-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Et8karfExQhX86hMh0WVDhoJWmH9Fst2secZ1jo+P0Z5MowA4HgWuUyR6/8e85LD LYjed0gJpcAoDGEPogvAQA== 0001047469-03-018656.txt : 20030515 0001047469-03-018656.hdr.sgml : 20030515 20030515095038 ACCESSION NUMBER: 0001047469-03-018656 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20030331 FILED AS OF DATE: 20030515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMPUTER HORIZONS CORP CENTRAL INDEX KEY: 0000023019 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-COMPUTER INTEGRATED SYSTEMS DESIGN [7373] IRS NUMBER: 132638902 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-07282 FILM NUMBER: 03701333 BUSINESS ADDRESS: STREET 1: 49 OLD BLOOMFIELD AVE CITY: MOUNTAIN LAKES STATE: NJ ZIP: 07046-1495 BUSINESS PHONE: 9732994000 MAIL ADDRESS: STREET 1: 49 0LD BLOOMFIELD AVE CITY: MOUNTAIN LAKES STATE: NJ ZIP: 07046-1495 10-Q 1 a2110958z10-q.htm 10-Q
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

ý	Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended March 31, 2003
or
o	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission File Number 0-7282

COMPUTER HORIZONS CORP.
(Exact name of registrant as specified in its charter)

New York		13-2638902
(State or other jurisdiction of		(I.R.S. Employer
incorporation or organization)		Identification Number)
49 Old Bloomfield Avenue, Mountain Lakes, New Jersey 07046-1495 (Address of principal executive offices) (Zip code)

Registrant's telephone number, including area code (973) 299-4000

Not Applicable
(Former name, former address and former fiscal year, if
changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).Yes ý No o

As of May 12, 2003 the issuer had 30,305,851 shares of common stock outstanding.

COMPUTER HORIZONS CORP. AND SUBSIDIARIES

Index

			Page No.
Part I		Financial Information
	Item 1	Consolidated Balance Sheets March 31, 2003 (unaudited) and December 31, 2002	3
		Consolidated Statements of Operations Three Months Ended March 31, 2003 and March 31, 2002 (unaudited)	4
		Consolidated Statements of Cash Flows Three Months Ended March 31, 2003 and March 31, 2002 (unaudited)	5
		Notes to Consolidated Financial Statements	6
	Item 2	Management's Discussion and Analysis of Financial Condition and Results of Operations	14
	Item 4	Controls and Procedures	18
Part II		Other Information	19
	Item 1	Legal Proceedings	19
	Item 6	Exhibits and Reports on Form 8-K
		Signatures	20
		Certifications	21

COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except per share data)

			March 31, 2003			December 31, 2002
			(unaudited)
ASSETS
CURRENT ASSETS:
	Cash and cash equivalents		$	70,394		$	59,769
	Accounts receivable, net of allowance for doubtful accounts of $6,879 and $7,696 at March 31, 2003 and December 31, 2002, respectively			56,860			56,616
	Deferred income taxes			4,557			4,557
	Refundable income taxes			—			19,051
	Other			6,148			7,219

		TOTAL CURRENT ASSETS		137,959			147,212

PROPERTY AND EQUIPMENT				38,296			37,643
	Less accumulated depreciation			(27,758	)		(26,626	)

				10,538			11,017

OTHER ASSETS—NET:
	Goodwill			19,590			19,203
	Deferred income taxes			8,560			8,020
	Other			11,121			8,279

		TOTAL OTHER ASSETS		39,271			35,502

TOTAL ASSETS			$	187,768		$	193,731

LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
	Accounts payable		$	7,867		$	10,830
	Accrued payroll, payroll taxes and benefits			4,304			4,529
	Restructuring reserve			2,789			3,266
	Income taxes payable			624			—
	Tax benefit reserve			19,600			19,600
	Other accrued expenses			3,262			3,408

		TOTAL CURRENT LIABILITIES		38,446			41,633

OTHER LIABILITIES				5,834			6,243

SHAREHOLDERS' EQUITY:
	Preferred stock, $.10 par; authorized and unissued 200,000 shares, including 50,000 Series A
	Common stock, $.10 par, authorized 100,000,000 shares; issued 33,153,107 shares at March 31, 2003 and December 31, 2002 respectively			3,315			3,315
	Additional paid-in capital			133,518			133,518
	Accumulated comprehensive loss			(4,530	)		(4,306	)
	Retained earnings			26,976			28,255

				159,279			160,782

	Less shares held in treasury, at cost; 2,931,382 shares and 2,660,667 shares at March 31, 2003 and December 31, 2002, respectively			(15,791	)		(14,927	)

		TOTAL SHAREHOLDERS' EQUITY		143,488			145,855

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY			$	187,768		$	193,731

COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(dollars in thousands, except per share data)

		THREE MONTHS ENDED
		March 31, 2003					March 31, 2002
					% of revenue					% of revenue
REVENUES:
	IT Services	$	36,183		60.1	%	$	54,650		69.0	%
	Solutions Group		19,601		32.5	%		20,671		26.1	%
	Chimes		4,469		7.4	%		3,898		4.9	%

			60,253		100.0	%		79,219		100.0	%

COSTS AND EXPENSES:
	Direct costs		42,773		71.0	%		58,192		73.5	%
	Selling, general and administrative		18,926		31.4	%		26,459		33.4	%
	Restructuring charges		249		0.4	%		—		0.0	%

			61,948		102.8	%		84,651		106.9	%

LOSS FROM OPERATIONS			(1,695	)	-2.8	%		(5,432	)	-6.9	%

OTHER INCOME/(EXPENSE):
	(Loss)/gain on sale of assets		(273	)	-0.5	%		3,570		4.5	%
	Loss on investments		—		0.0	%		(61	)	-0.1	%
	Interest income		174		0.3	%		214		0.3	%
	Interest expense		(6	)	0.0	%		(159	)	-0.2	%

			(105	)	-0.2	%		3,564		4.5	%

LOSS BEFORE INCOME TAXES AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE			(1,800	)	-3.0	%		(1,868	)	-2.4	%

INCOME TAX BENEFIT:
	Deferred		(540	)	-0.9	%		(635	)	-0.8	%

			(540	)	-0.9	%		(635	)	-0.8	%

LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE AND MINORITY INTEREST			(1,260	)	-2.1	%		(1,233	)	-1.6	%
Minority Interest			(19	)	0.0	%		—		0.0	%
Cumulative Effect of Change in Accounting Principle (Note 3)			—		0.0	%		(29,861	)	-37.7	%

NET LOSS		$	(1,279	)	-2.1	%	$	(31,094	)	-39.3	%

LOSS PER SHARE (BASIC & DILUTED):
Before Cumulative Effect of Change in Accounting Principle		$	(0.04	)			$	(0.04	)

Cumulative Effect of Change in Accounting Principle		$	—				$	(0.95	)

Net Loss		$	(0.04	)			$	(0.99	)

WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
	Basic & Diluted		30,369,000					31,501,000

COMPUTER HORIZONS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(dollars in thousands)

			Three Months Ended
			March 31, 2003			March 31, 2002
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss			$	(1,279	)	$	(31,094	)

Adjustments to reconcile net loss to net cash provided by operating activities:
	Deferred taxes			(540	)		4,119
	Depreciation			1,299			1,189
	Provision for bad debts			385			662
	Loss/(Gain) on sale of assets			273			(3,570	)
	Write off of goodwill			—			29,861
	Change in assets and liabilities, net of acquisitions:
		Accounts receivable		(629	)		10,235
		Other current assets		1,071			(1,281	)
		Assets held for sale		—			(1,929	)
		Other assets		(2,842	)		1,314
		Refundable income taxes		19,051			(2,769	)
		Accrued payroll, payroll taxes and benefits		(225	)		(1,088	)
		Accounts payable		(2,963	)		(6,053	)
		Income taxes payable		624			—
		Other accrued expenses		(1,255	)		210
		Other liabilities		(409	)		828

NET CASH PROVIDED BY OPERATING ACTIVITIES				12,561			634

CASH FLOWS FROM INVESTING ACTIVITIES
	Purchases of furniture and equipment			(820	)		(539	)
	Proceeds received from the sale of assets			149			15,880
	Acquisition of assets			(387	)		—

NET CASH PROVIDED BY/(USED IN) INVESTING ACTIVITIES				(1,058	)		15,341

CASH FLOWS FROM FINANCING ACTIVITIES
	Notes payable—banks, net			—			(10,000	)
	Stock options exercised			11			61
	Purchase of treasury shares			(875	)		(750	)
	Stock issued on employee stock purchase plan			—			290

NET CASH USED IN FINANCING ACTIVITIES				(864	)		(10,399	)

	Foreign currency losses			(14	)		(400	)

NET INCREASE IN CASH AND CASH EQUIVALENTS				10,625			5,176
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR				59,769			41,033

CASH AND CASH EQUIVALENTS AT END OF PERIOD			$	70,394		$	46,209

COMPUTER HORIZONS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Periods Ended March 31, 2003 and March 31, 2002
(unaudited)

1. Basis of Presentation

The consolidated balance sheets as of March 31, 2003, the consolidated statements of operations for the three months ended March 31, 2003 and March 31, 2002, respectively, and the statement of cash flows for the three months ended March 31, 2003 and 2002 have been prepared by the Company without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the financial position, results of operations and cash flows at March 31, 2003 (and for all periods presented) have been made.

Certain information and note disclosures, normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America, which are not required for interim purposes, have been condensed or omitted. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and notes thereto included in the Annual Report on Form 10-K for the year ended December 31, 2002 filed by the Company. The results of operations for the periods ended March 31, 2003 and 2002 are not necessarily indicative of the operating results for the respective full years.

Reclassifications

Certain reclassifications have been made to the 2002 comparative financial statements to conform to the 2003 presentation.

2. Recent Accounting Pronouncements

In June 2001, the Financial Accounting Standards Board approved the issuance of SFAS No. 141, "Business Combinations" and in July 2001, SFAS 142, "Goodwill and Other Intangible Assets." The new standards require that all business combinations initiated after June 30, 2001 must be accounted for under the purchase method. In addition, all intangible assets acquired that are obtained through contractual or legal right, or are capable of being separately sold, transferred, licensed, rented or exchanged shall be recognized as an asset apart from goodwill. Goodwill and intangibles with indefinite lives will no longer be subject to amortization, but will be subject to at least an annual assessment for impairment by applying a fair value based test. The Company adopted SFAS 142 as of January 1, 2002 and in compliance with this new regulation has discontinued the amortization of goodwill. For the effect of this statement on the Company see Note 3.

In November 2002, the EITF reached a consensus on Issue No. 00-21, "Accounting for Revenue Arrangements with Multiple Deliverables." This Issue provides guidance on when and how to separate elements of an arrangement that may involve the delivery or performance of multiple products, services and rights to use assets into separate units of accounting. The guidance in the consensus is effective for revenue arrangements entered into in fiscal periods beginning after June 15, 2003. The transition provision allows either prospective application or a cumulative effect adjustment upon adoption. The Company is currently evaluating the impact of adopting this guidance.

In December 2002, the Financial Accounting Standards Board approved the issuance of SFAS No. 148, "Accounting for Stock-Based Compensation—Translation and Disclosure." This statement amends FASB Statement No. 123, "Accounting for Stock-Based Compensation," to provide alternative methods of transition for a voluntary change to the fair value based method of accounting for stock-based employee compensation. In addition, this Statement amends the disclosure requirements of Statement 123 to require prominent disclosures in both annual and interim financial statements about the method of accounting for stock-based employee compensation and the effect of the methods used on reported results.

The exercise price per share on all options granted may not be less than the fair value at the date of the option grant. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," as modified by FIN 44, "Accounting for Certain Transactions Involving Stock Compensation," in accounting for stock-based employee compensation, whereby no compensation cost had been recognized for the plans. The Company expects to continue following the guidance under APB 25 for stock based compensation to employees. Had compensation cost for the plans been determined based on the fair value of the options at the grant dates and been consistent with the method of SFAS No. 123, the Company's net income and earnings per share would have been reduced to the pro forma amounts indicated below:

		March 31, 2003			March 31, 2002
		(in thousands, except per share data)
Net loss	As reported	$	(1,279	)	$	(31,094	)
	Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects		(828	)		(1,611	)

	Pro forma	$	(2,107	)	$	(32,705	)

Earnings per share
Basic	As reported	$	(0.04	)	$	(0.99	)
	Pro forma		(0.07	)		(1.04	)
Diluted	As reported	$	(0.04	)	$	(0.99	)
	Pro forma		(0.07	)		(1.04	)

The fair value of each option grant is estimated on the date of grant using the Black-Scholes options-pricing model with the following weighted-average assumptions used for grants in first quarter 2003 and 2002: expected volatility of 53%; risk-free interest rates of 3.90%; and expected lives of 7.8 years.

Effective on January 1, 2003 the Company adopted Financial Accounting Standards Board No. 146, "Accounting for Exit or Disposal Activities," ("SFAS 146"), which supersedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring)." The new standards require that a liability for a cost associated with an exit or disposal activity, including costs related to terminating a contract that is not a capital lease and the termination benefits that employees who are involuntarily terminated receive under the terms of a one-time benefit arrangement that is not ongoing or an individual deferred-compensation contract, be recognized when the liability is incurred. Previously, under Issue No. 94-3, a liability for an exit cost was recognized at the date of an entity's commitment to an exit plan, which may not necessarily meet the definition of a liability. SFAS 146 is effective for exit or disposal activities of the Company that are initiated after December 31, 2002. The effect of this statement is immaterial to the Company.

In January 2003, the FASB issued Financial Interpretation No. 46, "Consolidation of Variable Interest Entities" ("FIN 46"), which addresses consolidation by business enterprises of variable interest entities (VIEs). The accounting provisions and disclosure requirements of FIN 46 are effective immediately for VIEs created after January 31, 2003, and are effective for reporting periods beginning after June 15, 2003, for VIEs created prior to February 1, 2003. The Company is currently evaluating the impact of this statement to the Company.

3. Adoption of FAS 142

During the quarter ended June 30, 2002, the Company completed the initial valuation of the carrying value of goodwill existing at January 1, 2002. As a result, a non-cash charge of $29.9 million, or $(0.95) per share was retroactively recorded as the cumulative effect of an accounting change in the six months ended June 30, 2002 statement of operations. For the year ended December 31, 2002 the Company completed a second valuation of the carrying value of the remaining goodwill and it was determined that no further impairment had occurred. The changes in the carrying amount of goodwill for the three months ended March 31, 2003 are as follows:

Reporting Units	Solutions		IT Services		Education		Chimes		Consolidated
					(in 000's)
Balance as of December 31, 2002	$	19,203	$	—	$	—	$	—	$	19,203
Additions to goodwill		387		—		—		—		387

Balance as of March 31, 2003	$	19,590	$	—	$	—	$	—	$	19,590

The reporting units are equal to, or one level below, reportable segments. The Company engaged independent valuation consultants to assist with the transitional goodwill impairment tests.

The fair value of each of the reporting units was calculated using the following approaches: (i) market approach and (ii) income approach. Under the market approach, value is estimated by comparing the performance fundamentals relating to similar public companies' stock prices. Multiples are then developed of the value of the publicly traded stock to various measures and are then applied to each reporting unit to estimate the value of its equity. Under the income approach, value was determined using the present value of the projected future cash flows to be generated by the reporting unit.

The fair value conclusion of the reporting units reflects an equally blended value of the market multiple approach and the income approach discussed above. As a result of performing steps one and two of the goodwill impairment test, a loss of $29.9 million was recognized and recorded as a cumulative effect of change in accounting principle in the accompanying Consolidated Statements of Operations. There was no income tax effect on the impairment charge as approximately $19 million of the charge related to goodwill in foreign tax jurisdictions where the Company believes it is more likely than not that future taxable income in these jurisdictions will not be sufficient to realize the related income tax benefits associated with the charge. The remaining $11 million of the charge was related primarily to goodwill that was acquired prior to the ability to deduct goodwill for tax purposes.

The following pro forma table shows the effect of amortization expense and the cumulative effect of change in accounting principle on the Company's net loss as follows:

		Three Months Ended
		March 31, 2003			March 31, 2002
Reported Net Loss		$	(1,279	)	$	(31,094	)
Cumulative Effect of Change in Accounting Principle			—			29,861

Adjusted Net Loss		$	(1,279	)	$	(1,233	)

Reported Loss per Share:
	Basic & Diluted	$	(0.04	)	$	(0.99	)
Adjustment for Cumulative Effect of Change in Accounting Principle:
	Basic & Diluted		—			0.95

Adjusted Loss per Share:
	Basic & Diluted	$	(0.04	)	$	(0.04	)

4. Earnings/(Loss) per Share Disclosure

The computation of diluted earnings per share excludes options with exercise prices greater than the average market price. During 2003, there were 1,592,938 excluded options with exercise prices between $3.65 and $26.63 per share at March 31. During 2002, there were 4,796,054 excluded options outstanding at March 31, 2002 with exercise prices between $1.25 and $26.63 per share.

5. Segment Information

The Company has identified three business segments: IT Services, the Solutions Group and Chimes, Inc. The IT Services division provides highly skilled software professionals to augment the internal information management staffs of major corporations. IT Services is primarily staffing augmentation. The Solutions division provides enterprise application services, e-business solutions, customized Web development and Web enablement of strategic applications, Customer Relationship Management (CRM), network services, strategic outsourcing and managed resourcing as well as software and relational database products, up to the time of sale, March 25, 2002, of Princeton Softech Inc. Chimes, Inc., a wholly-owned subsidiary of CHC, provides workforce procurement and management services to Global 2000 companies. Operating loss consists of loss before income taxes, excluding interest income, interest expense, gain/(loss) on the sale of assets, restructuring charges and net loss on investments. These exclusions total expense of $0.4 million and income of $3.6 million at March 31, 2003 and 2002, respectively. Corporate services, consisting of general and administrative services are provided to the segments from a centralized location. Such costs are allocated to the segments based on revenue.

		Three Months Ended
		March 31, 2003			March 31, 2002
Revenue:
	IT Services	$	36,183		$	54,650
	Solutions Group		19,601			20,671
	Chimes		4,469			3,898

TOTAL		$	60,253		$	79,219

Operating income/(loss):
	IT Services	$	(1,189	)	$	(1,035	)
	Solutions Group		1,690			(1,905	)
	Chimes		(1,947	)		(2,492	)

TOTAL		$	(1,446	)	$	(5,432	)

Assets:
	IT Services	$	33,884		$	56,147
	Solutions Group		44,710			37,872
	Chimes		11,733			7,681
	Corporate and other		97,441			107,625

TOTAL		$	187,768		$	209,325

6. Restructuring Charges

During the fourth quarter of 2002, the Company recorded a restructuring charge of $2.8 million pertaining to 2002 office closings.

		Remaining at December 31, 2002		Paid			Remaining at March 31, 2003
Lease Obligations:
	United States	$	2,483	$	(355	)	$	2,128

During the fourth quarter of 2001, the Company recorded a restructuring charge of $410,000 pertaining to 2001 office closings. In addition, during the second quarter of 2001, the Company recorded an additional $5.5 million in restructuring expense to reduce the carrying amount of eB Networks to the estimated net realizable value.

During the fourth quarter of 2000, the Company recorded restructuring charges of $43.9 million. The Company's restructuring plan included the offering for sale of four businesses acquired between 1998 and 1999, including Princeton Softech, Inc., SELECT Software Tools division ("Select"), eB Networks and CHC International, Ltd (formerly Spargo Consulting PLC). In addition, restructuring charges included the shutdown of Enterprise Solutions Group ("ESG") which was acquired in 1998, the closing of seven offices and the site reduction of two other IT Services offices.

At December 31, 2000, the Company recorded a write-down of goodwill of $7.2 million for the shutdown of ESG. In addition, a non-cash charge writing down goodwill of $26 million and purchased software of $6.9 million was recorded, in the fourth quarter of 2000, in connection with the write-down of assets held for sale to realizable value. The closing of IT Services' and Solutions' offices resulted in the termination of 90 employees with a severance charge of $1.3 million. As of March 31, 2003, $1,127,000 had been paid in severance to the terminated employees. The balance remaining at March 31, 2003 includes continuing rent on six properties terminating in 2003, 2004 and 2005.

		Remaining at Dec. 31, 2002		Paid			Remaining at March 31, 2003
Severance:
	United States	$	1	$	(1	)	$	—

Lease Obligations:
	United States	$	294	$	(77	)	$	217

Total		$	295	$	(78	)	$	217

During the fourth quarter of 2001, the Company recorded a restructuring charge adjustment of $638,000 pertaining to the termination, by the sublessee, of the sublease contracts for closed offices included in the 1999 restructure charge.

During the third quarter of 1999, the Company recorded a restructuring charge of $6.4 million primarily related to the consolidating and closing of certain facilities, generally used for Year 2000 and other legacy related services, as well as attendant reduction of related staff levels.

During the second quarter of 2000, the Company recorded a restructuring credit of $2.4 million. This credit resulted primarily from the earlier than expected occupancy of two abandoned properties that were part of the 1999 restructuring reserve and the reversal of an over accrual of employee severance benefits due to terminated employees in the United Kingdom and Canada. The balance remaining at March 31, 2003 includes continuing rent on one property with the lease terminating in 2005.

		Remaining at Dec. 31, 2002		Paid			Remaining at March 31, 2003
Lease Obligations:
	United States	$	488	$	(44	)	$	444

7. Comprehensive Income / (Loss)

Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income ("SFAS No.130"), requires that items defined as other comprehensive income/(loss), such as foreign currency translation adjustments and unrealized gains and losses, be separately classified in the financial statements and that the accumulated balance of other comprehensive income/(loss) be reported separately from retained earnings and additional paid-in capital in the equity section of the balance sheet. The components of comprehensive loss for the three months ended March 31, 2003 and March 31, 2002 are as follows:

			Three Months Ended
			March 31, 2003			March 31, 2002
Comprehensive Loss:
Net Loss			$	(1,279	)	$	(31,094	)
	Other comprehensive loss—
		Foreign currency adjustment		(14	)		(402	)
		Unrealized loss on SERP investments		(210	)		—

Comprehensive Loss			$	(1,503	)	$	(31,496	)

8. Purchase of Westfield-India

On January 31, 2003, the Company acquired the IT Solutions operations of Global Business Technology Solutions (GBTS), from Alea (Bermuda) Limited, a member of the Alea Group of companies and Westfield Services, Inc., a subsidiary of Westfield Financial Corporation for $400,000. The outsourcing facility and its IT professionals are located in Chenni (Madras), India. This transaction was accounted for as a purchase.

9. Sale of Subsidiaries

On February 14, 2003, the Company sold the business and net assets of Computer Horizons e-Solutions (Europe) Limited, ("Solutions UK") to Systems Associates Limited for 92,822 British Sterling Pounds (approximately US$ 145,500).

On March 25, 2002, the Company sold the net assets of Princeton Softech to Apax Partners, Inc. and LLR Partners, for cash of $16 million, including amounts held in escrow of $1.5 million. The gain from the transaction was initially estimated as $3.6 million and was adjusted in the fourth quarter of 2002 to $3.2 million due to a purchase price adjustment. The results of operations are included in the consolidated financial statements through February 28, 2002 within the Solutions group.

On September 10, 2001, the Company sold the assets of eB Networks to Inrange Technologies, a storage networking company, for cash of $5.4 million, including amounts held in escrow of $540,000. The loss from the transaction was initially estimated as $3.2 million, which included the final write-down of related goodwill of $2.1 million. A purchase price adjustment was recorded in the fourth quarter of 2002 resulting in an increase to the loss of $144,000. The results of operations are included in the consolidated financial statements through September 10, 2001 within the Solutions group.

On August 30, 2001, the Company sold the ICM Education name to AlphaNet Solutions, Inc., an IT professional services firm, for $0.5 million. The gain from the transaction was $332,000. The results of operations are included in the consolidated financial statements through August 30, 2001 within the Solutions group. In November 2002, the Company received an additional $100,253 from AlphaNet Solutions, Inc, relating to an earnout.

On April 17, 2001, the Company sold the SELECT Software Tools division "Select" of Princeton Softech to Aonix, a member of the Gores Technology Group, for approximately $895,000 including $545,000 of cash received and a note receivable of $350,000, subsequently written off with the sale of Princeton Softech on March 25, 2002. This sale included all the software assets and intellectual property rights of Select and was sold at book value. The results of operations are included in the consolidated financial statements through April 17, 2001 within the Solutions group.

On January 31, 2001, the Company sold the stock of CHC International Limited, ("Spargo"), to an information technology consultancy service provider for cash of $3.2 million. The gain from the transaction was initially estimated as $438,000. A purchase price adjustment of $2.7 million was recorded, in the fourth quarter of 2002, to increase the gain after the final resolution of outstanding accounts receivables and the termination of leases. The results of operations for January 2001 were not material to the consolidated financial statements.

10. Purchase of Treasury Stock

In April of 2001, the Board of Directors approved the repurchase in the open market of up to 10% of its common shares outstanding, or approximately 3.2 million shares. As of the filing of this report, the Company had repurchased, in the open market, 3,114,900 shares of its stock at an average price of $3.47 per share for an aggregate purchase amount of $10.8 million. As of March 31, 2003 the remaining authorization for repurchase is approximately 93,000 shares.

11. Asset-Based Lending Facility

On July 31, 2001, amended February 14, 2003, the Company entered into a secured asset-based lending facility that replaced its two unsecured discretionary lines of credit. This new line of credit is a three-year, $40 million facility with availability based primarily on eligible customer receivables. The interest rate for the first ninety days from closing was Prime plus 0.5%, thereafter the rate was LIBOR plus 2.75% based on the unpaid principal. The borrowing base less outstanding loans must equal or exceed $17.5 million. At the time of closing there was a $170,000 commitment fee paid to the agent. As of March 31, 2003, the Company had no outstanding loan balance against the facility. Based on the Company's eligible customer receivables and cash balances, $21.9 million was available for borrowing as of March 31, 2003. The fee for the unused portion of the line of credit is 0.375% per annum charged to the Company monthly. This charge was approximately $42,000 and $170,000 for the three-month periods ended March 31, 2003 and 2002, respectively. This line of credit includes covenants relating to the maintenance of cash balances and providing for limitations on incurring obligations and spending limits on capital expenditures.

12. Tax Benefit Reserve

On March 9, 2002, the Job Creation and Worker Assistance Act of 2002 (the "Act") was enacted into law. This Act contains many economic and tax incentives, including the extension of the carryback period for losses arising in years ending during 2001 and 2002 to five years from the previous two year carryback rule. As a result, the Company's tax refund claim of approximately $10 million at December 31, 2001 was increased to approximately $30 million. The additional refund amount of $20 million was received in January 2003.

During 1998, the Company completed a business combination which, for financial statement purposes, has been accounted for as a pooling-of-interests. For income tax purposes the Company believes the transaction qualifies as a taxable purchase that gives rise to future tax deductions. Upon the sale of the acquired business in 2001, these deductions were recognized for tax purposes. The tax benefit of $19.6 million relating to the part of these deductions that was carried back to prior years was included in refundable income taxes in 2002. Since the tax structure of the transaction is subject to determination by the tax authorities, the Company has recorded a reserve for the tax benefits resulting from the carryback and has not recorded deferred tax assets for the tax benefits being carried forward. When resolved, the Company will record a deferred tax asset for the part of the tax benefits being carried forward and a tax benefit for the portion that was carried back, net of an appropriate valuation allowance. The tax benefit will be reflected as an increase in additional paid-in capital. Any adjustments to the valuation allowance will be charged or credited to income.

The Internal Revenue Service is currently examining the Company's federal income tax returns for the years ended December 31, 2001 and 2000, along with its federal refund claims for the calendar years 1996 through 1999. The additional refund amount received in January 2003 is shown as a liability until the audit is completed.

13. Subsequent Events

On April 15, 2003 the Company received an unsolicited proposal from Aquent, LLC, a privately held professional services firm, to acquire all of the outstanding common stock of the Company for $5.00 per share in cash, subject to a number of conditions. Aquent also indicated that it would seek to replace two current directors at the May 14, 2003 Shareholders' meeting, along with lowering the voting threshold to call a special Shareholders' meeting to 10%.

On April 28, 2003 in a letter from its Board of Directors, the Company advised its shareholders that recent hostile proxy activities of Aquent, LLC are misleading, needlessly disruptive and confusing to shareholders.

On April 29, 2003, the Company announced that its Board had executed a separation and non-compete agreement with John J. Cassese, the Company's founder and former CEO, under which Mr. Cassese resigned as an employee and officer of the Company and its subsidiaries, terminating his employment agreement with the Company. The agreement calls for Mr. Cassese to be bound by a five-year non-competition agreement and pays him $3.5 million, and certain health and insurance benefits.

On May 2, 2003 the Company stated in a press release that Aquent, LLC had failed to respond to the Company's request for its relevant financial data, financing commitments and the nature of any conditions or contingencies that might occur in the proposed transaction.

On May 2, 2003 Aquent, LLC announced that it has commenced mailings of its definitive proxy materials to all shareholders of record of the Company for the May 14, 2003 Annual Meeting of Shareholders.

On May 2, 2003, the Company announced that after careful consideration, including a thorough review with an independent financial advisor, J.P. Morgan, its Board of Directors has unanimously determined that Aquent LLC's purported $5.00 per share proposal for the Company's shares is grossly inadequate and not in the best interest of all of its shareholders.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
For the Periods Ended March 31, 2003 and March 31, 2002

FORWARD-LOOKING STATEMENTS

Statements included in this Management's Discussion and Analysis of Financial Condition and Results of Operations and elsewhere in this document that do not relate to present or historical conditions are "forward-looking statements" within the meaning of that term in Section 27A of the Securities Act of 1933, as amended, and in Section 21F of the Securities Exchange Act of 1934, as amended. Additional oral or written forward-looking statements may be made by the Company from time to time, and such statements may be included in documents that are filed with the Securities and Exchange Commission (SEC). Such forward-looking statements involve risks and uncertainties that could cause results or outcomes to differ materially from those expressed in such forward-looking statements. Forward-looking statements may include, without limitation, statements relating to the Company's plans, strategies, objectives, expectations and intentions and are intended to be made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Words such as "believes," "forecasts," "intends," "possible," "expects," "estimates," "anticipates," or "plans" and similar expressions are intended to identify forward-looking statements. Among the important factors on which such statements are based are assumptions concerning the anticipated growth of the information technology industry, the continued need of current and prospective customers for the Company's services, the availability of qualified professional staff, and price and wage inflation.

RESULTS OF OPERATIONS

Revenues. Revenues decreased to $60.3 million in the first quarter of 2003 from $79.2 million in the first quarter of 2002, a decrease of $18.9 million or 23.9%. Solutions Group revenues, including business units held for sale in 2002, decreased to $19.6 million in the first quarter of 2003 from $20.7 million in the first quarter of 2002, a decrease of $1.1 million or 5.3%. The decrease in Solutions Group revenues is entirely attributable to the revenue decline experienced by the business units held for sale. Solutions Group revenues, excluding the operations of units held for sale, increased $1.8 million in the first quarter of 2003 from $17.8 million in the first quarter 2002.

IT Services revenues decreased to $36.2 million in the first quarter of 2003 from $54.7 million in the first quarter of 2002, a decrease of $18.5 million or 33.8%. The decrease in IT Services revenue of $18.5 million, is the result of continued decreases in the demand for temporary technology workers, the trend of companies to outsource technology jobs offshore, the impact of pricing decreases by customers and the lagging economy. The Company does not anticipate any growth during 2003 in IT Services headcount levels unless the economy recovers and IT spending increases.

Chimes revenue increased to $4.5 million in the first quarter of 2003 from $3.9 million in the first quarter of 2002, an increase of $0.6 million, or 15.4%.

Direct Costs. Direct costs decreased to $42.8 million in the first quarter of 2003, from $58.2 million in the comparable period of 2002. Gross margin increased to 29.0% in the first quarter of 2003 from 26.5% in the same period of 2002.

Excluding assets for sale in the first quarter of 2002, direct costs decreased to $42.8 million in the first quarter of 2003 from $57.7 million in the first quarter of 2002. Gross margin increased to 29.0% in the first quarter of 2003 from 24.4% in the first quarter of 2002.

The Company's margins are subject to fluctuations due to a number of factors, including the level of salary and other compensation necessary to attract and retain qualified technical personnel.

Selling, General and Administrative. Selling, general and administrative expenses (excluding restructuring charges in the first quarter of 2003) decreased to $18.9 million in the first quarter of 2003 from $26.5 million in the first quarter of 2002, a decrease of $7.6 million or 28.7%.

Selling, general and administrative expenses (excluding assets held for sale in the first quarter of 2002 and restructuring charges in the first quarter of 2003) decreased to $18.9 million in the first quarter of 2003 from $22.1 million in the first quarter of 2002, a decrease of $3.2 million or 14.5%.

The decrease in selling, general and administrative expenses was primarily attributable to cost reductions in the IT Services group, the Solutions group and Corporate, offset by increases in Chimes as the Company continues to invest in this subsidiary.

Loss from Operations. The Company's loss from operations, excluding restructuring charges in the first quarter of 2003 and gain/(loss) on sale of assets in both quarters, totaled $1.4 million in the first quarter of 2003, an improvement of $4.0 million, from a loss of $5.4 million in the first quarter of 2002. The composition of operating loss of $1.4 million included a loss of $1.2 million in IT Services, profit of $1.7 in the Solutions Group and a loss of $1.9 million in Chimes. This compares to the operating loss of $5.4 million in the first quarter of 2002, consisting of a loss of $1.0 million in IT Services, a loss of $1.9 million in the Solutions Group and a loss of $2.5 million in Chimes. Operating margins, excluding restructuring charges in the first quarter of 2003 and gain/(loss) on sale of assets in both quarters, were a loss of 2.4% in the first quarter of 2003 as compared to a loss of 6.9% in the first quarter of 2002.

The Company's loss from operations (excluding assets held for sale in the first quarter of 2002, restructuring charges in the first quarter of 2003 and gain/(loss) on sale of assets in both quarters) totaled $1.4 million in the first three months ended March 31, 2003, an improvement of $2.1 million or 60.0%, from a loss of $3.5 million in the first three months ended March 31, 2002. The composition of the operating loss of $3.5 million included a loss of $1.2 million in IT Services, income of $219,000 in the Solutions Group and a loss of $2.5 million in Chimes.

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 to payroll costs.

Other Income/(Expense). Other expense increased to $0.1 million in the first quarter of 2003 compared to other income of $3.6 million in the same period of 2002. This decrease in other income was primarily the result of the gain on the sale of Princeton Softech in 2002, compared to a loss on the sale of Solutions UK in 2003.

Provision for Income Taxes. The effective tax rate for Federal, state and local income taxes was 30.0% for the first quarter of 2003 and 34% for the first quarter of 2002.

Net Loss. Net loss for the first quarter of 2003 was $1.3 million, or $0.04 loss per diluted share, compared to net loss of $31.1 million, or $0.99 loss per diluted share for the first quarter of 2002. The effect of restructuring charges and the loss on sale of assets amounted to $0.01 loss per share, net of taxes, in the first quarter of 2003. The net loss in the first quarter of 2002 includes a charge for the cumulative effect of change in accounting principle of $29.9 million, or $0.95 per share, net of taxes, and operations of assets held for sale and the gain on sale of assets which amounted to $1.1 million, or $0.03 loss per share, net of taxes.

Liquidity and Capital Resources

At March 31, 2003, the Company had approximately $100 million in working capital, of which $70.4 million was cash and cash equivalents.

Net cash provided by operating activities in the first three months of 2003 was $12.6 million, consisting primarily of the tax refund received.

Net cash used in investing activities in the first three months of 2003 was $1 million, consisting primarily of capital expenditures and the purchase of Westfield-India.

Net cash used in financing activities in the first three months of 2003 was $0.9 million primarily consisting of the repurchase of treasury shares. In April of 2001, the Board of Directors approved the repurchase in the open market of up to 10% of its common shares outstanding, or approximately 3.2 million shares. As of the filing of this report, the Company had repurchased, in the open market, 3,114,900 shares of its stock at an average price of $3.47 per share for an aggregate purchase amount of $10.8 million. As of March 31, 2003 the remaining authorization for repurchase is approximately 93,000 shares.

At March 31, 2002, the Company had a current ratio position of 3.6 to 1. The Company believes that its cash and cash equivalents, available borrowings and internally generated funds will be sufficient to meet its working capital needs through 2003.

Contractual Obligations and Commercial Commitments

The Company does not utilize off balance sheet financing other than operating lease arrangements for office premises and related equipment. Leases are short term in nature and non-capital. The following table summarizes all commitments under contractual obligations as of March 31, 2003:

	Obligation Due
	Total Amount		1 Year		2-3 Years		4-5 Years		Over 5 Years
	(in thousands)
Operating leases	$	10,695	$	4,234	$	5,132	$	1,318	$	11
Other long-term		5,834		887		—		—		4,947

Total Cash Obligations	$	16,529	$	5,121	$	5,132	$	1,318	$	4,958

Recent Accounting Pronouncements

The exercise price per share on all options granted may not be less than the fair value at the date of the option grant. The Company applies Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to Employees," as modified by FIN 44, "Accounting for Certain Transactions Involving Stock Compensation," in accounting for stock-based employee compensation, whereby no compensation cost had been recognized for the plans. The Company expects to continue following the guidance under APB 25 for stock based compensation to employees and has therefore included the disclosure requirements of FASB 148 in the accompanying financial statements.

Recent Developments

On April 15, 2003 the Company received an unsolicited proposal from Aquent, LLC, a privately held professional services firm, to acquire all of the outstanding common stock of the Company for $5.00 per share in cash, subject to a number of conditions. Aquent also indicated that it would seek to replace two current directors at the May 14, 2003 Shareholders' Meeting, along with lowering the voting threshold to call a Special Shareholders' Meeting to 10%.

On May 2, 2003 Aquent, LLC announced that it has commenced mailings of its definitive proxy materials to all shareholders of record of the Company for the May 14, 2003 Annual Meeting of Shareholders.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Within 90 days prior to the filing of this Quarterly Report on Form 10-Q, the Company's CEO and CFO evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures and concluded that the Company's disclosure controls and procedures are effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is accumulated and communicated to Registrant's management, including its officers, as appropriate to allow timely decisions regarding required disclosure, and are effective to ensure that such information is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms.

Changes in Internal Controls

The Company's CEO and CFO have also concluded there were no significant changes in the Company's internal controls or in other factors that could significantly affect these controls subsequent to the date of their evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

PART II Other Information

Item 1. Legal Proceedings

On April 29, 2003, the Company filed a complaint in the United States District Court, District of New Jersey against Aquent, LLC ("Aquent") and an application for temporary restraints, expedited discovery and a preliminary injunction. The complaint alleged that Aquent's preliminary proxy statement contained materially false and misleading statements requiring corrective disclosure through an amended proxy statement. On May 2, 2003, the court issued an opinion in which the judge found that certain statements in Aquent's preliminary proxy statement were material and misleading. The court ordered Aquent to issue a corrective proxy statement which Aquent did by including a supplement containing the corrective language with its uncorrected proxy statement.

Item 6. Exhibits and Reports on Form 8-K

a) Exhibits

10.1		—Severance agreement for John J. Cassese, Former Chairman, President and CEO
10.2		—Employment agreement for William J. Murphy, President and CEO
10.3		—Employment agreement for Michael J. Shea, Vice President and Chief Financial Officer
99.1		—CEO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
99.2		—CFO Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

b) A report on Form 8-K was filed on March 13, 2003 reporting the issuance of a press release stating that John J. Cassese, its CEO, President and Chairman, has taken a leave of absence as CEO and President and resigned his position as Director and Chairman of the Board. The Board has named William J. Murphy to the position of President and CEO, appointed Thomas J. Berry Chairman of the Board and named Michael J. Shea to the position of Chief Financial Officer.

Signatures

Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	COMPUTER HORIZONS CORP. (Registrant)
DATE: May 14, 2003	/s/ WILLIAM J. MURPHY
	William J. Murphy, President, CEO (Principal Executive Officer) and Director
DATE: May 14, 2003	/s/ MICHAEL J. SHEA
	Michael J. Shea, Vice President and CFO (Principal Financial Officer)
DATE: May 14, 2003	/s/ KRISTIN EVINS
	Kristin Evins, Controller (Principal Accounting Officer)

CERTIFICATIONS

I, WILLIAM J. MURPHY, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of COMPUTER HORIZONS;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects, the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and have:

a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c): presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of registrant's board of directors (or persons performing the equivalent functions):

(a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 14, 2003

/s/ William J. Murphy
WILLIAM J. MURPHY
Chief Executive Officer

CERTIFICATIONS

I, MICHAEL J. SHEA, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of COMPUTER HORIZONS;

2.

3.

4.

a): designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;
b): evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"); and
(c): presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

(a): all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and
(b): any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

Date: May 14, 2003

/s/ Michael J. Shea
MICHAEL J. SHEA
Chief Financial Officer

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Item 4. Controls and Procedures

PART II Other Information

Item 1. Legal Proceedings

Item 6. Exhibits and Reports on Form 8-K

Signatures
CERTIFICATIONS
EX-10.1 3 a2110958zex-10_1.htm EXHIBIT 10.1
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EXHIBIT 10.1

COMPUTER HORIZONS CORP.
49 Old Bloomfield Avenue
Mountain Lakes, NJ 07046-1495

April 28, 2003

Mr. John J. Cassese
3 Quimby Lane
Mendham, New Jersey 07945

Dear Mr. Cassese:

This is to confirm our agreement (the "Agreement") concerning the termination of your employment with Computer Horizons Corp. (the "Company"), your resignation as an officer and director of the Company and certain other related matters, as follows:

1.: You have voluntarily resigned as a director of the Company and, effective April 28, 2003 (the "Effective Date"), you hereby voluntarily terminate your emp1oyment with the Company and resign as an officer of the Company and as an officer and director_, as applicable, of its subsidiaries. Your employment Agreement (the "Emp1oyment Agreement") with the Company dated as of February 16, 1990 regarding the terms of your emp1oyment is hereby mutually terminated as of the Effective Date and thereupon will be of no further force or effect; provided, however, paragraph 3.7 of the Employment Agreement entitled "Indemnification" shall remain in full force and effect and is incorporated herein by reference. You will make no statements to representatives of the media or the financial community concerning the matters contemplated by this Agreement without the prior written consent of the Company's Chairman or General Counsel which shall not unreasonably be withheld, and you will adhere, in your communications concerning such matters with employees, independent contractors, representatives and others associated with the Company, to a brief general statement to be agreed upon by you and the Company.
2.: The Company agrees to pay you severance and retirement in recognition of your 34 years of service in founding and acting as an officer and director of the Company. The severance shall be in an amount of $3.5 million. These sums shall be paid in one payment on April 28, 2003. In addition, the Company will continue to pay for medical coverage for you until age 75 which medical coverage shall be the equivalent of what you are presently receiving. For a period of 30 days after the Effective Date, you will have the ability to exercise any or all of your existing stock options. Your options will expire 31 days after the Effective Date. In lieu of your current participation in the Option Exchange Program (the "Option Program"), the Company will issue you warrants equal to your current participation, at the Option Program price to be struck in August, 2003.
3.: The Company will continue to pay the premiums for the whole life and universal life insurance policies covering your life which it currently pays until the fifth anniversary of the Effective Date and, on or before such fifth anniversary date, will assign to you all its right, title and interest in and to such policies.
4.: The Company and you acknowledge and agree that as to the existing split dollar life insurance policies on the joint lives of you and your spouse, no additional premium will be paid by the Company and that the continuation of the policy will be your responsibility.
5.: The Company and you acknowledge and agree that so long as the split dollar program is maintained, your deferred compensation balance will remain in your account. The split dollar

program to be maintained is specified in an April 14, 2003 memorandum from James D. Kaplan to John Cassese, Subject: Life Insurance Programs. This account will be placed in a "Rabbi" Trust. The parties shall agree to an acceptable form of Trust, which, subject to I.R.S. qualification restrictions, allocates to you sole power to terminate.

6.

The Company and you also acknowledge and agree that you previously waived your right to payment under the Company's non-qualified supplemental retirement agreement and that the Company will have no obligation to you in connection with same, or any portion of same, including but not limited to any change in control payment, whether or not previously waived by you.

7.

In the event that, at any time after the Effective Date, you decide to sell some or all of your Computer Horizons Corp stock:

(i): You shall give timely written notice (the "Offer Notice") to the Company prior to the closing of the sale, stating that you intend to make such a sale, identifying the name and address of the prospective purchaser or transferee (the "Prospective Purchaser"), specifying how many shares to be sold (the "Right of First Refusal Shares") and specifying the price to be paid (collectively, the "Term Sheet Provisions")
(ii): Within 5 business days of delivery of the Offer Notice (the "Exercise Period"), the Company may deliver a written notice (the "Purchaser's Notice") to you stating whether it elects to exercise its purchase option under this Section 6 and agrees to be bound by the same terms as the Term Sheet Provisions. If the Company does not provide the Purchaser's Notice prior to the end of the Exercise Period, the Company shall be deemed to have rejected the Offer Notice
(iii): If the Company has rejected or is deemed to reject the Offer Notice, then you shall be free for a period of ninety (90) days from the date of the actual or deemed rejection to sell or transfer the Right of First Refusal Shares to the Proposed Purchaser upon terms which are no more favorable to the Proposed Purchaser than the Term Sheet Provisions. Any sale or transfer of the Right of First Refusal Shares after the end of such ninety (90) day period or any change in the Term Sheet Provisions which are more favorable to the Proposed Purchaser shall require a new Offer Notice to be delivered to the Company and shall give rise anew to the rights provided in the preceding paragraphs.
(iv): This paragraph 7 shall not restrict you in any manner whatsoever from selling or transferring "insubstantial portions of your Computer Horizons Corp. stock. For purposes of this sub-paragraph, "insubstantial portions" means no more than 10,000 shares transferred in any ninty (90) day period.
(v): In the event, however, of a change of control, the Offer Notice obligation shall cease, upon the effective date of the change of control.

8.

In consideration of the Company's undertakings contained in this Agreement, you agree to enter into a five year non-competition agreement in the form annexed hereto as Exhibit B and execute and deliver to the Company a general release in the form annexed hereto as Exhibit C. The terms and conditions of the non-compete shall not survive a change of control of the Company.

9.

In the event of any breach of any provisions of this Agreement, the Company shall have the right (without being required to post bond or other collateral or show actual damages), in addition to any other rights and remedies existing in its favor, to enforce its rights and the obligations against you under this Agreement by an action or actions for specific performance and/or injunctive or other equitable relief in order to enforce or prevent any violations of the provisions of this Agreement.

10.: This Agreement contains the entire agreement between the parties and supersedes any prior understandings, agreements or representations by or between the parties, written or oral, which may have related to the subject matter hereof in any way.
11.: The parties hereto agree that any dispute arising out of or relating to this Agreement shall be resolved first by attempting mediation and, failing that, by binding arbitration before a 3-person panel, unless the parties agree otherwise, under the rules of the American Arbitration Association. Both mediation and arbitration shall be conducted in New Jersey.

	Very truly yours,
	COMPUTER HORIZONS CORP.
	By:	/s/ THOMAS J. BERRY Thomas J. Berry
Agreed to and acknowledged by:
/s/ JOHN J. CASSESE John J. Cassese

Exhibit B

Employee agrees that for a period of five (5) years hereafter, Employee will not directly or indirectly, individually or in any corporation, firm, association or other business entity, compete or attempt to compete with Company, any parent, subsidiary, or affiliate of Company, or any corporation merged into, or merged or consolidated with Company (a) by soliciting business from any customer and/or client of Company with which Employee was directly involved during the Employment Period or (b) inducing, either directly or through an agent, any personnel of Company or its subsidiaries to leave the service of Company or its subsidiaries, or by employing or contracting with any such personnel. The provisions of this Exhibit shall be construed as an Agreement independent of any other provision contained herein and shall be enforceable in both Law and Equity, including by temporary or permanent Restraining Orders, notwithstanding the existence of any claim or cause of action by Employee against Company, whether predicated on this Agreement or otherwise. As noted above in the body of the Agreement to which this is an exhibit, this non-compete provision shall not survive a change of control of the Company.

Exhibit C

Release

This Release, dated April 23, 2003, is given

BY the Releasor:		John J. Cassese

TO the Releasee:		Computer Horizons Corp., its officers, directors, employees, affiliates and subsidiaries

1.: Release: Except for claims arising under or in connection with this April 23, 2003 letter Agreement of which this Release is an exhibit, the Releasor does hereby release, discharge, and acquit and by these presents does hereby release, acquit and forever discharge Releasee of and from any and all past, present and future claims, counterclaims, demands, actions, causes of action, liabilities, damages, costs, loss of services, expenses, compensation, third-party actions, suits at law or in equity, of every nature and description, whether known or unknown, suspected or unsuspected, foreseen, or unforeseen, real or imaginary, actual or potential, and whether arising at law or in equity, under the common law, state or federal law, or any other law, or otherwise, including but not limited to, any claims that have been or might have been asserted as a result of the establishment or termination of the employer-employee relationship, hereinafter collectively referred to as claims. It is the intention of the parties hereto to effect a full and final mutual, general release of all such claims. It is expressly understood and agreed that this Release is intended to cover, and does cover, not only all now known injuries, losses, and damages, but any future injuries, losses, and damages not now known or anticipated, but which may later develop or be discovered, including all the effects and consequences thereof. Releasor does hereby declare that Releasor understands, covenants, and agrees that Releasor will not make any claims or demand, or file any legal proceedings against Releasee or join Releasee to any claim, demand, or legal proceedings. The filing of any claim, demand, or any and all other legal proceedings by Releasor against Releasee shall be deemed to be a material breach of the terms of this Release.

2. Consideration

The parties hereby declare, understand, covenant and agree that the severance amounts paid to Releasor are the sole consideration for this Release, and that the Releasor voluntarily accepts said consideration for the purpose of making a full and final compromise, adjustment and settlement of all claims for injuries, losses, and damages resulting, or to result, from said claims.

3. Signature

Releasor understands and agrees to the terms of this Release.

/s/ JOHN J. CASSESE

John J. Cassese

Date: April 23, 2003

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EXHIBIT 10.1

COMPUTER HORIZONS CORP. 49 Old Bloomfield Avenue Mountain Lakes, NJ 07046-1495
EX-10.2 4 a2110958zex-10_2.htm EXHIBIT 10.2
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EXHIBIT 10.2

March 31, 2003

William J. Murphy
Computer Horizons Corp.
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046-1495

Re: Amendment to Employment Agreement

Dear Bill:

As a result of John J. Cassese taking a leave of absence from his position as Chief Executive Officer and President of Computer Horizons Corp. (the "Company") and the Board of Directors (the "Board") naming you as acting Chief Executive Officer and President, you and the Board have agreed to amend your employment agreement with the Company dated January 1, 2000 (the "Original Agreement"). All of the terms and conditions in the Original Agreement not otherwise amended as set forth herein in this letter agreement (the "Letter Agreement") shall be incorporated into this Letter Agreement and shall remain in full force and effect. In the event of any inconsistency between the terms and conditions in the Original Agreement and those in this Letter Agreement, the terms and conditions in this Letter Agreement shall control. Capitalized terms not defined herein have the meanings assigned to them in the Original Agreement.

1. You shall serve as the Company's Chief Executive Officer and President with the duties and responsibilities attendant to such positions.

2. Your term under this Letter Agreement shall be for two years commencing on the date hereof (the "Initial Term"). After the Initial Term this Letter Agreement shall renew automatically on a yearly basis (the "Yearly Term") so long as notice is not given by you to the Company or the Company to you, in either case no later than the last day of the 6^th month of the then current term, that the Yearly Term shall not be extended.

3. Promptly after execution of this Letter Agreement, the Company will pay to you a one-time special retention bonus of $75,000 (the "Retention Bonus"). In the event you voluntarily terminate your employment with the Company prior to the end of the Initial Term you agree to repay the Retention Bonus to the Company.

4. In the event the Company determines, for any reason and at any time during the Initial Term or an Extended Term, in the discretion of the Board, that you should relinquish your duties as President and Chief Executive Officer and return to service as the Company's Chief Financial Officer and Executive Vice President, the Company will give you 90 days written notice of such decision and this Letter Agreement shall terminate and the Original Agreement will remain in full force and effect, except that Section 6 of this Letter Agreement shall replace Section 10 of the Original Agreement.

5. In the event you resume your duties as CFO, in accordance with Paragraph 4, the Extended Term as defined in the Original Agreement shall commence on the date you resume said duties ("Resumption Date"), continue for one year and may be extended in accordance with the provisions of the Original Agreement except that the "anniversary date" shall be the Resumption Date or any subsequent Resumption Date.

6. In the event you terminate your employment for Good Reason pursuant to Section 9 of the Original Agreement or the Company terminates your employment other than for Cause or Disability, then you shall be entitled to a lump sum payment equal to the sum of (i) your current annual salary under the Original Agreement and (ii) your highest annual performance bonus paid during your employment with the company.

7. In the event that change of control, as defined in Par. 12 of your existing employment agreement, occurs, then you shall be paid 2X your current base salary plus the highest annual bonus paid during your term of employment with CHC.

8. Sections 4, 5, 6 and 7 of this Letter Agreement shall survive the termination of this Letter Agreement.

		Very truly yours,
		/s/ WILLIAM M. DUNCAN
		William M. Duncan for the Board as Chairman of the Board's Compensation Committee
Accepted and Acknowledged by:
/s/ WILLIAM J. MURPHY
William J. Murphy

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EXHIBIT 10.2

EX-10.3 5 a2110958zex-10_3.htm EXHIBIT 10.3
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EXHIBIT 10.3

April 3, 2003

Michael J. Shea
Computer Horizons Corp.
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046-1495

Re: Amendment to Employment Agreement

Dear Michael:

As a result of William J. Murphy being appointed by the Board of Directors (the "Board") as Chief Executive Officer and President of Computer Horizons Corp. (the "Company") and the Board naming you as Chief Financial Officer, you and the Board have agreed to amend your employment agreement with the Company dated March 6, 1997 (the "Original Agreement"). All of the terms and conditions in the Original Agreement not otherwise amended as set forth herein in this letter agreement (the "Letter Agreement") shall be incorporated into this Letter Agreement and shall remain in full force and effect. In the event of any inconsistency between the terms and conditions in the Original Agreement and those in this Letter Agreement, the terms and conditions in this Letter Agreement shall control.

1. You shall serve as the Company's Chief Financial Officer with the duties and responsibilities attendant to such positions.

2. Your term under this Letter Agreement shall be for one year commencing on the date hereof (the "Initial Term"). After the Initial Term this Letter Agreement shall renew automatically on a yearly basis (the "Yearly Term") so long as notice is not given by you to the Company or the Company to you, in either case no later than the first day of the tenth month of the then current term, that the Yearly Term shall not be extended.

3. Promptly after execution of this Letter Agreement, the Company will pay to you a one-time special retention bonus of $40,000 (the "Retention Bonus"). In the event you voluntarily terminate your employment with the Company prior to the end of the Initial Term, you agree to repay the Retention Bonus to the Company.

4. In the event the Company determines, for any reason and at any time during the Initial Term or an Extended Term, in the discretion of the Board, that you should relinquish your duties as Chief Financial Officer and return to service as the Company's Controller and Vice President, the Company will give you 90 days written notice of such decision and this Letter Agreement shall terminate and the Original Agreement will remain in full force and effect.

5. In the event you resume your duties as Controller, in accordance with Paragraph 4, the Employment Period as defined in the Original Agreement shall commence on the date you resume said duties, continue for one year and may be extended in accordance with the provisions of the Original Agreement. After resumption of your duties as Controller, Paragraph 6 below shall also apply and shall be incorporated into and made a part of your Original Agreement.

6. In the event you terminate your employment for Good Reason pursuant to your Original Agreement or the Company terminates your employment other than for Cause or Disability, then you shall be entitled to a lump sum payment equal to 1 times the sum of (i) your current annual salary under the Original Agreement and (ii) your highest annual performance bonus paid during your employment with the company.

7. In the event that change of control of the Company occurs and either (i) you continue to be employed by the Company through the end of the Employment Term or (ii) after such Change of Control you terminate your employment for Good Reason or the Company terminates your employment other than for Cause or Disability, then you shall be entitled to receive from the Company (without limiting any additional rights that you may have under applicable law in the case of termination prior to the expiration of the Employment Term), within five (5) days after the expiration of the Employment Term (whether or not you are then employed by the Company) or the termination of the your employment (as applicable), a lump sum of 2 times your Base Salary plus the highest annual performance bonus paid during your employment with the Company, plus any other rights accorded you under your current contract.

For purposes of this Amendment and the Employment Agreement, a "Change of Control" shall be deemed to have occurred if (i) any person (as defined in Section 3(a)(9) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and as used in Section 13(d) and 14(d) thereof), excluding the company, any Subsidiary and any employee benefit plan sponsored or maintained by the Company or any Subsidiary (including any trustee of any such plan acting in his capacity as trustee), but including a "group" as defined in Section 13(d)(3) of the exchange Act, becomes the beneficial owner of share of the Company having at least 20% of the total number of votes that may be cast for the election of directors of the Company; (ii) the shareholders of the Company shall approve any merger or other business combination of the Company, sale of all or substantially all of the Company's assets or combination of the foregoing transactions (a "Transaction") other than a Transaction involving only the Company and one or more of its Subsidiaries, or a Transaction immediately following which the shareholders of the Company immediately prior to the Transaction continue to have a majority of the voting power in the resulting entity (excluding for this purpose any shareholder owning directly or indirectly more than 10% of the shares of the other company involved in the Transaction), or (iii) within any 24 month period beginning on or after the date hereof, the persons who were directors of the Company immediately before the beginning of such period (the "Incumbent Directors") shall cease (for any reason other than death) to constitute at least a majority of the Board or the board of directors of any successor to the Company, provided that, any director who was not a director as of the date hereof shall be deemed to be an Incumbent Director if such director was elected to the Board by, or on the recommendation of or with the approval of, at least two-thirds of the directors who then qualified as Incumbent Directors actually or by prior operation of this paragraph unless such election, recommendation or approval was the result of an actual or threatened election contest of the type contemplated by Regulation 14a-11 promulgated under the Exchange Act or any successor provision. Notwithstanding the foregoing, no Change of Control of the Company shall be deemed to have occurred for purposes of this Agreement by reason of any actions or events in which the Executive participates in a capacity other than in his capacity as an executive or director of the Company, provided that the Executive's voting or tendering, exchanging or otherwise disposing of any or all his shares of the Company's capital stock shall not be deemed participation. For purposes of this paragraph, "Subsidiary" shall mean any entity in which the Company owns, directly or indirectly, at least 50% of the outstanding securities generally entitled to vote for the election of directors.

8. Sections 4, 5, 6 and 7 of this Letter Agreement shall survive the termination of this Letter Agreement.

		Very truly yours,
		/s/ THOMAS J. BERRY Thomas J. Berry
Accepted and Acknowledged by:
/s/ MICHAEL J. SHEA Michael J. Shea

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EXHIBIT 10.3

EX-99.1 6 a2110958zex-99_1.htm EXHIBIT 99.1
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Exhibit 99.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Quarterly Report on Form 10-Q of Computer Horizons Corp. (the "Company") for the quarterly period ended March 31, 2003 (the "Periodic Report"), I, William J. Murphy, Chief Executive Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2003

/s/ WILLIAM J. MURPHY
William J. Murphy
Chief Executive Officer

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Exhibit 99.1

EX-99.2 7 a2110958zex-99_2.htm EXHIBIT 99.2
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Exhibit 99.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

In connection with the accompanying Quarterly Report on Form 10-Q of Computer Horizons Corp. (the "Company") for the quarterly period ended March 31, 2003 (the "Periodic Report"), I, Michael J. Shea, Chief Financial Officer of the Company, hereby certify pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, to the best of my knowledge and belief, that the Periodic Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and that the information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: May 14, 2003

/s/ MICHAEL J. SHEA
Michael J. Shea
Chief Financial Officer

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Exhibit 99.2

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