred R. Plugge
II-6
Computer Horizons Corp. and Subsidiaries SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS For the years ended December 31, 1994, 1993 and 1992 Column A Column B Column C Column D Column E -------- -------- -------- -------- -------- Balance at Charge to Balance at beginning costs and Deductions - end of Description of Period expenses describe (1) period ----------- --------- -------- ------------ ------ Year ended December 31, 1994 Allowance for doubtful accounts $462,000 $244,000 $140,000 $566,000 ======= ======= ======= ======= Year ended December 31, 1993 Allowance for doubtful accounts $505,000 $136,000 $179,000 $462,000 ======= ======= ======= ======= Year ended December 31, 1992 Allowance for doubtful accounts $401,000 $166,000 $ 62,000 $505,000 ======= ======= ======= =======
Notes ----- (1) Uncollectible accounts written off, net of recoveries. S-1 Index to Exhibits Exhibit Description Incorporated by Reference to: 1.1 Form of Underwriting Agreement Among the Company and Janney Montgomery Scott Inc. and Robert W. Baird & Co. Incorporated as Representatives of the Underwriters 1.2 Form of Agreement Among Underwriters 1.3 Form of Selected Dealers Agreement 3.1 Certificate of Incorporation Exhibit 3(a) to the of the Company as amended Company's Registration through 1971. Statement on Form S-1, File No. 2-42259. 3.2 Certificate of Amendment Exhibit 3(a-2) to the dated May 16, 1983 to Company's Annual Report Certificate of Incorporation on Form 10-K for the of the Company. year ended February 28, 1983. 3.3 Certificate of Amendment Exhibit 3(a-3) to the dated June 15, 1988 to Company's Annual Report Certificate of Incorporation on Form 10-K for the of the Company. year ended December 31, 1988. 3.4 Certificate of Amendment Exhibit 3(a-4) to the dated July 6, 1989 to Company's Annual Report Certificate of Incorporation Form 10-K for the year of the Company. ended December 31, 1994. 3.5 Certificate of Amendment Exhibit 3(a-4) to the dated February 14, 1990 to Company's Annual Report Certificate of Incorporation on Form 10-K for the of the Company. year ended December 31, 1989. 3.6 Certificate of Amendment Exhibit 3(a-6) to the dated May 1, 1991 to the Company's Annual Report Certificate of Incorporation on Form 10-K for the of the Company. year ended December 31, 1994. 3.7 Certificate of Amendment Exhibit 3(a-7) to the dated July 12, 1994 to the Company's Annual Report Certificate of Incorporation on Form 10-K for the of the Company. year ended December 31, 1994. 3.8 Bylaws of the Company, as Exhibit 3(b) to the amended. Company's Annual Report on Form 10-K for the year ended December 31, 1988. 4.1 Rights Agreement dated as of Exhibit 1 to the July 6, 1989 between the Company's Registration Company and Chemical Bank, Statement on Form 8-A as Rights Agent ("Rights dated July 7, 1989. Agreement") which includes the form of Rights Certificate as Exhibit B. 4.2 Amendment No. 1 dated as of Exhibit 1 to the February 13, 1990 to Rights Company's Amendment No. Agreement. 1 on Form 8 dated February 13, 1990 to the Company's Registration Statement on Form 8-A. 4.3 Amendment No. 2 dated as of Exhibit 4(c) to the August 10, 1994 to Rights Company's Annual Report Agreement. on Form 10-K for the year ended December 31, 1994. 5* Opinion of Proskauer Rose Goetz & Mendelsohn LLP. Exhibit Description Incorporated by Reference to: 10.1 Employment Agreement dated Exhibit 10(a) to the as of February 16, 1990 Company's Annual Report between the Company and John on Form 10-K for the J. Cassese. year ended December 31, 1989. 10.2 Employment Agreement dated Exhibit 10(c) to the as of February 16, 1990 Company's Annual Report between the Company and on Form 10-K for the Bernhard Hubert. year ended December 31, 1989. 10.3 Employment Agreement dated Exhibit 10(d) to the as of January 1, 1992 Company's Annual Report between the Company and on form 10-K for the David W. Bialick. year ended December 31, 1991. 10.4 Note Agreement dated as of Exhibit 10(i) to the March 15, 1988 between the Company's Annual Report Company and Massachusetts on Form 10-K for the Mutual Life Insurance year ended December 31, Company 1988. 10.5 Lease ("Lease") dated Exhibit 12(a) to the September 21, 1989 between Company's Annual Report Glen Properties and the on Form 10-K for the Company. year ended December 31, 1989. 10.6 Modification to Lease, dated Exhibit 12(b) to the September 28, 1989. Company's Annual Report on Form 10-K for the year ended December 31, 1989. 10.7 1991 Directors' Stock Option Exhibit 10(g) to the Plan, as amended Company's Annual Report on Form 10-K for the Year ended December 31, 1994. 10.8 1994 Incentive Stock Option Exhibit 10(h) to the and Appreciation Plan Company's Annual Report on Form 10-K for the Year ended December 31, 1994. 10.9 $5,000,000 Promissory Note Exhibit 10(i) to the payable to The Bank of New Company's Annual Report York, N.A. on Form 10-K for the Year ended December 31, 1994. 10.10 $7,000,000 Commercial Exhibit 10(j) to the Purpose Loan Note payable to Company's Annual Report Chemical Bank New Jersey on Form 10-K for the N.A. Year ended December 31, 1994. 11 Statement regarding computation of per share earnings (for the years ended December 31, 1992, 1993 and 1994) 23.1 Consent of Grant Thornton LLP 23.2* Consent of Proskauer Rose Goetz & Mendelsohn LLP 24 Power of Attorney (included on the signature page of the Registration Statement). 27 Financial Data Schedule ____________________ * To be filed by amendment EX-1.1 2 Exhibit 1.1 1,265,000 Shares of Common Stock COMPUTER HORIZONS CORP. UNDERWRITING AGREEMENT , 1995 ---------------- JANNEY MONTGOMERY SCOTT INC. 1801 Market Street 20th Floor Philadelphia, Pennsylvania 19103 Attention: Syndicate Department ROBERT W. BAIRD & CO. INCORPORATED 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: Syndicate Department Ladies and Gentlemen: Computer Horizons Corp., a New York corporation (the "Company") , proposes to issue and sell to the several underwriters named in Schedule I hereto (the "Underwriters") 1,025,000 shares of Common Stock of the Company (the "Company Firm Shares"), and Mr. John J. Cassese, Chairman of the Board, President and Chief Executive Officer of the Company (the "Selling Shareholder") proposes to sell to the Underwriters 75,000 shares of Common Stock of the Company (the "Selling Shareholder Firm Shares" and, together with the Company Firm Shares, the "Firm Shares"). In addition, the Selling Shareholder and the Company each propose to grant severally to the Underwriters, solely for the purpose of covering over-allotments, the option described in Section 5 of this Agreement to purchase up to 165,000 additional shares of Common Stock of the Company (the "Additional Shares"). The Firm Shares and the Additional Shares are hereinafter collectively referred to as the "Shares." You, as representatives of the Underwriters (the "Representatives"), have advised the Company and the Selling Shareholder that you and the other Underwriters desire to purchase, severally, the Firm Shares and that you have been authorized by the Underwriters to execute this agreement (this "Agreement") on their behalf. The Company and the Selling Shareholder hereby severally confirm the agreement made by them with respect to the purchase of the Shares by the several Underwriters on whose behalf you are signing this Agreement, as follows: 1. Representations and Warranties of the Company. The Company represents and warrants to, and agrees with, each of the Underwriters that: (a) Registration Statement and Prospectus. The Company has filed with the Securities and Exchange Commission ("Commission") a registration statement on Form S-2 (No. 33-________) for the registration under the Securities Act of 1933, as amended (the "Securities Act"), of the Shares and may have filed one or more amendments thereto, copies of which have heretofore been delivered to you. The registration statement, including the prospectus, financial statements and exhibits and documents and information incorporated by reference therein, when it shall become effective, and such additional information, if any, with respect to the offering permitted to be omitted from such registration statement when it becomes effective if subsequently filed with the Commission pursuant to Rule 430A of the General Rules and Regulations of the Commission under the Securities Act (the "Rules under the Securities Act") is hereinafter called the "Registration Statement" and the final prospectus included as part of the Registration Statement is herein called the "Prospectus," except that, if any revised prospectus shall be provided to the Underwriters by the Company for use in connection with the offering of the Shares which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) of the Rules under the Securities Act) , the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Underwriters for such use. The term "Preliminary Prospectus" as used in this Agreement means a preliminary prospectus as defined in Rule 430 of the Rules under the Securities Act. The Securities Act, the Securities Exchange Act of 1934, as amended ("Exchange Act"), and the rules and regulations promulgated thereunder are sometimes collectively referred to in this Agreement as the "Acts." (b) Compliance with Securities Act, etc. When the Registration Statement shall become effective and at all times subsequent thereto, up to and including the Closing Date and the Option Closing Date (as such terms are herein defined), and during such longer period until any post-effective amendment to the Registration Statement shall become effective, the Registration Statement (and any post-effective amendment to the Registration Statement) (i) will contain all statements which are required to be stated therein in accordance with the Securities Act and the Rules under the Securities Act, (ii) will fully comply in all material respects with the applicable provisions of the Securities Act and the Rules under the Securities Act, and (iii) will not contain any untrue statement of a material fact and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Prospectus and any amendment or supplement thereto will at all times up to and including the Closing Date and the Option Closing Date, and during such longer period as the Prospectus may be required to be delivered in connection with sales of Firm Shares or Additional Shares by the Underwriters or any dealer, fully comply in all material respects with the provisions of the Securities Act and the Rules under the Securities Act and will not contain any untrue statement of a material fact and will not omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, -2- not misleading; provided, however, that the Company makes no -------- ------- representations or warranties as to the information contained in or omitted from the Registration Statement and any post-effective amendment to the Registration Statement or the Prospectus or any amendment of, or supplement to, either of them in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives or by the Selling Shareholder specifically for use in connection with the preparation of the Registration Statement or of the Prospectus. It is understood that the statements set forth in the Prospectus on page 2 with respect to stabilization, under the section entitled "Underwriting" and the identity of counsel for the Underwriters under the section entitled "Legal Matters" constitute the only information furnished in writing by or on behalf of the Underwriters for inclusion in the Registration Statement and Prospectus, as the case may be. (c) No Stop Order, etc. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus, and each Preliminary Prospectus, at the time of filing thereof, fully complied in all material respects with the provisions of the Securities Act and the Rules under the Securities Act and did not include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, --------- however, that the Company makes no representations or warranties as to the - ------- information contained in or omitted from any Preliminary Prospectus in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Underwriter through the Representatives or by the Selling Shareholder specifically for use in connection with the preparation of such Preliminary Prospectus. (d) Accountants. Grant Thorton LLP, independent certified public accountants, have audited the audited financial statements filed as part of the Registration Statement and those included in the Prospectus, to the extent set forth in their reports in the Registration Statement and Prospectus, and are independent public accountants as required by the Securities Act and the Rules under the Securities Act. (e) Reports and Financial Statements. (i) The Company has previously furnished the Underwriters with true and correct copies of (i) the Company's Annual Report on Form 10-K for each of the two fiscal years ended December 31, 1994 and 1993 as filed with the Commission; (ii) its Quarterly Reports on Form 10-Q for the fiscal quarters ended June 30, 1994, September 30, 1994 and March 30, 1995, each as filed with the Commission; and (iii) all other proxy statements, reports or registration statements filed by the Company with the Commission since January 1, 1994 (collectively, the "Publicly Filed Documents"). As of their respective dates, the Company's Publicly Filed Documents did not contain any untrue statement of a material fact, or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading. The audited consolidated financial statements and unaudited interim financial statements included in any Publicly Filed Document have been prepared in accordance with generally accepted accounting principals ("GAAP") applied on a consistent basis (except as may be indicated therein or in the notes thereto) and fairly present the financial condition, the results -3- of operations and consolidated cash flows of the Company and the Subsidiaries (as hereinafter defined), at the dates and for the periods indicated subject, in the case of unaudited interim financial statement, to normal year-end adjustments. The Company has filed with the Commission all reports and other filings required to be filed by it since January 1, 1992. (ii) The consolidated financial statements included in the Registration Statement and Prospectus comply as to form in all material respects with the applicable accounting requirements of the Securities Act and the Rules under the Securities Act. The consolidated financial statements present fairly the financial condition, results of operations and consolidated cash flows of the Company at the dates and for the periods indicated, and have been prepared in conformity with GAAP applied on a consistent basis throughout the periods involved. (f) Subsidiaries; Commonly Controlled Entities. The Company presently has no significant subsidiaries as that term is defined in Rule 405 of the Rules under the Securities Act, other than Computer Knowledge Corporation, Horizons Consulting, Inc., Strategic Outsourcing Services, Inc., Unified Systems Solutions, Inc. and Worldwide Computer Services, Inc. (the "Subsidiaries"). All of the outstanding shares of capital stock of the Subsidiaries have been duly authorized and validly issued, are fully paid and non-assessable and are owned beneficially by the Company, free and clear of any liens, encumbrances, security interests or other restrictions, and no rights exist, or with the passage of time or otherwise will exist, to acquire any of the capital stock of the Subsidiaries. Except as described herein, neither the Company nor any of the Subsidiaries owns any securities of any corporation or has any equity interest in any firm, partnership, association or other entity. (g) No Material Adverse Change. Subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, the Company has not incurred any material liabilities or obligations, direct or contingent, or entered into any material transactions, not in the ordinary course of business, and there has not been any material change in the capital stock (including any dividend or distribution of any kind declared, paid, or made on any class of capital stock of the Company) or long term debt or obligations under capital leases of the Company, or any material adverse change or any development involving a prospective material adverse change, including any proposed legislation or regulations which, if enacted or adopted, could have a material adverse change, in the condition (financial or otherwise) , or in the earnings, business affairs or business prospects of the Company, other than those reflected in the Registration Statement and the Prospectus. (h) Capitalization; Descriptions of Securities. The authorized, issued and outstanding capital stock of the Company is as set forth in the Prospectus under "Capitalization"; the issued and outstanding Common Stock, including the Additional Shares which may be purchased by the Underwriters from the Selling Shareholder, have been duly authorized and validly issued and are fully paid and non-assessable; the Firm Shares (and, if issued and sold hereunder by the Company, the Additional Shares) when issued and delivered by the Company pursuant to this Agreement, will be validly issued, fully paid and non-assessable. The Common Stock and the preferred stock of the Company conform to the descriptions of them contained in -4- the Prospectus, and the descriptions of the Common Stock and preferred stock conform to the rights set forth in the Company's Certificate of Incorporation, as amended, defining the same. No rights exist, or with the passage of time or otherwise will exist, to acquire any of the capital stock of the Company, except as set forth on the Registration Statement. The issuance of the Firm Shares (and, if issued and sold hereunder by the Company, the Additional Shares) is not subject to, or in violation of, any preemptive or other similar rights. (i) Organization, Qualification, etc. The Company is a duly organized and validly existing corporation in good standing under the laws of the State of New York, and has all of the corporate power to own and lease its properties and to conduct its business as described in the Prospectus and to enter into and perform its obligations under this Agreement. Each of the Subsidiaries is a duly organized and validly existing corporation in good standing under the laws of the state of its incorporation, each with the corporate power to own and lease its properties and to conduct its business as described in the Prospectus. Each of the Company and the Subsidiaries is duly qualified to do business and is in good standing in each jurisdiction in which such qualification is required, whether by reason of the ownership or leasing of property or the conduct of business, except where the failure to so qualify would not have a material adverse effect on its condition, financial or otherwise, or on its earnings, business affairs or business prospects. (j) Regulatory Compliance. The Company and each of the Subsidiaries hold all material licenses, certificates, permits and other evidence of regulatory compliance issued by appropriate federal, state or local governmental agencies or bodies necessary for the conduct of its business as described in the Prospectus, and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any such license, certificate, permit or other evidence of compliance which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, would materially and adversely affect its condition, financial or otherwise, or on its earnings, business affairs or business prospects. (k) Authority. The Company has full power and lawful authority, and has taken all corporate action necessary, to enter into this Agreement and to authorize, issue and sell the Shares on the terms and conditions set forth in this Agreement, and this Agreement has been duly authorized, executed and delivered by the Company and constitutes the legal, valid and binding obligation of the Company enforceable against the Company in accordance with its terms. (l) Compliance with Other Instruments; Consents. Neither the Company nor any Subsidiary is in violation of its charter or bylaws or in default in the performance or observation of any obligation, agreement, covenant or condition contained in any rights agreement, indenture, mortgage, deed of trust, note, bank loan or credit agreement, or any other material agreement or instrument to which it is a party or by which it is bound, or to which any of its property or assets are subject (collectively, "Contracts"), which default or defaults, singly or in the aggregate, are material to the condition, financial or otherwise, or its earnings, business affairs or business prospects, and each such Contract is in full force and effect and is the legal, -5- valid and binding obligation of the Company or a Subsidiary, as the case may be, and is enforceable against the Company or a Subsidiary, as the case may be, in accordance with its terms. The execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated herein (i) will not conflict with, result in a breach or violation of any of the terms or provisions of, or constitute a default under, or give rise to the rights of termination under, any Contract to which the Company or any Subsidiary is a party or by which any of their respective properties or assets are bound, or the charter or bylaws of the Company, or any of the Subsidiaries or any material law, rule, regulation, judgment, order or decree of any government, governmental instrumentality or court having jurisdiction over the Company, the Subsidiaries or their respective properties or operations, and (ii) no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation by the Company of any of the transactions contemplated hereby, except such as have been obtained and such as may be required under the Acts, and under state securities or "Blue Sky" laws in connection with the purchase and distribution of the Shares by the several Underwriters. (m) Compliance With Laws. Neither the Company nor any Subsidiary is in violation of any applicable order, injunction, award, citation, decree, or writ (collectively, "Orders"), or any applicable law, statute, code, ordinance, rule, regulation or other requirement (collectively, "Laws"), of any government or political subdivision thereof, whether federal, state, local or foreign, or any agency or instrumentality of any such government or political subdivision, or any court or arbitrator (collectively, "Governmental Bodies") affecting its assets, affairs or business, where the effect of any such violation, individually or in the aggregate, would have a material adverse affect on the business or financial condition of the Company. (n) Litigation. Except as set forth in the Prospectus, there is no action, suit or proceeding before or by any court or governmental agency or body, domestic or foreign, now pending or, to the knowledge of the Company, threatened, against or affecting the Company or any of the Subsidiaries that is required to be disclosed in the Registration Statement (other than as disclosed therein) , or that might result in a material adverse change in the condition, financial or otherwise, or in the earnings, business affairs or business prospects of the Company or the Subsidiaries or that might materially and adversely affect the properties or assets thereof or that might materially or adversely affect the consummation of this Agreement. (o) Payment of Taxes. The Company has filed all United States federal, state and local tax returns which are required to be filed by it. All taxes and all assessments to the extent that they have become due have been paid. The Company has made adequate accruals for all taxes which may be owed but have not been paid. (p) Real and Personal Property. Except as disclosed in the Prospectus, the Company owns outright, in fee simple, title to the real and personal property purported to be owned by it, free and clear of all liens, mortgages, charges or encumbrances of any nature, except those which do not materially diminish the value of the property subject to them or interfere with or impair the present and continued use of that property in the usual and normal -6- conduct of its business. All of the leases under which the Company holds properties or assets as lessee are, in all material respects, as described in the Prospectus and are valid and in full force and effect and enforceable against the Company in accordance with their terms, and the Company is not in default in any respect under any of the terms or provisions of any such leases, except for any default which would not have a material adverse change on the business of the Company, and no claim has been asserted by anyone adverse to the rights of the Company as lessee under any of the leases mentioned above, or affecting or questioning the right of the Company to continued possession of the leased premises or assets under any such lease. (q) Intellectual Property. The Company owns or possesses adequate licenses or other rights to use all patents, trade secrets, trademarks, trade names and copyrights necessary to enable it to conduct its business as now operated (the "Intellectual Property") and such Intellectual Property (other than Intellectual Property rights acquired as licensee) is owned free and clear of any liens, security interests, mortgages, charges, encumbrances and adverse rights of every kind, nature and description; and the Company does not have knowledge of any claim and has not received any notice of infringement of or conflict with asserted rights of others or have knowledge of infringement by others of its rights with respect to any of the foregoing which, singly or in the aggregate, could result in a material adverse change in its condition, financial or otherwise, or in its earnings, business affairs or business prospects. Except for the rights of customers under license agreements, (i) the Intellectual Property is not subject to any licenses, sublicenses, royalty arrangements, or disputes, and (ii) the Company has the exclusive right to make, copy, sell, exploit and provide to others the use of the Intellectual Property and all derivative works thereof free and clear of any liens, security interests, mortgages, charges, encumbrances and adverse rights of every kind, nature and description. There are no defects in the Intellectual Property, which defects would in any material and adverse respect affect the functioning thereof in accordance with the specifications therefor, or the use or exploitation thereof. No agreement exists which would preclude any desired change to the Intellectual Property. The Company has taken or is taking all actions necessary in its reasonable judgment to protect the Intellectual Property. No third party has any interest in or right to compensation from the Company by reason of the use, exploitation or sale of the Intellectual Property, and the Company has not received notice or knowledge of any complaint, assertion, threat or allegation that would contradict the foregoing. (r) Insurance. The Company has its property adequately insured against loss or damage by fire, maintains adequate insurance against liability for negligence, and maintains such other insurance in such nature and amounts of coverage as is usually maintained by companies engaged in the same or similar business. (s) No Stabilization or Manipulation of Price. Neither the Company nor any officer or director of the Company has taken, and the Company and each officer and director of the Company have agreed not to take, directly or indirectly, any action designed to stabilize or manipulate the price of any security of the Company, or which has constituted or which might in the future reasonably be expected to constitute stabilization or manipulation of -7- the price of the Shares in connection with the offering contemplated by the Registration Statement. (t) Related Transactions. There are no business relationships or related-party transactions of the nature described in Item 404 of Regulation S-K involving the Company and any other persons referred to in said Item 404 that are required to be described in the Prospectus and which have not been so disclosed. (u) No Registration Rights. There are no contracts, arrangements, or understandings between the Company and any person granting such person or entity the right to require registration of Common Stock or other securities of the Company or to require the Company to include such securities with the Shares registered pursuant to the Registration Statement. (v) Lock-up Agreements. The Company has obtained and delivered to the Underwriters a written agreement, in form satisfactory to Baer Marks & Upham, counsel for the Underwriters, by each officer, director and certain shareholders of the Company as of the effective date of the Registration Statement (the "Effective Date") not to, directly or indirectly, sell, offer to sell or agree to sell or otherwise dispose of any Common Shares of the Company for a period of 180 days from the Effective Date without the prior written consent of the Representatives, other than pursuant to the Registration Statement. (w) No Broker or Finder Engaged by the Company. The Company has not incurred any liability for any finder's fees or similar payments in connection with any of the transactions herein contemplated. (x) Labor Relations. Neither of the Company nor any Subsidiary is involved in any labor dispute which might be expected to result in a material adverse effect on its condition, financial or otherwise, or on its earnings, business affairs or business prospects, and no such dispute is pending or, to the Company's knowledge, threatened. (y) Dealings. None of the Company, the Subsidiaries, any of their respective officers or directors, nor any of their respective employees, agents or any other person acting on behalf of the Company or the Subsidiaries has, directly or indirectly, given or agreed to give any money, gift or similar benefit (other than legal price concessions to customers in the ordinary course of business) to any customer, supplier, employee or an agent of a customer or supplier, or official or employee of any governmental agency or instrumentality of any government (domestic or foreign) or any political party or candidate for office (domestic or foreign) or other person who was, is, or may be in a position to help or hinder the business of the Company (or assist in connection with any actual or proposed transaction) which (a) might subject the Company to any damage or penalty in any civil, criminal or governmental litigation or proceeding, (b) if not given in the past, might have had a materially adverse effect on the assets, business or operations of the Company as reflected in any of the consolidated financial statements contained in the Prospectus, or (c) if not continued in the future, might adversely -8- affect the assets, business, operations or prospects of the Company. The Company's internal accounting controls and procedures are sufficient to cause the Company to comply with the Foreign Corrupt Practices Act of 1977, an amended. (z) Investment Company. The Company is not an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. 2. Representations and Warranties of the Selling Shareholder. The Selling Shareholder represents and warrants to, and agrees with, each of the Underwriters and the Company that: (a) Authority; Compliance with Other Instruments. The Selling Shareholder has the full right, power and authority to enter into this Agreement and to sell, transfer and deliver the Additional Shares which may be sold by the Selling Shareholder hereunder. This Agreement has been duly executed and delivered by the Selling Shareholder and constitutes the legal, valid and binding obligations of the Selling Shareholder enforceable against him in accordance with its terms. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby will not result in a breach by such Selling Shareholder of, or constitute a default by the Selling Shareholder under, any indenture, mortgage, deed of trust, note, bank loan or credit agreement or any other agreement or instrument to which the Selling Shareholder is a party or by which the Selling Shareholder is bound, or any statute, judgment, decree, order, rule or regulation of any court or governmental agency or body applicable to the Selling Shareholder. (b) Consents. All authorizations, approvals and consents necessary for the execution and delivery by the Selling Shareholder of this Agreement, and the sale and delivery of Shares which may be sold by the Selling Shareholder hereunder (other than, at the time of the execution thereof, the issuance of the order of the Commission declaring the Registration Statement effective and such authorizations, approvals or consents as may be necessary under state securities or "Blue Sky" laws) have been obtained and are in full force and effect. (c) Title to Shares. The Selling Shareholder now is, and, on the Closing Date will be, the lawful owner of the Shares sold by the Selling Shareholder hereunder, and, in the event of the exercise of the over-allotment option granted to the Underwriters under Section 5 of this Agreement, on the Option Closing Date (as hereinafter defined) the Selling Shareholder will be, the lawful owner of the Additional Shares which may be sold by the Selling Shareholder hereunder. The Selling Shareholder has, and on the Closing Date, will have, valid and marketable title to the Shares which are being sold by the Selling Shareholder hereunder, in each case free and clear of all liens, encumbrances, security interests or other restrictions (collectively, "Liens") and, upon proper delivery of and payment for such Shares, the Underwriters will acquire valid and marketable title thereto, free and clear of all Liens. The Selling Shareholder has, and, in the event of the exercise of the over-allotment option granted -9- to the Underwriters under Section 5 of this Agreement, on the Option Closing Date the Selling Shareholder will have, valid and marketable title to the Additional Shares which may be sold by the Selling Shareholder hereunder, in each case free and clear of all Liens and, upon proper delivery of and payment for such Additional Shares as provided herein, the Underwriters will acquire valid and marketable title thereto, free and clear of all Liens. (d) Accuracy of Registration Statement and Prospectus. The Selling Shareholder has examined the Registration Statement and the Prospectus, and all information furnished by or on behalf of the Selling Shareholder for use in the Registration Statement and Prospectus is, and, on the Option Closing Date, if any, will be, true, correct and complete, and, with respect to such information, the Registration Statement and the Prospectus do not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (e) No Broker or Finder. The Selling Shareholder has not incurred any liability for any finder's fee or similar payments in connection with the possible sale of the Selling Shareholder's Shares hereunder. 3. Purchase and Sale of Shares. On the basis of the representations and warranties herein contained and subject to the terms and conditions herein set forth, (i) the Company hereby agrees to issue and sell to the several Underwriters, the Company Firm Shares and each Underwriter, severally and not jointly, hereby agrees to purchase from the Company, the number of Company Firm Shares set forth opposite the name of the Underwriter in Schedule I hereto, and (ii) the Selling Shareholder agrees to sell to the several Underwriters, the Selling Shareholder Firm Shares and each Underwriter, severally and not jointly, hereby agrees to purchase from the Selling Shareholder, the number of Selling Shareholder Firm Shares set forth opposite the name of the Underwriter in Schedule I hereto, at a purchase price of $___ per Firm Share. 4. Delivery and Payment. (a) The Company shall deliver the Company Firm Shares at the office of Janney Montgomery Scott Inc., 26 Broadway, New York, New York, on ________, 1995, at 10:00 A.M., New York City time, or at such other time, not more than ten (10) full business days thereafter, as the Company and you shall determine, the date and time of such delivery being hereinafter called the "Closing Date." On the Closing Date, delivery of the Firm Shares shall be made to you, for the respective accounts of the several Underwriters, against payment by the several Underwriters through you of the purchase price for the Firm Shares. The purchase price for the Company Firm Shares will be paid to or upon the order of the Company in a bank check in New York Clearing House funds. Certificates for the Firm Shares shall be made available to you for inspection, checking and packaging at the office of Janney Montgomery Scott Inc., 26 Broadway, New York, New York, not less than one full business day prior to the Closing Date. Time shall be of the essence and delivery at the time -10- and place specified in this Agreement is a further condition to the obligations of each Underwriter. (b) Pursuant to the terms and conditions of an escrow agreement (the "Escrow Agreement") dated the date hereof by and among the Selling Shareholder, the Representatives and Proskauer, Rose, Goetz & Mendelsohn LLP (the "Escrow Agent"), the Selling Shareholder has, on the date hereof, delivered to the Escrow Agent certificates representing the Selling Shareholder Firm Shares, together with stock transfer powers, duly endorsed in blank. Pursuant to the Escrow Agreement, the Selling Shareholder has authorized and directed the Escrow Agent to deliver the Selling Shareholder Firm Shares to the Underwriters on the Closing Date in accordance with the terms of Section 4(a). The purchase price for the Selling Shareholder Firm Shares will be paid to or upon the order of the Selling Shareholder in a bank check in New York Clearing House funds. 5. Option to Purchase Additional Shares. (a) For the purposes of covering any over-allotments in connection with the distribution and sale of the Firm Shares as contemplated by the Prospectus, the Company and the Selling Shareholder hereby grant an option to the Underwriters to purchase 165,000 Additional Shares from the Company and the Selling Shareholder, in each case at a price per Additional Share identical to the price per Firm Share set forth in Section 3 of this Agreement, in accordance with the following sentence. The Selling Shareholder shall have the right to sell all of the Additional Shares to the Underwriters and, to the extent the Selling Shareholder does not so elect, the Company shall sell the remaining Additional Shares to the Underwriters in accordance with Section 5(b) below. The option granted hereby may be exercised by the Underwriters as to all or any part of the Additional Shares at any time, but only once, prior to the end of the close of business on the thirtieth day following the Closing Date. Subject to such adjustments to eliminate fractional shares as you, as the Representatives of the Underwriters, may determine, the number of Additional Shares to be purchased by each Underwriter shall bear the same ratio to the total number of Additional Shares to be sold as the total number of Firm Shares to be purchased by such Underwriter bears to the total number of Firm Shares to be purchased by the Underwriters. (b) The option granted hereby may be exercised by you, as the Representatives of the Underwriters, by giving written notice (the "Representatives's Notice") to the Company and the Selling Shareholder setting forth the number of Additional Shares to be purchased, the date and time for delivery of payment for the Additional Shares, and stating that the Additional Shares being purchased are to be used for the purpose of covering over-allotments in connection with the distribution and sale of the Firm Shares. Within one (1) business day after such notice is given by the Representatives, the Selling Shareholder shall notify the Company and the Representatives of the amount, if any, of the Additional Shares that shall be sold by him to the Underwriters (the "Selling Shareholder Notice"). The Company shall sell to the Underwriters that amount of Additional Shares, if any, which the Selling Shareholder has indicated in the Selling Shareholder Notice that he will not sell to the Underwriters. If the Representatives's Notice is given prior to the Closing Date, the date for delivery and payment for the Additional -11- Shares shall not be earlier than the later of two (2) full business days after the Representatives's Notice is given, or the Closing Date. If the Representatives's Notice is given on or after the Closing Date, the date for delivery of and payment for the Additional Shares shall not be earlier than five full business days after the day on which the notice is given. In either event, the date shall not be more than fifteen (15) full business days after the day on which the notice is given. The date and time for delivery and payment is called the "Option Closing Date." Upon exercise of the option, the Company and the Selling Shareholder shall become obligated to sell to the Underwriters and, subject to the terms and conditions set forth in Section 5(c) of this Agreement, the Underwriters shall become obligated to purchase the number of Additional Shares described in Section 5(a) above, on the terms described herein. On the Option Closing Date, delivery of the Additional Shares shall be made against payment of the purchase price to the Company or the Selling Shareholder in a bank check payable in New York Clearing House funds. (c) The obligation of the Underwriters to purchase and pay for any of the Additional Shares is subject to the accuracy as of the date of this Agreement, the Closing Date and the Option Closing Date of, and the compliance by the Company and the Selling Shareholder in all material respects with, their respective representations and warranties in this Agreement, to the accuracy of the statements of the officers of the Company made pursuant to this Agreement, to the performance in all material respects by the Company and the Selling Shareholder of their respective obligations under this Agreement, to the satisfaction by the Company and the Selling Shareholder as of the Option Closing Date of the conditions set forth in Section 11 of this Agreement, and to the delivery to you of opinions, certificates, and letters addressed to you and dated the Option Closing Date substantially similar in scope to those specified in Section 11 of this Agreement, but with each reference to "Firm Shares" to be to the Additional Shares being sold, and "Closing Date" to be to the "Option Closing Date." 6. Offering by Underwriters. After the Registration Statement becomes effective, the Underwriters propose to offer for sale to the public the Firm Shares and any Additional Shares which may be sold at the price and upon the terms set forth in the Prospectus. 7. Expenses. (a) The Company agrees to pay all fees, taxes and expenses incident to the performance of the obligations of the Company and the Selling Shareholder under this Agreement and under any other agreement in connection with the offer, sale and issuance of the Firm Shares and Additional Shares, and any fees, taxes and expenses, including transfer taxes incident to the issuance and delivery of the Firm Shares and Additional Shares to the Underwriters as may be required by this Agreement, including, without limitation: (i) accounting, legal (other than the fees and disbursements of the Underwriters' counsel, except as provided below), printing, any state or local transfer or other taxes (excluding any income taxes assessed with respect to Shares sold by the Selling Shareholder), Nasdaq listing fees, "road show" costs, advertising and other costs incurred in connection with the preparation, printing, filing and delivery to the Representatives of the Registration Statement, the Preliminary -12- Prospectus, the Prospectus, and all amendments or supplements to them, preliminary and final Blue Sky Memoranda, this Agreement, the Agreement Among Underwriters and Selected Dealer Agreement, Underwriters' Questionnaires, powers of attorney and any other agreements or similar items reasonably used by you or reasonably required or desirable in connection with the offering and sale of the Firm Shares and Additional Shares; (ii) the costs of furnishing by messenger, by overnight delivery, other expedited delivery service or by mail copies of the Preliminary Prospectus, the Prospectus and all supplements and amendments thereto to the several Underwriters, Selected Dealers and their respective customers; (iii) all filing fees to the Commission and the National Association of Securities Dealers, Inc. ("NASD") payable in connection with this offering; (iv) the fees and expenses of the transfer agent; and (v) all legal fees, disbursements, filing fees and other costs of compliance with or registration and qualification under applicable state securities or Blue Sky laws, and all reasonable expenses incident thereto (including fees of Underwriter's counsel solely as it relates to the foregoing). In the event that the proposed offering does not proceed and the Closing does not occur for any reason, including the failure of the Company to satisfy any of the conditions under this Agreement, the Company shall reimburse the Representatives for their out-of-pocket expenses up to $25,000, and will, in addition, reimburse the Representatives for fees and expenses of counsel for the Underwriters based on actual time charges and disbursements, but not to exceed $50,000 (exclusive of Blue Sky fees), for which expenses the Representatives shall account to the Company. (b) The Selling Shareholder shall pay all stock transfer taxes payable with respect to the Shares sold by him. 8. Covenants of the Company. In further consideration of the agreements of the Underwriters contained in this Agreement, the Company covenants and agrees with each of the several Underwriters as follows: (a) The Company will not at any time submit or make any amendment or supplement to the Prospectus or Registration Statement which shall not have been submitted to you within a reasonable time prior to the proposed submission thereof, or to which you shall reasonably object in writing, or which is not in compliance with the Acts. (b) The Company will use its best efforts to cause the Registration Statement and any post-effective amendments thereto to comply with the requirements of the Securities Act and the Rules under the Securities Act and to become effective, and will promptly advise you and confirm in writing (i) when the Registration Statement shall become effective; (ii) when any post-effective amendment to the Registration Statement becomes effective; (iii) when the Commission shall request any amendment to the Registration Statement or Prospectus, or request any additional information; (iv) of the necessity of amending or supplementing the Registration Statement or any post-effective amendment in order to then meet the requirements of the Securities Act and the Rules under the Securities Act; and (v) of the issuance by the Commission, any "Blue Sky" authority or any other governmental agency with jurisdiction over -13- the Company or its securities, of any stop order or similar order with regard to the Registration Statement or the Prospectus, or any order preventing or suspending the use of any Preliminary Prospectus or the Registration Statement or Prospectus, or of the suspension of the qualification of the Firm Shares and Additional Shares for offer or sale in any jurisdiction, or of the institution of any proceedings for any such purpose. The Company will use its best efforts to prevent the issuance of any stop order or of any order preventing or suspending such use and if such an order shall be issued, the Company will use its beat efforts to obtain its withdrawal as soon as possible. (c) The Company will prepare and file with the Commission, upon your reasonable request, any amendments or supplements to the Registration Statement or Prospectus, in form and substance reasonably satisfactory to counsel for the Company, as in the opinion of Baer Marks & Upham, counsel for the Underwriters, may be necessary or advisable in connection with the distribution of the Firm Shares and Additional Shares, and will use its best efforts to cause the same to become effective as promptly as possible. (d) The Company consents to the use of any Preliminary Prospectus by the several Underwriters and by dealers for the purposes contemplated by this Agreement and in accordance with the Acts. The Company will deliver to you, without charge, on or before the Closing Date, three executed copies of the Registration Statement and all amendments thereto (including all financial statements, exhibits thereto, and documents incorporated by reference therein) and copies of all written communications between the Company, its representatives and agents and the Commission, and will deliver to you such number of copies of the Registration Statement (including all financial statements and documents incorporated by reference, but without exhibits), and all amendments thereto as you may reasonably request. The Company will deliver or mail to you and, upon your request, to the Underwriters, from time to time, during the period when delivery of the Prospectus relating to the Firm Shares and/or Additional Shares shall be required under the Acts, as many copies of the Prospectus (as amended or supplemented) as you may reasonably request. (e) If, at the time that the Registration Statement becomes effective, any information shall have been omitted therefrom in reliance upon Rule 430A of the Rules under the Securities Act, then, immediately thereafter, the Company will prepare and file or transmit for filing with the Commission in accordance with such Rule 430A and Rule 424(b) of the Rules under the Securities Act copies of the amended Prospectus or, if required by such Rule 430A, a post-effective amendment to the Registration Statement (including an amended Prospectus) containing all information so omitted. (f) The Company will comply with the requirements of the Acts and any other applicable rules and regulations of any governmental authority having jurisdiction over this offering so as to permit the continuance of sales or dealing in the Shares. Subject to the provisions of subsection (a) of this Section 8, if, at any time when a Prospectus is required to be delivered under the Acts, (i) an event relating to or affecting the Company shall have occurred which, in the judgment of the Company and its counsel, or in the opinion of counsel -14- for the Underwriters, would cause the Registration Statement as then in effect to include an untrue statement of a material fact or to omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, or in order to make the Registration Statement comply with the Acts, or (ii) in the opinion of Counsel to the Company or counsel for the Underwriters, it is necessary to amend or supplement the Registration Statement or Prospectus to comply with applicable laws, the Company will promptly notify you of the foregoing and will promptly prepare, file and deliver to you (or to the Underwriters and such dealers as you shall direct) without charge, such number of copies of the amended or supplemented Registration Statement or Prospectus as you shall reasonably request, and will use its best efforts to cause the Commission and appropriate "Blue Sky" authorities to take all required action with regard to any such amendment as may be necessary to permit the lawful use of the Registration Statement and Prospectus in connection with the distribution of the Firm Shares and Additional Shares. (g) The Company will supply all necessary documents, exhibits and information and execute all applications, instruments and papers as may be necessary or desirable in the opinion of Baer Marks & Upham, counsel for the Underwriters, to qualify the Shares for sale under the Blue Sky or other securities laws in such jurisdictions as the Underwriters may reasonably request. The Company will take any reasonable measures requested by you and such action, if any, which is necessary under such laws in order to qualify the Firm Shares and Additional Shares for sale and to continue such registration or qualification so long as necessary to permit the continuance of sales or dealings therein with respect to the Shares. (h) The Company will make generally available to its security holders as soon as practicable after the expiration of one year after the date the Registration Statement becomes effective, and in all events not later than _______, 1996, an earnings statement of the Company (which will be in such detail and form as you may reasonably request and which need not be audited) covering a period of at least 12 months beginning after the date the Registration Statement becomes effective, which earnings statement shall satisfy the provisions of Section 11(a) of the Securities Act. (i) So long as the Company shall be subject to the reporting requirements of the Exchange Act, the Company shall furnish to its shareholders annual reports containing financial statements of the Company audited by its independent certified public accountants and quarterly reports for the first three quarters of its fiscal year containing financial information which may be unaudited. (j) The Company will, from time to time, after the date the Registration Statement becomes effective, file with the Commission such reports as are required by the Acts and with state securities commissions in states where the Shares have been sold by the Representatives (as the Representatives shall have advised the Company in writing) such reports as are required to be filed by the securities acts and the regulations of those states. -15- (k) The Company shall furnish to you as early as practicable prior to the Closing Date, but no later than three (3) full business days prior thereto, a copy of the latest available unaudited interim financial statements of the Company which have been prepared by the Company's independent certified public accountants, as stated in their letters to be furnished pursuant to Section 11(h) of this Agreement. (l) During the period of five (5) years from the date the Registration Statement becomes effective, the Company will furnish to the Representatives copies of all reports and other communications (financial or other) furnished by the Company to its shareholders and, as soon as reasonably practicable, copies of any reports or financial statements furnished or filed by the Company to or with the Commission, NASDAQ, or any national exchange on which any class of securities of the Company may be listed. (m) During the period of 180 days after the date the Registration Statement becomes effective, the Company will not, directly or indirectly, without the prior written consent of JMS, offer, sell, grant any option to purchase or otherwise dispose of any Common Stock or any securities convertible into or exchangeable for Common Stock except pursuant (i) to this Agreement and (ii) upon the exercise of currently outstanding options granted under the Company's stock option and appreciation plans. (n) The Company will reasonably enforce, for your benefit, the written agreements (copies of which have been furnished to you) of all of the officers, directors and certain shareholders of the Company as of the date the Registration Statement becomes effective, not to, directly or indirectly, sell, offer to sell or agree to sell or otherwise dispose of any of their Common Stock for a period of 180 days from the date the Registration Statement becomes effective without the prior written consent of JMS and the Company agrees to cause the Common Stock held by such shareholders to be legended accordingly. 9. Indemnification. (a) The Company agrees to indemnify and hold harmless, and, subject to Section 9(c), the Selling Shareholder agrees, severally and not jointly, to indemnify and hold harmless, each Underwriter (including specifically each person who may be substituted for an Underwriter as provided in Section 13 of this Agreement) and each person, if any, who controls any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages, expenses or liabilities (collectively, "Losses"), joint or several, to which they or any of them may become subject under the Acts, state securities laws or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse each of the Underwriters and each such controlling person, if any, for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any claim or action whether or not resulting in any liability, insofar as such Losses or actions arise -16- out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, in any Preliminary Prospectus or in the Prospectus (or the Registration Statement or Prospectus as from time to time amended or supplemented by the Company) or in any application or other document (hereinafter "Application") executed by the Company or based upon written information furnished by or on behalf of the Company, filed in any jurisdiction in order to qualify the Shares under the securities laws of that jurisdiction, or which arise out of or are based upon the omission or alleged omission to state in any of the foregoing any material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the -------- ------- indemnity agreement contained in this subsection shall not apply to any Loss, to the extent arising out of any untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, Preliminary Prospectus or Prospectus (or the Registration Statement or Prospectus as from time to time amended or supplemented by the Company) or Application in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by the Representatives or any Underwriter directly or through you expressly for use therein; provided, further that the indemnity agreement contained in ----------------- this subsection is subject to the condition that, insofar as it relates to any such untrue statement or alleged untrue statement or omission or alleged omission in any Preliminary Prospectus but eliminated or remedied in the Prospectus, such indemnity agreement shall not inure to the benefit of any Underwriter or any person controlling such Underwriter from whom the person asserting any such Loss or action purchased the Shares if (i) prior to the time such Prospectus was required under the Securities Act to be furnished to such person the Company had furnished copies of the Prospectus to such Underwriter, (ii) a copy of such Prospectus, as then corrected or supplemented, was not furnished to such person at or prior to the time required under the Securities Act, and (iii) the delivery of such Prospectus would have cured the defect giving rise to such Losses or action. Promptly after receipt by any Underwriter or any person controlling such Underwriter of notice of the commencement of any action in respect of which indemnity may be sought against the Company or the Selling Shareholder under this subsection (a), such Underwriter or controlling person shall notify the Company and the Selling Shareholder in writing of the commencement of the action and, subject to the provisions hereinafter stated, the Company and/or the Selling Shareholder shall assume the defense of that action (including the employment of counsel, who shall be reasonably satisfactory to the Representatives, and the payment of expenses) insofar as such action shall relate to any alleged liability in respect of which indemnity may be sought against the Company and/or the Selling Shareholder hereunder. Any Underwriter or any such controlling person shall have the right to employ separate counsel in any such action and participate in the defense, but the fees and expenses of such counsel shall not be at the expense of the Company or the Selling Shareholder, unless (i) the employment of such counsel has been specifically authorized by the Company or the Selling Shareholder, as the case may be or, (ii) the indemnified party or parties reasonably conclude there may be defenses available to it or them which were not available to the Company or the Selling Shareholder (in which case the Company or the Selling Shareholder, as the case may be, will not have the right to direct the defense of the action on behalf of the indemnified parties), in which event the reasonable expenses of one additional counsel for the Underwriters will be borne by the Company. Neither -17- the Company nor the Selling Shareholder shall be liable to indemnify any person for any settlement of any such action effected without the written consent of the Company and/or the Selling Shareholder, as the case may be. The obligations of the Company and the Selling Shareholder under the indemnity agreement set forth in this subsection (a) shall be in addition to any liability the Company and the Selling Shareholder may otherwise have under this Agreement. (b) Each Underwriter (including specifically each person who may be substituted for any Underwriter as provided in Section 13 of this Agreement), severally and not jointly, agrees to indemnify and hold harmless the Company, each of its directors, each of its officers and each person, if any, who controls the Company within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, and the Selling Shareholder, from and against any and all Losses, joint or several, to which they or any of them may become subject under the Acts, state securities laws or under any other statute or at common law or otherwise, and, except as hereinafter provided, will reimburse the Company and each such director, officer or controlling person and the Selling Shareholder for any legal or other expenses reasonably incurred by them or any of them in connection with investigating or defending any claim or action whether or not resulting in any liability, insofar as such Losses, or actions arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, in any Preliminary Prospectus or in the Prospectus (or the Registration Statement or Prospectus as from time to time amended or supplemented) or in any Application, or arise out of or are based upon the omission or alleged omission to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, but only insofar as any such statement or omission was made in reliance upon and in conformity with information furnished in writing to the Company in connection therewith by the Representatives or such Underwriter directly or through the Representatives expressly for use therein. For all purposes of this Agreement, the information contained in the section entitled "Underwriting", set forth in the Prospectus constitutes the only information furnished in writing by or on behalf of the Underwriters expressly for inclusion in any Preliminary Prospectus, any Rule 430A Prospectus, the Registration Statement or the Prospectus (as from time to time amended or supplemented), or any amendment or supplement thereto, or in any application, as the case may be. Promptly after receipt of notice of the commencement of any action in respect of which indemnity may be sought against one or more Underwriters under this subsection (b), the indemnified party shall notify all Underwriters in writing of the commencement of the action and the Underwriter or Underwriters against whom indemnity may be sought shall, subject to the provisions hereinafter stated, assume the defense of such action (including the employment of counsel who shall be reasonably satisfactory to the Company and the Selling Shareholder, and the payment of expenses) insofar as such action shall relate to an alleged liability in respect of which indemnity may be sought against such Underwriter or Underwriters. The Company and each such director, officer or controlling person and the Selling Shareholder shall have the right to employ separate counsel in any such action and participate in the defense, but the fees and expenses of such counsel shall not be at the expense of any Underwriter unless (i) the employment of such counsel has been specifically authorized by the Underwriters obligated to -18- defend such action or (ii) the indemnified party or parties reasonably conclude there may be defenses available to it or them which are not available to the Underwriters against whom indemnification is sought (in which case those Underwriters will not have the right to direct the defense of the action an behalf of the indemnified party or parties), in which event the reasonable expenses of one additional counsel for all the indemnified parties will be borne by the indemnifying Underwriters. The Underwriters against whom indemnity may be sought shall not be liable to indemnify any person for any settlement of any action effected without such Underwriter's written consent. The obligations of each Underwriter under the indemnity agreement set forth in this subsection (b) shall be in addition to any liability each of them may otherwise have under this Agreement. (c) In the event of a claim for indemnity pursuant to the provisions of this Section 9, each Underwriter severally agrees to seek such indemnity in full from the Company. If, after seeking such indemnity, any Underwriter is unable, for any reason, to obtain such indemnity from the Company, such Underwriter may seek indemnity from the Selling Shareholder in accordance with the provisions of subsection (a) of this Section; provided, however, that the Selling Shareholder's aggregate liability under this Section shall be limited to an amount equal to the net proceeds (after deducting the Underwriter's discount but before deducting expenses) received by the Selling Shareholder from the sale of Shares pursuant to this Agreement. 10. Contribution. To the extent the indemnification provided for in Section 9 is unavailable to an indemnified party or insufficient in respect of any Losses referred to therein, then each indemnifying party under Section 9, in lieu of indemnifying such indemnified party thereunder, shall contribute to the amount paid or payable by such indemnified party as a result of such Losses (i) in such proportion as is appropriate to reflect the relative benefits received by the indemnifying party or parties, on the one hand, and the indemnified party or parties, on the other hand, from the offering of the Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above, but also the relative fault of the indemnifying party or parties on the one hand and of the indemnified party or parties on the other hand in connection with the statements or omissions that resulted in such Losses, as well as any other relevant equitable considerations. The relative benefits received by the Company and the Selling Shareholder on the one hand and the Underwriters on the other hand in connection with the offering of the Shares shall be deemed to be in the same respective proportions as the net proceeds from the offering of the Shares (before deducting expenses) received by the Company and the Selling Shareholder and the total underwriting discounts and commissions received by the Underwriters, in each case as set forth in the tables on the cover of the Prospectus, bear to the aggregate Public Offering Price of the Shares. The relative fault of the Company and the Selling Shareholder on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Selling Shareholder or by the -19- Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The Underwriters' respective obligations to contribute pursuant to this Section 10 are several in proportion to the respective number of Shares they have purchased hereunder, and not joint. The Company, the Selling Shareholder and the Underwriters agree that it would not be just or equitable if contribution pursuant to this Section 10 were determined by pro rata allocation (even if the Underwriters were --- ---- treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an indemnified party as a result of the Losses referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses reasonably incurred by such indemnified party in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 10, no Underwriter shall be required to contribute any amount in excess of the amount by which the total price at which the Shares underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The remedies provided for in this Section 10 are not exclusive and shall not limit any rights or remedies which may otherwise be available to any indemnified party at law or in equity. The indemnity and contribution provisions contained in Section 9 and this Section 10 and the representations and other statements of the Company and the Selling Shareholder contained in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter, the Selling Shareholder, or the Company, its officers or directors or any person controlling the Company and (iii) acceptance of and payment for any of the Shares. 11. Conditions of Obligations of Underwriters. The obligations of the Underwriters to purchase and pay for the Shares are subject (as of the date hereof and the Closing Date, and with respect to the Additional Shares, the Option Closing Date) to the accuracy of and the compliance with the representations and warranties of the Company and the Selling Shareholder, the accuracy of the statements of officers and directors of the Company made pursuant to the provisions of this Agreement, the performance by the Company and the Selling Shareholder of their respective obligations under this Agreement and to the following additional conditions: (a) The Registration Statement shall become effective with the Commission no later than 10:00 A.M., New York City time, on the day following the date of this Agreement, or such later time and date as shall have been consented to by the Underwriters (including you) who are obligated to purchase the Firm Shares to be purchased by the -20- Underwriters pursuant to this Agreement; the Commission shall have taken all required action, if any, with regard to the Registration Statement, and, prior to the Closing Date, no stop order or similar order with regard to the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge of the Underwriters, the Company or the Selling Shareholder, shall be contemplated by the Commission or by any securities, Blue Sky or other regulatory authority of any jurisdiction, and any request on the part of the Commission or such other securities, Blue Sky or regulatory authorities for additional information shall have been complied with to the satisfaction of Baer Marks & Upham, counsel for the Underwriters. (b) Prior to the date of this Agreement, the issuance and sale of the Firm Shares to be sold by the Company, and the Additional Shares which may be sold by the Company hereunder shall have been approved by all requisite corporate action of the Company. (c) The NASD shall have indicated that it had no objection to the underwriting arrangements pertaining to the sale of the Shares and the participation by the Underwriters in the sale of the Shares. (d) No action shall have been taken by the Commission or the NASD, the effect of which would make it improper, at any time prior to the Closing Date, for members of the NASD to execute transactions (as principal or agent) in any of the Shares, and no proceedings for the taking of such action shall have been instituted or shall be pending or, to the knowledge of the Underwriters or the Company, shall be contemplated by the Commission or the NASD. The Company represents that at the date hereof it has no knowledge that any such action is in fact contemplated by the Commission or the NASD. (e) Between the date of this Agreement and the Closing Date (and the Option Closing Date, if any), the Company (i) shall not have sustained any material loss outside the ordinary course of its business or of such character as would materially adversely affect its business or property, whether or not that loss is covered by insurance; and (ii) shall have conducted its business in the usual and ordinary manner and, except as disclosed in the Prospectus or except in the ordinary course of its business, there shall not have occurred any change, or any development including a prospective change, in the condition, financial or otherwise, or in the earnings, business or operations of the Company and the Subsidiaries, taken as a whole, which, in the reasonable judgment of the Representatives, is material and adverse and that makes it, in the reasonable judgment of the Representatives, impracticable to market the Shares on the terms and in the manner contemplated in the Prospectus. (f) At the Closing Date, there shall have been delivered to you a signed opinion of Proskauer, Rose, Goetz & Mendelsohn LLP addressed to the Underwriters, dated as of the Closing Date, in form and substance reasonably satisfactory to Baer Marks & Upham, counsel for the Underwriters, together with a signed or photostatic copy of that opinion for each of the other Underwriters, substantially to the effect that: -21- (i) Each of the Company and the Subsidiaries have been duly incorporated and are validly existing and in good standing under the laws of their respective jurisdictions of incorporation, has full corporate power and authority to own and lease its properties and to conduct its business as described in the Registration Statement and Prospectus, and is duly qualified to do business as a foreign corporation and is in good standing in each jurisdiction where it owns or leases properties, except where the failure to so qualify would not have a material adverse effect on the earnings, business affairs or business prospects of the Company and the Subsidiaries, taken as a whole. (ii) All of the outstanding shares of Common Stock of the Company have been duly authorized and validly issued, are fully paid and non-assessable. All of the outstanding shares of capital stock of the Subsidiaries are on the date hereof, and will be on the Closing Date, owned beneficially by the Company, free and clear of any liens, encumbrances, security interests or other restrictions, and no one has the right, upon the passage of time or otherwise, to acquire any of the stock of the Subsidiaries owned by the Company. (iii) The Shares to be sold by the Company as contemplated by this Agreement have been duly authorized, and, when issued as provided in this Agreement will be, validly issued, fully paid and non-assessable, and to the best of such counsel's knowledge, no preemptive rights will be applicable to any of the Shares to be sold by the Company under this Agreement when issued and sold as contemplated in this Agreement, and in the Registration Statement and the Prospectus. (iv) This Agreement has been duly authorized, executed and delivered by the Company and is a valid and binding agreement of the Company, enforceable against the Company in accordance with its terms, except to the extent enforceability may be limited by bankruptcy or other laws relating to or affecting creditors' rights generally or equitable principles and by limitations on the enforceability of the indemnification and contribution provisions under federal or state securities laws or public policy. All corporate action required to be taken by the Board of Directors of the Company and all action required to be taken by the shareholders of the Company in connection with the authorization, issuance and sale of the Shares to be sold by the Company as contemplated in this Agreement, the Registration Statement and the Prospectus have been duly taken. (v) The issuance by the Company of the Shares to be sold by it under this Agreement, the execution and delivery of this Agreement, or the undertakings contained in the Registration Statement or the Prospectus, or the consummation of the transactions contemplated in this Agreement or the compliance with the terms of this Agreement, will not conflict with or result in a breach of any of the terms or provisions of the Certificate of Incorporation, as amended, or the By-laws of the Company or the Subsidiaries, or any indenture, mortgage, deed of trust, note, bank loan or credit agreement or any other agreement or instrument of which such counsel is aware to which the Company or the Subsidiaries is a party or by which any of its properties or assets are bound or any applicable law (other than Blue Sky laws), rule or regulation, or (without search of any court dockets) any judgment, order or decree -22- of any government, governmental agency or instrumentality or court, domestic or foreign, having jurisdiction over the Company or its properties or assets, of which such counsel is aware. (vi) Except as described in the Prospectus, each of the Company and the Subsidiaries holds all material licenses, certificates, permits and other evidence of regulatory compliance issued by appropriate federal, state or local governmental agencies or bodies necessary for the conduct of its business as described in the Prospectus. (vii) This Agreement has been executed and delivered by or on behalf of the Selling Shareholder and constitutes a valid and legally binding agreement of the Selling Shareholder in accordance with its terms. (viii) All authorizations, approvals and consents necessary for the execution and delivery by the Selling Shareholder of this Agreement, and the sale and delivery of Shares which may be sold by the Selling Shareholder hereunder (other than, at the time of the execution thereof, the issuance of the order of the Commission declaring the Registration Statement effective and such authorizations, approvals or consents as may be necessary under state securities or Blue Sky laws), have been obtained and are in full force and effect. (ix) To the best of such counsel's knowledge and belief, the delivery of certificates for Shares being sold by the Selling Shareholder hereunder against payment therefor as provided herein will transfer to the Underwriters good and marketable title to such Shares, free and clear of all liens, encumbrances, security interests and claims, assuming the Underwriters purchased such Shares in good faith without notice of any adverse claim. (x) Except for registration or qualification under the Securities Act or under state securities or Blue sky laws, no authorization, approval, consent or license of any regulatory body or authority is required for the valid authorization, issuance, sale and delivery of the Firm Shares and Additional Shares, or, if required, all such authorizations, approvals, consents and licenses have been obtained and are in force and effect. (xi) The Registration Statement has become effective, and, to such counsel's knowledge, no stop order or similar order has been issued with regard to the Registration Statement or the Prospectus, and no proceedings for that purpose have been instituted or are pending and such counsel has not been notified that any such proceedings are contemplated under the Acts or under any Blue Sky or other securities laws of any jurisdiction. (xii) The Registration Statement, the Prospectus and each post-effective amendment or supplement thereto, and each document filed pursuant to the Exchange Act and incorporated by reference into the Registration Statement and the Prospectus, complies (or, with respect to documents incorporated by reference, complied when so filed) as to form in all material respects with the requirements of the Acts (except that no opinion shall be expressed as to the financial statements, notes related thereto, and other financial statistical data included therein and information supplied by you), and, to such counsel's knowledge, all contracts or -23- other documents of a character required by the Securities Act and the Rules under the Securities Act to be summarized or disclosed in the Prospectus or filed as exhibits to the Registration Statement have been so summarized, disclosed or filed, and the statements incorporated by reference from the Company's Annual Report on Form 10-K for the year ended December 31, 1994, in each case insofar as such statements constitute summaries of the legal matters, documents or proceedings referred to therein, fairly present the information called for with respect to such legal matters, documents and proceedings and fairly summarizes the matters referred to therein. (xiii) Such counsel has acted as counsel for the Company and has participated in the preparation of the Registration Statement and Prospectus and any post effective amendments or supplements thereto to the date of such opinion, and no facts have come to the attention of such counsel which would lead such counsel to believe that either the Registration Statement or the Prospectus or any post-effective amendment thereto contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (except no opinions need be expressed as to the financial statements and other financial or statistical data included therein and information supplied by you). (xiv) To such counsel's knowledge, all statutes or regulations or legal or governmental proceedings required to be described in the Registration Statement or Prospectus are described therein as required, and all such descriptions in the Registration Statement or Prospectus are accurate in all material respects and present fairly the information purported to be shown. (xv) To such counsel's knowledge, there are no outstanding options, warrants or other rights to purchase or acquire any shares of capital stock of the Company, except as set forth in the Registration Statement or the Prospectus. (xvi) The authorized capital stock of the Company conform as to legal matters in all material respects with the statements concerning them made in the Registration Statement and the Prospectus under the section entitled "Description of Capital Stock," and such statements present fairly the matters respecting the authorized capital stock of the Company required to be set forth in the Registration Statement or the Prospectus. (xvii) Except as set forth in the Registration Statement and Prospectus, to such counsel's knowledge, there is no pending or threatened action, suit or proceeding before any court or before or by any governmental agency or body to which the Company is a party, or of which any of its properties or assets are the subject, which is required to be disclosed in the Registration Statement or Prospectus or which would have a material adverse effect on the Company. -24- (xviii) The Company is not an "investment company" or an entity "controlled" by and "investment company," as such terms are defined in the Investment Company Act of 1940, as amended. In rendering such opinion, such counsel may rely (a) as to matters involving the application of laws other than the laws of the United States and jurisdictions in which they are admitted, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon an opinion or opinions (in form and substance reasonably satisfactory to counsel for Underwriters) of other counsel reasonably acceptable to counsel for the Underwriters, familiar with the applicable laws; and (b) as to matters of fact, to the extent they deem proper, on certificates of responsible officers of the Company and certificates or other written statements of officers of departments of various jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, provided that copies of any such statements or certificates shall be delivered to counsel for the Underwriters, and on the representations and warranties of the Company and the Selling Shareholder contained in this Agreement. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel, and, in their opinion, you and they are justified in relying thereon. (g) At the Closing Date, you shall have received a Certificate signed by the Chairman of the Board, the President and the Vice President- Finance of the Company, dated as of the Closing Date, to the effect that: (i) Each officer signing the Certificate has carefully examined the Registration Statement and the Prospectus and, in his or her opinion, as of the date of the Prospectus, and as of the date of the Certificate, neither the Registration Statement nor the Prospectus, nor any amendment or supplement, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, and, since the date of the Prospectus, no event has occurred which should have been set forth in an amendment or a supplement to the Registration Statement or Prospectus which has not been so set forth, and, since the respective dates as of which information is given in the Registration Statement and the Prospectus, there has not been any material adverse change in the condition of the Company, financial or otherwise, or, as compared with the comparable period in the prior fiscal year, in the earnings of the Company from that set forth in the Registration Statement, whether or not arising in the ordinary course of business. (ii) No stop order or similar order with regard to the Registration Statement or Prospectus has been issued and no proceedings for that purpose have been taken or are, to the knowledge of such officer, contemplated by the Commission or any other agency having jurisdiction with respect to the issuance, sale or distribution of the Shares. (iii) The Company has complied in all material respects with its obligations under this Agreement, and the representations and warranties set forth in Section 1 -25- of this Agreement are true and correct as of the date of the Certificate with the same force and effect as though made on that date. (h) On the date of this Agreement, you shall have received a letter addressed to the Underwriters, with a signed or photostatic copy for each of the several Underwriters, dated the date it is delivered, in form and substance satisfactory to you and Baer Marks & Upham, from Grant Thornton LLP, independent certified public accountants, concerning their examination and review of financial statements and various other data contained in the Registration Statement, containing the following: (i) confirming that they are, and during the periods covered by their report(s) included in the Registration Statement and the Prospectus were, independent certified public accountants with respect to the Company and the Subsidiaries within the meaning of the Act and the Rules under the Act and stating that the answer to Item 13 of the Registration Statement is correct insofar as it relates to them; (ii) stating that, in their opinion, the consolidated statements and schedules of the Company and the Subsidiaries included in the Registration Statement and Prospectus and covered by their opinion therein comply in form in all material respects with the applicable accounting requirements of the Act and the Rules under the Act; (iii) stating that, on the basis of procedures (but not an examination made in accordance with generally accepted auditing standards) consisting of a reading of the latest available unaudited interim financial statements of the Company and the Subsidiaries (with an indication of the date of the latest available unaudited interim financial statements), a reading of the latest available minutes (and consents) of the stockholders and Boards of Directors of the Company and the Subsidiaries and committees of such Boards of Directors, inquiries to certain officers and other employees of the Company and the Subsidiaries responsible for financial and accounting matters, and other specified procedures and inquiries to a date not more than five (5) business days prior to the date of such letter, nothing has come to their attention that caused them to believe that: (A) the unaudited consolidated financial statements and schedules of the Company and the Subsidiaries included in the Registration Statement and Prospectus do not comply in form in all material respects with the applicable accounting requirements of the Acts or are not fairly presented in conformity with generally accepted accounting principles (except to the extent that certain footnote disclosures regarding any stub period may have been omitted in accordance with the applicable rules of the Commission under the Exchange Act) applied on a basis consistent with that of the audited financial statements appearing therein; (B) the unaudited pro forma adjustments, if any, have not been properly applied; (C) there was any change in the capital stock or long-term debt of the Company or any decrease in the net current assets or stockholders' equity of the Company as of the date of the latest available monthly financial statements of the Company and the Subsidiaries or as of a specified date not more than five business days prior to the date of such letter, each as compared with the amounts shown in the most recent balance sheet included in the Registration Statement and Prospectus, other than as described in the Registration Statement and Prospectus or any change or decrease (which shall -26- be set forth therein) which you, in your sole discretion, shall accept; or (D) there was any decrease in combined net sales, net earnings, or net earnings per share of Common Stock of the Company and the Subsidiaries, during the period from __________________ to the date of the latest available combined monthly financial statements of the Company and the Subsidiaries or to a specified date not more than five business days prior to the date of such letter, each as compared with the corresponding period in 1993, other than as described in the Registration Statement and Prospectus or any decrease (which shall be set forth therein) which the Underwriters in the Underwriters sole discretion shall accept; and (iv) stating that they have compared specific numerical data and financial information pertaining to the Company and the Subsidiaries set forth in the Registration Statement, which have been specified by you prior to the date of this Agreement, to the extent that such data and information may be derived from the general accounting records of the Company, and excluding any questions requiring an interpretation by legal counsel, with the results obtained from the application of specified readings, inquiries and other appropriate procedures (which procedures do not constitute an examination in accordance with generally accepted auditing standards) set forth in the letter, and found them to be in agreement. At the Closing Date, you shall have received a letter addressed to you, dated as of the Closing Date, with a signed or photostatic copy for each of the several Underwriters from Grant Thornton LLP, confirming, as of the Closing Date, the statements made in the letter furnished by them at the date of this Agreement and advising that as of a date no earlier than three business days prior to the Closing Date, they have no reason to believe that there has been any change in the matters described in the prior letter. (i) At the Closing Date there shall have been delivered to you, with a photostatic copy for each of the several Underwriters, a signed opinion of Baer Marks & Upham, counsel for the Underwriters, dated as of the Closing Date, with respect to the sufficiency of corporate proceedings and other legal matters in connection with this Agreement, the Shares, Registration Statement, Prospectus and related matters as the Representatives may request, and the Company and the Selling Shareholder shall have furnished to such counsel all documents as such counsel may have requested for the purpose of enabling them to pass upon those matters. In rendering such opinion, such counsel may rely, as to all matters of law governed by the laws of states other than _______, New York and Delaware, and as to factual matters, upon the opinion referred to in (f) above. (j) All proceedings in connection with the authorization, issuance and sale of the Shares shall be reasonably satisfactory in form and substance to you and to your counsel, and your counsel shall have been furnished with all documents, certificates and opinions, including resolutions of the Board of Directors of the Company and minutes of any shareholders' meetings, as may have been reasonably requested in order to evidence the accuracy and completeness of any of the representations, warranties or statements of the Company or the Selling Shareholder, and the performance of any of the covenants of the company or the Selling Shareholder or the compliance with any of the conditions contained in this Agreement. -27- (k) The "lock up" agreements between you and certain shareholders, officers and directors of the Company relating to the sales and certain other dispositions of shares of Common Stock or other securities, delivered to you on or before the date hereof, shall be in full force and effect on the Closing Date. (l) The Shares shall have been approved for listing on the Nasdaq National Market. 12. Conditions of Obligations of Company and Selling Shareholder. The obligations of the Company and the Selling Shareholder to sell and deliver the Shares to the several Underwriters is subject to the condition that the Registration Statement shall become effective with the Commission not later than 10: 00 A.M., New York City time, on the day following the date of this Agreement, or such later date as shall have been consented to by the Underwriters (including you) who are obligated to purchase a majority of the Shares to be purchased by all of the Underwriters pursuant to this Agreement, and prior to the Closing Date (and, with respect to the Additional Shares, prior to the Option Closing Date), no stop order or similar order with regard to the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or, to your knowledge or to the knowledge of the Company, shall be contemplated by the Commission or any other regulatory agency having jurisdiction with respect to the offer and sales of the Shares. 13. Substitution of Underwriters. (a) If one or more Underwriters default in its or their obligations to purchase and pay for Firm Shares under this Agreement and if the aggregate amount of the Firm Shares which all Underwriters so defaulting shall have agreed to purchase does not exceed 10% of the Firm Shares, each nondefaulting Underwriter shall have the right and is obligated, severally, to purchase and pay for (in addition to the number of Firm Shares set forth opposite its name in Schedule I) that proportion of the Firm Shares agreed to be purchased by all the defaulting Underwriters which the percentage of Firm Shares set forth opposite its name in Schedule I bears to the aggregate of the percentage of Firm Shares set forth opposite the names of all the nondefaulting Underwriters. In that event, the Representatives, for the accounts of the several nondefaulting Underwriters, may take up and pay for all or any part of the Firm Shares to be purchased by each nondefaulting Underwriter under this subsection (a), and may postpone the Closing Date to a time not exceeding three full business days after the Closing Date determined as provided in Section 4 of this Agreement; and (b) If one or more Underwriters default in its or their obligations to purchase and pay for Firm Shares under this Agreement and if the aggregate amount of the Firm Shares which all Underwriters so defaulting shall have agreed to purchase exceeds 10% of the Firm Shares, or if one or more Underwriters for any reason permitted under this Agreement cancel its or their obligations to purchase and pay for Firm Shares under this Agreement, the noncancelling and nondefaulting Underwriters (hereinafter called the "Remaining Underwriters") shall have the right to purchase such Firm Shares on the Closing Date in the proportion as may -28- be agreed among them. If the Remaining Underwriters do not purchase and pay for all such Firm Shares at the Closing Date, the Closing Date shall be postponed by two business days and the Remaining Underwriters shall have the right to purchase the Firm Shares, or to substitute another person or persons to purchase them, or both, at the postponed Closing Date. If purchasers are not found for such Firm Shares by the postponed Closing Date, the Closing Date shall be postponed for a further five business days and the Company shall have the right to substitute another person or persons, satisfactory to the Representatives, to purchase those Firm Shares at the second postponed Closing Date. If the Company does not find the purchasers for those Firm Shares by the second postponed Closing Date, then this Agreement shall automatically terminate and neither the Company nor the Remaining Underwriters shall be under any obligation under this Agreement (except that the Company shall remain liable to the extent provided in Sections 7 and 9(a) and 10 and the Underwriters shall remain liable to the extent provided in Sections 9(b) and 10). As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section 13. Nothing in this Section will relieve a defaulting Underwriter from liability for its default or obligate any Underwriter to purchase or find purchasers for any Firm Shares in excess of those agreed to be purchased by the Underwriter in Section 3 and Section 13(a) of this Agreement. 14. Effective Date of Agreement. This Agreement shall become effective at whichever of the following times shall first occur: (i) at 9:30 A.M., New York City time, on the next full business day following the date on which the Registration Statement becomes effective or (ii) at such time after the Registration Statement has become effective and the Underwriters shall release the Firm Shares for sale to the public; provided, however, that the provisions of Sections 7, 9, 10, 14 and 18 hereof shall at all times be effective. For purposes of this Section 14, the Firm Shares shall be deemed to have been so released upon the release by the Underwriters for publication, at any time after the Registration Statement has become effective, of any newspaper advertisement relating to the Firm Shares or upon the release by the Underwriters of telegrams offering the Firm Shares for sale to securities dealers, whichever may occur first. 15. Termination of Agreement. (a) This Agreement may be terminated at any time prior to the Closing Date by you by giving written notice to the Company and the Selling Shareholder upon the occurrence of any of the following events: (i) the Company shall have sustained a loss, by reason of fire, flood, accident or other calamity which, in your reasonable judgment, materially affects the aggregate value of the property owned or leased by the Company or which materially interferes with the operation of the business of the Company, regardless of whether or not that loss shall have been insured; (ii) the Company has encountered or been threatened with a strike or other labor dispute or been subjected to governmental action or fluctuations in currency or major political upheaval which materially affects the aggregate value of the property owned or leased -29- or which materially interferes with the operation of its business or which in your reasonable judgment makes it impracticable or inadvisable to offer for sale or to enforce contracts made by the Underwriters for the resale of the Firm Shares; (iii) except as set forth in the Prospectus, there shall be pending or threatened against the Company or notification has been received by the Company, of the threat of any material legal or governmental proceeding or action relating generally to the business or prospects of the Company, as the case may be, which could materially adversely affect the Company (including action with respect to credit or interest rates) or which in your reasonable opinion makes it impracticable or inadvisable to proceed with the offering; (iv) any of the certificates, opinions or other documents to be delivered on the date of this Agreement or at the Closing Date are not in form reasonably satisfactory to counsel to the Underwriters; (v) any conditions set forth in Section 11 of this Agreement shall not have been satisfied; (vi) the Company is merged or consolidated or all or substantially all of the capital stock or assets of the Company are acquired by another company or group, or there exists a binding legal commitment for the foregoing or any other material change of ownership or control occurs; (vii) there has occurred any outbreak of hostilities or escalation of any existing hostilities or other calamity or crisis, the effect of which on the financial markets of the United States is such as to make it impracticable, in the reasonable exercise of judgment of the Underwriters, to market the Shares or to enforce contracts for the sale of the Shares; (viii) a banking moratorium shall have been declared by either federal or New York state authorities; (ix) if trading generally on either the American Stock Exchange, the New York Stock Exchange, or Nasdaq has been suspended, or minimum or maximum prices for trading have been fixed, or maximum ranges for prices for securities have been required, by either of said Exchanges or Nasdaq or by order of the Commission or any other governmental authority; (x) trading of any securities of the Company shall have been suspended on any exchange or in the over-the-counter market; or (xi) any law shall be enacted or any regulation promulgated relating to the business of the Company which could materially adversely affect the Company. -30- (b) This Agreement may be terminated at any time prior to the Closing Date by the Company by giving written notice to you (i) at any time before this Agreement becomes effective in accordance with section 14 hereof, or (ii) if the conditions set forth in Section 12 shall not have been satisfied at or prior to the Closing Date. 16. Notices. All communications under this Agreement shall be in writing and, except as otherwise provided shall be delivered at or mailed, registered or certified, return receipt requested, or telecopied to the following addresses: If to you or any other Underwriter: Janney Montgomery Scott Inc. 26 Broadway New York, New York 10004 Attention: William J. Barrett Copy to: Janney Montgomery Scott Inc. As Representatives of the Several Underwriters 1801 Market Street 20th Floor Philadelphia, Pennsylvania 19103 Attention: ________________________________________ and Robert W. Baird & Co. Incorporated 777 East Wisconsin Avenue Milwaukee, Wisconsin 53202 Attention: ________________________________________ and Baer Marks & Upham 805 Third Avenue New York, New York 10022 Attention: Eric D. Martins, Esq. -31- If to the Company: Computer Horizons Corp. 49 Old Bloomfield Avenue Mountain Lakes, New Jersey 07064-1495 Attention: John J. Cassese, President Copy to: Proskauer, Rose, Goetz & Mendelsohn 1585 Broadway New York, New York 10036 Attention: Robert Cantone, Esq. If to the Selling Shareholder: John J. Cassese, President 49 Old Bloomfield Avenue Mountain Lakes, New Jersey 07064-1495 Any party may change its address by giving notice in accordance with this Section. 17. Parties in Interest. This Agreement is made solely for the benefit of the Underwriters, the Company, directors and officers of the Company, the Selling Shareholder and their respective executors, administrators, successors and assigns, and no other person shall acquire or have any right under or by virtue of this Agreement. The term "successor" and "successor and assigns" shall not include any purchaser, as such purchaser, from the Company, the Selling Shareholder or any of the several Underwriters of the Shares. All of the obligations of the Underwriters under this Agreement are several and not joint. 18. Survival Clause. The representations, warranties, indemnities, agreements and other statements of the Underwriters and the Company and its officers and the Selling Shareholders set forth in this Agreement and made pursuant to this Agreement will remain operative and in full force and effect regardless of (i) any investigation made by or on behalf of any Underwriter or controlling person thereof or by or on behalf of the Company, any of its officers and directors the Selling Shareholders, an Underwriter or any controlling person thereof, (ii) any termination of this Agreement and (iii) delivery of and payment for the Shares. 19. Authority of Representatives. You will act for the several Underwriters in connection with this offering, and any action under or in respect of this Agreement taken by you -32- as Representatives on behalf of the Underwriters will be binding upon all of the Underwriters. In addition, any provision herein requiring the decision or consent of the Representatives shall be deemed to have been validly decided or given if decided or given by Janney Montgomery Scott Inc. 20. Applicable Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 21. Counterparts. This Agreement may be signed in one or more counterparts and shall be deemed effective when each party hereto has signed a counterpart. -33- If the foregoing is in accordance with your understanding of our Agreement, kindly sign and return to the Company the enclosed duplicate hereof, whereupon it will become a binding Agreement among the Company and the Underwriters in accordance with its terms. Very truly yours, COMPUTER HORIZONS CORP. By: ------------------------------------------ Name: Title: ---------------------------------------------- John J. Cassese, Selling Shareholder The foregoing Agreement is hereby confirmed and delivered as of the date first above written JANNEY MONTGOMERY SCOTT INC. By: -------------------------------- (Authorized Signature) ROBERT W. BAIRD & CO. INCORPORATED By: -------------------------------- (Authorized Signature) Acting on their own behalf and as Representatives of the several Underwriters named in Schedule I attached hereto. -34- SCHEDULE I ---------- LIST OF UNDERWRITERS Underwriters Number of Firm Shares ----------- Janney Montgomery Scott Inc. Robert W. Baird & Co. Incorporated Total . . . . . . . . . . . . . . . . 1,265,000 -35- EX-1.2 3 Exhibit 1.2 1,265,000 Shares of Common Stock COMPUTER HORIZONS CORP. AGREEMENT AMONG UNDERWRITERS _____________, 1995 To each of the Underwriters named in Schedule I to the attached Underwriting Agreement: 1. Underwriting Agreement. Computer Horizons Corp., a New York corporation (the "Company"), and a selling shareholder of the Company (the "Selling Shareholder") propose to enter into an underwriting agreement in the form attached hereto as Exhibit A (the "Underwriting Agreement") with Janney Montgomery Scott Inc., as a representative ("Representative") of the underwriters named in Schedule I thereto (the "Underwriters"), acting severally and not jointly, with respect to the purchase by the Underwriters of an aggregate of 1,100,000 shares of Common Stock (the "Firm Shares") of the Company. In addition, in order to cover over-allotments in the sale of the Firm Shares, the Underwriters may purchase an aggregate of not more than 165,000 additional shares of Common Stock of the Company (the "Additional Shares") from the Selling Shareholder or the Company pursuant to, and in accordance with the terms of, the over-allotment option granted to the Underwriters under Section 5 of the Underwriting Agreement. The Firm Shares and the Additional Shares are collectively referred to herein as the "Shares." The Firm Shares and the Additional Shares purchased by the several Underwriters pursuant to the Underwriting Agreement are sometimes collectively referred to herein as the "Purchased Shares." 2. Registration Statement and Prospectus. The Shares are described in a registration statement and related preliminary prospectus, copies of which, as filed with the Securities and Exchange Commission (the "Commission"), have heretofore been delivered to you. The registration statement as amended at the time it becomes effective is herein called the "Registration Statement." The prospectus relating to the Shares included in the Registration Statement is herein called the "Prospectus," except that if any revised prospectus shall be provided to the Underwriters by the Company under the Underwriting Agreement for use in connection with the sale of the Shares which differs from the Prospectus on file at the Commission at the time the Registration Statement becomes effective (whether or not such revised prospectus is required to be filed by the Company pursuant to Rule 424(b) of the rules and regulations of the Commission under the Securities Act of 1933, as amended (the "Securities Act")), the term "Prospectus" shall refer to such revised prospectus from and after the time it is first provided to the Underwriters for such use. You hereby confirm that you (i) are familiar with Rule 15c2-8 promulgated by the Commission under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), relating to the distribution of preliminary and final prospectuses for securities registered under the Securities Act and have previously complied and will continue to comply therewith, (ii) have examined each preliminary prospectus, the Registration Statement and the form of Prospectus (and any amendments or supplements thereto), (iii) are willing to accept the responsibilities of an underwriter under the Securities Act with respect to the Registration Statement and Prospectus, and (iv) are willing to proceed with a public offering of the Shares in the manner contemplated. Each of you individually also confirms that all statements made in the Registration Statement and Prospectus insofar as they apply to you are correct and not misleading, and that you understand that the Registration Statement and Prospectus are subject to further amendment, but that no such amendment shall relieve or affect your obligations hereunder or under the Underwriting Agreement. You authorize us, with the approval of counsel for the Underwriters, to approve on behalf of each Underwriter any further amendments or supplements to any preliminary prospectuses, the Registration Statement or the Prospectus. We hereby confirm that we will make available to you and to each of the other Underwriters such number of copies of the Prospectus (as amended or supplemented) as you may reasonably request for the purposes contemplated by the Securities Act or the Exchange Act, or the applicable rules and regulations of the Commission thereunder. 3. Authority and Compensation (a) You authorize us as your Representative to execute the Underwriting Agreement in substantially the form attached hereto as Exhibit A, to fix from time to time the public offering price of the Firm Shares and the Additional Shares, and to establish the concessions, if any, to Selected Dealers (as defined in Section 4(b) hereof) and the reallowances, if any, to other dealers. (b) You also authorize us to exercise in our absolute discretion all the authority and discretion vested in us by the provisions of the Underwriting Agreement and to take all such action as may in our judgment be desirable in order to carry out the Underwriting Agreement, this Agreement, and the purchase, carrying, sale and distribution of any of the Shares, including the authority to agree to any extension of the period or periods in which any action may or is to be taken by the Company or the Selling Shareholder or by us as Representative, and to agree to any modification of the terms of the Underwriting Agreement which in our judgment does not extend the several liabilities of the Underwriters except as provided herein and in Section 13 of the Underwriting Agreement. (c) Without in any way limiting the general authorization recited herein, you also authorize us, until termination of this Agreement, to act for you to arrange for or agree to the purchase by other persons (among which the Representative may be included) of any Shares not taken up by any withdrawing or defaulting Underwriter, in the manner set forth in Section 13 of the Underwriting Agreement, and you will at our request increase, pro rata with the other nondefaulting Underwriters, the number of Shares which you are to -2- purchase pursuant to the Underwriting Agreement by an amount not exceeding ten percent (10%) of your original underwriting obligation. As compensation for our services, each of you will pay to us an amount equal to $___ for each Firm Share and Additional Share included in the Purchased Shares. You authorize us to debit your account for this amount as an expense under this Agreement. 4. Offering. You authorize us, in our discretion, at any time and from time to time during the life of this Agreement: (a) To determine the time and the manner of the public offering and the concessions and reallowances to dealers, to change the public offering price and such concessions and reallowances, to furnish the Company with the information to be included in the Registration Statement and the Prospectus and any amendment or supplement thereto with respect to the terms of offering, and to determine the names of the Underwriters to appear on the cover page of the Prospectus and all matters relating to the public advertisement, including selection of Underwriters whose names appear in such advertisement, and any communications with dealers or others; (b) To reserve all or any part of your Purchased Shares for sale (i) to retail purchasers including institutions and (ii) to dealers selected by us (the "Selected Dealers") among which may be included any Underwriter (including ourselves) and each of which shall be a member of the National Association of Securities Dealers, Inc. (the "NASD") (or, if a foreign dealer, which shall agree not to reoffer, resell or deliver the Shares in the United States or to persons which it has reasons to believe are citizens or residents of the United States), such reservations for sales to retail purchasers to be as nearly as practicable in proportion to the respective underwriting obligations of the Underwriters and such reservations for sales to Selected Dealers to be in such proportion as we determine, and from time to time to add to the reserved Purchased Shares, any Purchased Shares retained by you remaining unsold, and to release to you any of your Purchased Shares reserved but not sold; (c) To sell reserved Purchased Shares, as nearly as practicable in proportion to the respective reservations, to retail purchasers at the public offering price and to Selected Dealers at the public offering price less the Selected Dealers' concession pursuant to the Selected Dealer Agreement in substantially the form attached hereto as Exhibit B; and (d) To buy Purchased Shares for your account from Selected Dealers at the public offering price less such amount, not in excess of the Selected Dealers' concession, as we may determine. After advice from us that the Purchased Shares are released for public offering, you will offer to the public in conformity with the terms of offering set forth in the Prospectus or any amendment or supplement thereto such of your Purchased Shares as we advise you are not reserved. -3- 5. Additional Provisions Regarding Sales. Any Purchased Shares sold by you (otherwise than through us) which we contract for or purchase in the open market or otherwise for the account of any Underwriter shall be repurchased by you on demand at the cost of such purchase plus commissions and taxes on redelivery. Shares delivered on such repurchase need not be the identical Purchased Shares sold by you. In lieu of demanding repurchase by you, we may in our discretion (a) sell for your account the Shares so purchased by us, at such prices and upon such terms as we may determine, and debit or credit your account with the loss and expense or net profit resulting from such sale, or (b) charge your account with an amount not in excess of the Selected Dealers' concession with respect to such Shares. 6. Payment and Delivery. At our request from time to time, you will furnish us within twenty-four (24) hours the funds needed to make payment for your Purchased Shares at the public offering price less the Selected Dealers' concession, by certified or bank cashier's check or checks payable in New York Clearing House funds to the order of Janney Montgomery Scott Inc., and you authorize us to make such payment against delivery of your Purchased Shares. In the event you fail to timely deliver your check as herein provided, you authorize us to make payment for you at the full price of the Purchased Shares you have agreed to purchase against delivery of your Purchased Shares and you shall be obligated to repay on demand, plus the current interest rate, for the amount so advanced for you. You authorize us (i) to take delivery of your Purchased Shares, (ii) to hold for your account such of your Purchased Shares as we have reserved for sale to retail purchasers and to Selected Dealers, and (iii) to deliver your reserved Purchased Shares against such sales. We will deliver your unreserved Purchased Shares to you promptly, and after we receive payment for reserved Purchased Shares sold by us for your account, we will remit to you an amount equal to the price paid by you for such Purchased Shares. As soon as practicable after termination of Sections 4, 5 and 9 and the first sentence of Section 8 (the "Offering Provisions") of this Agreement, we will deliver to you any of your Purchased Shares reserved but not sold. 7. Authority to Borrow. In connection with the purchase or carrying of your Purchased Shares and other securities purchased hereunder for your account, you authorize Janney Montgomery Scott Inc., in its discretion, to advance its funds for your account, charging current interest rates, or to arrange loans for your account, and in connection therewith to execute and deliver any notes or other instruments and hold or pledge as security any of your Purchased Shares or such other securities. Any lender may rely on the instructions of Janney Montgomery Scott Inc. in all matters relating to any such loan. Any of your Purchased Shares or such other securities held by us for your account may be delivered to you for carrying purposes only, and subject to your further direction. 8. Stabilization and Over-allotment. To facilitate the distribution of the Shares, you authorize us in our discretion after the execution of this Agreement to make purchases and sales of Shares for your account in the open market or otherwise, for long and short account, on such terms as we deem advisable and, in arranging sales, to over-allot. All such -4- purchases and sales and over-allotments shall be made for the account of the several Underwriters as nearly as practicable in proportion to their respective underwriting obligations. Your net commitment for long or short account under this Section 8 shall not, at the end of any business day, exceed 15% of your maximum underwriting obligation exclusive of your pro- rata share of short account attributable to the Underwriters' over- allotment option to purchase Additional Shares. You will on our demand take up at cost or deliver against payment any Shares so purchased or sold or over-allotted for your account. Upon request, you will advise us of the Purchased Shares retained by you and unsold and will sell to us for the account of one or more of the Underwriters such of your unsold Purchased Shares as we may designate, at the public offering price less such amount as we may determine, but not in excess of the Selected Dealers' concession. We agree to notify you if we engage in any stabilization transaction requiring reports to be filed pursuant to Rule 17a-2 under the Exchange Act and to notify you of the date of termination of stabilization. You agree to file with us any reports required of us pursuant to such Rule 17a-2 not later than five business days following the day upon which stabilization was terminated, and you authorize us as the Representative to file on your behalf with the Commission any reports required by such Rule. You have and assume for yourself the responsibility of making the reports required by the rules of the Commission with respect to your own transactions which are subject thereto. The foregoing provisions are not an assurance that the price of the Shares will be stabilized or that stabilization, if commenced, will not be discontinued at any time. 9. Open Market Transactions. We and you agree not to bid for, purchase, attempt to induce others to purchase or sell, directly or indirectly, the Shares or any other securities of the Company, except as brokers pursuant to unsolicited orders and as otherwise provided in this Agreement or in the Underwriting Agreement. 10. Expenses and Settlement. We may charge your account with Selected Dealers' concessions and all transfer taxes on sales made by us for your account and with your proportionate share (based upon your underwriting obligation) of all other expenses incurred by us under the terms of this Agreement or in connection with the purchase, carrying, sale or distribution of the Shares. Our determination of the amount and allocation of expenses shall be conclusive. As soon as practicable after termination of the offering, the accounts hereunder will be settled, but we may reserve from distribution such amount as we deem advisable to cover possible additional expenses. We may at any time make partial distributions of credit balances or call for payment of debit balances and call for advance deposit of funds with which to meet your obligations. Any of your funds in our hands may be held with our general funds without accountability for interest. Notwithstanding any settlement, you will pay (a) your proportionate share (based on your underwriting obligation) of any liability which may be incurred by the Underwriters, or any of them, based on the claim that the Underwriters constitute an association, partnership, unincorporated business or other separate entity, and of any expenses incurred by us or any other Underwriter with our approval in contesting any such liability, and (b) any transfer taxes which may be assessed and paid after such settlement on account of any sale or transfer or your account. -5- 11. Termination. The Offering Provisions of this Agreement shall terminate 45 days after the Registration Statement becomes effective; notwithstanding, said provisions may be terminated in part or in whole, by notice from us to the effect that the Offering Provisions (or specific provisions thereof) have been terminated. Such termination, however, shall not relieve any Underwriter from its proportionate share of any charges, liabilities or expenses incurred prior thereto. 12. Default by Underwriters. Default by one or more Underwriters hereunder or under the Underwriting Agreement shall not release or relieve the other Underwriters from their obligations or affect the liability of any defaulting Underwriter to the other Underwriters for damages resulting from such default. In the event that, pursuant to Section 13 of the Underwriting Agreement, the amount of Shares which you are to purchase is increased or arrangements are made for the purchase by others, including nondefaulting Underwriters, of Shares not taken by defaulting Underwriters, the respective amounts of Shares to be purchased by the nondefaulting Underwriters and by such others shall be taken as the basis for the underwriting rights and obligations under this Agreement. In case of such default for an aggregate amount exceeding 10% of the total number of Shares, the Representative is authorized, but shall not be obligated, to arrange for the purchase by other persons, which may include themselves, of that defaulted portion in excess of such 10%. In the event of default by one or more Underwriters in respect of their obligations under this Agreement, each nondefaulting Underwriter shall assume its proportionate share of the obligations under this Agreement of each such defaulting Underwriter (other than the underwriting obligation of such defaulting Underwriter). 13. Position of Representative. In taking action under this Agreement, we shall, except as otherwise provided herein, act only as agents of the several Underwriters. Except as herein otherwise expressly provided, we shall have full authority to take such action as we may deem necessary or advisable in respect to all matters pertaining to the Underwriting Agreement, this Agreement and the purchase, sale and distribution of the Shares, but neither individually nor as Representative shall the Representative be under any liability whatsoever to any of the Underwriters for or in respect to the issue, form, genuineness, validity, value of or title to the Shares or the validity of, or the representations contained in, the order forms for any such Shares, or the Registration Statement, Prospectus or any preliminary prospectus or the Underwriting Agreement, or the Selected Dealer Agreement, or for the performance by the Company, the Selling Shareholders or others of any agreement on their respective parts, or for any matter connected with any of the foregoing except for our own want of good faith. Nothing herein contained shall constitute the several Underwriters partners or an association or other separate entity, and the rights and liabilities of ourselves and each of the other Underwriters are several and not joint. -6- 14. Indemnification and Contribution. Each Underwriter, including yourself, agrees to indemnify and hold harmless each Underwriter and each person, if any, who controls any other Underwriter within the meaning of Section 15 of the Securities Act, and each and all of them, and to reimburse each such other Underwriter and each such controlling person, for expenses, all to the extent that such Underwriter will be obligated in the Underwriting Agreement to indemnify and hold harmless and reimburse the Company and any controlling person, director or officer thereof and the Selling Shareholder. The indemnification and reimbursement agreement of each Underwriter contained in this Section 14 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement or (ii) any investigation made by or on behalf of any Underwriter or controlling person, and any successor of any Underwriter or controlling person shall be entitled to the benefits contained in this Section 14. Notwithstanding any settlement or the termination of this Agreement, in the event that at any time any claim or claims shall be asserted against us, as Representative or otherwise, involving the Underwriters generally relating to any preliminary prospectus, the Prospectus, the Registration Statement, any amendments or supplements thereto, the public offering of the Shares or any of the transactions contemplated by this Agreement, you authorize us to make such investigation, to retain such counsel and take such action as we may deem necessary or desirable under the circumstances, including settlement of any such claim or claims if such course of action shall be recommended by counsel retained by us. You agree to pay us, on request, your proportionate share (based on your underwriting obligation) of all expenses incurred by us (including, without limitation, the disbursements and fees of counsel retained by us) in investigating and defending against such claim or claims, and your proportionate share (based on your underwriting obligation) of any liabilities incurred by us in respect of such claim or claims, whether such liabilities shall be the result of a Judgment against us or as a result of any such settlement. 15. Blue Sky Matters. We shall not have any responsibility with respect to the right of any Underwriter or other person to sell the Shares in any jurisdiction, notwithstanding any information we may furnish in that connection. You authorize us to file a New York Further State Notice with the Department of State of New York, if required. 16. Title to Shares. The Shares purchased by the respective Underwriters and any other securities purchased by us hereunder for their respective accounts shall remain the property of such Underwriters until sold and no title to any such Shares or other securities shall in any event pass to us, as Representative, by virtue of any of the provisions of this Agreement. 17. Capital Requirements. You confirm that you now satisfy, and after giving effect to the commitment contemplated herein you will continue to satisfy, the net capital requirements established pursuant to the Exchange Act. -7- 18. Notice and Governing Law. Any notice from us to you shall be mailed, telephoned or telecopied to you at your address as set forth in your Underwriters' Questionnaire. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. 19. Compliance with Applicable Statutes and Rules. We represent that we are members in good standing of the NASD. You agree to comply with all applicable provisions of the Securities Act, the Exchange Act and the rules and regulations of the Commission in connection with the purchase and public offering of the Shares. If your business involves offers or sales to purchasers of securities in the United States of America, you represent that you are registered under the Exchange Act and are a member in good standing of the NASD and you agree to comply with the fixed price offering rules set forth in Sections 8, 24, and 36 of Article III of the NASD Rules of Fair Practice. If you are not registered under the Exchange Act, you agree not to offer, sell or deliver any of the Shares in the United States of America or to any person unless you have reason to believe that such person is not a citizen, resident or national of the United States of America. -8- 20. Counterparts. This Agreement may be signed in any number of counterparts which taken together shall constitute one and the same instrument. Please confirm that the foregoing correctly states the understanding between you, as one of the Underwriters, and us, as the Representative, by signing and returning to us a counterpart hereof. Upon our confirmation hereof and the execution and delivery of an identical agreement by us with each of the other Underwriters, this Agreement and all such other identical agreements shall constitute the Agreement Among Underwriters. Very truly yours. JANNEY MONTGOMERY SCOTT INC. By: ----------------------------------------------- (Authorized Signature) Confirmed and accepted as of the date first above written: The Underwriters named in Schedule I to the attached Underwriting Agreement - ----------------------------------------- Name of Underwriter By: -------------------------------------- (Official Signature) ______________, Attorney-in-Fact -9- EX-1.3 4 Exhibit 1.3 1,265,000 Shares of Common Stock COMPUTER HORIZONS CORP. SELECTED DEALER AGREEMENT Dear Sirs: The underwriters (the "Underwriters") named in the enclosed Prospectus have severally agreed, subject to the terms and conditions of the underwriting agreement dated ________________, 1995 (the "Underwriting Agreement"), to purchase the above shares of Common Shares (the "Shares") from Computer Horizons Corp. (the "Company") and a shareholder of the Company (the "Selling Shareholder"). The Shares are described in the en- closed Prospectus, the receipt of which you hereby acknowledge. We are acting as Representative of each of the Underwriters in all matters connected herewith and with their respective purchases of the Shares from the Company and the Selling Shareholder. 1. Offering to Selected Dealers ---------------------------- The Underwriters, acting through us, are severally, and not jointly, offering part of the Shares for sale to certain dealers (the "Selected Dealers") as principals, at the public offering price, less a concession of not more than $________ per Share (the "Selected Dealer's Concession"), subject to the terms and conditions stated herein and in the Prospectus. Sales of Shares to you pursuant to such offering will be evidenced by our written confirmation and will be on the terms and conditions contained herein. In purchasing Shares, you will rely upon no statement whatsoever, written or oral, other than statements in the Prospectus. The public offering price and Selected Dealer's Concession may be changed at any time or from time to time in our discretion without notice. We will advise you by telecopier or telegram of the method and terms of the offering, including the time the Shares are released by us for public offering, the amount of Shares being offered and the initial public offering. The offering is made subject to the issuance and delivery of the Shares and their acceptance by the Underwriters, to the approval of certain legal matters by counsel, and to the terms and conditions herein set forth and may be made on the basis of the reservation of Shares or an allotment against subscriptions, and is not joint but several. All orders will be strictly subject to confirmation and we reserve the right in our sole discretion to reject an order in whole or in part, to accept or reject orders in the order of their receipt or otherwise, and to allot. 2. Reoffering by Selected Dealers ------------------------------ Shares purchased by you may be reoffered in conformity with the terms of offering set forth in the Prospectus. You may reallow a concession from the public offering price of not more than $________ per Share with respect to Shares sold by you to any member of the National Association of Securities Dealers. Inc., or to any foreign dealer not eligible for membership in said Association who agrees not to reoffer, resell or deliver Shares sold to him within the United States or to persons whom he has reason to believe are citizens or residents of the United States. Any concession reallowed by you to such dealers must be retained by such dealers and not allowed in whole or in part. It is assumed that Shares sold by you will be effectively placed for investment. If we contract for or purchase in the open market for the account of any Underwriter any Shares sold to you and not effectively placed for investment, we may charge you the Selected Dealer's Concession originally allowed you on the Shares so repurchased, and you agree to pay such amount to us on demand. Shares so delivered need not be the identical Shares originally purchased by you. You will advise us upon request of Shares purchased by you remaining unsold, and we shall have the right to repurchase such unsold Shares on demand at the public offering price less all or part of the Selected Dealer's Concession. After the books in respect of the offering to dealers have been closed, dealers who are parties to a Selected Dealer Agreement and Underwriters may deal in the Shares with each other at the public offering price less an amount not exceeding the concession to dealers as set forth in this Section 2. 3. Payment and Delivery -------------------- Payment for Shares purchased by you shall be made by you on such dates and at such places as we advise you, by certified check or bank cashier's check payable to the order of Janney Montgomery Scott Inc. in such clearing house funds as we advise, against delivery of the Shares. Delivery instructions must be in our hands at the office of Janney Montgomery Scott Inc., 26 Broadway, New York, New York 10004, at such time as we request. The above payment shall be made by you at the public offering price, as determined by us from time to time, or, if we so advise you, at a net price equal to such public offering price less the Selected Dealer's Concession. If payment is made by you at such public offering price, the Selected Dealer's Concession payable to you hereunder shall be paid promptly after the termination of this Agreement (or on such earlier date as we may determine), except that such 2 concession may be withheld and canceled, at our discretion, as to Shares which we have repurchased as set forth in the second paragraph of Section 2 hereof. 4. Position of Selected Dealers and Underwriters --------------------------------------------- (a) You represent that you are a member in good standing of the National Association of Securities Dealers, Inc., or, if a foreign dealer not eligible for membership in said Association, that you will not reoffer, resell or redeliver Shares sold to you in the United States or to any person unless you have reason to believe that such person is not a resident, citizen or national of the United States. You represent that you shall comply with Sections 8, 24, 25 and 36 of Article 3 of the NASD Rules of Fair Practice. You are not authorized to give any information or make any representations other than as contained in the Prospectus, or to act as agent for any Underwriter or us. Nothing shall constitute the Selected Dealers an association, unincorporated business or other separate entity or partners with the several Underwriters, with us, or with each other, but you shall be liable for your proportionate share of any tax, liability or expense based on any claim to the contrary. (b) Neither we, acting as Representative, nor any of the Underwriters shall be under any obligations to you, except for obligations expressly assumed by us in this Agreement. (c) For the purpose of stabilizing the market in the Shares, we have been authorized to make purchases in accordance with Rule 10b-7 and sales to the extent permitted by Rule 10b-8 in the open market or otherwise and, in arranging for sales, to over-allot Shares. (d) You agree, until the termination of this Agreement, not to bid for, purchase, attempt to induce others to purchase, to sell, directly or indirectly, any Shares otherwise than (i) as provided for in this Agreement and (ii) as a broker executing unsolicited orders, except as expressly authorized by us. In acting as a dealer under this Agreement and in offering and selling Shares hereunder, you agree to comply with applicable requirements of the Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and all applicable state securities laws. 5. Reports ------- You agree to furnish us, for statistical purposes and with the understanding that we will not make the same public, a report, in such form as we may request, showing the number of Shares sold by you in each state and showing the distribution of the purchasers classified by number of Shares purchased, but no such report shall require you to inform us of the names of any purchasers of any of the Shares from you. 3 6. Notices ------- All communications from you to us shall be addressed to us in care of Janney Montgomery Scott Inc., 1801 Market Street, 20th Floor, Philadelphia, Pennsylvania 19103. Attention: Syndicate Department. Any notice from us to you shall be deemed to have been duly given if delivered, mailed or telecopied to you at the address to which this letter is mailed. 7. Termination ----------- This Agreement shall terminate 45 days after the date hereof and may be terminated by us at any time. Such termination shall not affect your obligation to pay for any Shares purchased by you or any of the provisions of Section 2 and 4 hereof. Please confirm the foregoing by signing the duplicate copy of this Agreement enclosed herewith and returning it to us at the address in Section 6 above. Very truly yours, JANNEY MONTGOMERY SCOTT INC. By: ---------------------------- (Authorized Signature) Confirmed as of the date first above written The Underwriters named in Schedule I to the attached Underwriting Agreement - --------------------------------------------- By: Attorney-in-Fact --------------- 4 EX-11 5
Exhibit 11 Computer Horizons Corp. and Subsidiaries EARNINGS PER COMMON AND COMMON SHARE EQUIVALENT Year Ended December 31, Three Months Ended March 30, 1992 1993 1994 1994 1995 ---- ---- ---- ---- ---- (Unaudited) Primary Average shares outstanding 9,018,000 9,738,000 8,882,000 8,863,000 8,936,000 Stock options 65,000 258,000 624,000 657,000 566,000 --------- --------- ---------- ---------- ---------- Primary weighted average of common and common equivalent shares outstanding 9,083,000 9,996,000 9,506,000 9,520,000 9,502,000 ========= ========= ========= ========= ========= Fully diluted Average shares outstanding 9,018,000 9,738,000 8,882,000 8,863,000 8,936,000 Stock options 212,000 593,000 652,000 695,000 626,000 --------- --------- --------- --------- --------- Fully diluted weighted average number of common and common equivalent shares outstanding 9,230,000 10,331,000 9,534,000 9,558,000 9,562,000 ========= ========== ========= ========= ========= Net income $ 2,026,000 $ 3,704,000 $ 5,686,000 $ 1,114,000 $ 1,682,000 ========== ========== ========== ========== ========== Earnings per share Primary $ .22 $ .37 $ .60 $ .12 $ .18 =========== =========== =========== =========== ============ Fully diluted $ .22 $ .37 $ .60 $ .12 $ .18 =========== =========== =========== =========== ============
EX-23.1 6 Exhibit 23.1 Consent of Independent Certified Public Accountants --------------------------------------------------- We have issued our report dated January 31, 1995, accompanying the consolidated financial statements and schedule of Computer Horizons Corp. and Subsidiaries contained in the Registration Statement and Prospectus. We consent to the use of the aforementioned report in the Registration Statement and Prospectus, and to the use of our name as it appears under the caption "Experts." GRANT THORNTON LLP Parsippany, New Jersey May 3, 1995 EX-27 7
5 3-MOS DEC-31-1995 MAR-30-1995 234,000 0 35,067,000 542,000 0 36,655,000 6,268,000 3,577,000 51,461,000 14,829,000 4,288,000 1,076,000 0 0 30,647,000 51,461,000 0 43,867,000 0 31,366,000 9,294,000 0 175,000 3,032,000 1,350,000 1,682,000 0 0 0 1,682,000 0.18 0.18
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