AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 30, 1996
REGISTRATION NO. 333-______
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- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-1
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
THE JUDGE GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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Pennsylvania 6719 23-1726661
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation of Organization) Classification Code Number) Identification Number)
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TWO BALA PLAZA, SUITE 800, BALA CYNWYD, PENNSYLVANIA 19004, (610) 667-7700
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
MARTIN E. JUDGE, JR., CHIEF EXECUTIVE OFFICER, THE JUDGE GROUP, INC.
TWO BALA PLAZA, SUITE 800, BALA CYNWYD, PENNSYLVANIA 19004, (610) 667-7700
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
Copies to:
Robert H. Strouse, Esq. Charles C. Zall, Esq.
Drinker Biddle & Reath Saul, Ewing, Remick & Saul
1000 Westlakes Drive, Suite 300 3800 Centre Square
Berwyn, Pennsylvania 19312 Philadelphia, Pennsylvania 19102
(610) 993-2200 (215) 972-7777
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective and the
Underwriting Agreement is executed.
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / / _______________
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / / _______________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. / /
CALCULATION OF REGISTRATION FEE
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TITLE OF
EACH CLASS OF PROPOSED PROPOSED
SECURITIES AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TO BE TO BE OFFERING PRICE AGGREGATE REGISTRATION
REGISTERED REGISTERED (1) PER SHARE (2) OFFERING PRICE (2) FEE
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Common Shares.......................... 4,197,500 $11.00 $46,172,500 $15,921.55
=============================================================================================================================
</TABLE>
(1) Includes 547,500 shares of Common Shares that may be sold pursuant to the
Underwriters' over-allotment option.
(2) Estimated solely for the purpose of calculating the registration fee.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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<PAGE>
THE JUDGE GROUP, INC.
CROSS-REFERENCE SHEET
(PURSUANT TO ITEM 501(B) OF REGULATION S-K SHOWING THE LOCATION IN THE
PROSPECTUS OF THE RESPONSES TO THE ITEMS OF PART I OF FORM S-1)
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REGISTRATION STATEMENT ITEM AND HEADING LOCATION OR CAPTION IN PROSPECTUS
--------------------------------------- ---------------------------------
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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 cover page of Prospectus; outside back
cover page of Prospectus
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges........................... Prospectus Summary; Risk Factors
4. Use of Proceeds....................................... Use of Proceeds
5. Determination of Offering Price....................... Outside front cover page of Prospectus; Underwriting
6. Dilution.............................................. Dilution
7. Selling Security Holders.............................. Principal and Selling Shareholders
8. Plan of Distribution.................................. Underwriting
9. Description of Securities to be Registered............ Outside front cover page of Prospectus; Prospectus
Summary; Dilution; Description of Capital Stock
10. Interests of Named Experts and Counsel................ Legal Matters; Experts
11. Information with Respect to the Registrant............ Prospectus Summary; Risk Factors; Use of Proceeds;
Dividend Policy; Dilution; Capitalization; Selected
Consolidated Financial Data; Management's Discussion
and Analysis of Financial Condition and Results of
Operations; Business; Management; Certain Transactions;
Description of Capital Stock; Shares Eligible for
Future Sale; Combined Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities
Act Liabilities..................................... Not applicable
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<PAGE>
SUBJECT TO COMPLETION, DATED SEPTEMBER 30, 1996
3,650,000 SHARES
THE JUDGE GROUP, INC.
COMMON SHARES
------------------------
Of the Common Shares being offered hereby, 3,000,000 are being offered by
The Judge Group, Inc. ('The Judge Group' or the 'Company') and 650,000 shares
are being sold by the Selling Shareholders. See 'Principal and Selling
Shareholders.' The Company will not receive any of the proceeds from the sale of
shares by the Selling Shareholders.
Prior to this Offering, there has been no public market for the Common
Shares. It is currently estimated that the initial public offering price will be
between $9.00 and $11.00 per share. See 'Underwriting' for a discussion of the
factors to be considered in determining the initial public offering price. The
Company has applied for quotation of the Common Shares on the Nasdaq Stock
Market under the symbol 'JUDG.'
------------------------
SEE 'RISK FACTORS,' BEGINNING ON PAGE 7, FOR A DISCUSSION OF CERTAIN
FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON SHARES
OFFERED HEREBY.
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
===============================================================================
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<CAPTION>
PRICE UNDERWRITING PROCEEDS TO
TO DISCOUNTS AND PROCEEDS TO SELLING
PUBLIC COMMISSIONS (1) COMPANY (2) SHAREHOLDERS
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Per Share........................... $ $ $ $
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Total(3)............................ $ $ $ $
=================================================================================================================
</TABLE>
(1) The Company and Selling Shareholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, as amended (the 'Securities Act'). See
'Underwriting.'
(2) Before deducting expenses payable by the Company estimated to be $1,100,000.
(3) The Company and certain of the Selling Shareholders have granted to the
Underwriters an option, exercisable for 30 days from the date of the initial
public offering of the Common Shares, to purchase up to an aggregate of
547,500 shares at the Price to Public, less Underwriting Discounts and
Commissions, solely to cover over-allotments, if any. If the Underwriters
exercise this option in full, the Price to Public will total $________, the
Underwriting Discounts and Commissions will total $________, the Proceeds to
Company will total $ and the Proceeds to Selling Shareholders will
total $ . See 'Underwriting.'
------------------------
The Common Shares are offered by the several Underwriters named herein,
subject to receipt and acceptance by them and subject to their right to reject
any order in whole or in part. It is expected that delivery of the certificates
representing such shares will be made at the offices of Janney Montgomery Scott
Inc., Philadelphia, Pennsylvania, on or about , 1996.
------------------------
JANNEY MONTGOMERY SCOTT INC.
The date of this Prospectus is , 1996
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 THE SECURITIES LAWS
OF ANY SUCH STATE.
<PAGE>
COMPANY LOGO SURROUNDED BY NAMES OF FOUR OPERATING BUSINESSES
Background - outerspace - Earth in upper right-hand corner,
bottom of frame are mountains.
Judge(Trademark) and MENTOR(Trademark) are trademarks of the Company. This
Prospectus also contains other product names, trade names, service marks and
trademarks of the Company and of other organizations.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON SHARES
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. SUCH
TRANSACTIONS MAY BE EFFECTED THROUGH THE NASDAQ STOCK MARKET, IN THE
OVER-THE-COUNTER MARKET OR OTHERWISE.
2
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PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and notes thereto appearing elsewhere in
this Prospectus. Unless the context otherwise requires, all references herein to
the 'Company' or 'The Judge Group' include all direct and indirect subsidiaries.
Unless otherwise indicated, the information in this Prospectus (i) assumes the
Underwriters' over-allotment option is not exercised and (ii) gives effect to
the Pre-Offering Transactions. The 'Pre-Offering Transactions' consist of
certain corporate reorganization events, including a 52.6 for 1.0 stock split,
the issuance of 526,000 Common Shares upon the conversion of $500,000 principal
amount of the Company's 10% Convertible Senior Subordinated Notes, the
acquisition by The Judge Group of all of the issued and outstanding stock of
Judge Imaging Systems, Inc. ('JIS') not presently held by it, the acquisition of
the Berkeley Associates Corporation ('Berkeley') and the acquisition of Systems
Automation, Inc. ('Systems Automation'). The Pre-Offering Transactions will
occur concurrently with or prior to the consummation of this Offering. See
'Business -- Pre-Offering Transactions: Corporate Reorganization, Merger and
Recent Acquisitions' for a description of the Pre-Offering Transactions.
THE COMPANY
The Judge Group services the information technology ('IT') and engineering
needs of its clients through the following four complementary operating units:
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o Contract Placement -- Provides IT and engineering personnel ('technical consultants') on
a contract basis;
o Permanent Placement -- Provides IT and engineering personnel on a permanent basis;
o Imaging and Network Services -- Automates and increases the efficiency of business processes
through computer networking, imaging, document management,
workflow and related consulting services; and
o IT Training -- Provides standard and customized IT training on established and
emerging software applications.
</TABLE>
The Company's Contract Placement business provides technical consultants
skilled in a variety of fields, such as applications programming and
development, client/server technology, legacy systems conversion, software
architecture and design, data communications, systems engineering,
Internet/Web-Site design, project consulting and Help Desk management. The
Company provides technical consultants in the MidAtlantic and New England
regions of the United States through three branch offices, and on a nationwide
basis through its National Division. The Company maintains a database of over
100,000 technical consultants, and in 1995 provided over 1,200 technical
consultants to more than 400 clients. By relying on contract consultants,
clients with complex technical requirements can reduce the costs associated with
recruiting, training and relocating employees as those requirements change.
According to Staffing Industry Report, revenues from technical/computer
temporary staffing are estimated to have grown from $5.7 billion in 1993 to $9.2
billion in 1995 and are expected to grow to $11.4 billion in 1996, representing
a 26.0% compound annual growth rate. The Company's Contract Placement business
generated revenues of $50.8 million and $28.6 million, which represented 80.3%
and 76.6% of the Company's consolidated net revenues, in 1995 and the six months
ended June 30, 1996, respectively.
The Company's Permanent Placement business provides medium to high-level IT
and engineering professionals on a permanent basis to clients nationwide. The
Company maintains a database of over 70,000 IT and engineering professionals,
and in 1995 placed 460 candidates with more than 240 clients. According to
Staffing Industry Report, revenues from permanent placement providers are
estimated to have grown from $1.2 billion in 1993 to $1.7 billion in 1995, and
are expected to grow to $1.8 billion in 1996, representing a 14.5% compound
annual growth rate. The Company's Permanent
3
<PAGE>
Placement business generated revenues of $4.3 million and $2.6 million, which
represented 6.7% and 7.0% of the Company's consolidated net revenues, in 1995
and the six months ended June 30, 1996, respectively.
The Company's Imaging and Network Services business offers advanced
technical solutions to increase the efficiency of business processes, such as
network and document management systems design, integration, implementation,
maintenance and training, business process redesign through its
MENTOR(Trademark) Consulting Program, project management and advanced
applications development. The Company is a value-added reseller and service
facility for personal computer ('PC') and network hardware, software and related
peripherals manufactured by Compaq, ACER, IBM, Apple, Okidata, Tricord, Hewlett
Packard and others. The Company has installed more than 120 imaging systems, is
an authorized value-added reseller of Optika, Filenet, Saros, Watermark,
Keyfile, OTP and Lotus Notes imaging software, and integrates its imaging
solutions on a variety of operating systems, including Banyan, OS/2 and Windows
NT. According to a study prepared for the Association for Information and Image
Management International ('AIIM'), electronic imaging revenues, including
hardware, software, services and support, grew 18.2% in 1995, from $2.2 billion
in 1994 to $2.6 billion in 1995. The Company's Imaging and Network Services
business generated revenues of $8.2 million and $6.1 million, which represented
13.0% and 16.4% of the Company's consolidated net revenues, in 1995 and the six
months ended June 30, 1996, respectively.
The Company's IT Training business, acquired in September 1996, provides
training on a range of software and network applications to corporate,
governmental and individual clients. The IT Training business currently offers
three licensed diploma courses, six certificate courses, and over 180
open-enrollment courses, either in its own computer labs or at client locations,
and generated revenues of $2.3 million and $1.5 million in 1995 and the six
months ended June 30, 1996, respectively. The Updata Group, Inc. estimates that
revenues from IT training services will grow from $2.9 billion in 1995 to $5.6
billion by the year 2000, representing a 14.8% compound annual growth rate.
Besides expanding the Company's range of technical service offerings, the IT
Training business will assist the Company in identifying emerging technologies
and integrating such technologies into its organization through the training of
its technical consultants and in-house personnel.
The Company serves its clients through offices located in Bala Cynwyd,
Pennsylvania; Foxborough and Wakefield, Massachusetts; Edison and Moorestown,
New Jersey; Hartford, Connecticut; Tampa, Florida; and Alexandria, Virginia. The
Company's client base includes various Fortune 500 companies and governmental
agencies, including Merck & Co., Inc. ('Merck'), Bell Atlantic NYNEX Mobile,
Texas Instruments, Compaq, Intel and the City of Philadelphia. The Company
believes that its four complementary businesses afford it a competitive
advantage over IT service providers that have fewer service offerings, and
position it to benefit from the anticipated growth in both the technical
staffing industry and the imaging and document management industry. The Company
has recently adopted an integrated marketing and service approach aimed at both
new and existing customers which seeks to take advantage of its ability to offer
a comprehensive, cost-effective and convenient means to meet a wide variety of
technical requirements. Key elements of the Company's business strategy to
become a leading nationwide provider of IT and engineering professional services
include:
o Offering a Single Source of Technical Solutions
o Developing a National Presence
o Aggressively Marketing Broad Range of Services
o Expanding Imaging and Network Services
o Capitalizing on IT Training Resources
o Pursuing Strategic Acquisitions
The executive offices of The Judge Group are located at Two Bala Plaza,
Suite 800, Bala Cynwyd, Pennsylvania 19004, and its telephone number is (610)
667-7700.
4
<PAGE>
THE OFFERING
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Common Shares offered by the Company......................................... 3,000,000 shares
Common Shares offered by the Selling Shareholders............................ 650,000 shares
Common Shares to be outstanding after the Offering........................... 13,042,737 shares1
</TABLE>
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Use of Proceeds.............................................................. For repayment of certain indebtedness, payment
of portions of the purchase prices of recently
completed acquisitions, and for working capital
and general corporate purposes, including the
establishment of a corporate level sales force.
The Company may use portions of the proceeds
for acquisitions, although the Company is not
currently engaged in any acquisition
negotiations. The Company will not receive any
proceeds from the sale of the Common Shares
offered by the Selling Shareholders. See 'Use of
Proceeds.'
Nasdaq Stock
Market Symbol................................................................ 'JUDG'
</TABLE>
- ------------------
1 Based on the number of shares outstanding as of September 27, 1996 and
assuming the consummation of the Pre-Offering Transactions. Excludes 587,000
Common Shares issuable upon exercise of options outstanding on that date, none
of which were then exercisable.
5
<PAGE>
SUMMARY CONSOLIDATED HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------------------- ---------------------------------
PRO FORMA PRO FORMA
1993 1994 1995 1995(1) 1995 1996 1996(1)
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED) (UNAUDITED)
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STATEMENT OF OPERATIONS DATA:
Net revenues........................ $ 35,069 $ 45,253 $ 63,299 $ 68,095 $ 29,399 $ 37,327 $ 39,396
Cost of sales....................... 26,070 34,146 47,550 50,682 22,292 27,588 28,797
Selling and operating............... 5,853 6,509 9,798 10,895 4,612 6,364 6,796
General and administrative.......... 2,525 3,155 4,187 5,043 2,038 2,848 3,334
--------- --------- --------- ----------- --------- --------- -----------
Total costs and expenses............ 34,448 43,811 61,535 66,620 28,942 36,800 38,927
--------- --------- --------- ----------- --------- --------- -----------
Income from operations.............. 621 1,443 1,764 1,475 457 527 469
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
Interest expense.................... 338 427 670 706 307 371 389
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
Net income (loss)................... $ 101 $ 343 $ 486 $ 409 $ (175) $ 182 $ (106)
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
Fully-diluted net income
(loss) per Common Share:2 $ 0.01 $ 0.04 $ 0.05 $ 0.03 $ (0.02) $ 0.02 $ (0.01)
--------- --------- --------- ----------- --------- --------- -----------
--------- --------- --------- ----------- --------- --------- -----------
Fully-diluted weighted average
shares............................ 8,500 8,847 9,110 13,043 9,110 9,110 13,043
--------- --------- --------- ----------- --------- --------- -----------
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JUNE 30, 1996
------------------------
PRO FORMA
AS
ACTUAL ADJUSTED(1)
--------- -------------
(UNAUDITED)
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BALANCE SHEET DATA:
Working capital (deficiency)......................................................... $ 6,546 $ 24,100
Total assets......................................................................... 15,021 36,406
Notes payable, including current portion............................................. 6,358 0
Other long-term obligations, including current portion............................... 1,593 1,016
Shareholders' equity (deficit)....................................................... 397 28,655
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1. Pro Forma financial information reflects the consummation of the Pre-Offering
Transactions and the sale by the Company of 3,000,000 Common Shares offered
hereby at an assumed offering price of $10.00 per share and the application
of the net proceeds therefrom. See 'Business -- Pre-Offering Transactions:
Corporate Reorganization, Merger and Recent Acquisitions,' 'Use of Proceeds'
and 'Unaudited Pro Forma Consolidating Financial Statements included in the
Financial Statements.'
2. All per share and share amounts reflect a 52.6 for 1.0 stock split which
occurred on September 23, 1996.
3. Fully-diluted shares includes Common Stock equivalents and 526,000 Common
Shares issuable upon conversion of the Company's 10% Convertible Senior
Subordinated Notes.
6
<PAGE>
RISK FACTORS
An investment in Common Shares offered by this Prospectus involves a high
degree of risk. Prospective purchasers of the Common Shares offered hereby
should carefully review the following risk factors as well as the other
information set forth in this Prospectus.
DEPENDENCE ON AVAILABILITY OF QUALIFIED TECHNICAL CONSULTANTS
The Company is dependent upon its ability to attract and retain technical
consultants who possess the skills and experience necessary to meet the staffing
requirements of its clients. To keep pace with rapidly evolving information
technologies and changing client needs, the Company must continually evaluate
and upgrade its database of available qualified technical consultants.
Competition for individuals with proven technical skills is intense, and, as is
currently customary in the industry, the Company does not have any exclusive
contracts with its consultants. The Company competes for such individuals with
other providers of technical staffing services, systems integrators, providers
of outsourcing services, computer systems consultants, clients and temporary
personnel agencies. Factors influencing such competition include compensation,
benefits, growth opportunities and pre-existing relationships with other
companies, particularly specialty staffing companies. As the Company expands
into new geographic areas, it may experience difficulty attracting qualified
technical consultants who have a prior relationship or familiarity with more
established specialty staffing companies in such areas. There can be no
assurance that qualified technical consultants will continue to be available to
the Company in sufficient numbers to meet the Company's current and anticipated
growth requirements. See 'Business -- Technical Personnel' and 'Business --
Competition.'
ACQUISITION RISKS
A principal component of the Company's growth strategy is the acquisition
of companies that will complement and expand the Company's existing businesses,
principally in new geographic markets. The successful implementation of this
strategy is dependent on the Company's ability to identify suitable acquisition
candidates, acquire such companies on suitable terms and integrate their
operations with those of the Company. There can be no assurance that the Company
will be able to identify suitable acquisition candidates or that, if identified,
the Company will be able to acquire such companies on suitable terms. The
specialty staffing industry is relatively mature. Acquisitions in this industry
are therefore likely to be at higher relative prices than for other industries
due to competition from other staffing companies for acquisition candidates.
Acquisitions also involve a number of special risks, including: (i) adverse
effects on the Company's reported operating results, including increased
goodwill amortization and interest expense; (ii) diversion of management
attention; (iii) risks associated with unanticipated problems, liabilities or
contingencies; and (iv) difficulties related to the integration of the acquired
business. The occurrence of some or all of the events described in these risks
could have a material adverse effect on the Company's business, financial
condition and results of operations. See 'Management's Discussion and Analysis
of Financial Condition and Results of Operations -- Liquidity and Capital
Resources' and 'Business -- Business Strategy.'
ABILITY TO MANAGE GROWTH
Sustained or significant growth, if achieved, will subject the Company to
risks by placing a substantial strain on the Company's available managerial,
financial and other resources. Specifically, such growth will require the
Company to: (i) hire, integrate and retain qualified managers in existing
markets as well as markets in which the Company has no prior operating
experience; (ii) develop and maintain relationships with an increasingly large
number of highly qualified technical consultants; and (iii) apply its management
practices to a significantly larger organization. Expansion beyond the
geographic areas where the Company's offices are presently located will further
increase demands on the Company's management. The Company's ability to manage
its staff and facilities growth effectively will require it to continue to
expand its operational, financial and other internal systems. There can be no
assurance that the Company's systems, procedures and controls will be
successfully implemented or adequate to support the Company's expanded
operations. Furthermore, an element of
7
<PAGE>
the Company's business strategy is to cross-sell the existing services of its
four businesses to new and existing clients. Historically, these businesses have
operated independently, producing only occasional referrals, and there can be no
assurance that the Company will successfully market such services on an
integrated basis. See 'Business -- Business Strategy' and 'Management.'
HISTORY OF OPERATING LOSSES IN IMAGING AND NETWORK SERVICES BUSINESS
The Company's Imaging and Network Services business has had net operating
losses since its commencement in 1988, and at June 30, 1996 has an accumulated
deficit of $3.1 million. The losses have resulted from high marketing and
general and administrative costs associated with building the division's imaging
and document management infrastructure and capabilities, and the costs
associated with the acquisition and integration of an imaging and document
management company, combined with historically low profit margins related to the
hardware component of the networking business and a slower emergence of the
imaging and document management market than anticipated by the Company. The
Company is currently focusing on achieving profitability in its Imaging and
Network Services business and expanding it through internal growth, new service
offerings and acquisitions. Typically, the decision by a prospective customer to
install a network or to implement a document management system requires the
Company to engage in a lengthy and complex sales cycle and involves a
significant commitment of resources by the customer over an extended period of
time. For these and other reasons, the sales and implementation cycles are
subject to a number of significant delays over which the Company has little or
no control. Even if it increases sales, there can be no assurance that the
Imaging and Network Services business will achieve a pricing and cost structure
that will generate profits, or that the Company will be able to identify and
acquire appropriate acquisition candidates on favorable terms. Failure of the
Imaging and Network Services business to grow through internal expansion and
favorable acquisitions or to achieve profitability would have a material adverse
effect on the Company's business, financial condition and results of operations.
TECHNOLOGICAL OBSOLESCENCE IN IMAGING AND NETWORK SERVICES
The market for Imaging and Network Services is characterized by rapid
technological change, changes in customer requirements, frequent new product
introductions and enhancements and emerging industry standards. The Company's
future performance will depend in part on its ability to respond effectively to
these developments and to develop expertise in, and form relationships with
vendors of, products that gain market acceptance and popularity. The
introduction of products and services embodying new technologies and the
emergence of new industry standards can render existing products obsolete,
unmarketable or noncompetitive. The Company is unable to predict the future
impact of new products on the Company's services. Furthermore, the life cycles
of the systems and products with respect to which the Company has developed
expertise are difficult to estimate. The Imaging and Network Services business's
future performance will depend on the ability of software and hardware vendors
to develop and introduce new products that respond to evolving customer
requirements and on the Company's ability to stay abreast of and enhance its
expertise with respect to new products and systems. The inability of the Imaging
and Network Services business to enhance its expertise and capabilities in
response to changing customer requirements, technological change or emerging
industry standards would have a material adverse effect on the Company's
business, financial condition and results of operation. Furthermore, to the
extent the vendors of the hardware or software components of document management
systems experience delays in the development and shipments of new products, the
Company's ability to sell document management systems could be materially
adversely affected.
COMPETITION
The IT professional services industry is highly competitive. The Company
competes for both clients and qualified technical personnel with a variety of
companies, including other specialty staffing companies, national and regional
consulting firms, systems integrators, IT outsourcing firms and independent
contractors. The Company also competes for technical consultants with the
information
8
<PAGE>
technology staffs of its clients and potential clients. In addition, several
traditional staffing companies that historically emphasized the placement of
clerical and other less highly skilled personnel on short-term assignments, have
begun to provide services competitive with those provided by the Company.
Several of the Company's competitors in each of the businesses in which it
provides services are substantially larger than the Company and have greater
financial and other resources. Several of such competitors have also been in
business much longer than the Company and have significantly greater name
recognition throughout the United States, including the geographic areas in
which the Company operates and into which it intends to expand. In addition,
such companies are able to meet a broader range of a client's temporary
personnel needs and serve a broader geographic range than the Company, which
permits such companies to better serve national accounts. There can be no
assurance that the Company will be able to compete successfully with its
existing and future competitors. Also, to the extent that the Company offers
fixed-price contracts to clients in the future, which it may do for competitive
reasons, it will be responsible for cost overruns and may experience revenue
streams that vary from those generated by the provision of time and material
services.
DEPENDENCE ON KEY CUSTOMERS AND GEOGRAPHIC CONCENTRATION
The Company's business is dependent in part on the economic strength of its
clients. While the Company serves a large number of clients in a range of
industry groups, approximately 6.4% of the Company's revenues in fiscal 1995
were derived from Merck, the only customer responsible for more than 5% of the
Company's revenues in 1995. Similarly, a substantial portion of the Company's
revenues are currently derived from services provided to clients in the
Mid-Atlantic Region of the United States. A substantial deterioration in general
economic conditions in that Region could adversely affect the Company.
EMPLOYMENT LIABILITY RISKS
The Company provides staffing services in the workplaces of other
businesses. Risks inherent in such activity include possible claims of errors
and omissions, misuse of client proprietary information, misappropriation of
funds, discrimination and harassment, theft of client property, other criminal
activity or torts and other claims. While the Company has not historically
experienced any material claims of these types, there can be no assurance that
the Company will not experience such claims in the future.
DEPENDENCE ON KEY PERSONNEL
The Company's future success may depend to a significant extent upon the
performance of a number of the Company's key personnel, including Martin E.
Judge, Jr., Chairman of the Board and Chief Executive Officer of the Company.
The loss of Mr. Judge or other key management personnel or the failure to
recruit and retain experienced personnel could have a material adverse effect on
the Company's business. Typically, the Company does not enter into contracts
with these individuals providing for continued employment. See 'Management --
Employment Agreements.'
CONTROL OF THE COMPANY
Immediately after the effective date of the Offering, Martin E. Judge, Jr.
and Michael A. Dunn will beneficially own approximately 45.8% and 14.2% of the
outstanding Common Shares, respectively (45.7% and 14.1% if the over-allotment
option is exercised in full). As a result, Mr. Judge and Mr. Dunn will have the
ability to determine the election of all of the Company's directors and control
the outcome of substantially all issues submitted to the Company's shareholders.
While no voting agreement between Mr. Judge and Mr. Dunn exists, such
concentration of ownership could have the effect of making it more difficult for
a third party to acquire control of the Company and may discourage third parties
from attempting to do so. See 'Principal and Selling Shareholders' and
'Description of Capital Shares.'
9
<PAGE>
FLUCTUATIONS IN OPERATING RESULTS; SEASONALITY AND GENERAL ECONOMIC CONDITIONS
Because the Company only derives revenue in its Contract Placement business
when its consultants are actually working, its operating results are adversely
affected when client facilities close due to holidays or inclement weather. In
particular, the Company generally experiences a certain amount of reduction in
revenues in its Contract Placement business in its fourth fiscal quarter due to
the number of holidays in that quarter. Further, the Company's Contract
Placement business generally incurs additional expense in its first fiscal
quarter due in part to the timing of certain payroll and related employment tax
costs.
Demand for IT professional services is significantly affected by the
general level of economic activity. When economic activity slows, clients may
delay or cancel plans that involve the hiring of permanent or contract technical
consultants, and may postpone or cancel plans to implement document management
systems or to implement training programs. The Company is unable to predict the
level of economic activity at any particular time, and fluctuations in the
general economy could adversely affect the Company's business, operating results
and financial condition. See 'Management's Discussion and Analysis of Financial
Condition and Results of Operations.'
BROAD DISCRETION IN USE OF PROCEEDS
The Company intends to use approximately $9.4 million of the net proceeds
from the Offering to repay certain outstanding indebtedness and to pay portions
of the purchase prices of recently completed acquisitions, and it will have
broad discretion in using the remaining proceeds from the Offering. The Company
intends to use the approximately $17.4 million in remaining net proceeds
(approximately $20.2 million if the Underwriters' over-allotment is exercised in
full) for working capital and general corporate purposes, including
establishment of a corporate level sales force and possible acquisitions. The
Company currently has no understandings, commitments or agreements with respect
to any possible acquisitions. Consequently, there can be no assurance as to when
or how the remaining net proceeds from the Offering will be used. If the Company
is unable to invest such proceeds in acquisitions or to otherwise use such
proceeds in operating its business, the returns realized from holding such
proceeds may be substantially less than the returns which could be realized if
such proceeds were successfully invested in the business. See 'Use of Proceeds.'
RISKS RELATED TO TAX STATUS OF TECHNICAL CONSULTANTS
Generally, the Company treats its technical consultants as employees for
federal and state tax purposes and pays all requisite Social Security taxes
(FICA), payroll taxes, unemployment taxes, workers compensation insurance
premiums and other employee taxes and similar costs. In certain cases, however,
technical consultants desire to be treated as independent contractors for
federal and state tax purposes with respect to their assignments. In such cases,
the Company reviews the relevant facts and the applicable statutes and
regulations, and if appropriate, the consultant is treated as an independent
contractor for tax purposes. Of the technical consultants on assignment as of
December 31, 1994 and 1995 and June 30, 1996, approximately 12%, 15% and 14%,
respectively, were treated as independent contractors for federal and state tax
purposes. The determination of whether a technical consultant can be treated as
an independent contractor for tax purposes is dependent on the facts and
circumstances of each case and as a result is subject to some uncertainty. The
Internal Revenue Service recently has announced various worker reclassification
compliance projects designed to ensure that personnel classified as independent
contractors are properly classified. The Company believes that it is in material
compliance with all applicable tax regulations concerning the classification of
its technical consultants, and has not, to date, been the subject of any attempt
by any federal or state authority to reclassify any of the consultants it has
treated as independent contractors. There can be no assurance, however, that
federal and state taxing authorities will not challenge the Company's
classification of technical consultants as independent contractors in the
future. If successful, such a challenge could result in the imposition of back
taxes, interest and penalties, the amount of which could be material to the
Company's financial statements.
10
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Sales of the Company's Common Shares in the public market after the
Offering could adversely affect the market price of the Company's Common Shares
and could impair the Company's future ability to raise capital through the sale
of equity securities. Upon completion of the Offering, the Company will have
13,042,737 Common Shares outstanding (13,340,237 shares if the Underwriters'
over-allotment option is exercised in full.) Of these shares, all of the shares
sold in the Offering will be available for resale in the public markets without
restriction, except for any such shares which may be purchased by affiliates of
the Company. Of the remaining shares, 394,820 are subject to a two-year holding
period which commenced on February 29, 1996 and __________ are subject to a
two-year holding period that commenced on September 27, 1996. The Selling
Shareholders, except for Martin E. Judge, Jr., the Company's directors,
executive officers and certain other shareholders have agreed, subject to
certain limitations, not to sell any Common Shares for a period of 180 days
after the closing of the Offering. Mr. Judge has agreed not to sell any of his
5,952,061 shares for a period of one year after the closing of the Offering.
Following the expiration of this 180-day period, the Selling Shareholders,
directors, executive officers and certain other shareholders will hold an
aggregate of 2,809,716 Common Shares which may be resold subject to certain
restrictions under Rule 144. The approximately 30,000 remaining Common Shares
are restricted securities under the Securities Act and may be sold only if they
are registered under the Securities Act or pursuant to an applicable exemption
from the registration requirements of the Securities Act, including Rule 144
thereunder. In addition, the Company intends, as soon as practicable after the
consummation of this Offering, to register approximately 1,500,000 Common Shares
reserved for issuance to its employees, directors, consultants and advisors
under the Company's 1996 Incentive Stock Option and Non-Qualified Stock Option
Plan ('the Plan'). As of September 27, 1996, options to purchase _______ Common
Shares were outstanding under the Plan. See 'Management -- Stock Plans.'
'Description of Capital Shares,' 'Registration Rights' and 'Shares Eligible for
Future Sale.'
ABSENCE OF PUBLIC MARKET; POSSIBLE VOLATILITY OF STOCK PRICE
There has been no prior public market for the Company's Common Shares.
Although the Common Shares have been approved for inclusion in the Nasdaq Stock
Market, subject to notice of issuance, there can be no assurance that a viable
public market for the Common Shares will develop or be sustained after the
Offering or that purchasers of the Common Shares will be able to resell their
Common Shares at prices equal to or greater than the initial public offering
price. The initial public offering price has been determined by negotiations
among the Company, the Selling Shareholders and the representatives of the
Underwriters and may not be indicative of the prices that may prevail in the
public market after the Offering is completed. Numerous factors, including
announcements of fluctuations in the Company's or its competitors' operating
results and market conditions for staffing services industry stocks in general,
could have a significant impact on the future price of the Common Shares. In
addition, the stock market in recent years has experienced significant price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of companies. These broad fluctuations may adversely
affect the market price of the Common Shares. See 'Description of Capital Stock'
and 'Underwriting.'
ABSENCE OF DIVIDENDS
The Company has never paid any cash dividends on the Common Shares and does
not anticipate paying any cash dividends on the Common Shares in the foreseeable
future. In addition, the Company is prohibited under the terms of its revolving
line of credit from paying dividends without the consent of the lender. Future
dividends, if any, will depend, among other things, on the Company's results of
operations, capital requirements and financial condition, and on such other
factors as the Company's Board of Directors may, in its discretion, consider
relevant. See 'Dividend Policy.'
11
<PAGE>
POTENTIAL EFFECT OF ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Articles of Incorporation and By-Laws
may have anti-takeover effects that may delay, deter or prevent a takeover
attempt that shareholders might consider in their best interest. These
provisions include (i) the authority of the Board of Directors to issue up to
10,000,000 preferred shares in one or more series with such rights, obligations
and preferences as the Board of Directors may determine, (ii) authorization for
only the Board of Directors or the President to call special meetings of the
shareholders, and (iii) certain advance notice procedures for shareholder
nomination of candidates for election as directors and for certain shareholder
proposals. See 'Description of Capital Stock.'
The Company's Certificate of Incorporation permits the Board of Directors
to establish the rights, preferences, privileges and restrictions of, and to
issue, up to 10,000,000 Preferred Shares without any further vote or action by
the Company's shareholders. The issuance of Preferred Shares could adversely
affect the holders of Common Shares and could have the effect of delaying,
deferring or preventing a change in control of the Company. The Company has no
present plans to issue any Preferred Shares. See 'Description of Capital
Shares.'
CERTAIN ANTI-TAKEOVER EFFECTS OF THE PENNSYLVANIA BUSINESS CORPORATION LAW
The 'business combination' provisions under the Pennsylvania Business
Corporation Law ('BCL') prohibit the Company from engaging in certain 'business
combinations' with 'interested shareholders' without certain director or
shareholder approval. The 'business combination' provisions potentially could
deter certain types of transactions that might be proposed, whether or not such
transactions were favored by the majority of the shareholders, and could enhance
the ability of the Company's officers and directors to retain their positions.
The BCL expressly permits directors of a corporation to consider the interests
of constituencies other than shareholders in discharging their duties, provides
that they need not, in considering the best interests of the corporation,
consider any particular constituency's interests (including the interests of
shareholders) as the dominant or controlling interest, and provides that
directors do not violate their fiduciary duty by relying on shareholders' rights
plans and other anti-takeover provisions of the BCL. See 'Description of Capital
Stock.'
DILUTION
Assuming an initial public offering price of $10.00 per share of Common
Shares, purchasers of the Common Shares offered hereby will realize an immediate
and substantial dilution of approximately $8.06 in net tangible book value per
share of Common Shares of their investment from the initial public offering
price. See 'Dilution.'
12
<PAGE>
The net proceeds to the Company from its sale of 3,000,000 Common Shares at
an estimated public offering price of $10.00 per share, after deducting
underwriting discounts and commissions and estimated Offering expenses (which
expenses include an investment advisory fee of approximately $300,000 payable to
The Gemstone Group, Inc.), are estimated to be approximately $26.8 million
(approximately $29.6 million if the Underwriters' over-allotment option is
exercised in full).
The Company intends to use a portion of the estimated net proceeds to pay
down its working capital line of credit, which bears interest at the prime rate
plus 1% and is due on May 31, 1998, the balance of which was $6.4 million as of
June 30, 1996, The Company intends to maintain this line of credit and may draw
on the line as needed in the future. The Company intends to use approximately
$1.5 million to pay certain portions of the purchase prices relating to the
Berkeley and Systems Automation acquisitions. The Company anticipates using $1.3
million for the retirement of other short-term and long-term indebtedness,
principally equipment leases.
The remaining net proceeds of approximately $17.6 million will be used for
working capital and general corporate purposes, including establishment of the
corporate level sales force. In addition, the Company may use portions of the
remaining net proceeds for future acquisitions described in "Business -- Sales
and Marketing". As discussed in 'Business -- Business Strategy,' a significant
element of the Company's strategy is to grow through acquisitions of companies
in existing or complementary lines of business, although the Company is not
currently engaged in any acquisition negotiations.
Pending application of the net proceeds as set forth above, the Company
intends to invest any remaining net proceeds temporarily in short-term,
investment grade securities. The Company will not receive any proceeds from the
sale of the Common Shares offered by the Selling Shareholders.
DIVIDEND POLICY
The Company has not paid any cash dividends on its Common Shares. The
Company currently intends to retain future earnings for use in its business and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The payment of future dividends, if any, will depend, among other
things, on the Company's results of operations and financial condition, any
restriction in the Company's loan agreements and on such other factors as the
Company's Board of Directors may, in its discretion, consider relevant. The
Company's ability to pay dividends is dependent in part upon the receipt of
dividends from its direct and indirect subsidiaries. See 'Management's
Discussion and Analysis of Financial Condition and Results of Operations --
Liquidity and Capital Resources.'
13
<PAGE>
DILUTION
The net tangible book value (deficit) per Common Share represents the
amount of the Company's total tangible assets less its total liabilities,
divided by the number of Common Shares outstanding. The net tangible book value
(deficit) of the Company (on a fully diluted basis) at June 30, 1996 was
$375,000, or $0.04 per Common Share (giving effect to the Pre-Offering
Transactions). The sale of Common Shares by the Company pursuant to this
Offering at an assumed initial public offering price of $10.00, would increase
net tangible book value to $1.94 per Common Share, representing an immediate
increase in net tangible book value of $1.90 per Common Shares to existing
shareholders and an immediate dilution in net tangible book value of $8.06 per
Common Shares to purchasers of Common Shares in this Offering. The following
table illustrates this dilution at June 30, 1996:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per Common Share........................ $10.00
Net tangible book value per Common Share before Offering.............. $0.04
Increase per Common Share attributable to sale of Common Shares in $1.90
Offering...........................................................
Pro forma net tangible book value per Common Share after this Offering........ $1.94
---------
Dilution per Common Share to new shareholders1................................ $8.06
---------
</TABLE>
- ------------------
1 Dilution is determined by subtracting pro forma net tangible stock value per
Common Share after completion of this Offering from the price paid by
investors purchasing Common Shares in this Offering.
14
<PAGE>
CAPITALIZATION
The following table sets forth the capitalization of the Company at June
30, 1996 and as adjusted to give effect to the sale of the 3,000,000 Common
Shares being offered by the Company hereby at an assumed offering price of
$10.00 per share, the application of the estimated net proceeds therefrom, and
the Pre-Offering Transactions described in 'Business -- Pre-Offering
Transactions: Corporate Reorganization, Merger and Recent Acquisitions.' This
table should be read in conjunction with the Company's Consolidated Financial
Statements, the Pro Forma Consolidating Financial Statements and the Notes
thereto, and 'Use of Proceeds,' all included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1996
----------------------
PRO FORMA
ACTUAL AS ADJUSTED
--------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt................................................... $ 303 $ 0
Note payable, bank(1)............................................................... 6,358 0
Other long-term debt................................................................ 790 1,016
Convertible debentures(2)........................................................... 500 0
--------- -----------
Total long-term debt................................................................ 7,648 1,016
--------- -----------
Minority interest(3)................................................................ 659 0
--------- -----------
Shareholders' equity:
Preferred shares(4)................................................................. 0 0
Common shares(5).................................................................... 1 130
Additional paid in capital.......................................................... 451 28,580
Retained earnings (deficit)......................................................... (55) (55)
--------- -----------
Total shareholders' equity..................................................... 397 28,655
--------- -----------
Total capitalization........................................................... $ 9,007 $ 29,671
--------- -----------
--------- -----------
</TABLE>
- ------------------
(1) For a description of the Company's note payable, bank, see Note 4 and 5 of
Notes to Consolidated Financial Statements.
(2) Assumes conversion into 526,000 common shares.
(3) Elimination of minority interest due to merger of the Company and Judge
Imaging Systems, Inc.
(4) Preferred Shares at June 30, 1996 were $0.01 par value, 10,000,000 shares
authorized, none issued.
(5) Common Shares at June 30, 1996 were $0.005 par value, 10,000,000 shares
authorized, 160,000 shares issued and outstanding; Common Shares Pro Forma
As Adjusted were $0.01 par value, 50,000,000 shares authorized, 13,043,000
shares issued and outstanding.
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth selected consolidated operating statement
and balance sheet data for the periods indicated. The selected consolidated
operating statement and balance sheet data at and for each of the five fiscal
years presented below are derived from the Company's Consolidated Financial
Statements, of which the years ended December 31, 1995, 1994 and 1993 and the
six month period ended June 30, 1996 have been audited by Rudolph, Palitz LLP,
independent accountants. The selected statement of operations and balance sheet
data for the years ended December 31, 1992 and 1991 and the six month period
ended June 30, 1995 are derived from the unaudited Consolidated Financial
Statements of the Company, which include all adjustments, consisting only of
normal recurring adjustments, which management considers necessary for a fair
presentation of the data for such periods. This data should be read in
conjunction with the Consolidated Financial Statements, related notes, and other
financial information included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- --------------------
1991 1992 1993 1994 1995 1995 1996
--------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net revenues.................. $ 22,438 $ 26,722 $ 35,069 $ 45,253 $ 63,299 $ 29,399 $ 37,327
Cost of sales................. 1,616(1) 20,104 26,070 34,146 47,550 22,292 27,588
Selling and operating......... 18,655 4,950 5,853 6,509 9,798 4,612 6,364
General and administrative.... 1,600 2,171 2,525 3,155 4,187 2,038 2,848
--------- --------- --------- --------- --------- --------- ---------
Total costs and expenses...... 21,871 27,225 34,448 43,810 61,535 28,942 36,800
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations.................. 567 (503) 621 1,443 1,764 457 527
Interest expense.............. 222 238 338 427 670 307 371
Other income (expense)........ 31 (6) 4 7 (27) (10) 0
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income
taxes....................... 376 (747) 287 1,023 1,067 140 156
Income taxes.................. 294 41 228 680 588 315 203
Minority interest (income).... 161 (126) 0 0 (7) 0 (229)
Cumulative effect change...... 0 0 42 0 0 0 0
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)............. $ (79) $ (662) $ 101 $ 343 $ 486 $ (175) $ 182
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Fully diluted net income
(loss) per Common
Share(2)(3):
Income before cumulative
effect adjustment........... $ (0.01) $ (0.08) $ 0.01 $ 0.04 $ 0.05 $ (0.02) $ 0.02
Cumulative effect
adjustment.................. 0.00 0.00 0.00 0.00 0.00 0.00 0.00
--------- --------- --------- --------- --------- --------- ---------
$ (0.01) $ (0.08) $ 0.01 $ 0.04 $ 0.05 $ (0.02) $ 0.02
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Fully-diluted weighted average
shares(2)(3)................ 8,416 8,416 8,500 8,847 9,110 9,110 9,110
--------- --------- --------- --------- --------- --------- ---------
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital (deficiency)...................................... $ 367 $ (615) $ (608) $ 329 $ 5,567
Total assets...................................................... 3,398 4,539 5,687 8,017 11,632
Notes payable, including current portion.......................... 1,299 1,977 2,499 2,749 5,368
Other long-term obligations, including current portion............ 412 1,236 961 2,030 1,433
Shareholders' equity (deficit).................................... 123 (539) (438) (95) 391
<CAPTION>
JUNE 30,
1996
-----------
BALANCE SHEET DATA:
Working capital (deficiency)...................................... $ 6,546
Total assets...................................................... 15,021
Notes payable, including current portion.......................... 6,358
Other long-term obligations, including current portion............ 1,593
Shareholders' equity (deficit).................................... 397
</TABLE>
- ------------------
(1) Does not reflect reclassification between cost of sales and selling and
operating expense principally related to the cost of consultants.
(2) All per share and share amounts reflect a 52.6 for 1.0 stock split which
occurred subsequent to June 30, 1996.
(3) Fully-diluted shares include Common Stock equivalents and 526,000 Common
Shares issuable upon conversion of the Company's 10% Convertible Senior
Subordinated Notes.
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with the
consolidated financial statements of the Company and related notes thereto
appearing elsewhere in this Prospectus.
OVERVIEW
The Company derives its revenues from the provision of contract and
permanent IT and engineering personnel, networking, imaging, document management
and workflow services and IT training. Components of cost of sales differ
depending on the type of service or product supplied, and may include salaries,
as well as hardware and software costs. Selling and operating expenses consist
primarily of salaries and fringe benefits for selling representatives, and also
include marketing expenditures and bad debt charges. General and administrative
expenses consist of management and administrative salaries and related fringe
benefits, as well as other overhead, such as rent and depreciation.
Revenue in the Company's Contract Placement business is derived from
professional service activities, primarily the placement of skilled IT and
engineering personnel whose work is billed at an hourly rate. Engagements of the
Company's technical consultants typically last from six to twelve months and the
Company bills clients and recognizes revenue on a weekly basis. Revenues are
directly related to the total number of hours billed to clients and the
associated hourly billing rates. Hourly billing rates are established for each
technical consultant based on the technical consultant's skills, experience and
the type of work performed. Revenues in the Company's Contract Placement
business have increased from $27.5 million in 1993 to $50.8 million in 1995, or
approximately 35.8% per year on average. Revenues for the six months ended June
30, 1996 were $28.6 million, compared to $24.2 million for the prior year
period, an increase of 18.2%. Revenue growth has been derived primarily from
increases in the number of technical consultants placed with existing and new
clients and increases in average billing rates. The Company believes that the
recent increase in the average billing rates for its technical consultants has
resulted from improved economic conditions and increased demand for skilled and
experienced technical consultants. Total hours billed in 1995 were 1,303,412,
with a weighted average billing rate of $38.99. For the six months ended June
30, 1996, total hours billed were 732,358, with a weighted average billing rate
of $39.08, compared to total hours billed of 660,140 with a weighted average
billing rate of $36.66 for the prior year period. Cost of sales in the Contract
Placement business consists primarily of the compensation expenses related to
the consultants, such as salaries, fringe benefits and payroll taxes.
Revenue in the Company's Permanent Placement business is generated from
one time fees received upon successful placements of engineering or IT
professionals with clients. The standard fee arrangement is 1% of each thousand
dollars of salary, up to a maximum of 33% of the professional's first year
salary. Revenue is recognized upon commencement of the employment, subject to
reversal if employment terminates during a 30 to 90 day guarantee
period. The Permanent Placement business placed 396 professionals with an
average placement fee of $10,800 in 1995, and 254 professionals with an average
placement fee of $10,800 for the six months ended June 30, 1996. No cost of
sales is recorded in the Permanent Placement business.
Revenue in the Company's Imaging and Network Services business is derived
from the provision of networking, imaging and document management services and
related sales of hardware and software. Revenues are recorded in the period in
which services are rendered and merchandise is shipped, except where
installation is significant to the completion of the contract, in which case
revenue is not recognized until the installation is completed and accepted by
the customer. Cost of sales consists of computer hardware, software and related
licensing fees, salaries and fringe benefits for design, installation and
maintenance personnel, and overhead expenditures allocated to imaging and
networking activities.
The Company's Imaging and Network Services business was originally formed
to provide networking services to educational markets, primarily network design,
installation and maintenance utilizing the Company's private-label PC products,
and later expanded its networking operations to
17
<PAGE>
include additional platforms and peripherals. Due to relatively low operating
margins on hardware and software sales, which accounted for a substantial
portion of networking revenues, this business generated operating losses in its
early years. Beginning in 1988, the Company anticipated the emergence of a
market for networking systems incorporating imaging and document management
technology. It entered this market first as an exclusive reseller of Optika
software, and then decided to expand its product line to include both high
production, high end systems such as Filenet and low end workflow imaging
systems such as Watermark, Keyfile and Lotus Notes. More recently, the Company
has devoted substantial resources to expand the infrastructure of its imaging
and document management business to support anticipated sales growth, including
the hiring of 34 engineering, sales and administrative personnel since the
beginning of 1994.
Revenue attributable to imaging and document management systems and
services has grown from $2.3 million in 1995 to $2.7 million in the six months
ended June 30, 1996, representing approximately 28% and 44% of the Imaging and
Network Services business total revenue in those periods, respectively. However,
the Company's imaging activities have generated operating losses to date due to
slower than expected market expansion combined with the substantial investment
in infrastructure development. Specifically, imaging and document management
systems and services generated operating losses of $(477,000) and $(213,000) in
1995 and for the six months ended June 30, 1996, respectively, representing 91%
and 56% of the total operating losses experienced by the Imaging and Network
Services business as a whole, respectively. The Company currently is focusing on
achieving profitability in its Imaging and Network Services business and
expanding it through internal growth, new service offerings such as the
MENTOR(Trademark) Consulting Program and a help desk practice, and through
acquisitions.
The following table presents the net revenue (net of intercompany
eliminations) and the income (loss) from operations attributable to each of the
Company's businesses, in dollars and as a percentage of consolidated net
revenues, for the periods indicated. Except for consolidated net revenues and
consolidated income (loss) from operations for 1993, 1994, 1995 and the six
months ended June 30, 1996, all of such financial information is unaudited:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------- -------------------------------
1993 1994 1995 1995 1996
-------------------- -------------------- -------------------- -------------------- ---------
(DOLLARS IN THOUSANDS) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues:
Permanent Placement....... $ 3,131 8.9% $ 3,294 7.3% $ 4,275 6.7% $ 2,065 7.0% $ 2,614
Contract Placement........ 27,537 78.5 38,186 84.4 50,804 80.3 24,196 82.3 28,603
Imaging and Network
Services................ 4,401 12.6 3,773 8.3 8,220 13.0 3,138 10.7 6,110
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Consolidated net
revenues................ $ 35,069 100.0% $ 45,253 100.0% $ 63,299 100.0% $ 29,399 100.0% $ 37,327
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from
operations:
Permanent Placement....... $ 722 2.1% $ 258 0.6% $ 287 0.4% $ 123 0.4% $ 200
Contract Placement........ 732 2.1 2,392 5.2 2,939 4.7 1,216 4.1 1,399
Imaging and Network
Services................ (137) (.4) (466) (1.0) (526) (.8) (413) (1.4) (380)
Corporate overhead
expense................. (696) (2.0) (741) (1.6) (936) (1.5) (469) (1.6) (692)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Consolidated income (loss)
from operations......... $ 621 1.8% $ 1,443 3.2% $ 1,764 2.8% $ 457 1.5% $ 527
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1996
-----------
Net revenues:
Permanent Placement....... 7.0%
Contract Placement........ 76.6
Imaging and Network
Services................ 16.4
---------
Consolidated net
revenues................ 100.0%
---------
---------
Income (loss) from
operations:
Permanent Placement....... 0.5%
Contract Placement........ 3.7
Imaging and Network
Services................ (1.0)
Corporate overhead
expense................. (1.8)
---------
Consolidated income (loss)
from operations......... 1.4%
---------
---------
</TABLE>
Included in corporate overhead expense are salaries, benefits and related
costs for the Company's founder and chief executive officer, Martin E. Judge,
Jr., and for corporate level financial, human resources, management information
systems and marketing personnel. The number of personnel included in corporate
overhead has increased from five at December 31, 1993, to 16 at June 30, 1996.
Founder's compensation of $357,000, $390,000, $495,000, and $306,000 was charged
to the Permanent Placement business in 1993, the Imaging and Network Services
business in 1994, and the Contract Placement business in 1995 and the six months
ended June 30, 1996, respectively. Future
18
<PAGE>
corporate overhead expense will be allocated according to the number of
full-time employees in each of the Company's businesses.
Early in 1995 the Company began to implement a strategy to accelerate its
growth through the addition of new services, geographic expansion and strategic
acquisitions. As part of this strategy, the Company added sales, marketing,
engineering and operational personnel in its existing four regional offices and
in its National Division in Foxborough, Massachusetts, and opened a fifth branch
office in Edison, New Jersey. In addition, in September 1996, the Company
completed the acquisition of The Berkeley Associates Corporation and Systems
Automation, Inc.
Berkeley, now the Company's IT Training business, provides training on a
variety of computer network and software applications through offices located in
Bala Cynwyd, Pennsylvania and Alexandria, Virginia. Besides expanding the
Company's range of technical service offerings, the IT Training business will
assist the Company in identifying emerging technologies and integrating such
technologies into its organization through the training of its technical
consultants and in-house personnel. The Company's IT Training business generated
revenues of $2.3 million and $1.5 million for 1995 and the first six months of
1996, respectively.
Systems Automation, located in Wakefield, Massachusetts, provides imaging
and document management systems and services, and establishes a presence for the
Imaging and Network Services business in the Boston metropolitan area. Systems
Automation generated revenues of $1.2 million and $467,000 for 1995 and the
first six months of 1996, respectively.
RESULTS OF OPERATIONS
The following table sets forth certain statement of operations data as a
percentage of consolidated net revenues for each of the periods indicated:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
------------------------------- ------------------------
1993 1994 1995 1995 1996
--------- --------- --------- ------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Net revenues................................................. 100.0% 100.0% 100.0% 100.0% 100.0%
Cost of sales................................................ 74.3 75.4 75.1 75.8 73.9
Selling and operating........................................ 16.7 14.4 15.5 15.7 17.0
General and administrative................................... 7.2 7.0 6.6 6.9 7.7
--------- --------- --------- ------ ---------
Total costs and expenses..................................... 98.2 96.8 97.2 98.4 98.6
Income from operations....................................... 1.8 3.2 2.8 1.6 1.4
Interest and other, net...................................... 1.0 0.9 1.1 1.1 1.0
--------- --------- --------- ------ ---------
Income before income taxes................................... 0.8% 2.3% 1.7% 0.5% 0.4%
--------- --------- --------- ------ ---------
--------- --------- --------- ------ ---------
</TABLE>
SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO SIX MONTHS ENDED JUNE 30, 1995
Net Revenues. Consolidated net revenues increased by 27.0%, or $7.9
million, for the six months ended June 30, 1996 compared to the prior year
period. Revenue for the Contract Placement business increased by 18.2%, or $4.4
million, for the six month period ended June 30, 1996 compared to the prior year
period. Contributing to this increase was revenue of $1.8 million attributable
to the Edison, New Jersey office, which opened in April 1995, and revenue of
$1.1 million attributable to the Company's National Division in Foxborough,
Massachusetts. Revenue for the Permanent Placement business increased by 26.6%,
or $549,000, for the six months ended June 30, 1996 compared to the prior year
period. Contributing to this increase was revenue of $270,000 in the Tampa,
Florida office, attributable to the hiring of additional sales and marketing
personnel, and revenue of $174,000, attributable to the Edison, New Jersey
office. Revenue for the Imaging and Network Services business increased by
94.7%, or $3.0 million, for the six months ended June 30, 1996 compared to the
prior year period. Of this increase, $1.5 million was attributable to networking
systems and services and $1.5 million was attributable to imaging and document
management systems and services.
Cost of Sales. Consolidated cost of sales increased by 23.8%, or $5.3
million, for the six months ended June 30, 1996 compared to the prior year
period. Cost of sales as a percentage of consolidated net revenues decreased to
73.9% from 75.8%. With respect to the Company's Imaging and Network Services
business, cost of sales as a percentage of revenue decreased to 75.2% from
78.2%, primarily as a result of the realization of economies of scale and an
increased focus on providing services that yield higher margins than traditional
hardware and software sales. With respect to the Company's Contract Placement
business, cost of sales as a percentage of revenue remained constant at 80.4%.
The decline in cost of sales as a percentage of consolidated net revenues was
also attributable to an increase in revenue for the Permanent Placement
business, which has no cost of sales.
19
<PAGE>
Selling and Operating. Consolidated selling and operating expenses
increased by 38.0%, or $1.8 million, for the six months ended June 30, 1996
compared to the prior year period. Selling and operating expenses as a
percentage of consolidated net revenues for the six months ended June 30, 1996
increased to 17.0% from 15.7% in the prior year period, due primarily to a 38%
increase in payroll costs associated with the Company's hiring of sales and
marketing personnel and a $215,000 bad debt charge resulting principally from
the bankruptcy of one of the Company's Contract Placement customers.
General and Administrative. Consolidated general and administrative
expenses increased 39.7%, or $810,000, for the period ending June 30, 1996
compared to the prior year period. General and administrative expenses as a
percentage of consolidated net revenues increased to 7.6% for the period ending
June 30, 1996 compared to 6.9% for the prior year period, primarily as a result
of expansion of the Company's corporate staff, specifically the hiring of
additional management information systems personnel, human resources personnel
and a financial analyst. In addition, rent expense increased by $156,000 as a
result of the opening of the Company's Edison, New Jersey office and the
expansion of the Bala Cynwyd, Pennsylvania office
Interest. Interest expense increased by $64,000, or 20.8%, for the six
months ended June 30, 1996 compared to the prior year period. This increase was
due to increased borrowing under the Company's line of credit.
YEAR ENDED DECEMBER 31, 1995 COMPARED TO YEAR ENDED DECEMBER 31, 1994
Net Revenues. Consolidated net revenues increased by 39.9%, or $18.0
million, in 1995 compared to 1994. Revenue for the Contract Placement business
increased by 33.0%, or $12.6 million, in 1995 compared to 1994. Contributing to
this increase was revenue of $1.6 million attributable to the Edison, New Jersey
office, which opened in April, 1995. Revenue for the Permanent Placement
business increased by 29.8%, or $981,000, in 1995 compared to 1994. Contributing
to this increase was revenue of $81,000 attributable to the Edison, New Jersey
office. Revenue for the Imaging and Network Services business increased by
117.8%, or $4.4 million, in 1995 compared to 1994. Contributing to this increase
was revenue of approximately $2.0 million attributable to the addition of a
major networking systems contract with the State of New Jersey.
Cost of Sales. Consolidated cost of sales increased by 39.3%, or $13.4
million, in 1995 compared to 1994. Cost of sales as a percentage of consolidated
net revenues decreased slightly to 75.1% in 1995 from 75.4% in 1994. This
decrease is attributable to an increase in Permanent Placement revenue which has
no cost of sales, and a decrease in cost of sales as a percentage of revenue for
the Contract Placement business, partially offset by an increase in cost of
sales as a percentage of net revenue for the Imaging and Network Services
business.
Selling and Operating. Consolidated selling and operating expenses
increased by 50.5%, or $3.3 million, in 1995 compared to 1994, and increased to
15.5% of consolidated net revenues in 1995 compared to 14.4% in 1994. This
increase primarily resulted from an increase in salaries and related fringe
benefits incurred as a result of an increase in sales personnel in each of the
Company's businesses. In addition, the Company realized a bad debt charge of
$300,000 in 1995 compared to $72,000 in 1994, principally attributable to the
bankruptcy of a Contract Placement customer.
20
<PAGE>
General and Administrative. Consolidated general and administrative
expenses increased 32.7%, or $1.0 million, in 1995 compared to 1994. This
increase was primarily attributable to an increase in administrative staffing
levels in the Edison, New Jersey, Bala Cynwyd, Pennsylvania and Foxborough,
Massachusetts offices and increased rent expense of $168,000 associated with the
new Edison office and the expansion of the Bala Cynwyd office. The increase in
general and administrative expenses was also attributable to tax penalties of
$237,000 pursuant to a settlement with the IRS. General and administrative
expenses as a percentage of consolidated net revenues decreased marginally from
7.0% in 1994 to 6.6% in 1995.
Interest. Interest expense increased by 56.9%, or $243,000, in 1995
compared to 1994. This increase was attributable to the increased borrowing
under the Company's line of credit.
YEAR ENDED DECEMBER 31, 1994 COMPARED TO YEAR ENDED DECEMBER 31, 1993
Net Revenues. Consolidated net revenues increased by 29.0%, or $10.2
million, in 1994 compared to 1993. Revenue from the Contract Placement business
increased by 38.7%, or $10.6 million, due to increased marketing efforts in all
of the Company's offices, and a $1.0 million increase in revenue in the
Company's National Division. Revenue for the Permanent Placement business
increased by 5.2%, or $163,000, from 1993 to 1994. Revenue for the Imaging and
Network Services business decreased by 14.3%, or $628,000, in 1993, due
principally to a vacancy in the office of president for all of 1994 and the loss
of a networking systems contract with the State of New Jersey that had generated
$2.0 million in revenue in 1993.
Cost of Sales. Consolidated cost of sales increased by 31.0%, or $8.1
million, in 1994 compared to 1993. Cost of sales as a percentage of consolidated
net revenues increased to 75.5% in 1994 compared to 74.3% in 1993. This increase
is primarily attributable to the cost of sales in the Imaging and Network
Services business, which increased as a percentage of its revenue from 74.8% in
1993 to 80.5% in 1994, due in large part to the loss of the $2.0 million
contract with the State of New Jersey. Cost of sales for the Contract Placement
business decreased slightly as a percentage of its revenue.
Selling and Operating. Consolidated selling and operating expenses
increased by 11.2%, or $656,000, in 1994 compared to 1993. Selling and operating
expenses decreased as a percentage of consolidated net revenues to 14.4% in 1994
compared to 16.7% in 1993, primarily as a result of the increased volume of
business and a decrease in medical and workmen's compensation insurance expense
in all of the Company's businesses.
General and Administrative. Consolidated general and administrative
expenses increased 25.0%, or $630,000, in 1994 compared to 1993, primarily due
to an increase in salaries and related fringe benefits associated with the
hiring of management information systems and accounting personnel in the
Contract Placement business. General and administrative expenses also increased
as a result of higher rent expense for the Company's Bala Cynwyd office and an
increase in accounting fees. General and administrative expenses as a percentage
of consolidated net revenues remained constant at approximately 7.0% in 1994 and
1993.
Interest. Interest expense increased by 26.3%, or $89,000, in 1994,
compared to 1993. This increase was attributable to increased borrowing
under the Company's line of credit.
INCOME TAXES
The Company adopted the statement of Financial Accounting Standards No.
109, 'Accounting for Income Taxes,' as of January 1, 1993 by determining the
cumulative effect on prior years of the change in method of accounting for
income taxes. The effective tax rates for 1995, 1994 and 1993 are higher than
the applicable statutory tax rate of 34%, due to certain non-deductible
expenses related to the Company's repurchase of equity interests held in the
Company by a former employee, a Federal and state provision at the maximum rates
for the Contract Placement business and net operating losses for the Imaging and
Network Services business, which are consolidated for financial but not for tax
21
<PAGE>
reporting purposes. The effective tax rate was 79%, 66%, 55%, 225% and 130% for
fiscal year 1993, 1994, 1995, the six months ended June 30, 1995 and the six
months ended June 30, 1996, respectively.
SEASONALITY AND QUARTERLY RESULTS OF OPERATIONS
The following table presents certain unaudited quarterly statements of
operations data for each of the Company's last six fiscal quarters. In the
opinion of the Company's management, this quarterly information has been
prepared on the same basis as the audited financial statements appearing
elsewhere in this Prospectus and includes all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly the unaudited
quarterly results set forth herein. The Company's quarterly results have in the
past been subject to fluctuations, and thus, the operating results for any
quarter are not necessarily indicative of results for any future period.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------
MARCH 31, JUNE 30, SEPT. 30, DEC. 31, MARCH 31, JUNE 30,
1995 1995 1995 1995 1996 1996
----------- --------- ----------- --------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Net revenues..................................... $ 14,131 $ 15,268 $ 17,265 $ 16,635 $ 16,435 $ 20,892
Cost of sales.................................... 10,859 11,432 12,625 12,633 12,528 15,060
Selling and operating............................ 2,124 2,489 2,689 2,497 2,654 3,710
General and administrative....................... 976 1,062 1,191 959 1,398 1,450
----------- --------- ----------- --------- ----------- ---------
Total costs and expenses......................... 13,959 14,983 16,505 16,089 16,580 20,220
Income from operations........................... 172 285 760 546 (145) 672
Interest Expense and other, net.................. 131 186 178 202 181 191
----------- --------- ----------- --------- ----------- ---------
Income (loss) before income taxes................ $ 41 $ 99 $ 582 $ 344 $ (326) $ 481
----------- --------- ----------- --------- ----------- ---------
----------- --------- ----------- --------- ----------- ---------
</TABLE>
Because the Company only derives revenue in its Contract Placement business
when its consultants are actually working, its revenues and operating results
are adversely affected when its clients' facilities close due to holidays or
inclement weather. The Company also incurs additional expenses in its first
fiscal quarter, in part as a result of higher employment and related payroll
taxes. During the quarter ended December 31, 1995, the number of holidays and
vacation days marginally affected revenues in the Contract Placement business.
In the quarter ended March 31, 1996, severe weather negatively affected revenues
in all of the Company's operating businesses, particularly the Contract
Placement business.
LIQUIDITY AND CAPITAL RESOURCES
The Company has funded its working capital and capital expenditure needs
primarily through borrowings under its credit facility and cash generated from
operations. The Company typically maintains minimum cash balances, and at June
30, 1996 had approximately $28,000 in cash.
The Company generated cash from operations of approximately ($87,000),
$21,000, ($1.9) million and ($1.1) million in 1993, 1994, 1995 and the six
months ended June 30, 1996, respectively. The Company's primary uses of cash
have been to fund increases in accounts receivables to purchase fixed assets
and to repay long-term debt. The Company's net accounts receivable have
increased from $4.3 million at December 31, 1993 to $11.4 million at June 30,
1996, principally due to the rapid growth in revenue in its Contract Placement
business. Purchases of fixed assets in 1993, 1994, 1995 and the six months ended
June 30, 1996 were $91,000, $480,000, $637,000 and $657,000, respectively.
Cash provided from financing activities, principally bank borrowings, was
approximately $2.2 million, $358,000, $203,000 and $805,000 in 1993, 1994 and
1995 and the six months ended June 30, 1996, respectively. In addition, the
Company received cash proceeds of $888,000 from a private placement of Series A
Preferred shares by its Imaging and Network Services business in February 1996.
22
<PAGE>
The Company's bank borrowings consist of a $10.0 million revolving advance
facility with PNC Bank, N.A. (sucessor to Midlantic Bank, N.A.) ('the Line of
Credit') and a $1.0 million term loan. The Line of Credit expires on May 31,
1998 and carries an interest rate of prime plus 1.0%, which rate will revert to
prime upon the successful completion of this Offering. This facility allows the
Company to borrow the lesser of 80% of eligible receivables or $10.0 million.
Based on eligible receivables of $9.1 million at August 31, 1996, the maximum
amount that the Company can borrow under the Line of Credit is $7.8 million. The
Company intends to use a portion of the estimated net proceeds to pay down the
Line of Credit, the balance of which was $6.4 million as of June 30, 1996,
although the Company does intend to draw on the line as needed in the future.
The Line of Credit is secured by substantially all of the Company's assets and
contains customary restrictive covenants, including limitations on amounts of
loans the Company may extend to officers and employees, the incurrence of
additional debt and the payment of dividends on the Company s common or
preferred shares. The term loan, which carries an interest rate of prime plus 1
1/2%, is payable in 60 monthly installments, with the balance due upon
consummation of this Offering. At June 30, 1996, there were no amounts
outstanding under the term loan. In addition, at June 30, 1996, the Company had
approximately $1.0 million of additional short-term and long-term debt
outstanding, principally equipment leases, which it intends to repay with a
portion of the proceeds from this Offering.
The Company believes that the proceeds from this Offering, together with
cash generated from operations and borrowings under the Line of Credit, or other
credit facilities which may be available to the Company in the future, will be
sufficient to meet the Company's capital needs for at least the next twelve
months. The Company anticipates that its primary uses of capital in future
periods will be for acquisitions, funding of increases in accounts receivables
and the development of its corporate level sales force. See 'Use of Proceeds.'
INFLATION
The Company does not believe that the rates of inflation prevailing in the
United States in recent years have had a significant effect on its operations.
23
<PAGE>
BUSINESS
INTRODUCTION
The Judge Group services the IT and engineering needs of its clients
through the following four complementary operating units:
<TABLE>
<S> <C> <C>
o Contract Placement -- Provides IT and engineering personnel ('technical
consultants') on a contract basis;
o Permanent Placement -- Provides IT and engineering personnel on a permanent
basis;
o Imaging and Network Services -- Automates and increases the efficiency of business
processes through computer networking, imaging,
document management, workflow and related consulting
services; and
o IT Training -- Provides standard and customized IT training on
established and emerging software applications.
</TABLE>
The Company's Contract Placement business provides technical consultants
skilled in a variety of fields, such as applications programming and
development, client/server technology, legacy systems conversion, software
architecture and design, data communications, systems engineering,
Internet/Web-Site design, project consulting and Help Desk management. The
Company provides technical consultants in the MidAtlantic and New England
regions of the United States through three branch offices, and on a nationwide
basis through its National Division. The Company maintains a database of over
100,000 technical consultants, and in 1995 provided over 1,200 technical
consultants to more than 400 clients.
The Company's Permanent Placement business provides medium to high-level IT
and engineering professionals on a permanent basis to clients nationwide. The
Company maintains a database of over 70,000 IT and engineering professionals,
and in 1995 placed 460 candidates with more than 240 clients.
The Company's Imaging and Network Services business offers advanced
technical solutions to increase the efficiency of business processes, such as
network and document management systems design, integration, implementation,
maintenance and training, business process redesign through its
MENTOR(Trademark) Consulting Program, project management, and advanced
applications development. The Company is a value-added reseller and service
facility for PC and network hardware, software and related peripherals
manufactured by Compaq, ACER, IBM, Apple, Okidata, Tricord, Hewlett Packard and
others. The Company has installed more than 120 imaging systems, is an
authorized value-added reseller of Optika, Filenet, Saros, Watermark, Keyfile,
OTP and Lotus Notes imaging software, and integrates its imaging solutions on a
variety of operating systems, including Banyan, OS/2 and Windows NT.
The Company's IT Training business, acquired in September 1996, provides
training on a range of software and network applications to corporate,
governmental and individual clients. The IT Training business currently offers
three licensed diploma courses, six certificate courses, and over 180
open-enrollment courses, either in its own computer labs or at client locations.
Besides expanding the Company's range of technical service offerings, the IT
Training business will assist the Company in identifying emerging technologies
and integrating such technologies into its organization through the training of
its technical consultants and in-house personnel.
The Company serves its clients through offices located in Bala Cynwyd,
Pennsylvania; Foxborough and Wakefield, Massachusetts; Edison and Moorestown,
New Jersey; Hartford, Connecticut; Tampa, Florida; and Alexandria, Virginia. The
Company's client base includes various
24
<PAGE>
Fortune 500 companies and governmental agencies, including Merck, Bell Atlantic
NYNEX Mobile, Texas Instruments, Compaq Computer Corporation, Intel Corporation
and the City of Philadelphia. The Company believes that its four complementary
businesses afford it a competitive advantage over IT service providers that have
fewer service offerings, and position it to benefit from the anticipated growth
in both the technical staffing industry and the imaging and document management
industry. The Company has recently adopted an integrated marketing and service
approach aimed at both new and existing customers which seeks to take advantage
of its ability to offer a comprehensive, cost-effective and convenient means to
meet a wide variety of technical requirements.
INDUSTRY OVERVIEW
The Company operates in two interrelated and growing segments within the IT
professional services industry: the Technical Personnel Placement and Training
segment and the Imaging, Document Management and Network Services segment. Both
segments are highly fragmented and characterized by a large number of local and
regional service providers.
Technical Personnel Placement and Training. To address the demands created
by an increasing shortage of technical personnel and expertise in the workplace,
organizations need to (i) permanently hire qualified personnel, (ii) temporarily
engage qualified personnel, or (iii) train their existing personnel. In order to
more effectively identify and understand technical professional skills and gain
access to a broader range of professionals, many organizations are turning to
permanent placement providers. According to Staffing Industry Report, revenues
from permanent placement services are estimated to have grown from $1.2 billion
in 1993 to $1.7 billion in 1995, and are expected to grow to $1.8 billion in
1996, representing a 14.5% compound annual growth rate.
Organizations desiring variable cost solutions to their technical staffing
needs are increasingly using contract service providers to supplement or
outsource in-house technical personnel requirements. By relying on technical
consultants, organizations can reduce the costs associated with recruiting,
training and relocating employees as technical needs change. According to
Staffing Industry Report, revenues from technical/computer temporary staffing
are estimated to have grown from $5.7 billion in 1993 to $9.2 billion in 1995,
and are expected to grow to $11.4 billion in 1996, representing a 26.0% compound
annual growth rate. Furthermore, since technical consultants are often able to
maintain compensation levels comparable to or higher than those of similarly
skilled full-time employees, the number of individuals with technical skills
that prefer to work independently for one or more contract service providers has
increased in recent years.
In many industries, organizations are training increasing proportions of
their workforces on certain relevant applications in order to achieve maximum
productivity with their IT systems. In addition, many individuals, including
those already employed as technical consultants, seek training to acquire or
improve technical skills in order to advance professionally. The Updata Group,
Inc. estimates that revenues from IT training services will grow from $2.9
billion in 1995 to $5.6 billion by the year 2000, representing a 14% compound
annual growth rate.
Imaging, Document Management and Network Services. During the early to
mid-1980's, many organizations began to migrate from mainframe-based computer
operations to more cost-effective platforms based on PC client/server networks
utilizing multi-vendor and multi-protocol technologies. While IT networks
provide many competitive benefits, including increased computing power, ease of
use and flexibility, they also have placed increased pressures on clients'
in-house IT personnel, as well as on software and hardware vendors, to support
and manage the networks in an environment of rapidly changing technology. As a
result, organizations must increasingly rely on independent service providers
with the technical expertise to design and configure complex IT networks,
integrate and support a variety of protocols, applications and equipment, and
manage and upgrade the networks on an ongoing basis.
One type of IT network system that has grown in prevalence in recent years
is the imaging and document management system. Historically, information has
been stored, manipulated and retrieved
25
<PAGE>
through the use of paper based filing systems, microfilm and microfiche. Each of
these methods suffer one or more of the disadvantages of being relatively
costly, slow in providing information exchange, subject to human error and not
simultaneously accessible to multiple users. The document management industry
has evolved as a result of the need to store, manipulate and retrieve large
quantities of information in an efficient and cost-effective manner.
An imaging system uses software and high speed input scanners to convert
paper documents into digitized images and store them on optical or magnetic
disks. Documents that have been converted to a digital format, as well as other
computerized text and data, can be indexed, stored, retrieved and routed from
one worker or department to another by using a document management system.
Workflow, a feature of a document management system, automates routine work
processes by automatically, rather than manually, routing digital information
(such as invoices or insurance claims) from one workstation to another. For
paper intensive industries, document management systems offer several advantages
over paper or microfilm, including faster, easier and more reliable digital file
access by multiple users in various locations, and a reduction in the overall
cost of document storage, including related time and labor.
The increasing implementation of client/server networks, the decreasing
cost of such systems and the desire of businesses to increase productivity are
sources of growth for the document management and network services markets. In
addition, paper intensive industries, such as health care, insurance, financial
services and retailing, are seeking cost-effective document management solutions
to take advantage of the full capabilities of their existing IT systems.
According to a study prepared for AIIM, electronic imaging revenues, including
hardware, software, services and support, grew approximately 18.2% in 1995, from
$2.2 billion in 1994 to $2.6 billion in 1995. The Company believes that document
management service providers, such as the Company, will benefit from the
anticipated growth in the market to a greater degree than software or hardware
vendors, due to the declining prices of hardware and software and the increasing
number of installations, which are expected to result in the need for new
applications and maintenance.
BUSINESS STRATEGY
The Company's objective is to become a leading nationwide provider of IT
and engineering professional services. Key elements of the Company's business
strategy include:
Offering a Single Source of Technical Solutions. The Company provides its
clients with a wide range of technical staffing, consulting, imaging, document
management, workflow and training services. By integrating multiple IT and
engineering services, the Company is able to provide clients with a
comprehensive, cost-effective and convenient means to meet their technical
requirements, reducing the time and expense associated with selecting multiple,
qualified vendors. The Company intends to continue to develop complementary new
services, such as the recently introduced MENTOR(Trademark) Consulting Program,
a methodology for evaluating new technology and organizational redesign, and its
Help Desk and Asset Management services, in order to enhance its capabilities as
a single-source provider of technical solutions.
Aggressively Marketing a Broad Range of Services. The Company has recently
established several incentive sales programs to increase business from existing
clients by encouraging the cross-selling of the services of its four operating
units. In addition, the Company has implemented a new direct marketing program
that emphasizes its competitive advantage over IT service providers that offer
only one or two of the Company's services. Furthermore, the Company plans to
establish a corporate-level sales force to identify opportunities where it can
provide integrated solutions to new clients and then market such solutions in
conjunction with the sales professionals of the relevant operating businesses.
Developing a National Presence. The Company believes that many
organizations with multiple geographic locations prefer to utilize technical
service providers that can offer high quality services on a nationwide basis.
The Company has provided engineering personnel on a contract basis nationwide
through its National Division in Foxborough, Massachusetts since 1991 and has
recently expanded its
26
<PAGE>
national efforts to include IT personnel. In addition, the Company has begun
targeting longer-term national projects as well as those projects utilizing more
highly skilled personnel. The Company believes that it has several national
accounts with which it has a large enough base of business to warrant
establishing a local Contract Placement office, and intends to leverage select
national accounts to expand into new geographic areas.
Expanding Imaging and Network Services Business. The Company began
developing its imaging, document management and workflow service capabilities
and infrastructure in 1988. The Company's Imaging and Network Services business
has installed more than 120 imaging and document management systems, and
currently has 85 people committed full-time to imaging projects, including
personnel specializing in high-volume backfile conversion, an Advanced
Development Group, and the MENTOR Consulting Group. The Company believes that
many organizations are evaluating the implementation or expansion of imaging
technologies, and will continue to invest resources to develop this business in
order to benefit from the projected growth in the imaging and document
management market. In addition, the Company will seek to establish initial
client relationships with many organizations through its Imaging and Network
Services business, enabling it to then cross-sell the capabilities of its other
three operating units.
Capitalizing on IT Training Resources. The Company intends to leverage its
recently acquired IT Training unit to assist it in identifying emerging
technologies and integrating such technologies into its organization in order to
expand its service offerings and maintain its competitive position. The Company
intends to employ its instructors to train its technical consultants in
leading-edge technologies, and believes this will enhance its ability to
attract, retain and increase the marketability and job satisfaction of such
consultants. By training its in-house personnel, the Company will enhance its
ability to stay current on new technologies and to position itself as a provider
of leading-edge technical solutions.
Pursuing Strategic Acquisitions. The IT professional services industry is
highly fragmented and contains a number of local and regional technical service
providers that market one or more of the Company's four service offerings and
have established customer bases and access to qualified technical personnel. In
order to facilitate its expansion into new geographic markets and strengthen its
position in existing markets, the Company intends to acquire certain of these
providers through which it can then market its full range of complementary
service offerings and expand its databases of technical consultants and
permanent placement professionals. The Company will seek to make such
acquisitions in major metropolitan areas that have a significant concentration
of companies with a need for IT services and in which the Company believes it
can secure a sufficient market share to warrant opening a new office.
SERVICES
CONTRACT PLACEMENT
The Company provides IT and engineering technical consultants on a contract
basis regionally through its offices in Bala Cynwyd, Pennsylvania; Foxborough,
Massachusetts; and Edison, New Jersey, and nationally through its National
Division in Foxborough. The Company maintains a database of over 100,000
technical consultants, and in 1995 placed over 1,200 consultants with more than
400 clients. Typical engagements range in duration from six to twelve months,
though the Company's technical consultants have been performing services for
several of its clients for a period of more than 5 years. The Company's
technical consultants often work jointly with a client's in-house IT personnel,
and are generally placed with clients on an hourly basis at billing rates
ranging from $10.00 to $150.00 and averaging $39.00. The Company's Contract
Placement business, founded in 1986, generated revenue of $50.8 million in
fiscal 1995 and $28.6 million for the six months ending June 30, 1996, which
represented 80.3% and 76.6% of the Company's consolidated net revenues in those
periods, respectively.
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<PAGE>
The majority of the Company's Contract Placement business is derived from
providing technical consultants skilled in applications programming and
development, client/server technology, legacy systems conversion, software
architecture and design, data communications, systems engineering and
Internet/Web-Site design. In addition to staff augmentation, the Company has
recently begun to provide project consulting services, which can include project
management, workflow analysis, database design, custom applications and systems
integration. In a project management engagement, which is usually priced on a
fixed fee basis, the Company will typically oversee an entire IT project from
inception to completion, utilizing technical consultants with specialty skills
in the relevant technologies.
The following chart illustrates some of the capabilities of the Company's
technical consultants.
INFORMATION SYSTEMS
<TABLE>
<CAPTION>
POSITION/TITLE SKILLS
- -------------- ------
<S> <C>
Client/Server Developer Visual Basic; GUI Access; Powerbuilder
Database Developer Foxpro; Paradox Dbase
Database Manager DB2 DBA; Oracle DBA; Maintenance of Database
Software Engineer Unix; C++; Realtime; Embedded Systems; QA; OOP; OOD; Visual C++; MFC
Internet/Web-Site Designer HTML; Java; Shell Script; Shockwave; CGI Unix; TCP/IP; Perl
IBM Mainframe Programmer Cobol; CICS; DB2; IMS; DMS
Network Engineer Novell or Windows NT; CNE Certificate; MCSE
Help Desk Consultant Support of MS Office/Lotus Suite; Windows; Trouble shooting
hardware/software
</TABLE>
ENGINEERING
<TABLE>
<CAPTION>
POSITION/TITLE SKILLS
- -------------- ------
<S> <C>
Engineer ASIC Chip Design; Embedded Microprocessor Design
(Mechanical; Electrical; Chemical) Engineer; Autolisp Programming; Pharmaceutical
Validation
Designer Piping Design; Mechanical Design; Unigraphics Design; Semiconductor
Machine Design; Liquid Crystal Display Systems; Micro-station Design;
3-D Pro Engineering Design; Chilled Water Electro-Mechanical Packaging
Design
</TABLE>
The Company, as part of its strategy of being a single source provider of
technical solutions, seeks to develop new service offerings. Since many IT
systems currently are incapable of recognizing dates subsequent to 1999, the
Company recently began assisting clients in re-engineering their IT systems and
databases to accommodate the year 2000 and beyond. The Company is also currently
developing a Help Desk practice to assist clients in staffing and training
personnel to implement and maintain their in-house help desks. Alternatively,
clients will be able to outsource this function to the Company under a monthly
fee arrangement. The Company is also developing an Asset Management service
whereby it will monitor and service a client's mobile computing inventory, such
as a network of laptop or notebook computers utilized by pharmaceutical
representatives. In addition, the Company has recently expanded the type of
skilled personnel its Contract Placement business is capable of providing to
such diverse areas as finance, life sciences, desktop publishing, PC support and
help desk, and human resources. Furthermore, the Company has in the past, and
will continue to, leverage its Contract
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<PAGE>
Placement capabilities by providing technical consultants to assist in the
implementation and operation of systems installed by its Imaging and Network
Services business.
The Company believes that many organizations with multiple geographic
locations prefer to utilize technical service providers that can offer high
quality services on a nationwide basis. The Company established its National
Division in Foxborough, Massachusetts in 1991 to provide engineering personnel
on a contract basis nationwide, and the Company currently serves national
clients in such locations as Portland, Oregon and Houston, Texas. The Company
has recently expanded its national efforts to include placement of IT as well as
engineering professionals, and to begin longer term projects requiring more
highly skilled personnel. Revenue attributable to the National Division was $8.9
million and $4.9 million in 1995 and the first six months of 1996, respectively.
PERMANENT PLACEMENT
The Company's Permanent Placement business provides medium to high-level IT
and engineering professionals nationwide through its regional offices in Bala
Cynwyd, Pennsylvania; Tampa, Florida; and Edison, New Jersey. A significant
portion of the Company's engineering placements are in food related industries.
The Company maintains a database of over 70,000 engineering and IT applicants,
and in 1995 it placed 460 professionals with more than 240 clients. Over the
course of the Company's twenty-six year history in the technical permanent
placement industry, it has forged long-term relationships with many individuals
with hiring authority, which have resulted in significant repeat business. Of
the 240 clients serviced in 1995, 16% were clients of the business in 1990. As
compensation for its service, the Company receives a fee based on a percentage
of each placed professional's first year salary, subject to forfeitures if the
placed professional leaves such position during a specified guarantee period of
thirty to ninety days. The Permanent Placement business, founded in 1970,
generated revenues of $4.3 million in 1995 and $2.6 million for the six months
ending June 30, 1996, respectively, representing 6.7% and 7.0% of total Company
revenues for those periods, respectively.
IMAGING AND NETWORK SERVICES
The Company provides various networking, imaging, document management,
workflow and related consulting services through regional offices in Bala
Cynwyd, Pennsylvania; Moorestown, New Jersey; Hartford, Connecticut; and
Wakefield, Massachusetts. The Imaging and Network Services business, which began
operations in 1988, generated revenue of $8.2 million and $6.1 million, which
represented 13.0% and 16.4% of the Company's consolidated net revenues, in
fiscal 1995 and the six months ending June 30, 1996, respectively.
The Company is a value-added reseller and service facility for PC and
network hardware, software and related peripherals for a variety of
manufacturers, including Compaq, ACER, IBM, Apple, Okidata, Tricord and Hewlett
Packard, and provides a full range of installation, training, maintenance,
repair and network integration services. In addition, the Company assembles,
sells and services its own private-label PC products.
The Company sells and installs high-end, mid-range and low-end imaging
systems, complementary software and database products and the technical
engineering services necessary to deliver a 'turn key' imaging system. The
Company has installed more than 120 imaging and document management systems, and
offers its customers hardware and software maintenance, support and training.
The Company was the first to implement Optika software in Banyan, OS/2 and
Windows NT environments and is currently a value-added reseller of a variety of
other imaging software systems, including Filenet, Saros, Watermark, Keyfile,
OTP and Lotus Notes. In addition, certain Company personnel have been certified
by the Document Imaging Association, the only certification available in the
document management industry. The Company integrates its imaging software
solutions on hardware manufactured by IBM, Compaq, Hewlett Packard and Sun
Microsystems, operating under Windows NT, OS/2 and Unix operating systems.
29
<PAGE>
The Company seeks to provide its clients with networking and document
management solutions to improve their operations through work process redesign
and enabling technology implementation. The Company believes that a thorough
understanding of the clients existing IT system and work processes is necessary
to the design of an optimal network and/or document management system. In 1996,
Company introduced its MENTOR(Trademark) Consulting Program, a methodology for
evaluating new technology and organizational redesign ('MENTOR'), to provide
clients with a framework for selecting such a system. The services provided
through MENTOR can be categorized into four phases: Business Process
Re-engineering; Systems Design; Systems Implementation; and Support, Maintenance
and Training.
Business Process Re-engineering. The Company assigns senior level, multiple
disciplinary study teams to evaluate the client's operations from
technology, financial and overall business perspectives. This analysis
includes a review of the architecture, security and limitations of the
client's current IT system as well as the client's personnel and culture.
Upon completion of this phase, the Company presents the client with a
detailed set of technological and work process recommendations. Based on a
client's decision to accept some or all of these recommendations, the
Company provides functional specifications for the new work processes and IT
system.
System Design. The Company assists clients in designing a technology
infrastructure that will support the interrelated strategic business
objectives and IT needs identified in the previous stage. Design services
include selection of viable systems components, creation of migration plans
from the existing to the proposed system and integration of systems,
networks, applications and databases. In those instances where the network
or imaging software solution selected by the client does not completely meet
its application requirements, the Company's Advanced Development Group
provides custom application development.
Systems Implementation. The Company provides the necessary technical
personnel to implement each networking or document management solution,
often drawing on the technical consultant resources of its Contract
Placement business. The Company's internal staff of network engineers is
certified by Novell, Banyan and Microsoft (Windows NT) to perform
installation, maintenance and training in their network operating system
platforms. The Company also can provide backfile conversion of paper,
microfilm and microfiche files as part of the integrated new document
management system or as a stand alone service.
Support, Maintenance and Training. The Company is authorized to service all
of the hardware products it sells. The Company typically enters into
maintenance contracts in connection with the installation of networking and
document management systems. The Company also offers training on all of the
networking and imaging products it sells, as well as on the use and
administration of all network operating systems it installs.
TRAINING
The Company's IT Training business, acquired in September 1996, has
provided training to approximately 2,500 client companies and over 12,000
trainees in a variety of software and network applications since its founding in
1986. The IT Training business provides these services at its facilities in Bala
Cynwyd, Pennsylvania and Alexandria, Virginia, and at various off-site
locations. The Company is an authorized training center for many major software
manufacturers, including Microsoft, Adobe, Quark, Corel, and Claris, and is also
an approved Apple Training Alliance Center, Microsoft Solutions Provider and
Microsoft Advanced Technical Education Center. The Company's diploma programs in
Desktop Publishing, Business Software and Multimedia and Internet are licensed
and accredited by the Pennsylvania Board of Private Licensed Schools and are
approved for veteran's education by the U.S. Veteran's Administration. The
Company also offers six certificate programs, often geared toward retraining
mid-career workers in new technology applications, and 180 open-enrollment
courses. The Company's job search assistance program achieved a 92% placement
rate for the Company's graduates in 1995. The Company maintains twelve computer
labs in its Bala Cynwyd, Pennsylvania facility and eight computer labs in its
Alexandria, Virginia facility. In addition, the
30
<PAGE>
Company frequently conducts its courses at the in-house facilities of its
corporate clients and has the ability to provide the necessary computer
equipment at conference centers, hotels and other off-site locations as
requested by its clients. Prices for a single, open-enrollment training course
range from $99 to $900, with an average of $385, and prices for a diploma course
range from $3,900 to $7,400, with an average of $6,300. The chart below sets
forth many of the training programs offered by the Company:
<TABLE>
<CAPTION>
SUBJECT APPLICATIONS
- ------- ------------
<S> <C>
Operating Systems/Networking Microsoft Windows for Workgroups, Windows 95, Microsoft
Windows NT, Microsoft Windows NT Server, Macintosh,
Novell
Windows/Advanced Macintosh Business Software Lotus 1-2-3, Lotus Notes, Microsoft Excel, Microsoft
PowerPoint, Microsoft Project, Microsoft Word,
Microsoft Works, PageMaker, Persuasion, Quattro Pro,
QuickBooks, Quicken, WordPerfect for Windows, WordPro,
ClarisWorks, Filemaker Pro, Fox Pro
Desktop Publishing Quark XPress, PageMaker, FrameMaker, Interleaf,
Multi-Ad Creator
Electronic Design Prepress/Advanced Publishing Photoshop, Presswise, Trapwise, Scanning
Multimedia/Presentation Graphics Macromedia Director, PowerPoint, Authorware, Persuasion
Internet/WorldWide Web HTML, HotMetal Pro, Premiere, Hot Dog, PageMill,
SiteMill, Netscape, Java
</TABLE>
CUSTOMERS
The primary industries served by the Company include financial services,
manufacturing, software/computers, telecommunications, healthcare, government,
and pharmaceutical. In fiscal 1995, approximately 24% of the Company's revenue
was derived from its top 10 customers and Merck accounted for 6.4% of revenues.
The following table sets forth a list of certain of the largest clients, by
revenues, for which each of the Company's four operating units provided services
in 1995:
<TABLE>
<CAPTION>
TELECOMMUNICATIONS PHARMACEUTICAL SOFTWARE/COMPUTERS
- ------------------ -------------- ------------------
<S> <C> <C>
Bell Atlantic NYNEX Mobile (2)(4) Merck & Co., Inc. (1) Texas Instruments (1)
Ciba Corning Diagnostics (1) Rhone Poulenc Rorer (1) Compaq Computer Corporation(1)
Wyeth-Ayerst (3) Intel Corporation (1)
Hoffman LaRoche, Inc. (2)
</TABLE>
<TABLE>
<CAPTION>
MANUFACTURING FINANCIAL SERVICES GOVERNMENTAL
- ------------- ------------------ ------------
<S> <C> <C>
Nestle Incorporated (3) Vanguard (1) City of Philadelphia (2)(4)
Ciba Corning (1) Reliance Insurance Company (3) Bordentown (NJ) Board of Education (2)
Tandem Computer (1)
</TABLE>
<TABLE>
<CAPTION>
HEALTHCARE
- ---------
<S> <C> <C>
US Healthcare (1)(4)
</TABLE>
- ------------------
(1) Contract Placement client
(2) Imaging and Network Services client
(3) Permanent Placement client
(4) IT Training client
31
<PAGE>
TECHNICAL PERSONNEL
The Company believes its applicant and technical consultant sourcing and
retention practices are, and will continue to be, a significant factor in its
continued growth and competitiveness. The Company maintains a proprietary
database in each of its Permanent and Contract Placement businesses specifically
designed to identify and match these individuals with clients' needs. The
Company's Permanent and Contract Placement databases currently contain the
resumes of approximately 70,000 and 100,000 technical personnel, respectively.
All of the Company's technical recruiters who place applicants and consultants
have on-line access to the appropriate database.
The Company identifies applicants and recruits technical consultants
through advertisements in local media and trade journals, industry specific job
fairs and referrals by current and past applicants. In addition, the Company has
developed a World Wide Web site on the Internet that provides information about
the Company and enables individuals to submit their resumes. The Company also
actively searches the Internet to identify potential technical consultants,
often downloading resumes and proactively recruiting such individuals. The
resumes of technical professionals are entered into the appropriate database,
thus giving technical consultants in all offices immediate access to the
professionals. Once a professional is identified for a particular position, the
technical recruiter institutes screening procedures designed to ensure a good
match for the client and professional. These procedures include personal
interviews, reference checks and review of work product. Once a technical
consultant is placed with a client, the Company routinely interviews the client
and technical consultant to make sure a proper fit exists, thereby ensuring both
customer and technical consultant satisfaction.
The Company recognizes the need to differentiate itself from other
technical personnel providers and has adopted a number of policies to enhance
its attractiveness to technical consultants, such as paid vacation,
participation in a 401(k) Plan, access to group medical coverage, and on-going
professional training. In addition, the Company seeks to secure new engagements
for its technical consultants before their current engagements end to keep them
continuously employed and eliminate downtime. The Company believes that its
ability to offer a variety of assignments nationwide through its National
Division also is a factor in retaining technical consultants.
SALES AND MARKETING
The Company's Contract Placement, Imaging and Network Services and IT
Training businesses each market their respective services through discrete
direct sales forces. In the Permanent Placement business, recruiters are
responsible for both originating and maintaining client contacts, and updating
the database with new applicants.
Account Managers constitute the sales force in the Company's Contract
Placement business, operating out of offices in Bala Cynwyd, Pennsylvania;
Edison, New Jersey; and Foxborough, Massachusetts. The responsibilities of the
Account Managers include identification of new staffing requirements,
coordination of client/consultant interviews, monitoring existing projects,
interaction with technical consultants, expanding services to additional areas
within the client s organization and coordination with the Company s corporate
office to facilitate the billing and purchasing cycle. Account Managers receive
a base salary plus individual incentives tied to gross margins. The Company
generates new business leads through a combination of a telemarketing programs,
media advertising and local trade shows. In addition, the Company receives sales
leads from its other operating units.
The Company has two direct technical sales teams through which it markets
its Imaging and Network Services business, one that concentrates on imaging and
document management systems and services, and one that focuses on more
traditional network systems and services. Technical sales personnel are located
in Bala Cynwyd, Pennsylvania; Moorestown and Edison, New Jersey; and Tampa,
Florida. The Company generates leads through a combination of telemarketing
programs, seminars, local trade shows and media advertising. The Company also
receives sales leads from its software vendors.
32
<PAGE>
The Company markets its IT training services through print advertising in
trade publications, telemarketing, trade shows and direct mail and on local
radio. The Company uses media demographics and industry psychographic profiles
to identify potential client firms and individuals who will benefit from
training. Targeted efforts are then concentrated toward these markets by an
executive sales force located in Bala Cynwyd, Pennsylvania. The Company has
determined that over 60% of its 1995 IT Training sales were generated by either
repeat business or client referrals.
The Company's Bala Cynwyd, Pennsylvania location is the prototype sales
office out of which the full range of its services are offered. The Company
believes that its four complementary businesses afford it a competitive
advantage over IT service providers that offer only one or two of the Company's
services and intends to eventually offer all of its services at each of its
locations. The Edison, New Jersey office, which currently offers Contract
Placement, Permanent Placement and Imaging and Network Services, is scheduled to
begin offering IT Training by the end of 1997, becoming the Company's second
full-service location.
The Company has recently adopted a new marketing and service delivery
approach which seeks to take advantage of its ability to offer comprehensive,
cost-effective and convenient means to meet a wide variety of technical
requirements. In addition, the Company plans to develop a corporate level sales
force which will identify opportunities where it can provide integrated
solutions to new and existing clients and then market such solutions in
conjunction with the existing sales professionals in the Company's four
operating businesses.
COMPETITION
The IT professional services industry is highly competitive and fragmented
on the local, regional and national levels. Although the Company is not aware of
any competitors that offer a full range of technical staffing, imaging, document
management, consulting and training services, many companies offer one or two of
the Company's services in all of the geographical markets in which the Company
currently operates. Many of the Company s competitors have significantly greater
name recognition and financial, technical and other resources and generate
greater revenues than the Company.
Contract and Permanent Placement. Within any given geographical or
technical specialty market, the Company competes for clients with other IT and
engineering professional services providers, outsourcing and consulting
companies, systems integrators and, to a lesser extent, temporary personnel
agencies. The majority of the competition is made up of smaller local and
regional firms with a strong presence in their local markets and occasionally
with a nationally franchised firm. The principal competitive factors for
obtaining and retaining clients include: the ability to match consultant skills
and personality with the client's requirements and culture; expertise of its
technical consultants; price; client satisfaction; and overall responsiveness to
client needs. The Company competes for technical consultants with other
professional services providers, outsourcing and consulting companies, systems
integrators, temporary personnel agencies and client companies. The principal
competitive factors for recruiting and retaining technical consultants include
compensation, availability and quality of benefits, consistent flow of high
quality, varied assignments and an understanding of consultant skills and work
preferences. The Company's principal competitors in the Contract Placement
business include a range of companies such as The Registry, Inc., Techaid
Corporation, Volt, H.L. Yoh, Additional Tech Support, and CDI.
Imaging, Document Management and Network Services. The imaging, document
management and network services market is intensely competitive and subject to
rapid technological change. In order to compete effectively, the Company needs
to continually enhance its current product and service offerings and expand its
professional services capabilities. The Company currently competes principally
on the basis of its reputation, the breadth of its product line and services,
including the ability to sell document management solutions responsive to each
client's applications needs and budgetary constraints, provide consulting and
conversion services, and the quality, ease of use, reliability and performance
of the systems it offers. As there are relatively low barriers to entering the
imaging marketplace, the Company expects additional competition from emerging
companies as the
33
<PAGE>
market expands. In addition, the market includes participants in a variety of
market segments, including systems consulting and integration firms,
professional services companies, applications software firms, temporary
employment agencies, the professional service groups of companies such as Unisys
Corporation and Digital Equipment Corporation, facilities management and MIS
outsourcing companies, certain Big Six accounting firms, and general management
consulting firms. The Company's principal competitors include a range of
companies such as Andersen Consulting, Technology Solutions Corporation,
Cambridge Technology Partners, Inc., USI and Viewstar.
IT Training. Within the IT training industry, there is competition among
the available training methods, such as instructor-led training versus
computer-based training. Within the instructor-led training segments, some of
the major software and equipment manufacturers maintain their own training
programs for both internal training and public training. The Company believes
its established library of courses and proprietary course materials that can be
updated (or customized for a particular customer) provide it with a competitive
advantage. Moreover, the Company believes that the diversity of its course
offerings, the quality of its personnel, its multiple training locations, its
flexibility in the locations at which it provides its services and its ability
to recognize emerging technologies and develop the requisite courses responsive
thereto, permit it to remain competitive with others in the marketplace. The
Company competes in the IT training business on the basis of its pricing,
perceived quality and breadth of course offerings. The Company's principal
competitors in the IT Training business include Chubb, Computer Learning
Centers, Executrain and Catapult, which is owned by IBM.
REGULATION
The Company's operations, as currently conducted, are subject to
governmental regulation in the State of New Jersey, where the Company's
Permanent Placement business is a licensed employment agency, and its Contract
Placement business has registered with the Temporary Help Service Section of the
Bureau of Employment and Personnel Services, a component of the Division of
Consumer Affairs of the Department of Law and Public Safety. Compliance with
such New Jersey regulations has not and is not expected to have a material
effect on the Company's business. The Company is unaware of any other
jurisdictions in which its operations are subject to material governmental
regulation.
All the jurisdictions in which the Company operates its training centers
regulate and license certain kinds of vocational, trade, technical or other
post-secondary education. The Company believes that employer-funded or
reimbursed IT training is exempt from such requirements in many of these states.
The Company is licensed in each jurisdiction in which it operates training
centers.
If the Company were found to be in violation of a state's licensing or
other regulatory requirements, it could be subject to civil or criminal
sanctions, including monetary penalties. No state educational or regulatory
authority has cited the Company or commenced any proceeding against it for the
violation of any licensing or other vocational educational requirement.
EMPLOYEES
As of August 31, 1996, the Company had 307 employees, of which 5 were staff
IT consultants, 63 were either Technical Recruiters or Recruiting Coordinators,
59 served in sales or marketing capacities and 95 were working in engineering
and technical support, and 85 were employed in managerial and administrative
capacities. On that date, there were also approximately 1,200 IT consultants
(including the 5 staff IT consultants) working on full-time assignments for the
Company's clients. The Company is not a party to any collective bargaining
agreements and considers its relationships with its employees to be good.
Approximately 85% of the technical consultants placed by the Company during
1995 were treated as employees of the Company for federal and state tax
purposes. For such employees, the Company pays Social Security Taxes (FICA),
federal and state unemployment taxes, workers' compensation insurance premiums
and other employee costs. The remainder of the technical consultants were
treated
34
<PAGE>
as independent contractors for federal and state tax purposes. The Company
believes that these consultants meet the requirements for such treatment under
applicable law. See 'Risk Factors -- Risks Related to Tax Status of Technical
Consultants.'
PRE-OFFERING TRANSACTIONS: CORPORATE REORGANIZATION, MERGER AND RECENT
ACQUISITIONS
Prior to the completion of this Offering, the Company completed a corporate
reorganization (the 'Reorganization'), concluded its merger with JIS through a
wholly-owned subsidiary and acquired Berkeley and Systems Automation.
Reorganization. In the Reorganization, completed in September 1996, The
Judge Group became a holding company for its operating subsidiaries, effected a
52.6 for 1.0 stock split, and amended and restated its by-laws.
Merger with JIS. Immediately prior to the Offering, and as a condition to
the completion of the Offering, the Company will acquire JIS in a statutory
merger in which JIS will merge into a newly organized, wholly-owned subsidiary
of the Company ('Judge Acquisition'). Judge Acquisition will be the surviving
corporation in the Merger and will change its name to 'Judge Imaging Systems,
Inc.' As a result of the Merger, JIS will become a wholly-owned subsidiary of
the Company at the time of the Offering.
As consideration, each share of JIS common stock or Series A Preferred
Stock outstanding at the time of the Merger will be converted into that number
of Common Shares of the Company equal to $2.50 divided by the initial public
offering price.
As of the date of this Prospectus, JIS had approximately 3,980,141 and
822,628 shares of common stock and Series A Preferred Stock outstanding,
respectively. If all JIS shareholders elect to receive the value of their stock
in Common Shares, the Company will issue approximately 892,748 Common Shares in
the Merger, representing approximately 6.9% of the total number Common Shares
that will be outstanding after the Offering (assuming an initial public offering
price of $10.00). Prior to the Merger, the Company owned approximately 25.6% of
JIS's fully-diluted outstanding common stock (calculated after giving effect to
the conversion of the outstanding Series A Preferred Stock of JIS into its
common stock). Mr. Judge owned an additional 30.9%, and other officers and
directors of the Company owned an additional 6.9% of JIS's fully-diluted
outstanding common stock. See 'Certain Transactions.'
Judge Imaging Systems, Inc. Effective February 29, 1996, Judge Computer
Corporation ('Judge Computer'), a subsidiary of the Company, merged into
DataImage, Inc. ('DataImage'), a publicly traded provider of imaging and
document management services, with DataImage as the surviving entity. Following
the merger, DataImage changed its name to Judge Imaging Systems, Inc. (the
'Surviving Corporation'). As a result of this transaction, the Company held
25.6% of the Surviving Corporation's outstanding shares of common stock on a
fully-diluted basis, and affiliates of the Company held an additional 45.7% of
the Surviving Corporation's outstanding common stock. Following this
transaction, the Surviving Corporation continued to be a public reporting
company.
Berkeley Associates Corporation. In September 1996, the Company acquired
Berkeley for cash and stock consideration of approximately $2.5 million.
Berkeley, founded in 1980, is a provider of IT training services to corporate,
governmental and individual clients. The Company intends to expand the IT
training services of Berkeley in its other locations, as well as to use
Berkeley's materials and expertise to train its internal staff and to enhance
the capabilities of the Company's technical consultants.
Systems Automation. In September 1996, the Company acquired Systems
Automation for consideration consisting of cash and a note totaling
approximately $597,252. This acquisition established a presence for the
Company's Imaging and Network Services business in the metropolitan Boston area.
35
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FACILITIES
The Company has leased offices in the following locations:
<TABLE>
<CAPTION>
SQUARE SERVICES OFFERED
OFFICE FEET LEASE EXPIRATION AS OF SEPTEMBER 1, 1996
- ------ ------ ---------------- -----------------------
<S> <C> <C> <C>
Bala Cynwyd, Pennsylvania 32,000 June 30, 2000 Contract Placement, Imaging
and Network Services,
Permanent Placement,
IT Training
Foxborough, Massachusetts 7,100 March 1, 2000 Contract Placement
Moorestown, New Jersey 6,400 January 1, 1997 Imaging and Network Services
Edison, New Jersey 4,700 March 1, 2000 Contract Placement,
Permanent Placement and
Imaging and Network Services
Alexandria, Virginia 4,700 December 31, 2000 IT Training
Wakefield, Massachusetts 3,500 Month to Month Imaging and Network Services
Hartford, Connecticut 3,200 June 15, 2000 Imaging and Network Services
Tampa, Florida 2,500 April 30, 1998 Permanent Placement and
Imaging and Network Services
</TABLE>
LEGAL PROCEEDINGS
The only pending legal proceeding against the Company involves a former
employee who has filed a claim with the Department of Labor under the Uniform
Services Employment and Reemployment Rights Act. The former employee has also
filed an identical claim with the Equal Employment Opportunity Commission under
the Americans With Disabilities Act. These claims arise from the same allegation
that Judge, Inc. failed to comply with its obligations to make certain
accommodations on behalf of the employee under the respective Acts. The former
employee seeks reinstatement and back pay.
These claims are presently in the investigation stage before the respective
agencies. While the preliminary status of these matters makes it difficult to
predict an outcome, Judge, Inc. believes that it has fully complied with its
obligations under each Act. It intends to vigorously defend these matters and
does not view either claim as having an adverse material impact on the operation
of the Company.
The Company is involved in legal proceedings from time to time in the
ordinary course of business. As of the date of this Prospectus, there are no
material legal proceedings pending against the Company.
36
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
Set forth below is certain information concerning the executive officers
and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Martin E. Judge, Jr.......................... 52 Chairman of the Board and Chief Executive Officer
Richard T. Furlano........................... 46 President and Director; President -- Contract Placement
Michael A. Dunn.............................. 48 Executive Vice President and Director; President --
Permanent Placement
Jeffrey J. Andrews........................... 44 Chief Financial Officer and Treasurer
Katharine A. Wiercinski...................... 35 Secretary; Vice President -- Human Resources
Wendy Greenberg-Marcelli..................... 30 Vice President; President -- Imaging and Network Services
</TABLE>
- ------------------
Martin E. Judge, Jr. founded the Company in 1970 and has been the Chief
Executive Officer and Chairman of the Board since that time. Mr. Judge is the
brother-in-law of Mr. Furlano.
Richard T. Furlano has served as the President of the Company's Contract
Placement business since April 1992. From 1990 to 1992, Mr. Furlano was a
Regional Sales Manager for Yorkship Business Supplies, and from 1980 to 1990 he
was the President of The Furst Group, a reseller of telecommunications services.
He is the President of the Company and currently serves on its Board of
Directors.
Michael A. Dunn has served as the President of the Company's Permanent
Placement business since 1990. Mr. Dunn served as Executive Vice President of
the Permanent Placement business from 1980 to 1990, and has also held various
recruiting and managerial positions in that business since joining the Company
in 1973. Mr. Dunn is an Executive Vice President of the Company and serves on
the Company's Board of Directors.
Jeffrey J. Andrews has served as the Company's Chief Financial Officer
since joining the Company in May 1996. Mr. Andrews was an independent financial
advisory consultant from September 1995 until May 1996, and served as Controller
for Godwin Pumps of America (a manufacturer of industrial pumps) from September
1994 to August 1995. From April 1993 to August 1994, Mr. Andrews was a Manager
for Ernst & Young, LLP, and prior to that time, was the President and sole
shareholder of Andrews Associates, an investment banking firm.
Katharine A. Wiercinski has served as the Vice President of Human Resources
for the Company and each of its subsidiaries since 1990 and as Secretary of the
Company since 1990. Ms. Wiercinski has also held various administrative and
managerial positions since joining the Company in 1981.
Wendy Greenberg-Marcelli has been the President of the Company's Imaging
and Network Services business since July 1995 and Vice President of the Company
since July 1993. From July 1994 to July 1995, Ms. Greenberg-Marcelli served as
Executive Vice President of the Imaging and Network Services business, and from
January 1991 to July 1994 served as its Operations Manager.
Ms. Greenberg-Marcelli joined the Company's Customer Support Division in 1989.
Following the completion of the Offering, the Company expects to expand its
Board of Directors from its present three members to five members, including two
new directors who are not affiliated with the Company or its current principal
shareholders.
37
<PAGE>
DIRECTORS' COMPENSATION
In fiscal years 1994 and 1995, the Company's directors, and the directors
of each of the Company's subsidiaries, did not receive any compensation for
their services as directors.
EXECUTIVE COMPENSATION
The following table summarizes the compensation paid for the last two
fiscal years to the Chief Executive Officer and to each of the Company's most
highly compensated officers whose total annual salary and bonus for the fiscal
year ended December 31, 1995 exceeded $100,000.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
FISCAL SALARY BONUS OTHER
NAME AND PRINCIPAL POSITION YEAR ($) ($) COMPENSATION
--------------------------- --------- --------- --------- -------------
<S> <C> <C> <C> <C>
Martin E. Judge, Jr.
Chairman of the Board and Chief Executive Officer................. 1995 417,000 68,000 10,000
Richard Furlano
President......................................................... 1995 192,017 65,127 -0-
Michael A. Dunn
Executive Vice President.......................................... 1995 250,260 -0- 2,311
Wendy Greenberg-Marcelli
Vice President.................................................... 1995 100,000 26,971 9,640
</TABLE>
- ------------------
EMPLOYMENT AGREEMENTS
The Company has employment agreements with Wendy Greenberg-Marcelli and
Jeffrey J. Andrews, and requires that all key employees execute confidentiality
and one-year post-termination non-competition agreements.
Ms. Greenberg-Marcelli's agreement, dated as of October 1, 1995, provides
for a term of four years with automatic renewal periods of one year thereafter,
unless prior written notice is given by the Company. The agreement provides that
Ms. Greenberg-Marcelli may be terminated only for cause. In addition to
providing an annual base salary of $100,000, Ms. Greenberg-Marcelli was granted
70,604 shares of Judge Computer Corporation (now JIS) stock.
Mr. Andrews' agreement, dated May 1, 1996, provides for a two-year term of
employment with one year automatic renewals thereafter, unless the Company
provides prior written notice. The agreement provides a base salary of $75,000
and certain other benefits.
STOCK PLANS
The Judge Group, Inc.'s 1996 Incentive Stock Option and Non-Qualified Stock
Option Plan for Key Employees and Non-Employee Directors (the 'Plan') was
adopted in September of 1996, subject to shareholder approval, to provide a
means whereby the Company could, through the grant of incentive stock options
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended ('ISOs') and non-qualified stock options ('NQSOs') to purchase Common
Shares of the Company to officers and other key employees ('Key Employees'),
attract and retain such Key Employees and motivate such Key Employees to
exercise their best efforts on behalf of the Company and of any related
corporation ('Related Corporation'). Moreover, the Company may, through the
grant of NQSOs to non-employee directors ('Non-Employee Directors') under a
formula, attract and retain Non-Employee Directors and motivate such
Non-Employee Directors to exercise their best efforts on behalf of the Company
and any Related Corporation.
38
<PAGE>
ISOs and NQSOs (collectively, 'Options') may be granted under the Plan to
purchase up to a maximum of one million five hundred thousand (1,500,000) of the
Company's Common Shares, par value $.01 per share, subject to certain
adjustments and provided that no Key Employee shall receive Options for more
than 50,000 Common Shares over any one (1) year period.
The Plan shall be administered by the Company's Stock Option Committee
('Committee'), which shall consist of two (2) directors of the Company who shall
be appointed by, and shall serve at the pleasure of, the Company's Board of
Directors ('Board') and each of whom shall be an 'outside director', within the
meaning of Treasury Regulation Section 1.162-27(e)(3), within the period of time
described in Treasury Regulation Section 1.162-27(f)(2). Each member of such
Committee, while serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company.
The exercise price of each Option shall be the fair market value (110% of
fair market value in the case of an ISO granted to a more than 10% shareholders)
of the Common Shares on the date of the grant. The term of each Option shall be
not more than ten (10) years (five (5) years in the case of an ISO granted to a
more than ten percent (10%) shareholder) from the date of grant, and the Options
shall be exercisable in such installments and on such dates, not less than six
(6) months from the date of grant, as the Committee may specify. The Option
price shall be payable in cash or its equivalent or, in the Committee's
discretion, in Company Common Shares. In the event the Option price is paid, in
whole or in part, with Common Shares, the portion of the Option price so paid
shall be equal to the 'fair market value' of such Shares on the date of exercise
of the Option.
The aggregate fair market value of the Common Shares with respect to which
ISOs are exercisable for the first time by a Key Employee during any calendar
year (under this Plan and any other ISO plan of the Company or a Related
Corporation) shall not exceed one hundred thousand dollars ($100,000). The
annual limit set forth above for ISOs shall not apply to NSQOs.
If a Key Employee's employment by the Company and the Related Corporations
is terminated by either party prior to the expiration date fixed for his or her
Option for any reason other than death or disability, such Option may be
exercised, to the extent of the number of Common Shares that the Key Employee
could have exercised on the date of such termination, or to any greater extent
permitted by the Committee, by the Key Employee at any time prior to the earlier
of (i) the expiration date specified in such Option or (ii) an accelerated
termination date determined by the Committee, which date, in the case of ISOs,
shall not be later than three (3) months after the date of such termination of
employment.
If a Key Employee shall become disabled (within the meaning of section
22(e)(3) of the Code) during his or her employment and, prior to the expiration
date fixed for his or her Option and his or her employment is terminated as a
consequence of such disability, such Option may be exercised, to the extent of
the number of Common Shares that the Key Employee could have exercised on the
date of such termination, or to any greater extent permitted by the Committee,
by the Key Employee at any time prior to the earlier of (i) the expiration date
specified in such Option or (ii) an accelerated termination date determined by
the Committee, which such date, in the case of ISOs, shall not be later than one
(1) year after the date of such termination of employment.
If a Key Employee shall die during his or her employment and prior to the
expiration date fixed for his or her Option, or if a Key Employee shall die
following termination of employment but prior to the earliest of (i) the
expiration date fixed for his or her Option; (ii) the accelerated expiration
date determined by the Committee (as described above); or (iii) in the case of
an ISO, three (3) months following termination of employment; then such Option
may be exercised, to the extent of the number of Common Shares that the Key
Employee could have exercised it on the date of his or her death, or to any
greater extent permitted by the Committee, by the Key Employee's estate,
personal representative or beneficiary, at any time prior to the earlier of (A)
the expiration date specified in such Option or (B) an accelerated termination
date determined by the Committee, which date shall not be earlier than one (1)
year nor later than three (3) years after the date of death.
No ISO and, except as otherwise provided in any Option agreement, no NQSO
granted pursuant to the Plan shall be assignable or transferable by the Key
Employee or Non-Employee Director
39
<PAGE>
otherwise than by will or by the laws of descent and distribution, and, during
the lifetime of the Key Employee, the ISO shall be exercisable only by him or by
his or her guardian or legal representative.
Pursuant to the Plan, each Non-Employee Director will receive an initial
grant of an NQSO to purchase 2,500 Common Shares on the date of this Offering,
and any person subsequently elected as a Non-Employee Director will receive an
initial grant of an NQSO to purchase 2,500 Common Shares on the first business
day immediately following the date he or she is elected a director. In addition,
on the first business day immediately following each of the dates on which an
incumbent Non-Employee Director is re-elected, he will receive an additional
grant of an NQSO to purchase 2,500 additional Common Shares. The grant of NQSOs
to Non-Employee Directors pursuant to the Plan shall be automatic and neither
the Committee or the Board shall have any discretionary authority with respect
thereto.
The exercise price of NQSOs granted pursuant to the Plan will be the fair
market value of the Common Shares at the time of the grant. NQSOs granted on the
date of this Offering will have an exercise price equal to the initial public
offering price set forth on the cover page of this Prospectus. The Option
exercise price may be paid in full in cash or, unless in the opinion of counsel
to the Company that to do so may result in a possible violation of law, in whole
or in part through the transfer of Common Shares previously acquired by the
Non-Employee Director, provided the Common Shares so transferred have been held
by the Non-Employee Director for more than 12 months on the date of exercise at
the time an NQSO is exercised.
An NQSO granted under the Plan to a Non-Employee Director will expire on
the earliest of (i) ten years from the date of grant, (ii) one year from the
date the grantees ceases to be a director by reason of death or disability or
(iii) three months from the date the grantee ceases to be a director for any
reason other than death or disability.
NQSOs granted to Non-Employee Directors shall be exercisable in three equal
annual installments commencing with the first anniversary of the grant date, but
only if the Non-Employee Director has attended at least seventy-five (75)
percent of the Board meetings during the twelve (12) month period immediately
preceding the date the annual installment first becomes exercisable. In the
event the Non-Employee Director fails to attend at least seventy-five (75)
percent of the Board meetings during the twelve (12) month period immediately
preceding the date the annual installment first becomes exercisable, the Options
otherwise exercisable in that installment shall not be exercisable but shall be
cancelled and shall be available for other grants under the Plan.
Notwithstanding the foregoing, the first annual installment of Options granted
on the date of this Offering shall be exercisable as of the earlier of twelve
months from the date of grant or six months after the Plan is approved by the
shareholders of the Company.
The Plan provides that certain adjustments will be made to the exercise
price and number of shares subject to options granted thereunder in the event of
a stock split, stock dividend, combination or reclassification. In the event of
certain other corporate transactions, outstanding Options may terminate. Subject
to certain limitations, the Board of Directors may amend or discontinue the Plan
as it deems necessary, but no amendment may adversely affect the rights of a
grantee with respect to an outstanding Option without his or her consent.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Currently, the Compensation Committee members are Martin E. Judge, Jr. and
Richard T. Furlano. As soon as practicable these members will be replaced with
outside directors within the meaning of the Code.
Decisions concerning compensation of executive officers were made by the
Board of Directors, which included Mr. Judge, the Chairman of the Board and
Chief Executive Officer of the Company.
40
<PAGE>
PRINCIPAL AND SELLING SHAREHOLDERS
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Shares as of August 31, 1996, and
as adjusted to reflect the sale of Common Shares offered hereby and the
consummation of the Merger, (1) by each person known by the Company to own
beneficially 5% or more of the outstanding Common Shares, (2) by each director
and executive officer of the Company, (3) by all directors and executive
officers as a group, and (4) by the selling shareholders.
<TABLE>
<CAPTION>
NUMBER OF
SHARES TO
BENEFICIAL OWNERSHIP BE BENEFICIAL OWNERSHIP
PRIOR TO THIS OFFERING(2) SOLD IN AFTER THIS OFFERING
-------------------------- THIS --------------------------
NAME AND ADDRESS SHARES PERCENTAGE OFFERING SHARES PERCENTAGE
- ---------------- ----------- ------------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Martin E. Judge, Jr.(1)......................... 5,878,050 64.5% 270,000 5,952,061 45.8%
Michael A. Dunn(1).............................. 1,959,350 21.5% 150,000 1,849,416 14.2%
Richard T. Furlano(1)........................... 52,600 0.6%
Wendy Greenberg-Marcelli(1)..................... 20,139 --
Arthur Kania.................................... 420,800 4.6% 30,000 488,499 3.5%
Katharine A. Wiercinski(1)...................... 52,600 0.6%
Jeffrey Andrews(1).............................. -- --
Lawrence Chimerine.............................. 26,300 0.3%
Marvin N. Demchick.............................. 52,600 0.6%
DGA Investments................................. 26,300 0.3%
The Gemstone Group, Inc......................... 171,739 1.3% -- -- --
Edwin T. Johnson................................ 26,300 0.3%
Robert and Margot Keith......................... 26,300 0.3%
Max H. Kraus.................................... 26,300 0.3%
Ira Lubert...................................... 52,600 0.6%
Edward H. and Evelyn B. Rosen................... 105,200 1.2%
Trust Under Will of Maurice L. Strauss for
Thomas S. Rosen............................... 52,600 0.6%
Ernest Scheller, Jr............................. 26,300 0.3%
A. Richard Sloane............................... 52,600 0.6%
Milton S. Stearns, Jr........................... 52,600 0.6%
All directors and officers as a group
(six persons)................................. 7,995,200 87.7% 420,000 7,977,586 61.4%
</TABLE>
- ------------------
(1) The address of each of the directors and officers identified is Two Bala
Plaza, Suite 800, Bala Cynwyd, Pennsylvania.
(2) Unless otherwise indicated, each person has sole voting and investment power
with respect to all such shares.
41
<PAGE>
CERTAIN TRANSACTIONS
Effective upon the date of this Offering, any transactions between the
Company and related parties will be subject to the review and approval of its
Audit Committee or a comparable committee consisting of a majority of
disinterested parties.
As of September 3, 1996 each of Mr. Judge and Mr. Dunn and his wife
executed personal guaranties of the Company's obligations under the Line of
Credit with Midlantic Bank, N.A., to enable the Company to obtain the Line of
Credit. The amount outstanding under the Line of Credit at August 31, 1996 was
$7,781,000. Upon the completion of this Offering, Mr. Judge and Mr. and Mrs.
Dunn will be released from these guaranties, subject to certain qualifications.
As of June 30, 1996, the Company owed approximately $115,000 to Martin E.
Judge, Jr. This loan has no formal repayment terms and bears interest at various
rates (from prime plus 1% to a fixed rate of 12%). The Company pays the interest
related to these loans directly to the commercial banks from which Mr. Judge
borrowed the same amount. As of August 31, 1996, Mr. Judge owed the Company
$287,505. This loan will be repaid at or prior to the completion of this
Offering.
As of June 30, 1996, the Company had advanced $106,000 to Judge Financial
Services, a personal financial advisory company, which is owned by Dennis Judge,
Martin E. Judge, Jr.'s brother. This advance does not bear interest, does not
have formal repayment terms and will be repaid at or prior to the completion of
this Offering.
In connection with the Merger, Martin E. Judge, Jr., Michael A. Dunn,
Arthur Kania and Wendy Greenberg-Marcelli will acquire 378,412, 44,072, 107,469
and 20,139 Common Shares of the Company, respectively, in exchange for shares of
common and/or preferred stock they presently hold in JIS. See 'Business --
Pre-Offering Transactions: Corporate Reorganization, Merger and Recent
Acquisitions.'
42
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of (1) 50,000,000
Common Shares, par value $.01 per share (the 'Common Shares'), and (iii)
10,000,000 Preferred Shares, par value $.01 per share (the 'Preferred Shares').
Upon the closing of this Offering, 13,042,737 Common Shares will be issued and
outstanding. There are no Preferred Shares outstanding.
The following summary description relating to the Company's capital stock
sets forth the material terms of the capital stock, but does not purport to be
complete. A description of the Company's capital stock is contained in the
Amended and Restated Articles of Incorporation, which is filed as an exhibit to
the registration statement of which this Prospectus forms a part. Reference is
made to such exhibit for a detailed description of the provisions thereof
summarized below.
COMMON SHARES
Voting, Dividend and Other Rights. The holders of the Company's Common
Shares are entitled to one vote per share for each share held of record on all
matters submitted to a vote of shareholders. Holders of Common Shares do not
have the right to cumulate their votes in the election of directors. The Company
does not anticipate paying cash dividends on the Common Shares in the
foreseeable future. See 'Dividend Policy.' The holders of the Common Shares have
no preemptive right or rights to convert Common Shares into any other securities
and are not subject to future calls or assessments by the Company. All of the
outstanding Common Shares are, and, when issued, the Common Shares offered
hereby will be, validly issued, fully paid, and nonassessable by the Company.
Each share of Common Shares is entitled to receive dividends if, as and
when declared by the Board of Directors of the Company out of funds legally
available therefor.
In the event of a merger or consolidation to which the Company is a party,
each share of Common Shares will be entitled to receive the same consideration.
Shareholders of the Company have no preemptive or other rights to subscribe
for additional shares. Subject to any rights of holders of any Preferred Shares,
all holders of Common Shares, regardless of class, are entitled to share equally
on a share for share basis in any assets available for distribution to
shareholders on liquidation, dissolution or winding up of the Company. No Common
Shares are subject to redemption or a sinking fund. All Common Shares offered
hereby will be, when so issued or sold, validly issued, fully paid and
nonassessable. In the event of any decrease in the number of outstanding Common
Shares from a combination, consolidation of shares or other capital
reclassification, the Company is required to take parallel action with respect
to the other class so that the number of shares of each class outstanding
immediately following the combination, consolidation or capital reclassification
bears the same relationship to each other as the number of shares of each class
outstanding before such event.
PREFERRED SHARES
The Company has authorized 10,000,000 Preferred Shares, $.01 par value per
share. No Preferred Shares have been issued and the Company does not presently
contemplate the issuance of such shares. The Board of Directors is empowered by
the Company's Certificate of Incorporation to designate and issue from time to
time one or more classes or series of Preferred Shares without any action of the
shareholders. The Board of Directors may authorize issuance in one or more
classes or series, and may fix and determine the relative rights, preferences
and limitations of each class or series so authorized. Such action could
adversely affect the voting power of the holders of the Common Shares or could
have the effect of discouraging or making difficult any attempt by a person or
group to obtain control of the Company.
43
<PAGE>
TRANSFER AGENT AND REGISTRAR
The Transfer Agent and Registrar for the Common Shares is StockTrans, Inc.,
Ardmore, Pennsylvania. Its telephone number is (610) 649-7300.
PENNSYLVANIA ANTI-TAKEOVER LAWS, LIMITATION ON DIRECTORS' LIABILITY AND CERTAIN
PROVISIONS OF THE COMPANY'S ARTICLES OF INCORPORATION AND BY-LAWS
Certain provisions of the Pennsylvania Business Corporation Law of 1988
(the 'BCL') and the Company's Articles of Incorporation and By-laws may have the
effect of deterring, delaying or preventing an attempt by a third party to
acquire control of the Company.
The 'business combination' provisions in Sections 2551 through 2556 of the
BCL prohibit the Company from engaging in any business combination (which is
defined broadly to include mergers, consolidations, share exchanges, divisions
and sales or other dispositions of assets having a value in excess of 10% or
more of the assets, market value or earning power or net income of the
corporation) with an 'interested shareholder' or an affiliate thereof unless
(A) the business combination or the acquisition of shares in which a person
becomes an interested shareholder is approved by the Board of Directors before
the shareholder becomes an 'interested shareholder,' (B) the interested
shareholder owns 80% of the corporation's outstanding voting shares and the
business combination satisfies certain 'fair price' criteria and is approved by
the holders of a majority of the remaining shares, or (C) the holders of a
majority of the voting shares (excluding those held by the interested
shareholder unless the fair price criteria are satisfied) approve the business
combination at a meeting held no earlier than five years after the interested
shareholder's acquisition date. An 'interested shareholder' is any beneficial
owner of 20% or more of the voting shares of a corporation or an affiliate of
the corporation who was at any time within the five year period prior to the
date in question a beneficial owner of 20% or more of the voting shares of the
corporation, but does not include shareholders who were interested shareholders
prior to the date of the adoption of these provisions by the Company.
The Company has opted out of, and is not subject to, certain anti-takeover
provisions of the BCL, including the 'control transactions' provision, which
provides for mandatory shareholder notice of the acquisition of 20% of the
voting power of a Pennsylvania corporation and provides shareholders with the
opportunity to demand 'fair value' for their shares upon acquisition of voting
power, the 'control share' provision, which limits the voting power of
shareholders owning 20% or more of a corporation's voting stock, and the
'disgorgement' provision, which permits a corporation to recover profits
resulting from the sale of shares in certain situations, including those where
an individual or group attempts to acquire at least 20% of the corporation's
voting shares do not apply to the Company.
Under the BCL, directors of a corporation are not required to regard the
interests of the shareholders as being dominant or controlling when determining
the best interests of the corporation. The directors may consider, to the extent
the directors deem appropriate, a broad range of additional factors in taking
corporate actions. These additional factors include: the effects of any action
upon any group affected by such action (including shareholders, employees,
suppliers, customers and creditors of the corporation); the short term and long
term interests of the corporation (including benefits that may accrue to the
corporation from its long term plans and the possibility that these interests
may be best served by the continued independence of the corporation); and the
resources, intent and conduct of any person seeking to acquire control of the
corporation. These BCL provisions also provide directors with additional
protection from challenges to their decision-making process, particularly with
respect to acquisitions or proposed acquisitions of corporate control.
The Company's Articles of Incorporation and By-Laws provide that special
meetings of the Company's shareholders can be called only by the Board of
Directors or the Company's President.
The Company's By-laws establish an advance notice procedure that must be
followed by shareholders wishing to propose nominations of professionals for
election as directors, or to bring other business before an annual meeting of
shareholders of the Company. The By-laws provide that only persons who are
nominated by, or at the direction of, the Chairman, the President or the Board
of
44
<PAGE>
Directors, or by a shareholder who has given timely written notice to the
secretary of the Company prior to the meeting at which directors are to be
elected, will be eligible for election as directors of the Company. The By-laws
also provide that at an annual meeting only such business may be conducted as
has been brought before the meeting by, or at the direction of, the Chairman,
the President or the Board of Directors or by a shareholder who has given timely
written notice to the secretary of the Company of such shareholder's intention
to bring such business before such meeting. Generally, for notice of shareholder
nominations or business to be brought before an annual meeting to be timely
under the By-laws, such notice must be received by the Company not less than 70
days nor more than 90 days prior to the first anniversary of the previous year's
annual meeting (or, in the case of a special meeting, not earlier than the 90th
day before such meeting and not later than the later of (i) the 70th day prior
to such meeting and (ii) the 10th day after public announcement of the date of
such meeting is first made). Under the By-laws, a shareholder's notice must also
contain certain information specified in the By-laws.
As permitted by the BCL, the Company's Articles of Incorporation provide
that, subject to certain limited exceptions, directors of the Company shall not
be personally liable, as such, for monetary damages for any action taken unless
the director has breached or failed to perform the duties of his office under
the BCL and the breach or failure to perform constitutes self-dealing, willful
misconduct or recklessness. The effect of this provision is to limit the ability
of the Company and its shareholders (through shareholder derivative suits on
behalf of the Company) to recover monetary damages against a director for the
breach of certain fiduciary duties as a director (including breaches resulting
from grossly negligent conduct). In addition, the Company's Articles of
Incorporation and By-Laws provide that the Company shall, to the full extent
permitted by the BCL, indemnify all persons whom it has the power to indemnify
pursuant thereto, including directors and officers of the Company.
The By-Laws of the Company provide that the number of directors will be
fixed from time to time exclusively by the Board of Directors. The By-Laws also
provide that any action required or permitted to be taken at any annual or
special meeting of shareholders may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting forth the actions so
taken, is executed by the holders of outstanding shares having not less than the
minimum number of votes that would be necessary to authorize or take such action
at a meeting at which all shares entitled to vote thereon were present and
voted.
SHARES ELIGIBLE FOR FUTURE SALE
Upon completion of this Offering, assuming an initial public offering price
of $10.00 per share and after giving effect to the issuance of shares
contemplated by the Pre-Offering Transactions, the Company will have outstanding
13,042,737 Common Shares. Of these shares, the 3,000,000 Common Shares sold in
this Offering will be tradeable without restriction unless they are purchased by
affiliates of the Company. All Common Shares received by holders of JIS stock
pursuant to the Merger will be tradeable without restriction, except those
shares held by affiliates, and except for 394,820 shares acquired by various
shareholders that are subject to a two-year holding period which commenced
February 29, 1996. The holders of shares are subject to a two-year
holding period which commenced on September __, 1996. Of the remaining shares,
1,349,166 are 'restricted securities' under the Securities Act and may be sold
only if they are registered under the Securities Act or pursuant to an
applicable exemption from the registration requirements of the Securities Act.
The holders of 2,809,716 shares and 5,986,462 shares have agreed not to sell,
otherwise dispose of, or pledge any of the Company's Common Shares for 180 days
and one year, respectively, after the date of this Prospectus without the prior
written consent of Janney Montgomery Scott Inc. All of the Company's directors,
executive officers and certain other shareholders are subject to the 180-day
lock-up, other than Mr. Judge, who is subject to the one (1) year lock-up.
In general, under Rule 144 as currently in effect, a person who has
beneficially owned restricted shares for at least two years, including
affiliates, may sell, within any three-month period, a number of shares that
does not exceed the greater of 1% of the then outstanding Common Shares 130,427
45
<PAGE>
immediately after this Offering) or the average weekly trading volume in the
Common Shares on the Nasdaq during the four calendar weeks preceding such sale.
Sales under Rule 144 are also subject to certain provisions regarding the manner
of sale, notice requirements and the availability of current public information
about the Company. A person who is not deemed an affiliate of the Company and
who has beneficially owned restricted shares for three years from the date of
acquisition of restricted securities from the Company or any affiliate is
entitled to sell such shares under Rule 144(k) freely and without restriction or
registration under the Securities Act. Affiliates continue to be subject to the
limitations described below. As used in Rule 144, affiliates of the Company
generally include its directors, executive officers and persons directly or
indirectly owning 10% or more of the Common Shares.
The Commission has proposed to amend the holding period required by Rule
144 to permit sales of 'restricted securities' after one year rather than two
years (and two years rather than three years for affiliates who desire to sell
such shares under Rule 144(k)). If such proposed amendment were enacted, the
'restricted securities' would become freely tradeable (subject to any applicable
contractual restrictions) at correspondingly earlier dates.
REGISTRATION RIGHTS
Pursuant to a Note Purchase Agreement executed in July 1994 (the
'Agreement'), certain existing stockholders of the Company have certain rights
to require the Company, at its expense, to register Common Shares under the
Securities Act. Following completion of this offering, an aggregate of 450,000
Common Shares will be subject to registration rights under the Agreement.
Under the terms of the Agreement, holders of 450,000 shares are entitled to
make request for the Company to register such shares under the Securities Act,
subject to certain limitations and conditions. In addition, if the Company at
any time proposes to register any of its securities under the Securities Act
(other than securities issuable pursuant to employee compensation plans or for
certain other purposes), parties to the Agreement are entitled to require the
Company to include their shares in such registration. The underwriter of such
offering has the right to limit the number of shares included in such
registration for marketing purposes.
LOCK-UP AGREEMENT
All of the executive officers, directors and certain other shareholders of the
Company, who will be deemed to beneficially own 9,362,737 Common Shares upon
consummation of this Offering, have agreed with the Underwriters not to sell,
otherwise dispose of or pledge any of the Common Shares for 180 days after the
date of this Prospectus without the prior written consent of Janney Montgomery
Scott Inc. In addition, Mr. Judge has agreed with the Underwriters not to sell
or otherwise dispose of or pledge any of the Common Shares for one year after
the date of this Prospectus without the prior written consent of Janney
Montgomery Scott Inc.
ABSENCE OF PRIOR MARKET
Prior to this Offering, there has been no public market for the Common Shares
offered hereby, and no prediction can be made about the effect, if any, that
market sales of shares or the availability of shares for sale will have on the
market price from time to time. Nevertheless, sales of substantial amounts of
Common Shares in the public market may have an adverse impact on the market
price.
46
<PAGE>
UNDERWRITING
The Underwriters named below, acting through their Representatives, Janney
Montgomery Scott Inc. and _________ (the 'Representatives') have severally
agreed, subject to the terms and conditions of the Underwriting Agreement, to
purchase a total of 3,650,000 Common Shares from the Company and the Selling
Stockholders. The number of Common Shares that each Underwriter has agreed to
purchase is set forth opposite its name below. The Underwriters are committed to
purchase all of such shares if any are purchased. Under certain circumstances
the commitments of non-defaulting Underwriters may be increased. The names of
the several Underwriters and the respective number of shares to be purchased by
each of them are as follows:
<TABLE>
<CAPTION>
UNDERWRITER NUMBER OF SHARES
----------- ----------------
<S> <C>
Janney Montgomery Scott Inc...............................................
----------------
TOTAL............................................................... 3,650,000
----------------
----------------
</TABLE>
The Underwriters propose to offer the Common Shares to the public initially
at the offering price per share set forth on the cover page of this Prospectus
and to certain dealers at such price less a concession not in excess of $_____
per share, and the Underwriters may allow, and such dealers may reallow, a
concession not in excess of $_____ per share on sales to other dealers. After
the initial public offering of the Common Shares, the offering price and the
concession may be changed.
The Company has agreed to indemnify the several Underwriters against
certain liabilities which may be incurred in connection with the offering,
including liabilities under the Act.
The Company has granted an option to the Underwriters, exercisable during
the 30-day period after the date of this Prospectus, to purchase up to an
aggregate of 547,500 Common Shares at the same price per share as the initial
public offering price. The Underwriters may exercise such option only to cover
over-allotments in the sale of the Common Shares that the Underwriters have
agreed to purchase. To the extent the Underwriters exercise this option, each of
the Underwriters has a firm commitment, subject to certain conditions, to
purchase the same percentage of the option shares as the number of shares to be
purchased and offered by that Underwriter as shown in the above table bears to
the 3,650,000 Common Shares initially offered hereby.
Martin E. Judge, Jr., has agreed with the Representatives not to sell or
dispose of any shares owned by him for a period of one year after the date of
this Prospectus. All of the other directors, executive officers, the Selling
Shareholders and certain other shareholders have agreed with the Representatives
not to sell or dispose of any shares owned by them without the consent of the
Representatives for a period of 180 days after the date of this Prospectus. See
'Shares Eligible for Future Sale.'
The Underwriters do not intend to confirm sales of the Common Shares to any
accounts over which they exercise discretionary authority.
The Underwriters have reserved for sale, at the initial public offering
price, up to 5% of the Common Shares offered hereby for employees of the Company
and certain other individuals who have expressed an interest in purchasing such
Common Shares in this offering. The number of Common Shares available for sale
to the general public will be reduced to the extent such persons purchase such
reserved Common Shares. Any reserved Common Shares not so purchased will be
offered by the Underwriters to the general public on the same basis as the other
Common Shares offered hereby.
Prior to this offering, there has been no public market for the Company's
Common Shares. The initial public offering price for the Common Shares was
determined by negotiation between the Company and the Representatives. The
factors considered in determining the initial public offering price include,
among other things, the history of and the prospectus for the industry in which
the Company competes, the capability of the Company's management, the past and
present operations of the Company, the historical results of operations of the
Company and the trend of its earnings, the prospect for future earnings of the
Company, the general condition of the securities markets at the time of the
offering and the prices of similar securities of generally comparable companies.
47
<PAGE>
LEGAL MATTERS
Drinker Biddle & Reath, Philadelphia, Pennsylvania, has rendered an opinion
that the Common Shares offered hereby by the Company, when issued and paid for
pursuant to the terms of the Underwriting Agreement, will be legally issued,
fully paid and non-assessable. Certain legal matters in connection with this
Offering will be passed upon for the Underwriters by Saul, Ewing, Remick & Saul,
Philadelphia, Pennsylvania.
EXPERTS
The Company's consolidated balance sheets as of June 30, 1996, December 31,
1995 and 1994 and the related consolidated statements of operations and deficit
and statements of cash flows for the six month period ended June 30, 1996 and
each of the three years in the period ended December 31, 1995 included in this
Prospectus have been included herein in reliance on the report of Rudolph,
Palitz LLP, independent accountants, given on the authority of said firm as
experts in accounting and auditing.
ADDITIONAL INFORMATION
The Company is not currently subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the 'Exchange Act'). The
Company has filed with the Securities and Exchange Commission (the 'Commission')
a Registration Statement on Form S-1 under the Securities Act with respect to
the registration of the Common Shares offered hereby. This Prospectus, which
constitutes a part of the Registration Statement, omits certain information
contained in the Registration Statement, and reference is made to the
Registration Statement and the exhibits thereto for further information with
respect to the Company and the Common Shares to which this Prospectus relates.
Statements contained herein concerning the provisions of any contract, agreement
or other document are not necessarily complete, and, in each instance, reference
is made to the copy of such document filed as an exhibit to the Registration
Statement for a more complete description of the matter involved, and each such
statement is qualified in its entirety by such reference. The Registration
Statement, including the exhibits and schedules filed therewith, may be
inspected at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at the regional offices of the
Commission located at 7 World Trade Center, New York, New York 10048 and
Northwestern Atrium Center, 500 West Madison Street, Chicago, Illinois 60606.
Copies of such materials may be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
As a result of this Offering of the Common Shares, the Company will become
subject to the informational requirements of the Exchange Act. The Company
intends to furnish to its shareholders annual reports containing audited
financial information.
48
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS
CONTENTS
<TABLE>
<CAPTION>
PAGE(S)
--------------
<S> <C>
INDEPENDENT AUDITORS' REPORT FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND EACH OF THE THREE YEARS IN
THE PERIOD ENDED DECEMBER 31, 1995.............................................................. F-2
CONSOLIDATED BALANCE SHEETS AS OF JUNE 30, 1996 AND DECEMBER 31, 1995 AND 1994.................... F-3
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT FOR SIX MONTHS ENDED JUNE 30, 1996 AND YEARS
ENDED DECEMBER 31, 1995, 1994 AND 1993.......................................................... F-4
CONSOLIDATED STATEMENTS OF CASH FLOWS FOR SIX MONTHS ENDED JUNE 30, 1996 AND YEARS ENDED DECEMBER
31, 1995, 1994 AND 1993......................................................................... F-5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FOR SIX MONTHS ENDED JUNE 30, 1996 AND YEARS ENDED
DECEMBER 31, 1995, 1994 AND 1993................................................................ F-6 - F-21
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
Board of Directors
Judge, Inc.
Bala Cynwyd, Pennsylvania
We have audited the accompanying consolidated balance sheets of Judge, Inc. and
Subsidiaries as of June 30, 1996, December 31, 1995 and December 31, 1994, and
the related consolidated statements of operations and deficit and of cash flows
for the six months ended June 30, 1996 and for each of the three years in the
period ended December 31, 1995. 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 Judge, Inc. and
Subsidiaries as of June 30, 1996, December 31, 1995 and December 31, 1994, and
the consolidated results of their operations and their cash flows for the six
months ended June 30, 1996 and for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
As discussed in Note 8 to the financial statements, the Company adopted
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes,' as of January 1, 1993.
September 17, 1996, except for Note 18, which is as of September 26, 1996
Plymouth Meeting, PA
F-2
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1996 AND DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------
1996 1995 1994
------------ ------------ -----------
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash................................................................... $ 28,433 $ 35,078 $ 82,928
Accounts receivable, net............................................... 11,368,815 8,881,059 6,418,697
Inventories............................................................ 679,366 515,099 232,705
Prepaid income taxes and deferred taxes................................ 476,076 347,352 127,000
Other.................................................................. 310,676 508,640 103,997
------------ ------------ -----------
Total current assets................................................. 12,863,366 10,287,228 6,965,327
------------ ------------ -----------
PROPERTY AND EQUIPMENT
Furniture, office and computer equipment............................... 2,711,775 1,732,677 1,545,784
Automotive equipment................................................... 42,224 48,617 40,544
Leasehold improvements................................................. 33,879 28,069 15,158
------------ ------------ -----------
2,787,878 1,809,363 1,601,486
Less: accumulated depreciation and amortization........................ 1,236,625 875,552 1,009,422
------------ ------------ -----------
Net property and equipment........................................... 1,551,253 933,811 592,064
------------ ------------ -----------
OTHER ASSETS
Notes receivable -- officers and employees............................. 375,774 222,564 169,738
Other receivable, related party........................................ 106,812 -- --
Deposits............................................................... 102,384 94,317 45,752
Covenant not-to-compete, net of accumulated amortization of $581,293,
1996, $508,645, 1995 and $358,131, 1994.............................. 21,296 93,944 244,458
------------ ------------ -----------
Total other assets................................................... 606,266 410,825 459,948
------------ ------------ -----------
Total assets......................................................... $ 15,020,885 $ 11,631,864 $ 8,017,339
------------ ------------ -----------
------------ ------------ -----------
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Note payable, bank..................................................... $ -- $ -- $ 2,748,666
Current portion of long-term debt...................................... 303,291 280,420 324,427
Current portion of payroll tax obligation.............................. 199,554 321,391 230,427
Accounts payable and accrued expenses.................................. 4,517,019 3,277,546 2,344,295
Payroll and sales taxes................................................ 610,025 396,735 463,955
Income taxes payable................................................... -- 6,968 252,727
Deferred revenue....................................................... 571,414 297,362 82,151
Advances from shareholders............................................. 115,723 139,906 189,699
------------ ------------ -----------
Total current liabilities............................................ 6,317,026 4,720,328 6,636,347
------------ ------------ -----------
LONG-TERM LIABILITIES
Note payable, bank..................................................... 6,358,063 5,367,516 --
Deferred rent obligation............................................... 143,672 156,943 117,902
Debt obligations, net of current portion............................... 646,425 496,012 536,273
Convertible notes...................................................... 500,000 500,000 500,000
Payroll tax obligation, net of current portion......................... -- -- 321,392
------------ ------------ -----------
Total long-term liabilities.......................................... 7,648,160 6,520,471 1,475,567
------------ ------------ -----------
MINORITY INTEREST........................................................ 659,000 -- --
------------ ------------ -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY (DEFICIT)
Common stock, -- $.005 par value,
10,000,000 shares authorized, 160,000 shares issued and
outstanding........................................................ 800 800 800
Additional paid-in capital............................................. 450,938 626,848 626,848
Deficit................................................................ (55,039) (236,583) (722,223)
------------ ------------ -----------
Total shareholders' equity (deficit)................................. 396,699 391,065 (94,575)
------------ ------------ -----------
Total liabilities and shareholders equity (deficit).................. $ 15,020,885 $ 11,631,864 $ 8,017,339
------------ ------------ -----------
------------ ------------ -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-3
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND DEFICIT
SIX MONTHS ENDED JUNE 30, 1996 AND YEARS ENDED DECEMBER 31,
1995, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, ----------------------------------------
1996 1995 1994 1993
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
NET REVENUES............................................. $ 37,327,166 $ 63,299,353 $ 45,253,417 $ 35,068,867
------------ ------------ ------------ ------------
COSTS AND EXPENSES
Cost of sales.......................................... 27,587,582 47,550,114 34,146,215 26,069,583
Selling and operating.................................. 6,363,990 9,797,875 6,509,549 5,853,608
General and administrative............................. 2,848,111 4,187,485 3,155,012 2,524,824
------------ ------------ ------------ ------------
Total costs and expenses............................. 36,799,683 61,535,474 43,810,776 34,448,015
------------ ------------ ------------ ------------
INCOME FROM OPERATIONS................................... 527,483 1,763,879 1,442,641 620,852
OTHER EXPENSE, NET, PRINCIPALLY INTEREST EXPENSE......... (371,439) (697,339) (419,590) (334,004)
------------ ------------ ------------ ------------
INCOME BEFORE INCOME TAX EXPENSE, MINORITY INTEREST IN
NET LOSS OF CONSOLIDATED SUBSIDIARY AND CUMULATIVE
EFFECT ADJUSTMENT...................................... 156,044 1,066,540 1,023,051 286,848
INCOME TAX EXPENSE....................................... 203,500 587,957 679,800 227,460
------------ ------------ ------------ ------------
INCOME (LOSS) BEFORE MINORITY INTEREST IN NET LOSS OF
CONSOLIDATED SUBSIDIARY AND CUMULATIVE EFFECT
ADJUSTMENT............................................. (47,456) 478,583 343,251 59,388
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED
SUBSIDIARY............................................. 229,000 7,057 -- --
------------ ------------ ------------ ------------
INCOME BEFORE CUMULATIVE EFFECT ADJUSTMENT............... 181,544 485,640 343,251 59,388
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE...... -- -- -- 42,000
------------ ------------ ------------ ------------
NET INCOME............................................... 181,544 485,640 343,251 101,388
DEFICIT, BEGINNING....................................... (236,583) (722,223) (1,065,474) (1,166,862)
------------ ------------ ------------ ------------
DEFICIT, ENDING.......................................... ($ 55,039) ($ 236,583) ($ 722,223) ($ 1,065,474)
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
NET INCOME PER SHARE:
PRIMARY:
Income before cumulative effect adjustment........... $ 0.02 $ 0.06 $ 0.04 $ 0.01
Cumulative effect adjustment......................... -- -- -- --
------------ ------------ ------------ ------------
$ 0.02 $ 0.06 $ 0.04 $ 0.01
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
FULLY DILUTED:
Income before cumulative effect adjustment........... $ 0.02 $ 0.05 $ 0.04 $ 0.01
Cumulative effect adjustment......................... -- -- -- --
------------ ------------ ------------ ------------
$ 0.02 $ 0.05 $ 0.04 $ 0.01
------------ ------------ ------------ ------------
------------ ------------ ------------ ------------
</TABLE>
See Notes to Consolidated Financial Statements.
F-4
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND YEARS ENDED DECEMBER 31,
1995, 1994 AND 1993
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, -------------------------------------
1996 1995 1994 1993
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income.................................................. $ 181,544 $ 485,640 $ 343,251 $ 101,388
Adjustments to reconcile net income to net cash provided by
(used in) operating activities:
Depreciation and amortization............................. 262,108 421,613 340,708 286,273
Deferred taxes............................................ -- (103,000) (60,000) (67,000)
Deferred rent............................................. (13,271) 39,041 117,902 --
Provision for losses on accounts receivable............... 215,040 300,033 71,697 58,655
Stock compensation........................................ -- 6,000 -- --
Minority interest in net loss of consolidated
subsidiary.............................................. (229,000) (7,057) -- --
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable..................................... (2,598,669) (2,762,395) (2,221,822) (1,145,179)
Inventories............................................. (125,166) (282,394) 127,518 (208,551)
Deposits................................................ (2,527) (48,565) (16,807) (1,915)
Prepaid taxes........................................... (135,692) (117,352) 59,406 96,796
Other current assets.................................... 153,204 (404,643) (24,796) (50,703)
Increase (decrease) in:
Accounts payable and accrued expenses................... 1,157,386 933,251 1,310,299 131,299
Payroll and sales taxes................................. 91,453 (297,648) (168,965) 586,832
Deferred revenue........................................ (87,985) 215,211 (109,982) 124,882
Income taxes payable.................................... -- (245,759) 252,727 --
----------- ----------- ----------- -----------
Net cash provided by (used in) operating
activities......................................... (1,131,575) (1,868,024) 21,136 (87,223)
----------- ----------- ----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment......................... (308,464) (373,051) (252,286) (91,465)
Proceeds from disposals of property and equipment........... -- 24,461 -- --
(Increase) in notes receivable, officers and employees,
net....................................................... (260,022) (52,826) (56,743) (17,677)
----------- ----------- ----------- -----------
Net cash used in investing activities................ (568,486) (401,416) (309,029) (109,142)
----------- ----------- ----------- -----------
FINANCING ACTIVITIES
Cash acquired in business combination....................... 13,786 -- -- --
Proceeds from notes payable, bank, net...................... 990,547 2,618,850 249,431 522,101
Proceeds from long-term debt................................ -- 38,000 556,000 --
Principal payments on long-term debt........................ (174,734) (386,524) (383,756) (275,462)
Proceeds from issuance of stock............................. -- 1,057 -- --
Repayments from shareholders................................ (24,183) (49,793) (64,028) (43,421)
Issuance of Series A Preferred Shares, net of costs......... 888,000 -- -- --
----------- ----------- ----------- -----------
Net cash provided by financing activities............ 1,693,416 2,221,590 357,647 203,218
----------- ----------- ----------- -----------
INCREASE (DECREASE) IN CASH................................... (6,645) (47,850) 69,754 6,853
CASH, BEGINNING............................................... 35,078 82,928 13,174 6,321
----------- ----------- ----------- -----------
CASH, ENDING.................................................. $ 28,433 $ 35,078 $ 82,928 $ 13,174
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest.................................................. $ 371,000 $ 657,000 $ 405,000 $ 330,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income taxes.............................................. $ 298,000 $ 1,056,000 $ 496,000 $ 214,000
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
</TABLE>
See Notes to Consolidated Financial Statements.
F-5
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 1. DESCRIPTION OF BUSINESS
Judge, Inc., a Pennsylvania corporation founded in 1970 ('Judge' or the
'Company'), provides (i) information technology ('IT') and engineering
professionals to its clients on both a temporary basis (through its 'Contract
Placement' business) and a permanent basis (through its 'Permanent Placement'
business), and (ii) computer network and document management system integration,
implementation, maintenance and training (through its 'Imaging and Network
Services' business). At June 30, 1996, the Company had offices in Bala Cynwyd,
Pennsylvania, Hartford, Connecticut, Foxborough, Massachusetts, Tampa, Florida,
Moorestown, New Jersey and Edison, New Jersey.
The Contract Placement business includes the operations of three of the
Company's wholly-owned subsidiaries, Judge Technical Services, Inc. ('JTS'),
Judge Professional Services, Inc. ('JPS') and Judge Technical of New Jersey,
Inc. ('JTNJ').
The Permanent Placement business is comprised of the operations of the
Company and two of its wholly owned subsidiaries, Judge Electronic Services of
Florida, Inc. ('JESF') and Judge, Inc. of New Jersey ('JINJ').
At December 31, 1995 the Company owned 33%, Martin E. Judge, the Company's
founder, Chairman and Chief Executive Officer owned 47%, and another officer and
director of the Company owned 5% of the outstanding voting shares, on a fully
diluted basis, of Judge Computer Corporation ('JCC'). On December 1, 1995, JCC
entered into an Agreement and Plan of Merger (the 'JCC/DI Merger Agreement')
with DataImage, Inc. ('DI'), a public reporting company, the common stock of
which was traded on the over-the-counter market. Pursuant to the JCC/DI Merger
Agreement, JCC was merged into DI on February 29, 1996 (the 'JCC/DI Merger'),
and DI, as the surviving corporation, changed its name to Judge Imaging Systems,
Inc. ('JIS'). As a result of the Merger, the former shareholders of JCC hold, on
a fully diluted basis, a majority of the outstanding common stock of JIS, which
remains a public reporting company.
The Imaging and Network Services business of the Company consisted of the
operations of JCC prior to the JCC/DI Merger, and subsequent to the Merger this
business is comprised of the operations of JIS. See Notes 12 and 16.
Unless the context indicates otherwise, references to the Company herein
prior to February 29, 1996 include reference to its wholly owned subsidiaries
and JCC and such references subsequent to February 29, 1996 include reference to
its wholly owned subsidiaries and JIS.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of
Judge, JIS and the Company's wholly-owned subsidiaries, which include JTS, JPS,
JTNJ, JESF and JINJ, and Judge Hospitality Services, Inc. and Judge Electronic
Services of Boston, Inc. (which had no activity during the six months ended June
30, 1996 or during the three years in the period ended December 31, 1995). JINJ
had no activity in the period ended December 31, 1994 and December 31, 1993.
JCC has been consolidated due to certain elements of common ownership and
control being present. All significant intercompany accounts and transactions
have been eliminated.
F-6
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Risks and Uncertainties
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Revenue Recognition in Contract Placement and Permanent Placement Businesses
The Company recognizes permanent placement revenues at the date employment
of the placed professional commences, subject to reversal and adjustments if
such employment is terminated during a guarantee period. Revenues related to
temporary placement services are recognized on a weekly basis as the services
are performed.
Revenue Recognition in Imaging and Network Services Business
Network, imaging and document management systems are assembled and tested
in the Company's facilities prior to delivery. Revenues are recorded in the
period in which the merchandise is shipped or the services are rendered.
However, in instances in which installation is significant to the completion of
the contract, revenue recognition is deferred until the installation is
completed and accepted by the client. Revenues billed in advance for computer
sales, warranties and maintenance contracts are deferred and recorded in the
period in which the merchandise is shipped or the services are rendered.
Cash
The Company maintains cash balances at financial institutions. These
balances are insured by the Federal Deposit Insurance Corporation up to $100,000
at each institution.
Inventories
Inventories of computer and related supplies and equipment held for resale
are valued at the lower of cost (first-in, first-out) or market.
Accounts Receivable and Accounts Payable
Accounts receivable at June 30, 1996, December 31, 1995, 1994 and 1993
were net of allowances for doubtful accounts of $297,000, $174,000, $157,000
and $132,000, respectively. During 1996, 1995, 1994 and 1993, the Company
recorded charge-offs of approximately $92,000, $283,000, $47,000 and $0.
Included in accounts receivable was unbilled work-in-process of
approximately $1,289,000, $655,000 and $564,000 at June 30, 1996, December 31,
1995 and 1994, respectively. Included in accounts payable and accrued expenses
was approximately $941,000, $510,000 and $436,000 of accrued employee and
contractor payroll principally relating to unbilled work-in-process at June 30,
1996, December 31, 1995 and 1994, respectively.
F-7
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Property and Equipment and Depreciation and Amortization
Property and equipment are stated at cost. Depreciation and amortization is
computed on the straight-line and accelerated methods over the estimated useful
lives of the related assets. Leasehold improvements are amortized using the
straight-line method over the shorter of the lease term or estimated useful
lives of the improvements.
Depreciation and amortization related to property and equipment amounted to
$189,460 in 1996, $271,099 in 1995, $190,192 in 1994 and $135,758 in 1993.
Property Under Capital Leases and Amortization
Property under capital leases is stated at the lower of fair market value
or net present value of the minimum lease payments at inception of the leases.
Property under capital leases consists of furniture and office equipment and is
included in 'property and equipment' in the accompanying consolidated balance
sheets. Amortization is provided over the shorter of the related lease terms or
the estimated useful lives of the related assets.
Income Taxes
Deferred taxes are accounted for in accordance with Statement of Financial
Accounting Standards ('Statement') No. 109, 'Accounting for Income Taxes.' The
Statement requires the use of the liability method to account for income taxes.
Deferred income taxes are provided for the difference between the tax basis of
an asset or liability and its reported amount in the financial statements and at
the tax rates that are expected to be in effect when the taxes are actually paid
or recovered.
Deferred income taxes arise principally from differences between financial
and income tax reporting, including amounts recorded for workers' compensation
funding, timing differences relating to the restrictive covenant described in
Note 13 (the 'Restrictive Covenant'), amounts recorded for inventory
capitalization, the availability of net operating loss carryforwards and certain
other temporary differences.
Deferred income tax assets are reduced by a valuation allowance when, based
on the weight of evidence available, it is more likely than not that some
portion or all of the deferred tax assets will not be realized.
Interim Financial Reporting
For interim financial reporting purposes, costs and expenses are accounted
for in accordance with Accounting Principles Board Opinion No. 28 ('APB 28').
Intangible Assets
The Restrictive Covenant (covenant-not-to-compete) was being amortized on a
straight-line method over the life of the covenant (forty-eight months).
Amortization expense related to the covenant was approximately $73,000 for the
six months ended June 30, 1996 and $150,000 for each of 1995, 1994 and 1993. See
Notes 5, 13 and 18.
F-8
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Deferred Rent Obligation
The Company is party to an operating lease agreement for its principal
office facilities, which contains a provision for free rent for a certain
period, with subsequent rent increases. In accordance with generally accepted
accounting principles, the Company records monthly rent expense equal to the
total of the payments due over the lease term, divided by the number of months
of the lease term. The difference between rent expense recorded and the amount
paid is credited or charged to deferred rent obligation in the accompanying
consolidated balance sheets.
Advertising Costs
The Company participates in various advertising programs. All costs related
to advertising are expensed in the period incurred. Advertising expense amounted
to approximately $295,000, $464,000, $267,000 and $214,000 in 1996, 1995, 1994
and 1993, respectively.
Recently Issued Accounting Standards
In March 1995, the Financial Accounting Standards Board ('FASB') issued
Statement No. 121, 'Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of' ('Statement 121'). Statement 121
established accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used, and for long-lived assets and certain identifiable intangibles to
be disposed of. Statement 121 requires that long-lived assets and certain
identifiable intangibles to be held and used by an entity be reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Measurement of an impairment
loss for long-lived assets and identifiable intangibles that an entity expects
to hold and use should be based on the fair value of an asset. Statement 121
became effective January 1, 1996 and did not have a material effect on the
Company's financial condition or results of operations.
In October 1995, FASB issued Statement No. 123 'Accounting for Stock-Based
Compensation,' ('Statement 123'), which provides an alternative method of
accounting for stock-based compensation arrangements, based on fair value of the
stock-based compensation utilizing various assumptions regarding the underlying
attributes of the options and the underlying stock, rather than the existing
method of accounting for stock-based compensation which is provided in
Accounting Principles Board Opinion No. 25, 'Accounting for Stock Issued to
Employees' (APB No. 25). FASB encourages entities to adopt the fair value-based
method but does not require adoption of this method. Statement 123 became
effective January 1, 1996 and, based upon information presently available, is
not expected to have a material impact on the Company's financial position or
its results of operations.
Earnings Per Share
The number of shares used in the earnings per share calculation and
convertible note share conversion (Note 7) has been adjusted for the 52.6 to 1.0
stock split which occurred subsequent to June 30, 1996 (Note 18).
Primary earnings per share amounts were computed based on the weighted
average number of shares actually outstanding plus the shares that would be
outstanding assuming conversion of outstanding common share warrants, which are
considered common share equivalents. See Note 11. The number of shares used in
the computation were approximately 8,584,000 in 1996, 1995 and 1994 and
8,500,000 in 1993.
F-9
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (Continued)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -- (Continued)
Earnings Per Share (Continued)
Fully diluted earnings per share amounts for 1996, 1995, 1994 and 1993 were
based on the weighted average number of shares calculated for primary earnings
per share purposes increased by the number of shares that would be outstanding
assuming conversion of outstanding convertible debentures. See Note 7. The
number of shares used in the calculation were 9,110,000 in 1996 and 1995,
8,847,000 in 1994 and 8,500,000 in 1993.
NOTE 3. NOTE RECEIVABLE (DI)
In connection with the JCC/DI Merger, JCC provided a $50,000 bridge loan,
with interest at 11%, to DI in September 1995 to fund DI's ongoing operations
and working capital requirements through the date of the expected closing of the
JCC/DI Merger. The loan was collateralized by certain assets of DI. As a result
of the JCC/DI Merger, no interest was charged on this loan. This receivable was
included in 'other' current assets in the accompanying December 31, 1995
consolidated balance sheet.
NOTE 4. NOTE PAYABLE, BANK
Note payable, bank, consisted of advances to Judge, JTS and JIS under a
$6,400,000 line of credit at June 30, 1996. At June 30, 1996, this line of
credit bore interest at the prime rate plus 1% ( 9.25% at June 30, 1996), and
maximum permitted borrowing thereunder was the lesser of $6,400,000 or 80% of
qualified accounts receivable, as defined in the line of credit agreement. The
line of credit is collateralized by substantially all of the Company's assets,
is personally guaranteed by certain shareholders and the wife of a shareholder,
cross collateralized by certain subsidiaries and is subject to certain financial
covenants. In addition, the Company and all of its subsidiaries are jointly and
severally responsible for all of the debt outstanding under the line. Prior to
January 1, 1995, the line of credit was due on demand. At June 30, 1996, the
Company was in violation of certain covenants on this line, which violations
were waived by the Bank. In addition, subsequent to June 30, 1996, the Bank
extended the maturity date of the line from May 31, 1997 to May 31, 1998,
modified certain financial covenants, and the maximum permitted borrowings were
increased. See Note 18.
Included in accounts payable and accrued expenses at June 30, 1996,
December 31, 1995 and 1994 were approximately $1,755,000, $1,338,000 and
$917,000, respectively, of bank overdrafts.
F-10
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 5. LONG-TERM DEBT
Long-term debt consisted of the following:
<TABLE>
<CAPTION>
1996 1995 1994
--------- --------- ---------
<S> <C> <C> <C>
Equipment notes payable, bank (repaid in 1995);...................... $ -- $ -- $ 13,703
Note payable, Restrictive Covenant; payable in monthly installments
of $13,194, including interest imputed at 8.0%, through August 1998
(see Note 13); repaid in full subsequent to June 30, 1996 (see Note
18)................................................................ 311,680 376,759 499,386
Note payable, stock; payable in monthly payments of $2,039, including
interest at 5.0%, through August 1998 (see Note 13); repaid in full
subsequent to June 30, 1996 (see Note 18).......................... 50,140 60,961 81,810
Capital lease obligations; payable in monthly installments currently
aggregating $3,471, including interest at various rates, through
March 2000; the leases transfer ownership of certain office
equipment to the Company at the end of the respective lease
terms.............................................................. 105,994 59,207 31,581
Capital lease obligations; payable in monthly installments currently
aggregating $7,369, including interest at various rates, through
December 1999; the leases transfer ownership of certain office
equipment to the Company at the end of the respective lease
terms.............................................................. 160,653 192,050 136,651
Equipment note payable; payable in monthly installments of $1,247,
including interest at 8.85%, through December 1999; collateralized
by certain equipment............................................... 44,058 49,418 --
Equipment note payable; payable in monthly installments of $5,868,
including interest at 8.5%, through March 2001; collateralized by
certain equipment and personally guaranteed by the Company's
majority shareholder............................................... 274,191 -- --
Related Parties
Martin E. Judge, Jr. (Founder, Chairman and Chief Executive Officer
of the Company) -- non-interest bearing.......................... 3,000 23,000 15,528
Michael Dunn (President of Permanent Placement Business) -- payable
in variable monthly installments plus interest at prime plus 2%;
repaid in full prior to June 30, 1996............................ -- 15,037 82,041
--------- --------- ---------
949,716 776,432 860,700
Less: current portion............................................ (303,291) (280,420) (324,427)
--------- --------- ---------
Long-term portion................................................ $ 646,425 $ 496,012 $ 536,273
--------- --------- ---------
--------- --------- ---------
</TABLE>
F-11
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 5. LONG-TERM DEBT -- (CONTINUED)
The following is a schedule of debt maturities:
TWELVE MONTHS
ENDING JUNE 30, AMOUNT
--------------- -----------
1997............................................................. $ 303,291
1998............................................................. 309,332
1999............................................................. 171,701
2000............................................................. 114,577
2001............................................................. 50,815
-----------
$ 949,716
-----------
-----------
YEARS ENDING
DECEMBER 31, AMOUNT
------------ -----------
1996............................................................. $ 280,420
1997............................................................. 239,777
1998............................................................. 182,451
1999............................................................. 71,780
2000............................................................. 2,004
-----------
$ 776,432
-----------
-----------
Subsequent to June 30, 1996, $201,143 of debt obligations related to the
Company's stock redemption due during the twelve month periods ending June 30,
1998 and 1999 were paid in full in satisfaction of all amounts due related to
those obligations. See Notes 13 and 18.
Interest expense charged to operations was approximately $371,000 in 1996,
$670,000 in 1995, $427,000 in 1994 and $338,000 in 1993.
NOTE 6. ADVANCES FROM SHAREHOLDERS
JCC had advances from shareholders of $115,723 at June 30, 1996, $139,906
at December 31, 1995 and $189,699 at December 31, 1994. There are no formal
repayment terms, however, interest is charged monthly at various rates (from
prime plus 1% to a fixed rate of 12%). Interest expense related to these
advances was approximately $7,000 in 1996, $18,000 in 1995, $22,000 in 1994 and
$20,000 in 1993.
NOTE 7. CONVERTIBLE NOTES
In 1994, Judge received $500,000 from a group of investors in the form of
10% convertible senior subordinated promissory notes. The notes mature in 1997,
are subject to certain financial covenants and are convertible into 526,000
common shares (Note 2) upon the occurrence of certain events. The notes
may be redeemed at any time, subject to certain contingent interest and other
provisions. In addition, the financial advisor who arranged such financing will
receive certain remuneration should the Company effect a successful initial
public offering. The notes are guaranteed by JTS and JESF. At June 30, 1996,
December 31, 1995 and 1994, the Company was in violation of certain covenants,
which were waived by the note holders.
F-12
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 8. INCOME TAXES
In 1991, Judge filed a consolidated Federal income tax return with its
wholly-owned subsidiaries. JTS and JCC were not included in Judge's consolidated
Federal income tax return, as Judge owned less than 80% of each such Company's
outstanding common shares at December 31, 1991. Under Internal Revenue
regulations, JTS and JCC were not part of the consolidated group for tax
purposes and filed their own Federal income tax returns. In 1992, JTS became a
wholly owned subsidiary of Judge, but continued to file its own Federal income
tax returns. In 1995, JTS filed a consolidated tax return with its wholly-owned
subsidiaries, JPS and JTNJ. State income taxes are determined on the basis of
filing separate returns for each company as required by the applicable state
regulations.
The Company adopted Statement of Financial Accounting Standards No. 109,
'Accounting for Income Taxes,' as of January 1, 1993 by determining the
cumulative effect on prior years of the change in method of accounting for
income taxes. As of January 1, 1993, the cumulative effect on prior years of
adopting SFAS No. 109 was $42,000.
The net deferred tax asset at December 31, 1995 and 1994 included the
following:
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Deferred tax asset................................................... $1,175,000 $1,004,000
Valuation allowance for deferred tax asset........................... (945,000) (877,000)
---------- ----------
Net deferred tax asset after valuation allowance..................... $ 230,000 $ 127,000
---------- ----------
---------- ----------
</TABLE>
At December 31, 1995 and 1994, the net deferred assets of $230,000 and
$127,000, respectively were included in 'prepaid income taxes and deferred
taxes' in the accompanying consolidated balance sheets.
The tax effect of major temporary differences that gave rise to the
Company's net deferred tax asset are as follows:
<TABLE>
<CAPTION>
1995 1994
------------- -------------
<S> <C> <C>
Net operating loss carryforwards..................................... $ 952,000 $ 853,000
Restrictive Covenant payments........................................ 101,000 75,000
Other................................................................ 122,000 76,000
---------- ----------
$1,175,000 $1,004,000
---------- ----------
---------- ----------
</TABLE>
Income tax expense for the years ended December 31, 1995, 1994 and 1993
consisted of the following:
<TABLE>
<CAPTION>
1995 1994 1993
-------- -------- ---------
<S> <C> <C> <C>
Current tax expense:
Federal................................................. $531,000 $520,400 $180,000
State.................................................... 159,957 219,400 72,460
Deferred tax (benefit)..................................... (103,000) (60,000) (25,000)
-------- -------- --------
Provision for income taxes................................. $ 587,957 $679,800 $227,460
-------- -------- --------
-------- -------- --------
</TABLE>
In accordance with APB 28 (interim financial reporting), income taxes for
the six months ended June 30, 1996 are calculated at the estimated effective
annual (Federal and state) rate of 40% for JTS and 33% for Judge, Inc. As a
result of operating losses, no provision for income taxes was required in 1996
for JIS.
F-13
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 8. INCOME TAXES -- (CONTINUED)
In accordance with APB 28 (interim financial reporting), income taxes for
the six months ended June 30, 1996 are calculated at the estimated effective
annual (Federal and state) rate of 40% for Judge Technical and 33% for Judge,
Inc. As a result of operating losses, no provision for income taxes was required
in 1996 for JIS.
The effective tax rate for 1996, 1995, 1994 and 1993 was higher than the
applicable statutory tax rate, due to certain expenses that were not deductible
for tax purposes, Federal and state provisions at the maximum rates for JTS and
net operating losses for JCC, which is consolidated for financial reporting, but
not tax, purposes. A reconciliation of the Company's effective income tax rate
with the statutory federal rate follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1996 1995 1994 1993
-------- --------- --------- --------
<S> <C> <C> <C> <C>
Tax at statutory rate (34%)...................... $ 53,000 $ 363,000 $ 348,000 $ 98,000
Effect of losses of subsidiary not consolidated
for tax purposes............................... 144,000 92,000 227,000 75,000
Non-deductible tax penalties and other permanent
differences.................................... -- 90,000 -- 6,000
Other............................................ -- (31,000) (13,000) --
State income taxes, net of Federal tax benefit... 20,500 105,000 143,000 48,000
Federal income tax rate differentials due to
surtax exemptions.............................. (14,000) (31,000) (25,000) --
-------- -------- -------- --------
$203,500 $588,000 $680,000 $227,000
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
As a result of operating losses, no provision for income taxes was required
in 1996, 1995, 1994 or 1993 for JIS. For income tax reporting purposes, as of
December 31, 1995 JIS had an unused operating loss carryforward of
approximately $2,355,000, which will begin expiring in 2002, that may be applied
against future taxable income of JIS.
NOTE 9. COMMITMENTS
The Company and its subsidiaries lease several office facilities under
operating lease agreements that expire at various times through the year 2000.
Rent expense was approximately $392,000, $557,000, $394,000 and $381,000 for the
six months ended June 30, 1996 and years ended December 31, 1995, 1994 and 1993,
respectively. Minimum annual future rental commitments, exclusive of common area
maintenance costs and utilities, are as follows:
TWELVE MONTHS
ENDING JUNE 30, AMOUNT
-------------- ------------
1997.......................................................... $ 846,000
1998.......................................................... 828,000
1999.......................................................... 798,000
2000.......................................................... 749,000
--------------
$ 3,221,000
--------------
--------------
F-14
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 9. COMMITMENTS -- (CONTINUED)
YEAR ENDING
DECEMBER 31, AMOUNT
----------- --------------
1996........................................................... $ 769,000
1997........................................................... 741,000
1998........................................................... 717,000
1999........................................................... 703,000
2000........................................................... 302,000
-------------
$ 3,232,000
-------------
-------------
Effective January 1994, the Company became self-insured for workers'
compensation purposes and was liable for aggregate claims up to approximately
$185,000 for 1996, $78,000 for 1995 and $116,000 for 1994. In addition, the
Company is responsible for certain fixed costs including underwriting,
brokerage, reinsurance and administration costs.
The Company is partially self-insured for health care claims for eligible
active employees. The Company is liable for aggregate claims up to approximately
$418,000 annually at June 30, 1996. Self-insurance costs are accrued based upon
the aggregate of the liability for reported claims and an estimated liability
for claims incurred but not reported.
NOTE 10. RETIREMENT PLANS
The Company has various 401(k) retirement plans (the 'Plans') covering
substantially all employees. Employees may contribute a percentage of their
pre-tax salary to the Plans. Company contributions to the Plans are at the
discretion of the Board of Directors. The Company charged $-0-, $-0-, $40,000
and $15,000 to operations related to the Plans in 1996, 1995, 1994 and 1993,
respectively.
Effective July 1, 1996, all the Plans were merged into one Plan. The new
Plan has no Company contribution provision.
NOTE 11. SHAREHOLDERS' EQUITY (DEFICIT) AND EARNINGS PER SHARE
Deficit and Dividends
In accordance with the provisions of its line of credit, the Company is not
permitted to declare or pay any cash dividends on its common stock. See Note 4.
Additional Paid-In Capital
During 1996, additional paid-in capital decreased due to the JCC/DI merger
which was accounted for as a reverse acquisition and a 'pooling of interests.'
(Notes 12 and 16).
Capital Structure
On September 4, 1996, the Company's Board of Directors voted to modify the
Company's capital structure to increase the number of authorized common shares
to 50,000,000 and to adjust par value per share to $.01. In addition, the
Company authorized the issuance of 10,000,000 preferred shares with a par value
of $.01 per share. The Board of Directors also authorized a 52.6 to 1.0 split of
the
F-15
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 11. SHAREHOLDERS' EQUITY (DEFICIT) AND EARNINGS PER SHARE -- (CONTINUED)
Capital Structure -- (Continued)
outstanding common shares for shareholders of record on September 23, 1996.
Common Shares -- Warrants
During 1993, Judge issued to a financial advisor warrants to purchase
171,739 (Note 2) (split-adjusted) common shares of Judge. Subsequent to June 30,
1996, such warrants were exercised. See Note 18.
Stock Option Plan
Subsequent to June 30, 1996, the Company adopted an Incentive Stock Option
and Non-Qualified Stock Option Plan (the 'Plan') for key employees and
non-employee directors. Options may be granted under the Plan to purchase up to
a maximum of 1,500,000 of the Company's common shares, subject to certain
adjustments and restrictions. The price of each option shall be the fair market
value of the shares on the date of the grant.
NOTE 12. CAPITAL STRUCTURE OF JIS
Common Stock
In 1993, JCC issued to a financial advisor, warrants to purchase common
shares of JCC equal to 2% of its outstanding common shares at a purchase price
of $.005 per share. JCC issued 211,327 common shares to the financial adviser in
1995 upon the exercise of these warrants.
Preferred Shares
During 1991, the capital structure of JCC was modified to authorize
10,000,000 $.10 par value preferred shares. During 1991, $100,000 of debentures
and $266,577 of investor loans payable were converted to 1,000,000 and 2,665,770
preferred shares, respectively. Accrued interest of approximately $97,000
relating to these payables was contributed to capital.
The JCC preferred shares bore cumulative dividends at an annual rate of
$.005 per share. Cumulative dividends in arrears at December 31, 1995 and 1994
were approximately $74,000 and $55,000, respectively. No dividends were declared
or paid in 1996, 1995, 1994 or 1993. In February 1996, the preferred
shareholders waived receipt of all dividends due them. In February 1996, the
preferred shareholders converted their preferred shares into JCC common shares
on a one-to-one basis.
At December 31, 1995, 1994 and 1993, these preferred shares were eliminated
in consolidation and were presented at no value in minority interest, due to the
extent of JCC's shareholders' deficit at December 31, 1995, 1994 and 1993.
In February 1996, JCC's Board of Directors authorized additional preferred
shares, consisting of 1,125,000 $.01 par value Series A Convertible Preferred
Shares and 25,000 $1,000 stated value Series B Preferred Shares.
F-16
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 12. CAPITAL STRUCTURE OF JIS -- (CONTINUED)
In February 1996, JIS raised approximately $1,097,000 ($888,000, net of
costs) in a private offering of 822,628 Series A Convertible Preferred Shares at
a purchase price per share of $1.33. The Preferred A Shares are convertible into
JIS common shares at the holder's option, and conversion is mandatory at the
time of a subsequent public offering of common shares by JIS in excess of $5
million. The Preferred Shares carry a cumulative dividend of 7% per year, and
holders have a liquidation preference prior to the common shareholders and all
other existing classes. In the event JIS does not complete a public offering by
the eighth anniversary of the JCC/DI Merger, then JIS will have the right to
redeem the outstanding Series A Preferred Shares. See Note 16.(1) At June 30,
1996, this preferred stock is presented at $659,000 as minority interest in
the accompanying consolidated financial statements.
In February, 1996, and at the effective time of the JCC/DI Merger, advances
from the Company to JCC in the aggregate of $1,520,000 were converted into 1,500
Series B Preferred Shares of JCC, which were immediately converted into the same
number of shares of Series B Preferred Stock of JIS. The JIS Series B Preferred
Stock carries a cumulative annual dividend of 10%, are not convertible, do not
have a liquidation preference and are subject to mandatory redemption.
NOTE 13. STOCK REDEMPTION (JTS)
An employee of JTS (the 'Minority Shareholder') acquired an aggregate of
400 common shares of JTS over a period of time ending in 1990. The aggregate
purchase price for these shares was paid by the Minority Shareholder in the form
of unsecured promissory notes. At December 31, 1991, the aggregate outstanding
principal amount of these notes was $66,409.
On August 12, 1992, JTS redeemed the Minority Shareholder's shares for
$266,000 (of which $40,000 was paid in cash, $59,405 represented debt
forgiveness, and $126,595 was payable in 72 equal monthly installments). In
connection with this redemption, JTS agreed to pay the Minority Shareholder $333
per month for six years pursuant to an agreement and $13,194 per month for 72
months ($950,000 in the aggregate) pursuant to the Restrictive Covenant. The
Restrictive Covenant and the related liability were recorded at the net present
value of the payments, at an assumed interest rate of 8% (or $752,539). The
unpaid portions of the above liabilities were satisfied in full by JTS
subsequent to June 30, 1996. See Notes 5 and 18.
NOTE 14. SETTLEMENT OF PAYROLL TAX OBLIGATION
During 1994, the Company entered into an agreement with the Internal
Revenue Service (the 'IRS') regarding the payment of approximately $882,000 of
past-due payroll taxes, relating principally to the second and third quarters of
1993, and related assessed interest.
The parties agreed to an extended repayment term requiring a $150,000 down
payment and $22,000 per month beginning June 1994 until the total liability,
which had been subordinated to the Company's bank, was paid in full. In
connection with the past due payroll taxes, the Company was disputing certain
related penalty and interest amounts. Subsequent to June 30, 1996, the Company
entered into a tentative settlement agreement with the IRS, and at June 30,
1996, approximately $280,000 for penalty and interest is included in accounts
payable and accrued expenses in the accompanying consolidated balance sheet,
bringing the total outstanding liability related to the payroll taxes to
approximately $479,000 at June 30, 1996. In July 1996, the remaining liability
existing at that time ($445,000) was paid in full. See Note 18.
- ----------
(1) At June 30, 1996, this preferred stock is presented at $659,000 as "minority
interest" in the accompanying consolidated balance sheet. $229,000 of JIS
losses have been allocated to this minority interest in the accompanying
consolidated financial statements.
F-17
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 15. STATEMENT OF CASH FLOWS
Supplemental disclosure of non-cash investing and financing transactions:
During 1996, the Company entered into certain financing arrangements for
the purchase of property and equipment in the amount of approximately $348,000.
Effective February 29, 1996, JCC and DI effected a Business Combination
(see Note 16):
Acquisition of Business:
Inventories................................................ $ 39,101
Accounts receivable........................................ 104,127
Property and equipment..................................... 150,034
Other assets............................................... 10,780
------------
304,042
Accounts payable and accrued expenses...................... ( 82,087)
Due to Judge............................................... ( 100,000)
Deferred revenue and customer deposits..................... ( 362,037)
------------
Net liabilities assumed in business combination............ ( $240,082)
------------
------------
During 1995, the Company entered into certain financing arrangements for
the purchase of property and equipment in the amount of approximately $264,000.
During 1994, the Company entered into certain capital lease arrangements
for the purchase of property and equipment in the amount of approximately
$228,000.
NOTE 16. BUSINESS COMBINATION (THE JCC/DI MERGER)
On September 13, 1995, JCC and DI signed a Letter of Intent relating to the
JCC/DI Merger. On December 1, 1995, JCC and DI executed the JCC/DI Merger
Agreement, which was amended effective December 20, 1995 and February 26, 1996.
The JCC/DI Merger was consummated effective February 29, 1996.
In the JCC/DI Merger, JCC was merged into DI. DI survived the merger and
changed its name to JIS. JIS continued to be a public reporting company. In
connection with the merger, the Certificate of Incorporation of JIS was amended
to increase its authorized capital by 1,125,000 shares of $.01 value Series A
Convertible Preferred Stock (the 'Series A Preferred'), 1,500 shares of $1,000
stated value Series B Preferred Stock (the 'Series B Preferred') and 3,873,500
shares of 'blank check' preferred stock (for an aggregate of 5,000,000 shares of
new preferred stock). The Series A Preferred and Series B Preferred have
essentially the same rights and privileges as the Series A Convertible Preferred
Shares and Series B Preferred Shares of JCC existing immediately prior to the
merger.
In the JCC/DI Merger, each stockholder of DI received one share of JIS
common stock for every 31.96 shares of DI common stock held thereby immediately
prior to the merger, and each shareholder of JCC received one share of JIS
common stock for every 2.83 common shares of JCC held thereby immediately prior
to the merger. In addition, the JCC Series A Convertible Preferred Shares and
the Series B Shares outstanding prior to the JCC/DI Merger were converted into
the same numbers of Series A Preferred and Series B Preferred, respectively.
The conversion ratios were calculated so that, after giving effect to
certain reserved shares for issuance to employees following the merger and
assuming the sale of the maximum of 1,125,000 Series A Convertible Preferred
Shares offered in JCC's 1995 private offering (822,628 were actually
F-18
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 16. BUSINESS COMBINATION (THE JCC/DI MERGER) -- (CONTINUED)
sold) and the conversion of such maximum number of Series A Convertible
Preferred Shares to JCC common shares, there would be approximately 5,000,000
shares of common stock of JIS outstanding immediately following the merger, of
which holders of DI common stock immediately prior to the merger were to receive
in the aggregate approximately 5% (approximately 250,000 shares) and the holders
of JCC common shares and Series A Convertible Preferred Shares immediately prior
to the merger were to receive in the aggregate approximately 95% (approximately
4,750,000 shares). The Series B Preferred Stock was not included in the
foregoing percentage calculations.
The JCC/DI Merger was accounted for as a 'reverse acquisition' whereby JCC,
in substance, acquired DI, allocating the fair value of JCC shares exchanged
over the relative fair value of assets and liabilities of DI (assumed to equal
its book value) prior to the merger. No value was ascribed to DI's net loss
carryforwards as a result of limitations on these carryforwards subsequent to
the change in control.
NOTE 17. SEGMENT INFORMATION
The Company's operations cover two industry segments, the Contract and
Permanent Placement segment (consisting of the Company's Contract Placement
business and Permanent Placement business) and the Imaging and Network Services
segment. The following represents financial information for each of the
Company's reportable industry segments:
<TABLE>
<CAPTION>
CONTRACT AND IMAGING AND
PERMANENT NETWORK
PLACEMENT SERVICES ELIMINATIONS TOTAL
-------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers................... $ 31,217,187 $ 6,109,979 $ -- $ 37,327,166
Intersegment sales................................ -- 44,520 44,520 --
--------------- ------------- ------------- --------------
Total revenues.................................. $ 31,217,187 $ 6,154,499 $ 44,520 $ 37,327,166
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Income (loss) from operations..................... $ 862,784 ($ 335,301) $ -- $ 527,483
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Net income (loss)................................. $ 377,827 ($ 425,283) ($ 229,000) $ 181,544
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Depreciation and amortization..................... $ 212,228 $ 49,880 $ -- $ 262,108
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Identifiable assets............................... $ 13,412,406 $ 3,477,404 $ 1,868,925 $ 15,020,885
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Capital expenditures.............................. $ 511,935 $ 144,924 $ -- $ 656,859
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
</TABLE>
F-19
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 17. SEGMENT INFORMATION -- (CONTINUED)
<TABLE>
<CAPTION>
1995
-------------------------------------------------------------
CONTRACT AND IMAGING AND
PERMANENT NETWORK
PLACEMENT SERVICES ELIMINATIONS TOTAL
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers................... $ 55,079,572 $ 8,219,781 $ -- $ 63,299,353
Intersegment sales................................ -- 480,000 480,000 --
--------------- ------------- ------------- --------------
Total revenues.................................. $ 55,079,572 $ 8,699,781 $ 480,000 $ 63,299,353
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Income (loss) from operations..................... $ 1,810,035 ($ 46,156) $ -- $ 1,763,879
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Net income (loss)................................. $ 751,041 ($ 272,458) ($ 7,057) $ 485,640
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Depreciation and amortization..................... $ 384,419 $ 37,194 $ -- $ 421,613
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Identifiable assets............................... $ 10,900,309 $ 2,530,930 $ 1,799,375 $ 11,631,864
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Capital expenditures.............................. $ 474,100 $ 163,207 $ -- $ 637,307
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
1994
-------------------------------------------------------------
CONTRACT AND IMAGING AND
PERMANENT NETWORK
PLACEMENT SERVICES ELIMINATIONS TOTAL
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers................... $ 41,480,081 $ 3,773,336 $ -- $ 45,253,417
Intersegment sales................................ -- 402,000 402,000 --
--------------- ------------- ------------- --------------
Total revenues.................................. $ 41,480,081 $ 4,175,336 $ 402,000 $ 45,253,417
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Income (loss) from operations..................... $ 1,956,082 ($ 513,441) $ -- $ 1,442,641
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Net income (loss)................................. $ 1,009,858 ($ 666,607) $ -- $ 343,251
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Depreciation and amortization..................... $ 307,090 $ 33,618 $ -- $ 340,708
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Identifiable assets............................... $ 8,655,125 $ 1,050,453 $ 1,688,239 $ 8,017,339
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Capital expenditures.............................. $ 457,213 $ 22,756 $ -- $ 479,969
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
</TABLE>
<TABLE>
<CAPTION>
1993
-------------------------------------------------------------
CONTRACT AND IMAGING AND
PERMANENT NETWORK
PLACEMENT SERVICES ELIMINATIONS TOTAL
--------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Sales to unaffiliated customers................... $ 30,667,821 $ 4,401,046 $ -- $ 35,068,867
Intersegment sales................................ 90,000 -- 90,000 --
--------------- ------------- ------------- --------------
Total revenues.................................. $ 30,757,821 $ 4,401,046 $ 90,000 $ 35,068,867
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Income (loss) from operations..................... $ 757,424 ($ 136,572) $ -- $ 620,852
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Net income (loss)................................. $ 321,546 ($ 220,158) $ -- $ 101,388
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Depreciation and amortization..................... $ 256,748 $ 29,525 $ -- $ 286,273
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Identifiable assets............................... $ 6,105,562 $ 1,023,455 $ 1,442,240 $ 5,686,777
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
Capital expenditures.............................. $ 69,784 $ 21,681 $ -- $ 91,465
--------------- ------------- ------------- --------------
--------------- ------------- ------------- --------------
</TABLE>
See Note 2 for summary of significant accounting policies.
F-20
<PAGE>
JUDGE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
SIX MONTHS ENDED JUNE 30, 1996 AND
YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
NOTE 18. SUBSEQUENT EVENTS
Subsequent to June 30, 1996, the following occurred:
o The Company (JTS) reached a settlement agreement with the IRS regarding
past due payroll taxes and related interest and penalties (Note 14);
o The Company (JTS) reached an agreement with a former minority shareholder
(Note 13) to settle at less than face value the remaining balances on
certain notes payable (Note 5);
o The Company increased its Bank credit facility to approximately
$11,000,000 (Note 4);
o The Company engaged an investment banking firm to assist it in a public
offering of its common stock;
o The Company adopted an Incentive Stock Option and Non-Qualified Stock
Option Plan for key employees and non-employee directors (Note 11);
o The Company modified its capital structure and authorized a stock split
(Note 11);
o The Company acquired 100% of the outstanding stock of an information
technology training organization for a total purchase price of
$2,322,200. The transaction will be accounted for as a purchase and is
expected to result in goodwill of approximately $2,200,000. In the event
the Company is successful in its public offering of its common stock, the
purchase price will be paid in cash, notes and shares of the Company's
stock. In the event the public offering is not completed, consideration
will be in the form of cash and notes;
o The Company acquired substantially all of the assets and assumed
substantially all of the liabilities of an imaging and network services
organization for a total purchase price of $547,252. The transaction will
be accounted for as a purchase and is expected to result in goodwill of
approximately $945,000. In the event the Company is successful in its
public offering of its common stock, the purchase price will be paid
principally in cash at closing. In the event the public offering is not
completed, consideration will be principally in the form of a note
payable;
o The common stock warrants to purchase 171,739 shares (Notes 2 and 7)
of Judge described in Note 11 have been exercised.
o The Boards of Directors of Judge, Inc. and JIS approved the merger of
JIS into a newly-formed, wholly-owned subsidiary of Judge, Inc. This
merger is subject to approval by the shareholders of JIS and a
successful public offering of the Company's common shares.
F-21
<PAGE>
JUDGE GROUP, INC.
PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS
(UNAUDITED)
<TABLE>
<S> <C>
PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS............................................................. F-23
NOTES TO PRO FORMA CONSOLIDATING BALANCE SHEET, JUNE 30, 1996............................................ F-25
PRO FORMA CONSOLIDATING BALANCE SHEET, JUNE 30, 1996..................................................... F-27
NOTE TO PRO FORMA CONSOLIDATING STATEMENTS OF OPERATIONS, SIX MONTHS ENDED JUNE 30, 1996 AND YEAR ENDED
DECEMBER 31, 1995...................................................................................... F-29
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS, YEAR ENDED DECEMBER 31, 1995............................ F-30
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS, SIX MONTHS ENDED JUNE 30, 1996.......................... F-31
</TABLE>
F-22
<PAGE>
JUDGE GROUP, INC.
PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS
(UNAUDITED)
The following unaudited pro forma consolidating financial statements give
effect to a public offering of common shares of the Judge Group, Inc. ('Judge')
as described elsewhere in the Registration Statement, certain proposed
transactions of Judge, including a reorganization in which Judge, Inc. changed
its name to the Judge Group, Inc. and transferred all of its business, assets
and liabilities to a new wholly-owned subsidiary (named Judge, Inc.) formed to
conduct that business after the reorganization, in exchange for all of the
issued and outstanding stock of the new subsidiary, a stock split of Judge
common shares (approximately 52.6 to 1), a conversion of Judge convertible
debentures of $500,000 into shares of its common stock, an exercise of 3,265
outstanding warrants to purchase common stock, and certain business combinations
with Judge Imaging Systems, Inc. ('Imaging') (a consolidated subsidiary of
Judge), with The Berkeley Associates Corporation ('Berkeley') and with Systems
Automation, Inc. ('Systems'). The pro forma balance sheet gives effect to all of
the transactions as if they occurred on June 30, 1996. The pro forma balance
sheet is presented for informational purposes only and does not purport to be
indicative of the financial condition that actually would have resulted if the
business combinations had been consummated at June 30, 1996. The pro forma
statements of operations for 1995 and for the six months ended June 30, 1996,
give effect to all of the business transactions as if they occurred on January
1, 1995 and January 1, 1996, respectively. The pro forma statements of
operations are also presented for informational purposes only and do not purport
to be indicative of the results of operations that actually would have resulted
if the business combinations had been consummated at January 1, 1995 and January
1, 1996, respectively. The pro forma adjustments relate to various transactions
which occurred subsequent to June 30, 1996 and/or which will occur prior to or
on the effective date of the proposed public offering. These pro forma financial
statements should be read in conjunction with the separate historical financial
statements of Judge, Berkeley, Systems, and Imaging and notes thereto, which are
included elsewhere in this Registration Statement.
The following is a description of the terms of the business combination
between Judge and Berkeley which give rise to certain pro forma adjustments on
the accompanying pro forma consolidating financial statements. On or about
September 26, 1996 Judge purchased 100% of the outstanding stock of Berkeley for
a total purchase price of $2,322,200. In the event that Judge successfully
completes the public offering of stock currently being contemplated herein, then
the following terms apply. (In the event the public offering is not completed, a
revised payment schedule applies.) At settlement a cash payment of $175,000 is
to be made, and payments of $50,000 per month commencing October 1, 1996 through
December 1, 1996 become payable. At consummation of the public offering Judge
will provide to sellers of Berkeley a cash payment of $1,000,000 less cash paid
at settlement, plus the number of shares of stock of Judge that would equate to
$300,000 divided by the public offering price per share, plus a promissory note
in the amount of $300,000 bearing interest at the rate of 8% per annum and
payable in equal monthly installments commencing January 1, 1997 through August
1, 2000, plus $60,000 for a deferred withdrawal of cash. The remainder of the
purchase price, $572,200, is considered a holdback payment, as is an additional
cash withdrawal of $70,000 anticipated to occur prior to the settlement date but
deferred in accordance with the purchase agreement. The $572,200 holdback
payment portion of the above purchase price is to be paid following the
completion of an audit of Berkeley for the 1996 fiscal year end and contingent
on Berkeley reaching certain target pre-tax income amounts. The $70,000 deferred
cash withdrawal represents a withdrawal of cash for income taxes by the
shareholders of Berkeley, and is to be paid to the selling shareholders no later
than April 15, 1997. The base target pre-tax income ('base') for Berkeley for
1996 is $250,000. In the event that Berkeley's pre-tax income exceeds the base
but is less than $350,000, then it is entitled to a payment of a portion of the
holdback payments calculated by multiplying the $572,200 by a fraction
determined as follows. The denominator of the fraction shall be $100,000 (the
difference between $250,000 base and $350,000) and the numerator shall be the
amount by which pre-tax income exceeds $250,000. In the event 1996 pre-tax
income equals or exceeds
F-23
<PAGE>
JUDGE GROUP, INC.
PRO FORMA CONSOLIDATING FINANCIAL STATEMENTS -- (CONTINUED)
(UNAUDITED)
$350,000 then the full amount of the holdback payments shall be payable in the
form of a promissory note providing for 36 equal monthly payments of principal
plus interest at 8% per annum. In the event that 1996 pre-tax income is less
than $350,000, but greater than the base, payment shall be calculated as above
and any remainder of the $572,200 still unpaid shall remain unpaid pending
completion of an audit of Berkeley's books and records for fiscal year end 1997.
Payment of any such remainder shall be subject to Berkeley attaining a certain
1997 pre-tax income target. The base target pre-tax income for 1997 is $430,000.
In the event pre-tax income for 1997 equals or exceeds the base amount, then
payment of any remainder still unpaid shall be effected in the form of a
promissory note providing for payment over 36 equal monthly installments of
principal plus interest at 8% per annum. In the event 1997 pre-tax income is
less than $430,000 then no additional payments are to be made and any remainder
from 1996 is forfeited. The accompanying pro forma consolidating financial
statements reflect the purchase terms effective in the event of the successful
completion of a public offering of Judge stock and the assumption that
Berkeley's pre-tax income for 1996 is sufficient to require the full payment of
the $572,200 holdback.
The following is a description of the terms of the business combination
between Judge and Systems which give rise to certain pro forma adjustments on
the accompanying pro forma consolidating financial statements. On or about
September 2, 1996 Judge purchased substantially all of the tangible and
intangible assets of Systems for a total purchase price of $547,252. In the
event that Judge successfully completes the public offering of stock currently
being contemplated herein, then the following terms apply. (In the event the
public offering is not completed, a revised payment schedule applies.) At
settlement a cash payment of $75,000 is to be made. Within 15 days of the
consummation of the public offering a cash payment of $472,252 shall be
made. The accompanying pro forma consolidating financial statements reflect the
purchase terms effective in the event of the successful completion of a public
offering of Judge stock.
The pro forma consolidating statements of operations include the results of
operations of Imaging on a pro forma basis, as though its merger with DataImage,
Inc. occurred on January 1, 1995 and January 1, 1996, respectively. (The
description of that merger and pro forma statements of operations pertaining
solely to that transaction are included in the Form 10-Q for Imaging for the six
months ended June 30, 1996, and which is incorporated by reference in the
Registration Statement.) In addition, as more fully described in the
Registration Statement, Judge will, immediately prior to the public offering,
merge with Imaging in a statutory merger in which Imaging will merge into a
newly organized, wholly-owned subsidiary of Judge. The newly organized
subsidiary will be the surviving Corporation and change its name to Judge
Imaging, Inc. As a result, Imaging will become a wholly-owned subsidiary of
Judge at the time of the offering. In the merger each Imaging common share (not
already owned by Judge) or Series A Preferred share outstanding at the time of
the merger will be converted in the merger into $2.50 of value, payable in Judge
common shares. Since Imaging is effectively controlled by Judge (by virtue of
the combined ownership of Imaging by its parent, Judge, and Martin E. Judge,
Jr., the principal owner of Judge, being in excess of 50%) the transaction will
be accounted for as a corporate reorganization of entities under common control
('as-if pooling'), with no resulting increase recorded in the recorded assets
and liabilities of each company.
F-24
<PAGE>
JUDGE GROUP, INC.
NOTES TO PRO FORMA CONSOLIDATING BALANCE SHEET
(UNAUDITED)
JUNE 30, 1996
(1) Adjustment to record $26,800,000 proceeds of sale of 3,000,000 shares
of common stock at $10.00 per share, net of commissions of $2,100,000 and
estimated costs of approximately $1,100,000; record payment of $175,000 cash at
the time of purchase of The Berkeley Associates Corporation ('Berkeley'),
$975,000 additional cash and $60,000 deferred cash withdrawal at the successful
completion of the public offering; record payment of $75,000 cash at the time of
the business combination of Systems Automation, Inc. ('Systems'), and $472,252
additional cash at the successful completion of the public offering.
(2) Adjustment to record the goodwill created by the business combinations
of Berkeley and Systems calculated as follows:
<TABLE>
<CAPTION>
BERKELEY SYSTEMS
-------- -------
<S> <C> <C> <C>
Purchase price............................ $ 2,322,200 Purchase price............................ $ 547,252
Less: Shareholders Equity................. 112,123 Less assets purchased..................... 290,580
-------------
Goodwill.................................. $ 2,210,077 Plus liabilities assumed.................. 688,702
------------- -----------
-------------
Goodwill.................................. $ 945,374
-----------
-----------
</TABLE>
The above calculations of Goodwill assume that the fair values of the
assets and liabilities of Berkeley and Systems as of June 30, 1996 equal their
recorded values at that date. Goodwill will be amortized equally over 180 months
for Berkeley, and 120 months for Systems.
(3) Adjustment to record the liability for the $572,000 holdback payments
to Berkeley.
(4) Adjustments to record the following equity transactions:
<TABLE>
<S> <C>
Split existing shares (52.6 to 1) into 8,416,000 shares of Judge common stock,
par value $.01............................................................... $ 83,360
Sale and issuance of 3,000,000 shares of common stock of Judge, par value
$.01......................................................................... 30,000
Elimination of common stock of Berkeley at June 30, 1996....................... (15,620)
Elimination of common stock of Systems at June 30, 1996........................ (30,000)
Issuance of 30,000 shares of common stock of Judge, par value $.01 to sellers
of Berkeley ($300,000/$10)................................................... 300
Merger of Judge and Imaging; issuance of 892,748 Judge shares ($.01 par value)
in exchange for 2,748,363 minority owned common shares and 822,628 preferred
shares of Imaging............................................................ 8,927
Exercise of 3,265 warrants for 171,739 common shares .......................... 1,717
Conversion of convertible debentures (see note 6 below)........................ 5,260
-----------
Pro forma adjustments to common stock.......................................... $ 83,944
-----------
-----------
</TABLE>
F-25
<PAGE>
JUDGE GROUP, INC.
NOTES TO PRO FORMA CONSOLIDATING BALANCE SHEET -- (CONTINUED)
JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C>
Reduction in paid in capital due to stock split (see above)............... ($ 83,360)
Additional paid in capital from sale of 3,000,000 shares of common stock
of Judge ($26,800,000 proceeds less $30,000 common stock issued
above).................................................................. 26,770,000
Elimination of additional paid in capital of Berkeley..................... (52,670)
Paid in capital from issuance of 30,000 shares of common stock to sellers
of Berkeley............................................................. 299,700
Merger of Judge and Imaging (see above)................................... 650,073
Reduction in paid in capital due to exercise of warrants (see above)...... (1,717)
Conversion of convertible debentures (see note 6 below)................... 494,740
----------------
Pro forma adjustments to additional paid in capital....................... $ 28,076,766
----------------
----------------
Reduction of minority interest due to merger of Judge and Imaging (see
above).................................................................. ($ 659,000)
----------------
----------------
Reduction of retained earnings of Berkeley by deferred cash withdrawals... ($ 130,000)
Elimination of adjusted retained earnings of Berkeley..................... (107,488)
Elimination of deficit of Systems......................................... 428,122
----------------
Pro forma adjustments to retained earnings................................ $ 190,634
----------------
----------------
</TABLE>
(5) Adjustment to record a $70,000 deferred withdrawal by the sellers of
Berkeley, which is payable by April 15, 1997. (See description of the terms of
the business combination between Judge and Berkeley.)
(6) Adjustment to record conversion of $500,000 of convertible debentures
into 526,000.
(7) Adjustment to record note payable to sellers of Berkeley. (See
description of the terms of the business combination between Judge and
Berkeley.)
F-26
<PAGE>
JUDGE, GROUP, INC.
PRO FORMA CONSOLIDATING BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
ASSETS
<TABLE>
<CAPTION>
PRO FORMA
JUDGE GROUP, INC. SYSTEM PRO FORMA CONSOLIDATED
JUNE 30, 1996 BERKELEY AUTOMATION ADJUSTMENTS JUNE 30, 1996
---------------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CURRENT ASSETS:
Cash..................................... $ 28,433 $ 89,806 $ 20,882 $ 25,042,748(1) $25,181,869
Accounts receivable, net................. 11,368,815 290,340 168,716 11,827,871
Inventories.............................. 679,366 0 16,629 695,995
Prepaid taxes and deferred tax benefit... 476,076 38,053 0 514,129
Other.................................... 310,676 0 3,975 0 314,651
------------ --------- --------- ------------ -----------
TOTAL CURRENT ASSETS................... 12,863,366 418,199 210,202 25,042,748 38,534,515
------------ --------- --------- ------------ -----------
PROPERTY AND EQUIPMENT:
Furniture and office equipment........... 2,711,775 576,716 55,308 3,343,799
Automotive equipment..................... 42,224 0 0 42,224
Leasehold improvements................... 33,879 6,595 0 0 40,474
------------ --------- --------- ------------ -----------
2,787,878 583,311 55,308 0 3,426,497
Less: accumulated depreciation and
amortization........................... 1,236,625 404,967 0 0 1,641,592
------------ --------- --------- ------------ -----------
NET PROPERTY AND EQUIPMENT............. 1,551,253 178,344 55,308 0 1,784,905
------------ --------- --------- ------------ -----------
OTHER ASSETS:
Due from subsidiaries/affiliate.......... 0 0 20,367 0 20,367
Receivables -- officers and employees.... 375,774 0 0 0 375,774
Deposits................................. 102,384 0 0 0 102,384
Investment in subsidiaries, at cost...... 0 0 0 0 0
Other.................................... 106,812 0 4,703 0 111,515
Goodwill................................. 0 0 0 3,155,451(2) 3,155,451
Covenant not to compete, net of
accumulated amortization............... 21,296 0 0 0 21,296
------------ --------- --------- ------------ -----------
TOTAL OTHER ASSETS..................... 606,266 0 25,070 3,155,451 3,786,787
------------ --------- --------- ------------ -----------
$ 15,020,885 $ 596,543 $ 290,580 $ 28,198,199 $44,106,207
------------ --------- --------- ------------ -----------
------------ --------- --------- ------------ -----------
</TABLE>
F-27
<PAGE>
JUDGE, GROUP, INC.
PRO FORMA CONSOLIDATING BALANCE SHEET
JUNE 30, 1996
(UNAUDITED)
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
<TABLE>
<CAPTION>
PRO FORMA
JUDGE GROUP, INC. SYSTEM PRO FORMA CONSOLIDATED
JUNE 30, 1996 BERKELEY AUTOMATION ADJUSTMENTS JUNE 30, 1996
---------------- --------- ----------- ------------ -------------
<S> <C> <C> <C> <C> <C>
CURRENT LIABILITIES:
Current portion of long-term debt........ $ 303,291 $ 87,013 $ 202,748 $ 0 $ 593,052
Current portion of payroll tax
obligations............................ 199,554 0 0 0 199,554
Accounts payable and accrued expenses.... 4,517,019 80,458 255,865 70,000 (5) 4,923,342
Payroll and sales taxes.................. 610,025 30,927 0 0 640,952
Income taxes payable..................... 0 0 456 0 456
Deferred revenue and customer deposits... 571,414 53,481 229,633 0 854,528
Advances from shareholders............... 115,723 0 0 0 115,723
------------ --------- --------- ------------ -----------
TOTAL CURRENT LIABILITIES.............. 6,317,026 251,879 688,702 70,000 7,327,607
------------ --------- --------- ------------ -----------
LONG-TERM LIABILITIES:
Note payable, bank....................... 6,358,063 0 0 0 6,358,063
Deferred rent obligation................. 143,672 0 0 0 143,672
Due to subsidiaries...................... 0 0 0 0 0
Debt obligations, net of current
portion................................ 646,425 102,541 0 0 748,966
Deferred payments to Berkeley
shareholders........................... 0 0 0 572,200 (3) 572,200
Note payable, Berkeley shareholders...... 0 0 0 300,000 (7) 300,000
Convertible debentures................... 500,000 0 0 (500,000)(6) 0
------------ --------- --------- ------------ -----------
TOTAL LONG-TERM LIABILITIES............ 7,648,160 102,541 0 372,200 8,122,901
------------ --------- --------- ------------ -----------
MINORITY INTEREST.......................... 659,000 (659,000)(4) 0
SHAREHOLDERS' EQUITY:
Common stock............................. 800 15,620 30,000 83,944 (4) 130,364
Preferred stock.......................... 0 0 0 0 (4) 0
Additional paid-in capital............... 450,938 52,670 0 28,076,766 (4) 28,580,374
Retained earnings (deficit).............. (55,039) 237,488 (428,122) 190,634 (4) (55,039)
------------ --------- --------- ------------ -----------
396,699 305,778 (398,122) 28,351,344 28,655,699
Less: Treasury stock, at cost............ 0 (63,655) 0 63,655 (4) 0
------------ --------- --------- ------------ -----------
TOTAL SHAREHOLDERS' EQUITY (DEFICIT)... 396,699 242,123 (398,122) 28,414,999 28,655,699
------------ --------- --------- ------------ -----------
$ 15,020,885 $ 596,543 $ 290,580 $ 28,198,199 $44,106,207
------------ --------- --------- ------------ -----------
------------ --------- --------- ------------ -----------
</TABLE>
F-28
<PAGE>
JUDGE, GROUP, INC.
NOTES TO PRO FORMA
CONSOLIDATING STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
(1) Adjustments to reflect amortization of goodwill, as discussed in Note 2
in Notes to Pro Forma Consolidating Balance Sheets.
(2) Adjustments to reflect interest expense on notes payable, resulting
from business combination with Berkeley of $61,849 in the year ended December
31, 1995 and $32,850 in the six months ended June 30, 1996.
(3) Adjustments to record reduction in interest expense, relating to
conversion of convertible debentures into Judge common stock, of $50,000 in the
year ended December 31, 1995 and $25,000 in the six months ended June 30, 1996.
(4) Adjustment to record merger of Judge and Imaging as though it occurred
at the beginning of each of the pro forma periods presented. The adjustment
represents the elimination of the minority interest for each of the periods
presented.
(5) Adjustments to provide for Federal and state income tax expense
(benefit) attributable to income (loss) of Berkeley and Systems as well as the
amortization of goodwill and interest expense recognized in adjustments (1), (2)
and (3) above, all at an effective rate of 40%.
F-29
<PAGE>
JUDGE, GROUP, INC.
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
DATAIMAGE
PRO FORMA JUDGE GROUP, INC. BERKELEY
JUDGE GROUP INC. ADJUSTMENTS TOTAL ASSOCIATES
---------------- ----------- ---------------- -----------
REVENUES.................................................. $ 63,299,353 $1,284,333 $ 64,583,686 $ 2,324,524
------------ ---------- ------------ -----------
COSTS AND EXPENSES
Cost of Sales........................................... 47,550,114 800,841 48,350,955 1,807,348
Selling and Operating................................... 9,797,875 437,904 10,235,779 0
General and Administrative.............................. 4,187,485 0 4,187,485 443,181
------------ ---------- ------------ -----------
Total Costs and Expenses.............................. 61,535,474 1,238,745 62,774,219 2,250,529
------------ ---------- ------------ -----------
INCOME (LOSS) FROM OPERATIONS............................. 1,763,879 45,588 1,809,467 73,995
Interest Expense.......................................... (670,110) (6,070) (676,180) (16,325)
Other Income (expense).................................... (27,229) 0 (27,229) 1,335
------------ ---------- ------------ -----------
Income (loss) before Income
Tax Expense and Minority Interest....................... 1,066,540 39,518 1,106,058 59,005
Income Tax Expense (Benefit).............................. 587,957 0 587,957 0
------------ ---------- ------------ -----------
INCOME (LOSS) BEFORE MINORITY INTEREST.................... $ 478,583 $ 39,518 $ 518,101 $ 59,005
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED
SUBSIDIARY.............................................. 7,057 0 7,057 0
------------ ---------- ------------ -----------
NET INCOME (LOSS)......................................... 485,640 39,518 525,158 59,005
------------ ---------- ------------ -----------
------------ ---------- ------------ -----------
NET INCOME (LOSS) PER COMMON SHARE:
PRIMARY.................................................
FULLY DILUTED...........................................
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING...............................
<CAPTION>
PRO FORMA
CONSOLIDATED
SYSTEM PRO FORMA YEAR ENDED
AUTOMATION ADJUSTMENTS 31-DEC-95
----------- ----------- ------------
REVENUES.................................................. $1,187,273 $ 0 $ 68,095,483
---------- --------- ------------
COSTS AND EXPENSES
Cost of Sales........................................... 523,448 50,681,751
Selling and Operating................................... 659,967 10,895,746
General and Administrative.............................. 169,976 241,876 (1) 5,042,518
---------- --------- ------------
Total Costs and Expenses.............................. 1,353,391 241,876 66,620,015
---------- --------- ------------
INCOME (LOSS) FROM OPERATIONS............................. (166,118) (241,876) 1,475,468
Interest Expense.......................................... (6,261) (7,049)(2)(3) (705,815)
Other Income (expense).................................... 180,901 0 155,007
---------- --------- ------------
Income (loss) before Income
Tax Expense and Minority Interest....................... 8,522 (248,925) 924,660
Income Tax Expense (Benefit).............................. 0 (72,559)(5) 515,398
---------- --------- ------------
INCOME (LOSS) BEFORE MINORITY INTEREST.................... $ 8,522 ($176,366) $ 409,262
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED
SUBSIDIARY.............................................. 0 (7,057)(4) 0
---------- --------- ------------
NET INCOME (LOSS)......................................... 8,522 (183,423) 409,262
---------- --------- ------------
---------- --------- ------------
NET INCOME (LOSS) PER COMMON SHARE:
PRIMARY................................................. $ 0.03
------------
------------
FULLY DILUTED........................................... $ 0.03
------------
------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING............................... 13,042,737
------------
------------
</TABLE>
F-30
<PAGE>
JUDGE, GROUP, INC.
PRO FORMA CONSOLIDATING STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996
(UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
DATAIMAGE
PRO FORMA JUDGE GROUP, INC. BERKELEY
JUDGE GROUP INC. ADJUSTMENTS TOTAL ASSOCIATES
---------------- ----------- ---------------- -----------
REVENUES.................................................. $ 37,327,166 $ 122,692 $ 37,449,858 $ 1,479,473
---------------- ----------- ---------------- -----------
COSTS & EXPENSES
Cost of sales............................................. 27,587,582 60,450 27,648,032 976,149
Selling and operating..................................... 6,363,990 77,829 6,441,819 0
General and administrative................................ 2,848,111 7,317 2,855,428 261,962
---------------- ----------- ---------------- -----------
Total Costs & Expenses.................................. 36,799,683 145,596 36,945,279 1,238,111
---------------- ----------- ---------------- -----------
INCOME (LOSS) FROM OPERATIONS............................. 527,483 (22,904) 504,579 241,362
Interest Expense.......................................... (371,439) 0 (371,439) (9,524)
Other income (expense).................................... 0 (3,598) (3,598) 122
---------------- ----------- ---------------- -----------
Income (loss) before income tax expense (benefit) and
minority interest....................................... 156,044 (26,502) 129,542 231,960
Income Tax Expense (benefit).............................. 203,500 0 203,500 0
---------------- ----------- ---------------- -----------
Income (loss) before minority interest in net income
(loss) of consolidated subsidiary....................... (47,456) (26,502) (73,958) 231,960
Minority interest in net income (loss) of consolidated
subsidiary.............................................. 229,000 0 229,000 0
---------------- ----------- ---------------- -----------
NET INCOME (LOSS)......................................... $ 181,544 ($ 26,502) $ 155,042 $ 231,960
---------------- ----------- ---------------- -----------
---------------- ----------- ---------------- -----------
NET INCOME (LOSS) PER COMMON SHARE:
Primary.................................................
Fully diluted...........................................
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING...............................
<CAPTION>
PRO FORMA
CONSOLIDATED
SIX MONTHS
SYSTEM PRO FORMA ENDED
AUTOMATION ADJUSTMENTS 30-JUNE-96
----------- ----------- ------------
REVENUES.................................................. $ 466,683 $ 0 $ 39,396,014
--------- --------- ------------
COSTS & EXPENSES
Cost of sales............................................. 172,998 0 28,797,179
Selling and operating..................................... 354,388 0 6,796,207
General and administrative................................ 95,195 120,938 (1) 3,333,523
--------- --------- ------------
Total Costs & Expenses.................................. 622,581 120,938 38,926,909
--------- --------- ------------
INCOME (LOSS) FROM OPERATIONS............................. (155,898) (120,938) 469,105
Interest Expense.......................................... (2,878) (5,450)(2)(3) (389,291)
Other income (expense).................................... 107 0 (3,369)
--------- --------- ------------
Income (loss) before income tax expense (benefit) and
minority interest....................................... (158,669) (126,388) 76,445
Income Tax Expense (benefit).............................. 0 (21,239)(5) 182,261
--------- --------- ------------
Income (loss) before minority interest in net income
(loss) of consolidated subsidiary....................... (158,669) (105,149) (105,816)
Minority interest in net income (loss) of consolidated
subsidiary.............................................. 0 (229,000)(4) 0
--------- --------- ------------
NET INCOME (LOSS)......................................... ($158,669) ($334,149) ($ 105,816)
--------- --------- ------------
--------- --------- ------------
NET INCOME (LOSS) PER COMMON SHARE:
Primary................................................. ($ 0.01)
------------
Fully diluted........................................... ($ 0.01)
------------
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING............................... 13,042,737
-----------
</TABLE>
F-31
<PAGE>
================================================================================
NO DEALER, SALES REPRESENTATIVE OR ANY OTHER PERSON HAS BEEN AUTHORIZED TO
GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS IN CONNECTION WITH THIS
OFFERING OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, ANY OF THE SELLING SHAREHOLDERS, OR ANY OF THE
UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A
SOLICITATION OF ANY OFFER TO BUY ANY SECURITIES OTHER THAN THE SHARES OF COMMON
SHARES TO WHICH IT RELATES OR AN OFFER TO, OR A SOLICITATION OF, ANY PERSON IN
ANY JURISDICTION WHERE SUCH AN OFFER OR SOLICITATION WOULD BE UNLAWFUL. NEITHER
THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER ANY
CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY OR THAT INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY
TIME SUBSEQUENT TO THE DATE HEREOF.
------------------
TABLE OF CONTENTS
<TABLE>
<S> <C>
PAGE
----
Prospectus Summary............................. 3
Risk Factors................................... 7
Use of Proceeds................................ 13
Dividend Policy................................ 13
Dilution....................................... 14
Capitalization................................. 15
Selected Consolidated Financial Data........... 16
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 17
Business....................................... 24
Management..................................... 37
Ownership: Principal and Selling Shareholders.. 41
Certain Transactions........................... 42
Description of Capital Stock................... 43
Shares Eligible for Future Sale................ 45
Underwriting................................... 47
Legal Matters.................................. 48
Experts........................................ 48
Additional Information......................... 48
Index to Financial Statements.................. F-1
</TABLE>
------------------
UNTIL , 1996, ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON
SHARES OFFERED HEREBY, WHETHER OR NOT PARTICIPATING IN THIS DISTRIBUTION, MAY BE
REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE OBLIGATIONS OF
DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO
THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
===============================================================================
===============================================================================
3,650,000 SHARES
THE JUDGE GROUP, INC.
COMMON SHARES
-------------------
PROSPECTUS
-------------------
JANNEY MONTGOMERY SCOTT INC.
, 1996
===============================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses payable by the Registrant in
connection with this Registration Statement. All of such expenses are estimates,
other than the filing and listing fees payable to the Securities and Exchange
Commission and the National Association of Securities Dealers, Inc. The Selling
Shareholders will not bear any expenses of this Offering.
<TABLE>
<S> <C>
Filing Fee -- Securities and Exchange Commission.......................... $ 15,922
Filing Fee -- National Association of Securities Dealers, Inc............. 5,117
Listing Fees -- Nasdaq Stock Market....................................... 50,000
Fees and Expenses of Accountants.......................................... 300,000
Fees and Expenses of Counsel.............................................. 250,000
Printing Expenses......................................................... 100,000
Blue Sky Fees and Expenses................................................ 10,000
Investment Advisory Fee................................................... 300,000
Miscellaneous Expenses.................................................... 68,961
-------------
Total................................................................... $ 1,100,000
-------------
-------------
</TABLE>
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Amended and Restated Articles of Incorporation provide that
no director or officer of the Company shall be personally liable for monetary
damages except to the extent that by law a director's liability for monetary
damages may not be limited. The effect of this provision is to prevent the
Company and its shareholders (through shareholder derivative suits on behalf of
the Company) from recovering monetary damages against a director for breach of
certain fiduciary duties as a director (including breaches resulting from
grossly negligent conduct). This provision does not, however, exonerate the
directors from liability (i) pursuant to any criminal statute, (ii) for the
payment of taxes pursuant to federal, state or local law, or (iii) for
self-dealing, willful misconduct or recklessness. The By-laws of the Company
provide for indemnification of the officers and directors of the Company to the
fullest extent permitted by applicable law. Applicable law permits
indemnification for all matters (including those asserted in derivative actions)
except for those determined by a court to have constituted willful misconduct or
recklessness.
The Registrant has obtained directors' and officers' liability insurance.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
On September __, 1996 the Company issued 171,739 Common Shares to The
Gemstone Group, Inc. upon exercise of its warrant issued by the Company on July
8, 1993. This transaction was exempt from the registration requirements of the
Securities Act pursuant to Section 4 (2) thereof.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF DOCUMENT
- --------- -----------------------
<S> <C>
1.1** Form of Underwriting Agreement.
2.1** Agreement and Plan of Merger, among the Company, Judge Acquisition, Inc. and Judge Imaging Systems, Inc.
3.1* Amended and Restated Articles of Incorporation of the Company.
3.2* Amended and Restated By-Laws of the Company.
</TABLE>
II-1
<PAGE>
<TABLE>
<S> <C>
4.1* 10% Convertible Senior Subordinated Note Purchase Agreement.
4.3* Third Amended and Restated Loan and Security Agreement, dated September 3, 1996, between the Company and
Midlantic Bank, N.A.
5.1** Opinion of Drinker Biddle & Reath.
10.1* Lease of Two Bala Plaza, Bala Cynwyd, Pennsylvania, dated January 21, 1994, between The Prudential
Insurance Company of America, as landlord, and Judge, Inc., as tenant.
10.2** Stock Purchase Agreement by and among the Company, Berkeley Associates Corporation, Sandy Mayer and
Gregory McCartney.
10.3** Asset Purchase Agreement by and among the Company, Systems Integration, Inc. and ______.
10.4* 1996 Incentive Stock Option and Non-Qualified Stock Option Plan for Key Employees and Non-Employee
Directors.
10.5* Professional Services Agreement between Merck & Co., Inc. and
Judge Technical Services, Inc.
10.6* Split-Dollar Agreement by and between Judge, Inc. and Dennis F. Judge, Trustee of the Irrevocable
Agreement of Trust of Martin E. Judge, Jr., Settlor, dated December 28, 1995.
10.7* Split-Dollar Agreement by and between Judge, Inc. and Kathleen Dunn, Trustee of the Irrevocable
Agreement of Trust of Michael Dunn, Settlor, date June 19, 1996.
10.8* Split-Dollar Agreement by and between Judge, Inc. and Ann L. Judge, Trustee of the Irrevocable Agreement
of Trust of Martin E. Judge, Jr., Settlor, dated December 20, 1995.
10.9* Split-Dollar Agreement by and between Judge, Inc. and D. Michael Carmody, Trustee of the Irrevocable
Agreement of Trust of Michael Dunn, Settlor, dated June 19, 1996.
10.10* Employment Agreement, by and between Judge Computer Corporation and Wendy Greenberg.
10.11* Employment Agreement, by and between Judge Imaging Systems, Inc. and Jeff Andrews.
21.1* Subsidiaries of the Company.
23.1** Consent of Drinker Biddle & Reath (included in their opinion filed as Exhibits 5.1).
23.2* Consent of Rudolph, Palitz LLP.
24.1* Powers of Attorney (included on the signature page hereto).
27.1* Financial Data Schedule.
</TABLE>
- ------------------
* Filed herewith.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
Schedule II. Valuation and Qualifying Accounts
All other schedules of Judge for which provision is made in the applicable
accounting regulations of the Commission are not required, are inapplicable or
have been disclosed in the Notes to the Consolidated Financial Statements and
therefore have been omitted.
ITEM 17. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 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 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
II-2
<PAGE>
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 Securities Act
of 1933, the information omitted from the form of prospectus filed as part
of this Registration Statement in reliance upon Rule 430A and contained in
the form of prospectus filed by the registrant pursuant to Rule 424(b)(1)
or (4) or 497(h) under the Securities Act shall be deemed to be part of
this Registration Statement as of the time it was declared effective.
2. For the purposes of determining any liability under the Securities
Act of 1933, 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.
The undersigned registrant hereby undertakes to provide to the underwriters
at the closing specified in the underwriting agreements certificates in such
denominations and registered in such names as required by the underwriters to
permit prompt delivery to each purchaser.
II-3
<PAGE>
SIGNATURES AND POWERS OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned and hereunto duly authorized in the Town of Bala Cynwyd,
Commonwealth of Pennsylvania, on the 30th day of September, 1996.
THE JUDGE GROUP, INC.
By: /s/ Martin E. Judge, Jr.
----------------------------------
Martin E. Judge, Jr.
Chief Executive Officer
Each person whose signature appears below hereby constitutes and appoints
Martin E. Judge, Jr. and Jeffrey J. Andrews as his attorneys-in-fact and agents,
with full power and substitution for him in any and all capacities, to sign any
or all amendments or post-effective amendments to this Registration Statement,
or any Registration Statement for the same offering that is to be effective upon
filing pursuant to Rule 462(b) under the Securities Act of 1933, and to file the
same, with exhibits thereto and other documents in connection therewith or in
connection with the registration of the Common Shares under the Securities
Exchange Act of 1934, as amended, with the Securities and Exchange Commission,
granting unto each of such attorneys-in-fact the agents full power and authority
to do and perform each and every act and thing requisite and necessary in
connection with such matters and hereby ratifying and confirming all that each
of such attorneys-in-fact and agents or his 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 and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Martin E. Judge, Jr. Chief Executive Officer and Chairman September 30, 1996
- ------------------------------------------- of the Board
Martin E. Judge, Jr.
(Principal Executive Officer)
/s/ Jeffrey J. Andrews Chief Financial Officer and Treasurer September 30, 1996
- -------------------------------------------
Jeffrey J. Andrews
(Principal Financial and Accounting Officer)
/s/ Michael A. Dunn Executive Vice President and Director September 30, 1996
- -------------------------------------------
Michael A. Dunn
/s/ Richard T. Furlano President and Director September 30, 1996
- -------------------------------------------
Richard T. Furlano
</TABLE>
II-4
EXHIBIT 2.1
AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of
September 4, 1996, is by and among JUDGE IMAGING SYSTEMS, INC., a Delaware
corporation ("JIS"), JUDGE, INC., a Pennsylvania corporation ("Judge"), and
JUDGE ACQUISITION, INC., a Delaware corporation and a wholly-owned subsidiary of
Judge ("Acquisition").
BACKGROUND
The respective boards of directors of JIS, Judge and Acquisition have
each approved the acquisition of JIS by Judge through a merger (the "Merger") of
JIS with and into Acquisition (JIS and Acquisition being sometimes hereinafter
together referred to as the "Constituent Corporations"), upon the terms and
subject to the conditions hereinafter set forth, in which outstanding shares of
JIS Common Stock, par value $.01 per share ("JIS Common Shares"), and JIS Series
A Convertible Preferred Stock, par value $.01 per share ("JIS Series A Preferred
Shares") will be converted into and become shares of Judge Common Stock, par
value $.01 per share ("Judge Common Shares").
TERMS
NOW, THEREFORE, in consideration of the mutual representations,
warranties, covenants, agreements and conditions contained herein, and in order
to set forth the terms and conditions of the Merger and the mode of carrying the
same into effect, the parties hereto, intending to be legally bound, hereby
agree as follows:
SECTION 1
THE MERGER
1.1 The Merger. At the Effective Time (as hereinafter defined), JIS shall be
merged with and into Acquisition pursuant to this Agreement, the separate
corporate existence of JIS shall cease (except as it may be continued by
operation of law) and Acquisition shall continue as the surviving corporation
under the corporate name "Judge Imaging Systems, Inc.," all upon the terms and
subject to the conditions provided for in this Agreement and pursuant to the
Delaware General Corporation Law (the "DGCL"). Acquisition, as it exists from
and after the Effective Time, is sometimes hereinafter referred to as the
"Surviving Corporation."
1.1.1 Effect of the Merger. The Merger shall have the effects specified
in Sections 259, 260 and 261 of the DGCL. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, except as otherwise
provided herein, all the property, rights, privileges, powers and franchises of
Acquisition and JIS shall vest in the Surviving
<PAGE>
Corporation, and all debts, liabilities and duties of Acquisition and JIS shall
become the debts, liabilities and duties of the Surviving Corporation.
1.1.2 Certificate of Incorporation. At the Effective Time, the
Certificate of Incorporation of the Surviving Corporation shall be the
Certificate of Incorporation of Acquisition as in effect immediately prior to
the Effective Time, continuing until thereafter amended in accordance with the
provisions therein and as provided by the DGCL, except that as of the Effective
Time, the following provision of the Certificate of Incorporation of the
Surviving Corporation shall be amended in its entirety to read as follows:
"1. The name of the corporation is Judge Imaging Systems, Inc."
1.1.3 Bylaws. At the Effective Time, the Bylaws of the Surviving
Corporation shall be the Bylaws of Acquisition as in effect immediately prior to
the Effective Time, continuing until thereafter amended in accordance with its
terms and the Certificate of Incorporation of the Surviving Corporation and as
provided by the DGCL.
1.1.4 Directors and Officers. The persons who are the directors and
officers of JIS at the Effective Time shall become the directors and officers of
the Surviving Corporation at the Effective Time. Such persons shall hold such
positions as directors and officers until their successors are elected or
appointed in accordance with the Certificate of Incorporation and the Bylaws of
the Surviving Corporation.
1.1.5 Tax-Free Reorganization. The parties intend that the Merger
qualify as a tax-free reorganization under Section 368(a) of the Internal
Revenue Code of 1986, as amended, and the regulations thereunder (the "Code").
1.2 Closing and Effective Time. Subject to the Merger receiving the Requisite
Stockholder Approval of JIS stockholders pursuant to Section 5.2 and subject to
the provisions of this Agreement, the parties shall hold a closing (the
"Closing") on either (i) the later of (A) the first business day following the
meeting of the stockholders of JIS to consider and vote upon the Merger or
(B) the business day on which the last of the conditions set forth in Section 6
to be fulfilled prior to the Closing is fulfilled or waived, or (ii) such other
date as the parties hereto may agree (the "Closing Date"), at 10:00 A.M. (local
time) at the offices of Drinker Biddle & Reath, Berwyn, Pennsylvania, or at such
other time or place as the parties hereto may agree. On the Closing Date, the
parties shall effect the Merger by filing a Certificate of Merger (the
"Certificate of Merger") with the Secretary of State of the State of Delaware in
accordance with the provisions of the DGCL. The Merger shall become effective at
the time of the filing of the Certificate of Merger or at such later time on the
Closing Date as may be specified in the filing with the Secretary of State of
the State of Delaware (the "Effective Time"). As a result of the Merger, the
Surviving Corporation shall become a wholly-owned subsidiary of Judge at the
Effective Time.
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SECTION 2
CONVERSION OF SHARES AND OTHER MATTERS
2.1 Cancellation of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of Judge, Acquisition, JIS or any holder of
any shares of capital stock of JIS (the "JIS Stock"):
2.1.1 Cancellation of Treasury Stock. Each JIS Common Share and each
share of any class or series of JIS Preferred Shares ("JIS Preferred Shares")
which may be held in the treasury of JIS immediately prior to the Effective Time
shall be canceled and shall cease to exist at and after the Effective Time
without payment of any consideration therefor.
2.1.2 Cancellation of JIS Series B Preferred Shares. Each share of JIS
Series B Preferred Shares, par value $.01 per share ("JIS Series B Preferred
Shares"), issued and outstanding immediately prior to the Effective Time shall
cease to the outstanding and shall automatically be canceled and retired at the
Effective Time of the Merger.
2.1.3 Cancellation of JIS Options; No Convertible Securities. All
options and warrants, if any, to purchase JIS Common Shares that have been
issued by JIS and that are outstanding immediately prior to the Effective Time
shall be canceled and shall cease to exist at and after the Effective Time and
no capital stock of the Surviving Corporation or Judge, cash or other
consideration shall be paid or delivered in exchange therefor or in exercise
thereof in connection with the Merger. At the Effective Time, other than as
described in Section 2.2 with respect to the conversion of JIS capital stock in
the Merger, and Section 2.4 with respect to shares held by Dissenters (as
hereinafter defined), there shall not be any other securities, rights, warrants
or other instruments originally issued by JIS which, after consummation of the
Merger, would be convertible into or exercisable for securities of the Surviving
Corporation or Judge.
2.1.4 Cancellation of JIS Common Shares owned by Judge. Each JIS Common
Share owned by Judge immediately prior to the Effective Time shall be canceled
and shall cease to exist at and after the Effective Time without payment of any
consideration therefor.
2.2 Conversion of JIS Capital Stock. At the Effective Time, by virtue of the
Merger and without any action on the part of Judge, Acquisition, JIS or any
holder of any JIS Stock, except as provided in Sections 2.1 (with respect to
shares held by Judge) and 2.4 (with respect to shares held by Dissenters), each
remaining outstanding JIS Common Share and JIS Series A Preferred Share (and
together with JIS Common Shares, "JIS Shares") shall be converted (subject to
the provisions set forth in Section 2.3 regarding fractional share interests) as
follows:
2.2.1 Each such JIS Common Share shall be converted into that
number of Judge Common Shares equal to $2.50 divided by the offering price to
the public (the "IPO Offering Price") of Judge Common Shares registered under
the Securities Act of 1933, as amended (the "1933 Act"), on a registration
statement (the "IPO Registration Statement") on
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Form S-1 filed with the Securities and Exchange Commission (the "SEC") and
declared effective by the SEC prior to the Effective Time; and
2.2.2 Each such JIS Series A Preferred Share shall be
converted into that number of Judge Common Shares obtained by (i) dividing $2.50
by the IPO Offering Price, and (ii) multiplying the quotient so obtained by the
number of JIS Common Shares issuable upon the conversion of such JIS Series A
Preferred Share immediately prior to the Effective Time. On the date hereof,
such conversion ratio is one JIS Common Share per one JIS Series A Preferred
Share so converted.
2.2.3 The Judge Common Shares to be issued in the Merger
pursuant to this Section 2.2 are referred to herein as the "Merger Shares."
2.3 No Fractional Shares. No fractional Judge Common Shares will be issued in
the Merger and each holder of outstanding JIS Shares immediately prior to the
Effective Time excluding Dissenters (the "JIS Holders") will receive cash in
lieu of any fraction of a Judge Common Share otherwise issuable to such person
in an amount equal to such fraction multiplied by the IPO Offering Price of
Judge Common Shares.
2.4 Dissenting Shares. Notwithstanding anything herein to the contrary, JIS
Common Shares and JIS Preferred Shares that are outstanding immediately prior to
the Effective Time and that are held by stockholders, if any, who shall have
performed all such acts as are required to perfect appraisal rights pursuant to
Section 262 of the DGCL (a "Dissenter") shall be converted into the right to
receive the consideration payable in respect thereof in accordance with the
DGCL, unless such holder loses the status and rights of a Dissenter after the
Effective Time. Any such payment shall be made by JIS. If after the Effective
Time such holder loses the status and rights of a Dissenter, the JIS Shares held
by such holder shall be treated as if they had been converted as of the
Effective Time into the right to receive such holder's allocable portion of the
Merger Shares. JIS shall promptly provide Judge with copies of any written
demand for payment received by JIS from a Dissenter, and Judge shall have the
right to participate in all negotiations and proceedings with respect to any
such demand. JIS shall not, except with the prior written consent of Judge, make
any payment with respect to, or settle or offer to settle, any such demand.
2.5 Exchange Procedure.
2.5.1 Exchange Agent. As of the Effective Time, Judge shall deposit
with a bank, trust company, transfer agent or other person designated by Judge,
which may be Judge itself (the "Exchange Agent"), for the benefit of each holder
of an outstanding certificate or certificates (the "JIS Certificates") which
prior thereto represented JIS Shares, for exchange in accordance with this
Section 2.5, certificates representing the Merger Shares.
2.5.2 Surrender of Certificates. As promptly as practicable after the
Effective Time, the Exchange Agent shall mail to each holder of an outstanding
certificate or certificates
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which prior thereto represented JIS Shares (i) a letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
JIS Certificates shall pass, only upon delivery of the JIS Certificates to the
Exchange Agent and shall be in such form and have such other provisions as Judge
and JIS may reasonably specify), and (ii) instructions for use in effecting the
surrender of the JIS Certificates in exchange for certificates representing
Judge Common Shares and any cash in lieu of any fractional Judge Common Shares.
Such holder shall upon such surrender receive in exchange therefor a certificate
or certificates representing the number of whole Judge Common Shares into which
such JIS Shares shall have been converted. Until so surrendered and exchanged,
each outstanding certificate which, prior to the Effective Time, represented JIS
Shares shall, upon and after the Effective Time, be deemed for all purposes
(other than to the extent provided in the following sentence) to evidence
ownership of the number of whole Judge Common Shares into which such JIS Shares
have been converted. Dividends, if any, payable after the Effective Time to
holders of Judge Common Shares shall, at Judge's option, be withheld from
holders of certificates formerly representing JIS Shares until such certificates
(or lost share affidavits reasonably acceptable in form and substance to Judge)
are surrendered for exchange in accordance with this Section 2.5 and, if so
withheld, shall then be paid without interest thereon.
2.5.3 Unsurrendered Certificates. In the event that any certificates
formerly representing JIS Shares (or lost share affidavits reasonably acceptable
in form and substance to Judge) are not surrendered for exchange by the first
anniversary of the Effective Time (the "Unsurrendered Certificates"), those
certificates representing Judge Common Shares corresponding to such
Unsurrendered Certificates then held by the Exchange Agent shall be delivered to
Judge, upon demand, and any stockholders of JIS who have not previously complied
with this Section 2.5 shall thereafter look only to Judge for payment of their
claim for Judge Common Shares and any cash in lieu of fractional Judge Common
Shares.
SECTION 3
MATTERS PRIOR TO CLOSING
3.1 Corporate Reorganization.
3.1.1 Prior to Effective Time, Judge intends to create a wholly-owned
subsidiary, Judge Subsidiary, Inc., a Delaware corporation (the "Subsidiary").
Judge intends, pursuant to a Contribution Agreement (or such other agreement) by
and between Judge and Subsidiary, to contribute all assets of its current
businesses (the "Judge Businesses"), including the assets associated with such
businesses, and the associated obligations and liabilities of the Judge
Businesses to the Subsidiary, however, Judge shall retain the JIS Common Shares
and the shares of common stock of Judge Technical Services, Inc. ("Judge
Technical") which Judge owns at the date hereof. In connection therewith, Judge
shall change its name to Judge Group, Inc. ("Judge Group") and Subsidiary shall
change its name to Judge, Inc. ("New Judge").
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3.1.2 In addition, (i) the Convertible Senior Subordinated Promissory
Notes of Judge (the "Lore Notes"), issued by Judge pursuant to a 10% Convertible
Senior Subordinated Note Purchase Agreement (the "Purchase Agreement"), dated
July 1994, which Lore Notes are convertible into Judge Common Shares, shall,
prior to the Effective Time, be fully converted into Judge Common Shares, and
(ii) a warrant held by The Gemstone Group, Inc. (the "Gemstone Warrant"), to
purchase Judge Common Shares at $.005 per share, shall, prior to the Effective
Time, be fully exercised for Judge Common Shares.
3.1.3 The transactions contemplated in Sections 3.1.1 and 3.1.2 are
collectively referred to as the "Corporate Reorganization." After the Corporate
Reorganization, Judge Group shall be a holding company and each of New Judge and
Judge Technical shall be a wholly-owned subsidiary of Judge Group. In the event
that the Corporate Reorganization is not consummated prior to Closing, this
Agreement shall terminate and the Merger shall be abandoned without any action
on the part of Judge, Acquisition or JIS.
3.2 Public Offering. Judge intends to make an offering of its Judge Common
Shares to the public, underwritten on a firm commitment basis by a managing
underwriter selected by Judge (the "Public Offering"), pursuant to the IPO
Registration Statement. In the event that the Public Offering is not consummated
at a price and on terms satisfactory to Judge, in its sole discretion, prior to
or simultaneously with the Closing, this Agreement shall terminate and the
Merger shall be abandoned without any action on the part of Judge, Acquisition
or JIS.
SECTION 4
MUTUAL REPRESENTATIONS AND WARRANTIES
Judge and Acquisition hereby represent and warrant to JIS, and JIS
hereby represents and warrants to Judge, that, as of the date hereof and as of
the Closing Date, except as set forth in a Disclosure Schedule delivered by such
party contemporaneously with the execution of this Agreement:
4.1 Organization and Qualification. In the case of Judge and Acquisition, each
of Judge and Acquisition is a corporation duly organized, validly existing and
in good standing under the laws of the state in which it is incorporated, having
full power and authority to carry on its business as it has been and is now
being conducted and to own, lease and operate its assets and properties. In the
case of JIS, JIS is a corporation duly organized, validly subsisting and in good
standing under the laws of the State of Delaware, having full power and
authority to carry on its business as it has been and is now being conducted and
to own, lease and operate its assets and properties. In the case of each party,
it is duly qualified to do business and is in good standing in every
jurisdiction in which such qualification is required, all of which jurisdictions
are disclosed in its Disclosure Schedule. Except for the entities listed in its
Disclosure Schedule (its "Subsidiaries"), it has no subsidiaries and no stock or
other equity or ownership interest (whether controlling or not) in any
corporation, association, partnership, joint venture or other entity. Each of
its Subsidiaries is duly organized, validly existing and in good standing under
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the laws of such Subsidiary's respective jurisdiction of incorporation set forth
in its Disclosure Schedule and is duly qualified and in good standing in every
jurisdiction in which such qualification is required, all of which jurisdictions
are disclosed in its Disclosure Schedule.
4.2 Capitalization.
4.2.1 In the case of Judge, its authorized capital stock immediately
prior to the Effective Time shall consist of 50,000,000 Judge Common Shares and
10,000,000 shares of preferred stock ("Judge Preferred Shares"). After the
consummation of the Corporate Reorganization (including the conversion of the
Gemstone Warrant into Judge Common Shares and the conversion of the Lore Notes
into Judge Common Shares) and immediately before the Effective Time of the
Merger and the consummation of the Public Offering, there will be outstanding
9,113,739 Judge Common Shares and no Judge Preferred Shares.
4.2.2 In the case of JIS, its authorized capital stock consists of
10,000,000 JIS Common Shares and 5,000,000 JIS Preferred Shares, of which
1,125,000 shares are designated as JIS Series A Preferred Shares, 1,500 shares
are designated as JIS Series B Preferred Shares and the remainder are unissued
shares of "blank check" preferred stock. As of the date of this Agreement, there
are outstanding 3,980,141 JIS Common Shares, 822,628 JIS Series A Preferred
Shares and 1,500 JIS Series B Preferred Shares.
4.2.3 In the case of either party, all of its outstanding shares of
capital stock have been duly authorized and validly issued, are fully paid and
nonassessable, were not issued in violation of the terms of any contract,
agreement or commitment binding upon it, and were issued in compliance with all
of its applicable charter documents and all applicable federal and state
statutes, laws, regulations and rules (the "Laws"). Except as set forth in its
Disclosure Schedule, there are, and have been, no preemptive rights with respect
to the issuance of its shares of capital stock. Its Disclosure Schedule lists
all agreements, contracts or arrangements to which it is a party or of which it
is aware regarding (i) the registration of transactions in its capital stock
under any securities law, or (ii) any voting or transfer arrangements with
respect to any of its shares of capital stock.
4.3 Options and Additional Rights.
4.3.1 Except for the options and warrants described in Section 3.1 or
in its Disclosure Schedule in response to this Section 4.3.1 and any convertible
securities described in Sections 4.2 or 3.1 of this Agreement, (i) there are not
outstanding any contracts, agreements, subscriptions, options, warrants,
commitments or rights of any character to purchase or otherwise acquire, or any
stock appreciation or similar rights measured by the value of, any shares of its
capital stock or other securities, including without limitation convertible or
exchangeable securities, and (ii) it is not party to any agreement the benefits
of which (including without limitation severance benefits) are contingent, or
the terms of which are materially altered, upon the occurrence of a transaction
involving it of the nature of any of the transactions contemplated by this
Agreement. Its Disclosure Schedule accurately sets forth as of the date of
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this Agreement all outstanding warrants, and all outstanding options granted by
it, vested or unvested, together with the identity of the optionees or warrant
holders, the vesting schedule for such options or warrants, if any, the exercise
price and the date on which such options or warrants were granted.
4.3.2 Except as otherwise provided in this Agreement, consummation of
the transactions contemplated hereby will not obligate it to issue any
additional equity interest in it, to declare any dividend or make any
distributions of any property or assets, or to redeem, purchase, acquire or
offer to acquire any shares of its capital stock.
4.4 Subsidiaries. Its Disclosure Schedule sets forth a description of all of the
issued and outstanding equity securities of each of its Subsidiaries. It owns of
record and beneficially all of the issued and outstanding capital stock of each
of its Subsidiaries, free and clear of any mortgage, lien, security interest,
pledge, encumbrance, restriction on transferability, defect of title, charge or
claim of any nature whatsoever ("Liens"). "Group" with respect to a designated
party means the designated party and each of its Subsidiaries, as a whole and
individually with respect to each of them.
4.5 Authority and Binding Effect. It has all requisite power and authority to
execute and deliver this Agreement and, upon receipt of its Requisite
Stockholder Approval (as hereinafter defined), to perform the transactions
contemplated hereby. The execution and delivery of this Agreement and the
consummation of the transactions herein contemplated will not contravene or
violate its Certificate or Articles of Incorporation or Bylaws. This Agreement
has been duly and validly executed and delivered by it and, subject to obtaining
its Requisite Stockholder Approval, constitutes the legal, valid and binding
obligation of it, enforceable against it in accordance with its terms, except to
the extent that enforceability thereof may be limited by applicable bankruptcy,
insolvency, reorganization or other similar laws relating to or affecting the
enforcement of creditors' rights generally and by principles of equity regarding
the availability of remedies. "Requisite Stockholder Approval" means, (i) in the
case of Judge, the approval of this Agreement and the Merger and the issuance of
the Merger Shares by the affirmative vote of a majority of the votes cast by all
Judge stockholders entitled to vote thereat, and, (ii) in the case of JIS, the
approval of this Agreement and the Merger (A) by the holders of a majority of
the outstanding JIS Common Shares and JIS Series A Preferred Shares (with each
JIS Series A Preferred Share being entitled to the number of votes equal to the
number of JIS Common Shares into which each JIS Series A Preferred Share could
be converted on the record date for the vote) voting together as a single class,
and (B) separately by the holders of a majority of the outstanding JIS Series A
Preferred Shares voting together as a class.
4.6 Validity of Contemplated Transactions. Neither the execution and delivery of
this Agreement by it nor the consummation of the transactions contemplated
hereby will (i) contravene or violate, any federal, state or local statute, law,
ordinance, regulation, order or rule ("Regulation") or any judgment, decree,
injunction, order or ruling of any court or governmental or regulatory authority
which is applicable to its Group; (ii) result in a default or loss of a benefit
under, or permit the acceleration of any obligation under, or require the
consent or
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approval of any party to, any contract, agreement, commitment, permit,
concession, franchise, license or authorization applicable to its Group, or
(iii) require its Group to notify or obtain any license, permit, approval or
authorization from any governmental or regulatory authority or, except as set
forth in its Disclosure Schedule, other person or entity; except for (A) its
Requisite Stockholder Approval, (B) in the case of Judge, the effective
registration under the 1933 Act, and all requisite compliance with state
securities or "blue-sky" laws in connection with the issuance of Judge Common
Shares in the Merger, (C) in the case of JIS, filings pursuant to the 1933 Act
and the Securities Exchange Act of 1934, as amended (the "1934 Act"), (D) the
filing of the Certificate of Merger and (E) in the case of (i) or (ii) above,
for any violation or default which, individually or in the aggregate, would not
have a Material Adverse Effect (as defined below). For purposes of this
Agreement, "Material Adverse Effect" means a material adverse effect on the
business, assets, financial condition or results of operations of its Group.
4.7 Issuance of Judge Common Shares. In the case of Judge only, upon receipt of
its Requisite Stockholder Approval, the Merger Shares will be duly authorized
and, when issued in accordance with this Agreement, will be validly issued and
outstanding, fully paid and nonassessable Judge Common Shares.
4.8 Corporate Records. The minute books of its Group are current and contain
correct and complete copies of all of the charter documents of its Group,
including all amendments thereto and restatements thereof, and of all minutes of
meetings, resolutions and other actions and proceedings of its stockholders and
board of directors and all committees thereof, duly signed by the Secretary or
an Assistant Secretary, and in the case of written consents, all directors or
all stockholders. The stock record books of its Group are current, correct and
complete and reflect the issuance of all of the issued and outstanding shares of
its capital stock as of the date hereof.
4.9 Financial Statements; Reports.
4.9.1 Financial Statements. In the case of JIS, it has delivered to
Judge, and in the case of Judge, it has delivered to JIS, (i) its consolidated
balance sheets at December 31, 1995 and 1994, (ii) its related statements of
operations, changes in stockholders' equity and cash flows for the three years
then ended, and (iii) all related notes and schedules, all of which (the
"Year-End Financial Statements") have been audited by an independent public
accountant. JIS has also delivered to Judge, and Judge has delivered to JIS,
(i) its consolidated balance sheet at June 30, 1996, and (ii) its related
statements of operations, changes in stockholders' equity and cash flows for the
six months then ended (the "Unaudited Interim Financial Statements"). The
Year-End Financial Statements were prepared in accordance with generally
accepted accounting principles consistently applied ("GAAP") and, subject to any
qualifications set forth in the applicable notes and schedules, fairly present
the financial position and results of operations of its Group at December 31,
1995 and 1994 and for each of the years in the three-year period ended December
31, 1995. The Unaudited Interim Financial Statements have been prepared in
accordance with GAAP and, subject to any qualifications set forth in the
applicable notes and
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schedules, and subject to normal recurring audit adjustments, fairly present its
financial information. All Liabilities (as hereinafter defined) of its Group at
December 31, 1995 and June 30, 1996, required to be reflected or reserved for by
GAAP are fully reflected or reserved for in the balance sheet included in the
Year-End Financial Statements and the Unaudited Interim Financial Statements,
respectively.
4.9.2 Reports. JIS has filed on a timely basis (i) all forms, reports,
statements and other documents required to be filed with (A) the SEC, including
without limitation (1) all Annual Reports on Form 10-KSB, (2) all Quarterly
Reports on Form 10-QSB, (3) all proxy statements relating to meetings of
shareholders (whether annual or special), (4) all Current Reports on Form 8-K
and (5) all other reports, schedules, registration statements or other documents
(collectively referred to as the "SEC Reports"), and (B) any applicable state
securities authorities and (ii) all forms, reports, statements and other
documents required to be filed with any other Regulatory Body, (all such forms,
reports, statements and other documents in clauses (i) and (ii) of this Section
4.9.2 being referred to herein, collectively, as the "Reports"). The Reports
(i) were prepared in all material respects in accordance with the requirements
of applicable law (including, with respect to the SEC Reports, the 1933 Act or
the 1934 Act, as the case may be, and the rules and regulations of the SEC
thereunder applicable to such SEC Reports) and (ii) did not at the time they
were filed contain any untrue statement of a material fact or 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.
4.10 Books of Account. The books of account of its Group fairly reflect, in
accordance with GAAP, (i) all transactions relating to its Group and (ii) all
items of income and expense, assets and liabilities and accruals relating to its
Group. Its Group has not engaged in any transaction, maintained any bank account
or used any corporate funds except for transactions, bank accounts and funds
which have been and are reflected in the normally maintained books and records
of its Group.
4.11 Taxes. (i) All reports, returns, statements and other similar filings
required to be filed by it (the "Tax Returns") with respect to any Taxes (as
defined below) have been timely filed with the appropriate governmental agencies
in all jurisdictions in which such Tax Returns are required to be filed, and all
such Tax Returns correctly reflect the liability of it for Taxes for the
periods, properties or events covered thereby; (ii) all Taxes payable with
respect to the Tax Returns referred to in the preceding clause have been paid;
(iii) no deficiency in respect of any Taxes which has been assessed against it
remains unpaid and it has no knowledge of any unassessed Tax deficiencies or of
audits or investigations pending or threatened against it with respect to any
Taxes; (iv) no claim has ever been made by any Tax authority in a jurisdiction
in which its Group does not file Tax Returns that it is or may be subject to
taxation by that jurisdiction; and (v) there are no Liens for Taxes upon any
asset of its Group except for Liens for current Taxes not yet due. For purposes
of this Agreement, "Taxes" means any taxes, duties, assessments, fees, levies,
or similar governmental charges, together with any interest, penalties, and
additions to tax, imposed by any taxing authority, wherever located (i.e.
whether
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federal, state, local, municipal, or foreign), including, without limitation,
all net income, gross income, gross receipts, net receipts, sales, use,
transfer, franchise, privilege, profits, social security, disability,
withholding, payroll, unemployment, employment, excise, severance, property,
windfall profits, value added, ad valorem, occupation, or any other similar
governmental charge or imposition.
4.12 Absence of Undisclosed Liabilities. Its Group has no Liabilities, except as
set forth in its balance sheet at June 30, 1996, or in the case of JIS, its SEC
Reports, or in its Disclosure Schedule and except for those Liabilities arising
and outstanding since June 30, 1996 in the ordinary course of business of its
Group in accordance with past practice or related to the actions and
transactions contemplated hereby or under any contract which is disclosed in its
Disclosure Schedule. "Liability" means any material liability, indebtedness,
obligation, expense, claim, deficiency, guaranty or endorsement of or by any
person (other than endorsements of notes, bills and checks presented to banks
for collection or deposit in the ordinary course of business) of any type,
whether accrued, absolute, contingent, matured, unmatured or other.
4.13 Title to Assets. Its Group owns outright and has good and marketable title
to all of the assets of its Group reflected on the balance sheets included in
its Financial Statements disclosed in Section 4.9, free and clear of all Liens,
except liens reflected in its Financial Statements, liens for current taxes not
yet delinquent, liens imposed by law and incurred in the ordinary course of
business for obligations not yet due to carriers, warehousemen, laborers,
materialmen, and the like, liens in respect of pledges or deposits under
workers' compensation laws or similar legislation, and minor defects in title,
none of which, individually or in the aggregate, materially interferes with the
use of such property.
4.14 Intellectual Property. Except as disclosed in its Disclosure Schedule, its
Group has either (i) sufficient title and ownership of all patents, trademarks,
service marks, trade names, copyrights, trade secrets, information, proprietary
rights and processes (collectively, "Intellectual Property"), necessary for its
business and operations (as now conducted and as proposed to be conducted)
without any conflict with or infringement of the right of others, or (ii) where
it does not own the necessary Intellectual Property, it has acquired rights to
use such Intellectual Property under licenses granted to its Group by the owner
of such Intellectual Property.
4.15 Contracts. Except as disclosed in the Disclosure Schedule, all material
contracts, agreements, commitments, leases, mortgages, instruments or other
documents ("Contracts") to which its Group is a party are valid, binding and
enforceable in accordance with their respective terms, except to the extent that
enforceability thereof may be limited by applicable bankruptcy, insolvency,
reorganization or other similar laws relating to or affecting the enforcement of
creditors' rights generally and by principles of equity regarding the
availability of remedies. Its Group has fulfilled, or taken all action necessary
to enable it to fulfill when due, all of its obligations under each of such
Contracts.
4.16 Compliance with Regulations and Court Orders. Its Group is not in violation
of, and the assets of its Group have not been used or operated by its Group or
any other person or entity
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in violation of, any Regulation or Court Order (as hereinafter defined), except
for such violations as do not subject its Group to significant penalties or the
compliance with which would not have a Material Adverse Effect on its Group. All
Court Orders to which its Group is a party or subject to are listed in its
Disclosure Schedule. Its Group has made all filings or notifications and has
obtained all licenses required to be made or obtained by its Group under any
Regulation applicable to its Group or its business or assets. "Court Order"
means any judgment, decree, injunction, order or ruling of any Regulatory Body
that is binding on the designated party, its Subsidiaries or their properties
under applicable law. "Regulatory Body" means any court or governmental
department, commission, board, bureau, agency, instrumentality, or body,
federal, state or local, domestic or foreign.
4.17 Environmental Matters. Except as set forth on its Disclosure Schedule, to
its knowledge:
4.17.1 Its Group has been and are in material compliance with all
applicable federal, state and local law or regulation concerning or relating to
industrial hygiene or the protection of health and/or the environment (the
"Environmental Laws");
4.17.2 There are no conditions on, about, beneath or arising from any
properties owned or leased by its Group which would give rise to any liability
under any applicable Environmental Law or which would require any Response,
Removal or Remedial Action, as such terms are defined in Section 101 of the
Comprehensive Environmental, Compensation and Liability Act, 42 U.S.C. ss.9601
et seq. (1995), as amended, by such party;
4.17.3 Its Group has obtained and possesses all permits, licenses,
approvals and other authorizations necessary under any applicable Environmental
Law for the operation of its business except as would not have a Material
Adverse Effect;
4.17.4 Its Group has not received any notification of a release or
threat of a release of any substance regulated under any of the Environmental
Laws ("Hazardous Substance") at any site or location owned or operated by that
party; and
4.17.5 Its Group has not disposed of, transported or caused to be
transported any Hazardous Substance on or to any on-site or off-site location
which location currently is the subject of a federal, state or local enforcement
action or other investigation or for which claims have been asserted against
such party for clean-up costs, remedial work or damages to natural resources.
4.18 Litigation. Except as set forth in the Disclosure Schedule, there is no
Litigation (as hereinafter defined) pending or, to its knowledge, threatened
against its Group or its business or assets, and no event known to its Group has
occurred and no claim has been asserted against its Group that might result in
Litigation against its Group or its business or assets; and to, the best of its
Group's knowledge, there is no reasonable basis for any such claim. "Litigation"
means any lawsuit, action, arbitration, administrative or other proceeding,
criminal prosecution
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or governmental investigation or inquiry involving or affecting the designated
party or any of its Subsidiaries, the business, the assets or any Contracts to
which the designated party or any of its Subsidiaries is a party or by which
they or any of their assets or business may he bound or affected.
4.19 Insurance. Except as set forth in the Disclosure Schedule, it is presently
insured, and has been insured against such risks as companies engaged in a
similar business would, in accordance with good business practice, customarily
be insured. The policies of fire, theft, liability and other insurance
maintained with respect to the assets or business of each Company provide
adequate coverage against loss.
4.20 Employee Benefit Plans. Except as described in the Disclosure Schedule, its
Group does not maintain or contribute to any employee pension benefit plan
("Pension Plan"), as defined in section 3(2) of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), any employee welfare benefit plan,
as defined in section 3(1) of ERISA, or any other plan or arrangement providing
compensation or benefits to its employees or former employees (collectively
"Benefit Plans"). To the knowledge of its Group, each Benefit Plan maintained by
its Group has been administered in compliance with its terms and is in
compliance with the applicable provisions of ERISA, the Code and other
applicable Laws. Its Group knows of no inquiries or proceedings pending or
threatened by any governmental department or agency, or by any participant or
beneficiary, with respect to any Benefit Plan now or formerly maintained by its
Group or to which it has contributed. Its Group has made or provided for all
contributions to Benefit Plans required by the terms of such Benefit Plans or
applicable Laws. Its Group has never contributed or been required to contribute
to any multiemployer plan, as defined in section 3(37) of ERISA. Other than
required "COBRA" coverage, its Group has never provided health or life insurance
coverage to former employees. Its Group has never maintained a Pension Plan
which was a defined benefit plan or one intended to be a qualified plan within
the meaning of section 401 of the Code.
4.21 Registration Statement; Etc. None of the information supplied or to be
supplied by its Group for inclusion or incorporation by reference in (i) the
registration statement on Form S-4 to be filed by Judge with the SEC in
connection with the issuance of Judge Common Shares in the Merger will, at the
time it is filed with the Commission or at the time it becomes effective under
the 1933 Act, or at the Effective Time of the Merger, 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 not misleading, or
(ii) the proxy statement forming a part of the Registration Statement used by
JIS to solicit proxies for the purpose of obtaining its Requisite Stockholder
Approval (the "Proxy Statement"), will, when mailed and at all times through the
date of the JIS stockholder meeting disclosed in Section 5.2 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, not misleading. All
documents that each Company is responsible for filing with the SEC or any
Regulatory Body in connection with the transactions contemplated hereby will
comply as to form in all material respects with the provisions of applicable
law, including applicable provisions of the 1933 Act, the 1934 Act and the rules
and regulations thereunder.
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<PAGE>
4.22 Subsequent Events. Except as set forth in its Disclosure Statement and
except for the transactions contemplated hereby, since June 30, 1996 (i) there
has been no actual or threatened change in the business of its Group or, to the
best of its Group's knowledge, any event, condition or state of facts, in either
case that is material and adverse to its Group or its business or assets,
(ii) it has not declared, set aside or made payment of any dividend or
distribution of assets to the holders of any class or series of capital stock ,
nor has it repurchased or redeemed any shares of its capital stock, (iii) its
Group has conducted its business only in the ordinary course consistent with
past practice, and (iv) there has not occurred any of the events described in
Section 5.5 hereof.
4.23 Acquisition. In the case of Judge and of Acquisition only, Acquisition was
formed solely for the purpose of engaging in the transactions contemplated
hereby, has engaged in no other business activities and has conducted its
operations only as contemplated hereby.
4.24 Fairness Opinion. In the case of JIS only, JIS has been advised in writing
by Janney Montgomery Scott Inc. ("Janney") that the consideration to be received
by the stockholders (the Merger Consideration) of JIS in the Merger taken as a
whole is fair to such stockholders from a financial point of view.
4.25 Section 203 of the DGCL Not Applicable. In the case of JIS only, the
provisions of Section 203 of the DGCL will not, prior to the termination of this
Agreement, apply to this Agreement or to the transactions contemplated hereby.
4.26 Broker's and Finder's Fee. No person acting on behalf of it or under its
authority is or will be entitled to any broker's or finder's fee or any other
commission or similar fee directly or indirectly in connection with the
completion of the Merger, other than the fees payable to Janney for its services
in issuing its opinion disclosed in Section 4.24.
SECTION 5
ADDITIONAL COVENANTS AND AGREEMENTS
5.1 Registration Statement and Proxy Statement. Judge and JIS shall, in
compliance with the 1934 Act, prepare as promptly as practicable the Proxy
Statement to be used by JIS to solicit the approval of its stockholders of this
Agreement and the Merger. Judge, in cooperation with and with the assistance of
JIS, shall promptly prepare and cause to be filed with the SEC its Registration
Statement on Form S-4 in compliance with the 1933 Act. The Registration
Statement shall register the issuance of the Merger Shares. Judge and JIS shall
use their best efforts to cause such Registration Statement to be declared
effective as promptly as practicable. JIS shall furnish to Judge all information
concerning its Group and the stockholders of JIS as may be reasonably requested
in connection with such filing. Judge shall take any action required to be taken
under any applicable state securities or "blue-sky" laws in connection with the
issuance of Judge Shares in the Merger. If requested by Judge, JIS shall use its
best efforts to cause to be delivered to Judge a letter of Rudolph Palitz LLP,
JIS's auditors, dated a date within
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<PAGE>
two business days before the date on which the Registration Statement shall
become effective and addressed to Judge in form and substance reasonably
satisfactory to Judge and customary in scope and in substance for letters
delivered by independent public accountants in connection with registrations
statements similar to the Registration Statement.
5.2 Stockholder Meeting. Each of JIS and Judge shall, as soon as practicable and
in accordance with applicable law, call and hold a stockholders' meeting to
obtain its Requisite Stockholder Approval. Subject to its fiduciary obligations,
the board of directors of each party will unanimously recommend to its
stockholders approval of the Merger and this Agreement and each party shall take
all such actions consistent with the fiduciary obligations of such boards to
obtain such approvals as promptly as practicable, including without limitation
in the case of JIS the solicitation of proxies by means of the Proxy Statement.
5.3 Regulatory and Contract Approvals. Each of Judge and JIS shall use their
best efforts to obtain as soon as practicable all approvals, consents and
permits from all Regulatory Bodies and all consents required under the terms of
any Contract which are required in connection with the consummation of the
Merger.
5.4 Access to Information. From the date of this Agreement to the Closing Date,
each party will give to the other party and its officers, employees, counsel,
accountants and other representatives free and full access to and the right to
inspect, during normal business hours, all of the assets, records, Contracts and
other documents relating to its business as the other party may reasonably
request. Neither party will use such information for purposes other than in
connection with the Merger and each party will otherwise hold such information
in confidence until such time as such information otherwise becomes publicly
available, and in the event of termination of this Agreement for any reason will
promptly return, or cause to be returned, to the other party all nonpublic
documents obtained from the other party, and any copies made of such documents.
5.5 Conduct of Business Pending Closing. Until the Closing Date, except as set
forth in its Disclosure Schedule and except for the proposed acquisition of
Berkeley Associates Corporation and Systems Automation, Inc. by Judge or as may
be approved by the parties in writing or otherwise expressly provided in this
Agreement, each of JIS and Judge shall operate its businesses only in the
ordinary course and in substantially the same manner as it has been operated in
the past.
5.6 Indemnification. If the Merger is completed, all rights to indemnification
(including advancement of expenses) existing on the date hereof in favor of the
present or former officers and directors of JIS with respect to actions taken in
their capacities as directors or officers of JIS prior to the Effective Time as
provided in the Certificate of Incorporation of JIS, the Bylaws of JIS or any
indemnification agreements, prior to the Effective Time, shall survive the
Merger and continue in full force and effect as obligations of the Surviving
Corporation, the performance of which Judge hereby guarantees.
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<PAGE>
5.7 Public Announcements. JIS and Judge shall cooperate with each other in
releasing information concerning this Agreement and the transactions
contemplated herein. Where practicable each of the parties shall furnish to the
other drafts of all releases prior to publication. Nothing contained herein
shall prevent either party at any time from furnishing any information to any
governmental agency or from issuing any release where it reasonably believes it
is legally required to do so.
5.8 No Solicitation. JIS shall cause its officers, employees, representatives
and agents not to, directly or indirectly, continue, encourage, solicit,
initiate or (except as may be reasonably required to satisfy the fiduciary
duties of its board of directors) participate in discussions or negotiations
with, or provide any nonpublic information to, any person other than the other
party or its affiliates or any group in which the other party or its affiliates
participates, concerning any sale of assets (other than in the ordinary course
of its business consistent with past practice) or shares of capital stock, or
any merger, consolidation, recapitalization, liquidation or similar transaction
(collectively, an "Acquisition Transaction"). JIS will promptly communicate to
Judge the terms of any inquiry or proposal which it may receive in respect of an
Acquisition Transaction. Judge's notification under this Section 5.9 shall
include the identity of the person making such proposal, the terms of such
proposal and any other information with respect thereto as Judge may reasonably
request.
5.9 Notification of Certain Matters. JIS shall give prompt notice to Judge and
Acquisition, and Judge and Acquisition shall give prompt notice to JIS, of
(i) the occurrence, or failure to occur, of any event which such party believes
would likely cause any of its representations or warranties contained in this
Agreement to be untrue or inaccurate in any material respect at any time from
the date of this Agreement to the Effective Time and (ii) any material failure
of JIS, Judge or Acquisition, as the case may be, or any officer, director,
employee or agent thereof, to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it hereunder.
5.10 Rule 145 Affiliates.
5.10.1 Promptly following the execution of this Agreement, JIS shall
identify in a letter to Judge all persons who might, at the time of its
stockholders' meeting at which the Merger is to be voted upon by its
stockholders, be deemed to be an affiliate of JIS within the meaning of Rule 145
("Rule 145 Affiliate").
5.10.2 JIS shall use all reasonable efforts to deliver to Judge as soon
as practicable and in any case prior to the Effective Time an agreement signed
by each such Rule 145 Affiliates of JIS regarding compliance with Rule 145,
which agreement (the "Affiliate Agreements") shall be in substantially the form
of Exhibit 5.10.2.
5.10.3 Judge shall be entitled to place legends on the certificates
evidencing Judge Common Shares to be received by such Rule 145 Affiliates
pursuant to the terms of this Agreement, and to issue appropriate stop transfer
instructions to the transfer agent for Judge
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<PAGE>
Common Shares, consistent with the terms of such Affiliate Agreements, whether
or not such Affiliate Agreements are actually delivered to Judge.
SECTION 6
CONDITIONS TO THE MERGER
Subject to waiver as set forth in Section 7.7, the obligations of each
party under this Agreement are subject to the fulfillment prior to or at the
Closing of each of the following conditions:
6.1 Stockholder Approval. This Agreement shall have been adopted at or prior to
the Effective Time (i) by the Requisite Stockholder Approval of JIS in
accordance with the DGCL and Dissenters, if any, shall not hold in the aggregate
more than [ ] percent of the shares of JIS Common Shares and JIS Series A
Preferred Shares outstanding immediately prior to the Effective Time (assuming
the conversion of the JIS Series A Preferred Shares into JIS Common Shares
immediately prior to the Effective Time), and (ii) by the Requisite Stockholder
Approval of Judge.
6.2 Representations True at Closing. The representations and warranties of the
other party set forth in Section 4 shall be true and correct in all material
respects on the Closing Date with the same effect if made at that time.
6.3 Performance. The other party shall have performed and satisfied all
agreements and conditions which it is required by this Agreement to perform or
satisfy prior to or on the Closing Date.
6.4 Certificates. The other party shall have provided a certificate signed in
its name by its chief executive officer and chief financial officer, dated the
Closing Date, certifying in such detail as may be reasonably requested that each
of its conditions described in Section 6.2 and 6.3 has been fulfilled by the
other party. The other party shall have provided a certificate signed by its
secretary, dated the Closing Date, certifying that its Certificate of
Incorporation, or its Articles of Incorporation, as the case may be, and Bylaws
are true, correct and complete as of the Closing Date and further certifying
that the resolutions adopted by its board of directors and stockholders attached
thereto in connection with the transactions contemplated hereby are true,
correct and complete.
6.5 Tax Opinion. Judge and JIS shall have received from Drinker Biddle & Reath a
written opinion, in form and substance reasonably satisfactory to them, to the
effect that the Merger, when effected in accordance with this Agreement, will
qualify as a reorganization under Section 368(a) of the Code and Judge, JIS and
Acquisition will constitute parties to such reorganization.
6.6 Litigation Affecting Closing. No Court Order shall have been issued or
entered which would be violated by the completion of the Merger, and no person
who or which is not a party
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to this Agreement shall have commenced any Litigation seeking to restrain or
prohibit, or to obtain substantial damages in connection with, this Agreement or
the transactions contemplated by this Agreement which, in each case, would or is
reasonably likely to result in a Material Adverse Effect to a party.
6.7 Material Adverse Effect. From the date hereof to the Closing Date, no party
hereto shall have suffered a Material Adverse Effect in any way, including,
without limitation, by fire, casualty, act of God or otherwise and there shall
be no conditions existing or threatened that might reasonably be expected to
have a Material Adverse Effect on such party.
6.8 Registration Statement. The Registration Statement shall have been declared
effective by the SEC. No stop order suspending the effectiveness of the
Registration Statement shall have been issued by the SEC and no proceedings for
that purpose shall have been initiated or threatened by the SEC, and all
approvals, consents, permits, licenses or qualifications from authorities
administering the securities or "blue-sky" laws of any state having jurisdiction
required for the consummation of the Merger shall have been obtained and shall
be effective.
6.9 Affiliate Agreements. Judge shall have received from each Rule 145 Affiliate
an executed Affiliate Agreement in form satisfactory to Judge.
6.10 Corporate Reorganization. The Corporate Reorganization shall have been
consummated.
6.11 Public Offering. The managing underwriter of the Public Offering shall have
advised the parties that the Public Offering will be completed immediately
following the Effective Time of the Merger.
6.12 Regulatory Compliance, Approvals and Consents. Each party shall have
complied with all Regulations applicable to the Merger, and all approvals
required under any Regulations to carry out the Merger and consents required to
be obtained in connection with the Merger in order to avoid a default under any
Contract to or by which the other party is a party or may be bound shall have
been obtained on terms reasonably satisfactory to each party.
6.13 Stock Exchange Listing. Judge shall have applied for the inclusion of the
Merger Shares on The Nasdaq National Market.
6.14 Fairness Opinion. JIS shall have received an updated opinion of Janney,
dated on or about the mailing date of the Proxy Statement, to the effect that
the Merger Consideration, taken as a whole, is fair from a fairness point of
view, to the stockholders of JIS.
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SECTION 7
TERMINATION AND ABANDONMENT
7.1 Termination by Mutual Consent. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the filing of the Certificate of
Merger, before or after obtaining the Requisite Stockholder Approvals, by the
mutual consent of JIS, Judge and Acquisition, by action of their respective
boards of directors.
7.2 Termination by JIS, Judge or Acquisition. This Agreement may be terminated
and the Merger may be abandoned by action of either the board of directors of
JIS or the boards of directors of, Judge and Acquisition if (i) the Merger shall
not have been consummated on or before March 31, 1997, or such later date as may
be mutually agreed to by the parties hereto, provided that the party seeking to
terminate this Agreement is not otherwise in breach in any material respect of
any of its obligations hereunder or (ii) any court of competent jurisdiction
shall have issued an order, decree or ruling or taken any other action
restraining, enjoining or otherwise prohibiting the Merger and such order,
decree, ruling or other action shall have become final and nonappealable.
7.3 Termination by JIS. This Agreement may be terminated and the Merger may be
abandoned by action of the board of directors of JIS if (i) Judge or Acquisition
shall have failed to comply in any material respect with any of the covenants or
agreements contained in this Agreement to be complied with or performed by it at
or prior to the Effective Time and such failure has not been cured within 30
days after receipt of notice thereof, or (ii) the board of directors of Judge
shall not recommend to its stockholders the approval of this Agreement, or shall
withdraw or modify in a manner adverse to JIS its approval or recommendation of
the Merger.
7.4 Termination by Judge and Acquisition. This Agreement may be terminated and
the Merger may be abandoned by action of the boards of directors of Judge and
Acquisition if (i) JIS shall have failed to comply in any material respect with
any of the covenants or agreements contained in this Agreement to be complied
with or performed by it at or prior to the Effective Time and such failure has
not been cured within 30 days after receipt of notice thereof, or (ii) the board
of directors of JIS shall not recommend to its stockholders the approval of this
Agreement, or shall withdraw or modify in a manner adverse to Judge or
Acquisition its approval or recommendation of the Merger.
7.5 Effect of Termination. Except as provided in Section 5.4 hereof with respect
to information obtained in connection with the transactions contemplated hereby,
in the event of the termination of this Agreement, and the abandonment of the
Merger, this Agreement shall thereafter become void and have no effect, and no
party thereto shall have any liability to any other party hereto or its
stockholders or directors or officers in respect thereof, and each party shall
be responsible for its own costs and expenses incurred in connection with this
Agreement
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and the transactions contemplated hereby, except that nothing herein shall
relieve any party from liability for any willful breach hereof.
7.6 Amendment. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto, except as set forth in
Section 7.7.
7.7 Waiver. Any time prior to the Effective Time, any party hereto may (i) in
the case of Judge or Acquisition, extend the time for the performance of any of
the obligations or other acts of JIS or waive compliance with any of the
agreements of JIS or with any conditions to the respective obligations of Judge
or Acquisition, or (ii) in the case of JIS, extend the time for the performance
of any of the obligations or other acts of Judge or Acquisition, or waive
compliance with any conditions to its own obligations. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid if set forth in
an instrument in writing signed on behalf of such party by a duly authorized
officer.
SECTION 8
MISCELLANEOUS
8.1 Notices. Any notices or other communications required or permitted hereunder
shall be sufficiently given if sent by facsimile transmission, registered or
certified mail, postage prepaid, or Federal Express or similar overnight
delivery addressed, in the case of JIS, to it at
Judge Imaging Systems, Inc.
102 Executive Drive, Suite 7
Moorestown, NJ 08057
Attention: Martin E. Judge, Jr.
Facsimile No.
or, in the case of Judge and Acquisition, to them at:
Judge, Inc.
Two Bala Plaza, Suite 800
Bala Cynwyd, PA 19004
Attention: Martin E. Judge, Jr.
Facsimile No.
or such other address as shall be furnished in writing by any party to the
others prior to the giving of the applicable notice or communication.
8.2 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
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8.3 Headings. The headings herein are for convenience of reference only, do not
constitute a part of this Agreement, and shall not be deemed to limit or affect
any of the provisions of this Agreement.
8.4 No Survival of Representations or Warranties. None of the representations
and warranties included or provided for herein or in any schedule or certificate
or other document delivered pursuant to this Agreement shall survive
consummation of the Merger.
8.5 Entire Agreement. This Agreement, which includes the Exhibits and Disclosure
Schedules hereto constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties, with
respect to the subject matter of this Agreement.
8.6 Cooperation. Subject to the terms and conditions of this Agreement, each of
the parties hereto shall use its reasonable best efforts to take, or cause to be
taken, such action, to execute and deliver, or cause to be executed and
delivered, such governmental notifications and additional documents and
instruments and to do, or cause to be done, all things necessary, proper or
advisable under the provisions of this Agreement and under applicable law to
consummate and make effective the transactions contemplated by this Agreement,
and neither JIS nor Judge shall take any action in conflict with or contrary to
the stated intention of JIS and Judge that the Merger qualify as a tax-free
reorganization pursuant to Section 368(a) of the Code.
8.7 No Third Party Rights. Nothing in this Agreement, express or implied, is
intended to confer upon any other person, other than the persons indemnified
under Section 5.6, any rights or remedies under or by reason of this Agreement.
8.8 No Assignment. This Agreement shall not be assigned, by operation of law or
otherwise.
8.9 Governing Law. This Agreement shall be governed in all respects, including
without limitation validity, interpretation and effect, by the laws of the
Commonwealth of Pennsylvania, applicable to contracts made and to be performed
in such Commonwealth.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed as of the date first above written.
JUDGE IMAGING SYSTEMS, INC.
By: /s/ MARTIN E. JUDGE, JR.
--------------------------------
Name: Martin E. Judge, Jr.
Title: President
JUDGE, INC.
By: /s/ MARTIN E. JUDGE, JR.
--------------------------------
Name: Martin E. Judge, Jr.
Title: Chief Executive Officer
JUDGE ACQUISITION, INC.
By: /s/ MARTIN E. JUDGE, JR.
--------------------------------
Name: Martin E. Judge, Jr.
Title: Chief Executive Officer
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EXHIBIT 3.1
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
THE JUDGE GROUP, INC.
ARTICLE 1. The name of the Corporation is The Judge Group, Inc.
ARTICLE 2. The location and post office address of the current registered
office of the Corporation in this Commonwealth is: Two Bala
Plaza, Suite 800, Bala Cynwyd, PA 19004, Montgomery County.
ARTICLE 3. The Corporation is incorporated under the Pennsylvania Business
Corporation Law of 1988, as amended, for the following purpose or
purposes:
The Corporation shall have unlimited power to engage in and do
any lawful act concerning any or all lawful business for which
Corporations may be incorporated under the Pennsylvania Business
Corporation Law of 1988, as amended.
ARTICLE 4. The term for which the Corporation is to exist is perpetual.
ARTICLE 5. (a) The aggregate number of shares of all classes of stock which
the Corporation shall have authority to issue is 60,000,000
shares, divided into a class of 50,000,000 common shares, par
value $.01 per share (the "Common Shares"), and a class of
10,000,000 preferred shares, par value $.01 per share (the
"Preferred Shares.) The Preferred Shares shall be divided into
one or more series as the Board of Directors may determine as
provided herein.
Simultaneously with the time of filing in the Department of State
of the amended and restated articles of incorporation that
contain this sentence (the "Effective Time"), each common share
of the Corporation issued and outstanding immediately prior
thereto (the "Old Common Shares") shall automatically and without
any action on the part of the holder thereof be reclassified and
changed into 52.6 common shares of the Corporation, par value
$.01 per share (the "New Common Shares"), subject to the
treatment of fractional shares described below. Each holder of a
certificate or certificates which immediately prior to the
Effective Time represented outstanding Old Common Shares (the
"Old Certificates," whether one or more") shall be entitled to
receive, upon surrender for cancellation of such Old Certificates
to the transfer agent designated by the Corporation, a
certificate or certificates (the "New Certificates,"
<PAGE>
whether one or more) representing the number of New Common Shares
for which the Old Common Shares formerly represented by such Old
Certificates so surrendered are reclassified under the terms
hereof. From and after the Effective Time, the Old Certificates
shall represent only the right to receive New Certificates
pursuant to the provisions hereof. No certificates or scrip
representing fractional interests in the New Common Shares will
be issued, and no such fractional share interest will entitle the
holder thereof to vote or to any other rights of a shareholder of
the Corporation. A holder of the Old Certificates shall receive,
in lieu of any fraction of a New Common Share to which the holder
would otherwise be entitled, a cash payment therefor on the basis
of the initial public offering price (without underwriting
discounts and commissions) of the New Common Shares in the first
underwritten public offering of New Common Shares after the
Effective Time (or, in the event an initial public offering of
the New Common Shares is not consummated prior to four months
after the Effective Time, $11.00 per share).
(b) The holders of Common Shares shall have one vote per share.
The Common Shares shall be subject to the prior rights of holders
of any series of Preferred Shares outstanding, according to the
preferences, if any, of such series.
(c) Preferred Shares of the Corporation may be issued from time
to time in one or more classes or series, each of which shall
have such distinctive designation or title as shall be fixed from
time to time by the Board of Directors of the Corporation prior
to the issuance of any shares thereof. Each such class or series
of Preferred Shares shall have such voting powers, full or
limited, or no voting powers, and such other relative rights,
powers and preferences, including, without limitation, rights to
dividends, conversion rights, if any, redemption price and
liquidation preference, and such qualifications, limitations or
restrictions thereof, as shall be stated in such resolution or
resolutions providing for the issuance of such class or series as
may be adopted from time to time by the Board of Directors prior
to the issuance of any shares thereof pursuant to the authority
hereby expressly vested in it, all in accordance with the laws of
the Commonwealth of Pennsylvania.
(d) Except to the extent that the resolution or resolutions of
the Board of Directors authorizing a particular series of
Preferred Shares shall otherwise provide, the number of
authorized shares of any class or classes of shares of the
Corporation may be increased solely by the affirmative vote of
shareholders entitled to cast at least a majority of the votes
which all voting shareholders are entitled to cast thereon.
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<PAGE>
ARTICLE 6. Shareholders shall not have cumulative voting rights in the
election of directors.
ARTICLE 7. No director of the Corporation shall be personally liable, as
such, for monetary damages for any action taken, or any failure
to take action, except to the extent that by law a director's
liability for monetary damage may not be limited.
ARTICLE 8. In lieu of any statutory standard of care that would otherwise be
applicable in the absence of this article, each officer of the
Corporation shall perform his duties as an officer in good
faith, in a manner he reasonably believes to be in the best
interests of the Corporation and with such care, including
reasonable inquiry, skill and diligence, as a person of ordinary
prudence would use under similar circumstances, except that
notwithstanding the foregoing no officer shall be personally
liable for monetary damages (other than under criminal statutes
and under federal, state and local laws imposing liability on
officers for payment of taxes) unless his conduct constitutes
self-dealing, willful misconduct or recklessness. In performing
his duties, each officer shall be entitled to rely on others, to
consider all factors deemed by him to be pertinent, and to be
presumed to be acting in the best interests of the Corporation,
in each case to the same extent as directors of the Corporation
are so entitled under the Pennsylvania Business Corporation Law
of 1988 as the same may be amended from time to time.
ARTICLE 9. Shareholders shall not have the right to call meetings of
shareholders or to propose amendments to the articles of
incorporation of the Corporation.
ARTICLE 10. The provisions of Subchapters E, G and H of Chapter 25 of the
Pennsylvania Business Corporation Law of 1988 as the same may be
amended from time to time (the "BCL"), and any corresponding
provisions of succeeding law, shall not be applicable to the
Corporation. The Corporation shall be subject to the provisions
of Subchapter F of Chapter 25 of the BCL with respect to business
combinations with interested shareholders whose share acquisition
date is after the time of the filing in the Department of State
of the amended and restated articles of incorporation that
first made the Corporation subject to the provisions of such
Subchapter F.
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IN WITNESS WHEREOF, the Corporation has caused these Articles to be
signed by Michael A. Dunn, its President, and attested by Katharine A.
Wiercinski, its Secretary, this 23rd day of September, 1996.
THE JUDGE GROUP, INC.
By: /s/ Michael A. Dunn
---------------------------
Michael A. Dunn, President
Attest:
/s/ Katharine A. Wiercinski
- --------------------------------
Katherine A. Wiercinski
Secretary
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<PAGE>
EXHIBIT 3.2
AMENDED AND RESTATED
BY-LAWS
of
THE JUDGE GROUP, INC.
(A Pennsylvania Business Corporation)
Article 1. MEETINGS OF SHAREHOLDERS
Section 1.01. Place of Meeting. Meetings of shareholders of the
Corporation shall be held at such place, within the Commonwealth of Pennsylvania
or elsewhere, as may be fixed from time to time by the Board of Directors. If no
place is so fixed for a meeting, it shall be held at the Corporation's then
principal executive office.
Section 1.02. Annual Meeting. There shall be an annual meeting
of shareholders, unless the Board of Directors shall fix some other hour or date
therefor, at 10:00 o'clock A.M. on the third Tuesday in May in each year, if not
a legal holiday under the laws of Pennsylvania, and, if a legal holiday, then on
the next succeeding secular day not a legal holiday under the laws of
Pennsylvania, at which the shareholders shall elect by plurality vote a Board of
Directors and transact such other business as may properly be brought before the
meeting.
Section 1.03. Special Meetings. Special meetings of the
shareholders may be called at any time by the Board of Directors, or by the
Chairman of the Board, if any, the Chief Executive Officer, if any, or the
President or Secretary of the Corporation.
Section 1.04. Notice of Meetings. Except as provided in Section
1707 of the Pennsylvania Business Corporation Law of 1988, written notice of
every meeting of shareholders shall be given in any manner permitted by law by
or at the direction of the Secretary or such other person as is authorized by
the Board of Directors to each shareholder of record entitled to receipt
thereof, at least five days prior to the day named for the meeting, unless a
greater period of notice is required by law in a particular case.
Section 1.05. Organization. At every meeting of the
shareholders, the Chairman of the Board, if any, or in his absence, the Chief
Executive Officer, if any, or in his absence, the President, or in his absence,
a chairman chosen by the shareholders, shall act as chairman; and the Secretary,
or in his absence, a person appointed by the chairman, shall act as secretary.
Section 1.06. Voting. Except as otherwise specified herein or in
the Articles or provided by law, whenever any corporate action is to be taken by
vote of shareholders, it shall be authorized by a majority of the votes cast, by
person or by proxy, at a duly organized meeting of shareholders by the holders
of shares entitled to vote thereon. In each election of directors, the
candidates receiving the highest number of votes, up to the number of directors
to be elected in such election, shall be elected.
Section 1.07. Action Without a Meeting. Unless otherwise
restricted by the Articles of Incorporation, any action required or permitted to
be taken at any annual or special meeting of shareholders or a class of
shareholders may be taken without a meeting upon the written consent of
shareholders who would have been entitled to cast the minimum number of votes
that would be necessary to authorize the action at a meeting at which all
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shareholders entitled to vote thereon were present and voting. The consents
shall be filed with the secretary of the Corporation. The action shall not
become effective until after at least ten days' written notice of the action has
been given to each shareholder entitled to vote thereon who has not consented
thereto.
Section 1.08. Notifications of Nominations and Proposed
Business. Subject to the rights of holders of any class or series of preferred
shares, (a) nominations for the election of directors, and (b) business to be
brought before any shareholder meeting may be made or proposed by or at the
direction of the Chairman, the President or by the Board of Directors or a proxy
committee appointed by the Board of Directors, or by any shareholder entitled to
vote in the election of directors generally. However, any such shareholder may
nominate one or more persons for election as directors at a meeting or propose
business to be brought before a meeting only if such shareholder has given
timely notice in proper written form of his or its intent to make such
nomination or nominations or to propose such business. To be timely, a
shareholder's notice must be received by the Corporation not less than 70 days
nor more than 90 days prior to the first anniversary of the previous year's
annual meeting (or, in the case of a special meeting, not earlier than the 90th
day before such meeting and not later than the later of (i) the 70th day prior
to such meeting and (ii) the 10th day following the day on which notice of the
meeting was mailed or public announcement of the date of such meeting was made,
whichever first occurs). To be in proper written form, a shareholder's notice to
the Corporation shall set forth:
(i) the name and address of the shareholder who
intends to make the nominations or propose the business and, as
the case may be, of the person or persons to be nominated or of
the business to be proposed;
(ii) a representation that the shareholder is a
holder of record of shares of the Corporation entitled to vote
at such meeting and, if applicable, intends to appear in person
or by proxy at the meeting to nominate the person or persons
specified in the notice or to make the proposal to the meeting;
(iii) a description of all arrangements or
understandings between the shareholder and each nominee and any
other person or persons (naming such person or person) pursuant
to which the nomination or nominations are to be made by the
shareholder, or the business is to be proposed;
(iv) such other information regarding each
nominee or each matter of business to be proposed by such
shareholder as would be required to be included in a proxy
statement filed pursuant to the proxy rules of the Securities
and Exchange Commission had the nominee been nominated, or
intended to be nominated, or the matter been proposed, or
intended to be proposed by the Board of Directors; and
(v) if applicable, the consent of each nominee
to serve as director of the Corporation if so elected.
The chairman of the meeting may refuse to acknowledge the
nomination of any person or the proposal of any business not made in compliance
with the foregoing procedures.
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Article 2. DIRECTORS
Section 2.01. Number and Term of Office. The number of directors
of the Corporation shall be such number as shall be designated from time to time
by resolution of the Board of Directors and initially shall be three. Each
director shall be elected for the term of one year and shall serve until his
successor is elected and qualified or until his earlier death, resignation or
removal.
Section 2.02. Resignations. Any director may resign at any time
by giving written notice to the Board of Directors, the Chairman of the Board,
the President or the Secretary. The resignation shall be effective upon receipt
thereof or at such subsequent time as may be specified in the notice of
resignation. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 2.03. Annual Meeting. Immediately after each annual
election of directors, the Board of Directors shall meet for the purpose of
organization, election of officers, and the transaction of other business, at
the place where such election of directors was held. Notice of such meeting need
not be given. In the absence of a quorum at said meeting, the same may be held
at any other time and place which shall be specified in a notice given as
hereinafter provided for special meetings of the Board of Directors.
Section 2.04. Regular Meetings. Regular meetings of the Board of
Directors shall be held on the 3rd Tuesday of each February, May, August and
November or at such other time and place as shall be designated from time to
time by the Board. Notice of such meetings need not be given. If the date fixed
for any such regular meeting be a legal holiday under the laws of the State
where such meeting is to be held, then the same shall be held on the next
succeeding secular day not a legal holiday under the laws of said State, or at
such other time as may be determined by resolution of the Board. At such
meetings the directors may transact such business as may be brought before the
meeting.
Section 2.05. Special Meetings. Special meetings of the Board of
Directors may be called by the Chairman of the Board or Chief Executive Officer
or by two or more of the directors, and shall be held at such time and place as
shall be designated in the call for the meeting. Notice of each special meeting
shall be given by or at the direction of the person or persons authorized to
call such meeting to each director at least two days prior to the day named for
the meeting.
Section 2.06. Organization. Every meeting of the Board of
Directors shall be presided over by the Chairman of the Board, if one has been
selected and is present, and, if not, the President, or in the absence of the
Chairman of the Board and the President, a chairman chosen by a majority of the
directors present. The Secretary, or in his absence, a person appointed by the
chairman, shall act as secretary.
Article 3. COMMITTEES
Section 3.01. The Board of Directors may establish one or more
committees to consist of one or more directors of the corporation. Any
committee, to the extent provided by the Board of Directors, shall have and may
exercise all of the powers and authority of the Board of Directors except that a
committee shall not have any power or authority as to the following: (i) the
submission to shareholders of any action requiring
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approval of shareholders under the Pennsylvania Business Corporation Law of
1988; (ii) the creation or filling of vacancies in the Board of Directors;
(iii) the adoption, amendment or repeal of the bylaws; (iv) the amendment or
repeal of any resolution of the Board that by its terms is amendable or
repealable only by the Board; (v) action on matters committed by the bylaws or
resolution of the Board of Directors to another committee of the Board.
Article 4. OFFICERS
Section 4.01. Number. The officers of the Corporation shall be a
President, a Secretary and a Treasurer, and may include a Chairman of the Board
and one or more Vice Presidents, one or more Assistant Secretaries, one or more
Assistant Treasurers, and such other officers as the Board of Directors may
authorize from time to time.
Section 4.02. Qualifications. The President and Secretary shall
be natural persons of full age. The Treasurer may be a corporation, but if a
natural person shall be of full age.
Section 4.03. Election and Term of Office. The officers of the
Corporation shall be elected or appointed by the Board of Directors and each
shall serve at the pleasure of the Board.
Section 4.04. Resignations. Any officer may resign at any time
by giving written notice to the Board of Directors, the President or the
Secretary. The resignation shall be effective upon receipt thereof or at such
subsequent time as may be specified in the notice of resignation. Unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective.
Section 4.05. Chairman of the Board. If there is a Chairman of
the Board, he shall preside at the meetings of the Board. Such Chairman shall
also perform such other duties as may be specified by the Board from time to
time and as do not conflict with the duties of the President.
Section 4.06. The President. The President shall have general
supervision over the business and operations of the Corporation, subject,
however, to the control of the Board of Directors. He shall sign, execute, and
acknowledge, in the name of the Corporation, deeds, mortgages, bonds, contracts,
and other instruments authorized by the Board, except in cases where the signing
and execution thereof shall be expressly delegated by the Board to some other
officer or agent of the Corporation; and, in general, he shall perform all
duties incident to the office of President, and such other duties as from time
to time may be assigned to him by the Board.
Section 4.07. The Vice Presidents. In the absence or disability
of the President or when so directed by the President, any Vice President
designated by the Board of Directors may perform all the duties of the
President, and, when so acting, shall have all the powers of, and be subject to
all the restrictions upon, the President; provided, however, that no Vice
President shall act as a member of or as chairman of any committee of the Board
of which the President is a member or chairman by designation or ex-officio,
unless such Vice President is a member of the Board of Directors and has been
designated expressly by the Board as the alternate to the President for purposes
of service on such committee. The Vice Presidents shall perform such other
duties as from time to time may
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be assigned to them respectively by the Board or the President.
Section 4.08. The Secretary. The Secretary shall record all the
votes of the shareholders and of the directors and the minutes of the meetings
of the shareholders and of the Board of Directors in a book or books to be kept
for that purpose; he shall see that notices of meetings of the Board and
shareholders are given and that all records and reports are properly kept and
filed by the Corporation as required by law; he shall be the custodian of the
seal of the Corporation and shall see that it is affixed to all documents to be
executed on behalf of the Corporation under its seal; and, in general, he shall
perform all duties incident to the office of Secretary, and such other duties as
may from time to time be assigned to him by the Board or the President.
Section 4.09. Assistant Secretaries. In the absence or
disability of the Secretary or when so directed by the Secretary, any Assistant
Secretary may perform all the duties of the Secretary, and, when so acting,
shall have all the powers of, and be subject to all the restrictions upon, the
Secretary. The Assistant Secretaries shall perform such other duties as from
time to time may be assigned to them respectively by the Board of Directors, the
President, or the Secretary.
Section 4.10. The Treasurer. The Treasurer shall have charge of
all receipts and disbursements of the Corporation and shall have or provide for
the custody of its funds and securities; he shall have full authority to receive
and give receipts for all money due and payable to the Corporation, and to
endorse checks, drafts, and warrants in its name and on its behalf and to give
full discharge for the same; he shall deposit all funds of the Corporation,
except such as may be required for current use, in such banks or other places of
deposit as the Board of Directors may from time to time designate; and, in
general, he shall perform all duties incident to the office of Treasurer and
such other duties as may from time to time be assigned to him by the Board or
the President.
Section 4.11. Assistant Treasurers. In the absence or disability
of the Treasurer or when so directed by the Treasurer, any Assistant Treasurer
may perform all the duties of the Treasurer, and, when so acting, shall have all
the powers of, and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform such other duties as from time to time may be
assigned to them respectively by the Board of Directors, the President, or the
Treasurer.
Article 5. INDEMNIFICATION AND LIABILITY OF
DIRECTORS AND OFFICERS
Section 5.01. Personal Liability of Directors. A director of the
Corporation shall not be personally liable for monetary damages for any action
taken, or any failure to take any action, as a director except to the extent
that by law (including Section 512 of the Pennsylvania Business Corporation Law
of 1988) a director's liability for monetary damages may not be limited.
Section 5.02. Indemnification. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, including actions
by or in the right of the Corporation, whether civil, criminal, administrative
or investigative, by reason of the fact that such person is or was a director or
officer of the Corporation, or is or was serving while a director or officer
of the Corporation at the request of the Corporation as a director, officer,
employee, agent, fiduciary or other representative of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgments, fines, excise taxes and
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amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding unless the act or failure to act
giving rise to the claim for indemnification is determined by a court to have
constituted willful misconduct or recklessness.
Section 5.03. Advancement of Expenses. Expenses incurred by an
officer or director of the Corporation in defending a civil or criminal action,
suit or proceeding described in Section 5.02. may be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of such person to repay such amount if it
shall ultimately be determined that the person is not entitled to be indemnified
by the Corporation.
Section 5.04. Other Rights. The indemnification and advancement
of expenses provided by or pursuant to this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification or
advancement of expenses may be entitled under the Corporation's Articles of
Incorporation, any insurance or other agreement, vote of shareholders or
directors or otherwise, both as to actions in their official capacity and as to
actions in another capacity while holding an office, and shall continue as to a
person who has ceased to be a director or officer and shall inure to the benefit
of the heirs, executors and administrators of such person.
Section 5.05. Insurance. The Corporation shall have the power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, employee benefit plan or
other enterprise, against any liability asserted against him and incurred by him
in any such capacity, or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of these By-Laws.
Section 5.06. Security Fund; Indemnity Agreements. By action by
the Board of Directors (notwithstanding their interest in the transaction) the
Corporation may create and fund a trust fund or fund of any nature, and may
enter into agreements with its directors, officers, employees and agents for the
purpose of securing or insuring in any manner its obligation to indemnify or
advance expenses provided for in this Article.
Section 5.07. Modification. The duties of the Corporation to
indemnify and to advance expenses to a director or officer provided in this
Article shall be in the nature of a contract between the Corporation and each
such director or officer, and no amendment or repeal of any provision of this
Article, and no amendment or termination of any trust or other fund created
pursuant to Section 5.06., shall alter, to the detriment of such director or
officer, the right of such person to the advance of expenses or indemnification
related to a claim based on an act or failure to act which took place prior to
such amendment, repeal or termination.
Article 6. BORROWING, DEPOSITS, PROXIES, ETC.
Section 6.01. Borrowing, etc. No officer, agent or employee of
the Corporation shall have any power or authority to borrow money on its behalf,
to pledge its credit, or to mortgage or pledge its real or personal property,
except within the scope and to the extent of the authority delegated by
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resolution of the Board of Directors. Authority may be given by the Board for
any of the above purposes and may be general or limited to specific instances.
Section 6.02. Deposits and Investments. All funds of the
Corporation shall be deposited from time to time to the credit of the
Corporation in such banks, trust companies, or other depositaries, or invested
in such manner, as the Board of Directors may approve or designate, and all such
funds shall be withdrawn only upon checks signed by, and all such investments
shall be disposed of only by, such one or more officers or employees as the
Board shall from time to time determine.
Section 6.03. Proxies. Unless otherwise ordered by the Board of
Directors, any officer of the Corporation may appoint an attorney or attorneys
(who may be or include such officer himself), in the name and on behalf of the
Corporation, to cast the votes which the Corporation may be entitled to cast as
a shareholder or otherwise in any other corporation any of whose shares or other
securities are held by or for the Corporation, at meetings of the holders of the
shares or other securities of such other corporation, or, in connection with the
ownership of such shares or other securities, to consent in writing to any
action by such other corporation, and may instruct the person or persons so
appointed as to the manner of casting such votes or giving such consent, and may
execute or cause to be executed in the name and on behalf of the Corporation and
under its seal such written proxies or other instruments as he may deem
necessary or proper in the premises.
Article 7. SHARE CERTIFICATES; TRANSFER
Section 7.01. Share Certificates. Share certificates in the form
prescribed by the Board of Directors, shall be signed by the Chief Executive
Officer, President or a Vice President and by the Secretary or the Treasurer or
an Assistant Secretary or an Assistant Treasurer of the Corporation, but such
signatures may be facsimiles, engraved or printed. In case any officer who has
signed, or whose facsimile signature has been placed upon any share certificate
shall have ceased to be such officer because of death, resignation, or
otherwise, before the certificate is issued, it may be issued by the Corporation
with the same effect as if the officer had not ceased to be such at the date of
its issue.
Section 7.02. Transfer of Shares. The Corporation or a Registrar
or Transfer Agent of the Corporation shall maintain books in which the ownership
and transfer of the Corporation's shares shall be definitively registered.
Transfer of share certificates and the shares represented thereby shall be made
only on the books of the Corporation by the owner thereof or by his attorney
thereunto authorized, by a power of attorney duly executed and filed with the
Secretary or a Transfer Agent of the Corporation, and on surrender of the share
certificates.
Section 7.03. Transfer Agent and Registrar; Regulations. The
Corporation may, if and whenever the Board of Directors so determines, maintain,
in the Commonwealth of Pennsylvania, or any other state of the United States,
one or more transfer offices or agencies, each in charge of a Transfer Agent
designated by the Board, where the shares of the Corporation shall be
transferable, and also one or more registry offices, each in charge of a
Registrar (which may also be a Transfer Agent) designated by the Board, where
such shares shall be registered; and no certificates for shares of the
Corporation in respect of which a Transfer Agent shall have been designated
shall be valid unless countersigned by such Transfer Agent and no certificates
for shares of the Corporation in respect of which a Registrar shall have been
designated shall be valid unless registered by such Registrar. The Board may
also make such additional rules and regulations as it
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may deem expedient concerning the issue, transfer and registration of its
shares.
Section 7.04. Lost, Destroyed and Mutilated Certificates. The
Board of Directors, by standing resolution or by resolutions with respect to
particular cases, may authorize the issue of new share certificates in lieu of
share certificates lost, destroyed or mutilated, upon such terms and conditions
as the Board may direct.
Article 8. AMENDMENTS
Section 8.01. Except as otherwise provided by Section 5.07 or
the Business Corporation Law of 1988, the authority to adopt, amend and repeal
these bylaws is expressly vested in the Board of Directors, subject to the power
of the shareholders to change such action. No provision of these bylaws shall
vest any property right in any shareholder as such.
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EXHIBIT 4.1
FORM OF
10% CONVERTIBLE SENIOR SUBORDINATED
NOTE PURCHASE AGREEMENT
THIS 10% CONVERTIBLE SENIOR SUBORDINATED NOTE PURCHASE AGREEMENT (this
"Agreement") is dated as of July __, 1994 by and among Judge, Inc. a
Pennsylvania corporation (the "Company") and each of the purchasers listed on
the Schedule of Purchasers attached hereto and made a part hereof (each, a
"Purchaser" and together, the "Purchasers").
WITNESSETH:
WHEREAS, each of the Purchasers desires to purchase, and the Company
desires to sell, certain securities of the Company upon such terms and for such
consideration as is more fully described herein;
WHEREAS, the proceeds of such securities will be used for working
capital purposes by the Company and each of the Guarantors, and such Guarantors
will benefit substantially from the execution and delivery of this Agreement and
the performance by the Purchasers of their duties hereunder; and
WHEREAS, except as otherwise provided herein, certain capitalized terms
shall have the meanings ascribed to them in paragraph 11 hereof.
NOW, THEREFORE, in consideration of the mutual promises set forth
herein and intending to be legally bound hereby, the parties hereto agree as
follows:
1. Authorization of Securities.
1.1 Principal and Interest. The Company hereby authorizes the
issue and sale of its convertible senior subordinated promissory notes (herein,
together with any such notes which may be issued hereunder in substitution
therefor, collectively called the "Notes" and individually called a "Note") in
the aggregate principal amount of $500,000 to be dated the date hereof, to
mature on July ___, 1997, to bear interest on the unpaid balances thereof from
the date hereof until the principal thereof shall become due and payable at the
rate of 10% per annum, payable quarterly in arrears on the first day of each
October, January, April, and July and at maturity, to be convertible at the
option of the Purchasers upon the occurrence of certain events described more
fully herein into shares of the common stock of the Company, par value $.005 per
share ("Common Stock") and to be substantially in the form of Exhibit 1 attached
hereto (the Notes and the Common Stock are herein collectively called the
"Securities" and individually called a "Security").
1.2 Contingent Interest. In addition to interest as provided
herein above, the Notes shall earn a premium (the "Contingent Interest") equal
to 8% per annum, simple (noncompounding) interest, of the face amount of each
Note outstanding; provided, however, that, in the event that any optional or
mandatory redemption or conversion of Notes pursuant to paragraphs 4.1, 4.2 or
4.4 hereof occurs prior to maturity, Contingent Interest shall be pro-rated as
of the date of such redemption or conversion.
1.3 Guaranty. Repayment of principal, interest and Contingent
Interest shall be unconditionally and jointly and severally guaranteed by Judge
Technical Services, Inc. a Pennsylvania corporation and Judge Electronic
Services of Florida, Inc., a Florida corporation (together, the "Guarantors") in
accordance with the Guaranty.
2. Purchase and Sale of Securities. The Company hereby agrees to sell
to the Purchasers and, subject to the terms and conditions herein set forth, the
Purchasers agree to purchase from the Company notes, in denominations not less
than $25,000 and in integral multiples thereof, as more fully described in the
Schedule of Purchasers and registered in the name of such Purchasers (or in the
name of their nominee), at a purchase price equal to 100% of the principal
amount of such Notes.
The closing of the sale and purchase of the Securities (the "Closing")
shall take place at the offices of Fox, Rothschild, O'Brien & Frankel on July
___, 1994 or such other date as the parties hereto shall approve. At the
Closing, the Company will deliver to each Purchaser the Securities to be
purchased by them against payment of the
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purchase price thereof in hand delivered or by deposit of immediately available
funds to the account of Judge Technical Services, Inc., No. 8019333 at
Continental Bank. If at the Closing the Company shall fail to tender to such
Purchasers the Securities to be purchased by them or if at the Closing any of
the conditions specified in paragraph 3 shall not have been fulfilled such
Purchasers shall, at their election, be relieved of all further obligations
under this Agreement, without thereby waiving any other rights they may have by
reason of such failure or such non-fulfillment.
3. Conditions of Closing. Each Purchaser's obligation to purchase and
pay for the Securities to be purchased by them is subject to the satisfaction on
or before the date of the Closing of the following conditions:
3.1 Delivery of Notes. Each Purchaser shall have had delivered
to them a Note substantially in the form of Exhibit 1 hereto in such principal
amount as is set forth in the Schedule of Purchasers.
3.2 Opinion of Company's Counsel. The Company shall deliver
for the benefit of the Purchasers, an opinion of its counsel in substantially
the form set forth in Exhibit 3.2 hereof, as to matters described in paragraphs
9.1, 9.3, 9.4 and 9.8 hereof.
3.3 Representations and Warranties. The representations and
warranties contained in paragraph 9 shall be true on and as of the date of the
Closing except to the extent of changes caused by the transactions herein
contemplated; there shall exist on the date of the Closing no Default hereunder;
and the Company shall have delivered for the benefit of the Purchasers an
Officer's Certificate, dated the date of the Closing, to such effect.
3.4 Sales to Other Purchasers. Concurrently with the delivery
to each Purchaser of a Note, each other Purchaser shall tender in full the
purchase price therefor.
3.5 Legal Investment; Certificate. The purchase of the
Securities to be purchased by each Purchaser at the Closing shall be permitted
by the laws and regulations of the jurisdictions to which such Purchasers are
subject, and the Company shall have delivered to such Purchasers, if requested
by them, an Officer's Certificate, dated the date of the Closing, certifying as
to such matters of fact as such Purchasers may request to enable them to
determine whether such purchase is thus permitted.
3.6 Guaranty. The Guarantors shall each have executed and
delivered a Guaranty and Suretyship Agreement of even date in favor of the
Purchasers (the "Guaranties") in substantially the form set forth as Exhibit 3.6
hereto.
3.7 Subscription Agreements. Each Purchaser shall have
completed and delivered to the Company a Subscription Agreement in the form of
Exhibit 3.7 hereto, the execution and delivery of which shall be such
Purchaser's agreement to be bound by the terms hereof and thereof.
3.8 Proceedings. All corporate and other proceedings taken or
to be taken in connection with the transactions contemplated hereby and all
documents incident thereto shall be satisfactory in form and substance to each
Purchaser and each Purchaser shall have received all such counterpart originals
or certified or other copies of such documents as they may reasonably request.
3.9 Purchaser Questionnaire. Each Purchaser shall have
completed and delivered to the Company a Purchaser Questionnaire in the form of
Exhibit 3.9.
3.10 Minimum Purchase. The aggregate principal amount of Notes
purchased hereunder shall not be less than $300,000.
4. Redemption and Conversion. The Notes shall be subject to the
following redemption and conversion requirements:
4.1 Optional Redemption. The Notes, or any one or more of
them, may be redeemed at any time at the election of the Company upon 30 days
notice to the holder thereof. The redemption price shall be equal to 100% of the
principal amount of such Notes, together with interest accrued thereon and a
premium equal to all
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Contingent Interest accrued through and including the date on which such
redemption occurs in accordance with paragraph 1.2 hereof, provided, however,
that in the event that the Company registers or causes to be registered its
Common Stock pursuant to a Public Offering prior to the giving of notice of an
optional redemption hereunder, any Contingent Interest premium otherwise
required hereby shall be deemed to have been waived by all Purchasers.
4.2 Mandatory Redemption. Subject to paragraph 4.4 below, the
Company shall be obligated to redeem out of any funds legally available
therefor, at the election of any holder thereof, all Notes (or such number of
Notes as shall be tendered for redemption) at a price equal to 100% of the
principal amount of such Notes, together with interest accrued thereon and all
Contingent Interest earned in respect thereof in accordance with paragraph 1.2
hereof (the "Redemption Price") upon the occurrence of any of the following
(each, a "Change in Control Transaction"):
(a) A material change in the ownership of the Company or
either of the Guarantors. For purposes of this paragraph, a "material change"
shall mean the acquisition of voting stock of the Company or any Guarantor by a
shareholder or a group of shareholders, the result of which would be to have
such shareholder or group of shareholders own 51% or more of the outstanding
voting stock of such Company or Guarantor, as the case may be;
(b) The sale of all or substantially all of the assets of
the Company and its Subsidiaries considered as a whole;
(c) The occurrence of a merger or consolidation of the
Company with or into another entity in which the Company is not the surviving
entity; or
(d) The occurrence of a merger or consolidation of any
Guarantor or any Subsidiary with or into another entity in which such Guarantor
or such Subsidiary is not the surviving entity, unless such merger or
consolidation is with the Company or another Subsidiary of the Company.
4.3 Conversion.
(a) Subject to paragraph 4.4 below, at the election of any
holder thereof and upon thirty (30) days notice to the Company, the Notes shall
be convertible at any time into fully paid and nonassessable shares of Common
Stock at a rate equal to 2,000 shares of Common Stock for each $100,000
principal amount of Notes (the "Conversion Rate"). Interest (but not Contingent
Interest) accrued thereon shall be payable in cash. In the event of a conversion
the holder, by such conversion, waives any right to Contingent Interest unless
such conversion is pursuant to section 4.4;
(b) In the event of (i) any capital reorganization,
reclassification, consolidation or merger to which the Company is a party,
(ii) a sale of all or substantially all of the Company assets, (iii) a reverse
stock split or (iv) any other similar event, the Company's Board of Directors
will make such adjustments as are appropriate to the Conversion Rate and will
make appropriate provisions to assure that the holders of the Notes receive the
full benefits to which it is intended they be entitled under this Agreement.
4.4 Conversion Upon Change in Control. Upon the occurrence of
any Change in Control Transaction described in paragraph 4.2 hereof giving rise
to redemption rights as outlined therein, the holders of any Notes entitled to
exercise their redemption rights as described therein may, in the alternative,
request to have the principal amount of such Notes converted into shares of
Common Stock at the Conversion Rate, subject to adjustment as described in
paragraph 4.3(b) above which adjustment, in the event that such Change in
Control Transaction is determined to cause the Common Stock to be valued at a
price less than the Conversion Rate shall be made as to equate the Conversion
Rate with the value of the Common Stock as reflected in the Change of Control
transaction. Additionally, all accrued interest and Contingent Interest shall be
paid to the holder in cash.
4.5 Redemption Procedures. In the event that the Company
elects to exercise its redemption rights as described in paragraph 4.1 hereof or
if the Company is required to redeem its Notes as described in paragraph 4.2
hereof, the Company shall cause to be mailed to each holder of Notes, at the
last address of such holder as it shall appear in the Company's records, at
least 30 days prior to the record date of such redemption, a notice stating the
date on which such redemption is expected to take place (the "Redemption Date").
Except as
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otherwise required by applicable law, the failure to give any such notice, or
any defect therein, shall not affect the validity of such redemption. If less
than all of the Notes are to be redeemed, then each Note shall be partially
redeemed on a pro-rata basis, and a new Note shall be issued in substitution
therefor net of any pro-rata reduction in principal. Upon the Company's
redemption of Notes as set forth herein, the holder shall have no further
conversion rights unless default is made in the payment of the redemption price.
Unless default is made in the payment of the redemption price,
including accrued interest or Contingent Interest, as applicable, such interest
and Contingent Interest shall cease to accrue on the Redemption Date and all
rights of the holders of such Notes as creditors of the Company by reason of the
ownership of the Notes shall cease at the close of business on the Redemption
Date, except the right to receive payment in full of the redemption price,
including interest and Contingent Interest accrued thereon.
On the Redemption date, the holders of Notes subject to
redemption shall surrender their Notes to the Company at its principal place of
business or as otherwise notified and thereupon the redemption price of such
Notes shall be payable to the order of the person whose name appears on the
Company's records as the owner thereof and such Notes shall be marked as
cancelled.
4.6 Conversion Procedures. In the event that any holder of
Notes elects to exercise its conversion rights as described in paragraph 4.3
hereof or if the Company is requested to convert its Notes as described in
paragraph 4.4 hereof, the holder of such Notes shall cause to be mailed to the
Company at least thirty (30) days prior to the date selected for such conversion
(which date shall be reasonably acceptable to the Company), a notice stating the
date on which such conversion is to take place (the "Conversion Date").
Unless default is made in the exchange of shares of Common
Stock at the Conversion Rate, including accrued interest but not Contingent
Interest, as applicable (except in the case of a conversion pursuant to Section
4.4 hereof), such interest shall cease to accrue on the Conversion Date and all
rights of the holders of such Notes as creditors of the Company by reason of the
ownership of the Notes shall cease at the close of business on the Conversion
Date, except the right to receive shares of Common Stock in exchange for Notes
and interest and Contingent Interest accrued thereon.
On the Conversion Date, the holders of Notes to be converted
shall surrender their Notes to the Company at its principal place of business or
as otherwise notified and thereupon certificates shall issue for shares of
Common Stock at the Conversion Rate in the name of the person whose name appears
on the Company's records as the owner of such surrendered Notes and such Notes
shall be marked as cancelled.
4.7 Acquisition of Notes. The Company will not, and will not
permit any Subsidiary or Affiliate to, directly or indirectly, redeem, retire,
purchase or otherwise acquire any Note, except as expressly provided for in this
paragraph 4, or upon payment in full of any Note at its stated final maturity.
5. Affirmative Covenants Applicable to Notes.
5.1 Financial Statements and Other Reports. The Company
covenants that it will deliver in duplicate to each Purchaser (so long as such
Purchaser shall hold any Note):
(a) As soon as practicable and in any event within 120
days after the close of each fiscal year of the Company, consolidating and
consolidated statements of income, retained earnings and statements of cash
flows of the Company and its Subsidiaries for such fiscal year and consolidating
and consolidated balance sheets of the Company and its Subsidiaries as of the
close of such fiscal year, and notes to each, all in reasonable detail, setting
forth in comparative form the corresponding figures for the preceding fiscal
year, with such statements and balance sheets to be audited by independent
certified public accountants selected by the Company. The certificate or report
of such accountants shall be free of unreasonable exceptions or qualifications,
and shall in any event contain a written statement of such accountants
substantially to the effect that (i) such accountants prepared such financial
statements in accordance with GAAP, (ii) such consolidated and consolidating
financial statements present fairly the financial position of the Company and
its Subsidiaries as of the dates indicted and the results of their operations
and changes in financial position for the periods indicated in accordance with
GAAP, (iii) in making its examination, no information came to its attention
which would constitute an event of default under this Agreement. Additionally,
as soon as practicable and in any event within 120 days after the close of each
fiscal year of the
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Company, the Company shall furnish a consolidated and consolidating balance
sheet and income statement of the Company and its Subsidiaries as of the close
of such fiscal year, in reasonable detail, together with an Officer's
Certificate stating that such financial statements present fairly the financial
position of the Company and its Subsidiaries as of the end of such year, in
conformity with GAAP applied in a manner consistent with the most recent audited
financial statements of the Company.
(b) Quarterly Reports. As soon as practicable, and in any
event within 60 days after the close of the first three fiscal quarters of each
fiscal year, the Company shall furnish consolidating and consolidated statements
of income, retained earnings and cash flows for the Company and its Subsidiaries
for such quarters to the end of such quarters and for the fiscal year-to-date
and a consolidating and consolidated balance sheet of the Company and its
Subsidiaries as of the close of such periods, all in reasonable detail and
setting forth in comparative form the corresponding figures for the same period
of the preceding fiscal year, with such statements and balance sheet to be
accompanied by an Officer's Certificate stating that such financial statements
present fairly the financial position of the Company and such Subsidiaries as of
the end of such period and the results of their operations and the changes in
their financial position for such period, in conformity with GAAP applied in a
manner consistent with the most recent audited financial statements of the
Company subject to year-end audit adjustments.
5.2 Corporate Existence, Licenses and Permits; Maintenance of
Properties. The Company covenants that, so long as any of the Notes shall remain
outstanding, it will at all times cause to be done all things necessary to
maintain, preserve and renew its existence and the existence of each of its
Subsidiaries as a corporation organized under the laws of a state of the United
States of America, will preserve and keep in force and effect, and cause each of
its Subsidiaries to preserve and keep in force and effect, all licenses and
permits necessary to the conduct of its and their respective businesses and will
maintain and keep and will cause each of its Subsidiaries to maintain and keep,
its and their respective properties in good repair, working order and condition,
and from time to time make all needful and proper repairs, renewals and
replacements, so that the business carried on in connection therewith may be
properly and advantageously conducted at all times, provided, however, that
nothing in this paragraph 5.2 shall prevent any sale or other disposition of
assets in compliance with paragraph 7.3(e) or prevent the abandonment or
termination of the corporate existence, licenses or permits of any Subsidiary,
or of any license or permit of the Company, if such abandonment or termination
is not prejudicial in any material respect to the holders of the Notes.
5.3 Taxes. Subject to the disclosures set forth in Exhibit 5.3
hereto, the Company covenants that, so long as any of the Notes shall remain
outstanding, it will duly pay and discharge, and will cause each of its
Subsidiaries to duly pay and discharge, all taxes, assessments and governmental
charges upon or against the Company or its Subsidiaries or their respective
properties, in each case before the same become delinquent and before penalties
accrue thereon, unless and to the extent that the same are being contested in
good faith and by appropriate proceedings and the Company and its Subsidiaries
shall have set aside on their books adequate reserves with respect thereto.
5.4 Insurance. The Company covenants that, so long as any of
the Notes shall remain outstanding, it will apply for and continue in force, or
cause to be applied for and continued in force, adequate insurance covering the
respective risks of the Company and its Subsidiaries of such types and such
amounts as are customary for other corporations engaged in similar lines of
business and with good and responsible insurance companies.
5.5 Books and Accounts. The Company covenants that, so long as
any of the Notes shall remain outstanding, it will, and will cause each
Subsidiary to, maintain proper books of record and account in which full, true
and correct entries shall be made of its transactions and set aside on its books
from its earnings for each fiscal year all such proper reserves as in each case
shall be required in accordance with GAAP.
5.6 Indebtedness. The Company covenants that, so long as any
of the Notes shall remain outstanding, it will duly and punctually pay or cause
to be paid, and will cause each Subsidiary duly and punctually to pay or cause
to be paid (but only to the extent that the assets of such Subsidiary shall be
sufficient for that purpose), the principal of and the interest on all
Indebtedness heretofore or hereafter incurred or assumed by the Company or such
Subsidiary, as the case may be, (except for Indebtedness, the non-payment of
which would not have a material adverse effect on the Company) when and as the
same shall become due and payable, unless such Indebtedness shall be renewed or
extended, and faithfully observe, perform and discharge all the material
covenants,
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conditions and obligations which are imposed on the Company or such Subsidiary,
as the case may be, by any and all indentures and other agreements securing or
evidencing such Indebtedness or pursuant to which such Indebtedness is issued,
and will not permit to occur any act or omission which is or may be declared to
be a default thereunder. Neither the Company nor any Subsidiary shall be
required to make any payment or to take any other action by reason of the
provisions of this paragraph 5.6 at any time while it shall be contesting in
good faith its obligation to make such payment or to take such action.
5.7 Financial Advisor. So long as any Note or Common Stock
acquired upon the conversion of any Note shall remain outstanding, the Company
shall use commercially reasonable efforts to employ the services of The Gemstone
Group, Inc. as financial advisor (the "Advisor") to the Company and the holders
of the Notes. The Purchasers shall have the right to consult with the Advisor
from time to time, in a reasonable manner, at the expense of the Company, which
expense shall be limited to the Advisor's out of pocket expenses.
6. Affirmative Covenant Applicable to Notes Respecting the Securing of
Notes Equally. The Company covenants that, if it or any Subsidiary shall create
or assume any Lien upon any of its property or assets, whether now owned or
hereafter acquired, other than Liens excepted by the provisions of paragraph
7.3(a) (unless prior written consent to the creation or assumption thereof shall
have been obtained pursuant to paragraph 14.3), it will make or cause to be made
effective provision whereby the Notes will be secured by such Lien equally and
ratably with any and all other Indebtedness thereby secured as long as any such
other Debt shall be so secured; provided that this covenant shall not be
construed as consent by any Purchaser to any violation by the Company of the
provisions of paragraph 7.3(a).
7. Negative Covenants Applicable to Notes. All of the provisions of
this paragraph 7 are for the benefit of the holders of the Notes, and such
provisions shall remain in full force and effect so long as any of the Notes
shall remain outstanding.
7.1 Interest Coverage Ratio. The Company covenants that it
will not permit or suffer the ratio of EBIT to Interest Expense to be less than
2:1 at any time (calculated, as of the end of each fiscal quarter falling within
such period on a rolling four quarter basis to include the three fiscal quarters
immediately preceding such fiscal quarter ending).
7.2 Restricted Payments. The Company covenants that it will
not directly or indirectly, pay or declare any dividend on any class of its
stock, make any other distribution on account of any class of its stock, or
redeem, purchase or otherwise acquire, directly or indirectly, any shares of any
class of its stock, (all of the foregoing being herein called "Restricted
Payments").
7.3 Lien, Debt and Other Restrictions. The Company covenants
that it will not and will not permit any Subsidiary to:
(a) Liens. Create, assume, or suffer to exist any Lien
upon any of its property or assets, whether now owned or hereafter acquired
(whether or not provision is made for the equal and ratable securing of the
Notes in accordance with the provisions of paragraph 6), except:
(i) Liens for taxes not yet due or which are being
contested in good faith by appropriate proceedings,
(ii) other Liens incidental to the conduct of its
business or the ownership of its property and assets which were not incurred in
connection with the borrowing of money or the obtaining of advances or credit,
and which do not in the aggregate materially detract from the value of its
property or assets or materially impair the use thereof in the operation of its
business, and
(iii) Liens incurred in connection with Permitted
Debt.
(b) Permitted Debt. Create, incur, assume or suffer to
exist any debt, except as follows (defined as "Permitted Debt"):
(i) Debt of the Company owed to financial institutions
not exceeding eighty-
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five percent (85%) of the Company's accounts receivable (excluding intercompany
receivables, Affiliate receivables and receivables more than 90 days past due),
and
(ii) other debt provided that such debt is
subordinated in payment and priority to the Notes and at the time of issuance
thereof does not violate any of the covenants set forth in Article 7 hereof on a
pro forma basis.
(c) Loans, Advances, Investments and Contingent
Liabilities. Except as set forth on Exhibit 7.3 hereof, make or permit to remain
outstanding any loan or advance to, or guarantee, endorse or otherwise be or
become contingently liable, directly or indirectly, in connection with the
obligations, stock or dividends of, or purchase or acquire any stock,
obligations or securities of, or any other interest in, or make any capital
contribution to, any other Person, except that
(i) the Company or any Subsidiary may make or permit
to remain outstanding loans or advances to any other Subsidiary which, when
added to the loans, advances, etc. permitted under Section 7.3(c)(iv) hereof
shall be in an amount not to exceed $100,000 any time outstanding,
(ii) the Company or any Subsidiary may own, purchase
or acquire (a) commercial paper maturing not in excess of one year from the date
of acquisition and rated P1 by Moody's Investors Service, Inc. or A1 by Standard
& Poor's Corporation on the date of acquisition, (b) certificates of deposit in
United States commercial banks (having total assets in excess of $500,000,000)
maturing not in excess of one year from the date of acquisition, and
(c) obligations of the United States Government or any agency thereof the
obligations of which are guaranteed by the United States Government,
(iii) The Company or any Subsidiary may endorse
negotiable instruments for collection in the ordinary course of business, and
(iv) in addition to those permitted by clauses
(i) through (iii) of this paragraph, the Company or any Subsidiary may make or
permit to remain outstanding loans or advances to, or guarantee, endorse or
otherwise be or become contingently liable in connection with the obligations,
stock or dividends of, or purchase or acquire stock, obligations or securities
of, any other Person, provided that the aggregate principal amount of such loans
and advances, plus the aggregate amount of such contingent liabilities, plus the
aggregate amount of the investment (at original cost) in such stock, obligations
and securities, at any time outstanding for the Company and all Subsidiaries
which, when added to the loans, advances, etc. permitted under Section 7.3(c)(i)
hereof shall not exceed $50,000 less the aggregate amount of any losses incurred
at any time on account of such loans, advances, contingent liabilities and
investments, and provided, further, that no Subsidiary shall make any loan or
advance to, or acquire any stock, obligations or securities of the Company.
(d) Sale of Stock and Debt of Subsidiaries. Sell or
otherwise dispose of any shares of stock or debt of any Subsidiary, except that
any such shares of stock or debt may be sold or otherwise disposed of to the
Company or another Subsidiary.
(e) Merger and Sale of Assets. Merge or consolidate with
any other corporation or sell, lease, transfer or otherwise dispose of any
material portion of its assets outside the normal course of business (unless the
Company shall be the survivor thereof), except that
(i) any Subsidiary may merge with the Company
(provided that the Company shall be the continuing or surviving corporation) and
any Subsidiary may merge with any one or more other Subsidiaries, and
(ii) any Subsidiary may sell, lease, transfer or
otherwise dispose of any of its assets to the Company and any Subsidiary may
sell, lease, transfer or otherwise dispose of any of its assets to another
Subsidiary.
(f) Lease Rentals. Enter into, or permit to remain in
effect, any agreement to rent or lease (as lessee) any real or personal property
(other than office space, office equipment, data-processing equipment and
automotive and mobile material handling equipment, entered into in the ordinary
course of business) having initial terms (including options to extend, whether
or not exercised) of more than three years and providing
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for payments to lessors by the Company and all Subsidiaries on a consolidated
basis in an aggregate annual amount in excess of $50,000 for all such
agreements.
(g) Sale and Lease-Back. Enter into any arrangement with
any bank, insurance company or other lender or investor or to which such lender
or investor is a party providing for the leasing by the Company or any
Subsidiary of real or personal property which has been or is to be sold or
transferred by the Company or any Subsidiary to such lender or investor or to
any Person to whom funds have been or are to be advanced by such lender or
investor on the security of such property or rental obligations of the Company
or any Subsidiary.
(h) Sale or Discount of Receivables. Sell with recourse,
or discount or otherwise sell for less than the face value thereof, any of its
notes or accounts receivable.
(i) Certain Contracts. Enter into or be a party to:
(i) any contract providing for the making of loans,
advances or capital contributions to any Person other than a Subsidiary, or for
the purchase of any property or services from any Person, in each case in order
primarily to enable such Person to maintain working capital, net worth or any
other balance sheet condition or to pay debts, dividends or expenses, or
(ii) any contract for the purchase of materials,
supplies or other property or services if such contract (or any related
document) requires that payment for such materials, supplies or other property
or services shall be made regardless of whether or not delivery of such
materials, supplies or other property or services is ever made or tendered, or
(iii) any contract to rent or lease (as lessee) any
real or personal property if such contract (or any related document) provides
that the obligation to make payments thereunder is absolute and unconditional
under conditions not customarily found in commercial leases then in general use
or requires that the lessee purchase or otherwise acquire securities or
obligations of the lessor, or
(iv) any contract for the sale or use (as vendor,
lessor or hirer) of materials, supplies or other property, or the rendering of
services, if such contract (or any related document) requires that payment for
such materials, supplies or other property, or the use thereof, or payment for
such services, shall be subordinated to any indebtedness of the purchaser or
user of such materials, supplies or other property or the Person entitled to the
benefit of such services owed or to be owed to any Person, or
(v) any other contract which, in economic effect, is
substantially equivalent to a guarantee, except as permitted by paragraph
7.3(c).
(j) Expenditures for Capital Assets. Make expenditures
(whether paid in cash, securities or other property) or incur obligations for
Capital Assets in any fiscal year which, in the aggregate for such fiscal year
(less the aggregate proceeds of sales of Capital Assets for such fiscal year),
exceed (i) $400,000 in respect of the 1994 fiscal year and (ii) $250,000 in
respect of each fiscal year of the Company thereafter.
7.4 Compensation of Martin Judge. So long as any of the Notes
remain outstanding, neither the Company nor its Subsidiaries shall permit the
annual salary paid to Martin Judge to exceed the sum of (i) $325,000 as a base
salary and (ii) such amount as shall be necessary to repay certain indebtedness
incurred by Mr. Judge for the purchase of certain shares of Judge Computer
Corporation (the "Judge Indebtedness"), which amount may not exceed $92,000
annually. For the purpose of clause (i) hereof, the base salary amount shall be
adjusted up or down on January 1 of each year by reason of changes in the cost
of living. Such cost of living adjustment shall be calculated by ascertaining
the percentage change in the Consumer Price Index published by the National
Bureau of Labor Statistics for the month immediately preceding each January 1
from the same month in the immediately preceding year. For the purpose of clause
(ii) hereof, no amendment, modification or similar change may be made to the
repayment terms of the Judge Indebtedness from those in effect on the date
hereof.
8. Events of Default. If any of the following events shall occur and be
continuing for any reason whatsoever (and whether such occurrence shall be
voluntary or involuntary or come about or be effected by
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operation of law or otherwise): (i) if the Company defaults in the payment of
any principal of any Note when the same shall become due, either by the terms
thereof or otherwise as herein provided; or (ii) if the Company defaults in the
payment of any interest on any Note for more than 5 days after the date due
(unless such default is waived by the creditor); or (iii) if the Company or any
Subsidiary defaults in any payment of principal of or interest on any other
obligation for money borrowed or received (or any obligation under conditional
sale or other title retention agreement or any obligation issued or assumed as
full or partial payment for property whether or not secured by purchase money
mortgage or any obligation under notes payable or drafts accepted representing
extensions of credit) beyond any period of grace provided with respect thereto,
or defaults in the performance of any other agreement, term or condition
contained in any agreement under which any such obligation is created (or if any
other default under any such agreement shall occur and be continuing)( if the
effect of such default is to cause, or to permit the holder or holders of such
obligation or a trustee on behalf of such holder or holders) to cause, such
obligation to become due prior to its stated maturity; or (iv) if any material
representation or warranty made by the Company herein or in any writing
furnished in connection with or pursuant to this Agreement shall be false in any
material respect on the date as of which made; or (v) if the Company defaults in
the performance or observance of any agreement contained in paragraph 7 and such
default shall not have been remedied within 30 days; or (vi) if the Company
defaults in the performance or observance of any other agreement, covenant, term
or condition contained herein, and such default shall not have been remedied
within 30 days after written notice thereof shall have been received by the
Company from any Purchaser; (provided, however, that is such cure cannot be
effectuated within such 30 day period, so long as the Company shall have taken
steps within such 30 day period to remedy such defect, no event of default shall
be deemed to have occurred hereunder); or (vii) if the Company or any Subsidiary
makes an assignment for the benefit of creditors or admits in writing its
inability to pay its debts generally as they become due; or (viii) if an order,
judgment or decree is entered adjudicating the Company, or any Subsidiary
bankrupt or insolvent; or (ix) if the Company or any Subsidiary petitions or
applies to any tribunal for the appointment of a trustee, receiver or liquidator
of the Company or any Subsidiary, or of any substantial part of the assets of
the Company or any Subsidiary, or commences any proceedings (other than
proceedings for the voluntary liquidation and dissolution of a Subsidiary)
relating to the Company or any Subsidiary under any bankruptcy, reorganization,
arrangement, insolvency, readjustment of debt, dissolution or liquidation law of
any jurisdiction, whether now or hereafter in effect; or (x) if any such
petition or application is filed, or any such proceedings are commenced, against
the Company or any Subsidiary and the Company or any such Subsidiary by any act
indicates its approval thereof, consent thereto or acquiescence therein, or an
order, judgment or decree is entered appointing any such trustee, receiver or
liquidator, or approving the petition in any such proceedings, and such order,
judgment or decree remains unstayed and in effect for more than 60 days; or
(xi) if any order, judgment or decree is entered in any proceedings against the
Company or any Subsidiary decreeing the dissolution of the Company or such
Subsidiary and such order, judgment or decree remains unstayed and in effect for
more than 30 days; or (xii) if any order, judgment or decree is entered in any
proceedings against the Company or any Subsidiary decreeing a split-up of the
Company or such Subsidiary, which requires the divestiture of a substantial
part, or the divestiture of the stock of a Subsidiary whose assets constitute 5%
or more of the consolidated assets of the Company and its Subsidiaries or which
requires the divestiture of assets, or stock of a Subsidiary, which shall have
contributed 5% or more of Consolidated Net Earnings of the Company and its
Subsidiaries for any of the three fiscal years then most recently ended, and
such order, judgment or decree remains unstayed and in effect for more than 60
days; or (xiii) if a final judgment which, with other outstanding final
judgments against the Company and its Subsidiaries, exceeds an aggregate of
$50,000 shall be rendered against the Company or any Subsidiary and, within 60
days after entry thereof, such judgment shall not have been discharged or
execution thereof stayed pending appeal, or, within 60 days after the expiration
of any such stay, such judgment shall not have been discharged; then the holder
or holders of at least 51% of the aggregate principal amount of the Notes at the
time outstanding may, at their option and in addition to any right, power or
remedy permitted by law or equity by notice in writing to the Company, declare
all of the Notes, to be, and all of such Notes shall thereupon be and become,
forthwith due and payable together with interest accrued thereon.
9. Representations and Warranties. The Company represents, covenants
and warrants:
9.1 Organization and Qualification. The Company is a
corporation duly organized and existing in good standing under the laws of the
Commonwealth of Pennsylvania, has the corporate power to own its respective
properties and to carry on its respective business as now being conducted and as
proposed to be conducted. The Company is duly qualified as a foreign corporation
to do business and in good standing in each of the jurisdictions listed in
Exhibit 9.1, and the Company has not failed to qualify in any other jurisdiction
in which the nature of the business to be conducted by it makes such
qualification necessary.
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9.2 Financial Statements. The Company has heretofore furnished
to each Purchaser a consolidated balance sheet and a related consolidated
statement of income and retained earnings and cash flows for the fiscal year
ended December 31, 1993, as reviewed by Rudolph, Palitz, certified public
accountants. Such financial statements (and the notes thereto) present fairly
the financial condition of the Company and its subsidiaries and the results of
their operations and cash flows for the fiscal period then ended. The Company's
financial statements have been prepared in accordance with GAAP. Except as set
forth in such financial statement, there has been no material adverse change in
the operation, financial or otherwise, of the Company and its Subsidiaries since
December 31, 1993.
9.3 Capital Stock and Related Matters. As of the Closing the
authorized capital stock of the Company consists of 10,000,000 shares of Common
Stock, par value $.005 per share, the ownership of which is as set forth on
Exhibit 9.3. As of the Closing, the Company will have outstanding no stock or
securities convertible into or exchangeable for any shares of its capital stock,
except for the convertibility of the Notes as provided herein, nor, except as
set forth in the Certificate or Articles of Incorporation, will there be any
preemptive or similar rights to subscribe for or to purchase, or any other
rights to subscribe for or to purchase, or any options for the purchase of, or
any agreements providing for the issuance (contingent or otherwise) of, or any
calls, commitments or claims of any character relating to, any capital stock or
any stock or securities convertible into or exchangeable for any capital stock.
As of the Closing, the Company will not be subject to any obligation (contingent
or otherwise) to repurchase or otherwise acquire or retire any shares of its
capital stock or to register any shares of its capital stock except for its
obligations hereunder. As of the Closing, there will be no agreements (except
for the Shareholders Agreement dated December 30, 1976, as amended, and except
as set forth here) restricting the transfer of any shares of the Company's
capital stock. The Company is not required to file, nor has it filed, pursuant
to Section 12 of the Securities Exchange Act of 1934, as amended, a registration
statement relating to any class of debt or equity securities of the Company.
9.4 Actions Pending. There is no action, suit, or proceeding
pending or, to the best of the knowledge of the Company, threatened against the
Company or any of its Subsidiaries, at law or in equity before any court,
arbitrator, administrative or governmental body, or that can reasonably be
expected to result in any material adverse change in the business, condition or
operations of the Company or such Subsidiary.
9.5 Outstanding Debt. As of the Closing, neither the Company
nor any Subsidiary shall have outstanding any Funded or Current Debt except as
permitted by paragraph 7.3(b), and there shall exist no default under the
provisions of any instrument evidencing such Debt or of any agreement relating
thereto. The Company has conducted no business and will have incurred no
liabilities other than those arising from expenses in connection with its
organization and with the transactions contemplated hereby.
9.6 Properties. The Company has good and marketable title to
its properties and assets, free and clear of all Liens except as permitted by
paragraph 7.3(a).
9.7 Taxes. Except as reflected in Exhibit 5.3, all federal and
state income and other tax returns with respect to the income, properties and
business of the Company, which are required to be filed have been filed, and all
taxes as shown on said returns have been paid. All taxes due or payable by or on
behalf of the Company, without returns and all assessments received by it to the
extent that such taxes and assessments have become due have been paid or
adequate provisions have been made therefor. The charges, accruals and reserves
on the books of the Company, in respect of tax liabilities for all fiscal
periods to date are adequate. The federal income tax liability of the Company
has been examined and reported on by the Internal Revenue Service (or closed by
applicable statutes) and finally determined and fully paid for all fiscal years
prior to and including the fiscal year ending December 31, 1989.
9.8 Conflicting Agreements and Other Matters. Neither the
Company nor any of its Subsidiaries is a party to any contract or agreement or
subject to any charter or other corporate restriction which materially adversely
affects its business, property or assets, or financial condition. Neither the
execution and delivery of this Agreement, nor the offering and issuance of the
Notes or the issuance of the Common Stock upon conversion of the Notes as herein
provided, nor fulfillment of nor compliance with the terms and provisions hereof
and thereof conflict with, or result in a breach of the terms, conditions or
provisions of, or constitute a default under, or result in any violation of, or
require any consent, approval or other action by or any notice to or filing with
any court or administrative or governmental body, any award of any arbitrator or
any agreement, instrument,
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order, judgment, decree, statute, law, rule or regulation to which the Company
is subject, except for compliance with requirements of the Securities and
Exchange Commission and applicable blue sky requirements, if any, upon the
conversion of the Notes.
9.9 Disclosure. Neither this Agreement or any other document,
certificate or statement furnished to each Purchaser by or on behalf of the
Company in connection herewith contains any untrue statement of a material fact
or omits to state a material fact necessary in order to make the statement
contained herein and therein not misleading. There is no fact known to the
Company which materially adversely affects or in the future may (so far as
Company can now foresee) materially adversely affect the business, property or
assets, or financial condition of the Company, or any of its subsidiaries, the
Exhibits hereto or in the other documents, certificates and statements furnished
to each Purchaser by or on behalf of the Company in connection with the
transactions contemplated hereby.
9.10 Patents, etc. The Company and its Subsidiaries have
protected by way of trademark, trade name or otherwise to the fullest extent
permitted by law the names set forth in Exhibit 9.10. No other patents,
trademarks, trade names, copyrights, registrations or applications are necessary
for the conduct of the business of the Company or any of its Subsidiaries as now
conducted, other than those listed in Exhibit 9.10. Except as described in
Exhibit 9.10, all such patents, trademarks, trade names, copyrights and
registrations are in good standing, are valid and enforceable and are free from
any default on the part of the Company and its Subsidiaries. None of the Company
or any of its Subsidiaries is a licensor in respect of any patents, trademarks,
trade names, copyrights or registrations or applications therefor. The Company
and its Subsidiaries are not in violation of any patent, patent license, trade
name, trademark, or copyright of others. No director, officer or employee of the
Company or any of its Subsidiaries owns, directly or indirectly, in whole or in
part, any patents, trademarks, trade names, copyrights, registrations or
applications therefor or interests therein which the Company, or any of its
Subsidiaries has used, is presently using, or the use of which is necessary for
its business as now conducted.
9.11 Offering of Notes and Securities. Neither the Company nor
any agent acting on its behalf has offered the Notes, the Securities or any
similar securities of the Company to or solicited any offers to buy the Notes,
the Securities or any similar securities of the Company from, or otherwise
approached or negotiated with respect thereto with, any Person or Persons other
than the Persons listed on Exhibit 9.11 hereof; and neither the Company nor any
Person acting on its behalf has taken or will take any action which would
subject the offering and issuance of the Notes or the Securities to the
provisions of Section 5 of the Securities Act, or to the provisions of any
securities laws of any applicable jurisdiction.
9.12 Transactions with Affiliates. The Company covenants that
it shall conduct business with the Guarantors only upon fair and reasonable
terms no less favorable to the Company than those it would obtain in a
comparable arms-length transaction with one not affiliated with the Company.
10. Purchaser's Representations and Warranties. Each Purchaser
represents, covenants and warrants:
10.1 No Distribution. Each Purchaser is purchasing the Notes
for its own account for investment purposes and not with a view to the sale or
distribution of the Notes, nor with any present intention of distributing or
selling the same.
10.2 Illiquidity. Each Purchaser understands and agrees that
an investment in the Notes is an illiquid investment. In particular, such
Purchaser recognizes that it must bear the economic risk of investment in the
Notes for an indefinite period of time and that the Notes and Common Stock have
not been registered under the Securities Act or the Pennsylvania Securities Act
of 1972 (the "State Act"), and that they must be held indefinitely unless a
subsequent disposition thereof is exempt from the registration provisions of the
Securities Act and the State Act or pursuant to a registration of the Note and
Common Stock. Each Purchaser understands that the issuance of the Notes and
Common Stock is exempt from registration under the Securities Act pursuant to
Section 4(2) thereof and that the Company's reliance on this exemption is
predicated on such Purchaser's representation herein.
10.3 Independent Investigation. Each Purchaser in making its
decision regarding the Notes and Common Stock has relied on independent
investigations made by it, or such persons acting on its behalf and has been
given the opportunity to examine all documents and to ask questions of and to
receive answers from the
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Company or any person acting on the Company's behalf regarding every aspect of
the terms and conditions of the purchase hereunder and of the Company's
business, financial condition and operations.
10.4 Sophistication of Purchasers. Each Purchaser has
knowledge and experience in business and financial matters and, in particular,
investments generally comparable from an investment point of view to the
investment offered in the Company and making an informed investment decision.
Each Purchaser hereby acknowledges that it is in a position to be aware of the
character, business acumen and general business and financial circumstances of
the control persons of the Company.
10.5 No Solicitation. Each Person hereby acknowledges that
neither the Company nor any person acting on its behalf, offered or sold the
Notes or Common Stock using any general solicitation or general advertising.
10.6 Accredited Status. Each Purchaser represents that it is
an "accredited investor" within the meaning of Regulation D promulgated under
the Securities Act.
11. Definitions. For the purpose of this Agreement, the following terms
shall have the following respective meanings:
11.1 "Affiliate" shall mean with respect to any Person, any
other Person directly or indirectly controlling, controlled by, or under common
control with, such Person, but shall exclude the Purchasers, and any such other
Person which is an institution and which might be deemed to be such an Affiliate
solely by reason of its ownership of securities purchased by such Purchaser
under this Agreement or issued upon conversion of any such securities, or by
reason of its benefiting from any agreements or covenants of the Company
contained in this Agreement.
11.2 "Capital Assets" shall mean any assets which would be
classified as property, plant and equipment on a consolidated balance sheet of
the Company and its Subsidiaries prepared in accordance with GAAP.
11.3 "Consolidated Current Assets" shall mean the consolidated
current assets of the Company and its Subsidiaries, determined, on a
consolidated basis after eliminating all inter-company items and after
appropriate deductions for minority interests, in accordance with GAAP; provided
that there shall not be included any loans or advances made by the Company or
any Subsidiary except travel and other like advances to officers and employees
in the ordinary course of business.
11.4 "Consolidated Current Liabilities" shall mean the
consolidated current liabilities of the Company and its Subsidiaries,
determined, on a consolidated basis after eliminating all inter-company items
and after appropriate deductions for minority interests, in accordance with
GAAP.
11.5 "Consolidated Net Tangible Assets" shall mean the total
tangible assets less the liabilities (other than Funded Debt, capital stock and
capital surplus) of the Company and its Subsidiaries determined in accordance
with GAAP after eliminating all inter-company items and after deducting the
amount of all investments permitted by subdivision (iv) of paragraph 7.3.3 which
are included in Tangible Assets. "Tangible Assets" shall mean, as applied to any
corporation, the total amount of all assets properly appearing on a balance
sheet of such corporation prepared in accordance with GAAP, after deducting from
such total, without duplication of deductions: (i) that portion of the book
amount of all such assets which would be treated as intangibles under GAAP
including, without limitation, all such items as goodwill, trademarks, trade
names, brand names, copyrights, patents, patent applications, licenses,
franchises, permits, and rights with respect to the foregoing, experimental or
organizational expense and unamortized discount and expense, (ii) any write-up
in the book value of any such asset resulting from a revaluation thereof
subsequent to December 31, 1992, (iii) all reserves, including reserves for
liabilities, fixed or contingent, deferred income taxes, depreciation,
amortization, obsolescence, depletion, insurance and inventory valuation,
(iv) the amount, if any, at which any stock of such corporation appears on the
asset side of such balance sheet and (v) all deferred charges.
11.6 "Consolidated Working Capital" shall mean the excess of
Consolidated Current Assets over Consolidated Current Liabilities.
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11.7 "Contingent Interest shall mean a premium payable in
respect of the Notes and which shall be calculated as set forth in Section 1.1
hereof. Contingent Interest shall be payable at maturity unless earlier payment
is required pursuant to the provisions of Section 4 hereof. Any other provision
herein to the contrary notwithstanding, no Contingent Interest shall be deemed
to have been earned or shall be deemed to be payable in the event of a Public
Offering of the Common Stock.
11.8 "EBIT" shall mean, for any period, the sum of the
Company's (i) Net Income for such period, plus (ii) Interest Expense for such
period, plus (iii) Income Tax Expense for such period.
11.9 "Event of Default" shall mean any of the events specified
in paragraph 8, provided that there has been satisfied any requirement in
connection with such event for the giving of notice, or the lapse of time, or
the happening of any further condition, event or act, and "Default" shall mean
any of such events, whether or not any such requirement has been satisfied.
11.10 "GAAP" shall mean generally accepted accounting
principles (as such principles may change from time to time), applied on a
consistent basis both as to classification of items and amounts.
11.11 "Income Tax Expense" shall mean all federal, state, or
local income taxes paid or accrued during any period by the Company.
11.12 "Indebtedness" shall mean (i) all items, except for
items of capital stock, surplus, or general contingency or deferred tax
reserves, which in accordance with GAAP would be included in determining total
liabilities as shown on the liability side of a balance sheet of the Company or
a Subsidiary at such time, (ii) all obligations for borrowed money (including
without limitation, all notes payable and drafts accepted representing
extensions of credit, all obligations evidenced by bonds, debentures, notes or
similar instruments, all obligations in which interest charges are customarily
paid, all obligations under conditional sale or other title retention agreements
and all obligations issued or assumed as full or partial payment for property
whether or not any such notes, drafts of obligations are obligations for
borrowed money), (iii) all obligations secured by any mortgage, lien, pledge,
charge or security interest or encumbrance existing on property owned or
acquired subject thereto, whether or not the obligations secured thereby shall
have been assumed, (iv) all obligations guaranteed (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
directly or indirectly, in any manner, or in effect guaranteed, directly or
indirectly, through any agreement, contingent or otherwise, (a) to purchase
securities, indebtedness or other obligations, (b) to purchase, sell or lease
(as lessee or lessor) property to purchase or sell services primarily for the
purposes of enabling the debtor to make payment of indebtedness of other
obligations against loss, (c) to supply funds to or in any manner invest in the
debtor or (d) to repay amounts drawn down by beneficiaries of letters of credit,
(v) all indebtedness and other obligations for the payment or purchase of which
the Company or a Subsidiary has agreed contingently or otherwise to advance or
supply funds and (vi) indebtedness represented by capitalized leases.
11.13 "Interest Expense" shall mean, for any period for which
such amount shall be computed, all interest accrued during such period on
Indebtedness, including without limitation all interest required under GAAP to
be capitalized during such period.
11.14 "Lien shall mean any mortgage, pledge, security
interest, encumbrance, lien or charge of any kind (including any conditional
sale or other title retention agreement, any lease in the nature thereof and the
filing of or agreement to give any financing statement under the Uniform
Commercial Code of any jurisdiction).
11.15 "Net Income" shall mean, for any period, the net income
after taxes of the Company for such period determined in accordance with GAAP;
provided, however, that Net Income shall not include any gain or loss
attributable to extraordinary items or any taxes or tax savings as a result
thereof.
11.16 "Officer's Certificate" shall mean a certificate signed
in the name of the Company by its President, one of its Vice Presidents, or its
Chief Financial Officer (or, if the Company has no Chief Financial Officer, its
Controller), which certificate shall state (i) that the individual signing the
same has made or caused to be made such investigations as are reasonably
necessary in order to permit him to verify the accuracy of the information set
forth therein and (ii) that to the best of such individual's knowledge, the
certificate does not misstate any material fact or omit to state any material
fact necessary to make the certificate not misleading.
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11.17 "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an unincorporated
organization and a government or any department or agency thereof.
11.18 "Public Offering" shall mean any offering of securities
to the public required by the Securities Act of 1933, or any similar federal
statute then in force, to be registered with the Securities and Exchange
Commission, or any successor federal agency.
11.19 "Registrable Securities" shall mean the Common Stock
issued upon conversion. As to any particular Registrable Securities, once issued
such securities shall cease to be Registrable Securities when (i) they shall
have been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (ii) they shall have
been distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (iii) they shall have been otherwise transferred, and
new certificates for them not bearing a legend of the character set forth in
paragraph 12 shall have been delivered by the Company, in accordance with
paragraph 12.2 or (iv) they shall have ceased to be outstanding.
11.20 "Restricted Securities" shall mean any Common Stock
issued upon conversion of the Notes and any securities issued with respect to
any such Common Stock by way of stock dividend or stock split or in connection
with a combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such securities
shall cease to be Restricted Securities when (i) they shall have been
effectively registered under the Securities Act and disposed of in accordance
with the registration statement covering them, (ii) they shall have been
distributed to the public pursuant to Rule 144 (or any successor provision)
under the Securities Act, (iii) they shall have been otherwise transferred, and
new certificates for them not bearing a legend of the character set forth in
paragraph 12.1 shall have been delivered by the Company, in accordance with
paragraph 12.2 or (iv) they shall have ceased to be outstanding. Whenever any
particular securities cease to be Restricted Securities, the holder thereof
shall be entitled to receive from the Company, without expense (other than
transfer taxes, if any), new securities of like tenor not bearing a legend of
the character set forth in paragraph 12.1.
11.21 "Securities Act" shall mean the Securities Act of 1933,
as amended, or any similar federal law then in force, and the term "Securities
and Exchange Commission" shall include any governmental body or agency
succeeding to the functions thereof.
11.22 "Subsidiary" shall mean Judge Computer Corporation (so
long as the majority of each class of voting stock in such company is owned,
directly or indirectly, by the Company or any Affiliate of the Company) and any
other corporation, all of the stock of every class of which shall, at the time
as of which any determination is being made, be owned by the Company either
directly or through one or more Subsidiaries.
12. Restriction on Transfer of Restricted Securities and Registration.
Restricted Securities shall not be transferable except upon the conditions
specified in this paragraph 12.
12.1 Legend on Certificates for Restricted Securities. Each
Note and each certificate for Restricted Securities and each certificate issued
in exchange for or upon transfer of any thereof, except as otherwise herein
expressly provided, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE BLUE SKY LAW OR REGULATION (THE "STATE
ACT"). THE SECURITIES MAY NOT BE SOLD OR TRANSFERRED UNLESS
THEY HAVE FIRST BEEN REGISTERED UNDER THE ACT AND ANY
APPLICABLE STATE ACT OR UNLESS COUNSEL ACCEPTABLE TO THE
COMPANY HAS GIVEN AN OPINION SATISFACTORY TO THE COMPANY THAT
SUCH REGISTRATION IS NOT REQUIRED.
12.2 Conditions of Transfer. The holder of any certificate for
Restricted Securities bearing the aforesaid legend, by acceptance thereof,
agrees (subject to paragraph 10) prior to any transfer or conversion where such
conversion in connection with a proposed transfer of Restricted Securities, to
give written notice to the Company expressing such holder's intention to effect
such transfer or conversion and describing briefly the manner
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of the proposed transfer (which may include a distribution over a period of time
or in the case of such conversion, such holder's intention as to the disposition
(and the intended method thereof)) to be made of the Restricted Securities
issuable upon the proposed conversion. Promptly upon receiving such notice, the
Company shall present copies thereof to its counsel and to such holder's special
counsel and the following provisions shall apply:
(a) If (i) in the opinion of such special counsel, which
opinion shall be rendered not later than 15 days after receipt by the Company of
such written notice, the proposed transfer, conversion or disposition of such
Restricted Securities may be effected without registration or qualification of
such Restricted Securities under the Securities Act or any similar state law
then in force, and (ii) counsel to the Company shall not have rendered an
opinion within 15 days after receipt by the Company of such written notice that
such registration or qualification is required, the Company, as promptly as
practicable (and in any event, immediately upon the expiration of such 15 day
period) shall notify such holder that such conditions have been satisfied,
whereupon such holder shall be entitled to transfer, convert or dispose of such
Restricted Securities, all in accordance with the terms of the notice delivered
by such holder to the Company. Unless in the opinion of either of such counsel
subsequent disposition by such holder or by others of such Restricted Securities
to be so transferred requires such registration or qualification, the Company
will promptly upon such conversion or transfer deliver new certificates for such
Restricted Securities not bearing a legend of the character set forth in
paragraph 12.1. If in the opinion of either such counsel any subsequent
disposition by the transferee or others of such Restricted Securities may
require such registration or qualification thereof, the holder thereof shall not
transfer the same until such transferee has confirmed to the Company in writing
its agreement to be bound by these conditions.
(b) If the foregoing conditions entitling the holder to
effect a proposed transfer, conversion or disposition of such Restricted
Securities without registration or qualification thereof have not been
satisfied, the holder in each case shall not transfer the shares proposed to be
transferred and/or shall not effect the proposed conversion until such
registration or qualification of the Restricted Securities has been effected.
12.3 Registration on Request. No earlier than 180 days
following an initial Public Offering by the Company of Common Stock, and upon
the written request of one or more registered holders of Registrable Securities
holding in the aggregate at least 25% of the Registrable Securities, which
request shall state the intended method of disposition by such holder or holders
and shall request that the Company effect the registration of all or part of
such holder's or holders' Registrable Securities under the Securities Act, the
Company will promptly give written notice of such requested registration to all
registered holders of Registrable Securities, and thereupon will use its best
efforts to effect the registration under the Securities Act of:
(a) the Registrable Securities which the Company has been
so requested to register, for disposition in accordance with the intended method
of disposition stated in such request, and
(b) all other Registrable Securities the holders of which
shall have made written request (stating the intended method of disposition of
such securities by such holders) to the Company for registration thereof within
30 days after the receipt of such written notice from the Company, all to the
extent requisite to permit the disposition, (in accordance with the intended
methods thereof as aforesaid) by the holders of the Registrable Securities so to
be registered; provided, however, that any holder of Registrable Securities or
any transferee of such holder may request to be made no more than one (1)
registration in respect of such Registrable Securities pursuant to this
paragraph 12.3.
12.4 Incidental Registration. If the Company at any time
proposes to register any of its securities under the Securities Act (other than
pursuant to paragraph 12.3) whether of its own accord or at the request or
demand of any holder or holders of such securities, and if the registration form
proposed to be used may be used for the registration of Registrable Securities,
the Company will each such time give 30 days written notice to any holders of
Registrable Securities of its intention to do so and, upon the written request
of any such holder made within 15 days after the receipt of any such notice
(which request shall specify the Registrable Securities intended to be disposed
of by such holder and state the intended method of disposition thereof), the
Company will use its best efforts to cause all such Registrable Securities, the
holders of which shall have so requested the registration thereof to be
registered under the Securities Act to the extent requisite to permit the
disposition (in accordance with the intended methods thereof as aforesaid by the
holders of the Registrable Securities to be so registered. Provided that if such
registration shall be in connection with an underwritten public offering and if
the managing underwriters shall advise the Company in writing that in their
opinion the number of securities requested to be included in such registration
(whether by the Company pursuant to this paragraph 12.4 or pursuant to any other
rights granted by
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the Company to holders of its securities to request or demand such registration
or inclusion of any such securities in such registration) exceeds the number of
such securities which can be sold in such offering or which would have a
material adverse effect upon the Company's offering, the Company shall
nevertheless include in such registration pro rata among the respective holders
of Registrable Securities making requests pursuant to this paragraph 12.4 on the
basis of the number of Registrable Securities so requested to be included which
in the opinion of such underwriters can be so sold and shall not include in such
registration any securities (other than securities being sold by the Company,
which the Company shall have priority in including in such registration) so
requested to be included other than Registrable Securities unless all such
Registrable Securities are included therein, except that, in the case of a
registration initially requested or demanded by a holder or holders of
securities other than Registrable Securities, the Company need include therein
only a pro rata portion of the Registrable Securities requested to be included
therein on the basis of the number of Registrable Securities requested to be
included therein and the number of securities of such holder or holders
requested to be included therein; and the Company shall so provide in any
registration agreements hereafter entered into with respect to any of its
securities.
12.5 Registration Procedures. If and whenever the Company is
required to use its best efforts to effect or cause the registration of any
Registrable Securities under the Securities Act as provided in this paragraph
12, the Company will, as expeditiously as possible:
(a) prepare and file with the Securities and Exchange
Commission a registration statement with respect to such Registrable Securities
(including such audited financial statements as the Board of Directors of the
Company may in good faith deem appropriate) and use its best efforts to cause
such registration statement to become effective;
(b) prepare and file with the Securities and Exchange
Commission such amendments and supplements to such registration statement and
the prospectus used in connection therewith as may be necessary to keep such
registration statement effective for a period of not less than six months and to
comply with the provisions of the Securities Act with respect to the disposition
of all securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the seller or sellers
thereof set forth in such registration statement;
(c) furnish to each seller of such Registrable Securities
such number of copies of such registration statement and of each such amendment
and supplement thereto (in each case including all exhibits), such number of
copies of the prospectus included in such registration statement (including each
preliminary prospectus), in conformity with the requirements of the Securities
Act, and such other documents, as such seller may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such
Registrable Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions as any state shall reasonably
request, and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller to consummate the disposition in
such jurisdictions of the Registrable Securities owned by such seller, except
that the Company shall not for any such purpose be required to qualify generally
to do business as a foreign corporation in any jurisdiction wherein it would not
but for the requirements of this subparagraph (d) be obligated to be qualified,
to subject itself to taxation in any such jurisdiction, or to consent to general
service of process in any such jurisdiction;
(e) notify each seller of any such Registrable Securities
covered by such registration statement, at any time when a prospectus relating
thereto is required to be delivered under the Securities Act within the period
mentioned in subparagraph (b) of this paragraph 12.5, of the happening of any
event as a result of which the prospectus included in such registration
statement, as then in effect, includes an untrue statement of a material fact or
omits to state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the circumstances
then existing, and at the request of any such seller prepare and furnish to such
seller a reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
the light of the circumstances then existing,
(f) cause all such Registrable Securities covered by such
registration statement to be listed
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on each securities exchange on which similar securities issued by the Company
are then listed;
(g) provide a transfer agent and registrar for all such
Registrable Securities covered by such registration statement not later than the
effective date of such registration statement;
(h) make available for inspection by any seller of such
Registrable Securities covered by such registration statement, by any
underwriter participating in any disposition to be effected pursuant to such
registration statement and by any attorney, accountant or other agent retained
by any such seller or any such underwriter, all relevant financial and other
records, pertinent corporate documents and properties of the Company, and cause
all of the Company's officers, directors and employees to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement.
12.6 Registration Expenses. All expenses incident to the
Company's performance of or compliance with this paragraph 12, including,
without limitation, all registration and filing fees, fees and expenses of
compliance with securities or blue sky laws, printing expenses, messenger and
delivery expenses, and fees and disbursements of counsel for the Company and all
independent public accountants (including the expenses of any audit),
underwriters (excluding underwriting commissions and discounts) and other
Persons retained by the Company (all such expenses being herein call
"Registration Expenses"), shall be borne by the Company. The Company will not,
however, be responsible for Purchaser's costs or fees, or the expenses of their
counsel or agents.
12.7 Indemnification. The Company hereby indemnifies, to the
extent permitted by law, each holder of Registrable Securities, its officers and
directors, if any, and each Person, if any, who controls such holder within the
meaning of Section 15 of the Securities Act, against all losses, claims,
damages, liabilities and expenses (under the Securities Act or common law or
otherwise) caused by any untrue statement or alleged untrue statement of a
material fact contained in any registration statement or prospectus (and as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages, liabilities or expenses are caused by any untrue
statement or alleged untrue statement contained in or by any omission or alleged
omission from information furnished in writing to the Company by such holder
expressly for use therein. If the offering pursuant to any registration
statement provided for under this paragraph 12 is made through underwriters, the
Company agrees to enter into an underwriting agreement in customary form with
such underwriters and to indemnify such underwriters, their officers and
directors, if any, and each Person who controls such underwriters within the
meaning of the Securities Act to the same extent as hereinbefore provided with
respect to the indemnification of the holders of Registrable Securities. In
connection with any registration statement in which a holder of Registrable
Securities is participating, each such holder will furnish to the Company in
writing such information as shall reasonably be requested by the Company for use
in any such registration statement or prospectus and will indemnify, to the
extent permitted by law, the Company, its directors and officers and each
Person, if any, who controls the Company within the meaning of the Securities
Act, against any losses, claims, damages, liabilities and expenses resulting
from any untrue statement or alleged untrue statement of a material fact or any
omission or alleged omission of a material fact required to be stated in the
registration statement or prospectus or any amendment thereof or supplement
thereto or necessary to make the statements therein not misleading, but only to
the extent that such untrue statement is contained in or such omission is
contained in information so furnished in writing by such holder expressly for
use therein. If the offering pursuant to any such registration statement is made
through underwriters, each such holder agrees to enter into an underwriting
agreement in customary from with such underwriters and to indemnify such
underwriters, their officers and directors, if any, and each Person who controls
such underwriters within the meaning of the Securities Act to the same extent as
hereinbefore provided with respect to indemnification by such holder of the
Company.
12.8 Delayed Registration. Notwithstanding anything to the
contrary elsewhere in this paragraph 12, if at any time the Company shall have
previously filed a registration pursuant to paragraph 12.3 or shall have
previously filed a registration of which notice has been given to all holders of
Registrable Securities pursuant to paragraph 12.4, and if such previous
registration shall not have been withdrawn or abandoned or become effective,
then so long as such previous registration remains pending:
(a) The Company shall not be required to effect a
registration under paragraph 12.3; and
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(b) at the conclusion of each successive period of six
months after the filing of such previous registration, the Company will give
prompt written notice to all holders of Registrable Securities of the continued
pendency of such registration and, upon the written request of any such holder
made within 15 days after the receipt of any such notice (which request shall
specify the Registrable Securities intended to be disposed of by such holder and
state the intended method of disposition thereof), the Company will use its best
efforts to cause all such Registrable Securities, the holders of which shall
have so requested the registration thereof, to be registered under the
Securities Act to the extent requisite to permit the disposition (in accordance
with the intended methods thereof as aforesaid) by the holders of the
Registrable Securities to be so registered, provided, that if such registration
shall be in connection with any underwritten Public Offering and if the managing
underwriters shall advise the Company in writing that in their opinion the
number of securities requested to be included in such registration (whether from
the pending registration or pursuant to this paragraph 12.8) exceeds the number
of such securities which can be sold in such offering or which would have a
material adverse effect on the Company's offering, the Company shall
nevertheless include in such registration, pro rata among the respective holders
of Registrable Securities participating in the pending registration and/or
making requests pursuant to this paragraph 12.8 on the basis of the number of
Registrable Securities included in the pending registration and/or requested to
be included pursuant to this paragraph 12.8 (such Registrable Securities so
included and requested to be included being herein called "Priority Registrable
Securities") (but subject to the priority set forth in clause (i) of the second
sentence of paragraph 12.8 where the pending registration is subject to such
priority) the number of Priority Registrable Securities which in the opinion of
such underwriters can be so sold and shall not include in such registration any
securities (other than securities included in the pending registration being
sold by the Company, which the Company shall have priority in including in such
registration), including any securities previously a part of the pending
registration, other than Registrable Securities unless all the Priority
Registrable Securities are included therein, except that, in the case of a
pending registration initially requested or demanded by a holder or holders of
securities other than Registrable Securities, the Company need include therein
only a pro rata portion of the Priority Registrable Securities on the basis of
the number of Priority Registrable Securities and the number of securities of
such holder or holders included in the pending registration; and the Company
shall so provide in any registration agreements hereafter entered into with
respect to any of its securities; and
(c) the Company will pay all Registration Expenses in
connection with each registration under subparagraph (b) of this paragraph 12.8.
12.9 Certain Limitations on Registration Rights. In the case
of a registration under paragraph 12.3, if the holders of a majority of the
Registrable Securities to be included therein determine to enter into an
underwriting agreement in connection therewith, or in the case of a registration
under paragraphs 12.4 or 12.8, if the holders of securities initially requesting
or demanding such registration (in the case of a secondary registration) or the
Company (in the case of a primary registration) have determined to enter into an
underwriting agreement in connection therewith, no Person may participate in
such registration unless such Person agrees to sell such Person's securities on
the basis provided in the underwriting arrangements approved by such holders or
the Company and completes and/or executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents which must be
executed under the terms of such underwriting arrangements.
13. Subordination of Notes. Anything in this Agreement or any Note to
the contrary notwithstanding, the indebtedness evidenced by the Notes, as to
principal, premium, if any, and interest, shall be subordinate and junior to the
extent set forth in the following subparagraphs 13.1 to 13.6, inclusive, to all
principal of, premium, if any, and interest on Permitted Debt described in
paragraph 7.3(b)(i) and all other indebtedness of the Company for borrowed money
(except Permitted Debt described in paragraph 7.3(b)(ii) and such indebtedness
which is expressly made subordinate or junior in any respect to other
indebtedness of the Company) whether outstanding at the date of this Agreement
or created or incurred after the date of this Agreement but prior to the
maturity of the Notes by lapse of time, acceleration or otherwise. Such
indebtedness of the Company to which the Notes are subordinate and junior is
sometimes hereinafter referred to as "Senior Debt":
13.1 Insolvency, Etc. In the event of any insolvency,
bankruptcy, liquidation, reorganization or other similar proceedings, or any
receivership proceedings in connection therewith, relative to the Company or its
creditors or its property, and in the event of any proceedings for voluntary
liquidation, dissolution or other winding-up of the Company, whether or not
involving insolvency or bankruptcy proceedings, then all principal of, premium,
if any, and interest on all Senior Debt shall first be paid in full, or such
payment shall have been provided for, before any payment on account of principal
or interest is made upon any Note.
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13.2 Payment Direct to Senior Debtholders. In any of the
proceedings referred to in subparagraph 13.1 above, any payment or distribution
of any kind or character, whether in cash, property, stock or obligations, which
may be payable or deliverable in respect of the Notes shall be paid or delivered
directly to the holders of Senior Debt (or to a banking institution selected by
the court or Person making the payment or delivery or designated by any holder
of Senior Debt) for application in payment thereof, unless and until all
principal and interest on all Senior Debt shall have been paid in full, or such
payment shall have been provided for; provided, however, that:
(a) in the event that payment or delivery of such cash,
property, stock or obligations to the holder of any Note is authorized by an
order or decree giving effect, and stating in such order or decree that effect
is given, to the subordination of such Note to Senior Debt, and made by a court
of competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy or reorganization law, no payment or delivery of such cash, property,
stock or obligations payable or deliverable with respect to such Note shall be
made to the holders of Senior Debt; and
(b) no such delivery shall be made to holders of Senior
Debt of stock or obligations which are issued pursuant to reorganization
proceedings or dissolution or liquidation proceedings or upon any merger,
consolidation, sale, lease, transfer or other disposal not prohibited by the
provisions of this Agreement, by the Company, as reorganized, or by the
corporation succeeding to the Company or acquiring its property and assets, if
such stock or obligations are subordinate and junior at least to the extent
provided in this paragraph 13 to the payment of all Senior Debt then outstanding
and to the payment of any stock or obligations which are issued in exchange or
substitution for any Senior Debt then outstanding.
13.3 Acceleration of Notes. In the event that any Note is
declared due and payable before its expressed maturity for any reason, or in the
event that any default in the payment of principal, premium, if any, or interest
on any Senior Debt shall occur and be continuing, in each case, under
circumstances when the provisions of subparagraph (1) shall not be applicable,
then unless payment in full shall have first been made of all principal of and
premium, if any, and interest on, all Senior Debt, (a) the holders of the Notes
shall not be entitled to receive any payment on account of the principal or
interest on the Notes due and payable solely by virtue of any such acceleration
(payments due immediately prior to such acceleration and payments thereafter
becoming due on scheduled payment or maturity dates as if there had been no such
acceleration not being prohibited except during any period of suspension as
provided in the following clause (b), and (b) all other payments on account of
principal or interest on the Notes shall be suspended during any period:
(a) of 120 days after such declaration of acceleration of
Notes, or after written notice of such default in the payment of Senior Debt
shall have been given to the Company and to the holders of the two largest
principal amounts of the Notes outstanding as certified by the Company; provided
that no such notice shall be counted for such purpose if a previous such notice
shall have been given and all defaults in the payment of principal, premium, if
any, and interest on Senior Debt shall not subsequent to such previous notice
have been made good and cured; or
(b) in which judicial proceedings shall be pending in
respect of any such default in the payment of Senior Debt, a notice of
acceleration of the maturity of such Senior Debt shall have been transmitted to
the Company in respect of such default and such judicial proceedings shall be
diligently pursued in good faith.
The Company agrees that if any default shall occur with
respect to any Senior Debt permitting the holders of such Senior debt to
accelerate the maturity thereof the Company will give prompt notice in writing
of such happening to all known holders of Senior Debt and shall certify to each
such holder the names of the holders of the two largest principal amounts of the
Notes outstanding. The Company, forthwith upon receipt of any notice received by
it pursuant to this subparagraph (3), shall send a copy thereof by registered
mail or by telegram to each holder of a Note at the time outstanding.
13.4 Payments Received in Trust. If any payment or
distribution of any character on any security, whether in cash, securities or
other property (other than in accordance with subdivision (a) or (b) of
subparagraph (2) above shall be received by any holder of the Notes in
contravention of any of the terms hereof and before all the Senior Debt shall
have been paid in full, such payment or distribution or security shall be
received in trust for the benefit of, and shall be paid over or delivered and
transferred to, the holders of the Senior Debt at
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the time outstanding in accordance with the priorities then existing among such
holders for application to the payment of all Senior Debt remaining unpaid, to
the extent necessary to pay all such Senior Debt in full.
13.5 Obligations Absolute. The provisions of this paragraph
are solely for the purpose of defining the relative rights of the holders of
Senior Debt on the one hand, and the holder of any Note on the other hand,
against the Company and its property, and nothing herein shall impair, as
between the Company and the holder of any Note, the obligation of the Company,
which is unconditional and absolute, to pay to the holder thereof the principal
and interest thereon in accordance with its terms and the provisions hereof; nor
shall anything herein prevent the holder of any Note from exercising all
remedies otherwise permitted by applicable law or hereunder upon default
hereunder or under any Note, subject to the rights, if any, under this paragraph
of holders of Senior Debt to receive cash, property, stock or obligations
otherwise payable or deliverable to the holders of Notes.
13.6 Estoppel Certificate. Each Purchaser agrees that, upon
request of the Company, and provided that the Notes are current and not in
default, they shall execute an estoppel certificate, in such form as the company
shall provide, certifying that the Note is current and that no default hereunder
or thereunder exists.
14. Miscellaneous.
14.1 Home Office Payment. The Company agrees that, so long as
any Purchaser shall hold any Notes or any shares of Common Stock, the Company
will make payments of principal, interest, Contingent Interest and premium, if
any, on the Notes, dividends and redemption payments and dividends on the Common
Stock held by such Purchaser by wire transfer of immediately available funds to
such Purchaser or to an account in their name in a bank at the payment address
specified for them on the Schedule of Purchases or at such other address as they
may designate to the Company in writing, in the case of the Notes,
notwithstanding any contrary provision contained herein or in the Notes with
respect to the place of payment.
14.2 Confidentiality. With respect to all data, information,
and materials provided by the Company or its representatives to any Purchaser or
its representatives (the "Information"), such Purchaser will, and will cause its
officers, directors, employees, lenders, investors, and advisors (the "Purchaser
Representatives"), to (a) keep the Information strictly confidential, (b) not
use the Information in any way detrimental to the Company, (c) take such steps
as may be necessary or advisable to safeguard the Information and (d) not use
the Information other than in connection with the transactions contemplated by
this Agreement. The Purchaser may, however, disclose the Information to the
Purchaser Representatives, but only if the Purchaser Representatives reasonably
need to know the Information in connection with the transactions contemplated by
this Agreement. The Purchaser will (i) inform each of the Purchaser
Representatives receiving Information of the confidential nature of the
Information, (ii) direct the Purchaser Representatives to treat the Information
confidentially and not to use it other than in connection with the transactions
contemplated by this Agreement, and (iii) be responsible for any improper use of
the Information by the Purchaser Representatives. If any Purchaser or any of the
Purchaser Representatives are requested to disclose any Information, the
Purchaser will promptly notify the Company and will use its reasonable best
efforts to obtain confidential treatment therefor. The Purchaser will keep a
record in reasonable detail of the Information furnished to it. As soon as
possible upon the Company's request or upon the termination of this Agreement,
the Purchaser and the Purchaser Representatives will return to the Purchaser all
tangible Information that has been provided to the Purchaser or any Purchaser
Representatives and will return to the Company all summaries, digests, reports,
indexes, analyses, and notes based upon, including, or derived from the
Information prepared by it or the Purchaser Representatives. Any Information not
so returned will remain subject to this Agreement for a period of two (2) years,
notwithstanding the termination of all or any part of this Agreement for any
other purposes or causes. This provision will not apply to such portions of the
Information that (a) are or become generally available to the public through no
action by the Purchaser or the Purchaser Representatives or (b) are or become
available to Purchaser or the Purchaser Representatives on a nonconfidential
basis from a source, other than the Company or its Representatives, which
Purchaser believes, after reasonable inquiry, is not prohibited from disclosing
such portions by a contractual, legal or fiduciary obligation.
14.3 Right of First Refusal. Each Purchaser agrees that if at
any time they shall have received a bona fide offer to purchase any Notes which
such Purchaser wishes to accept, then such Purchaser shall cause such offer to
be reduced to writing and shall notify the Company in writing of such wish (the
Purchaser desiring to sell is hereinafter referred to as the "Selling
Noteholder"). Such notice shall contain an offer to sell such Note or Notes to
the Company at a purchase price equal to the purchase price contained in such
bona fide offer and shall
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<PAGE>
be accompanied by a true copy of such offer from the third party. At any time
within 30 days after the date of receipt of such notice, the Company may
purchase not less than all of the Notes so offered at the price specified in
such third-party offer by delivery of cash in the appropriate amount to the
Selling Noteholder at the principal office of the Company against delivery of
Notes or other instruments representing the Notes so purchased, appropriately
endorsed by the Selling Noteholder. If at the end of such 30-day period the
Company has not delivered such purchase price to the Selling Noteholder as
aforesaid, the Selling Noteholder shall have 30 days in which to (x) sell not
less than all of the Notes covered by the written offer from the third party,
pursuant thereto and on terms thereof, and (y) notify the Company of such sale.
The Selling Noteholder shall furnish such proof of the completion and time of
completion of such sale and of the terms thereof as may be requested by the
Company. If, at the end of 60 days following the date on which the Selling
Noteholder gave the original notice, the Selling Noteholder has not completed
the sale of such Notes as aforesaid, all of the restrictions on sale, transfer
or assignment set out in this Agreement shall again be in effect with respect to
such Notes. This right of first refusal shall be in addition to any other
repurchase rights of the Company set forth in Section 4 hereof.
14.4 Consent to Amendments. This Agreement may be amended and
the Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, by the holders
of 66% aggregate principal amount of outstanding Notes.
No course of dealing between the Company and the holder of
any Note or share of Common Stock nor any delay in exercising any rights
hereunder or under any Note or share of Common Stock, shall operate as a waiver
of any rights of any holder of such Note or share of Common Stock. As used
herein and in the Notes, the term "this Agreement" and references thereto shall
mean this Agreement as it may from time to time be amended or supplemented. Each
holder of any Note or share of Common Stock at the time or thereafter
outstanding shall be bound by any consent authorized by this paragraph 14.3,
whether or not such Note or the certificate representing such share of Common
Stock shall have been marked to indicate such consent, and, upon request,
written notice of any such consent, together with a copy of the instrument
evidencing the same (if any), shall promptly be furnished by the Company to each
Person holding a security at the time such consent becomes effective who is
affected thereby.
14.5 Form, Registration, Transfer and Exchange of Notes. The
Notes are issuable only as registered notes in denominations of $25,000 and any
larger integral multiple of $25,000. The Company shall keep at its principal
office a register in which the Company shall provide for the registration of
Notes and of transfers of Notes. Upon surrender for registration of transfer of
any Note at the office of the Company, the Company shall execute and deliver, at
its expense, one or more new Notes of a like aggregate principal amount
registered in the name of the designated transferee or transferees. At the
option of the holder of any Note, such Note may be exchanged for other Notes, of
any authorized denominations, of a like aggregate principal amount, upon
surrender of the Note to be exchanged at the office of the Company. Whenever any
Notes are so surrendered for exchange, the Company shall execute and deliver, at
its expense, the Notes which the holder thereof making the exchange is entitled
to receive, provided that the Company shall have no liability with respect to
any transfer taxes arising out of any exchange. Every Note presented or
surrendered for registration of transfer shall be duly endorsed, or be
accompanied by a written instrument of transfer duly executed, by the holder of
such Note or his attorney duly authorized in writing. Any Note or Notes issued
in exchange for any Note or upon transfer thereof shall carry the rights to
unpaid interest and interest to accrue which were earned by the Note so
exchanged or transferred, and neither gain nor loss of interest shall result
from any such transfer or exchange.
14.6 Loss, Theft, Destruction of Notes. Upon receipt of
evidence satisfactory to the Company of the loss, theft, destruction or
mutilation of any Note and, in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the holder of such Note is an institution, its own agreement of indemnity
shall be satisfactory), or, in the case of any such mutilation, upon surrender
and cancellation of such Note, the Company will make and deliver, in lieu of
such lost, stolen, destroyed or mutilated Note, a new Note of like tenor and
unpaid principal amount and dated as of the date from which unpaid interest has
then accrued on the Note so lost, stolen, destroyed or mutilated.
14.7 Persons Deemed Owners. The Company may treat the Person
in whose name any Note is registered as the owner and holder of such Note for
the purpose of receiving payment of principal of (and premium, if any), and
interest on, such Note and for all other purposes whatsoever, whether or not
such Note shall
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be overdue, and the Company shall not be affected by notice to the contrary.
14.8 Survival of Representations and Warranties. All
representations and warranties contained herein or made in writing by any party
in connection herewith shall survive the execution and delivery of this
Agreement and the issuance and delivery of the Securities for a period of one
year from the termination hereof, regardless of any investigation made by such
party or on its behalf.
14.9 Successors and Assigns. All covenants and agreements in
this Agreement contained by or on behalf of any of the parties hereto shall bind
and inure to the benefit of the respective successors and assigns such parties
hereto whether so expressed or not. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
each Purchaser's benefit as a purchaser or holder of any shares of Common Stock
shall also be for the benefit of, and enforceable by, any subsequent holder of
any shares of Common Stock now or hereafter held by them, or any subsequent
holder of shares of Common Stock for which shares of Common Stock now or
hereafter held by them have been converted or exchanged.
14.10 Notices. All communications provided for hereunder shall
be sent by express mail and, if to any Purchaser, addressed to such Purchaser in
the manner set forth in the Schedule of Purchasers, or to such other address as
they may have designated to the Company in writing, if to any other holder of
any Notes at such address as such holder may have designated to the Company in
writing or, until an address is so designated, to and at the address of the last
address of the holder of such Note so designating an address to the Company, and
if to the Company, addressed to it at Judge, Inc., Two Bala Plaza, Suite 800,
Bala Cynwyd, Pennsylvania 19004, Attention: President, or to such other address
as the Company may have designated in writing to each Purchaser and each other
holder of any of the Notes at the time outstanding, with a copy of any
communications to the Company to Doepken Keevican Weiss & Medved Professional
Corporation, 37th floor, USX Tower, 600 Grant Street, Pittsburgh, Pennsylvania
15219, Attention: Jeffrey W. Letwin, Esquire.
14.11 Descriptive Headings. The descriptive headings of the
several paragraphs of this Agreement are inserted for convenience only and do
not constitute a part of this Agreement.
14.12 Governing Law. This Agreement is being delivered and is
intended to be performed in the Commonwealth of Pennsylvania, and shall be
construed and enforced in accordance with, and the rights of the parties shall
be governed by, the law of such Commonwealth.
14.13 Counterparts. This Agreement may be executed
simultaneously in two or more counterparts, each of which shall be deemed an
original, and it shall not be necessary in making proof of this Agreement to
produce or account for more than one such counterpart.
IN WITNESS WHEREOF, the undersigned has executed this Agreement as of
the day and year first above written:
ATTEST: JUDGE, INC.
By: /s/ Katherine A. Wiercinski By: /s/ Martin Judge, Jr.
---------------------------- ------------------------
Secretary Title: CEO
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SCHEDULE OF PURCHASERS
Notes Purchased
Purchaser Name and Address (Principal Amount)
- -------------------------- ------------------
Lawrence Chimerine $25,000
President
Radnor Consulting Services
130 West Lancaster Avenue, Suite 103
Wayne, Pa 19087
Marvin Demchick $50,000
50 Belmont Avenue, #809
Bala Cynwyd, PA 19004
Edwin Johnson $25,000
220 Stoopville Road
Spring Lane Farm
Newtown, PA 18940
Robert Keith $25,000
Principal
The Gemstone Group, Inc.
801 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Max H. Kraus $25,000
2 Carol Place
Meadowbrook, PA 19046
Ira M. Lubert $50,000
Principal
The Gemstone Group, Inc.
801 The Safeguard Building
435 Devon Park Drive
Wayne, PA 19087
Edward H. Rosen $100,000
Colonial Mast Road off Kansas Road
Naples, ME 04055
Thomas S. Rosen $50,000
Prudential Securities
1515 Market Street, Suite 300
Philadelphia, PA 19102
Ernest Scheller, Jr. $25,000
Silberline Manufacturing Co., Inc.
730 Canterbury Lane
Villanova, PA 19085
A. Richard Sloane $50,000
Sofmart, Inc.
Oaklands Corporate Center
467 Creamery Way
Exton, PA 19341
Milton Stearns, Jr. $50,000
Charter Financial Company
Radnor Station
Building 2, Suite 300
290 King of Prussia Road
Radnor, PA 19087
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EXHIBIT 4.3
THIRD AMENDED AND RESTATED
LOAN AND SECURITY AGREEMENT
THIS THIRD AMENDED AND RESTATED LOAN AND SECURITY AGREEMENT (the
"Agreement") made the 3rd day of September, 1996 by and between MIDLANTIC BANK,
N.A., successor by merger to CONTINENTAL BANK ("Lender"), having
offices at 1500 Market Street, Philadelphia, Pennsylvania 19102; JUDGE, INC., a
corporation organized under the laws of the Commonwealth of Pennsylvania
("Judge, Inc.") having its principal place of business at Two Bala Plaza, Suite
800, Bala Cynwyd, Pennsylvania 19004, JUDGE TECHNICAL SERVICES, INC., a
corporation organized under the laws of the Commonwealth of Pennsylvania ("Judge
Technical") having its principal place of business at Two Bala Plaza, Suite 800,
Bala Cynwyd, Pennsylvania 19004; JUDGE PROFESSIONAL SERVICES, INC., a
corporation organized under the laws of the Commonwealth of Pennsylvania ("Judge
Professional") having its principal place of business at Two Bala Plaza, Suite
800, Bala Cynwyd, Pennsylvania 19004; JUDGE IMAGING SYSTEMS, INC., a Delaware
corporation ("Judge Imaging"), successor by merger to JUDGE COMPUTER
CORPORATION, a corporation organized under the laws of the State of New Jersey
and to DATAIMAGE, INC., a Delaware corporation ("DataImage"), having its
principal place of business at 102 Executive Drive, Suite 7, Moorestown, New
Jersey 08057; Judge Electronics Services of Florida, Inc., a Florida corporation
("Judge of Florida") having its principal place of business at 500 N. Westshore
Boulevard, Suite 850, Tampa, Florida 33609; Judge, Inc. of New Jersey, a New
Jersey corporation ("Judge of New Jersey") having its principal place of
business at 379 Thornall Road, 6th Floor, Edison, New Jersey 08818 and Judge
Technical Services of N.J., Inc. a New Jersey corporation ("Judge Technical of
NJ") having its principal place of business at 379 Thornall Road, 6th Floor,
Edison, New Jersey 08818 (hereinafter Judge, Inc., Judge Technical, Judge
Professional, Judge Imaging, Judge of Florida, Judge of New Jersey and Judge
Technical of N.J. are collectively called "Borrower or Borrowers"); and Martin
E. Judge, Jr., ("Surety"), residing at 261 Tarrington Court, Delran, New Jersey
08075, Michael A. Dunn ("Surety") and Kathleen A. Dunn ("Surety"), husband and
wife, each residing at 45 Avondale Avenue, Haddonfield, New Jersey 08033 (each
of the foregoing three Sureties being collectively called the "Sureties").
A. BACKGROUND
Commencing on December 10, 1992, Lender loaned to Judge, Inc. and Judge
Technical a revolving line of credit loan facility in the maximum principal sum
of up to Two Million Dollars ($2,000,000) pursuant to the terms of a Revolving
Security Agreement of even date. Thereafter, Lender loaned various amounts to
the Borrowers or to some of the Borrowers in the form of a revolving line of
credit loan facility, which as of October 1, 1995, was in the principal sum of
Five Million Five Hundred Thousand Dollars ($5,500,000). On June 2, 1995,
pursuant to a Second Amended and Restated Loan and Security Agreement of that
date, all of the Borrowers became co-borrowers for the amounts due the Lender
for the revolving line of credit loan facilities.
<PAGE>
All of the extensions of credit by the Lender to Borrowers were secured
by a first security interest in all of the assets of the Borrowers and by the
surety agreement of the Sureties. All of the extensions of credit by the Lender
to the Borrowers were evidenced by promissory notes, by a Loan and Security
Agreement as restated and amended on October 15, 1993, March 8, 1994, February
16, 1995, June 2, 1995, October 1, 1995 and on March 1, 1996, by financing
statements filed by Lender with the applicable recording offices, and by other
Relevant Documents (hereafter defined) executed and delivered by the Borrowers
and/or Sureties to the Lender.
The Borrowers and the Sureties have now requested the Lender to renew
and/or increase the principal amount of the Revolving Loan (hereafter defined in
Section 2A) to Eleven Million Dollars ($11,000,000), subject to the terms and
conditions herein and to the Relevant Documents (hereafter defined), and the
Lender, subject to the terms and conditions in the Relevant Documents, has
agreed to renew and increase the principal amount of the Revolving Loan to
Eleven Million Dollars ($11,000,000).
B. INCORPORATION OF RECITALS
The recitals set forth in the Background section of this Agreement are
hereby incorporated by reference into this Agreement as if same had been fully
set forth at length herein.
C. REAFFIRMATION OF AMOUNT DUE
Borrower and Sureties hereby acknowledge and agree that as of August
31, 1996, there is due and owing to Lender on the Revolving Loan the principal
sum of Seven Million Eight Hundred Fifty Seven Thousand Three Hundred Sixty
Seven and 87/100 Dollars ($7,857,367.87) and all accrued and unpaid interest
thereon.
D. AGGREGATE PRINCIPAL SUM DUE; RENEWAL
NON DISCOUNT NOTE
At the request of Borrower, the Lender has increased the line of credit
due the Lender by the Borrower from Five Million Five Hundred Thousand Dollars
($5,500,000.00) to Eleven Million Dollars ($11,000,000) (defined hereinbelow as
the "Revolving Loan") as evidenced by the renewal Non Discount Note of the
Borrower of even date herewith (the "Non Discount Note"). Anything to the
contrary contained herein, in the Non Discount Note or any other Loan Documents
notwithstanding, at no time shall the aggregate principal amount of the
Revolving Loan and the Term Loan outstanding and due the Lender by the Borrower
exceed the principal sum of Eleven Million Dollars ($11,000,000).
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NOW, THEREFORE, in consideration of the foregoing and the mutual
promises contained herein and intending to be legally bound hereby, the parties
restate their agreements and understandings as follows:
1. DEFINITIONS
"Account" - as defined in Section 2A.1(c)(i).
"Banking Day" - any day other than a Saturday, Sunday or legal
holiday for banks under the laws of the State of New Jersey.
"Capital Expenditures" as defined in Section 6.19.
"Collateral" - as defined in Section 3.2(b).
"Default Rate" - a rate of interest per annum in excess of the rate
otherwise applicable at the time to the Revolving Loan or the Term Loan as set
forth in the Notes.
"Equipment" - as defined in Section 3.2(c).
"ERISA" - as defined in Section 4.17.
"Event of Default" - as defined in Section 8.
"Immediately" - shall mean within three (3) business days.
"Initial Public Offering" - as described in Section 2B.
"Interest Coverage" - as defined in Section 6.18.
"Inventory" - as defined in Section 2A.1(c)(iv).
"Liabilities" - shall mean liabilities as determined in accordance
with generally accepted accounting principles but excludes debt subordinated to
the Obligations due the Lender.
"Limitation on Compensation" - as defined in Section 6.20.
"Loans" - the Revolving Loan and the Term Loan.
"Non Discount Note" - the Eleven Million Dollar ($11,000,000)
Renewal Non Discount Note and Addendum thereto evidencing the Revolving Loan and
dated of
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even date herewith, when not referred to by its full title as more fully
described in Section 2A.1(a).
"Notes" - The Non Discount Note and the Term Loan Note.
"Obligations" - as defined in Section 3.2(a).
"Prime Rate" - the rate of interest announced from time to time by
Lender as its "prime rate" or "prime lending rate," which rate is determined
from time to time by Lender as a means of pricing some loans to its customers
and is neither tied to any external rate of interest or index nor necessarily
reflects the lowest rate of interest actually charged by Lender to any
particular class or category of customers. The prime rate of the Lender may not
necessarily be the same rate of interest as charged by other lenders as their
prime or base rate of interest.
"Qualified Accounts" - as defined in Section 2A.1(c)(ii).
"Ratio of Liabilities" - as defined in Section 5.15.
"Related Entity" - any corporate subsidiary of Borrower, and any
unincorporated association or other entity through which Borrower conducts any
part of its business.
"Relevant Documents" - any and all documents and instruments
delivered to Lender pursuant or incident to this Agreement or the Loans (a) by
Borrower or any Related Entity, (b) by any pledgor or grantor of a lien,
security interest or other right, or (c) by any guarantor of any of the
Obligations, including without limitation the guaranty of the Obligations of
Borrower executed by the Sureties on even date.
"Revolving Loan" - as defined in Section 2A.
"Revolving Loan Limit" - as defined in Section 2A.1(b).
"Sureties" shall mean Martin E. Judge, Jr., individually; Michael A.
Dunn, individually and Kathleen A. Dunn, individually, husband and wife.
"Tangible Net Worth" - as defined in Section 5.15.
"Term Loan" - as defined in Section 2D.
"Term Loan Note" - the promissory Commercial Term Note evidencing
the Term Loan of Lender to Borrower.
"UCC" - the Uniform Commercial Code as in effect from time to time
in the Commonwealth of Pennsylvania.
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"Unbilled Receivables" shall mean amounts which are due for services
rendered for which an invoice has not as yet been issued to a customer.
"Working Capital" - as defined in Section 6.18.
2A. REVOLVING LOAN; ACCOUNTS; LETTERS OF CREDIT;
INVENTORY
2A.1 Amount and Certain Definitions.
(a) Lender may at its discretion, upon the request
of Borrower, make loans hereunder to Borrower ("Revolving Loan") from time to
time on a revolving loan basis in an aggregate principal amount not in excess at
any time outstanding of the Borrower's Revolving Loan Limit; provided that, if
the outstanding amount of the Revolving Loan should exceed the Revolving Loan
Limit at any time, such excess (i) shall nevertheless be secured by the
Collateral and be subject to the terms of this Agreement, and (ii) shall be
payable immediately upon demand by Lender. No out-of-formula overadvances shall
be permitted at any time. The Revolving Loan shall be payable (i) on the
maturity date of the Revolving Loan as set forth in the Non Discount Note, or
(ii) at such other time as is provided in Section 9 or elsewhere in this
Agreement, whichever of (i) or (ii) shall first occur. The Revolving Loan shall
be evidenced by the Non Discount Note; except as may be otherwise provided in
the Non Discount Note, the Revolving Loan shall be payable in accordance with
the terms of this Agreement.
(b) Definition of Revolving Loan Limit. Borrower's
Revolving Loan Limit shall, subject to Sections 2A.1(d) and 2D hereinbelow, be
the lesser of:
(i) Eleven Million Dollars ($11,000,000) less
the principal balance due by the Borrower on the Term Loan described in
Section 2D below and the outstanding principal balance due by the Borrower on
the Letters of Credit described in Section 2A.1(d) below; or
(ii) The value of the following Collateral determined
as follows:
(A) Eighty (80%) percent of the Qualified
Accounts (less reserves determined by Lender for advertising allowances,
warranty claims and other contingencies) of Judge, Inc., Judge Technical, Judge
Professional, Judge of Florida, Judge of New Jersey, Judge Technical of NJ and
Judge Imaging; plus
(B) Subject to Section 2B herein below, sixty
(60%) percent of the Unbilled Receivables of Judge Technical, but in no event
may advances
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to be made by the Lender against said Unbilled Receivables exceed One Million
Dollars ($1,000,000); less
(C) Fifty percent (50%) of the outstanding
principal balance due Lender at any given time on the Term Loan.
Anything to the contrary contained hereinbelow
notwithstanding, the Lender may increase or decrease the stated advance rates
with respect to Qualified Accounts and Unbilled Receivables of the Borrower as
Lender in its sole and absolute discretion may determine. As provided in Section
2A.1(d) and in Section 2D below, as the Borrower commences making monthly
payments to the Lender on the Term Loan, subject to the terms of this Agreement,
the Borrower's availability under the Revolving Loan Limit shall increase in an
amount equal to the principal reduction made by the Borrower on the Term Loan as
of the date said principal payment is made by the Borrower, but in no event
shall the Revolving Loan Limit exceed Eleven Million Dollars ($11,000,000.00).
Notwithstanding anything herein to the contrary, Borrower
acknowledges that the Revolving Loan matures on May 31, 1998 and that during the
time the Revolving Loan is outstanding, the aforementioned advance rate of
eighty (80%) percent may be reduced by the Lender at its sole discretion and
that the Lender may establish reserves or reduce advance rates with respect to
Qualified Accounts or limit advances in the nature of letters of credit, at its
sole and absolute discretion; provided, however, the Lender agrees to notify the
Borrower in writing at least fifteen (15) days in advance of any decrease in the
advance rate.
Lender, upon fifteen (15) days prior written notice to the
Borrower, shall have the right to increase or decrease the Revolving Loan Limit
from time to time.
(c) Definitions of Account; Qualified Account;
Inventory; Qualified Inventory; Net Value of
Qualified Inventory.
(i) The term "Account" shall mean all items
described in the UCC definition thereof and all of the following, whether or not
so described (in all cases whether now existing or hereafter created): all
obligations of any kind at any time due or owing to Borrower and all rights of
Borrower to receive payment or any other consideration (whether classified under
the UCC or the law of any other state as accounts, accounts receivable, contract
rights, chattel paper, general intangibles, or otherwise) including without
limitation invoices, contract rights, accounts receivable, general intangibles,
choses-in-action, notes, drafts, acceptances, instruments and all other debts,
obligations and liabilities in whatever form owing to Borrower from any person,
firm, corporation, governmental authority or other entity, together with all
security for any thereof, and all of Borrower's rights to goods sold (whether
delivered, undelivered, in
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transit or returns), represented by any thereof, together with all proceeds and
products of any of the foregoing.
(ii) The term "Qualified Account" shall
mean an account or accounts which have been identified and described to Lender's
satisfaction, are represented by Borrower (by its acceptance of the Revolving
Loan thereon) as meeting all of the following criteria on its origination date
and thereafter until collected, and is in all other respects acceptable to
Lender:
(A) Borrower is the sole owner of the account
and has not sold, assigned or otherwise transferred it, and the Account is not
subject to any claim, lien or security interest;
(B) The Account is bona fide and legally
enforceable and owing to Borrower for the sale of goods or performance of
services in the United States and in the ordinary course of business and the
Account does not require any further act on the part of Borrower to make it
owing by the Account debtor, and Borrower has delivered to Lender (or, at the
time of origination of the Account, if required by Lender, will deliver to
Lender) invoices, billings, shipping documents and other documents evidencing
the obligation to pay the account;
(C) The Account does not represent a conditional
sale, consignment or other sale on a basis other than that of absolute sale, is
not evidenced by any note, instrument, chattel paper or like document, and does
not arise out of a contract with the United States or any of its departments,
agencies or instrumentalities;
(D) The Account is invoiced, for payment within
five (5) days, on the date services are rendered or Inventory or other goods
represented thereby are shipped to the Account debtor, and the Borrower's
invoice has not been outstanding for more than ninety (90) days, except with
respect to Accounts due Judge Imaging by municipalities or school districts
where the Borrower's invoice has not been outstanding thirty (30) days after the
actual due date up to a maximum of one hundred twenty (120) days;
(E) The amount of the Account included in
calculating the Revolving Loan Limit does not exceed twenty (20%) percent of
Borrower's total Qualified Account at the time outstanding;
(F) The Account is not subject to any defense,
offset, counterclaim, credit, allowance or adjustment except usual and customary
prompt payment discounts, nor has the Account debtor returned the goods or
indicated any dispute or complaint concerning them;
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(G) No other Account of the Account debtor is
overdue in payment, the Borrower has not received any notice, nor has it any
knowledge, of any facts which adversely affect the credit of the Account debtor;
(H) The Account debtor is not a Related Entity
or other affiliate of Borrower nor a director or officer of Borrower or an
affiliate of any director or officer; and
(I) Any contracted imaging sale by Borrower
assigned to the Lender must be accompanied by a signed customer acceptance
criteria sheet.
(d) Letters of Credit.
Lender, at its sole discretion, may issue for the account of
Borrower merchandise or stand-by letters of credit in form and content
satisfactory to Lender, at its sole discretion, with a term not to extend beyond
December 31, 1997. Notwithstanding the foregoing, at no time shall the aggregate
face amount of all outstanding letters of credit issued under the Revolving Loan
exceed the amount of Fifty Thousand Dollars ($50,000). Borrower's ability to
borrow under the Revolving Loan from time to time shall be reduced by an amount
equal to the aggregate face amount of outstanding letters of credit. In the
event the Lender is required to fund any letters of credit, the amount advanced
by the Lender shall bear interest at the Default Rate of interest applicable in
the Non Discount Note.
In the event the Revolving Loan is terminated for any reason
or demand is made thereunder, Borrower will deposit with Lender an amount equal
to the face amount of all letters of credit then outstanding which have been
issued under the Revolving Loan, plus all fees related thereto or to accrue
thereunder. Such funds will be held by Lender as cash collateral to secure
Borrower's obligations hereunder.
(e) The term "Inventory" shall mean all items
described in the UCC definition thereof and all of the following, whether or not
so described (in all cases whether now owned or hereafter acquired by Borrower
and wherever located): all goods, merchandise or other personal property held by
Borrower for sale or lease or to be furnished under labels and other devices,
names or marks affixed thereto for purposes of selling or identifying the same
or the seller or manufacturer thereof, and all right, title and interest of
Borrower therein and thereto; all raw materials, work or goods in process; and
all materials and supplies of any kind or description used or usable in
connection with the manufacture, packaging, shipping, advertisement, sale or
finishing of any of the foregoing, together with all proceeds and products of
any of the foregoing.
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2A.2 Interest Rate. Except in the event of the occurrence of
an Event of Default as provided in the Non Discount Note and subject to Section
2B.2(b)(iii) below, the Revolving Loan portion of the Loan (i.e., excluding any
principal balance due by the Borrowers to the Lender on the Term Loan) shall
bear interest at a fluctuating interest rate per annum equal at all times to one
(1%) percent above Lender's Prime Rate in effect from time to time, each change
in such fluctuating rate to take effect simultaneously with the corresponding
change in the Lender's Prime Rate, without notice to Borrower; provided,
however, upon the occurrence of an Event of Default, the Revolving Loan shall
bear interest at the default rate of interest set forth in the Non Discount
Note.
2A.3 Payment of Interest. Interest on the Revolving Loan shall
be debited, on the due date from any account maintained by Borrower with Lender.
Otherwise, Borrower will be obligated to make such payments directly to Lender.
All payments are to be made in immediately available funds. If Lender accepts
payment in any other form, such payments shall not be deemed to have been made
until the funds comprising such payment have actually been received by or made
available to Lender.
2A.4 Collection and Remittance.
(a) Borrower shall collect its accounts receivable only
in the ordinary course of Business. All accounts receivable collections
of Borrower will be deposited in a non-interest bearing cash collateral account
maintained at Lender (the "Collection Account"). Lender will have sole dominion
and control over all items and funds in the Collection Account and such items
and funds may be withdrawn only by Lender. Lender will have the right to apply
all or any part of such funds towards payment of any of the indebtedness of
Borrower to Lender under the Revolving Loan; provided, however, upon the
occurrence of a default or an event with which the giving of notice or the
passage of time or both would be a default hereunder or under the Loan
Documents, Lender may apply all or any part of such funds towards payment of any
indebtedness of Borrower to Lender.
(b) All items deposited into the Collection Account will
be credited by Lender as payments of the principal balance of the Revolving Loan
on the day on which such items are deposited into the Collection Account. As
compensation for the foregoing arrangement, Borrower will pay to Lender a sum
equal to three (3) Banking Days interest on all such deposits at the interest
rate for the Revolving Loan. Borrower will reimburse Lender on demand for the
amount of any items credited as provided above and subsequently returned unpaid.
Lender may terminate the foregoing arrangement upon notice to Borrower.
(c) Borrower agrees that all monies, checks, notes,
instruments, drafts or other payments relating to or constituting proceeds of
any accounts receivable of Borrower which come into the possession or under the
control of Borrower or any
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employees, agents or other persons acting for or in concert with Borrower, shall
be received and held in trust for Lender and such items shall be the sole and
exclusive property of Lender. Immediately upon receipt thereof, Borrower and
such other persons shall remit the same or cause the same to be remitted, in
kind, to Lender. Borrower shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment to Lender with full recourse to Borrower,
all instruments, notes and chattel paper constituting an account receivable.
Lender is hereby authorized to open all mail addressed to Borrower and endorse
all checks, drafts or other items for payment on behalf of Borrower. Lender is
granted a power of attorney by Borrower with full power of substitution to
execute on behalf of Borrower and in Borrower's name or to endorse Borrower's
name on any check, draft, instrument, note or other item of payment or to take
any other action or sign any document in order to effectuate the foregoing. Such
power of attorney being coupled with an interest is irrevocable.
2A.5 Determination of Balance of Revolving Loan.
(a) In determining the outstanding balance of the
Revolving Loan, (i) domestic checks received by Lender's Asset Based Secured
Lending Department before three o'clock p.m. (3:00 p.m.) of a Banking Day will
be credited on that Banking Day, and thereafter on the following Banking Day;
(ii) any other form of funds received by Lender's Asset Based Secured Lending
Department will be credited on the Banking Day when that Department has received
notification of collection if before three o'clock p.m. (3:00 p.m.), and
thereafter on the following Banking Day; and (iii) all credits shall be
conditional upon final payment to Lender in cash or solvent credits of the items
giving rise to them and, if any item is not so paid, the amount of any credit
given for it shall be charged to the balance of the Revolving Loan whether or
not the item is returned.
(b) For the purpose of computing interest on the
Revolving Loan and other Obligations, interest shall continue to accrue on the
amount of any payment received by Lender's Asset Based Secured Lending
Department for a period of three (3) Banking Days after it is credited.
2A.6 Monthly and Interim Statements. Once each month Lender
shall render a statement of account to Borrower showing the current status of
principal, interest and service charges with respect to the Revolving Loan. If
these statements or any interim statements indicate that the outstanding balance
of the Revolving Loan exceeds the Revolving Loan Limit, Borrower, at Lender's
option, forthwith shall either furnish additional Collateral satisfactory to
Lender or pay the difference in cash. The statement of account rendered by
Lender shall be considered correct, accepted by Borrower and conclusively
binding upon Borrower, unless Borrower gives Lender written notice to the
contrary within ten (10) Banking Days after the sending of the statement by
Lender. If Borrower disputes the correctness of Lender's statement, Borrower's
notice shall specify in detail the particulars of its basis for contending that
Lender's statement is incorrect.
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2A.7 Overdrafts. In the event Lender honors a check of
Borrower resulting in Borrower's checking account being overdrawn, then Lender
shall be deemed to have loaned the amount of such overdraft to Borrower,
pursuant to the terms of this Section 2A, on the Lender's Banking Day
immediately preceding the day on which the Borrower's check is tendered to
Lender for collection. Lender shall not be obligated to honor any overdraft of
Borrower, whether or not it has done so in the past.
2A.8 Audit Fees. There will be an annual audit fee of One
Thousand Five Hundred Dollars ($1,500) due and payable in advance on December
31, 1996, and on December 31 of each calendar year thereafter while the
Revolving Loan remains outstanding.
2A.9 Revolving Loan Facility Fee. The Borrower shall pay to
the Lender a fee equal to one-fourth (1/4%) percent of the unused portion of the
Revolving Loan, which fee shall be due and payable quarterly and in arrears five
(5) business days after the end of each calendar quarter (three (3) months)
commencing with the quarter ended September 30, 1996 and on the fifth (5th)
business day after the end of each December, March, June and September of each
calendar year while the Revolving Loan is outstanding.
2A.10 Prepayment. The Revolving Loan may be prepaid in full
and the Revolving Loan terminated by Borrower at any time; provided, however,
any prepayment and termination of the Revolving Loan by the Borrower shall be
accompanied by the following:
(a) One (1%) percent of the total Revolving Loan credit
facility if prepayment occurs in the first twelve (12) months after the date
hereof ("Year 1"); and
(b) One-half of one (.5%) percent of the total Revolving
Loan credit facility if prepayment occurs in the second twelve (12) months after
the date hereof ("Year 2").
2B. INITIAL PUBLIC OFFERING BY BORROWER
2B.1 Borrowers' Intention To Do An Initial Public Offering.
The Borrower has advised the Lender that it intends to increase shareholders'
equity by at least Twenty Million Dollars ($20,000,000) by means of the sale of
capital stock in an initial public offering (the "Initial Public Offering"). The
Borrower anticipates that the Initial Public Offering will be completed by
December 31, 1996.
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2B.2 Modification of Loan Terms Upon Completion of Public Offering.
(a) The Lender agrees to modify the terms of the Loans as
set forth below in Section 2B.2(b), provided the following conditions precedent
are first fulfilled by the Borrower:
(i) The Borrower receives net proceeds from the
Initial Public Offering of at least Twenty Million Dollars ($20,000,000) and the
same has increased the Tangible Net Worth of Borrower and the ratio of
Liabilities to Tangible Net Worth as described in Section 5.15 hereof does not
exceed 2:1;
(ii) The Term Loan due the Lender described in
Section 2D below has been paid in full from the proceeds of the Initial Public
Offering; and
(iii) The Borrower is not in default on the Loans due
the Lender and is otherwise in compliance with all of the terms and conditions
of the Relevant Loan Documents.
(b) Upon receipt from the Borrower of a written
request to modify the terms of the Loans and a certification by the Chief
Executive Officer of the Borrower that the conditions precedent set forth in
Section 2B.2(a) above have been fulfilled, the Lender agrees to modify the terms
of the Revolving Loan as follows:
(i) The Unlimited Surety Agreement of the Sureties
shall be released;
(ii) The Lender shall no longer be required to make
advances for the Revolving Loan based upon the Unbilled Receivables of Judge
Technical as set forth in Section 2A1.b(ii)(B) above;
(iii) The interest rate on the Revolving Loan shall
be reduced to a fluctuating interest rate per annum equal at all times to the
Lender's Prime Rate in effect from time to time, each change in such fluctuating
rate to take effect simultaneously with the corresponding change in the Lender's
Prime Rate, without prior notice to Borrower; provided, however, upon the
occurrence of an Event of Default, the Revolving Loan shall bear interest at the
default rate of interest set forth in the Non Discount Note; and
(iv) The Lender agrees to review and reset, in the
Lender's sole discretion, the financial reporting requirements in Section 5.5
and the Financial Covenants set forth in Sections 5.15, 6.3 and 6.19
hereinbelow.
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2C. ADDITIONAL PROVISIONS RE: INTEREST AND PAYMENTS ON
ALL THE LOANS
2C.1 Interest Calculation; Lawful Rate. Interest on the Loans shall
be calculated on a daily basis upon the unpaid principal balance, with each day
representing 1/360th of a year. If the interest rate calculated in accordance
with any provision of this Agreement for the Loans would at any time exceed the
maximum permitted by any law then applicable to such Loans, then for such period
as such rate would exceed the maximum permitted by such law (and no longer), the
rate of interest payable on such Loans shall be reduced to the maximum permitted
by such law.
2C.2 Charge Against Borrower. Lender may, at its discretion, charge
the amount of any payment of principal or interest on the Loans to any checking
or loan account of Borrower, deduct such amount from any future Loan to
Borrower, or apply any Collateral proceeds or other funds received by Lender
against payment of such amount.
2C.3 Non-Banking Days. If any payment pursuant to this Agreement or
any of the Relevant Documents shall be stated to be due on a day other than a
Banking Day, such payment may be made on the next succeeding Banking Day and
such extension of time shall be included in computation of the interest or other
payment due.
2C.4 Reimbursement of Increased Cost to Lender. If any law,
regulation or guideline, or change in any law, regulation or guideline or in the
interpretation thereof, or any order or ruling by any regulatory body, court or
other governmental authority, or compliance by the Lender with any request or
directive (whether or not having the force of law) of any such regulatory body,
court or authority, shall impose, modify, or deem applicable to Lender any
reserve, capital, special deposit or other requirement or condition in respect
of this Agreement or any of the Loans, which results in an increased cost or
reduced benefit to Lender in maintaining any of the Loans (as determined by
reasonable allocation of the aggregate of such increased costs or reduced
benefits to Lender resulting from such event), then Borrower shall pay to Lender
from time to time, upon demand, additional amounts sufficient to compensate
Lender for such increased costs or reduced benefits, together with interest on
each such amount from a date ten (10) days after the date demand until payment
in full thereof, at the highest rate then applicable to the Loans. A certificate
setting forth in reasonable detail such increased cost incurred or reduced
benefit realized by Lender as a result of any such event shall be conclusive as
to the amount thereof, absent manifest error.
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2D. TERM LOAN
2D.1 Amount and Terms of Term Loan; Documents; Collateral.
(a) Subject to Section 2B hereof, Lender agrees to lend to
Borrower on the date hereof as a Term Loan the principal sum of One Million
Dollars ($1,000,000) to refinance, in part, amounts previously borrowed by
Borrower from the Lender on the Revolving Loan. Borrower's ability to borrow
under the Revolving Loan from time to time shall be reduced by an amount equal
to the principal balance outstanding on the Term Loan; provided, however, as the
Term Loan principal is reduced (repaid), the availability for borrowing under
the Revolving Loan shall be correspondingly restored as is provided in Section
2A.1(b)(i) above.
(b) The proceeds of the Term Loan were used by the Borrower to
satisfy the indebtedness now due by the Borrower to the Internal Revenue Service
for past due withholding taxes, interest and penalties of approximately Four
Hundred Sixty-Five Thousand Dollars ($465,000.00), to repay an indebtedness due
by the Borrower in the approximate amount of $322,000.00 to Paul Hansen, a prior
shareholder, and to fund miscellaneous capital expenditures. The Borrower shall
provide evidence satisfactory to the Bank of the disbursement of the Term Loan
proceeds for such purposes (including proof of satisfaction of the Internal
Revenue Service indebtedness) within thirty (30) days after the date hereof.
(c) Borrower agrees to execute and deliver to Lender at the
time the Loan Term is made by Lender, the Term Loan Note and such other
documents as Lender may require.
(d) The Collateral defined hereinbelow in Section 3.2(b) shall
serve as Collateral for the Term Loan and all other Borrower's Obligations due
the Lender.
2D.2. Interest Rate. Except in the event of a default as provided
in the Term Loan Note, the Term Loan shall bear interest at a fluctuating
interest rate per annum equal at all times to one and one-half (1 1/2%) percent
above the Lender's Prime Rate in effect from time to time, each change in such
fluctuating rate to take effect simultaneously with the corresponding change in
the Prime Rate, without notice to Borrower; provided, however, upon the
occurrence of an Event of Default, the Term Loan shall bear interest at the
default rate of interest set forth in the Term Loan Note.
2D.3. Payment of Principal and Interest. The Borrower shall
repay the Term Loan to the Lender in monthly principal payments plus interest at
the interest rate set forth above and in the amounts as provided in the Term
Loan Note.
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2D.4. Term of Term Loan. Subject to Section 2B.2(a)(ii) above,
the Term Loan will be for a term of the lesser of sixty (60) months or the
completion date of the Initial Public Offering, whichever first occurs.
2D.5. Prepayment. The Term Loan may be prepaid in full, at any
time, without prepayment premium or penalty.
3. SECURITY INTEREST; ADDITIONAL DEFINITIONS
3.1 Reaffirmation of Collateral; Grant of Security Interests.
As security for the due and punctual payment and performance
of all of the Obligations (defined below), whether pursuant to this Agreement or
otherwise, on June 2, 1995 and prior thereto, Borrowers executed and delivered
to the Lender their respective General Security Agreements and forms UCC-1 or
forms UCC-3, financing statements, pursuant to which the Borrowers pledged,
transferred and assigned to Lender, and granted to Lender security interests in
(a) all of the Collateral wherever located and whether now existing or hereafter
created and whether now owned or hereafter acquired by Borrower, and (b) all
accessions and additions thereto, replacements and substitutions therefor, and
proceeds and products thereof. Borrowers hereby reaffirm, pledge, transfer and
assign to Lender, and reaffirm their continuing grants to Lender of security
interests in (a) all of the Collateral wherever located and whether now existing
or hereafter created and whether now owned or hereafter acquired by Borrowers,
and (b) all accessions and additions thereto, replacements and substitutions
therefor, and proceeds and products thereof. It is the intent of the Borrowers
that the security interests of the Lender in the Collateral shall continue to
secure the Loans due the Lender by the Borrowers without the necessity on this
date of re-filing additional financing statements. The security interests
reaffirmed and granted in hereby, and all remedies and other rights stated or
referred to in this Agreement or any of the Relevant Documents, shall continue
in full force and legal effect until full and final payment and performance of
the Loans and all other Obligations under this Agreement and the Relevant
Documents.
3.2 Definitions of "Obligations," "Collateral" and "Equipment"
(a) The term "Obligations" shall mean:
(i) all principal of and interest on the Revolving Loan or
the Term Loan, and all other sums payable by Borrower or any Related Entity
under the terms of this Agreement or any of the Relevant Documents,
(ii) all other indebtedness, liabilities, obligations and
agreements of every kind and nature of Borrower or any Related Entity to or with
Lender or any affiliate of Lender,
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(iii) all guaranties of any of Borrower's Obligations, and
(iv) any participation or interest of Lender or any
affiliate of Lender in any indebtedness, liabilities, obligations or agreements
of Borrower, any Related Entity or any such guarantor to or with others, in each
case whether now existing or hereafter created, whether now or hereafter
contemplated, whether pursuant to this Agreement, any of the Relevant Documents
or otherwise, whether in the form of refinancing, letters of credit, bankers
acceptances, guaranties, loans, interest, charges, fees, expenses or otherwise,
whether direct or indirect, whether acquired outright, conditionally or as
collateral security from another, whether absolute or contingent, joint or
several, liquidated or unliquidated, secured or unsecured, and whether arising
by operation of law or otherwise, and including without limitation any future
advances, renewals, extensions, modifications or changes in form of, or
substitutions for, any of the items described in this clause and in the
preceding clauses (i) through (iii).
(b) The term "Collateral" shall mean the following, wherever
located and whether now subject to Section 2B with respect to the Sureties,
existing or hereafter created and whether now owned or hereafter acquired:
(i) the Borrower's Accounts; (ii) the Borrower's Inventory; (iii) the Borrower's
Equipment; (iv) the unlimited continuing guaranty as sureties, of Martin E.
Judge, Jr., individually; Michael A. Dunn, individually and Kathleen A. Dunn,
individually, husband and wife; (v) all guaranties, security and liens for
payment of any of Borrower's Accounts, and all of Borrower's documents of title,
policies or certificates of insurance, insurance proceeds, proceeds of
condemnation or other seizure, securities, chattel paper and other documents and
instruments evidencing or pertaining to any thereof; all claims of Borrower
against third parties for loss of or damage to, or otherwise relating to, any of
the Collateral; and all files, correspondence, customer lists, computer
programs, tapes, discs and related data processing software, owned by Borrower
or in which Borrower has an interest, which contains information identifying any
of the Collateral or identifying an Account debtor or the amount owed by same,
or which would otherwise be necessary or helpful in the realization on any of
the Collateral; (vi) all of Borrower's moneys, securities, drafts, notes, items,
contract rights, leases, licenses and general intangibles, and all general or
special deposits, balances, sums, proceeds and credits of Borrower; (vii) all of
Borrower's trade names, trademarks, trademark registrations, copyrights,
patents, patent applications and licenses, and other franchises and licenses in
which Borrower has an interest, and all other tangible personal property similar
to any of the foregoing; (viii) all other property of Borrower; (ix) all rights
and remedies which Borrower might exercise with respect to any of the foregoing
but for the execution of this Agreement; and (x) all accessions and additions
to, replacements and substitutions for, and proceeds and products of, the items
described in the preceding clauses (i) through (ix).
(c) The term "Equipment" shall mean all items described in the
UCC definition thereof and all of the following, whether or not so described (in
all cases whether now owned or hereafter acquired by Borrower and wherever
located): all of
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Borrower's equipment, machinery, furniture, fixtures, motor vehicles, parts,
supplies and tools, and all other tangible personal property similar to any of
the foregoing, and all repairs, modifications, alterations, replacements,
additions, controls and operating accessories therefor.
3.3 Reaffirmation of Sureties. Martin E. Judge, Jr., Michael
A. Dunn and Kathleen A. Dunn, husband and wife, who have re-executed Unlimited
Surety Agreements of payment to the Lender, hereby reaffirm their respective
Unlimited Surety Agreements as sureties as to all liabilities due the Lender by
the Borrower and agree that said Unlimited Surety Agreements will remain in full
force and effect as to all said liabilities due the Lender.
3.4 Further Assurances. Borrower shall execute and deliver
such financing statements and other documents (in form and substance
satisfactory to Lender) and take such other actions as Lender may request from
time to time in order to create, perfect or continue the security interests and
other liens provided for by this Agreement under the UCC or other laws of the
State of New Jersey or under any other state or federal law.
4. REPRESENTATIONS AND WARRANTIES
All of the representations and warranties set forth in the
Relevant Documents are hereby restated and reaffirmed by the Borrowers as of the
date hereof, as if such representations and warranties were set forth at length
herein. The Borrowers hereby acknowledge that such representations and
warranties are being specifically relied upon by the Bank as an inducement to
the Bank to enter into this Agreement and as partial consideration for the terms
and conditions contained herein. In addition to the representations and
warranties already contained in the Relevant Documents, the Borrowers, as a
material inducement to the Bank to enter into this Agreement, hereby
acknowledge, confirm, represent and warrant that:
4.1 Organization and Qualification.
(a) Except Judge of Florida, which is present not validly
existing and in good standing under the laws of Florida, but which is taking
steps to restore its valid existence and its good standing, each of the entities
comprising Borrower are corporations duly organized, validly existing and in
good standing under the laws of the jurisdiction stated at the beginning of this
Agreement.
(b) Borrower has the power and authority, and all necessary
licenses or other authorizations, to own its properties and to carry on its
business as now conducted, and is duly qualified and in good standing in each
jurisdiction wherein the nature of the property owned or used or of the business
conducted requires such qualification.
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4.2 Due Authorization; No Default.
(a) The execution, delivery and performance by Borrower of this
Agreement, the Notes and the Relevant Documents are within Borrower's powers,
have been duly authorized by all necessary action on the part of Borrower, and
do not and will not (i) violate Borrower's Certificate or Articles of
Incorporation or ByLaws, or any applicable law or regulation, or any judgment,
order or decree of any judicial or other governmental body, (ii) constitute a
breach of, or default under, any agreement, undertaking or instrument to which
Borrower is a party or by which it may be affected, or (iii) result in the
imposition of any lien, encumbrance or restriction on any assets of Borrower.
(b) Borrower has delivered to Lender true and complete copies of
Borrower's resolutions necessary to authorize the transactions contemplated by
this Agreement, and of Borrower's Certificate or Articles of Incorporation and
ByLaws, all as in effect on the date hereof and certified by a duly authorized
officer of the Borrower.
(c) This Agreement and the Relevant Documents upon their
execution and delivery, and the Notes upon their issuance, will be legal, valid
and binding obligations of Borrower, enforceable against Borrower in accordance
with their respective terms.
(d) The Borrowers have no defenses, charges, claims, demands,
pleas or offsets whatsoever in law or equity against the Lender or against the
enforcement of the Loan Documents;
4.3 No Governmental Consent Necessary. No authorization, approval
or other action by, and no notice to or filing with, any governmental authority
or regulatory body is required for the due execution, delivery and performance
by Borrower of this Agreement, the Notes or any of the Relevant Documents.
4.4 No Proceedings. Except for the tax assessment proceedings
by the United States and the Commonwealth of Pennsylvania against Judge
Technical previously disclosed to the Lender and now paid and concluded by the
Borrower, and except for the involuntary dissolution of Judge of Florida on
August 29, 1996 (which Judge of Florida is taking steps to reverse), there are
no pending or threatened claims, actions, proceedings or investigations before
any court, arbitrator, or governmental body or agency that may, singly or in the
aggregate, have a material adverse effect on (a) the validity or enforceability
of this Agreement, the Notes or any of the Relevant Documents, or the ability of
Borrower to perform any of its Obligations, or (b) the financial condition or
the properties or operation of Borrower.
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4.5 Financial Statements.
(a) Subject to any limitation stated therein, all balance
sheets, income statements and other financial data which have been or shall
hereafter be furnished to Lender do and will truly and fairly present the
financial condition of Borrower as at the respective dates thereof and the
results of its operations for the respective dates thereof and the results of
its operations for the periods ended on such dates, in accordance with generally
accepted accounting principles consistently applied during all periods. All
other information, reports and other papers and data furnished to Lender are, or
will be at the time the same are so furnished, true, accurate and complete in
all material respects.
(b) Except as shown on the most recent financial statements set
forth on Schedule 1 to this Agreement, Borrower has no liabilities as of the
date hereof which would have an adverse effect on the Collateral or on the
financial condition, operations or other properties of Borrower.
4.6 No Change in Financial Condition; Solvency.
(a) There has been no material change in Borrower's financial
condition since the date of its last financial statements as set forth on
Schedule 1 to this Agreement.
(b) Borrower's assets, at a fair valuation, exceed Borrower's
liabilities (including, without limitation, contingent liabilities), Borrower is
paying its debts as they become due, and Borrower has capital and assets
sufficient to carry on its business.
4.7 Compliance With Laws. Except for Judge of Florida, Borrower
is in compliance with all federal, state and local statutes, rules,
regulations, orders and other provisions of law applicable to its ownership or
use of properties or the conduct of its business; Borrower has not received any
notice of violation of any of the foregoing; and Borrower is not in violation of
any judgment, order or decree of any judicial or other governmental body.
4.8 No Other Violation. Except for Judge of Florida, Borrower is
not in violation of any term of its Certificate or Articles of Incorporation or
ByLaws, and no event or condition has occurred and is continuing which
constitutes or results in (or would constitute or result in, with the giving of
notice, lapse of time or other condition) (a) breach of, or a default under, any
material agreement, undertaking or instrument to which Borrower is a party or by
which it may be affected, or (b) the imposition of any lien, encumbrance or
restriction on any property of Borrower.
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4.9 Taxes and Assessments. Except for Judge of Florida, Borrower
has filed all federal, state and local tax returns and other reports it required
to file to the date hereof (or has obtained valid, written extensions as to any
not so filed), has paid all taxes, assessments and other governmental charges
due and payable to the date hereof except as has been reported to the Lender in
writing, and has made adequate provision for the payment of such taxes,
assessments and charges accrued but not yet payable. Borrower has no knowledge
of any deficiency or additional assessment in a materially important amount in
connection with any taxes, assessments or other governmental charges not
provided for or disclosed in the financial statements set forth on Schedule 1 to
this Agreement. Borrower's federal income tax returns for the year ended 1990
have been audited by the Internal Revenue Service, and the tax liability of
Borrower for such periods has been fully determined by the Internal Revenue
Service and satisfied.
4.10 Accounts. The list of Accounts delivered to Lender is complete
and contains an accurate aging thereof and, except as otherwise specified by
Borrower to Lender in writing, each of said Accounts meets the criteria for a
Qualified Account stated in Section 2A.1(c)(ii) of this Agreement.
4.11 Inventory. Borrower's Inventory, as reflected by its most
recent balance sheet included on Schedule 1 to this Agreement, consists of items
of a quality and quantity usable or saleable in the ordinary course of its
business; the values of obsolete items, items below standard quality and items
in the process of repair have been written down to realizable market value, or
adequate reserves have been provided therefore; and the values carried on said
balance sheet are set at the lower cost or market, in accordance with generally
accepted accounting principles consistently applied.
4.12 Books and Records. Judge, Inc., Judge Technical, Judge
Professional, Judge of Florida and Judge of New Jersey and Judge Technical of NJ
maintains books and records relative to their Accounts at Two Bala Plaza, Suite
800, Bala Cynwyd, Pennsylvania 19004. Judge Imaging maintains its books and
records relative to its Accounts and its Inventory at 102 Executive Drive, Suite
7, Moorestown, New Jersey 08057.
4.13 Location of Collateral. None of the Inventory, Equipment or
other tangible property constituting part of the Collateral is or will be, or
has been during the six (6) months preceding execution of this Agreement,
located in or on any premises other than those identified in Schedule 2 to this
Agreement. Schedule 2 contains an accurate record of all landlords of premises
leased by Borrower and of all mortgagees of premises owned by Borrower.
4.14 Places of Business. The principal place of business and chief
executive office of each of the Borrowers is set forth on Schedule 3 to this
Agreement.
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4.15 Other Name or Entities. Except as disclosed on Schedule 4 to
this Agreement, none of Borrower's business is conducted through any corporate
subsidiary, unincorporated association or other entity and Borrower has not,
within the seven (7) years preceding the date of this Agreement (a) changed its
name, (b) used any name other than the name stated at the beginning of this
Agreement, or (c) merged or consolidated with, or acquired the assets of, any
corporation or other business. Except as set forth in this Agreement, there are
no other entities through or by which the Borrower or any affiliate of Borrower
transacts business.
4.16 Title and Liens. Borrower has good and marketable title to all
of the Collateral as sole owner thereof, free and clear of any mortgage,
security interest, assignment, pledge, hypothecation, or other lien or
encumbrance, except the liens created by this Agreement and any identified on
Schedule 5 to this Agreement. None of the Collateral is subject to any
prohibition against encumbering, pledging, hypothecating or assigning the same
or requires notice or consent in connection therewith.
4.17 ERISA. Borrower is in compliance in all material respects with
the provisions of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), and the related provisions of the Internal Revenue Code, and
with all regulations and published interpretations issued thereunder by the
United States Treasury Department, the United States Department of Labor and the
Pension Benefit Guaranty Corporation ("PBGC"). Neither a reportable event as
defined in Section 1343 of ERISA, nor a prohibited transaction as defined in
Section 406 of ERISA or Section 4975 of the Internal Revenue Code, has occurred
and is continuing with respect to any employee benefit plan subject to ERISA
established or maintained or to which contributions have been or may be made, by
Borrower or by any trade or business (whether or not incorporated) which
together with Borrower would be treated as a single employer under Section 4001
of ERISA (any such trade or business being referred to hereinafter as an "ERISA
Affiliate," and any such employee benefit plan being referred to hereinafter as
a "Plan"). No notice of intention to terminate a Plan has been filed nor has any
Plan been terminated; the PBGC has not instituted proceedings to terminate, or
to appoint a trustee to administer, and Plan, nor do circumstances exist that
constitute grounds for any such proceedings; and neither Borrower nor any ERISA
Affiliate has completely or partially withdrawn from any multiemployer Plan
described in Section 4001(a)(3) of ERISA. Borrower and each ERISA Affiliate has
met the minimum funding standards under ERISA with respect to each of its Plans;
no Plan of Borrower or of any ERISA Affiliate has an accumulated funding
deficiency or waived funding deficiency within the meaning of ERISA; and no
material liability to the PBGC under ERISA has been incurred by Borrower or any
ERISA Affiliate.
4.18 O.S.H.A. Borrower has duly complied with, and its facilities,
business, leaseholds, equipment and other property are in compliance in all
material respects with, the provisions of the federal Occupational Safety and
Health Act and all rules and regulations thereunder and all similar state and
local laws, rules and regulations;
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and there are no outstanding citations, notices or orders of non-compliance
issued to Borrower or relating to its facilities, business, leaseholds,
equipment or other property under any such law, rule or regulation.
4.19 Environmental Matters.
(a) Except as disclosed in Schedule 6 to this Agreement, no
property owned or used by Borrower and located in the State of New Jersey is an
"industrial establishment" within the meaning of the New Jersey Environmental
Cleanup Responsibility Act ("ECRA") as superseded by the Industrial Site
Recovery Act ("ISRA") or is or has been used for the generation, manufacture,
refining, transportation, treatment, storage, handling or disposal of any
"hazardous substances" or "hazardous wastes" within the meaning of ECRA or ISRA.
The following are all of the Standard Industrial Classification Codes applicable
to the properties and operations of Borrower:
7361 and 5734
(b) Except as disclosed in Schedule 6 to this Agreement, no
property owned or used by Borrower and located in the Commonwealth of
Pennsylvania has been used for the generation, manufacture, refining,
transportation, treatment, storage, handling, disposal, transfer, production or
processing of hazardous substances except in compliance with all applicable
federal, state and local laws or regulations. Without limiting the generality of
the foregoing, no property owned or used by Borrower and located in the
Commonwealth of Pennsylvania or any other property owned or operated by the
Borrower, is being used, nor has it ever been used in the past for a landfill,
surface impoundment or other area for the treatment, storage, or disposal of
solid waste (including solid waste such as sludge). For purposes of this
paragraph, "hazardous substances" shall have the meanings ascribed thereto as
set forth in Sections 101(14) and (33) of the Comprehensive Environmental
Response, Compensation and Liability Act (42 USC Section 9601(14) and (33)) or
40 CFR Part 302 of the Federal Water Pollution Control Act Amendments of 1972,
33 U.S.C. 1321, or Section 103 of the Pennsylvania Hazardous Sites Cleanup Act
(35 P.S. Section 6020.101), or Section 103 of the Pennsylvania Hazardous
Materials Emergency Planning and Responsibility Act (35 P.S. Section 6022.103),
or in any amendment thereto or any replacement thereof.
(c) Borrower is in compliance in all material respect with all
applicable federal, state and local statues, rules, regulations, orders and
other provisions of law relating to air emissions, water discharge, noise
emissions, solid and liquid disposal, hazardous waste and substances, and other
environmental, health and safety matters.
4.20 Margin Stock. No part of the proceeds of the Revolving Loan
will be used, directly or indirectly, to purchase or carry any "margin stock"
(as defined in Regulation U issued by the Board of Governors of the Federal
Reserve System), to
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extend credit to others for the purpose of purchasing or carrying any such
margin stock, or for any purpose that violates any provision of Regulations G,
T, U or X issued by the Board of Governors of the Federal Reserve System.
4.21 Representations and Warranties True, Accurate and Complete;
Confirmation With Each Loan; Adequate Professional
Representation.
(a) None of the representations, warranties or statements to
Lender contained in this Agreement, in any of the Relevant Documents or in any
other writing delivered to Lender in connection with the Collateral, this
Agreement or any of the transactions contemplated thereby, contains or will
contain any untrue statement of a material fact or omits or will omit to state a
material fact necessary not misleading to make such representation, warranty or
statement in light of the circumstances under which it is made. All of such
representations, warranties and statements shall survive until full and final
payment and performance of the Loans and all other Obligations under this
Agreement and the Relevant Documents.
(b) Borrower's acceptance of each advance on the Revolving
Loan under this Agreement shall constitute a confirmation of the matters set
forth in the preceding Sections 4.1 through 4.21(a) as of the date of such
Loans. If requested by Lender, Borrower shall further confirm such matters by
delivery of a certificate dated the day of the Revolving Loan and signed by a
duly authorized officer of Borrower satisfactory to Lender.
(c) The Borrower and the Sureties represent to the Lender that
they have, at all times relevant to this Agreement, been represented by advisors
of their own selection including but not limited to attorneys at law and
certified public accountants; that they have not relied upon any representation,
warranty, agreement or information provided by the Lender, its employees, agents
or attorneys; that they acknowledge that they have been and are informed of
their rights, duties and obligations with respect to the Loans due the Lender
under all applicable laws; that they have no set-offs, defenses, claims or
recoupments against the Lender with respect to the Loans due the Lender by the
Borrower.
(d) The Borrower and the Sureties acknowledge and agree that
the Lender has made no representations, warranties, agreements or provided
information to them in order to induce the execution of this Agreement. The
Borrowers and the Sureties further acknowledge and agree that all agreements of
the parties are set forth in this Agreement and/or in the Relevant Loan
Documents or written documentation evidencing and/or amending the Revolving Loan
or the Term Loan.
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5. AFFIRMATIVE COVENANTS
Borrower covenants and agrees that, until full and final payment and
performance of the Loans and all other Obligations under this Agreement and the
Relevant Documents, Borrower shall, unless Lender shall otherwise consent in
writing:
5.1 Maintenance of Existence and Qualifications. Maintain and preserve
in full force and effect (or in the case of Judge of Florida, restore) its
existence and good standing and all other rights, powers, franchises, licenses
and qualifications necessary or desirable for its ownership or use of properties
or the conduct of its business.
5.2 Payment of Taxes and Other Obligations. Pay (a) before they become
delinquent, all taxes, assessments and governmental charges imposed upon it or
any of its property or required to be collected by it, and (b) when due, all
other indebtedness and liabilities of any kind now or hereafter owing by it.
5.3 Maintenance of Properties. Maintain its properties in good working
order and condition.
5.4 Notice of Adverse Events. Promptly notify Lender in writing of the
occurrence or existence of any of the following: (a) any Event of Default as
defined in this Agreement or any event which, with the giving of notice, lapse
of time or other condition, would become such an Event of Default; (b) any
matter or event which has resulted in, or may result in, a material adverse
change in the financial condition or any property or operations of Borrower;
(c) any material claim, action, proceeding or investigation filed or instituted
against Borrower, or any adverse determination in any material pending action,
proceeding or investigation affecting it; (d) any loss from casualty or theft in
excess of Fifty Thousand Dollars ($50,000), whether or not insured, affecting
property of Borrower; (e) whether or not otherwise reportable under this Section
5.4, any complaint, citation, order or other notice of a violation or a claim
involving any of the following, if the liability or penalty therefor may exceed
One Hundred Thousand Dollars ($100,000) singly or in the aggregate: any
applicable federal, state or local statute, rule, regulation, order or other
provision of law relating to air emissions, water discharge, noise emissions,
solid or liquid disposal, hazardous waste or substances, or other environmental,
health or safety matters (the notice to Lender to include, along with other
relevant information, the name of the complainant or claimant and the nature and
potential amount of the claim); (f) any event or condition described in Section
8.15 of this Agreement relating to ERISA; or (g) if any of the representations
and warranties contained in this Agreement, or in any of the Relevant Documents
or any other writing delivered to Lender by Borrower in connection with this
Agreement or any of the transactions contemplated thereby, ceases to be true,
correct and complete.
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5.5 Information and Documents to be Furnished to Lender. Furnish to
Lender in form and substance satisfactory to it:
(a) Financial Statements:
(i) Annual Statements. As soon as available and in any
event within one hundred twenty (120) days after the end of such fiscal year of
each Borrower:
(A) The certified and audited consolidated and
consolidating income and retained earnings statements of each Borrower for
each fiscal year;
(B) The certified and audited consolidated and
consolidating balance sheet of each Borrower as at the end of such fiscal year;
and
(C) The certified and audited consolidated and
consolidating statement of cash flows of each Borrower for such fiscal year;
each setting forth in comparative form the corresponding
figures as at the end of the previous fiscal year, all in reasonable detail,
including all supporting schedules and comments. The foregoing statements and
balance sheets shall be prepared in accordance with generally accepted
accounting principles consistently applied and maintained ("GAAP") and shall be
certified and audited by independent certified public accountants of recognized
standing acceptable to Lender in the reasonable exercise of its discretion with
respect to which such accountants shall deliver their opinion.
(ii) Monthly Financial Statements. As soon as available but in
no event later than thirty (30) days after the end of each month, a balance
sheet of each Borrower as of the end of such month and statements of income,
cash flows and changes in stockholders' equity for such month and for the period
commencing at the end of the previous fiscal year and ending with the end of
such month (all in reasonable detail and with all notes and supporting
schedules), prepared on a consolidated and consolidating basis, certified by the
Chief Executive Officer or the Chief Financial Officer of Borrower as presenting
fairly the financial condition of each Borrower as of the dates and for the
periods indicated and as having been prepared in accordance with generally
accepted accounting principles consistently applied, except as may be otherwise
disclosed in such financial statements or the notes thereto.
(b) Accounts, Inventory and Accounts Payable Reports. On or before
the fifteenth (15th) day of each month as at the close of the preceding month,
and from time to time as Lender may require: certificates and assignment
schedules describing the Qualified Accounts and Inventory in detail and total,
aging reports of
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Accounts, Accounts Payable aging reports, and Collateral and Loan Reconciliation
reports, all in such form as Lender may require.
Borrower shall at least once each week, submit a borrowing
base certificate to Lender in such form and containing such information as may
be required by the Lender.
(c) Change in Status. Immediately, notice identifying any Inventory
or Account that has ceased to be Qualified.
(d) Rejection, Delay, Claims. Immediately, notice of the rejection
of goods, delay in performance, or claims made in regard to Accounts.
(e) ERISA Documents. As soon as filed or distributed, all ERISA
reports, notices, returns and other documents filed as required by or in
compliance with ERISA, whether to the Internal Revenue Service, the Department
of Labor, the Pension Benefit Guaranty Corporation or any other appropriate
agency.
(f) Violations. Immediately, a copy of any complaint, citation,
order or other notice of a violation or claim required to be reported pursuant
to Section 5.4(e) of this Agreement.
(g) Other Documents.
(i) Within thirty (30) days after the last day of each calendar
quarter, a certificate executed by the Chief Executive Officer or Chief
Financial Officer of Borrower satisfactory to Lender stating that there then
exists no Event of Default hereunder and no event which, with the giving of
notice or lapse of time or other condition, would constitute an Event of
Default;
(ii) Immediately upon demand of the Bank, all original and other
documents evidencing right to payment, including but not limited to invoices,
original orders, and shipping and delivery receipts; and
(iii) Immediately upon demand of the Bank, such other documents
or information as Lender may reasonably request, including financial projections
and cash flow analysis.
5.6 Access to Records and Property. At any time and from time to time,
upon request by Lender (but not in excess of four (4) times annually unless in
the opinion of Lender, the Borrower's financial condition or the Collateral is
deteriorating in which case there shall be no limitation on the number of
reviews by the Lender), give any representative of Lender access during normal
business hours to inspect any of Borrower's properties and to examine, copy and
make extracts from any and all books,
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records and documents in the possession of Borrower or any independent
contractor relating to Borrower's affairs or the Collateral (including without
limitation returns for federal income tax and other taxes).
5.7 Insurance at Borrower's Expense.
(a) Liability and Property Insurance. Maintain at Borrower's
expense (with such insurers, in such amounts and with such deductibles as is
satisfactory to Lender) public liability and third party property damage
insurance and insurance on the Collateral (including without limitation
insurance against fire, explosion, boiler damage, theft, burglary, spoilage,
pilferage, loss in transit and all other hazards and risks ordinarily insured
against by other owners or users of such properties in similar businesses),
which insurance shall be evidenced by policies (i) in form and substance
satisfactory to Lender, (ii) designating Lender and its assigns as additional
co-insureds or loss payees as their interests may appear from time to time,
(iii) containing a "breach of warranty clause" whereby the insurer agrees that a
breach of the insuring conditions or any negligence of Borrower or any other
person shall not invalidate the insurance as to Lender and its assigns, and
(iv) requiring at least thirty (30) days prior written notice to Lender and its
assigns before cancellation or any material change shall be effective.
(b) Copies of Policies. Upon demand, deliver to Lender the original
of each policy evidencing insurance required by this Section 5.7, together with
evidence of payment of all premiums.
(c) Notice and Proof of Loss. In the event of loss or damage,
forthwith notify Lender and file proofs of loss satisfactory to Lender with the
appropriate insurer, but without limiting the rights of Lender pursuant to
Section 7.1(k).
(d) Proceeds. Forthwith upon receipt, endorse and deliver
insurance proceeds to Lender, but without limiting the rights of Lender pursuant
to Section 7.1(k).
In no event shall Lender be required either to (i) ascertain the
existence of or examine any insurance policy, or (ii) advise Borrower in the
event such insurance coverage shall not comply with the requirements of this
Agreement.
5.8 Condition of Collateral; No Liens. Maintain the Collateral in good
condition and repair at all times, preserve the Collateral from loss, damage, or
destruction of any nature whatsoever, and keep the Collateral free and clear of
any mortgage, security interest, assignment, pledge, hypothecation, or other
lien or encumbrance, except the liens created by this Agreement and any
identified on Schedule 5 to this Agreement.
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5.9 Proceeds of Collateral. Forthwith upon receipt, pay to Lender all
proceeds of Collateral, whereupon such proceeds shall become Lender's sole
property.
5.10 Records. Maintain complete and accurate books and records of all
its operations and properties, including records of the Collateral and the
status of each of the Accounts.
5.11 Delivery of Documents. If any proceeds of Accounts shall include,
or any of the Accounts shall be evidenced by, notes, trade acceptances or
instruments or documents, or if any Inventory is covered by documents of title
or chattel paper, whether or not negotiable, immediately deliver them to Lender
appropriately endorsed. Borrower waives protest regardless of the form of the
endorsement. If Borrower fails to endorse any instrument or document, Lender is
authorized to endorse it on Borrower's behalf.
5.12 United States Contracts. If any of the Accounts arises out of a
contract with the United States or any of its departments, agencies or
instrumentalities, immediately notify Lender and execute any necessary
instruments in order that all money due or to become due under such contract
shall be assigned to Lender and proper notice of the assignment given under the
Federal Assignment of Claims Act.
5.13 Further Assurances.
(a) From time to time, execute and deliver such further documents
and take such further actions as Lender may reasonably request in order to carry
out the purposes of this Agreement, the Relevant Documents and any other
instruments, documents and agreements which shall be executed concurrently
herewith or thereafter with regard to the transactions contemplated by this
Agreement.
(b) In addition, if Judge Hospitality Services, Inc. or Judge
Electronic Services of Boston, Inc. operate any business activity after the date
hereof, the Borrower shall immediately notify Lender of such business activity,
shall grant to Lender a first lien or security interest in the assets of said
entity, execute and deliver to Lender such further documents and take such
further actions as Lender may reasonably request, and reimburse Lender for all
costs and expenses incurred by Lender in connection with such transactions
including but not limited to reasonable attorneys fees and costs.
5.14 Related Entities. Cause each Related Entity to comply with the
covenants stated in this Section 5, to the extent relevant to such Entity, as if
stated with reference to such Entity.
5.15 Affirmative Financial Covenants. The Borrowers shall comply with
the following financial covenants, (the "Financial Covenants") at all times
during the term of the Loans. The Financial Covenants shall be tested by the
Lender on a calendar quarter basis, i.e. September 30, December 31, March 31 and
June 30 of each calendar
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year during the term of the Loans. The Borrower shall deliver to the Lender
within forty-five (45) days after the end of each calendar quarter, schedules
setting forth in such detail as may reasonably be required by the Lender, a
computation of the Financial Covenants and certified by the Chief Executive
Officer or the Chief Financial Officer of Borrowers to be true and correct. The
Affirmative Financial Covenants are as follows:
(a) Tangible Net Worth. "Tangible Net Worth" shall mean the
Borrowers' net worth plus subordinated debt plus subordinated advances from
shareholders less officers'/employees' receivables less amounts due on covenants
not to compete, all of the foregoing as set forth on the Borrowers' consolidated
financial statements prepared in accordance with GAAP. Borrowers' Tangible Net
Worth shall not be less than the following amounts at the dates set forth:
As of Tangible Net Worth
----- ------------------
September 30, 1996 $1,000,000
December 31, 1996 1,900,000
March 31, 1997 2,800,000
June 30, 1997 4,000,000
September 30, 1997 6,000,000
December 31, 1997 8,500,000
March 31, 1998 at least 95% of Tangible
Net Worth as of December 31, 1997
June 30, 1998 at least 105% of Tangible
Net Worth as of December 31, 1997
September 30, 1998 at least 115% of Tangible
Net Worth as of December 31, 1997
December 31, 1998 at least 125% of Tangible
Net Worth as of December 31, 1997
(b) Ratio of Liabilities to Tangible Net Worth. The ratio of
Borrowers' consolidated Liabilities to Borrowers' Tangible Net Worth shall not
exceed the following ratios at the dates indicated:
As of Ratio Not to Exceed
----- -------------------
September 30, 1996 15.0 to 1
December 31, 1996 8.5 to 1
March 31, 1997 6.5 to 1
June 30, 1997 4.5 to 1
September 30, 1997 3.0 to 1
December 31, 1997 and thereafter 3.0 to 1
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(c) Ratio of Liabilities Service Coverages. During the terms of the
Loans the Borrowers' Liabilities Service Coverage ratio shall be at least 1.5 to
1 measured on a rolling four (4) calendar quarter basis and shall be determined
as follows, all as set forth in the Borrowers' consolidated financial statements
prepared in accordance with GAAP:
Net profit plus depreciation plus amortization less
unfunded capital expenditures less dividends paid
---------------------------------------------------
Current portion of long term Liabilities
6. NEGATIVE COVENANTS
Borrower covenants and agrees that, until full and final
payment and performance of the Loans and all other Obligations under this
Agreement and the Relevant Documents, Borrower shall not, unless Lender shall
otherwise consent in writing:
6.1 No Consolidation, Merger, Acquisition, Liquidation. Enter into any
merger, consolidation, reorganization or recapitalization; take any steps in
contemplation of dissolution or liquidation; conduct any part of Borrower's
business through any corporate subsidiary, unincorporated association or other
entity not disclosed on Schedule 4 to this Agreement; or acquire the stock or
assets of any person, firm, joint venture, partnership, corporation or other
entity, whether by merger, consolidation, purchase of stock or otherwise.
6.2 Disposition of Assets or Collateral. Sell, lease, or otherwise
transfer or dispose of any or all of the Collateral or other assets of Borrower,
other than the sale of Inventory in the ordinary course of business and the
retirement of other assets in the normal course of operations.
6.3 Other Liens. Incur, create or permit to exist, any mortgage,
security interest, assignment, pledge, hypothecation, lien, encumbrance,
conditional sale or other title retention agreement, financing lease having
substantially the same effect as any of the foregoing, or other preferential
arrangement of any type, in each case upon or with respect to any assets of
Borrower, whether now owned or hereafter acquired, except (a) liens for taxes
not delinquent, (b) the liens created by this Agreement and the Relevant
Documents, (c) any liens identified on Schedule 5 to this Agreement, or
(d) liens in an aggregate amount at any time outstanding not exceeding Six
Hundred Thousand Dollars ($600,000) in 1996 and thereafter.
6.4 Other Liabilities. Incur, create, assume or permit to exist any
indebtedness or liability on account of either borrowed money or the deferred
purchase price of property or services, except (a) Obligations to Lender,
(b) indebtedness subordinated to payment of the Obligations on terms approved by
Lender in writing, (c) those liabilities existing on the date of this Agreement
and shown by the financial
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statements attached as Schedule 1 to this Agreement, and (d) liabilities secured
by liens permitted under Section 6.3.
6.5 Loans. Makes loans to any person or entity except for loans to
each of the Borrower, inter se.
6.6 Guaranties; Contingent Liabilities. (a) Assume, guarantee, endorse,
contingently agree to purchase or otherwise become liable upon the obligation of
any person or entity, except by the endorsement of negotiable instruments for
deposit or collection or similar transactions in the ordinary course of
business, or (b) agree to maintain the working capital or net worth of any
person or entity or to make investment in any person or entity (except for
short-term investment of excess cash), or (c) guarantees of liabilities under
Section 6.4.
6.7 Dividends and Other Distributions. Declare or pay any cash dividend
or make any distribution on, or redeem, retire or otherwise acquire directly or
indirectly, any share of its stock, or make any distribution of assets to its
stockholders.
6.8 Transactions with Affiliates. Except for transactions among
Borrower, inter se, Enter into any transaction with a person or entity directly
or indirectly controlling, controlled by or under the direct or indirect common
control of Borrower, on a basis less favorable in a material respect to Borrower
than if such transactions were not with such a person or entity.
6.9 Sale of Inventory. Sell any of the Inventory or a bill-and-hold,
guaranteed sale, sale-and-return, sale on approval or consignment basis, or any
other basis subject to a repurchase obligation or return right.
6.10 Removal of Collateral. Remove, or cause or permit to be removed,
any of the Collateral or other assets from the premises listed with the Lender,
except for sales of Inventory in the ordinary course of business.
6.11 Transfer of Notes or Accounts. Sell, assign, transfer, discount or
otherwise dispose of any Accounts or any promissory note or other instrument
payable to it with or without recourse, except for collection without recourse
in the ordinary course of business.
6.12 Settlements. Compromise, settle or adjust any claim in a material
amount relating to any of the Collateral.
6.13 Modification of Governing Documents. Change, alter or modify, or
permit any change, alteration or modification of, its Certificate of
Incorporation or Bylaws or other governing documents in any way that will have
any adverse effect on the Borrower's Obligations to the Lender.
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6.14 Change Business. Cause or permit a material change in the nature
of its business as conducted on the date of this Agreement.
6.15 Change of Location or Name. Change any of the following:
(a) the locations stated in Section 4.12 of this Agreement for the maintenance
of the books and records relative to the Accounts and Inventory, (b) the
location of the principal place of business or chief executive office of
Borrower as stated in Section 4.14 of this Agreement, or (c) the name under
which Borrower conducts any of its business operations.
6.16 Change of Accounting Practices. Change its present accounting
principles or practices in any material respect, except as may be required by
changes in generally accepted accounting principles.
6.17 Inconsistent Agreement. Enter into any agreement containing any
provision that would be violated by the performance of Borrower's obligations
under this Agreement or any of the Relevant Documents or under any document
delivered or to be delivered by it in connection therewith.
6.18 Intentionally Omitted.
6.19 Capital Expenditures. During any fiscal year, enter into any
agreement to purchase or pay for, or become obligated to pay for, capital
expenditures, long term leases, capital leases or sale lease backs, in an amount
aggregated in excess of the following amounts:
As of Not to Exceed
----- -------------
January 1, 1996 to December 31, 1996 $1,500,000
January 1, 1997 to December 31, 1997
and in each year thereafter 750,000
6.20 Limitation on Compensation. In any fiscal year of Borrower, pay or
become obligated to pay in salaries, bonuses or other compensation to Martin E.
Judge, Jr., a total amount more than fifteen (15%) percent in excess of the
total amount Borrower paid or became obligated to pay Martin E. Judge, Jr. in
its immediately preceding fiscal year.
6.21 Related Entities. Cause, suffer or permit any Related Entity to
fail to observe any covenant stated in this Section 6. as if stated with
reference to such Entity.
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7. ADDITIONAL POWERS OF LENDER
7.1 Powers of Attorney. Borrower hereby constitutes and appoints Lender
(and any employee or agent of Lender, with full power of substitution) its true
and lawful attorney and agent in fact to take any or all of the actions
described below in Lender's or Borrower's name and at Borrower's expense:
(a) Charges Against Credit Balances. Lender, without demand, may
charge and withdraw from any credit balance that Borrower may have with Lender,
or with any affiliate of Lender, any amount that shall become due from Borrower
to Lender under this Agreement or any of the Relevant Documents.
(b) Evidence of Liens. Lender may execute such financing statements
and other documents and take such other actions as Lender deems necessary or
proper in order to create, perfect or continue the security interests and other
liens provided for by this Agreement or any of the Relevant Documents, and
Lender may file the same (or a photocopy of this Agreement or of any financing
statement signed by Borrower) in any appropriate governmental office.
(c) Preservation of Collateral. Lender may take any and all action
that it deems necessary or proper to preserve its interest in the Collateral,
including without limitation the payment of debts of Borrower that might impair
the Collateral or Lender's security interest therein, the purchase of insurance
on Collateral, the repair or safeguarding of Collateral, or the payment of
taxes, assessment or other liens thereon. All sums so expended by Lender shall
be added to the Obligations, shall be secured by the Collateral, and shall be
payable on demand with interest at the Default Rate from the respective dates
such sums are expended.
(d) Lender's Right to Cure. In the event Borrower fails to perform
any of its Obligations, then Lender may perform the same but shall not be
obligated to do so. All sums so expended by Lender shall be added to the
Obligations, shall be secured by the Collateral, and shall be payable on demand
with interest at the Default Rate from the respective dates such sums are
expended.
(e) Verification of Accounts. Lender may make test verifications of
any and all Accounts in any manner and through any medium Lender considers
advisable, and Borrower shall render any necessary assistance.
(f) Collections; Modifications of Terms. Upon the occurrence and
continuance of any Event of Default, Lender may demand, sue for, collect and
give receipts for any money, instruments or property payable or receivable on
account for or in exchange for any of the Collateral, or make any compromises it
deems necessary or proper, including without limitation extended the time of
payment, permitting payment in installments, or otherwise modifying the terms or
rights relating to any of the
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Collateral, all of which may be effected without notice to or consent by
Borrower and without otherwise discharging or affecting the Obligations, the
Collateral or the security interest granted under this Agreement or any of the
Relevant Documents.
(g) Notification of Account Debtors. Borrower, at the request of
Lender, shall notify the Account Debtors of Lender's security interest in its
Accounts. Upon the occurrence and continuance of any Event of Default, Lender
may notify the Account debtors on any of the Accounts to make payment directly
to Lender, and Lender may endorse all items of payment received by it that are
payable to Borrower; until such time as Lender elects to exercise such right of
notification, Borrower is authorized to collect and enforce the Accounts in
accordance with Section 2A.4.
(h) Notification as to Inventory. Lender may notify the bailee of
any Inventory of Lender's security interest therein.
(i) Endorsements. Lender may endorse Borrower's name on checks,
notes, acceptances, drafts, invoices, bills of lading and any other documents or
instruments requiring Borrower's endorsement.
(j) Mails. Upon the occurrence and continuance of any Event of
Default, Lender may notify the postal authorities to deliver all mail, parcels,
and other material addressed to Borrower to Lender at such address as Lender may
direct, and Lender may open and deal with same as it deems necessary or proper.
(k) Insurance. Lender may file proofs of loss and claim with
respect to any of the Collateral with the appropriate insurer, and may endorse
in its own and Borrower's name any checks or drafts constituting insurance
proceeds.
7.2 Irrevocability; Lender's Discretion. Borrower covenants and
agrees that any action in Section 7.1 may be taken at Lender's sole and absolute
discretion, at any time and from time to time, and (unless stated specifically
to the contrary in Section 7.1 with respect to any power) whether prior or
subsequent to an Event of Default, and Borrower hereby ratifies and confirms all
action so taken. Borrower further covenants and agrees that the powers of
attorney granted by Section 7.1 are coupled with an interest and shall be
irrevocable until full and final payment and performance of the Loans and all
other Obligations under this Agreement and the Relevant Documents; that said
powers are granted solely for the protection of Lender's interest and Lender
shall have no duty to exercise any thereof; that the decision whether to
exercise any of such powers, and the manner of exercise, shall be solely within
Lender's discretion; and that neither Lender nor any of its directors, officers,
employees or agents shall be liable for any act of omission or commission, or
for any mistake or error of judgment, in connection with any such powers.
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8. EVENTS OF DEFAULT
The occurrence of any of the following shall constitute an Event of
Default:
8.1 Failure to Pay. Borrower fails to pay when due any principal of or
interest on any Revolving Loan or any other sum owing to Lender, including
without limitation any of the Obligations arising under this Agreement or any of
the Relevant Documents or under any other agreement with Lender;
8.2 Failure to Perform. Borrower fails to perform or observe (a) any
covenant, term or condition of this Agreement or any of the Relevant Documents,
and (b) any of the other Obligations;
8.3 Cross Default; Default on Other Debt. (a) Any other default on any
of the Obligations or under any of the Relevant Documents occurs, or (b) default
occurs under any indebtedness or other obligation of Borrower or of any
guarantor of any of the Obligations, or to any third party that entitles such
third party to declare such indebtedness or other obligation due prior to its
date of maturity;
8.4 False Representation or Warranty. Any representation, warranty or
statement contained in this Agreement, in any of the Relevant Documents or in
any other writing delivered to Lender in connection with the Collateral, this
Agreement or any of the transactions contemplated thereby, proves to have been
incorrect in any material respect when made;
8.5 Cessation of Business. Borrower ceases to do business as a going
concern;
8.6 Change in Condition. There occurs any change in the condition or
affairs, financing or otherwise, of Borrower or of any endorser, guarantor or
surety for any of the Obligations, which in the opinion of Lender impairs
Lender's security or increases its risks;
8.7 Change in Ownership. Except with respect to shares of the
outstanding voting stock sold by Borrower as part of the Initial Public Offering
and except for 3,000 shares of Judge, Inc. being transferred from Martin E.
Judge, Jr. and Michael Dunn to Katharine A. Wiercinski, Richard Furlano and
Margaret Sulpazo, if at any time less than one hundred (100%) percent of the
issued and outstanding voting stock of Borrower is owned by persons other than
the shareholders holding voting stock of the Borrower on the date of this
Agreement; anything to the contrary in the foregoing sentence notwithstanding,
at any time, Martin E. Judge, Jr., shall own less than fifty one percent (51%)
of the voting stock of Borrower;
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8.8 Insecurity. At any time Lender believes that the prospect of
payment or performance of any of the Obligations is impaired;
8.9 Liquidation or Dissolution. Borrower takes any action to authorize
its liquidation or dissolution;
8.10 Inability to Pay Debts. Borrower (a) becomes unable or fails to
pay its debts generally as they become due, (b) admits in writing its inability
to pay its debts, or (c) proposes or makes a composition agreement with
creditors, a general assignment for the benefit of creditors; or a bulk sale;
8.11 Bankruptcy; Insolvency. Any proceeding is instituted by or against
Borrower (and such proceeding is not dismissed within sixty (60) days after it
is filed) (a) seeking to adjudicate it bankrupt or insolvent, or seeking
reorganization, arrangement, adjustment or composition of its or its debts under
any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or (b) seeking appointment of a receiver, trustee, or other similar
official for it or for any substantial part of its property, or Borrower takes
any action to authorize or consent to any action described in this Section 8.11;
8.12 Judgments. One or more judgment or orders for the payment of money
exceeding One Hundred Thousand Dollars ($100,000) in the aggregate are rendered
against Borrower, and such judgment or order continues unsatisfied and not
effectively stayed for a period of thirty (30) consecutive days;
8.13 Attachment. Any substantial part of the assets of Borrower becomes
subject to attachment, execution, levy or like process which shall not have been
effectively stayed within thirty (30) days after it is served upon the Borrower;
8.14 Condemnation. Any governmental agency, or other entity with power
to do so, commences proceedings to condemn, seizes or expropriates assets of
Borrower necessary for the conduct of Borrower's business as conducted on the
date of this Agreement, without material change, or Borrower abandons such
assets or suspends operation thereof for a period of thirty (30) consecutive
days;
8.15 ERISA. With respect to any Plan (as defined in Section 4.17 of
this Agreement), there occurs or exists any of the events or conditions
described in the following clauses (a) through (h) and such event or condition,
together with all like events or conditions, could in the opinion of Lender
subject Borrower to any tax, penalty or other liability that might, singly or in
the aggregate, have a material adverse effect on the financial condition or the
properties or operations of Borrower: (a) a reportable event as defined in
Section 4043 of ERISA, (b) a prohibited transaction as defined in Section 406 of
ERISA or Section 4975 of the Internal Revenue Code, (c) termination of the Plan
or filing of notice of intention to terminate, (d) institution by the Pension
Benefit Guaranty
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Corporation of proceedings to terminate, or to appoint a trustee to administer,
the Plan, or circumstances that constitute grounds for any such proceedings,
(e) complete or partial withdrawal from a multiemployer Plan, or the
reorganization, insolvency or termination of a multiemployer Plan, (f) an
accumulation funding deficiency within the meaning of ERISA, (g) violation of
the reporting, disclosure or fiduciary responsibility requirements of ERISA or
the Internal Revenue Code, or (h) any act or condition which could result in
direct, indirect or contingent liability to any Plan or the Pension Benefit
Guaranty Corporation; or
8.16 Guaranty. Any guaranty of any of the Obligations ceases to be
effective or any guarantor denies liability thereunder.
9. REMEDIES
9.1 Rights in General. Upon the occurrence of an Event of Default
described in Section 8.11, and at the option of Lender upon the occurrence of
any other Event of Default and upon ten (10) days written notice of a breach of
Sections 8.1, 8.4, 8.5, or 8.10, and upon thirty (30) days written notice of a
breach of Sections 8.2, 8.3, 8.6, 8.7, 8.8, 8.9, 8.11, 8.12, 8.13, 8.14, 8.15 or
8.16, (a) all provisions for additional Loans under this Agreement shall
terminate, (b) the principal and interest of the Revolving Loan and all other
amounts payable under this Agreement and all other Obligations shall become and
be immediately due and payable, without presentment, demand, protest, or further
notice of any kind, all of which are hereby expressly waived by Borrower, and
(c) Lender shall be entitled to exercise forthwith (to the extent and in such
order as Lender may elect, in its sole and absolute discretion) any or all
rights and remedies provided for in this Agreement, any Notes, or any Relevant
Documents, all rights and remedies of a secured party under the UCC, and all
other rights and remedies that may otherwise be available to Lender by agreement
or at law or in equity.
9.2 Specific Rights Regarding Collateral. In addition to the rights as
stated generally in Section 9.1, Borrower agrees that, upon the occurrence of an
Event of Default, Lender shall be entitled to the rights and remedies, and
Borrower shall have the obligations, set forth below:
(a) Lender may enter upon the premises where any of the Collateral
is located and take possession thereof and, at Lender's option, remove or sell
in place any or all thereof.
(b) Upon notice from Lender, Borrower shall promptly at its expense
assemble any or all of the Collateral and make it available at a reasonably
convenient place designated by Lender.
(c) Lender may, with or without judicial process, sell, lease or
otherwise dispose of any or all of the Collateral at public or private sale or
proceedings,
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by one or more contracts, in one or more parcels, at the same or different times
and places, with or without having the Collateral at the place of sale or other
disposition, to such persons or entities, for cash or credit or for future
delivery and upon such other terms, as Lender may in its discretion deem best in
each such matter. The purchaser of any of the Collateral at any such sale shall
hold the same free of any equity or redemption or other right or claim of
Borrower, all of which - together with all rights of stay, exemption or
appraisal under any statute or other law now or hereafter in effect Borrower
hereby unconditionally waives to the fullest extent permitted by law. If any of
the Collateral is sold on credit or for future delivery, Lender shall not be
liable for the failure of the purchaser to pay for same and, in the event of
such failure, Lender may resell such Collateral.
(d) Borrower hereby further agrees that notice of the time and
place of any public sale, or of the time after which any private sale or other
intended disposition or action relating to any of the Collateral is to be made
or taken, shall be deemed commercially reasonable notice thereof, and shall
satisfy the requirements of any applicable statute or other law, if such notice
(i) is delivered not less than three (3) business days prior to the date of the
sale, disposition or other action to which the notice relates, or (ii) is mailed
(by ordinary first class mail, postage prepaid) not less than five (5) business
days prior thereto. Lender shall not be obligated to make any sale or other
disposition or take other action pursuant to such notice and may, without other
notice or publication, adjourn or postpone any public or private sale or other
disposition or action by announcement at the time and place previously fixed
therefor, and such sale, disposition or action may be held or accomplished at
any times or places to which the same may be so adjourned or postponed.
(e) Lender may purchase any or all of the Collateral at any public
sale and may purchase at private sale any of the Collateral that is of a type
customarily sold in a recognized market or the subject of widely distributed
price quotations or as may be further permitted by law. Lender may make payment
of the purchase price for any Collateral by credit against the then outstanding
amount of the Obligations.
(f) Lender may at its discretion retain any or all of the
Collateral and apply the same in satisfaction of part or all of the Obligations.
(g) Any cash proceeds of sale, lease or other disposition of
Collateral shall be applied as follows:
First: To the expenses of collecting, enforcing, safeguarding,
holding and disposing of Collateral, and to other expenses of
Lender in connection with the enforcement of this Agreement, the
Notes, any of the Relevant Documents, or any other agreement
relating to any of the Obligations (including without limitation
court costs and the fees and expenses of attorneys, accountants and
appraisers),
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together with interest at the Default Rate from the respective date
such sums are expended;
Second: Any surplus then remaining to the payment of
interest and principal of the Loans and other sums payable as part
of the Obligations, in such order as Bank elects; and
Third: Any surplus then remaining to Borrower or whomever
may be lawfully entitled thereto.
9.3 Set-Off. Borrower further agrees that:
(a) Upon the occurrence of an Event of Default, Lender is hereby
authorized at any time from time to time, without notice to Borrower (any such
notice being expressly waived by Borrower), to set off and apply (or cause any
affiliate of Lender to set off and apply) any and all deposits (general or
special, time or demand, provisional or final) at any time held and other
indebtedness at any time owing by Lender or such affiliate to or for the credit
or the account of Borrower, against any or all of the Obligations of Borrower
now or hereafter existing under this Agreement, the Notes or otherwise,
irrespective of whether or not Lender shall have made any demand and although
such Obligations may be unmatured.
(b) If any other lender has participated with Lender with respect
to any of the Loans, Borrower hereby authorizes such participating lender, upon
the occurrence of any Event of Default, immediately and without notice or other
action, at request of Lender, to set off against any of Borrower's Obligations
to Lender any deposits held or money owed by such participating lender in any
capacity to Borrower, whether or not due, and to remit the money set off to
Lender.
(c) The rights stated in this Section 9.3 are in addition to other
rights and remedies (including, without limitation, other rights of set-off or
lien) that Lender or any participating lender may have.
9.4 Cumulative Remedies; No Waiver by Lender. No remedy referred to
in this Agreement is intended to be exclusive, but each shall be cumulative and
in addition to any other remedy referred to in this Agreement or otherwise
available to Lender by agreement or at law or in equity. No express or implied
waiver by Lender of any default or Event of Default shall in any way be, or be
construed to be, a waiver of any future or subsequent default of Event of
Default. The failure or delay of Lender in exercising any rights granted it
hereunder upon any occurrence of any of the contingencies set forth herein shall
not constitute a waiver of any such right upon the continuation or recurrence of
any such contingency or similar contingencies, and any single or partial
exercise of any particular right by Lender shall not exhaust the same or
constitute a waiver of any other right.
39
<PAGE>
9.5 Waivers and Consents Relating to Remedies. In connection with any
action or proceeding arising out of or relating in any way to this Agreement,
the Notes, any of the Loans, any of the Relevant Documents, any other agreement
relating to any of the Obligations, any of the Collateral, or any act or
omission relating to any of the foregoing:
(a) BORROWER AND LENDER WAIVE THE RIGHT TO TRIAL BY JURY AS MORE
FULLY SET FORTH IN SECTION 14.15 BELOW;
(b) Borrower and Lender consent to the jurisdiction of any court of
the Commonwealth of Pennsylvania and of any federal court located in
Pennsylvania, and waive any right to object to such court as an inconvenient
forum;
(c) Borrower agrees that all of the Collateral constitutes equal
security for all of the Obligations, and agrees that Lender shall be entitled to
sell, retain or otherwise deal with any or all of the Collateral, in any order
or simultaneously as Lender shall determine in its sole and absolute discretion,
free of any requirement for the marshalling of assets or other restriction upon
Lender in dealing with the Collateral; and
(d) Borrower agrees that Lender may proceed directly against
Borrower for collection of any or all of the Obligations without first selling,
retaining or otherwise dealing with any of the Collateral.
10. ADDITIONAL WAIVERS AND CONSENTS OF BORROWER.
10.1 Waivers. Borrower waives demand, presentment, notice of dishonor
or protest of any instruments either of Borrower or others which may be included
in the Collateral.
10.2 Consents. Borrower consents to (a) any extension, postponement of
time of payment or other indulgence, (b) any substitution, exchange or release
of Collateral, (c) any addition to, or release of, any party or person primarily
or secondarily liable, and (d) any acceptance of partial payment on any Accounts
or instruments and the settlement, compromising or adjustment thereof.
11. RELEASE UPON PAYMENT IN FULL
11.1 Mutual Release. Upon full and final payment and performance of the
Loans and all other Obligations under this Agreement and the Relevant Documents,
Borrower, Lender and any sureties shall thereupon automatically each be fully,
finally and forever released and discharged from any and all claims, liabilities
and obligations, whether in contract or tort, arising out of or relating in any
way to this Agreement, the
40
<PAGE>
Notes or Loans, or any act or omission relating to any of the foregoing or to
any of the Collateral or Relevant Documents.
12. COSTS, EXPENSES AND TAXES
Borrower agrees to pay on demand:
(a) all costs and expenses in connection with the preparation,
execution, delivery and administration of this Agreement, the Notes, the
Relevant Documents, and the other documents to be delivered in connection with
this Agreement, or any amendments to any of the foregoing (including, without
limitation, the reasonable fees and out-of-pocket expenses of counsel for Lender
and the cost of appraisals and reappraisals of Collateral).
(b) all losses, costs and expenses incurred by Lender in
connection with the enforcement of this Agreement, the Notes, any of the
Relevant Documents, or any other agreement relating to any of the Obligations,
or in the preservation of any rights of Lender under any thereof, or in
connection with legal advice relating to the rights or responsibilities of
Lender under any thereof (including without limitation court costs and the
reasonable fees and expenses of attorneys, accountants and appraisers), and any
expenditure made by Lender in accordance with Section 7.1(b) or (c) of this
Agreement; and
(c) any and all stamp and other taxes payable or determined to
be payable in connection with the execution and delivery of this Agreement, the
Notes, or any of the Relevant Documents, and all liabilities to which Lender may
become subject as the result of delay in paying or omission to pay such taxes.
With respect to any amount advanced by Lender and required to
be reimbursed by Borrower pursuant to the foregoing provisions of this Section
12, Borrower shall also pay Lender interest on such amount at the Default Rate.
Borrower's obligations under this Section 12 shall survive termination of the
other provisions of this Agreement.
13. INDEMNIFICATION BY BORROWER
Borrower hereby covenants and agrees to indemnify, defend and
hold harmless Lender and its officers, directors, employees and agents from and
against any and all claims, damages, liabilities, costs and expenses (including
without limitation, the fees and out-of-pocket expenses of counsel) which may be
incurred by or asserted against Lender or any such other individual or entity in
connection with:
41
<PAGE>
(a) any investigation, action or proceeding arising out of or in
any way relating to this Agreement, the Notes, the Loans, any of the Relevant
Documents, any other agreement relating to any of the Obligations, any of the
Collateral, or any act or omission relating to any of the foregoing;
(b) any taxes, liabilities, claims or damages relating to the
Collateral or Lender's liens thereon;
(c) the correctness, validity or genuineness of any instruments or
documents that may be released or endorsed to Borrower by Lender (which shall
automatically be deemed to be without recourse to Lender in any event), or the
existence, character, quantity, quality, condition, value or delivery of any
goods purporting to be represented by any such documents; or
(d) the requirement of this Section 13 by the Borrower to indemnify
the Lender shall not apply in any litigation between the Lender and the
Borrower.
14. MISCELLANEOUS
14.1 Opinion of Counsel for Borrower and Sureties. The Borrower
shall cause its attorneys to issue an opinion to the Lender on such matters as
the Lender may require from time to time including but not limited to the
organization and existence of the Borrower and Sureties, the enforceability
and validity of the Loan Documents, the enforceability of the Loans and
opinions on such other matters as Lender may reasonably request.
14.2 Entire Agreement; Amendments; Lender's Consent. This Agreement
(including the Schedules thereto), the Notes, and the Relevant Documents
supersede, with respect to their subject matter, all prior and contemporaneous
agreements, understandings, inducements or conditions between the respective
parties, whether express or implied, oral or written. No amendment or waiver of
any provision of this Agreement, the Notes or any of the Relevant Documents, nor
consent to any departure by Borrower therefrom, shall in any event be effective
unless the same shall be in writing and signed by Lender, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
14.3 Notices. All notices and other communications relating to this
Agreement or the Notes (or to any of the Relevant Documents, unless otherwise
specified therein) shall be in writing and addressed as follows:
42
<PAGE>
If to Lender: Midlantic Bank, N.A.
1535 Locust Street
Philadelphia, Pennsylvania 19102
Attention: Commercial Finance Department
If to Borrower: c/o Judge, Inc., et al.
Two Bala Plaza, Suite 800,
Bala Cynwyd, Pennsylvania 19004
Attention: Martin E. Judge, Jr.,
Chief Executive Officer
or to such other address as the respective party or its successors or
assigns may subsequently designate by proper notice.
14.4 Gender. Throughout this Agreement, the masculine shall include the
feminine and vice versa and the singular shall include the plural and vice
versa, unless the context of this Agreement indicates otherwise.
14.5 Joint Borrowers. If more than one party executes this Agreement as
Borrower, then for the purpose of this Agreement the term Borrower shall mean
each such party and each such party shall be jointly and severally liable as
Borrower for the Obligations as defined herein without regard to which party
receives the proceeds of any of the Loans. Each such party hereby acknowledges
that it expects to derive economic advantage from each of the Loans.
14.6 Cross Default; Cross Collateral. Borrower hereby agrees that
(a) all other agreements between Borrower and Lender or any of its affiliates is
hereby amended so that a default under this Agreement is a default under all
other agreements and a default under any one of the other agreements is a
default under this Agreement, and (b) the Collateral under this Agreement
secures the Obligations now or hereafter outstanding under all other agreements
between Borrower and Lender or any of its affiliates and the collateral pledged
under any other agreement with Lender or any of its affiliates secures the
Obligations under this Agreement.
14.7 Binding Effect; Governing Law. This Agreement shall be binding
upon and inure to the benefit of Borrower and Lender and their respective
successors and assigns, except that Borrower shall not have the right to assign
its rights hereunder or any interest herein without the prior written consent of
Lender. This Agreement, the Notes, the Relevant Documents and the other
documents delivered in connection with this Agreement shall be governed by, and
construed in accordance with, the laws of the Commonwealth of Pennsylvania.
Anything to the contrary contained herein notwithstanding, this Agreement and
the Relevant Documents executed by the Borrower and/or the Sureties in
connection herewith, shall not be effective until
43
<PAGE>
(i) executed by the Borrower and delivered to the Bank's offices in Pennsylvania
and (ii) duly signed by two officers of the Bank in Pennsylvania.
14.8 Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute but one and the same
agreement.
14.9 Severability of Provisions. Any provision of this Agreement, the
Notes or any of the Relevant Documents that is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement, such Notes or such Documents or affecting the
validity or enforceability of such provision in any other jurisdiction.
14.10 Headings. The headings preceding the text of this Agreement are
inserted solely for convenience of reference and shall not constitute a part of
this Agreement nor affect its meaning, construction or effect.
14.11 Schedules. All of the Schedules to this Agreement are hereby
incorporated by reference herein and made a part hereof.
14.12 Further Acknowledgements and Agreements of Borrower and the
Lender.
(a) General Acknowledgements.
(1) Borrower and the Lender acknowledge and agree that
they (i) have independently reviewed and approved each and every provision of
this Agreement, including the Exhibits attached hereto and any and all other
documents and items as they or their counsel have deemed appropriate, and
(ii) have entered into this Agreement and have executed the closing documents
voluntarily, without duress or coercion, and have done all of the above with the
advice of their legal counsel.
(2) Borrower and Lender acknowledge and agree that, to
the extent deemed necessary by them or their counsel, they and their counsel
have independently reviewed, investigated and/or have full knowledge of all
aspects of the transaction and the basis for the transaction contemplated by
this Agreement and/or have chosen not to so review and investigate (in which
case, Borrower acknowledges and agrees that it has knowingly and upon the advice
of counsel waived any claim or defense based on any fact or any aspect of the
transaction that any investigation would have disclosed), including without
limitation:
44
<PAGE>
(i) the risks and benefits of the various waivers of
rights contained in this Agreement, including
but not limited to, the waiver of the right to a
jury trial;
(ii) the adequacy of the consideration being
transferred under this Agreement, including the
adequacy of the consideration for the Mutual Release
as set forth in Section 11.3 hereof;
(3) Borrower has made its own investigation or elected not
to make such investigation as to all matters it deems material to this
transaction and has not relied on any statement of fact or opinion, disclosure
or non-disclosure of the Lender, and has not been induced by the Lender in any
way, except for the consideration recited herein, in entering into this
Agreement and executing the closing documents contemplated hereby, and further
acknowledges that the Lender has not made any warranties or representations of
any kind in connection with this transaction except as specifically set forth
herein or in the documents executed in connection with this Agreement, and
Borrower is not relying on any such representations or warranties.
(4) Borrower acknowledges and agrees that, after careful
consideration, it does not deem any matter not reviewed or investigated by it to
be material to this Agreement and the transaction contemplated hereby.
14.13 Prior Agreements. This Agreement is an amendment and restatement
of the terms and conditions of the lending relationship between Borrower and
Lender as previously set forth in Relevant Documents, and any amendments or
supplements to the aforementioned agreements, and is not a new loan agreement,
and all of the terms and conditions of the aforementioned agreements shall
remain in full force and effect as though set forth herein at length, to the
extent not inconsistent with the terms of this Agreement. To the extent of any
inconsistencies, the terms of this Agreement shall control.
14.14 Liability of Sureties. By executing this Agreement, the Lender is
not releasing any existing Surety with respect to the obligations of Borrower to
the Lender.
14.15 WAIVER OF JURY TRIAL.
BORROWER, SURETIES AND LENDER, UPON ADVICE FROM THEIR RESPECTIVE
COUNSEL, HEREBY INTENTIONALLY, KNOWINGLY, VOLUNTARILY, EXPRESSLY AND
MUTUALLY WAIVE ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE
OF ACTION (A) ARISING UNDER THIS AGREEMENT OR ANY OTHER DOCUMENTS
45
<PAGE>
EVIDENCING THE LOAN, OR (B) IN ANY WAY CONNECTED WITH OR RELATED OR INCIDENTAL
TO THE DEALINGS OF THE PARTIES HERETO OR ANY OF THEM WITH RESPECT TO THIS
AGREEMENT OR ANY OF THE OTHER DOCUMENTS EVIDENCING THE LOAN, OR THE TRANSACTIONS
RELATED HERETO OR THERETO, OR (C) IN ANY LITIGATION BETWEEN THE PARTIES, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING AND WHETHER IN CONTRACT OR TORT
OR OTHERWISE, AND EACH PARTY HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM,
DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A
JURY, AND THAT ANY PARTY TO THIS AGREEMENT MAY FILE THIS ORIGINAL AGREEMENT OR A
COPY THEREOF WITH ANY COURT AS WRITTEN EVIDENCE TO THE CONSENT OF THE PARTIES
HERETO TO THE WAIVER OF THEIR RIGHT TO A TRIAL BY JURY.
IN WITNESS WHEREOF, the undersigned have set their hands and
seals or caused these presents to be executed by their proper corporate officers
and sealed with their seal the day and year first above written.
JUDGE, INC. (Borrower)
Attest:
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
JUDGE TECHNICAL SERVICES, INC.
(Borrower)
Attest:
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- -----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
SIGNATURES CONTINUED ON PAGE 47
46
<PAGE>
SIGNATURES CONTINUED FROM PAGE 46
JUDGE PROFESSIONAL SERVICES, INC.
(Borrower)
Attest:
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
JUDGE IMAGING SYSTEMS, INC.
(Borrower)
Attest:
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
JUDGE ELECTRONICS SERVICES OF
FLORIDA, INC.
Attest: (Borrower)
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
JUDGE INC. OF NEW JERSEY
Attest: (Borrower)
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
JUDGE TECHNICAL SERVICES OF
N.J., INC.
Attest: (Borrower)
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ----------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr.,
(Corporate Seal) Chief Executive Officer
SIGNATURES CONTINUED ON PAGE 48
47
<PAGE>
SIGNATURES CONTINUED FROM PAGE 47
Witness:
/s/ Jeanne L. Hanson /s/ Martin E. Judge, Jr. (Seal)
- -------------------------------- -------------------------------------------
Martin E. Judge, Jr., individually (Surety)
Witness:
/s/ Jeanne L. Hanson /s/ Michael A. Dunn (Seal)
- -------------------------------- -------------------------------------------
Michael A. Dunn, individually (Surety)
Witness:
/s/ Jeanne L. Hanson /s/ Kathleen A. Dunn (Seal)
- -------------------------------- -------------------------------------------
Kathleen A. Dunn, individually (Surety)
MIDLANTIC BANK, N.A. (Lender)
By: /s/ Jeanne L. Hanson
--------------------------------------
Jeanne L. Hanson, Vice President
48
<PAGE>
EXHIBIT 10.1
LEASE
BALA CYNWYD
PENNSYLVANIA
BETWEEN THE PRUDENTIAL INSURANCE COMPANY OF AMERICA,
AS LANDLORD,
AND
JUDGE, INC.,
AS TENANT
<PAGE>
L E A S E
BALA CYNWYD, PENNSYLVANIA
1. PARTIES This Lease, made this 21st day of January, 1994, by and
between THE PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation
having an office at 3 Gateway Center -- 13th Floor, Newark, New Jersey 07102
(hereinafter "Landlord"), and JUDGE, INC., a Pennsylvania corporation having its
principal offices at 150 Monument Road, Suite 402, Bala Cynwyd, Pennsylvania
19004 (hereinafter "Tenant").
2. PREMISES For and in consideration of the rent to be paid and the
covenants and agreements to be performed by Tenant as hereinafter set forth,
Landlord does hereby lease, demise and let unto Tenant that portion of the 8th
floor, shown outlined and hatched in black on the floor plan attached hereto as
Exhibit A and containing approximately 12,493 rentable square feet (hereinafter
"Premises"), in Landlord's building known as Two Bala Plaza and located in Bala
Cynwyd, Bala Cynwyd, Pennsylvania (hereinafter "Building").
3. TERM The term of this Lease shall be for six (6) years, commencing
on July 1, 1994, and expiring at midnight on June 30, 2000, unless renewed or
sooner terminated as hereinafter provided.
4. BASE RENT
(a) Base Rent -- During the entire term of this Lease, Tenant shall pay
to Landlord, as yearly rent (hereinafter "Base Rent"), the following sums in
equal monthly installments in advance on the first day of each calendar month,
without setoff or deduction:
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT RATE
PERIOD BASE RENT BASE RENT PER SQUARE FOOT
------ --------- --------- ---------------
<S> <C> <C> <C>
7/1/94-6/30/97 $262,353.00 $21,862.75 $21.00/RSF
7/1/97-6/30/00 $274,846.00 $22,903.83 $22.00/RSF
</TABLE>
In the event the term of this Lease commences on a day other than the first day
of a calendar month or expires on a day other than the last day of a calendar
month, Tenant shall pay to Landlord a pro rata portion of the monthly
installment of Base Rent for such partial month.
(b) Additional Rent -- Whenever under the terms of this Lease any sum
of money is required to be paid by Tenant in addition to the Base Rent herein
reserved, and said additional
<PAGE>
sum is not designated as "additional rent," then if not paid when due, said sum
shall nevertheless be deemed "additional rent" and be collectible as such with
any installment of Base Rent thereafter falling due hereunder, but nothing
herein contained shall be deemed to suspend or delay the payment of any such sum
at the time the same became due and payable hereunder, or limit any other remedy
of Landlord.
(c) All payments of Base Rent and additional rent shall be paid when
due, without demand, at the office of Premisys Real Estate Services, Inc., One
Bala Plaza -- Suite E501, Bala Cynwyd, Pennsylvania 19004, or at such other
place as Landlord may from time to time direct. All checks shall be made payable
to Premisys Real Estate Services, Inc., Agent.
(d) Security Deposit -- Landlord acknowledges receipt from Tenant of
the sum of Twenty-One Thousand Eight Hundred Sixty-Two and 75/100 ($21,862.75)
Dollars ("Security Deposit") to be held as collateral security for the payment
of the Base Rent, additional rent and all other sums of money payable by Tenant
under this Lease, and for the faithful performance of all other covenants and
agreements of Tenant under this Lease. The Security Deposit, without interest,
shall be repaid to Tenant within ninety (90) days after the expiration date of
this Lease, provided Tenant shall have made all such payments and performed all
such covenants and agreements. Upon any default by Tenant hereunder, at
Landlord's sole option, Landlord may apply all or part of the Security Deposit
on account of such default, and thereafter Tenant shall promptly restore the
original amount of the Security Deposit.
5. OPERATION AND MAINTENANCE COSTS AND REAL ESTATE TAXES
ADDITIONAL RENT
(a) The costs and expenses of the operation, maintenance and repair of
the Building (hereinafter "Operation and Maintenance Costs") shall include,
without limitation, the cost and expense to Landlord of the following items:
(1) All wages, salaries and fees of all employees and agents engaged in
the management, operation, repair, replacement, maintenance and
security of the Building, including taxes, insurance and all other
employee benefits relating thereto.
(2) All supplies and materials used in the management, operation,
repair, replacement, maintenance and security of the Building.
(3) All utilities consumed by the Building and the servicing thereof,
including, without limitation, gas,
-2-
<PAGE>
water, sewer and electricity for lighting, heating, ventilating and
air-conditioning.
(4) All maintenance and service contracts for the operation, repair,
replacement, maintenance, and security of the Building, including,
without limitation window cleaning, security system, heating,
ventilating and air-conditioning system, fire sprinkler system,
elevators and landscaping.
(5) All fire and extended coverage (with all risk coverage) insurance
and comprehensive general liability insurance for the Building
(including all common areas) and Landlord's personal property and
fixtures used in connection therewith.
(6) All repairs (including necessary replacement) and general
maintenance of the Building.
(7) All cleaning and janitorial services for the Building.
(8) The cost of any capital improvements (i) which are made for the
primary purpose of reducing Operation and Maintenance Costs or
(ii) which may be required by governmental authority under any
governmental law or regulation that was not applicable to the Building
as of the date of this Lease, which cost shall be amortized over the
expected useful life of the capital improvement as reasonably
determined by Landlord, together with interest on the unamortized
balance at the rate equal to the Prime Rate being charged by Mellon
Bank East, Philadelphia, Pennsylvania or such higher rate as may have
been paid by Landlord on funds borrowed for the purpose of constructing
such capital improvements. With respect to capital improvements under
(i) above, Landlord may only include in each Year the annual amortized
instalment plus applicable interest to the extent of the actual
reduction in Operation and Maintenance Costs for the same Year.
(9) All other costs and expenses necessarily and reasonably incurred by
Landlord in the proper operation and maintenance of a first-class
office building; provided, however, that the following shall be
excluded from the term "Operation and Maintenance Costs": (i) expenses
for any capital improvements made to the Building, except as provided
in paragraph 5(a)(8) above; (ii) expenses for repairs or other work
occasioned by fire, windstorm or other insured casualty; (iii) expenses
incurred in leasing or procuring new tenants (e.g., for lease
commissions, advertising and renovating space); (iv) legal expenses in
enforcing the terms of any lease; and (v) interest and amortization
payments on any mortgage or mortgages.
-3-
<PAGE>
(b) All "Real Estate Taxes" which, for the purposes of this Article,
shall mean all gross real property taxes, charges and assessments (including any
special assessments) which are levied, assessed or imposed by any governmental
authority with respect to the land and the Building and any improvements,
fixtures and equipment and all other property of Landlord, real or personal,
located in or on the Building and used in connection with the operation of the
Building and any tax which shall be levied or assessed in addition to and/or in
lieu of such real or personal property taxes (including, without limitation any
municipal income tax, any license fees, tax measured by or imposed upon rents,
or other tax or charge upon Landlord's business of leasing the Building), but
shall not include any federal or state income tax, or any franchise, capital
stock, estate or inheritance taxes. In the event that the tax statement from the
taxing authority does not allocate assessments with respect to the Building and
assessments relating to any other improvements located upon the land upon which
the Building is situated, Landlord shall make a reasonable determination of the
proper allocation of such assessment.
(c) (i) "Base Year" shall be defined as calendar year
1994;
(ii) "Comparison Year" shall be defined as each
calendar year (or part thereof) following
the Base Year and included in the original
term of this Lease and any renewal thereof;
and
(iii) "Tenant's Percentage" shall be 4.8395%, which
is the ratio that the rentable square foot
area of the Premises (i.e. 12,493 rentable
square feet) bears to the total rentable
square foot area of office space in the
Building (i.e. 258,148 rentable square feet).
For each Comparison Year, Tenant shall pay Landlord, as additional
rent, Tenant's Percentage of:
(1) Any increase in the Real Estate Taxes for each Comparison Year
over the Real Estate Taxes for the Base Year; and
(2) Any increase in Operation and Maintenance Costs for each
Comparison Year over the Operation and Maintenance Costs for
the Base Year.
(d) During each comparison Year commencing on January 1, 1995, Landlord
and Tenant agree that Tenant shall pay monthly, in advance, an amount equal to
one-twelfth of Tenant's estimated annual Operation and Maintenance Costs
additional rent due for each Comparison Year. For each Comparison Year, Landlord
shall
-4-
<PAGE>
make an estimate of Tenant's Operation and Maintenance Costs additional rent and
notify Tenant as to such estimate on or about December 15th of the preceding
year.
(e) On or about May 1 of each Comparison Year commencing with the 2nd
Comparison Year, Landlord shall submit to Tenant a statement setting forth the
actual Operation and Maintenance Costs for the Building for the preceding
Comparison Year and Tenant's Percentage of the increase thereof above the
Operation and Maintenance Costs for the Base Year. Within thirty (30) days after
delivery of such statement to Tenant, an adjustment shall thereupon be made
between Landlord and Tenant to reflect any difference between Tenant's estimated
payments under paragraph (d) above and Tenant's Percentage of the increase in
the actual Operation and Maintenance Costs for the preceding Comparison Year
above the Operation and Maintenance Costs for the Base Year. In no event,
however, shall the monthly rent paid by Tenant be less than the Base Rent set
forth in Section 4 (a) above.
(f) Tenant shall pay Landlord Tenant's Percentage of the increase in
the Real Estate Taxes for each Comparison Year over the Real Estate Taxes for
the Base Year, within 30 days after Landlord's billing therefor.
(g) All sums due under this Article 5 shall be appropriately
apportioned and prorated for any portion of the year during which this Lease
shall be in force. In the event that this Lease shall expire at any time other
than at the end of a calendar year, then within thirty (30) days after
statements reflecting the actual Operation and Maintenance Costs for the year in
which such expiration occurs are submitted by Landlord to Tenant, either
Landlord or Tenant shall pay to the other party the adjustment sum due. The
provisions of this paragraph (g) shall survive the expiration of this Lease.
(h) If the Building is less than 95% occupied during any portion or all
of the Base Year or any Comparison Year, then Landlord shall adjust the
Operation and Maintenance Costs for any such Year to an amount which reflects
what the Operation and Maintenance Costs would have been for such Year had the
Building been 95% occupied throughout such Year.
6. LATE CHARGES In the event that Tenant shall fail to pay Base Rent or
any additional rent within five (5) days after its due date, Tenant shall pay an
automatic late charge to Landlord of $.05 for each dollar overdue. In addition,
in the event that Tenant shall fail to pay Base Rent or any additional rent
within thirty (30) days after its due date, then from and after the thirty-first
(31st) day until the date Tenant finally pays the Base Rent or additional rent,
Tenant shall pay Landlord an additional late charge at the rate of ten (10%)
percent per annum with respect to the delinquent amount. Such late charges
-5-
<PAGE>
shall be deemed additional rent for all purposes under this
Lease.
7. USE OF PREMISES Tenant shall use and occupy the Premises for
purposes of executive and general offices. Tenant shall not use or occupy the
Premises for any other purpose or business, without the prior written consent of
Landlord. Tenant shall observe and comply with the rules and regulations set
forth on Exhibit B attached hereto and made a part hereof (hereinafter "Rules
and Regulations"). The Rules and Regulations shall uniformly apply to Tenant and
all other Building tenants and their respective employees, agents, licensees,
invitees, subtenants and contractors.
8. COMMON AREAS All parking areas, walkways, elevators, stairs,
driveways, alleys, public corridors, fire escapes, and other areas, facilities
and improvements which may be provided by Landlord from time to time for the
general use, in common, of Tenant and other Building tenants and their
employees, agents, invitees and licensees, shall at all times be subject to the
exclusive control and management of Landlord. Landlord shall have the right from
time to time to establish, modify and enforce reasonable rules and regulations
with respect to all such common areas, facilities and improvements.
9. ALTERATIONS AND TRADE FIXTURES, REMOVAL
(a) During the term of this Lease, Tenant shall not make any
alterations or additions to the Premises which are structural in nature or which
affect the Building systems, without the prior written consent of Landlord. In
the event that Tenant shall desire to perform any such alterations or additions
in or about the Premises, Tenant shall deliver to Landlord detailed plans and
specifications prepared by and at the expense of Tenant. Landlord shall review
such plans and specifications and return same to Tenant either marked approved,
marked to show the corrections required (in which event such marked-up plans and
specifications shall be deemed approved as marked-up), or marked disapproved
with the reasons therefor. If Landlord disapproves Tenant's plans and
specifications, Tenant shall have twenty (20) days from the date of such
disapproval to submit revised plans and specifications subject to subsequent
mark-ups or disapprovals and corrections in the above manner. Upon approval by
Landlord of Tenant's plans and specifications, Tenant shall proceed with due
diligence to commence the work to be performed by Tenant and shall complete same
in a diligent manner. All such work consented to by Landlord, to be done or
performed in or about the Premises by Tenant, shall be performed (i) at Tenant's
sole cost and expense, and (ii) by contractors and subcontractors approved by
Landlord. Upon completion of any such work which requires the review of plans
and specifications and continuous observance of construction, Tenant shall pay
to Landlord's Building Manager an
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amount equal to five (5%) percent of the cost of such work, to reimburse
Landlord's Building Manager for said review and observance and the coordination
and final inspection of the work. During the course of performance of any
alteration work or additions (whether or not Landlord's consent is required),
Tenant will carry or cause to be carried Comprehensive General Liability
insurance, with a limit of at least $2,000,000.00, naming Landlord and
Landlord's Building managing agent as additional insureds and further providing
that such insurance shall not be canceled without at least thirty (30) days'
prior written notice to Landlord and Landlord's agent. Landlord shall require a
guarantee by each of Tenant's prime contractors for the benefit of Landlord and
Tenant that all work performed and materials and equipment furnished by such
contractors will conform to the requirements of the plans and specifications as
to the kind, quality, function of the equipment and characteristics of material
and workmanship and will remain so for a period of at least one year from the
date that the work has been completed. In the event any defects in materials,
equipment or workmanship shall appear prior to the expiration of such period,
upon receiving written notice thereof from Landlord or Tenant, the contractor
will immediately correct and repair the same at the expense of such contractor.
Said guarantees shall be effective whether or not any part of the aforesaid work
has been subcontracted by the contractor.
(b) Any consent by Landlord permitting Tenant to do any alteration work
in or about the Premises shall be and hereby is conditioned upon Tenant's work
being performed by workmen and mechanics working in harmony and not interfering
with labor employed by Landlord, Landlord's contractors or by any other tenants
or their contractors. To that end, said work shall be done by union labor having
the same union affiliations as other workmen performing work for other tenants
or Landlord and their contractors, if required by Landlord. If at any time any
of the workmen or mechanics performing any of Tenant's work shall not be of the
same union affiliation or shall be unable to work in harmony or shall interfere
with any labor employed by Landlord, other tenants or their respective mechanics
and contractors, then the permission granted by Landlord to Tenant permitting
Tenant to do any work in or about the Premises, may be withdrawn by Landlord
upon forty-eight (48) hours written notice to Tenant.
(c) All alterations, interior decorations, improvements or additions
made to the Premises by Tenant, except for movable furniture, equipment and
trade fixtures, shall immediately become Landlord's property. Tenant shall have
the right but not the obligation to remove all movable furniture, equipment and
trade fixtures installed by Tenant in the Premises, except lighting fixtures and
air-conditioning equipment, provided that Tenant repairs any damage caused to
the Premises by said removal. All of said movable furniture, equipment and trade
fixtures remaining
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in the Premises after the Lease expiration date, or any sooner termination date
due to any default of Tenant, shall be deemed to be abandoned property and shall
automatically become the property of Landlord.
10. MECHANICS' LIENS Prior to Tenant performing any alterations,
additions or construction work in or about the Premises for which a lien could
be filed against the Premises or the Building, Tenant shall have its contractor
execute a Waiver of Mechanics' Lien, in form satisfactory to Landlord, and
provide Landlord with the original copy thereof. Notwithstanding the foregoing,
if any mechanics' or other lien shall be filed against the Premises or the
Building purporting to be for labor or materials furnished or to be furnished at
the request of Tenant, then at its expense, Tenant shall cause such lien to be
removed of record by payment, bond or otherwise, within twenty (20) days after
the filing thereof. If Tenant shall fail to cause such lien to be removed of
record within such 20-day period, Landlord may cause such lien to be removed of
record by payment, bond or otherwise, without investigation as to the validity
thereof or as to any offsets or defenses thereto, in which event Tenant shall
reimburse Landlord in the amount paid by Landlord, including expenses, within
ten (10) days after Landlord's billing therefor. Tenant shall indemnify and hold
Landlord harmless from and against any and all claims, costs, damages,
liabilities and expenses (including attorney fees) which may be brought or
imposed against or incurred by Landlord by reason of any such lien or removal of
record.
11. CONDITION OF PREMISES Tenant acknowledges and agrees that, except
for Landlord's work set forth in Article 45 of the Rider, there have been no
representations or warranties made by or on behalf of Landlord with respect to
the Premises or the Building or with respect to the suitability of either for
the conduct of Tenant's business. The taking of possession of the Premises by
Tenant shall conclusively establish that the Premises and the Building were in
satisfactory condition, order and repair at such time.
12. BUILDING SERVICES
(a) Landlord shall provide, within its Building standards, the
following services and facilities:
(1) Heating, ventilating and air conditioning, Monday to Friday from
8:00 A.M. to 6:00 P.M. and on Saturdays from 8:00 A.M. to 1:00 P.M.
(hereinafter "Business Hours"), except on the holidays set forth on
Exhibit C (hereinafter "Holidays"). Tenant agrees to cooperate fully
with Landlord and to abide by all the rules and regulations which
Landlord may reasonably prescribe for the proper functioning and
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protection of the heating, ventilating and air conditioning
systems;
(2) Electricity for normal office use, including normal office
equipment, in the Premises, during Business Hours (3-1/2 watts per
rentable square foot per day is deemed normal office use). Tenant
agrees to pay for the installation of a separate electric meter for all
electrical usage above normal office use. Tenant agrees to pay Landlord
for all electricity registered on said meter at the current general
service rate;
(3) Cleaning and maintenance of common areas in the Building, including
bathroom facilities;
(4) Continuous passenger elevator service during Business Hours, and
service via at least one car at all other times; freight elevator
service from 8:00 A.M. to 4:00 P.M., Monday through Friday, except
Holidays;
(5) Janitorial services, including cleaning of Premises, in accordance
with Landlord's Building standard schedule, which is annexed hereto as
Exhibit D. Landlord shall not be required to furnish cleaning services
to any kitchens, lunchrooms or non-Building standard lavatories in the
Premises; and
(6) Water for lavatory and drinking purposes.
Tenant shall reimburse Landlord for all additional cleaning expenses
incurred by Landlord, including but not limited to, garbage and trash removal
expense over and above the normal cleaning provided by Landlord, due to the
presence of a lunchroom or kitchen or food and beverage dispensing machines
within the Premises. No food or beverage dispensing machines shall be installed
by Tenant in the Premises without the prior written consent of Landlord.
Landlord hereby consents to Tenant's installation of beverage and food
dispensing machines in the lunchroom of the Premises for the exclusive use of
Tenant's employees and invitees.
(b) Landlord does not warrant that the services provided for in
paragraph 12 (a) above shall be free from any slowdown, interruption or stoppage
due to the order of any governmental bodies and regulatory agencies, or caused
by the maintenance, repair, replacement or improvement of any of the equipment
involved in the furnishing of any such services, or caused by changes of
services, alterations, strikes, lockouts, labor controversies, fuel shortages,
accidents, acts of God or the elements or any other cause beyond the reasonable
control of Landlord. No such slowdown, interruption or stoppage of any such
services shall ever be construed as an eviction, actual or
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constructive, of Tenant, nor shall same cause any abatement of annual Base Rent
or additional rent or in any manner or for any purpose relieve Tenant from any
of its obligations under this Lease. Landlord agrees to use reasonable diligence
to resume the service upon any such slowdown, interruption or stoppage.
13. ASSIGNMENT AND SUBLETTING
(a) Except as expressly permitted pursuant to this Article, Tenant
shall not assign or hypothecate this Lease or any interest therein or sublet the
Premises or any part thereof, without the prior written consent of Landlord,
which consent shall not be unreasonably withheld or delayed. Any of the
foregoing acts without Landlord's consent shall be voidable and shall, at the
option of Landlord, be an event of default under this Lease. Neither this Lease
nor any interest therein shall be assignable as to the interest of Tenant by
operation of law, without the prior written consent of Landlord, which shall not
be unreasonably withheld or delayed. Notwithstanding the foregoing, without the
consent of Landlord but upon notice to Landlord, a corporate Tenant may assign
this Lease to its parent, affiliate or subsidiary, provided the assignee
assumes, in full, the obligations of Tenant under this Lease, and provided
further that such assignment shall not relieve Tenant of any of its obligations
under this Lease.
(b) If at any time or from time to time during the term of this Lease,
Tenant desires to assign this Lease or sublet all or a portion of the Premises,
Tenant shall notify Landlord of such intent. Landlord shall have the option,
exercisable by notice given to Tenant within twenty (20) days after receipt of
Tenant's notice, of reacquiring the Premises or portion thereof proposed to be
sublet or assigned and terminating the Lease with respect thereto, effective on
a date selected by Landlord which shall be no sooner than sixty (60) days and no
later than one hundred twenty (120) days after Landlord's receipt of Tenant's
notice. If Landlord does not exercise such option, Tenant may assign this Lease
or sublet such space to any third party, subject to the following terms and
conditions:
(1) Tenant shall obtain the consent of Landlord, which consent shall
not be unreasonably withheld; Landlord shall base its decision upon
exclusive uses given to other Building tenants, the financial condition
and character of the proposed assignee or subtenant and the proposed
use of the Premises;
(2) Tenant may not sublease the Premises or any portion thereof or
assign this Lease to an existing tenant in the Building unless Landlord
does not have any comparable vacant space in the Building to lease to
the existing tenant;
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(3) No sublease or assignment shall be valid and no subtenant or
assignee shall take possession of the premises subleased or assigned
until a fully executed original of such sublease or assignment of this
Lease has been delivered to Landlord;
(4) No subtenant shall have a further right to sublet;
(5) No assignee shall have a further right to assign the Lease, except
in accordance with the provisions of this Article 13; and
(6) In no event shall Tenant be entitled to have more than two (2)
subtenants simultaneously in the Premises.
(c) Tenant shall pay Landlord, as additional rent any sums or other
economic consideration received by Tenant as a result of any subletting or
assignment (except payments received which are attributable to the amortization
of the cost of leasehold improvements made to the Premises by Tenant for the
subtenant or assignee, and other reasonable expenses incident to the subletting
or assignment, including standard leasing commissions), whether denominated
rentals under the sublease or otherwise, which exceed, in the aggregate, the
total sums which Tenant is obligated to pay Landlord under this Lease (prorated
to reflect obligations allocable to that portion of the Premises subject to a
sublease). If such subleasing or assignment has been made without the consent of
Landlord as provided herein, Landlord shall be entitled to all economic
consideration received by Tenant in accordance with the provisions of this
subparagraph 13(c), but the receipt of such monies shall not be deemed to be a
waiver of the provisions of this Article 13 with respect to assignment and
subletting, or the acceptance of such assignee or subtenant as Tenant hereunder.
(d) Regardless of Landlord's consent, no subletting or assignment shall
release Tenant of Tenant's obligations or alter the primary liability of Tenant
to pay the Base Rent and additional rent and to perform all other obligations to
be performed by Tenant under this Lease. The acceptance of rental by Landlord
from any other person shall not be deemed to be a waiver by Landlord of any
provision hereof. Consent to one assignment or subletting shall not be deemed
consent to any subsequent assignment or subletting. In the event of default by
any assignee of Tenant or any successor of Tenant in the performance of any of
the terms of this Lease, Landlord may proceed directly against Tenant without
the necessity of exhausting remedies against such assignee or successor.
(e) In the event that the Premises or any part thereof have been sublet
by Tenant and Tenant is in default under this Lease pursuant to the provisions
of Article 24 hereof, then Landlord
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may collect rent from the subtenant and apply the amount collected to the Base
Rent and additional rent herein reserved but no such collection shall be deemed
a waiver of the provisions of this Article 13 with respect to subletting or the
acceptance of such subtenant as Tenant hereunder or a release of Tenant under
the Lease.
14. ACCESS TO PREMISES Landlord, its employees and agents shall have
the right to enter the Premises at all reasonable times during Business Hours
and at anytime in case of an emergency for the purpose of examining or
inspecting the Premises, showing the Premises to prospective purchasers,
mortgagees and (during the last year of the Lease term only) prospective tenants
of the Building, and making such alterations, repairs, improvements or additions
to the Premises or to the Building as Landlord may determine to be necessary or
desirable. If representatives of Tenant shall not be present to open and permit
entry into the Premises at anytime when such entry by Landlord is necessary or
permitted hereunder, Landlord may enter by means of a master key (or forcibly in
the event of an emergency) without liability to Tenant and without such entry
constituting an eviction of Tenant or termination of this Lease. Such entry into
the Premises by Landlord shall not unreasonably interfere with Tenant's use of
the Premises.
15. REPAIRS
(a) At its cost (which cost shall be an Operation and Maintenance Cost
under Article 5 above), Landlord shall make all repairs necessary to maintain
the plumbing, heating, ventilating, air conditioning and electrical systems
(except light fixtures), windows, floors (except carpeting) and all other
structural portions of the Premises provided, however, that Landlord shall not
be obligated to make any of such repairs until Landlord has received written
notice from Tenant that such repair is needed. Landlord shall be responsible for
the maintenance and repair of all common areas and facilities in the Building
provided that Tenant shall be responsible for the repair of any damage to the
Premises or the Building common areas and facilities caused by the negligence of
Tenant and its agents, servants, employees, invitees, licensees, subtenants, or
contractors.
(b) Except for Landlord's repairs under paragraph (a) above, at its
sole cost and expense, Tenant shall make all other repairs necessary to maintain
and keep the Premises and the fixtures therein in neat and orderly condition. If
Tenant refuses or neglects to make such repairs within five (5) business days
(or such longer period reasonably necessary to complete the repair), after
written notice from Landlord of the need therefor, Landlord may make such
repairs at the expense of Tenant and such expense, along with a fifteen (15%)
percent service charge, shall be collectible as additional rent.
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At Tenant's expense, Landlord shall make all repairs to the light
fixtures in the Premises, including replacement bulbs and ballasts.
(c) Landlord shall not be liable for any interference with Tenant's
business arising from the making of any repairs in the Premises under paragraph
(a) above. Landlord shall interfere as little as reasonably practicable with the
conduct of Tenant's business. There shall be no abatement of Base Rent because
of such repairs.
16. INDEMNIFICATION OF LANDLORD AND LIABILITY INSURANCE
(a) Tenant shall indemnify, defend and hold Landlord harmless from and
against any and all costs, expenses (including reasonable counsel fees),
liabilities, losses, damages, suits, actions, fines, penalties, claims or
demands of any kind and asserted by or on behalf of any person or governmental
authority, arising out of or in any way connected with (i) any failure by Tenant
to perform any of the agreements, terms, covenants or conditions of this Lease
required to be performed by Tenant, (ii) any failure by Tenant to comply with
any statutes, ordinances, regulations or orders of any governmental authority,
or (iii) any accident, bodily injury (including death resulting therefrom), or
damage to or loss or theft of property, which shall occur in or about the
Premises occasioned wholly or in part by reason of any act or omission of
Tenant, or any of its agents, contractors, licensees, invitees, employees or
subtenants.
(b) During the term of this Lease and any renewal thereof, Tenant shall
obtain and promptly pay all premiums for Comprehensive General Liability
Insurance with broad form extended coverage, including Contractual Liability,
covering claims for bodily injury (including death resulting therefrom) and loss
or damage to property occurring upon, in or about the Premises, with a minimum
combined single limit of at least $1,000,000.00. All such policies and renewals
thereof shall identify Landlord and Landlord's Building managing agent as
additional insureds. All policies of insurance shall provide (i) that no
material change or cancellation of said policies shall be made without at least
thirty (30) days' prior written notice to Landlord and Tenant, and (ii) that any
loss shall be payable notwithstanding any act or negligence of Tenant or
Landlord which might otherwise result in the forfeiture of said insurance. On or
before the commencement date of the term of this Lease, and thereafter not less
than fifteen (15) days prior to the expiration dates of said policy or policies,
Tenant shall furnish Landlord with renewal certificates of the policies of
insurance required under this paragraph. Tenant's insurance policies shall be
issued by insurance companies authorized to do business in the Commonwealth of
Pennsylvania with a financial rating of at least an A+ as rated in the most
recent edition of Best's Insurance
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Reports and have been in business for the past five years. The aforesaid
insurance limits may be reasonably increased by Landlord from time to time
during the term of this Lease.
(c) Tenant and Landlord, respectively, hereby release each other from
any and all liability or responsibility to the other for all claims of anyone
claiming by, through or under them by way of subrogation or otherwise for any
loss or damage to property owned by Landlord and Tenant respectively in the
Premises and covered by the Pennsylvania Standard Form of Fire Insurance Policy
with extended coverage endorsement, whether or not such insurance is maintained
by the other party.
17. WAIVER OF CLAIMS Landlord and Landlord's agents, servants, and
employees shall not be liable for, and Tenant hereby releases and relieves
Landlord, its agents, servants, and employees from, all liability in connection
with any and all bodily injury (including death), damage to or loss of property,
or loss or interruption of business occurring to Tenant, its agents, servants,
employees, invitees, licensees, and subtenants, in or about the Premises, from,
without limitation, (a) any fire or other casualty, accident, occurrence or
condition in or upon the Premises or the Building; (b) any defect in or failure
of the plumbing, sprinkler, electrical, heating, ventilating and air
conditioning systems and equipment, or any other systems and equipment in the
Premises and the Building; (c) any steam, gas, oil, water, rain or snow that may
leak into or flow from any part of the Premises or the Building; (d) the falling
of any fixture or any wall or ceiling materials; (e) broken glass; (f) latent or
patent defects; (g) any acts or omissions of the other tenants or occupants of
the Building; (h) any acts or omissions (excluding gross negligence) of
Landlord, its agents, servants and employees; and (i) theft, Act of God, public
enemy, injunction, riot, strike, insurrection, war, court order, or any order of
any governmental authorities having jurisdiction over the Premises.
18. QUIET ENJOYMENT Landlord covenants and agrees with Tenant that upon
Tenant paying the Base Rent and additional rent and observing and performing all
the terms, covenants and conditions, on Tenant's part to be observed and
performed under this Lease, Tenant may peaceably and quietly enjoy the Premises
hereby demised, subject to the terms and conditions of this Lease and to the
ground leases, underlying leases and mortgages in Article 21 below.
19. NEGATIVE COVENANTS OF TENANT Tenant agrees that it will not do or
suffer to be done, any act, matter or thing objectionable to Landlord's fire
insurance companies whereby the fire insurance or any other insurance now in
force or hereafter placed on the Premises or any part thereof or on the Building
by Landlord shall become void or suspended, or whereby the same shall be rated
as a more hazardous risk than at the date when
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Tenant took possession of the Premises. In case of a breach of this covenant, in
addition to all other remedies of Landlord hereunder, Tenant agrees to pay to
Landlord, as additional rent, any and all increases in premiums on insurance
carried by Landlord on the Premises or any part thereof or on the Building
caused in any way by the occupancy of Tenant.
20. FIRE OR OTHER CASUALTY
(a) If the Premises are damaged by fire or other casualty, the damages
shall be repaired by and at the expense of Landlord and restored to the
condition which existed immediately prior to such damage and the Base Rent and
additional rent shall be apportioned from the date of such fire or other
casualty until substantial completion of the repairs, according to the part of
the Premises which is usable by Tenant. Landlord agrees to repair such damage
within a reasonable period of time after receipt from Tenant of written notice
of such damage, subject to any delays caused by Acts of God, labor strikes or
other events beyond Landlord's control. Landlord shall not be liable for any
inconvenience to Tenant or injury to the business of Tenant resulting in any way
from such damage or the repair thereof. Tenant hereby acknowledges that
(i) Landlord shall not be obligated to obtain insurance of any kind on Tenant's
furniture or furnishings, equipment, trade fixtures, alterations, improvements
and additions, (ii) it is Tenant's obligation to obtain such insurance at
Tenant's sole cost and expense, and (iii) Landlord shall not be obligated to
repair any damage thereto or replace the same.
(b) If, in the reasonable opinion of Landlord, the Premises are
(i) substantially damaged (i.e. more than 50%) by reason of such fire or other
casualty, or (ii) twenty (20%) per cent or more of the Premises is damaged by
said fire or other casualty and less than six (6) months would remain in the
current Lease term upon substantial completion of the repairs and restoration,
Landlord shall have the right, upon written notice to Tenant within thirty (30)
days after said occurrence, to elect not to repair and restore the Premises, and
in such event, this Lease and the tenancy hereby created shall cease as of the
date of said occurrence, the Base Rent and additional rent to be adjusted and
apportioned as of said date.
(c) If, in the reasonable opinion of Landlord, the Building shall be
substantially damaged by fire or other casualty, regardless of whether or not
the Premises were damaged by such occurrence, Landlord shall have the right,
upon written notice to Tenant within thirty (30) days after said occurrence, to
terminate this Lease, and in such event, this Lease and the tenancy hereby
created shall cease and the Base Rent and additional rent shall be adjusted and
apportioned as of the date
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of said termination unless terminated as of the date of said occurrence in
accordance with paragraph 20(b) above.
21. SUBORDINATION This Lease is and shall be subject and subordinate to
all ground or underlying leases and to all mortgages which may now or hereafter
affect such leases or the real property of which the Premises are a part, and to
all renewals, modifications, consolidations, replacements and extensions of any
such underlying leases and mortgages. Tenant agrees that in the event any
person, firm, corporation or other entity acquires the right to possession of
the real property of which the Premises are a part including any mortgagee or
holder of any estate or interest having priority over this Lease, Tenant shall,
if requested by such person, firm, corporation or other entity, attorn to and
become the tenant of such person, firm, corporation or other entity, upon the
same terms and conditions set forth in this Lease for the balance of the term of
this Lease. Notwithstanding the foregoing, any mortgagee may, at any time,
subordinate its mortgage to this Lease, without Tenant's consent, by notice in
writing to Tenant, and thereupon this Lease shall be deemed prior to such
mortgage without regard to their respective dates of execution and delivery, and
in that event, such mortgagee shall have the same rights with respect to this
Lease as though it had been executed prior to the execution and delivery of the
mortgage. This clause shall be self-operative and no further instrument of
subordination or attornment shall be required by any ground or underlying lessor
or lessee or by any mortgagee, but in confirmation of such subordination and/or
attornment, Tenant shall execute any certificate that Landlord may reasonably
require acknowledging such subordination and/or attornment, within fifteen (15)
days after Landlord's request.
22. CONDEMNATION
(a) If the entire Premises shall be condemned or taken permanently for
any public or quasi-public use or purpose, under any statute or by right of
eminent domain, or by private purchase in lieu thereof, then in that event, at
the option of either Landlord or Tenant exercised by notice to the other within
30 days after the date when possession is taken, the term of this Lease shall
cease and terminate as of the date when possession is taken pursuant to such
proceeding or purchase. The Base Rent and additional rent shall be adjusted and
apportioned as of the time of such termination and any Base Rent and additional
rent paid for a period thereafter shall be refunded. In the event a material
portion of the Building shall be so taken (even though the Premises may not have
been affected by the taking), Landlord may elect to terminate this Lease as of
the date when possession is taken pursuant to such proceeding or purchase or
Landlord may elect to repair and restore the portion not taken at its own
expense, and thereafter the Base Rent and additional rent shall
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be reduced proportionately to reflect the portion of the Premises
not taken.
(b) In the event of any total or partial taking of the Premises,
Landlord shall be entitled to receive the entire award in any such proceeding
and Tenant hereby assigns any and all right, title and interest of Tenant now or
hereafter arising in or to any such award or any part thereof and Tenant hereby
waives all rights against Landlord and the condemning authority, except that to
the extent permitted by applicable law, Tenant shall have the right to claim and
prove in any such proceeding and to receive any award which may be made to
Tenant, if any, specifically for loss of good will, movable trade fixtures,
equipment and moving expenses.
23. ESTOPPEL CERTIFICATE At any time and from time to time and within
ten (10) days after written request by Landlord, Tenant shall execute,
acknowledge and deliver to Landlord a statement in writing duly executed by
Tenant certifying that (i) this Lease is in full force and effect, without
modification or amendment (or, if there have been any modifications or
amendments, that this Lease is in full force and effect as modified and amended
and setting forth the dates of the modifications and amendments), (ii) the dates
to which annual Base Rent and additional rent have been paid, and (iii) to the
knowledge of Tenant no default exists under this Lease or specifying each such
default; it being the intention and agreement of Landlord and Tenant that any
such statement by Tenant may be relied upon by a prospective purchaser or a
prospective mortgagee of the Building, or by others, in any matter affecting the
Premises.
24. DEFAULT The occurrence of any of the following shall constitute a
material default and breach of this Lease by Tenant:
(a) The failure of Tenant to take possession of the Premises within
thirty (30) days after the commencement date of this Lease;
(b) The vacation or abandonment of the Premises by Tenant (except
pursuant to a sublease or assignment approved by Landlord) coupled with
nonpayment of Base Rent and/or additional rent;
(c) A failure by Tenant to pay, when due, any installment of Base Rent,
additional rent or any other sum required to be paid by Tenant under this Lease,
where such failure continues for more than fifteen (15) days after Tenant has
received written notice of the delinquent payment from or on behalf of Landlord;
provided, however, Landlord shall not be required to give any such written
notice, and Tenant shall not be entitled to any such cure period, more than
twice in any twelve (12) month period;
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(d) A failure by Tenant to observe and perform any other provision or
covenant of this Lease to be observed or performed by Tenant, where such failure
continues for thirty (30) days after Tenant receives written notice thereof from
or on behalf of Landlord provided, however, that if the nature of the default is
such that the same cannot reasonably be cured within such 30-day period, Tenant
shall not be deemed to be in default if Tenant shall commence the cure of the
default within such 30-day period and thereafter diligently prosecutes the same
to completion; and
(e) The filing of a petition by or against Tenant for adjudication as a
bankrupt or insolvent or for its reorganization or for the appointment of a
receiver or trustee of Tenant's property pursuant to any local, state or federal
bankruptcy or insolvency law; or an assignment by Tenant for the benefit of
creditors; or the seizure of Tenant's property by any local, state or federal
governmental officer or agency or court-appointed official for the dissolution
or liquidation of Tenant or for the operating, either temporary or permanent, of
Tenant's business, provided, however, that if any such action is commenced
against Tenant the same shall not constitute a default if Tenant causes the same
to be dismissed within sixty (60) days after the filing thereof.
25. REMEDIES Upon the occurrence of any event of default set forth in
Article 24 above:
(a) Landlord may perform for the account of Tenant the cure of any such
default of Tenant and immediately recover as additional rent any expenditures
made and the amount of any obligations incurred in connection therewith, plus
fifteen (15%) per cent per annum interest from the date of any such
expenditures.
(b) Landlord may accelerate all Base Rent and additional rent due for
the balance of the term of this Lease and declare the same, along with all sums
past due, to be immediately due and payable. In determining the amount of any
future additional rent payments due Landlord as a result of increases in
operation and Maintenance Costs, Landlord may make such determination based upon
the amount of Operation and Maintenance Costs additional rent paid by Tenant for
the entire Comparison Year immediately prior to such default.
(c) Landlord may immediately proceed to collect or bring action for
such Base Rent and additional rent or such part thereof as aforesaid, as well as
for liquidated damages provided for hereinafter, as being rent in arrears, or
may enter judgment therefor as herein elsewhere provided for in case of rent in
arrears, or may file a Proof of Claim in any bankruptcy or insolvency proceeding
for such Base Rent and additional rent, or
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Landlord may institute any other proceedings, whether similar to the foregoing
or not, to enforce payment thereof.
(d) Landlord may re-enter and repossess the Premises breaking open
locked doors, if necessary, and may use as much force as necessary to effect
such entrance without being liable to any action or prosecution for such entry
or the manner thereof, and Landlord shall not be liable for the loss of any
property in the Premises. Landlord may remove all of Tenant's goods and property
from the Premises. Landlord shall have no liability for any damage to such goods
and property and Landlord shall not be responsible for the storage or protection
of the same upon removal.
(e) Upon prior notice and in accordance with Pennsylvania law, Landlord
may re-enter and repossess the Premises or any part thereof and shall use
reasonable efforts to relet all or any part of the Premises for and upon such
terms and to such persons, firms or corporations and for such period or periods
as Landlord, in its sole discretion, shall determine, including a term beyond
the termination of this Lease. If Landlord has other vacant space in the
Building for lease, Landlord shall be entitled to prefer leasing such vacant
space over reletting of the Premises. Landlord shall consider any tenant offered
by Tenant in connection with such reletting. For the purpose of such reletting,
Landlord may decorate; or make reasonable repairs, changes, alterations or
additions in or to the Premises to the extent deemed by Landlord desirable or
convenient and the cost of such repairs, changes, alterations or additions shall
be charged to and be payable by Tenant as additional rent hereunder, as well as
any reasonable brokerage and legal fees expended by Landlord. Any sums collected
by Landlord from any new tenant obtained on account of Tenant shall be credited
against the balance of the Base Rent and additional rent due hereunder as
aforesaid. Tenant shall pay to Landlord monthly, on the days when the Base Rent
and additional rent would have been payable under this Lease, the amount due
hereunder less the net amount obtained by Landlord from such new tenant.
(f) At its option, Landlord may serve notice upon Tenant that this
Lease and the then unexpired term hereof shall cease and expire and become
absolutely void on the date specified in such notice, to be not less than ten
(10) days after the date of such notice, without any right on the part of Tenant
to save the forfeiture by payment of any sum due or by the performance of any
term, provision, covenant, agreement or condition broken; and, thereupon and at
the expiration of the time limit in such notice, this Lease and the term hereof
granted, as well as the entire right, title and interest of Tenant hereunder,
shall wholly cease and expire and become void in the same manner and with the
same force and effect (except as to Tenant's liability) as if the date fixed in
such notice were the expiration date of the term of this
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Lease. Thereupon, Tenant shall immediately quit and surrender the Premises to
Landlord and Landlord may enter into and repossess the Premises by summary
proceedings, detainer, ejectment or otherwise and remove all occupants thereof
and, at Landlord's option, any property therein, without being liable to
indictment, prosecution or damages therefor.
(g) In the event of termination of this Lease pursuant to the
provisions of paragraph 25(f) above, Tenant shall pay to Landlord all Base Rent,
additional rent and other charges payable hereunder due and unpaid to the date
of termination, together with liquidated damages in an amount equal to
twenty-five percent (25%) of the balance of the Base Rent, additional rent and
other charges required to be paid under this Lease from the date of said
termination to the expiration date of the term of this Lease, as if the same had
not been terminated, the said Base Rent and additional rent for the balance of
the term of this Lease and other charges to be computed in the same manner as
provided in paragraph 25(b) above. In the event any judgment has been entered
against Tenant for any amount in excess of the total amount required to be paid
by Tenant to Landlord hereunder, then the damages assessed under said judgment
shall be reassessed and a credit granted to the extent of such excess. Landlord
and Tenant acknowledge that the damages to which Landlord is entitled in the
event of a breach of this Lease and termination by Landlord are not easily
computed and are subject to many variable factors. Therefore, Landlord and
Tenant have agreed to the liquidated damages as herein provided in order to
avoid extended litigation in the event of default by Tenant and termination of
this Lease.
In the event Landlord exercises the remedy under this paragraph and
Tenant pays Landlord the entire amount of the liquidated damages, Landlord shall
be deemed to have made an election of remedies and except for regaining
possession of the Premises, Landlord shall not be entitled to exercise any other
remedy under this Article 25.
(h) In the event of a breach or threatened breach by Tenant of any of
the agreements, conditions, covenants or terms of this Lease, Landlord shall
have the right to seek an injunction to restrain the same and the right to
invoke any remedy allowed by law or in equity, whether or not other remedies,
indemnity or reimbursements are herein provided. The rights and remedies given
to Landlord in this Lease are distinct, separate and cumulative remedies, and no
one of them, whether or not exercised by Landlord, shall be deemed to be in
exclusion of any of the others.
(i) In the event of any default, Tenant, in consideration of the
execution of this Lease by Landlord and of the covenants and agreements on the
part of Landlord herein contained, and
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fully comprehending the relinquishment of certain rights including rights of
pre-judgment notice and hearing, hereby expressly authorizes and empowers (which
power is coupled with an interest) any prothonotary or attorney of any Court of
Record to accept service of process for, to appear for, and to confess judgment
against Tenant (i) to recover possession from time to time of the Premises (and
Tenant agrees that upon the entry of each judgment for said possession a Writ of
Possession or other appropriate process may issue forthwith), and/or (ii) to
enforce payment from time to time for Base Rent, additional rent, or other
charges or expenses payable under this Lease, including, at Landlord's option,
the Base Rent for the entire unexpired balance of the term of this Lease,
computed as aforesaid, and any other charges, payments, costs and expenses
reserved as rent or agreed to be paid by Tenant, as well as liquidated damages,
and for interest and costs together with an attorney's commission of five (5%)
percent thereof.
So long as Judge, Inc. is Tenant under this Lease, Landlord
agrees not to exercise the remedy under this paragraph (i).
(j) Tenant further hereby expressly authorizes and empowers (which
power is coupled with an interest) Landlord, upon the occurrence of a default
hereunder and so long as the same is continuing, to enter upon the Premises,
distrain upon and remove therefrom all inventory, equipment, machinery, trade
fixtures, and personal property of whatsoever kind or nature, whether owned by
Tenant or others, and to proceed, without judicial decree, writ of execution or
assistance of constables, to conduct a private sale, by auction or sealed bid,
of such personal property, at which sale Landlord may bid without restriction.
Tenant hereby waives the benefit of all laws, whether now in force or hereafter
enacted, exempting any personal property of the Premises from sale or levy,
whether execution thereon is had by order of any court or through private sale
as herein authorized. Tenant waives the right to issue a Writ of Replevin under
the Pennsylvania Rules of Civil Procedure, under the laws of the Commonwealth of
Pennsylvania or under any law previously enacted and now in force or which
hereinafter may be enacted for the recovery of any articles of any nature
whatsoever seized under a distress for rent, or levy upon an execution for rent,
liquidated damages or otherwise.
So long as Judge, Inc. is Tenant under this Lease, Landlord
agrees not to exercise the remedy under this paragraph (j).
(k) In any action by confession for ejectment, for rent due and owing
or for distraint, Landlord shall first cause to be filed in such action an
affidavit made by it or someone acting for it setting forth the facts necessary
to authorize the entry of judgment, of which facts such affidavit shall be
conclusive evidence, and if a true copy of this Lease be filed in such
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action, it shall not be necessary to file the original as a warrant of attorney,
any rule of court, custom or practice to the contrary notwithstanding. The
authority to confess judgment against Tenant hereunder shall not be exhausted by
one (1) exercise thereof, but judgment may be confessed as provided herein from
time to time as often as any default occurs under this Lease, and such authority
may be exercised as well after the expiration of the term of this Lease and/or
during or after the expiration of any extended or renewal term.
(l) Tenant shall pay upon demand all of Landlord's costs, charges and
expenses, including the fees and out-of-pocket expenses of legal counsel, agents
and others retained by Landlord incurred in enforcing Tenant's obligations
hereunder or incurred by Landlord in any litigation, negotiation or transaction
in which Tenant causes Landlord, without Landlord's fault, to become involved or
concerned, together with interest at 15% per annum from the date incurred by
Landlord to the date of payment by Tenant.
26. REQUIREMENT OF STRICT PERFORMANCE The failure or delay on the part
of Landlord to enforce or exercise at any time any of the provisions, rights or
remedies in the Lease shall, in no way be construed to be a waiver thereof, or
in any way to affect the validity of this Lease or any part thereof, or the
right of Landlord to thereafter enforce each and every such provision, right or
remedy. No waiver of any breach of this Lease shall be held to be a waiver of
any other or subsequent breach. The receipt by Landlord of Base Rent or
additional rent at a time when the Base Rent or additional rent is in default
under this Lease shall not be construed as a waiver of such default. The receipt
by Landlord of a lesser amount than the Base Rent or additional rent due shall
not be construed to be other than a payment on account of the Base Rent or
additional rent then due, and any statement on Tenant's check or any letter
accompanying Tenant's check to the contrary shall not be deemed an accord and
satisfaction, and Landlord may accept such payment without prejudice to
Landlord's right to recover the balance of the Base Rent or additional rent due
or to pursue any other remedies provided in this Lease. No act or thing done by
Landlord or Landlord's agents or employees during the term of this Lease shall
be deemed an acceptance of a surrender of the Premises and no agreement to
accept such a surrender shall be valid unless in writing and signed by Landlord.
27. (Intentionally Omitted)
28. SURRENDER OF PREMISES; HOLDING OVER
(a) The Lease shall terminate and Tenant shall deliver up and surrender
possession of the Premises to Landlord on the last day of the term hereof, and
Tenant hereby waives the right to any
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notice of termination or notice to quit. Upon the expiration or sooner
termination of this Lease, Tenant covenants to deliver up and surrender
possession of the Premises in the same condition in which Tenant has agreed to
maintain and keep the same during the term of this Lease in accordance with the
provisions of this Lease, normal wear and tear excepted.
(b) Upon the failure of Tenant to surrender possession of the Premises
to Landlord upon the expiration or sooner termination of this Lease, Tenant
shall pay to Landlord, as liquidated damages, an amount equal to 150% of the
then current Base Rent and additional rent required to be paid by Tenant under
this Lease, applied to any period in which Tenant shall remain in possession
after the expiration or sooner termination of this Lease. Acceptance by Landlord
of Base Rent or additional rent after such expiration or earlier termination
shall not constitute a consent to a holdover hereunder or result in a renewal.
The foregoing provisions of this paragraph are in addition to and do not affect
Landlord's right to reentry or any other rights of Landlord hereunder or
otherwise provided by law.
29. DELAY IN POSSESSION
(a) In the event that the Premises are not ready for Tenant's Occupancy
at the commencement date of this Lease, because Landlord has not substantially
completed the tenant improvement work described in Article 45 of the Rider
(unless such tenant improvement work is being done by Tenant or Tenant's
contractor, in which case there shall be no delay in the commencement date and
no suspension or proration of Base Rent or additional rent), or because of the
failure or refusal of the present occupant of the Premises to vacate and
surrender up the same, or because of any restrictions, limitations or delays
caused by Government regulations or Governmental agencies, this Lease and the
term hereof shall not be affected thereby, nor shall Tenant be entitled to make
any claim for or receive any damages whatsoever from Landlord, but the entire
term of this Lease shall not commence and the Base Rent, additional rent and
other sums herein provided to be paid by Tenant shall not become due until the
date the Premises are substantially completed by Landlord and ready for Tenant's
occupancy or the date possession of the Premises is delivered to Tenant, as the
case may be.
(b) In the event of a delay in the commencement date of this Lease,
Landlord and Tenant agree to execute a confirmation of lease term agreement,
substantially in the form of Exhibit E hereto, to confirm the commencement date
and expiration date of the Lease.
30. COMPLIANCE WITH LAWS AND ORDINANCES At its sole cost and expense,
Tenant shall promptly fulfill and comply with all laws, ordinances, regulations
and requirements of the City,
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County, State and Federal Governments and any and all departments thereof having
jurisdiction over the Building, and of the National Board of Fire Underwriters
or any other similar body now or hereafter constituted, affecting Tenant's
occupancy of the Premises or the business conducted therein. Any obligations of
Tenant as an employer to modify or alter any part of the Premises for the
benefit of Tenant's employees under any law, rule or regulation, including
without limitation the Americans with Disabilities Act of 1990, shall be the
sole responsibility and at the sole cost of Tenant.
31. NOTICES All notices or demands under this Lease shall be in writing
and shall be given or served by either Landlord or Tenant to or upon the other,
either personally or by Registered or Certified Mail, Return Receipt Requested,
postage prepaid, and addressed as follows:
TO LANDLORD: The Prudential Insurance Company
of America
3 Gateway Center -- 13th Floor
Newark, New Jersey 07102
Attention: Law Department
WITH A COPY TO: Premisys Real Estate Services, Inc.
One Bala Plaza -- Suite E501
Bala Cynwyd, Pennsylvania 19004
TO TENANT: Judge, Inc.
Two Bala Plaza
Bala Cynwyd, Pennsylvania 19004
All notices and demands shall be deemed given or served upon the date of receipt
thereof by Landlord or Tenant, as the case may be. Either Landlord or Tenant may
change its address to which notices and demands shall be delivered or mailed by
giving written notice of such change to the other as herein provided.
32. WARRANTY OF TENANT Tenant warrants to Landlord that Tenant dealt
and negotiated solely and only with Jackson-Cross Company and CB Commercial Real
Estate Group, Inc., and Landlord for this Lease and with no other broker, firm,
company or person.
For good and valuable consideration, Tenant hereby agrees to indemnify,
defend and hold Landlord harmless from and against any and all claims, suits,
proceedings, damages, obligations, liabilities, counsel fees, costs, losses,
expenses, orders and judgments imposed upon, incurred by or asserted against
Landlord by reason of the falsity or error of Tenant's warranty.
33. FORCE MAJEURE Landlord shall be excused for the period of any delay
in the performance of any of its obligations under this Lease, when prevented
from so doing by any cause or causes
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beyond Landlord's control, which shall include, without limitation, all labor
disputes, inability to obtain any materials or services, civil commotion, or
acts of God.
34. LANDLORD'S OBLIGATIONS Landlord's obligations hereunder shall be
binding upon Landlord only for the period of time that Landlord is in ownership
of the Building, and upon termination of that ownership, except as to any
obligations which have then matured, Tenant shall look solely to Landlord's
successor in interest in the Building for the satisfaction of each and every
obligation of Landlord hereunder. If any security deposit has been made by
Tenant, Landlord shall transfer such security deposit to the purchaser and
thereupon Landlord shall be discharged from any further liability with respect
thereto.
35. LANDLORD'S LIABILITY Landlord shall have no personal liability
under any of the terms, conditions or covenants of this Lease and tenant shall
look solely to the equity of Landlord in the Building for the satisfaction of
any claim, remedy or cause of action accruing to Tenant as a result of the
breach of any provision of this Lease by Landlord.
36. SUCCESSORS The respective rights and obligations of Landlord and
Tenant under this Lease shall bind and shall inure to the benefit of Landlord
and Tenant and their legal representatives, heirs, successors and assigns,
provided, however, that no rights shall inure to the benefit of any successor of
Tenant unless Landlord's written consent to the transfer to such successor has
first been obtained as provided in Article 13 above.
37. GOVERNING LAW This Lease shall be construed, governed and enforced
in accordance with the laws of the Commonwealth of Pennsylvania.
38. SEVERABILITY If any provisions of this Lease shall be held to be
invalid, void or unenforceable, the remaining provisions of this Lease shall in
no way be affected or impaired and such remaining provisions shall continue in
full force and effect.
39. CAPTIONS Any headings preceding the text of the several Articles of
this Lease are inserted solely for convenience of reference and shall not
constitute a part of this Lease or affect its meaning, construction or effect.
40. GENDER As used in this Lease, the word "person" shall mean and
include, where appropriate, an individual, corporation, partnership or other
entity; the plural shall be substituted for the singular, and the singular for
the plural, where appropriate; and words of any gender shall mean to include any
other gender.
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41. EXECUTION This Lease shall become effective when it has been signed
by a duly authorized officer or representative of Landlord and Tenant and
delivered to the other party.
42. EXHIBITS AND RIDER Attached to this Lease and made part hereof are
Exhibits A, B, C, D and E and Rider Articles 45 to 49 inclusive.
43. ENTIRE AGREEMENT This Lease, including the Exhibits and the Rider,
contains all the agreements, conditions, understandings, representations and
warranties made between Landlord and Tenant with respect to the subject matter
hereof, and may not be modified orally or in any manner other than by an
agreement in writing signed by both Landlord and Tenant or their respective
successors in interest.
44. CORPORATE AUTHORITY If Tenant is a corporation, each individual
executing this Lease on behalf of said corporation represents and warrants that
he is duly authorized to execute and deliver this Lease on behalf of said
corporation in accordance with the duly adopted resolution of the Board of
Directors of said corporation or in accordance with the By-Laws of said
corporation, and that this Lease is binding upon said corporation in accordance
with its terms.
IN WITNESS WHEREOF, Landlord and Tenant have duly executed this Lease
the day and year first above written.
(LANDLORD)
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ John A. Gorham
---------------------------------
John A. Gorham, Vice President
(TENANT)
ATTEST: JUDGE, INC.
By: /s/ Katharine Wiercinski By: /s/
------------------------- -------------------------------
(Seal)
If Tenant is a corporation, Lease must be executed by the President or the Vice
President as well as the Secretary and properly sealed.
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<PAGE>
Rider Annexed to and Made Part of the Lease
Dated January 21, 1994
Between The Prudential Insurance Company of America,
as Landlord,
and Judge, Inc.,
as Tenant
45. LANDLORD'S WORK AND CONTRIBUTIONS Supplementing the provisions of
Article 9 above, at Landlord's expense up to a maximum of $199,888.00, Landlord
agrees to construct the Premises in Landlord's Building Standard manner, in
accordance with Tenant's interior design drawings and Final Plans and
Specifications which shall be prepared by Landlord's space designer, Space
Design, Inc., at the expense of Landlord (as part of Landlord's allowance) and
shall be submitted to Landlord on or before February 15, 1994, time being of the
essence. Landlord's contribution of up to a maximum of $199,888.00 shall cover
space design fees, construction costs and fees, including a 1.25% construction
management fee payable to Landlord's property manager, Premisys Real Estate
Services, Inc., labor and materials, construction permits and reasonable
overhead. In the event the cost of construction of the Premises exceeds
$199,888.00, then at its option, Tenant shall either (i) pay Landlord the entire
amount of the excess, in lump sum, within twenty (20) days after Landlord's
billing therefor, or (ii) reduce the amount of the Base Rent abatement under
Article 46 below by the amount of the excess.
In the event Tenant vacates the Premises and there is a default in the
payment of Base Rent under the Lease, or in the event Landlord obtains
possession of the Premises or terminates the Lease by reason of a default by
Tenant under the Lease, Tenant shall pay to Landlord, upon demand, as additional
rent hereunder, the full unamortized amounts (based on an amortization period of
six (6) years and including interest at 8.00% per annum on the outstanding
principal balance) of (i) Landlord's contribution and payment of up to
$199,888.00 in construction costs, including design fees, under the above
paragraph; and (ii) the Base Rent abatement in the amount of $196,764.75,
provided in Article 46 below.
46. BASE RENT ABATEMENT Notwithstanding the provisions of paragraph (a)
of Article 4 above, Landlord hereby grants Tenant a Base Rent abatement in the
total amount of $196,764.75 which shall be applied toward the first nine (9)
months of Base Rent accruing under the Lease. Landlord and Tenant agree that no
portion of the Base Rent paid by Tenant during the portion of the term of this
Lease occurring after the expiration of any period during which such Rent was
abated shall be allocated, for income tax purposes, by Landlord or Tenant to
such rent abatement
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period, nor is such Rent intended by Landlord and Tenant to be allocable, for
income tax purposes, to any abatement period.
47. OPTION TO RENEW Landlord hereby grants Tenant an option to renew
the term of the Lease, upon the following terms and conditions:
(a) The renewal term shall be for five (5) years, commencing July 1,
2000 and expiring June 30, 2005;
(b) Tenant must exercise the option, if at all, upon notice to
Landlord, on or before December 31, 1999;
(c) At the time Tenant delivers its notice of election to renew to
Landlord, this Lease shall be in full force and effect and Tenant
shall not then be in default under any of the terms and conditions
of the Lease beyond any applicable cure period;
(d) The renewal term shall be upon the same terms, covenants and
conditions contained in the Lease, except that the annual Base Rent
shall be the then current Fair Market Rent for the renewal of
similar space in the Building as of the effective commencement date
of the renewal, but in no event shall the annual Base Rent for the
renewal term be less than the annual Base Rent plus total accrued
additional rent for Real Estate Taxes and Operation and Maintenance
Costs increases under Article 5 of the Lease payable by Tenant
during calendar year 1999; and
(e) There shall be no further privilege of renewal.
48. RIGHT OF FIRST OFFER Landlord hereby grants Tenant the Right of
First Offer to lease the contiguous space of 2,758 rentable square feet on the
8th Floor of the Building, presently vacant and shown outlined on the floor plan
annexed hereto as Exhibit A ("First Offer Space"), upon the following terms and
conditions:
(a) Landlord will give Tenant written notice when Landlord is about to
begin negotiations to lease all or a portion of the First Offer
Space to a third party and Tenant shall have ten (10) days after
receipt of such notice to notify Landlord of its exercise of the
Right hereunder;
(b) At the time Tenant notifies Landlord of its exercise of the Right,
Tenant shall not be in default under any of the provisions of the
Lease beyond any applicable cure period;
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(c) Base Rent for the First Offer Space shall be at the same annual
Base Rents payable by Tenant with respect to the Premises;
(d) Tenant's Percentage under Article 5 above shall be increased
by 1.068%;
(e) The effective date of the addition of the First Offer Space to the
Premises shall be the 31st day after Tenant's receipt of Landlord's
notice under (a) above;
(f) Tenant agrees to accept the First Offer Space in "as is"
condition, in the physical state and condition thereof on the
effective date under (e) above, provided that Landlord shall
contribute a construction allowance of $.22 per rentable square
foot of the First Offer Space per month remaining in the initial
term of the Lease from and after the effective date under (e)
above;
(g) Except for the provisions of paragraphs (c), (d), and (f) above,
Tenant's lease of the First offer Space shall be upon the same
terms and conditions contained in the Lease; and
(h) Upon Tenant's failure to exercise its Right of First Offer with
respect to the First Offer Space, or any part thereof from time to
time, within the time period provided under (a) above, Landlord
shall have the right to pursue its negotiations for a lease of the
First Offer Space, or part thereof, as the case may be, with the
third party.
49. PARKING SPACE During the entire term of this Lease (including any
renewal thereof) and without charge to Tenant, Landlord shall provide one (1)
reserved parking space for Tenant's use in the executive area on the 2nd level
of the underground garage.
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EXHIBIT "B"
RULES AND REGULATIONS
DEFINITIONS
1. Wherever in these Rules and Regulations the word "Tenant" is used, it
shall be deemed to apply to and include Tenant and his agents,
employees, invitees, licensees, subtenants and contractors, and to be
of such number and gender as the circumstances require. The word "room"
is deemed to include the space covered by this Lease. The word
"Landlord" shall be taken to include the employees and agents of
Landlord.
CONSTRUCTION
2. The streets, parking areas, sidewalks, entrances, lobbies, halls,
passages, elevators, stairways and other common areas provided by
Landlord shall not be obstructed by Tenant, or used by him for any
other purpose than for ingress and egress.
WASHROOMS
3. Toilet rooms, water-closets and other water apparatus shall not be used
for any purposes other than those for which they were constructed.
INSURANCE REGULATIONS
4. Tenant shall not do anything in the rooms, or bring or keep
anything therein, which will in any way increase or tend to
increase the risk of fire or the rate of fire insurance, or
which will conflict with the regulations of the Fire
Department or the fire laws, or with any insurance policy on
the Building or any part thereof, or with any law,
ordinance, rule or regulation affecting the occupancy and
use of the rooms, now existing or hereafter enacted or
promulgated by any public authority or by the Board of Fire
Underwriters.
GENERAL PROHIBITIONS
5. In order to insure proper use and care of the Premises,
Tenant shall not:
a) Keep animals or birds in the rooms.
b) Use rooms as sleeping apartments.
c) Allow any sign, advertisement or notice to be affixed
to the Building, inside or outside, or viewed through
<PAGE>
any window from outside the Building and/or the
Premises, without Landlord's consent. Signs on
interior glass doors will be painted only by the person
designated by Landlord, the cost of the painting to be
paid by Tenant.
d) Make improper noises or disturbances of any kind; sing, play
or operate any musical instrument, radio or television without
consent of Landlord, or otherwise do anything to disturb other
tenants or tend to injure the reputation of the Building.
e) Mark or defile elevators, water-closets, toilet rooms,
walls, windows, doors or any other part of the
Building.
f) Place anything on the outside of the Building, including roof
setbacks, window ledges and other projections; or drop
anything from the windows, stairways, or parapets; or place
trash or other matter in the halls, stairways, elevators or
light wells of the Building.
g) Operate any machinery in the Premises other than normal
office equipment.
h) Interfere with the heating, ventilation and air
condition system.
i) Allow anyone but Landlord's employees or contractors to
clean rooms.
j) Use any electric heating device without permission of
Landlord.
k) Install call boxes, or any kind of wire in or on the
Building without Landlord's permission and direction.
l) Manufacture any commodity, or prepare or dispense
tobacco, drugs, flowers, or other commodities or
articles without the written consent of Landlord.
m) Secure duplicate keys for rooms or toilets, except from
Landlord.
n) Place any weights in any portion of the Premises or the
Building beyond the safe carrying capacity of the
structure.
o) Enter any mechanical or electrical areas, telephone
closets, loading areas, roof or Building storage areas
without the written consent of Landlord.
-2-
<PAGE>
p) Place door mats in public corridors without consent of
Landlord.
PUBLICITY
6. Tenant shall not use the name of the Building in any way in
connection with his business except as the address thereof.
MOVEMENT OF EQUIPMENT
7. Landlord reserves the right to designate the time when and
the method whereby freight, small office equipment,
furniture, safes and other like articles may be brought
into, moved or removed from the Building or the Premises,
and to designate the location for temporary disposition of
such items. In no event shall any of the foregoing items be
taken from Tenant's Premises for the purpose of removing
same from the Building without the express written consent
of both Landlord and Tenant.
REGULATION CHANGES
8. Landlord shall have the right to make such other and further
reasonable rules and regulations as in the judgment of
Landlord, may from time to time be reasonably necessary for
the safety, appearance, care, and cleanliness of the
Building and for the preservation of good order therein.
Landlord agrees to enforce such other rules and regulations
uniformly against all tenants in the Building. Landlord
shall not be responsible to Tenant for any violation of
rules and regulations by other tenants.
PUBLIC ENTRANCE
9. Landlord reserves the right to exclude the general public from the
Building upon such days and at such hours as in Landlord's judgment
will be for the best interest of the Building and its tenants. Persons
entering the Building after 6:00 P.M. on business days and at all times
on weekends and holidays must sign the register maintained for that
purpose in the Building Lobby.
-3-
<PAGE>
EXHIBIT C
HOLIDAYS
New Years Day
Memorial Day
Independence Day
Labor Day
Thanksgiving Day
Day After Thanksgiving*
Christmas Day
* HVAC available on this day
<PAGE>
EXHIBIT D
STANDARD CLEANING SPECIFICATIONS -- TENANT AREAS
DAILY
Clean common area bathrooms, including sinks, toilets, floors and
mirrors.
Fully vacuum all carpets from wall to wall.
Using approved spotter, spot clean carpet area.
Empty all trash receptacles and replace liners as necessary.
Remove all collected trash to designated area.
Empty and damp wipe ashtrays.
Dust all furniture, fixtures, equipment and accessories.
Spot clean all walls, light switches and doors.
Spot clean all partition glass.
Clean and sanitize all sinks and wipe dry.
Dust mop all hard surface floors with treated dust mop.
Mop all stains and spills, especially coffee and drink spills.
Detail clean threshold plates removing all visible soil.
WEEKLY
Vacuum all fabric office furniture, including chairs and couches.
Using a high speed floor machine, spray buff all hard surface areas.
Clean all partition glass.
Dust wood paneled walls.
<PAGE>
MONTHLY
Dust all surfaces above normal reach, including sills, ledges,
moldings, shelves, door frames, pictures and vents.
Dust all chair and table legs and rugs, baseboards, ledges, moldings,
and other low reach areas.
Dust all venetian blinds.
QUARTERLY
Spot clean all horizontal and vertical surfaces removing fingerprints,
smudges and stains.
Vacuum draperies.
Strip hard surface floor and recoat with three coats of floor polish.
EIGHT TIMES PER YEAR
Machine scrub hard surface floor and apply one coat of polish, allow to
dry, then buff.
TWO TIMES PER YEAR
Clean building windows both inside and outside.
D-2
<PAGE>
EXHIBIT E
CONFIRMATION OF LEASE TERM AGREEMENT
AGREEMENT, made as of the day of , 1993, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation, having an
office at Three Gateway Center, 13th Floor, 100 Mulberry Street, Newark,
New Jersey 07102-4077 ("Landlord") and
, a , having its principal
offices at
("Tenant").
WITNESSETH
WHEREAS:
A. Landlord and Tenant entered into a written lease dated as of ,
1993 ("Lease"), covering a portion of the Floor in the building known as
Bala Plaza and located in Bala Cynwyd, Pennsylvania.
B. Landlord and Tenant desire to amend the Lease to confirm the
commencement and expiration dates of the Lease term.
NOW, THEREFORE, in consideration of the following mutual terms and
conditions, the Lease is hereby amended as follows:
FIRST: Landlord and Tenant hereby acknowledge and confirm
that:
(i) The Lease term commenced on , 1993 and will
expire at midnight on , ;
(ii) Tenant's annual and monthly Base Rent payments shall
be as follows:
ANNUAL MONTHLY BASE RENT RATE
PERIOD BASE RENT BASE RENT PER SQUARE FOOT
- ------ --------- --------- ---------------
[(iii) The notice, commencement and expiration dates of Tenant's
option to renew under Article of the Lease are
________________, ________________ and _______________,
respectfully.]
<PAGE>
SECOND: Except for the provisions of this CONFIRMATION OF LEASE TERM
AGREEMENT, all the terms, covenants and conditions contained in the Lease shall
remain in full force and effect.
IN WITNESS WHEREOF, this AGREEMENT has been executed as of the day and
year first above written.
LANDLORD: THE PRUDENTIAL INSURANCE COMPANY OF
AMERICA
By:_________________________________________
, Vice President
TENANT:_____________________________________
By:_________________________________________
, Vice President
-2-
<PAGE>
FIRST AMENDMENT OF LEASE
AGREEMENT, made as of the 7th day of September, 1994, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation having an
office at 3 Gateway Center -- 13th Floor, Newark, New Jersey 07102 (hereinafter
"Landlord") and JUDGE, INC., a Pennsylvania corporation, having its principal
office at Two Bala Plaza, Bala Cynwyd, Pennsylvania 19004 (hereinafter
"Tenant").
WITNESSETH
WHEREAS:
A. Landlord and Tenant entered into a written lease dated January 21,
1994 (hereinafter "Lease"), covering approximately 12,493 rentable square feet
of space on the 8th Floor (hereinafter "Demised Premises"), in Landlord's
building known as Two Bala Plaza (hereinafter "Building"), in Bala Cynwyd,
Pennsylvania.
B. Landlord and Tenant desire to amend the Lease to add to the Demised
Premises that portion of the 8th Floor of the Building, shown outlined and
hatched in black on the Floor plan annexed hereto as Exhibit A and containing
approximately 765 rentable square feet (hereinafter "Additional Space").
NOW, THEREFORE, in consideration of the following mutual terms and
conditions, the Lease is hereby amended as follows:
<PAGE>
FIRST: Effective March 1, 1995 and for the balance of the
term of this Lease to June 30, 2001:
(i) the Demised Premises shall be enlarged to include the
Additional Space;
(ii) rentable square footage of the Demised Premises shall be
increased by 765 rentable square feet from 12,493 rentable
square feet to 13,258 rentable square feet;
(iii) "Tenant's Percentage" under Article 5. (OPERATION AND
MAINTENANCE COSTS AND REAL ESTATE TAXES ADDITIONAL RENT)
of the Lease shall be increased by .2963% from 4.8395% to
5.1358%. The Base Year with respect to the Additional
Space shall be calendar Year 1994.
SECOND: From March 1, 1995 to June 30, 2000, the annual Base Rent
shall be:
For Additional Space
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
03/01/95-06/30/97 $16,065.00 $1,338.75 $21.00
07/01/97-06/30/00 $16,830.00 $1,402.50 $22.00
TOTAL
-----
</TABLE>
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
03/01/95-06/30/97 $278,418.00 $23,201.50 $21.00
07/01/97-06/30/00 $291,676.00 $24,306.33 $22.00
</TABLE>
THIRD: Supplementing the provisions of Article 9 of the Lease, at
Landlord's expense up to a maximum of $10,771.20,
-2-
<PAGE>
Landlord agrees to construct the Additional Space in Landlord's Building
Standard manner and in accordance with Tenant's interior design drawings and
Final Plans and Specifications, which shall be prepared by Landlord's space
planner, Space Design, Inc., at Landlord's expense (as part of Landlord's
$10,771.20 allowance). Landlord's contribution of up to a maximum of $10,771.20
shall cover design fees, construction costs and fees (including the construction
management fee of 14% payable to Premises Real Estate Services, Inc., Landlord's
on-site property manager), labor and materials, construction permits, and
reasonable overhead. In the event the cost of the design and construction of the
Additional Space exceeds $10,771.20, then Tenant shall pay Landlord the entire
amount of the excess, in lump sum, within thirty (30) days after Landlord's
billing therefor.
-3-
<PAGE>
FOURTH: Except for the provisions of this First Amendment of Lease,
all the terms, covenants and conditions contained in the Lease shall remain in
full force and effect.
IN WITNESS WHEREOF, this First Amendment of Lease shall be executed as
of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ John S. Gregorits
---------------------------------
John S. Gregorits, Vice President
ATTEST: JUDGE, INC.
By: /s/ Katharine Wiercinski By: /s/ Martin E. Judge
------------------------- --------------------------------
Secretary Martin E. Judge, President
-4-
<PAGE>
SECOND AMENDMENT OF LEASE
AGREEMENT, made as of the 7th day of November, 1994, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation having an
office at 3 Gateway Center -- 13th Floor, Newark, New Jersey 07102 (hereinafter
"Landlord") and JUDGE, INC., a Pennsylvania corporation, having its principal
office at Two Bala Plaza, Bala Cynwyd, Pennsylvania 19004 (hereinafter
"Tenant").
WITNESSETH
WHEREAS:
A. Landlord and Tenant entered into a written lease dated January 21,
1994 (hereinafter "Lease"), covering approximately 12,493 rentable square feet
of space on the 8th Floor (hereinafter "Initial Premises"), in Landlord's
building known as Two Bala Plaza (hereinafter "Building"), in Bala Cynwyd,
Pennsylvania.
B. The Lease has been amended pursuant to the First Amendment of Lease
dated as of September 7, 1994, which added to the Initial Premises a portion of
the 8th Floor of the Building, containing approximately 765 rentable square feet
(hereinafter "Additional Space").
C. Landlord and Tenant desire to further amend the Lease to confirm the
commencement and expiration dates of the Lease and the total annual Base Rent
schedule for the entire term of the Lease.
<PAGE>
NOW, THEREFORE, in consideration of the following mutual terms and
conditions, the Lease is hereby further amended as follows:
FIRST: Landlord and Tenant confirm and agree that the term of the Lease
commenced on July 1, 1994 and shall expire on June 30, 2000.
SECOND: From March 1, 1995 to June 30, 2000, the total annual Base Rent
for the Initial Premises and Additional Space shall be:
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
03/01/95-03/31/95 $1,338.75* $21.00
04/01/95-06/30/97 $278,418.00 $23,201.50 $21.00
07/01/97-06/30/00 $291,676.00 $24,306.33 $22.00
</TABLE>
*Reflects monthly Base Rent for Additional Space only and last month
(i.e. 9th month) of Base Rent abatement for the Initial Premises.
THIRD: Except for the provisions of this Second Amendment of Lease, all
the terms, covenants and conditions contained in
-2-
<PAGE>
the Lease, as previously amended, shall remain in full force and effect.
IN WITNESS WHEREOF, this Second Amendment of Lease shall be executed as
of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ John S. Gregorits
----------------------------------
John S. Gregorits, Vice President
WITNESS: JUDGE, INC.
By: /s/ Katharine Wiercinski By: /s/ Martin E. Judge
------------------------ ---------------------------
Secretary Martin E. Judge, President
-3-
<PAGE>
THIRD AMENDMENT OF LEASE
AGREEMENT, made as of the 2nd day of May, 1995, between THE PRUDENTIAL
INSURANCE COMPANY OF AMERICA, a New Jersey corporation having an office at 3
Gateway Center -- 13th Floor, Newark, New Jersey 07102 (hereinafter "Landlord")
and JUDGE, INC., a Pennsylvania corporation, having its principal office at Two
Bala Plaza, Bala Cynwyd, Pennsylvania 19004 (hereinafter "Tenant").
WITNESSETH
WHEREAS:
A. Landlord and Tenant entered into a written lease dated January 21,
1994 (hereinafter "Lease"), covering approximately 12,493 rentable square feet
of space on the 8th Floor (hereinafter "Initial Premises"), in Landlord's
building known as Two Bala Plaza (hereinafter "Building"), in Bala Cynwyd,
Pennsylvania.
B. The Lease has been amended pursuant to:
(i) the First Amendment of Lease, dated as of
September 7, 1994, which added to the Initial
Premises a portion of the 8th Floor of the
Building, containing approximately 765 rentable
square feet (hereinafter "Additional Space"); and
(ii) Second Amendment of Lease, dated as of November 7,
1994, which confirmed the commencement and
<PAGE>
expiration dates of the Lease and the total annual
Base Rent schedule for the entire term.
C. Landlord delivered possession of the Additional Space to
Tenant on March 27, 1995 and not on March 1, 1995 as projected in
the First Amendment of Lease.
D. Landlord and Tenant desire to further amend the Lease to confirm the
commencement date of the Lease with respect to the Additional Space and the
total revised annual Base Rent schedule for the entire term of the Lease.
NOW, THEREFORE, in consideration of the following mutual terms and
conditions, the Lease is hereby further amended as follows:
FIRST: Landlord and Tenant confirm and agree that the term of the Lease
with respect to the Additional Space commenced on March 27, 1995 and shall
expire on June 30, 2000. The effective date of March 1, 1995, appearing in
Article FIRST of the First Amendment of Lease, is hereby amended to be
March 27, 1995.
SECOND: From March 27, 1995 to June 30, 2000, the total annual Base
Rent for the Initial Premises and Additional Space shall be:
-2-
<PAGE>
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
03/27/95-03/31/95 $1,338.75* $21.00
04/01/95-06/30/97 $278,418.00 $23,201.50 $21.00
07/01/97-06/30/00 $291,676.00 $24,306.33 $22.00
</TABLE>
*Reflects monthly Base Rent for Additional Space only and last month
(i.e. 9th month) of Base Rent abatement for the Initial Premises.
THIRD: Except for the provisions of this Third Amendment of Lease, all
the terms, covenants and conditions contained in the Lease, as previously
amended, shall remain in full force and effect.
IN WITNESS WHEREOF, this Third Amendment of Lease shall be executed as
of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Leigh Rae
---------------------------
Leigh Rae, Vice President
WITNESS: JUDGE, INC.
By: /s/ Katharine A. Wiercinski By: /s/ Martin E. Judge
--------------------------- ---------------------------
Secretary Martin E. Judge, President
-3-
<PAGE>
FOURTH AMENDMENT OF LEASE
AGREEMENT, made as of the 31st day of July, 1995, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation having an
office at 3 Gateway Center -- 13th Floor, Newark, New Jersey 07102 (hereinafter
"Landlord") and JUDGE, INC., a Pennsylvania corporation, having its principal
office at Two Bala Plaza, Bala Cynwyd, Pennsylvania 19004 (hereinafter
"Tenant").
WITNESSETH
WHEREAS:
A. Landlord and Tenant entered into a written lease dated January 21,
1994 (hereinafter "Lease"), covering approximately 12,493 rentable square feet
of space on the 8th Floor (hereinafter "Premises"), in Landlord's building known
as Two Bala Plaza (hereinafter "Building"), in Bala Cynwyd, Pennsylvania.
B. The Lease was amended pursuant to:
(i) First Amendment of Lease, dated as of September
7, 1994, which added approximately 765 rentable
square feet to the Premises;
(ii) Second Amendment of Lease, dated as of November 7,
1994, which confirmed the commencement and
expiration dates of the Lease and the total
<PAGE>
annual Base Rent schedule for the entire term;
and
(iii) Third Amendment of Lease, dated as of May 2,
1995, which confirmed March 27, 1995 (instead of
March 1, 1995) as the commencement date of the
additional space under the First Amendment.
C. Landlord and Tenant desire to further amend the Lease to add to the
Premises that portion of the 4th Floor of the Building, shown outlined and
hatched in black on the Floor plan annexed hereto as Exhibit A and containing
approximately 9,635 rentable square feet (hereinafter "Additional Space").
NOW, THEREFORE, in consideration of the following mutual terms and
conditions, the Lease is hereby amended as follows:
FIRST: Effective October 1, 1995 and for the balance of the term of
this Lease to June 30, 2000:
(i) the Premises shall be enlarged to include the
Additional Space;
(ii) rentable square footage of the Premises shall be
increased by 9,635 rentable square feet from
13,258 rentable square feet to 22,893 rentable
square feet; and
(iii) "Tenant's Percentage" under Article 5. (OPERATION
AND MAINTENANCE COSTS AND REAL ESTATE TAXES
ADDITIONAL RENT) of the Lease shall be increased
by 3.7324% from 5.1358% to 8.8682%.
-2-
<PAGE>
SECOND: From October 1, 1995 to June 30, 2000, the annual Base Rent
shall be:
For Additional Space only:
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
10/01/95-06/30/97 $202,335.00 $16,861.25 $21.00
07/01/97-06/30/00 $211,970.00 $17,664.17 $22.00
</TABLE>
Total Annual Base Rent for Premises, including Additional Space:
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
10/01/95-06/30/97 $480,753.00 $40,062.75 $21.00
07/01/97-06/30/00 $503,646.00 $41,970.50 $22.00
</TABLE>
THIRD: At Landlord's expense up to a maximum of $162,638.80, Landlord
agrees to construct the Additional Space in Landlord's Building Standard manner
and in accordance with Tenant's interior design drawings and Final Plans and
Specifications, which shall be prepared by Landlord's space planner, Space
Design, Inc., at Landlord's expense (as part of Landlord's $162,638.80
allowance). Landlord's contribution of up to a maximum of $162,638.80 shall
cover design fees, construction costs and fees (including the construction
management fee of 1 1/4% payable to Premises Real Estate Services, Inc.,
Landlord's on-site property manager), labor and materials, construction permits,
and reasonable overhead. In the event the cost of the design and construction of
the Additional Space exceeds $162,638.80, then Tenant shall pay Landlord the
entire amount of
-3-
<PAGE>
the excess, in lump sum, within thirty (30) days after Landlord's billing
therefor.
FOURTH: Upon execution and delivery of this Fourth Amendment of Lease
by Tenant, Tenant shall pay Landlord the sum of $33,722.50 which Landlord shall
hold as additional Security Deposit under paragraph 4(d) of the Lease for a
total Security Deposit of $55,585.25.
FIFTH: Landlord hereby grants Tenant the Right of First Offer to lease
the contiguous space of 1,708 rentable square feet on the Fourth Floor of the
Building, presently vacant and shown outlined on the floor plan annexed hereto
as Exhibit A ("First Offer Space"), upon the following terms and conditions:
(a) Landlord will give Tenant written notice when Landlord is
about to begin negotiations to lease all or a portion of the
First Offer Space to a third party and Tenant shall have ten
(10) days after receipt of such notice to notify Landlord of
its exercise of the Right hereunder;
(b) At the time Tenant notifies Landlord of its exercise of the
Right, Tenant shall not be in default under any of the
provisions of the Lease beyond any applicable cure period;
(c) Base Rent for the First Offer Space shall be at the
Fair Market rent for comparable space in the Building
as of the date of Tenant's exercise of its Right of
First Offer, which Fair Market rent shall in no event
be less than the annual Base Rent plus total accrued
additional rent per square foot under Article 5 on
account of increases in Operation and Maintenance Costs
and Real Estate Taxes payable by Tenant with respect to
the Premises;
(d) Tenant's Percentage under Article 5 above shall be
increased by .6616%;
-4-
<PAGE>
(e) The effective date of the addition of the First Offer Space to
the Premises shall be the 31st day after Tenant's receipt of
Landlord's notice under (a) above;
(f) Tenant agrees to accept the First Offer Space in "as
is" condition, in the physical state and condition
thereof on the effective date under (e) above;
(g) Except for the provisions of paragraphs (c), (d), and (f)
above, Tenant's lease of the First Offer Space shall be upon
the same terms and conditions contained in the Lease; and
(h) Upon Tenant's failure to exercise its Right of First Offer
with respect to the First Offer Space, or any part thereof
from time to time, within the time period provided under (a)
above, Landlord shall have the right to pursue its
negotiations for a lease of the First Offer Space, or part
thereof, as the case may be, with the third party.
SIXTH: Except for the provisions of this Fourth Amendment of Lease, all
the terms, covenants and conditions contained in the Lease, as previously
amended, shall remain in full force and effect.
IN WITNESS WHEREOF, this Fourth Amendment of Lease shall be executed as
of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: /s/ Leigh Rae
--------------------------
Leigh Rae, Vice President
ATTEST: JUDGE, INC.
By: /s/ Katharine Wiercinski By: /s/ Martin E. Judge
------------------------ ---------------------------
Secretary Martin E. Judge, President
-5-
<PAGE>
FIFTH AMENDMENT OF LEASE
AGREEMENT, made as of the 4th day of March, 1996, between THE
PRUDENTIAL INSURANCE COMPANY OF AMERICA, a New Jersey corporation having an
office at 3 Gateway Center -- 13th Floor, Newark, New Jersey 07102 (hereinafter
"Landlord") and JUDGE, INC., a Pennsylvania corporation, having its principal
office at Two Bala Plaza, Bala Cynwyd, Pennsylvania 19004 (hereinafter
"Tenant").
W I T N E S S E T H
WHEREAS:
A. Landlord and Tenant entered into a written lease dated January 21,
1994 (hereinafter "Lease"), covering approximately 12,493 rentable square feet
of space on the 8th Floor (hereinafter "Premises"), in Landlord's building known
as Two Bala Plaza (hereinafter "Building"), in Bala Cynwyd, Pennsylvania.
B. The Lease was amended pursuant to:
(i) First Amendment of Lease, dated as of September 7,
1994, which added approximately 765 rentable
square feet to the Premises;
(ii) Second Amendment of Lease, dated as of November 7,
1994, which confirmed the commencement and
expiration dates of the Lease and the total annual
Base Rent schedule for the entire term;
<PAGE>
(iii) Third Amendment of Lease, dated as of May 2, 1995,
which confirmed March 27, 1995 (instead of March 1,
1995) as the commencement date of the
additional space under the First Amendment; and
(iv) Fourth Amendment of Lease, dated as of July 31,
1995, which added 9,635 rentable square feet on
the 4th Floor of the Building to the Premises.
C. Landlord and Tenant desire to further amend the Lease to add to the
Premises that portion of the 4th Floor of the Building, shown outlined and
hatched in black on the Floor plan annexed hereto as Exhibit A and containing
approximately 1,708 rentable square feet (hereinafter "Additional Space").
NOW, THEREFORE, in consideration of the following mutual terms and
conditions, the Lease is hereby further amended as follows:
FIRST: Effective July 1, 1996 and for the balance of the term of this
Lease to June 30, 2000:
(i) the Premises shall be enlarged to include the
Additional Space;
(ii) rentable square footage of the Premises shall be
increased by 1,708 rentable square feet from
22,893 rentable square feet to 24,601 rentable
square feet; and
-2-
<PAGE>
(iii) "Tenant's Percentage" under Article 5. (OPERATION
AND MAINTENANCE COSTS AND REAL ESTATE TAXES
ADDITIONAL RENT) of the Lease shall be increased
by .6616% from 8.8682% to 9.5298%.
SECOND: From July 1, 1996 to June 30, 2000, the annual Base Rent
shall be:
For Additional Space only:
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
07/01/96-06/30/98 $40,992.00 $3,416.00 $24.00
07/01/98-06/30/00 $42,700.00 $3,558.33 $25.00
</TABLE>
Total Annual Base Rent for Premises, including Additional Space:
<TABLE>
<CAPTION>
ANNUAL MONTHLY BASE RENT
PERIOD BASE RENT BASE RENT RATE PSF
------ --------- --------- --------
<S> <C> <C> <C>
07/01/96-06/30/97 $521,745.00 $43,478.75 $21.21
07/01/97-06/30/98 $544,638.00 $45,386.50 $22.14
07/01/98-06/30/00 $546,346.00 $45,528.83 $22.21
</TABLE>
THIRD: At Landlord's expense up to a maximum of $29,036.00, Landlord
agrees to construct the Additional Space in Landlord's Building Standard manner
and in accordance with Tenant's interior design drawings and Final Plans and
Specifications, which shall be prepared by Landlord's space planner, Space
Design, Inc., at Landlord's expense (as part of Landlord's $29,036.00
allowance). Landlord's contribution of up to a maximum of $29,036.00 shall cover
design fees, construction costs and fees (including the construction management
fee of 1 1/4% payable to Premises Real Estate Services, Inc., Landlord's on-site
property manager),
-3-
<PAGE>
labor and materials, construction permits, and reasonable overhead. In the event
the cost of the design and construction of the Additional Space exceeds
$29,036.00, then Tenant shall pay Landlord the entire amount of the excess, in
lump sum, within thirty (30) days after Landlord's billing therefor.
FOURTH: Upon execution and delivery of this Fourth Amendment of Lease
by Tenant, Tenant shall pay Landlord the sum of $3,416.00 which Landlord shall
hold as additional Security Deposit under paragraph 4(d) of the Lease for a
total Security Deposit of $59,001.25.
FIFTH: Landlord and Tenant agree that the provisions of this Fifth
Amendment of Lease cover Tenant's exercise of the Right of First Offer under
Article FIFTH of the Fourth Amendment of Lease. Therefore, Article FIFTH of the
Fourth Amendment of Lease shall be deleted from the Fourth Amendment of Lease
and shall be of no further force and effect.
SIXTH: Tenant represents and warrants that Tenant has dealt directly
and only with Premisys Real Estate Services, as broker, in connection with this
Fifth Amendment of Lease and no other broker. Tenant hereby agrees to indemnify,
defend and hold Landlord harmless from and against any claims, lawsuits, damages
and costs, including attorneys' fees, incurred by Landlord by reason of the
falsity or error of Tenant's foregoing warranty.
-4-
<PAGE>
SEVENTH: Except for the provisions of this Fifth Amendment of Lease,
all the terms, covenants and conditions contained in the Lease, as previously
amended, shall remain in full force and effect.
IN WITNESS WHEREOF, this Fifth Amendment of Lease shall be executed as
of the day and year first above written.
THE PRUDENTIAL INSURANCE COMPANY
OF AMERICA
By: Premisys Real Estate Services,
Inc., as Agent
By: /s/ Barbara L. Yamarick
-----------------------------------
Barbara L. Yamarick, Vice President
ATTEST: JUDGE, INC.
By: /s/ Katharine Wiercinski By: /s/ Martin E. Judge
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Secretary Martin E. Judge, President
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EXHIBIT 10.4
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION
AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
DRAFTED BY
DRINKER BIDDLE & REATH
PHILADELPHIA NATIONAL BANK BUILDING
1345 CHESTNUT STREET
PHILADELPHIA, PA 19107-3496
SEPTEMBER 1996
(C) DRINKER BIDDLE & REATH 1996
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TABLE OF CONTENTS
Page
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SECTION 1 - Purpose and Definitions........................................ 1
SECTION 2 - Administration................................................. 2
SECTION 3 - Eligibility.................................................... 4
SECTION 4 - Stock.......................................................... 4
SECTION 5 - Granting of Options............................................ 5
SECTION 6 - Annual Limit................................................... 5
SECTION 7 - Options for Non-Employee Directors............................. 5
SECTION 8 - Terms and Conditions of Options................................ 9
SECTION 9 - Option Agreements - Other Provisions........................... 15
SECTION 10 - Capital Adjustments........................................... 16
SECTION 11 - Amendment or Discontinuance of the Plan....................... 17
SECTION 12 - Termination of Plan........................................... 18
SECTION 13 - Shareholder Approval.......................................... 18
SECTION 14 - Miscellaneous................................................. 19
<PAGE>
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
SECTION 1 - Purpose and Definitions
(a) Purpose. This, THE JUDGE GROUP, INC. 1996 INCENTIVE STOCK OPTION
AND NON-QUALIFIED STOCK OPTION PLAN ("Plan"), is intended to provide a means
whereby THE JUDGE GROUP, INC. ("Company") may, through the grant of incentive
stock options and non-qualified stock options (collectively, "Options") to
purchase common stock of the Company ("Common Stock") to officers and other key
employees ("Key Employees"), attract and retain such Key Employees and motivate
such Key Employees to exercise their best efforts on behalf of the Company and
of any related corporation ("Related Corporation"). Moreover, the Company may,
through the grant of non-qualified stock options to non-employee directors
("Non-Employee Directors") under a formula, attract and retain Non-employee
Directors and motivate such Non-Employee Directors to exercise their best
efforts on behalf of the Company and any Related Corporation.
(b) Definitions.
(1) Related Corporation. The term "Related Corporation" shall mean
either a corporate subsidiary of the Company, as defined in section
424(f) of the Internal Revenue Code of 1986, as amended ("Code"), or
the corporate parent of the Company, as defined in section 424(e) of
the Code.
(2) Incentive Stock Option. The term "Incentive Stock Option"
("ISO") shall mean an option which, at the time such option is granted
under the Plan, qualifies as an ISO within the meaning of section 422
of the Code and is designated as an ISO in the Option Agreement (as
hereinafter defined).
(C) Drinker Biddle & Reath 1996
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(3) Non-Qualified Stock Option. The term "Non-Qualified Stock
Option" ("NQSO") shall mean an option which, at the time such option is
granted, does not qualify as an ISO, and is designated as an NQSO in
the Option Agreement.
(4) Non-Employee Director. The term "Non-Employee Director" shall
mean a director who:
(A) Is not currently an officer (as defined in 17 CFR
240.16a-1(f)) of, or otherwise currently employed by, the Company
or a parent or subsidiary of the Company within the meaning of 17
CFR 240.16b-3(b)(3),
(B) Does not receive compensation, either directly or
indirectly, from the Company or a parent or subsidiary of the
Company within the meaning of 17 CFR 240.16b-3(b)(3) for services
rendered as a consultant or in any other capacity other than as a
director, except for an amount that does not exceed the dollar
amount for which disclosure would be required under 17 CFR
229.404(a),
(C) Does not possess an interest in any other transaction for
which disclosure would be required pursuant to 17 CFR 229.404(a),
and
(D) Is not engaged in a business relationship for which
disclosure would be required pursuant to 17 CFR 229.404(b).
Notwithstanding Sections 1(b)(2) and (3) if the option is not
designated in the Option Agreement as an ISO or NQSO, the option shall
constitute an ISO if it complies with the terms of section 422 of the
Code, and otherwise, it shall constitute an NQSO.
SECTION 2 - Administration
(a) General. The Plan shall be administered by the Company's Stock
Option Committee ("Committee"), which shall consist of not less than two (2)
directors of the Company who shall be appointed by, and shall serve at the
pleasure of, the Company's Board of Directors ("Board"). Each member of such
Committee, while serving as such, shall be deemed to be acting in his or her
capacity as a director of the Company.
The Committee shall have full authority, subject to the terms of the
Plan, to select the Key Employees to be granted ISOs and/or NQSOs under the
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Plan, to grant Options on behalf of the Company and to set the date of grant and
the other terms of such Options. The Committee may correct any defect, supply
any omission and reconcile any inconsistency in this Plan and in any Option
granted hereunder in the manner and to the extent it shall deem desirable. The
Committee also shall have the authority to establish such rules and regulations,
not inconsistent with the provisions of the Plan, for the proper administration
of the Plan, and to amend, modify or rescind any such rules and regulations, and
to make such determinations and interpretations under, or in connection with,
the Plan, as it deems necessary or advisable. All such rules, regulations,
determinations and interpretations shall be binding and conclusive upon the
Company, its shareholders and all employees, and upon their respective legal
representatives, beneficiaries, successors and assigns and upon all other
persons claiming under or through any of them. Notwithstanding the foregoing, if
the Committee does not consist solely of two (2) or more Non-Employee Directors,
each Option granted (other than grants to Non-Employee Directors under Article
7) must be approved by the full Board.
(b) Outside Director Requirement. In the event the Company becomes a
publicly held corporation, the Committee shall consist of two or more members
each of whom shall be an "outside director" within the meaning of Treas. Reg.
ss. 1.162-27(e)(3) or any successor thereto no later than the earliest of the
following dates:
(1) The expiration date of the Plan;
(2) The material modification of the Plan within the meaning of
Treas. Reg. ss. 1.162-27(h)(1)(iii);
(3) The issuance of all employer stock and compensation that has
been allocated under the Plan; or
(4) The first meeting of shareholders of the Company at which
directors are to be elected that occurs after the close of the third
calendar year following the calendar year in which the initial public
offering occurs, or, in the case of a privately held corporation that
becomes publicly held without an initial public offering, the first
calendar year following the calendar year in which the Company becomes
publicly held.
Notwithstanding the foregoing provisions of this Section 2(b), the
delayed effective date for the requirement that the Committee consist solely of
two or more outside directors shall not apply if the prospectus accompanying the
initial public offering does not disclose information concerning the Plan that
satisfied all applicable securities laws then in effect. Moreover, the delayed
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effective date does not apply if the Company is a member of an affiliated
service group that includes a publicly held corporation.
(c) Formula Plan for Non-Employee Directors. Notwithstanding the
foregoing, the terms and conditions of grants of NQSOs to Non-Employee Directors
are intended to be fixed in advance. Consequently, the grants of NQSOs to
Non-Employee Directors shall be as set forth in Article 7 and neither the
Committee nor the Board shall have any discretionary authority with respect
thereto.
(d) Liability of Board or Committee. No member of the Board or the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option granted under it.
SECTION 3 - Eligibility
The class of employees who shall be eligible to receive Options under
the Plan shall be the Key Employees (including any directors who also are
officers or are other key employees of the Company and/or of a Related
Corporation). More than one Option may be granted to a Key Employee under the
Plan. Non-Employee Directors shall be eligible to receive NQSOs (but not ISOs)
pursuant to Section 7.
SECTION 4 - Stock
Options may be granted under the Plan to purchase up to a maximum of
one million five hundred thousand (1,500,000) shares of the Company's Common
Stock, par value $.01 per share, subject to adjustment as hereinafter provided,
provided, however, that no Key Employee shall receive Options for more than
50,000 shares of the Company's Common Stock over any one (1) year period. Shares
issuable under the Plan may be authorized but unissued shares or reacquired
shares, and the Company may purchase shares required for this purpose, from time
to time, if it deems such purchase to be advisable.
If any Option granted under the Plan expires or otherwise terminates
for any reason whatever (including, without limitation, the Key Employee's or
Non-Employee Director's surrender thereof) without having been exercised, the
shares subject to the unexercised portion of such Option shall continue to be
available for the granting of Options under the Plan as fully as if such shares
had never been subject to an Option, provided, however, that:
(a) If an Option is cancelled, the cancelled Option is counted against
the maximum number of shares for which Options may be granted to a Key Employee,
and
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(b) If the Option price is reduced after the date of grant, the
transaction is treated as a cancellation of an Option and the grant of a new
Option for purposes of counting the maximum number of shares for which Options
may be granted to a Key Employee.
SECTION 5 - Granting of Options
From time to time until the expiration or earlier suspension or
discontinuance of the Plan, the Committee may, on behalf of the Company, grant
to Key Employees under the Plan such Options as it determines are warranted;
provided, however, that grants of ISOs and NQSOs shall be separate and not in
tandem. The granting of an Option under the Plan shall not be deemed either to
entitle the Key Employee to, or to disqualify the Key Employee from, any
participation in any other grant of Options under the Plan. In making any
determination as to whether a Key Employee shall be granted an Option and as to
the number of shares to be covered by such Option, the Committee shall take into
account the duties of the Key Employee, his or her present and potential
contributions to the success of the Company or a Related Corporation, and such
other factors as the Committee shall deem relevant in accomplishing the purposes
of the Plan. Moreover, the Committee may provide in the Option that said Option
may be exercised only if certain conditions, as determined by the Committee, are
fulfilled.
SECTION 6 - Annual Limit
(a) ISOs. The aggregate fair market value (determined as of the date
the ISO is granted) of the Common Stock with respect to which ISOs are
exercisable for the first time by a Key Employee during any calendar year (under
this Plan and any other ISO plan of the Company or a Related Corporation) shall
not exceed one hundred thousand dollars ($100,000).
(b) NQSOs. The annual limit set forth above for ISOs shall not apply to
NQSOs.
SECTION 7 - Options for Non-Employee Directors
(a) Granting of Options to Non-Employee Directors. Effective with the
date of the Company's "Initial Public Offering" ("IPO") and with each annual
shareholders' meeting of the Company following the IPO at which directors of the
Company are elected, each elected or re-elected Non-Employee Director shall be
granted an NQSO to purchase 2,500 Common Shares. In each case described above,
the NQSO shall be granted as of the first business day immediately following the
Non-Employee Director's election or subsequent re-election(s) to the Board, as
applicable, with the first such grant date occurring on the date of the IPO.
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(b) Terms and Conditions of Options. Options granted to Non-Employee
Directors shall expressly specify that they are NQSOs. In addition, such Options
shall include expressly or by reference the following terms and conditions, as
well as such other provisions not inconsistent with the provisions of the Plan:
(1) Number of Shares. A statement of the number of Common Shares to
which the Option pertains.
(2) Price. A statement of the Option exercise price, which shall be
100% of the Fair Market Value of the optioned Common Shares on the date
the Option is granted.
(3) Term. Subject to earlier termination as provided in Section
7(B)(5), (6) and (7) below, the term of each Option granted under this
Section 7 shall be 10 years from the date of grant.
(4) Exercise. Options granted under this Section 7 shall be
exercisable in three equal annual installments commencing with the
first anniversary of the grant date, but only if the Non-Employee
Director has attended at least seventy-five (75) percent of the Board
meetings during the twelve (12) month period immediately preceding the
date the annual installment first becomes exercisable. In the event the
Non-Employee Director fails to attend at least seventy-five (75)
percent of the Board meetings during the twelve (12) month period
immediately preceding the date the annual installment first becomes
exercisable, the Options otherwise exercisable in that installment
shall not be exercisable but shall be cancelled and shall be available
for other grants under the Plan. Notwithstanding the foregoing, the
first annual installment of Options granted on the date of the IPO
shall be exercisable as of the later of 12 months from the date of
grant or 6 months after the date the Plan is approved by the
shareholders of the Company in accordance with Section 13. Any Common
Shares the right to the purchase of which accrued under an Option may
be purchased at any time up to the expiration or termination of the
option. Exercisable Options may be exercised, in whole or in part, from
time to time by giving written notice of exercise to the Company at its
principal office, specifying the number of Common Shares to be
purchased and accompanied by payment in full of the aggregate option
exercise price for such shares. Only full shares shall be issued under
the Plan, and any fractional share which might otherwise be issuable
upon the exercise of an Option granted hereunder shall be forfeited.
The Option price shall be payable:
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(A) In cash or its equivalent; or
(B) Unless in the opinion of counsel to the Company to do so
may result in a possible violation of law, in whole or in part
through the transfer of Common Shares previously acquired by the
Non-Employee Director, provided the Common Shares so transferred
have been held by the Non-Employee Director for more than 12 months
on the date of exercise.
In the event such Option exercise price is paid, in whole or in
part, with Common Shares, the portion of the Option exercise price so
paid shall equal the Fair Market Value on the date of exercise of the
Option of the Common shares surrendered in payment of such Option
exercise price.
(5) Expiration of Term or Removal as Director. If a Non-Employee
Director's service as a director of the Company terminates prior to the
expiration date fixed for his or her Option under this Section 7 for
any reason (such as, without limitation, failure to be re-elected by
the Company's shareholders) other than by disability or death, such
Option may be exercised, to the extent of the number of Common Shares
with respect to which he or she could have exercised it on the date of
such termination, by the Non-Employee Director at any time prior to the
earlier of:
(A) The expiration date specified in such Option; or
(B) Three months after the date of such termination of service
as a director.
(6) Exercise upon Disability of Non-Employee Director. If a
Non-Employee Director shall become disabled (within the meaning of
section 22(e)(3) of the Code) during his or her term as a director of
the Company and, prior to the expiration date fixed for his or her
Option, his or her term as a director is terminated as a consequence of
such disability, such Option may be exercised, to the extent of the
number of Common Shares with respect to which the Non-Employee Director
could have exercised it on the date of such termination, by the
Non-Employee Director at any time prior to the earlier of:
(A) The expiration date of such Option; or
(B) One year after the date of such termination of service as a
director.
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In the event of the Non-Employee Director's legal disability, such
Option may be so exercised by his or her legal representative.
(7) Exercise upon Death of Non-Employee Director.
If a Non-Employee Director shall die during his or her term as a
director of the Company and prior to the expiration date fixed for his
or her Option, or if a Non-Employee Director whose term as a director
has been terminated for any reason shall die following his or her
termination as a director, but prior to the earlier of:
(A) The expiration date fixed for his or her Option; or
(B) The expiration of the period determined under Section
7(b)(5) and (6) above;
such Option may be exercised, to the extent of the number of shares
with respect to which the Non-Employee Director could have exercised it
on the date of his or her death, by the Non-Employee Director's estate,
personal representative or beneficiary who acquired the right to
exercise such Option by bequest or inheritance or by reason of the
death of the Non-Employee Director, at any time prior to the
earlier of:
(i) The expiration date specified in such Option (which may be
the expiration date determined under Section 7(b)(5) and (6)
above); or
(ii) One year after the date of death.
(8) Rights as a Shareholder. A Non-Employee Director shall have no
rights as a shareholder with respect to any shares covered by his or
her Option until the issuance of a stock certificate to him or her for
such shares.
(c) Option Agreements. Options granted under this Section 7 shall be
evidenced by Option Agreements which shall contain such provisions, not
inconsistent with the provisions of the Plan, as the Committee shall deem
advisable. Each Non-Employee Director shall enter into, and be bound by, the
terms of the Option Agreement.
(d) Listing and Registration of Shares. Each Option shall be subject to
the requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
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desirable as a condition of, or in connection with, the granting of such Option
or the purchase of shares thereunder, or that action by the Company or by the
Non-Employee Director should be taken in order to obtain an exemption from any
such requirement, no such Option may be exercised, in whole or in part, unless
and until such listing, registration, qualification, consent, approval, or
action shall have been effected, obtained, or taken under conditions acceptable
to the Committee. Without limiting the generality of the foregoing, each
Non-Employee Director or his or her legal representative or beneficiary may also
be required to give satisfactory assurance that shares purchased upon exercise
of an Option are being purchased for investment and not with a view to
distribution, and certificates representing such shares may be legended
accordingly.
SECTION 8 - Terms and Conditions of Options
The Options granted pursuant to the Plan shall expressly specify
whether they are ISOs or NQSOs; however, if the Option is not designated in the
Option Agreement as an ISO or NQSO, the Option shall constitute an ISO if it
complies with the terms of section 422 of the Code, and otherwise, it shall
constitute an NQSO. In addition, the Options granted pursuant to the Plan shall
include expressly or by reference the following terms and conditions, as well as
such other provisions not inconsistent with the provisions of this Plan and, for
ISOs granted under this Plan, the provisions of section 422(b) of the Code, as
the Committee shall deem desirable:
(a) Number of Shares. A statement of the number of shares to which the
Option pertains.
(b) Price. A statement of the Option price which shall be determined
and fixed by the Committee in its discretion but, in the case of an ISO, shall
not be less than the higher of one hundred percent (100%) (one hundred ten
percent (110%) in the case of more than ten percent (10%) shareholders as
discussed in (j) below) of the fair market value of the optioned shares of
Common Stock, or the par value thereof, on the date the ISO is granted and, in
the case of an NQSO, shall not be less than the higher of one hundred percent
(100%) of the fair market value of the optioned shares of Common Stock, or the
par value thereof, on the date the NQSO is granted.
The fair market value of the optioned shares of Common Stock shall be
arrived at by a good faith determination of the Committee and shall be:
(1) The mean between the highest and lowest quoted selling price,
if there is a market for the Common Stock on a registered securities
exchange or in an over the counter market, on the date of grant;
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(2) The weighted average of the means between the highest and
lowest sales on the nearest date before and the nearest date after the
date of grant, if there are no sales on the date of grant but there are
sales on dates within a reasonable period both before and after the
date of grant;
(3) The mean between the bid and asked prices, as reported by the
National Quotation Bureau on the date of grant, if actual sales are not
available during a reasonable period beginning before and ending after
the date of grant; or
(4) Such other method of determining fair market value as shall be
authorized by the Code, or the rules or regulations thereunder, and
adopted by the Committee. Where the fair market value of the optioned
shares of Common Stock is determined under (2) above, the average of
the means between the highest and lowest sales on the nearest date
before and the nearest date after the date of grant is to be weighted
inversely by the respective numbers of trading days between the selling
dates and the date of grant (i.e., the valuation date), in accordance
with Treas. Reg. ss. 20.2031-2(b)(1).
(c) Term.
(1) ISOs. Subject to earlier termination as provided in Subsections
(e), (f) and (g) below and in Section 10 hereof, the term of each ISO
shall be not more than ten (10) years (five (5) years in the case of
more than ten percent (10%) shareholders as discussed in (j) below)
from the date of grant.
(2) NQSOs. Subject to earlier termination as provided in
Subsections (e), (f) and (g) below and in Section 10 hereof, the term
of each NQSO shall be not more than ten (10) years from the date of
grant.
(d) Exercise.
(1) General. Options shall be exercisable in such installments and
on such dates, not less than six (6) months from the date of grant, as
the Committee may specify, provided that:
(A) In the case of new Options granted to a Key Employee in
replacement for options (whether granted under the Plan or
otherwise) held by the Key Employee, the new Options may be made
exercisable, if so determined by the Committee, in its discretion,
at the earliest date the replaced options were
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exercisable, but not earlier than six (6) months from the date of
grant of the new Options; and
(B) The Committee may accelerate the exercise date of any
outstanding Options (including, without limitation, the six (6)
month exercise date referred to in (A) above), in its discretion,
if it deems such acceleration to be desirable.
Any Option shares, the right to the purchase of which has accrued,
may be purchased at any time up to the expiration or termination of the
Option. Exercisable Options may be exercised, in whole or in part, from
time to time by giving written notice of exercise to the Company at its
principal office, specifying the number of shares to be purchased and
accompanied by payment in full of the aggregate Option price for such
shares. Only full shares shall be issued under the Plan, and any
fractional share which might otherwise be issuable upon exercise of an
Option granted hereunder shall be forfeited.
(2) Manner of Payment. The Option price shall be payable:
(A) In cash or its equivalent;
(B) If the Committee, in its discretion, so provides in the
Option Agreement (as hereinafter defined) or, in the case of
Options which are not ISOs, if the Committee, in its discretion, so
determines at or prior to the time of exercise, in whole or in
part, in Company Common Stock previously acquired by the Key
Employee, provided that if such shares of Common Stock were
acquired through the exercise of an ISO and are used to pay the
Option price of an ISO, such shares have been held by the Key
Employee for a period of not less than the holding period described
in section 422(a)(1) of the Code on the date of exercise, or if
such shares of Common Stock were acquired through exercise of an
NQSO or of an option under a similar plan or through exercise of an
ISO and are used to pay the Option price of an NQSO, such shares
have been held by the Key Employee for a period of more than six
months on the date of exercise;
(C) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs, if
the Committee, in its discretion, so determines at or prior to the
time of exercise, in whole or in part, in Company Common Stock
newly acquired by the Optionee upon exercise of such Option
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(which shall constitute a disqualifying disposition in the case of
an Option which is an ISO);
(D) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs, if
the Committee, in its discretion, so determines at or prior to the
time of exercise, in any combination of (A), (B) and (C) above; or
(E) If the Committee, in its discretion, so provides in the
Option Agreement or, in the case of Options which are not ISOs, if
the Committee, in its discretion, so determines at or prior to the
time of exercise, by permitting the Key Employee to deliver a
properly executed notice of exercise of the Option to the Company
and a broker, with irrevocable instructions to the broker promptly
to deliver to the Company the amount of sale or loan proceeds
necessary to pay the exercise price of the Option.
In the event such Option price is paid, in whole or in part, with
shares of Common Stock, the portion of the Option price so paid shall
be equal to the "fair market value" on the date of exercise of the
Option, as such "fair market value" is determined in Subsection (b),
above, of the Common Stock surrendered in payment of such Option price.
(e) Termination of Employment. If a Key Employee's employment by the
Company (and Related Corporations) is terminated by either party prior to the
expiration date fixed for his or her Option for any reason other than death or
disability, such Option may be exercised, to the extent of the number of shares
with respect to which the Key Employee could have exercised it on the date of
such termination, or to any greater extent permitted by the Committee, by the
Key Employee at any time prior to the earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the Committee, in
its discretion, except that, subject to Section 10 hereof, such
accelerated termination date shall not be earlier than the date of the
Key Employee's termination of employment, and in the case of ISOs, such
termination date shall not be later than three (3) months after the
date of such termination of employment.
(f) Exercise upon Disability of Key Employee. If a Key Employee shall
become disabled (within the meaning of section 22(e)(3) of the Code) during his
or her employment and, prior to the expiration date fixed for his or her Option,
his or her employment is terminated as a consequence of such
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disability, such Option may be exercised, to the extent of the number of shares
with respect to which the Key Employee could have exercised it on the date of
such termination, or to any greater extent permitted by the Committee, by the
Key Employee at any time prior to the earlier of:
(1) The expiration date specified in such Option; or
(2) An accelerated termination date determined by the Committee, in
its discretion, except that, subject to Section 10 hereof, such
accelerated termination date shall not be earlier than the date of the
Key Employee's termination of employment by reason of disability, and
in the case of ISOs, such date shall not be later than one (1) year
after the date of such termination of employment. In the event of the
Key Employee's legal disability, such Option may be so exercised by the
Key Employee's legal representative.
(g) Exercise upon Death of Key Employee. If a Key Employee shall die
during his or her employment, and prior to the expiration date fixed for his or
her Option, or if a Key Employee whose employment is terminated for any reason,
shall die following his or her termination of employment but prior to the
earliest of:
(1) The expiration date fixed for his or her Option;
(2) The expiration of the period determined under Subsections (e)
and (f) above; or
(3) In the case of an ISO, three (3) months following termination
of employment, such Option may be exercised, to the extent of the
number of shares with respect to which the Key Employee could have
exercised it on the date of his or her death, or to any greater extent
permitted by the Committee, by the Key Employee's estate, personal
representative or beneficiary who acquired the right to exercise such
Option by bequest or inheritance or by reason of the death of the Key
Employee, at any time prior to the earlier of:
(A) The expiration date specified in such Option; or
(B) An accelerated termination date determined by the
Committee, in its discretion except that, subject to Section 10
hereof, such accelerated termination date shall not be earlier than
one (1) year, nor later than three (3) years after the date of
death.
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(h) Non-Transferability.
(1) ISOs. No ISO shall be assignable or transferable by the Key
Employee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Key Employee, the ISO
shall be exercisable only by him or by his or her guardian or legal
representative. If the Key Employee is married at the time of exercise
and if the Key Employee so requests at the time of exercise, the
certificate or certificates shall be registered in the name of the Key
Employee and the Key Employee's spouse, jointly, with right of
survivorship.
(2) NQSOs. Except as otherwise provided in any Option Agreement (as
defined in Section 9), no NQSO shall be assignable or transferable by
the Key Employee otherwise than by will or by the laws of descent and
distribution, and during the lifetime of the Key Employee, the NQSO
shall be exercisable only by him or by his or her guardian or legal
representative. If the Key Employee is married at the time of exercise
and if the Key Employee so requests at the time of exercise, the
certificate or certificates shall be registered in the name of the Key
Employee and the Key Employee's spouse, jointly, with right of
survivorship.
(i) Rights as a Shareholder. A Key Employee shall have no rights as a
shareholder with respect to any shares covered by his or her Option until the
issuance of a stock certificate to him or her for such shares.
(j) Ten Percent Shareholder. If the Key Employee owns more than ten
percent (10%) of the total combined voting power of all shares of stock of the
Company or of a Related Corporation at the time an ISO is granted to such Key
Employee, the Option price for the ISO shall be not less than one hundred ten
percent (110%) of the fair market value of the optioned shares of Common Stock
on the date the ISO is granted, and such ISO, by its terms, shall not be
exercisable after the expiration of five (5) years from the date the ISO is
granted. The conditions set forth in this Subsection (j) shall not apply to
NQSOs.
(k) Listing and Registration of Shares. Each Option shall be subject to
the requirement that, if at any time the Committee shall determine, in its
discretion, that the listing, registration or qualification of the shares
covered thereby upon any securities exchange or under any state or federal law,
or the consent or approval of any governmental regulatory body, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the purchase of shares thereunder, or that action by the Company or by the
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<PAGE>
Key Employee should be taken in order to obtain an exemption from any such
requirement, no such Option may be exercised, in whole or in part, unless and
until such listing, registration, qualification, consent, approval, or action
shall have been effected, obtained, or taken under conditions acceptable to the
Committee. Without limiting the generality of the foregoing, each Key Employee
or his or her legal representative or beneficiary may also be required to give
satisfactory assurance that shares purchased upon exercise of an Option are
being purchased for investment and not with a view to distribution, and
certificates representing such shares may be legended accordingly.
(l) Withholding and Use of Shares to Satisfy Tax Obligations. The
obligation of the Company to deliver shares of Common Stock upon the exercise of
any Option shall be subject to applicable federal, state and local tax
withholding requirements.
If the exercise of any Option is subject to the withholding
requirements of applicable federal, state and/or local tax laws, the Committee,
in its discretion (and subject to such withholding rules ("Withholding Rules")
as shall be adopted by the Committee), may permit the Key Employee to satisfy
the minimum required federal, state and/or local withholding tax, in whole or in
part, by electing to have the Company withhold (or by returning to the Company)
shares of Common Stock, which shares shall be valued, for this purpose, at their
fair market value on the date of exercise of the Option (or if later, the date
on which the Optionee recognizes ordinary income with respect to such exercise)
(the "Determination Date"). An election to use shares of Common Stock to satisfy
tax withholding requirements must be made in compliance with and subject to the
Withholding Rules. The Committee may not withhold shares in excess of the number
necessary to satisfy the minimum federal income tax withholding requirements. In
the event shares of Common Stock acquired under the exercise of an ISO are used
to satisfy such withholding requirement, such shares of Common Stock must have
been held by the Key Employee for a period of not less than the holding period
described in section 422(a)(1) of the Code on the Determination Date, or if such
shares of Common Stock were acquired through exercise of an NQSO or of an option
under a similar plan, such option was granted to the Key Employee at least six
(6) months prior to the Determination Date.
SECTION 9 - Option Agreements - Other Provisions
Options granted under the Plan shall be evidenced by written documents
("Option Agreements") in such form as the Committee shall, from time to time,
approve, which Option Agreements shall contain such provisions, not inconsistent
with the provisions of the Plan for NQSOs granted pursuant to the Plan, and such
conditions, not inconsistent with section 422(b) of the Code or the provisions
of the
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<PAGE>
Plan for ISOs granted pursuant to the Plan, as the Committee shall deem
advisable, and which Option Agreements shall specify whether the Option is an
ISO or NQSO; provided, however, if the Option is not designated in the Option
Agreement as an ISO or NQSO, the Option shall constitute an ISO if it complies
with the terms of section 422 of the Code, and otherwise, it shall constitute an
NQSO. Each Key Employee shall enter into, and be bound by, such Option
Agreement.
SECTION 10 - Capital Adjustments
The number of shares which may be issued under the Plan, and the
maximum number of shares with respect to which options may be granted during a
specified period to any Key Employee under the Plan, both as stated in Section 4
hereof, the number of shares with respect to which NQSOs are granted to
Non-Employee Directors under Section 7(a), and the number of shares issuable
upon exercise of outstanding Options under the Plan (as well as the Option price
per share under such outstanding Options), shall, subject to the provisions of
section 424(a) of the Code and as permitted under Rule 16b-3, be adjusted, to
reflect any stock dividend, stock split, share combination, or similar change in
the capitalization of the Company.
In the event of a corporate transaction (as that term is described in
section 424(a) of the Code and the Treasury Regulations issued thereunder as,
for example, a merger, consolidation, acquisition of property or stock,
separation, reorganization, or liquidation), each outstanding Option shall be
assumed by the surviving or successor corporation; provided, however, that, in
the event of a proposed corporate transaction, the Committee may terminate all
or a portion of the outstanding Options if it determines that such termination
is in the best interests of the Company. If the Committee decides to terminate
outstanding Options, the Committee shall give each Key Employee holding an
Option to be terminated not less than seven (7) days' notice prior to any such
termination by reason of such a corporate transaction, and any such Option which
is to be so terminated may be exercised (if and only to the extent that it is
then exercisable) up to, and including the date immediately preceding such
termination. Further, as provided in Section 8(d) hereof the Committee, in its
discretion, may accelerate, in whole or in part, the date on which any or all
Options become exercisable.
Notwithstanding the foregoing, in the event of a corporate transaction
(as described above) in which holders of Common Shares are to receive cash,
securities or other property, and provision is not made for the continuance and
assumption of NQSOs granted to Non-Employee Directors, all such outstanding
NQSOs shall terminate as of the last business day immediately preceding the
closing date of such corporate transaction and the Company shall pay to each
Non-Employee Director an amount in cash with respect to each share to which a
terminated NQSO pertains equal
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<PAGE>
to the difference between the Option exercise price and the value of the
consideration to be received by the holders of Common shares in connection with
such transaction.
The Committee also may, in its discretion, change the terms of any
outstanding Option to reflect any such corporate transaction, provided that, in
the case of ISOs, such change is excluded from the definition of a
"modification" under section 424(h) of the Code.
SECTION 11 - Amendment or Discontinuance of the Plan
(a) General. The Board from time to time may suspend or discontinue the
Plan or amend it in any respect whatsoever, except that the following amendments
shall require shareholder approval (given in the manner set forth in Section
11(b) below):
(1) With respect to Options which are ISOs, any amendment which
would:
(A) Change the class of employees eligible to participate in
the Plan;
(B) Except as permitted under Section 10 hereof, increase the
maximum number of shares of Common Stock with respect to which ISOs
may be granted under the Plan; or
(C) Extend the duration of the Plan under Section 12 hereof
with respect to any ISOs granted hereunder; and
(2) With respect to Options, any amendment which would require
shareholder approval pursuant to Treas. Reg. ss. 1.162-27(e)(4)(vi) or
any successor thereto.
Notwithstanding the foregoing, no such suspension, discontinuance or
amendment shall materially impair the rights of any holder of an outstanding
Option without the consent of such holder.
(b) Shareholder Approval Requirements. Shareholder approval must meet
the following requirements:
(1) The approval of shareholders must be by a majority of the
outstanding shares of Common Stock present, or represented, and
entitled to vote at a meeting duly held in accordance with the
applicable laws of the Commonwealth of Pennsylvania; and
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<PAGE>
(2) The approval of shareholders must comply with all applicable
provisions of the corporate charter, bylaws, and applicable state law
prescribing the method and degree of shareholder approval required for
the issuance of corporate stock or options. If the applicable state law
does not prescribe a method and degree of shareholder approval in such
case, the approval of shareholders must be effected:
(A) By a method and in a degree that would be treated as
adequate under applicable state law in the case of an action
requiring shareholder approval (i.e., an action on which
shareholders would be entitled to vote if the action were taken at
a duly held shareholders' meeting); or
(B) By a majority of the votes cast at a duly held
shareholders' meeting at which a quorum representing a majority of
all outstanding voting stock is, either in person or by proxy,
present and voting on the plan.
(3) Amendments Affecting Non-Employee Directors. Notwithstanding
the foregoing, no amendment to any provision of the Plan that would
affect (1) the amount and price of shares subject to Options to be
awarded to Non-Employee Directors, (2) the timing of such awards to
Non-Employee Directors, or (3) the formula, if any, that determines the
amount, price, and timing of Option awards to Non-Employee Directors,
shall be made more than once every six months, other than to comport
with changes in the Code, the Employee Retirement Income Security Act,
or the rules promulgated thereunder.
SECTION 12 - Termination of Plan
Unless earlier terminated as provided in the Plan, the Plan and all
authority granted hereunder shall terminate absolutely at 12:00 midnight on
September 3, 2006, which date is within ten (10) years after the date the Plan
was adopted by the Board (or the date the Plan was approved by the shareholders
of the Company, whichever is earlier), and no Options hereunder shall be granted
thereafter. Nothing contained in this Section 12, however, shall terminate or
affect the continued existence of rights created under Options issued hereunder
and outstanding on September 3, 2006, which by their terms extend beyond such
date.
SECTION 13 - Shareholder Approval
This Plan shall become effective on September 4, 1996 (the date the
Plan was adopted by the Board); provided, however, that if the Plan is not
approved by the shareholders in the manner described in Section 11(b), within
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<PAGE>
twelve (12) months before or after the date adopted by the Board, the Plan and
all Options granted hereunder shall be null and void.
SECTION 14 - Miscellaneous
(a) Governing Law. With respect to any ISOs granted pursuant to the
Plan and the Option Agreements thereunder, the Plan, such Option Agreements and
any ISOs granted pursuant thereto shall be governed by the applicable Code
provisions to the maximum extent possible. Otherwise, the operation of, and the
rights of Key Employees and Non-Employee Directors under, the Plan, the Option
Agreements and any Options granted thereunder shall be governed by applicable
federal law and otherwise by the laws of the Commonwealth of Pennsylvania.
(b) Rights. Neither the adoption of the Plan nor any action of the
Board or the Committee shall be deemed to give any individual any right to be
granted an Option, or any other right hereunder, unless and until the Committee
shall have granted such individual an Option, and then his or her rights shall
be only such as are provided by the Option Agreement.
Any Option under the Plan shall not entitle the holder thereof to any
rights as a shareholder of the Company prior to the exercise of such Option and
the issuance of the shares pursuant thereto. Further, notwithstanding any
provisions of the Plan or the Option Agreement with a Key Employee, the Company
shall have the right, in its discretion, to retire a Key Employee at any time
pursuant to its retirement rules or otherwise to terminate his or her employment
at any time for any reason whatsoever.
(c) Indemnification of Board and Committee. Without limiting any other
rights of indemnification which they may have from the Company and any Related
Corporation, the members of the Board and the members of the Committee shall be
indemnified by the Company against all costs and expenses reasonably incurred by
them in connection with any claim, action, suit, or proceeding to which they or
any of them may be a party by reason of any action taken or failure to act
under, or in connection with, the Plan, or any Option granted thereunder, and
against all amounts paid by them in settlement thereof (provided such settlement
is approved by legal counsel selected by the Company) or paid by them in
satisfaction of a judgment in any such action, suit, or proceeding, except a
judgment based upon a finding of willful misconduct or recklessness on their
part. Upon the making or institution of any such claim, action, suit, or
proceeding, the Board or Committee member shall notify the Company in writing,
giving the Company an opportunity, at its own expense, to handle and defend the
same before such Board or Committee member undertakes to handle it on his or her
own behalf.
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<PAGE>
(d) Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options granted under the Plan shall be used
for general corporate purposes. Any cash received in payment for shares upon
exercise of an Option to purchase Common Stock shall be added to the general
funds of the Company and shall be used for its corporate purposes. Any Common
Stock received in payment for shares upon exercise of an Option to purchase
Common Stock shall become treasury stock.
(e) No Obligation to Exercise Option. The granting of an Option shall
impose no obligation upon a Key Employee or Non-Employee Director to exercise
such Option.
IN WITNESS WHEREOF, THE JUDGE GROUP, INC. has caused these presents to
be duly executed, under seal, this 23rd day of September, 1996.
ATTEST: THE JUDGE GROUP, INC.
[SEAL]
/s/ Katharine A. Wiercinski By: /s/ Martin E. Judge, Jr.
- ---------------------------------- ---------------------------------
Katharine A. Wiercinski, Secretary Martin E. Judge, Jr., Chairman and
Chief Executive Officer
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MERCK & CO., INC.
PROFESSIONAL SERVICES AGREEMENT
THIS AGREEMENT is entered into this first day of October, 1994 between
MERCK & CO., INC., having a place of business at One Merck Drive, Whitehouse
Station, New Jersey 08889-0100 ("MERCK") and JUDGE TECHNICAL SERVICES, INC.,
having a place of business at Two Bala Plaza, Suite 800, Bala Cynwyd,
Pennsylvania 19004 ("VENDOR");
WHEREAS, VENDOR is in the business of providing computer
programming and consulting services; and
WHEREAS, MERCK wishes to obtain from VENDOR, subject to the terms and
conditions contained herein, certain computer programming and consulting
services;
NOW THEREFORE, in consideration of the mutual promises and undertakings
set forth herein, the parties agree as follows:
ARTICLE 1: SERVICES TO BE PROVIDED
1.1 The services set forth in the Merck Contractor Request Form are to be
provided to MERCK by VENDOR. The total fee due VENDOR for such services
is included in the fee referred to in Article 4.
ARTICLE 2: PROGRESS REPORTS
2.1 VENDOR will submit weekly progress reports to Merck's hiring managers,
if requested. All progress reports will be signed by VENDOR and shall
detail the status of VENDOR's performance since the preceding report
and the progress expected to be made in the next succeeding reporting
period.
2.2 VENDOR will submit quarterly reports to MERCK detailing the
professional services provided to MERCK. The quarterly reports will be
submitted in the form attached as Schedule A.
ARTICLE 3: INTELLECTUAL PROPERTY
3.1 VENDOR understands that any information provided by MERCK is the
exclusive proprietary property of MERCK and that the same must be
treated at all times in accordance with the confidentiality provisions
of this Agreement.
3.2 All ownership rights in and related intellectual property rights to any
deliverable, end product, work product, discovery, invention, idea,
know-how and/or technique, including but not limited to software and
data processing
<PAGE>
material, developed by VENDOR in the course of performance of services
hereunder, or developed jointly by MERCK and VENDOR shall remain in or
are hereby assigned to MERCK. VENDOR shall furnish to MERCK. all copies
of any applicable source codes, drawings, plans, specifications and
data developed or produced under this Agreement. VENDOR will cooperate
with MERCK and execute such other documents as may be appropriate to
achieve the objectives of this section.
3.3 VENDOR shall not use, sell, sub-lease, assign, give or otherwise
transfer to any third party, any information or material provided to
VENDOR by MERCK or developed by VENDOR under or as a result of this
Agreement, except that VENDOR may provide said information to any of
its officers, employees and subcontractors who VENDOR requires to have
said information for fulfillment of VENDOR's obligations hereunder.
Each officer, employee and/or subcontractor to whom any MERCK
confidential information is to be disclosed shall be advised by VENDOR
of, and bound by the confidentiality and intellectual property terms of
this Agreement.
<PAGE>
3.4 VENDOR shall, at all times, treat all information and material provided
to VENDOR by MERCK or developed by VENDOR under or as a result of this
Agreement in accordance with the confidentially provisions of this
Agreement.
3.5 All writings, including without limitation software program code, logic
diagrams, flow charts, procedural diagrams, maps and any documentation
related thereto, produced by VENDOR in the course of its work for MERCK
are considered works made for hire and the property of MERCK, including
without limitation any copyrights on the writings; but to the extent
any such writing, may not, by operation of law or otherwise, be works
made for hire, VENDOR hereby assigns and transfers to MERCK the
ownership of copyright in such works, whether published or unpublished.
VENDOR will cooperate with MERCK and execute such other documents as
may be appropriate to achieve the objectives of this section.
ARTICLE 4: PAYMENT AND FEES
4.1 Payment for all work to be performed under this Agreement shall be made
by MERCK to VENDOR thirty days from receipt of invoice. Said payment
shall be inclusive of all goods and services provided by VENDOR
hereunder, and all other rights, taxes, goods and services to be
provided under this Agreement, and MERCK shall not be liable to VENDOR
for any other or additional fees unless expressly agreed to un writing.
Any taxable portion of services will be separately stated along with
the applicable tax.
4.2 VENDOR agrees that the fees and expenses for the personnel provided
hereunder shall be as set forth in Schedule B, provided that where
Schedule B specifies a range of fees, then the fee shall be as agreed
in writing between VENDOR and MERCK, within the limits specified in
such range. VENDOR further agrees that MERCK shall be given a discount
on all fees for services rendered hereunder un the current Calendar
Quarter, based upon the amount paid to VENDOR for the preceding four
Calendar Quarters under this and any other agreement between VENDOR and
MERCK for computer programming services under Merck's "Preferred Vendor
Program", as provided in Schedule B. For the purpose of the foregoing,
Calendar Quarter shall mean the three month periods ending March 31,
June 30, September 30 and December 31 each year.
4.3 VENDOR will invoice by the tenth day of each month for the previous
month's billable hours. The use of separate invoices for each contract
employee will not be allowed. Invoices shall be submitted to designated
MERCK invoice administrators. VENDOR shall folw the consolidated
invoicing sample attached as Schedule C.
<PAGE>
4.4 VENDOR agrees that the amount due VENDOR for personnel provided under
any existing agreement between VENDOR and MERCK for computer
programming services under MERCK's "Preferred Vendor Program" shall be
as specified in Schedule B, effective January 1, 1995, and all such
agreements are hereby amended accordingly. Notwithstanding the
foregoing, all such fees shall at all times be counted toward the
discount referred to in the last two sentences of Article 4.2.
ARTICLE 5: VENDOR'S STAFF
5.1 ln the performance of this Agreement, VENDOR shall at all times act as
and be deemed an independent contractor. Nothing in this Agreement
shall be construed to render VENDOR or any of its employees, agents or
officers, an employee, joint venture, agent, or partner of MERCK.
VENDOR is not authorized to assume or create any obligations or
responsibilities, express or implied, on behalf of or in tile name of
MERCK. It is understood that the employees, methods, facilities and
equipment of VENDOR shall at all times be under VENDOR's exclusive
direction and control.
5.2 Neither MERCK nor VENDOR shall use the other's name for any commercial
purpose without the other party's prior written consent.
<PAGE>
5.3 VENDOR's employees assigned to the MERCK account who will be on-site
shall comply with MERCK's health and safety policies, including MERCK's
no smoking policy, and other applicable MERCK policies while on-site.
5.4 VENDOR is responsible for and shall pay all charges for its staff or
employees' salary, insurance, taxes and all other costs, benefits or
expenses, including those arising from injury arising out of the
performance of this Agreement. VENDOR agrees to comply with any
Federal, State or Local withholding requirements applicable to its
staff or employees. In accordance with this Agreement, VENDOR shall
indemnify, defend and hold harmless MERCK against and such salary,
insurance, taxes, benefits, costs or expenses incurred by reason of the
performance of services for MERCK by VENDOR's staff or employees,
without regard to any outside party's description of the employment
status of such person.
5.5 Holidays to be observed for the period covered by this agreement shall
be un accordance with the (personnel assigned) site specific holiday
list. No payment shall be due to VENDOR for holidays unless services
are provided on those holidays.
5.6 MERCK will instruct the VENDORS on the method for screening applicants
and their resumes to ensure that they meet the minimum qualifications
for the job.
5.7 The VENDORS are responsible for submitting to MERCK hiring managers
only resumes of qualified applicants. To ensure that applicants are
qualified, the vendor must conduct personal interviews which may
include validated testing and thoroughly screen resumes to verify the
applicants' claimed educational backgrounds and work experiences. If
applicants do not meet the minimum qualifications for the jobs, the
reasons for submitting their resumes must be provided to the hiring
managers, in writing.
5.8 MERCK shall have the right to require VENDOR to replace any of its
contact employees hereunder if such persons are not providing
satisfactory services. If VENDOR has submitted to MERCK a resume with
respect to such person which VENDOR knows, or reasonably should have
known through the performance of a thorough screening and background
check, contains false information, then MERCK shall have no obligation
to pay any compensation or reimbursement of expenses to VENDOR with
respect to such person.
ARTICLE 6: INSURANCE
<PAGE>
6.1 VENDOR shall carry and maintain in force at all times relevant hereto
insurance of the type and minimum coverage amounts as follows:
a. Workmen's Compensation and Employers' Liability
Insurance providing for payment of benefits to and for
the account of employees employed in connection with
the work covered by this
Agreement as required by the statutes of the state where the
work is being performed.
b. Comprehensive General Liability Insurance with minimum
limits of $1,000,000 combined bodily injury and
property damage per occurrence and aggregate.
c. Comprehensive Automobile Liability Insurance in amounts not
less than $1,000,000 combined single limit bodily injury and
property damage per occurrence and aggregate.
6.2 Upon written request by MERCK, VENDOR shall increase the above
insurance limits or obtain additional insurance coverage.
6.3 All insurance policies shall contain an endorsement waiving
all subrogation rights against MERCK.
<PAGE>
6.4 Prior to the commencement of this Agreement, certificates of insurance
evidencing the coverage required above shall be filed with MERCK. Such
certificates shall be issued by insurers approved by MERCK shall
provide that the insurer must give MERCK not less than thirty (30) days
advance notice of any change in or cancellation of coverage and shall
name MERCK as an additional named insured, as applicable.
6.5 Neither failure of VENDOR to comply with any or all of the insurance
provisions of this Agreement, nor the failure to secure endorsements on
the policies as may be necessary to carry out the terms and provisions
of this Agreement shall be construed to limit or relieve VENDOR from
any of its obligations under this Agreement, including this insurance
clause.
ARTICLE 7: TERM AND TERMINATION
7.1 The effective date of this Agreement and the rights created herein
shall be the date that this Agreement is fully executed by the parties,
except that the terms and conditions regarding intellectual property
rights and confidentiality shall apply to all disclosures of
confidential information and all discoveries and developments occurring
prior to the execution of this Agreement. Subject to the remaining
provisions of this Article 7, the term of this Agreement shall expire
on the second anniversary of the effective date of this Agreement.
7.2 With respect to adjusting prices after one year, if the parties want to
amend the agreement to change the fee structure by mutual agreement,
they can do so without any special language in the contract. If either
party disagrees, there will be no change to the fee structure.
7.3 The rights and obligations created herein shall be subject to
termination only in accordance with the termination provisions of this
Agreement.
7.4 MERCK SHALL HAVE THE RIGHT TO TERMINATE THIS AGREEMENT OR SERVICES
COVERED BY ANY CONTRACTOR REQUEST FORM UNDER THIS AGREEMENT AT ANY TIME
WITH WRITTEN NOTICE AND FOR ANY REASON AND WITHOUT LIABILITY OTHER THAN
TO PAY FOR SERVICES PERFORMED THROUGH TERMINATION. IN SUCH EVENT,
VENDOR SHALL BE BOUND BY ALL CONFIDENTIALITY, INTELLECTUAL PROPERTY,
WARRANTY AND INDEMNITY OBLIGATIONS IN ACCORDANCE WITH THE TERMS AND
CONDITIONS OF THIS AGREEMENT.
7.5 Upon MERCK's termination of this Agreement, VENDOR will cease all work
being performed under this Agreement and destroy or deliver to MERCK
all copies of and any and all
<PAGE>
materials or information provided by MERCK to VENDOR or created by
VENDOR hereunder, whether complete or partially complete. Upon MERCK's
termination of services under any Contractor Request Form, VENDOR will
cease all work being performed under such Contractor Request Form and
destroy or deliver to MERCK all copies of any and all materials or
information provided by MERCK to VENDOR or created by VENDOR hereunder
which relate thereto, whether complete or partially complete.
Termination by MERCK of services under any Contractor Request Form
shall not affect any other services being rendered under any other
Contractor Request Form. If requested by MERCK, VENDOR shall certify to
MERCK, in writing, that the foregoing steps have been taken.
7.6 Termination of this Agreement by MERCK under this Article shall not
effect either party's duty to perform any obligation under this
Agreement arising prior to such termination.
7.7 If, at the natural expiration of the term of this Agreement, any of
VENDOR's personnel are engaged in work on one or more MERCK projects
which are incomplete, MERCK may, at its option, require VENDOR to
continue to supply such personnel for such projects, at the rates and
on the terms specified in this Agreement, until such projects are
complete.
ARTICLE 8: CONFIDENTIALITY/PROTECTION OF MERCK'S PROPRIETARY
RIGHTS
8.1 VENDOR understands and agrees that all materials and information
provided by MERCK or developed by VENDOR hereunder are valuable assets
of MERCK and are to be considered MERCK's proprietary information and
property.
8.2 VENDOR will treat the all materials and information provided by MERCK
or developed by VENDOR hereunder with the degree of care necessary to
insure that unauthorized disclosure does not occur
8.3 Except as is set forth in this Agreement, VENDOR will not use,
disclose, make or have made any copies of any materials or information
provided by MERCK or developed by VENDOR, in whole or in part, without
MERCK's prior written approval.
8.4 VENDOR shall not be liable for disclosure or use of any materials or
information provided by MERCK or developed by VENDOR hereunder which
is:
a. possessed by VENDOR prior to receipt from MERCK, other
than through prior disclosure by MERCK;
<PAGE>
b. published or available to the general public otherwise
than through a breach of this Agreement; or
c. obtained by VENDOR from a third party with a valid
right to make such disclosure, provided that said third
party is not under a confidentiality obligation to
MERCK.
8.5 In the event that VENDOR is required by judicial or administrative
process to disclose any information or materials required to be held
confidential hereunder, VENDOR shall promptly notify MERCK and allow
MERCK a reasonable time to oppose such process before making
disclosure.
8.6 VENDOR understands and agrees that any use or dissemination of
information in violation of this Agreement will cause MERCK irreparable
harm, will leave MERCK with no adequate remedy at law and shall entitle
MERCK to injunctive relief.
ARTICLE 9: WARRANTIES
9.1 VENDOR warrants that the product of the work performed hereunder will
not violate or conflict with any intellectual property rights of any
third persons including, but not limited to, said persons' copyrights,
patents and trademarks.
9.2 VENDOR warrants that VENDOR's work hereunder will not contain any
modules designed or intended to disable any software or hardware,
encrypt data, corrupt memory, or in any way hinder MERCK's full use of
any system, hardware, software or equipment.
9.3 VENDOR will only access MERCK computer facilities following a request
by MERCK to do so. Access will be made using an account name and
password supplied by MERCK. VENDOR warrants that access to this system
will not be attempted by any other means.
ARTICLE 10: PATENT, TRADEMARK AND COPYRIGHT INDEMNIFICATION
10.1 MERCK will notify VENDOR, in writing, of any claim against MERCK that
any part of the product of the work performed hereunder by VENDOR
infringes a United States patent or copyright.
<PAGE>
10.2 Upon being notified of any action brought against MERCK based on a
claim that the product of the work performed hereunder infringes a
United States patent or copyright, VENDOR, at VENDOR's sole cost, shall
defend MERCK in said action, perform any negotiations for settlement or
compromise of the action and pay any and all settlements reached and/or
costs and damages awarded in any such action, including reasonable
attorney's fees. MERCK will provide reasonable assistance if requested
by VENDOR, at no expense to MERCK. VENDOR shall also (i) obtain for
MERCK the right to use such product, (ii) modify the product so as to
render it non-infringing or (iii) if (i) and (ii) are not possible,
refund all amounts paid by MERCK hereunder for such product.
ARTICLE 11: LIMITATION OF LIABILITIES
11.1 Except for violation by VENDOR of Articles 3, 8, 9, and 10 herein,
neither party shall be liable to the other for special, indirect,
consequential or incidental losses or damages of any kind or nature
whatsoever, including but not limited to lost profits, lost records or
data, lost savings, loss of use of facility or equipment, loss by
reason of facility shut-down or non-operations or increased expense of
operations, or other costs, charges, penalties, or liquidated damages,
regardless of whether arising from breach of contract, warranty, tort,
strict liability or otherwise, even if advised of the possibility of
such loss or damage or if such loss or damage could have been
reasonably foreseen.
ARTICLE 12: DISPUTE RESOLUTION
12.1 Any controversy, claim, or dispute arising out of or relating to this
Agreement, or the breach thereof, shall be settled through good faith
negotiation between the parties. In the event that said negotiations
are not successful, the controversy, claim, or dispute shall be
resolved through arbitration before three (3) arbitrators. Such
arbitration shall take place in Newark, New Jersey and shall proceed in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association and the laws of the State of New Jersey without
regard to the provisions thereof concerning conflict of laws. Within
seven (7) calendar days of either party making a demand for
arbitration, -MERCK and VENDOR shall each select one (1) arbitrator.
The third arbitrator shall be designated by the arbitrators selected by
the parties within thirty (30) days of the demand for arbitration. If
any arbitrator is not selected within the prescribed time period either
party may apply to the president of the American Arbitrators
Association for the appointment of such arbitrator. The determination
of the majority of the arbitrators shall be binding regardless of
<PAGE>
whether one of the parties fails or refuses to participate in the
arbitration and said determination shall be enforceable by any court of
competent jurisdiction. All costs and expenses of the arbitration
(including fees of the arbitrators) shall also be split equally between
the parties.
ARTICLE 13 ASSIGNMENT
13.1 Neither party may assign any rights or delegate any obligations created
by this Agreement without the prior written consent of the other party.
This Agreement shall be binding upon the heirs, successors, legal
representatives and valid assigns of the parties.
ARTICLE 14: TAXES
14.1 To the extent that the goods or services to be provided hereunder are
subject to any sales, use, rental, personal property and any other
taxes, payment of said taxes is MERCK's responsibility and said taxes
have been included in the payment terms referred to in Article 4 of
this Agreement. VENDOR shall be liable for any and all taxes on any and
all income it receives from MERCK under this Agreement.
ARTICLE 15: AUDIT
15.1 VENDOR's records, which shall include, but not be limited to,
accounting records, time sheets, written policies and procedures, test
results, reports, correspondence, memoranda and any other documentation
relating to this Agreement, shall upon three business days prior notice
be open to inspection and subject to audit and/or reproduction, during
normal working hours, by MERCK or its authorized representative to the
extent necessary to adequately evaluate claims submitted by VENDOR,
required by governmental authorities or desirable for any other valid
business purpose. For the purpose of such audits, inspections,
examinations and evaluations, MERCK or its authorized representative
shall have access to said records beginning on the effective date of
this Agreement and continuing until five (5) years after the date of
final payment by MERCK to VENDOR pursuant to this Agreement.
ARTICLE 16: FORCE MAJEURE
16.1 Neither party hereto shall be considered in default in the performance
of its obligations hereunder, except the obligation to make payments
hereunder, to the extent that the performance of any such obligation is
prevented or delayed by any cause, existing or future, which has
neither
<PAGE>
been caused nor contributed to by such party, and which is beyond the
reasonable control of such party.
ARTICLE 17: GOVERNING LAW
17.1 This Agreement shall be governed by and construed in accordance with
the laws of the State of New Jersey.
ARTICLE 18: SEVERABILITY
18.1 If any provision of this Agreement is found invalid or unenforceable by
a court of competent jurisdiction, the remainder of this Agreement
shall Continue in full force and effect.
ARTICLE 19: SURVIVAL BEYOND COMPLETION
19.1 Unless expressly limited herein or in a subsequent writing by the
parties, the terms, provisions, representations and warranties
contained in this Agreement shall survive MERCK's final acceptance of
the goods and services to be provided or performed herein for a period
of ten (10) years.
ARTICLE 20: RESERVATION OF RIGHTS
20.1 Neither party's delay or failure in enforcing any of right or remedy
afforded hereunder or by law shall prejudice or operate to waive that
right or remedy or any other right or remedy which it shall have
available; nor shall any such failure or delay operate to waive either
party's rights to any remedies due to a future breach of this
Agreement, whether of a like or different character.
ARTICLE 21: ENTIRE AGREEMENT
21.1 This Agreement together with MERCK's Purchase Order and Contractor
Request Form referred to in Article I constitutes the entire agreement
between the parties hereto and supersedes any previous agreements or
understandings whether oral or written. The printed terms and
conditions contained in any other purchase orders, invoices or other
documents issued by MERCK or VENDOR with respect to this Agreement,
whether previously or in the future, shall be of no effect and shall be
superseded by, this Agreement.
21.2 No modification or waiver of the provisions of this Agreement shall be
valid or binding on either party unless in writing and signed by both
parties.
ARTICLE 22: REVIEW BY LEGAL COUNSEL
<PAGE>
22.1 Each of the parties agrees that it has had the opportunity to have this
Agreement reviewed by their respective legal counsel. Accordingly, the
rule of construction that any ambiguity in this Agreement is to be
construed against the drafting party shall not apply.
ARTICLE 23: NOTICES
23.1 Any notice given hereunder shall be sent in writing by certified mail,
return receipt requested or be overnight courier service which provides
a delivery receipt to the other party's business address set forth on
the first page or to such other address as such party shall most
recently have designated in writing and shall be addressed to the
attention of such person as such party shall most recently have
designated un writing. Such notices shall be effective when received.
Notices directed to VENDOR shall be sent to:
---------------------------------------------
---------------------------------------------
---------------------------------------------
---------------------------------------------
Notices directed to MERCK shall be sent to:
Executive Director, Information Technology Procurement
Merck & Co., Inc.
One Merck Drive
PO Box 100
Whitehouse Station, NJ 08889-0100
with a copy to the Office of the Secretary at MERCK's business address first set
forth above. The date of such notice shall be the date on which the notice is
received.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their duly authorized representatives.
MERCK & CO., INC.
BY:
TITLE:
DATE:
JUDGE TECHNICAL SERVICES, INC.
BY:
TITLE:
DATE:
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made this _____ day of ________________, 1996,
by and between JUDGE INC., Two Bala Plaza, Bala Cynwyd, Pennsylvania,
(Corporation) and Dennis F. Judge, Trustee of the Irrevocable Agreement of Trust
of Martin E. Judge, Jr., Settlor, dated December 20, 1995, and known as the
Martin E. Judge, Jr. Descendants Trust, II ("Owner")
W I T N E S S E T H T H A T:
WHEREAS, Martin E. Judge, Jr. ("Employee") is employed by
Corporation; and
WHEREAS, Employee wishes to provide life insurance protection
for his family in the event of his death, under a policy of life insurance
listed on Exhibit "A" attached hereto and made a part hereof (hereinafter
referred to as the "Policy"), which is on the life of Martin E. Judge, Jr.
(Guardian Life Insurance Company is hereinafter referred to as the "Insurer",
and Martin E. Judge, Jr. is hereinafter referred to as the "Insured"); and
WHEREAS, Corporation has paid and is willing to continue to
pay a portion of the premiums due on the Policy as an additional employment
benefit for the Employee, on the terms and conditions hereinafter set forth: and
WHEREAS, the Owner is the owner of the Policy and, as such,
possesses all incidents of ownership in and to the Policy; and
WHEREAS, Corporation may wish to have the Policy collaterally
assigned to it by Owner, in order to secure the payment of its Policy Interest,
as hereinafter defined; and
WHEREAS, the parties intend that by this Agreement and such
collateral assignment the Corporation shall receive only the right to such
repayment with the Owner retaining all other ownership rights in the Policy; and
WHEREAS, the parties intend that this arrangement shall
constitute a split-dollar agreement as described in Revenue Ruling 64-328,
1964-2 C.B. 11;
<PAGE>
NOW, THEREFORE, in consideration of the premises and of the
mutual promises contained herein, the parties hereto agree as follows:
1. Definition of Policy Interest. At any time prior to the
death of the Insured, the Corporation's "Policy Interest" with respect to a
Policy is an amount equal to the lesser of (I) the aggregate amount paid by
Corporation prior to the execution of this Agreement and under Article 5 of this
Agreement towards the premium payments due with respect to each Policy listed on
Exhibit "A" to this Agreement, less any amounts reimbursed by the Owner to the
Corporation prior to or following the execution of this Agreement under such
Article 5, and (ii) an amount equal to the cash surrender value of the Policy as
of the end of the Policy year with respect to which the current premiums are
paid, plus any dividend accumulations and the cash value of any paid up
additions as of the due date of the current premiums.
At any time following the Insured's death the Corporation's
"Policy Interest" with respect to a policy is that amount which is equal to the
lesser of (I) the aggregate amount paid by Corporation prior to the execution of
this Agreement and under Article 5 of this Agreement towards the premium
payments due with respect to each Policy listed on Exhibit "A" to this
Agreement, less any amounts reimbursed by the Owner to the Corporation prior to
or following the execution of this Agreement under such Article 5, and (ii) an
amount equal to the cash surrender value of such Policy immediately prior to the
Insured's death, plus any dividend accumulations and the cash value of any paid
up additions immediately prior to the Insured's death.
2. Policy of Insurance. The parties hereto shall take any
action which may be necessary to cause the Policy to conform to the provisions
of this Agreement. The parties hereto agree that the Policy shall be subject to
the terms and conditions of this Agreement and of any collateral assignment
filed with the Insurer relating to the Policy. The terms of this Agreement shall
be applicable to any policy of insurance received in exchange for an interest in
the Policy listed on Exhibit "A" attached hereto, provided all sums available to
the Owner under an old policy are applied to the new policy received in such
exchange. Owner shall notify the Corporation of any such exchange and the terms
Policy hereunder shall thereafter include such new policy.
3. Ownership of Insurance.
a. Owner is the sole and absolute owner of the
Policy, and may exercise all ownership rights granted to the owner thereof by
the terms of the Policy, except as hereinafter provided.
<PAGE>
b. It is the intention of the parties to this
Agreement and any collateral assignments executed by Owner to Corporation in
connection herewith that Owner shall retain all rights that the Policy grants to
the owner thereof, except Corporation's right to its Policy Interest with
respect to the Policy as hereinbefore defined. Specifically, but without
limitation, Corporation shall neither have nor exercise any right as collateral
assignee of the Policy which could in any way defeat or impair any of the
following rights of the Owner:
(1) the right to surrender the Policy;
(2) the right to receive the cash surrender
value or the death proceeds of the Policy in excess of the amount due
Corporation hereunder, if any;
(3) the right to collect from the Insurer
any disability benefit payable in cash that does not reduce the amount of
insurance;
(4) the right to designate and change the
beneficiary with respect to the Policy, and the right to elect any optional mode
of settlement permitted by the Policy or allowed by the Insurer;
(5) the right to exercise all non-forfeiture
rights permitted by the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom;
(6) the right to borrow upon the cash value
of the Policy; and
(7) the right to obtain one or more loans or
advances on the Policy, either from the Insurer or, at any time, from other
persons, or to pledge or assign the Policy as security for such loans or
advances.
It is the expressed intention of the parties that this
Agreement shall be construed so that the Corporation has absolutely no incidents
of ownership in the Policy. All provisions of this Agreement and of any
collateral assignment executed in conjunction with this Agreement shall be
construed so as to carry out such intention.
4. Application of Dividends.
a. Dividends declared by Insurers on the Policy
shall be accumulated at interest by Insurer until Owner elects a dividend option
and directs how the accumulated dividends and interest earned thereon shall be
applied.
<PAGE>
b. Owner shall elect a dividend option as provided
in Paragraph (a) of this Article, subject to any subsequent assignment of
the Policy.
5. Premium Payment.
a. Except as otherwise provided herein, on or before
the due date of each Policy premium -- or within the grace period provided
therein, Corporation shall pay the full amount of the premium due to each
Insurer, and shall, upon request, promptly furnish Owner evidence of timely
payment of such premium.
b. Thirty (30) days prior to the due date of each
premium for the Policy, Corporation shall notify Owner of the exact amount equal
to the annual cost of current life insurance protection under the Policy on the
life of the Insured, measured by the lower of the PS58 rate, set forth in
Revenue Ruling 55-747 (or the corresponding applicable provision of any future
Revenue Ruling), or the Insurer's current lowest published premium rate for
annually renewable term insurance for standard risks at the age of the Insured.
Owner shall pay such amount to Corporation prior to the premium due date. If
Owner shall not make such payment, Corporation shall make Owner's portion of the
premium payment, which payment shall be recovered by Corporation as provided
herein. The Corporation shall annually furnish to the Employee and to the Owner
a statement of the amount of income reportable by the Corporation for federal
and state income tax purposes as a result of such premium payments, indicating
the amount net of any payments by Owner under this Section 5(b), and including
any additional economic benefit to the Employee from this Agreement or the
Policy that is reportable as income for federal and state income tax purposes.
6. Collateral Assignment. To secure the payment to Corporation
of its Policy Interest with respect to the Policy, as hereinbefore defined,
Owner will, upon the request of Corporation, assign the Policy to Corporation as
collateral, under the forms used by Insurer for such assignment, and such
collateral assignment shall specifically limit the right of Corporation
thereunder to payment of its Policy Interest with respect to the Policy. If this
Agreement is terminated, or upon the surrender of the Policy, such payment shall
be made from the cash surrender value of the Policy (as defined therein). Upon
the death of the Insured such payment shall be made from the death proceeds of
the Policy.
In no event shall Corporation have any right to borrow against
the Policy. Any collateral assignment of the Policy to Corporation hereunder
shall not be terminated, altered or amended by Owner, without the express
written consent of Corporation. The parties hereto agree to take all action
necessary to cause any
<PAGE>
collateral assignment to conform to the provisions of this Agreement.
7. Owner's Rights in Policy.
a. Owner shall take no action with respect to the
Policy, which would in any way compromise or jeopardize Corporation's right to
be paid its Policy Interest with respect to each Policy, as hereinbefore
defined, without the express written consent of Corporation.
b. Owner shall have the sole right to surrender or
cancel the Policy, and to receive the full cash surrender value of the Policy
directly from Insurer. Upon the surrender or cancellation of the Policy,
Corporation shall have the unqualified right to receive an amount equal to the
Policy Interest with respect to the Policy. Immediately upon receipt of the cash
value, Owner shall pay to Corporation the portion of such cash value to which it
is entitled hereunder, and shall retain the balance, if any.
8. Death of Insured.
a. Upon the death of the Insured, Corporation and
Owner shall promptly take all action necessary to obtain the death benefit
provided under the Policy; when such benefit has been collected and paid as
provided therein, this Agreement shall thereupon terminate.
b. Corporation shall have the unqualified right to
receive a portion of such death benefit received with respect to the Policy
equal to its Policy Interest. The balance of the death benefit provided under
the Policy, if any, shall be paid directly to the beneficiary or beneficiaries
designated by Owner, in the manner and in the amount or amounts provided in the
beneficiary designation provision of the Policy. In no event shall the amount
payable to Corporation hereunder exceed the proceeds of the Policy payable at
the death of the Insured. No amount shall be paid from such death benefit to the
beneficiary or beneficiaries designated by Owner until the full amount due
Corporation hereunder has been paid. The parties hereto agree that the
beneficiary designation provisions of the Policy shall not be inconsistent with
the provisions hereof as modified by the collateral assignment.
c. Notwithstanding any provision hereof to the
contrary, in the event that, for any reason whatsoever, no death benefit is
payable under the Policy upon the death of the Employee and in lieu thereof the
Insurer refunds all or any part of the premiums paid for the Policy, the
Corporation and the Owner shall have the unqualified right to share such
premiums based on their respective cumulative contributions thereto.
<PAGE>
9. Termination of Agreement.
a. This Agreement shall terminate, without notice,
upon the occurrence of any one of the following events:
(1) Total cessation of the business of
Corporation; or
(2) Bankruptcy, receivership or dissolution
of Corporation.
b. In addition, either the Owner or the
Corporation shall have the right to terminate this Agreement by written notice
to the other party hereto. Such termination shall be effective as of the date of
such notice.
10. Release of Collateral Assignment.
a. For sixty (60) days after the date of the
termination of this Agreement, Owner shall have the option of obtaining the
release by Corporation of any collateral assignment of the Policy. To obtain
such release, Owner shall pay to Corporation the amount of Corporation's Policy
Interest in the policy. Upon receipt of such amount with respect to the Policy,
Corporation shall release the collateral assignment of the Policy, by the
execution and delivery of an appropriate instrument of release.
b. If Owner fails to exercise such option within
such sixty (60) day period, then, at the request of Corporation, Owner shall
execute any document or documents required by the Insurer to transfer the
interest of Owner in the Policy to Corporation.
11. Release of Insurer. Insurer shall be fully discharged from
its obligations with respect to the Policy by payment of the death benefit to
the beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any subsequent modification or amendment hereof, shall in any
way be construed as enlarging, changing, varying, or in any other way affecting
the obligations of Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by any collateral
assignment executed by Owner and filed with the Insurer in connection herewith.
<PAGE>
12. Fiduciary
a. Corporation is hereby designated as the named
fiduciary under this Agreement. The named fiduciary shall have authority to
control and manage the operation and administration of this Agreement, and it
shall be responsible for establishing and carrying out a funding policy and
method consistent with the objectives hereof.
b. Corporation shall make all determinations
concerning rights to benefits hereunder. Any decision by Corporation denying a
claim by Owner or a designated beneficiary for benefits hereunder shall be
stated in writing and delivered or mailed to Owner or such beneficiary. Such
decision shall set forth the specific reasons for the denial, written to the
best of Corporation's ability in a manner that may be understood without legal
or actuarial counsel. In addition, Corporation shall afford a reasonable
opportunity to Owner or such beneficiary for a full and fair review of the
decision denying such claim.
13. Amendment. This Agreement may not be amended, altered or
modified, except by a written instrument signed by the parties hereto, or their
respective successors or assigns, and may not be otherwise terminated except as
provided herein.
14. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of Corporation, Employee, Insured and Owner, and their
respective successors, assigns, heirs, executors, administrators and
beneficiaries.
15. Notice. Any notice, consent or demand required or
permitted to be given under provisions of this Agreement shall be in writing,
and shall be signed by the party giving or making the same. If such notice,
consent or demand is mailed to a party hereto, it shall be sent by United States
certified mail, postage prepaid, addressed to such party's last known address as
shown on the records of Corporation. The date of such mailing shall be deemed
the date of notice, consent or demand.
16. Governing Law. This Agreement and the rights of the
parties hereunder, shall be governed by and construed in accordance with the
laws of the Commonwealth of Pennsylvania.
17. Captains. The captions appearing in this Agreement are for
convenience only, and do not in any way define, limit or describe the scope of
this Agreement, or the intent of any provision thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement, in duplicate, as of the day and year first above written.
ATTEST: JUDGE, INC.
By:
- ----------------------------- ---------------------------------
Secretary Title: President
- ----------------------------- ------------------------------(Seal)
Witness Dennis F. Judge, Trustee Under
Agreement of Trust dated December
20, 1995 of Martin E. Judge, Jr.,
Settlor, known as the Martin E.
Judge, Jr., Descendants Trust, II
<PAGE>
EXHIBIT "A"
Company Policy Number
------- -------------
Guardian 3808142
<PAGE>
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made this ____ day of _____________, 1996, by and
between JUDGE INC., Two Bala Plaza, Bala Cynwyd, Pennsylvania, ("Corporation")
and Kathleen Dunn, Trustee of the Irrevocable Agreement of Trust of Michael
Dunn, Settlor, dated June 19, 1996, ("Owner").
W I T N E S S E T H T H A T:
WHEREAS, Michael Dunn ("Employee") is employed by Corporation; and
WHEREAS, Employee wishes to provide life insurance protection for his
family in the event of his death, under a policy of life insurance listed on
Exhibit "A" attached hereto and made a part hereof (hereinafter referred to as
the "Policy"), which is on the life of Michael Dunn (Connecticut General
Insurance Company is hereinafter referred to as the "Insurer", and Michael Dunn
is hereinafter referred to as the "Insured"); and
WHEREAS, Corporation has paid and is willing to continue to pay a
portion of the premiums due on the Policy as an additional employment benefit
for the Employee, on the terms and conditions hereinafter set forth; and
WHEREAS, the Owner is the owner of the Policy and, as such, possesses
all incidents of ownership in and to the Policy; and
WHEREAS, Corporation may wish to have the Policy collaterally assigned
to it by Owner, in order to secure the payment of its Policy Interest, as
hereinafter defined; and
WHEREAS, the parties intend that by this Agreement and such collateral
assignment the Corporation shall receive only the right to such repayment with
the Owner retaining all other ownership rights in the Policy; and
WHEREAS, the parties intend that this arrangement shall constitute a
split-dollar agreement as described in Revenue Ruling 64-328, 1964-2 C.B. 11;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. Definition of Policy Interest. At any time prior to
<PAGE>
the death of the Insured, the Corporation's "Policy Interest" with respect to a
Policy is an amount equal to the lesser of (I) the aggregate amount paid by
Corporation prior to the execution of this Agreement and under Article 5 of this
Agreement towards the premium payments due with respect to each Policy listed on
Exhibit "A" to this Agreement, less any amounts reimbursed by the Owner to the
Corporation prior to or following the execution of this Agreement under such
Article 5, and (ii) an amount equal to the cash surrender value of the Policy as
of the end of the Policy year with respect to which the current premiums are
paid, plus any dividend accumulations and the cash value of any paid up
additions as of the due date of the current premiums.
At any time following the Insured's death the Corporations' "Policy
Interest" with respect to a policy is that amount which is equal to the lesser
of (i) the aggregate amount paid by Corporation prior to the execution of this
Agreement and under Article 5 of this Agreement towards the premium payments due
with respect to each Policy listed on Exhibit "A" to this Agreement, less any
amounts reimbursed by the Owner to the Corporation prior to or following the
execution of this Agreement under such Article 5, and (ii) an amount equal to
the cash surrender value of such Policy immediately prior to the Insured's
death, plus any dividend accumulations and the cash value of any paid up
additions immediately prior to the Insured's death.
2. Policy of Insurance. The parties hereto shall take any action which
may be necessary to cause the Policy to conform to the provisions of this
Agreement. The parties hereto agree that the Policy shall be subject to the
terms and conditions of this Agreement and of any collateral assignment filed
with the Insurer relating to the Policy. The terms of this Agreement shall be
applicable to any policy of insurance received in exchange for an interest in
the Policy listed on Exhibit "A" attached hereto, provided all sums available to
the Owner under an old policy are applied to the new policy received in such
exchange. Owner shall notify the Corporation of any such exchange and the terms
Policy hereunder shall thereafter include such new policy.
3. Ownership of Insurance.
a. Owner is the sole and absolute owner of the Policy, and may
exercise all ownership rights granted to the owner thereof by the terms of the
Policy, except as hereinafter provided.
b. It is the intention of the parties to this Agreement and any
collateral assignments executed by Owner to Corporation in connection herewith
that Owner shall retain all rights that the Policy grants to the owner thereof,
except Corporation's right to its Policy Interest with respect to the Policy as
hereinbefore defined. Specifically, but without limitation, Corporation shall
neither have nor exercise any right as collateral assignee of the
<PAGE>
Policy which could in any way defeat or impair any of the following rights of
the Owner:
(1) the right to surrender the Policy;
(2) the right to receive the cash surrender value or the death
proceeds of the Policy in excess of the amount due
Corporation hereunder, if any;
(3) the right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of
insurance;
(4) the right to designate and change the beneficiary with
respect to the Policy, and the right to elect any optional
mode of settlement permitted by the Policy or allowed by the
Insurer;
(5) the right to exercise all non-forfeiture rights permitted by
the terms of the Policy or allowed by the Insurer and to
receive all benefits and advantages derived therefrom;
(6) the right to borrow upon the cash value of the Policy; and
(7) the right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other
persons, or to pledge or assign the Policy as security for
such loans or advances.
It is the expressed intention of the parties that this Agreement shall
be construed so that the Corporation has absolutely no incidents of ownership in
the Policy. All provisions of this Agreement and of any collateral assignment
executed in conjunction with this Agreement shall be construed so as to carry
out such intention.
4. Application of Dividends.
a. Dividends declared by Insurers on the Policy shall be accumulated at
interest by Insurer until Owner elects a dividend option and directs how the
accumulated dividends and interest earned thereon shall be applied.
b. Owner shall elect a dividend option as provided in Paragraph (a) of
this Article, subject to any subsequent assignment of the Policy.
5. Premium Payment.
a. Except as otherwise provided herein, on or before the due date of
each Policy premium, or within the grace period
<PAGE>
provided therein, Corporation shall pay the full amount of the premium due to
each Insurer, and shall, upon request, promptly furnish Owner evidence of timely
payment of such premium.
b. Thirty (30) days prior to the due date of each premium for the
Policy, Corporation shall notify Owner of the exact amount equal to the annual
cost of current life insurance protection under the Policy on the life of the
Insured, measured by the lower of the PS-58 rate, set forth in Revenue Ruling
55-747 (or the corresponding applicable provision of any future Revenue Ruling),
or the Insurer's current lowest published premium rate for annually renewable
term insurance for standard risks at the age of the Insured. Owner shall pay
such amount to Corporation prior to the premium due date. If Owner shall not
make such payment, Corporation shall make Owner's portion of the premium
payment, which payment shall be recovered by Corporation as provided herein. The
Corporation shall annually furnish to the Employee and to the Owner a statement
of the amount of income reportable by the Corporation for federal and state
income tax purposes as a result of such premium payments, indicating the amount
net of any payments by Owner under this Section 5(b), and including any
additional economic benefit to the Employee from this Agreement or the Policy
that is reportable as income for federal and state income tax purposes.
6. Collateral Assignment. To secure the payment to Corporation of its
Policy Interest with respect to the Policy, as hereinbefore defined, Owner will,
upon the request of Corporation, assign the Policy to Corporation as collateral,
under the forms used by Insurer for such assignment, and such collateral
assignment shall specifically limit the right of Corporation thereunder to
payment of its Policy Interest with respect to the Policy. If this Agreement is
terminated, or upon the surrender of the Policy, such payment shall be made from
the cash surrender value of the Policy (as defined therein). Upon the death of
the Insured such payment shall be made from the death proceeds of the Policy.
In no event shall Corporation have any right to borrow against the
Policy. Any collateral assignment of the Policy to Corporation hereunder shall
not be terminated, altered or amended by Owner, without the express written
consent of Corporation. The parties hereto agree to take all action necessary to
cause any collateral assignment to conform to the provisions of this Agreement.
7. Owner's Rights in Policy.
a. Owner shall take no action with respect to the Policy, which would
in any way compromise or jeopardize Corporation's right to be paid its Policy
Interest with respect to each Policy, as hereinbefore defined, without the
express written consent of Corporation.
<PAGE>
b. Owner shall have the sole right to surrender or cancel the Policy,
and to receive the full cash surrender value of the Policy directly from
Insurer. Upon the surrender or cancellation of the Policy, Corporation shall
have the unqualified right to receive an amount equal to the Policy Interest
with respect to the Policy. Immediately upon receipt of the cash value, Owner
shall pay to Corporation the portion of such cash value to which it is entitled
hereunder, and shall retain the balance, if any.
8. Death of Insured.
a. Upon the death of the Insured, Corporation and Owner shall promptly
take all action necessary to obtain the death benefit provided under the Policy;
when such benefit has been collected and paid as provided therein, this
Agreement shall thereupon terminate.
11. Release of Insurer. Insurer shall be fully discharged from its
obligations with respect to the Policy by payment of the death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any modification or amendment hereof No provision of this
Agreement, nor of any subsequent modification or amendment hereof, shall in any
way be construed as enlarging, changing, varying, or in any other way affecting
the obligations of Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by any collateral
assignment executed by Owner and filed with the Insurer in connection herewith.
12. Fiduciary.
a. Corporation is hereby designated as the named fiduciary under this
Agreement. The named fiduciary shall have authority to control and manage the
operation and administration of this Agreement, and it shall be responsible for
establishing and carrying out a funding policy and method consistent with the
objectives hereof.
b. Corporation shall make all determinations concerning rights to
benefits hereunder. Any decision by Corporation denying a claim by Owner or a
designated beneficiary for benefits hereunder shall be stated in writing and
delivered or mailed to Owner or such beneficiary. Such decision shall set forth
the specific reasons for the denial, written to the best of Corporation's
ability in a manner that may be understood without legal or actuarial counsel.
In addition, Corporation shall afford a reasonable opportunity to Owner or such
beneficiary for a full and fair review of the decision denying such claim.
13. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not be otherwise terminated except as provided
herein.
<PAGE>
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Corporation, Employee, Insured and Owner, and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.
15. Notice. Any notice, consent or demand required or permitted to be
given under provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.
16. Governing Law. This Agreement and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
17. Captions. The captions appearing in this Agreement are for
convenience only, and do not in any way define, limit or describe the scope of
this Agreement, or the intent of any provision thereof.
WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
ATTEST: JUDGE INC.
______________________________ By: __________________________________
Secretary Title:
- ------------------------------ --------------------------------------
Witness Kathleen Dunn, Trustee Under Agreement
of Trust dated June 19, 1996 of
Michael Dunn, Settlor
<PAGE>
EXHIBIT "A"
Company Policy Number
Connecticut General 7031148
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made this _____ day of _________________, 1996, by and
between JUDGE INC., Two Bala Plaza, Bala Cynwyd, Pennsylvania, ("Corporation")
and Ann L. Judge, Trustee of the Irrevocable Agreement of Trust of Martin E.
Judge, Jr., Settlor, dated December 20, 1995, and known as the Ann L. Judge
Trust ("Owner").
W I T N E S S E T H T H A T:
WHEREAS, Martin E. Judge, Jr. ("Employee") is employed by Corporation;
and
WHEREAS, Employee wishes to provide life insurance protection for his
family in the event of his death, under a policy of life insurance listed on
Exhibit "A" attached hereto and made a part hereof (hereinafter referred to as
the "Policy"), which is on the life of Martin E. Judge, Jr. (Guardian Life
Insurance Company is hereinafter referred to as the "Insurer", and Martin E
Judge, Jr. is hereinafter referred to as the "Insured"); and
WHEREAS, Corporation has paid and is willing to continue to pay a
portion of the premiums due on the Policy as an additional employment benefit
for the Employee, on the terms and conditions hereinafter set forth; and
WHEREAS, the Owner is the owner of the Policy and, as such, possesses
all incidents of ownership in and to the Policy; and
WHEREAS, Corporation may wish to have the Policy collaterally assigned
to it by Owner, in order to secure the payment of its Policy Interest, as
hereinafter defined; and
WHEREAS, the parties intend that by this Agreement and such collateral
assignment the Corporation shall receive only the right to such repayment with
the Owner retaining all other ownership rights in the Policy; and
WHEREAS, the parties intend that this arrangement shall constitute a
split-dollar agreement as described in Revenue Ruling 64-328, 1964-2 C.B. 11;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
1. Definition of Policy Interest. At any time prior to
BE:29442_1.WP5
<PAGE>
the death of the Insured, the Corporation's "Policy Interest" with respect to a
Policy is an amount equal to the lesser of (I) the aggregate amount paid by
Corporation prior to the execution of this Agreement and under Article 5 of this
Agreement towards the premium payments due with respect to each Policy listed on
Exhibit "A" to this Agreement, less any amounts reimbursed by the Owner to the
Corporation prior to or following the execution of this Agreement under such
Article 5, and (ii) an amount equal to the cash surrender value of the Policy as
of the end of the Policy year with respect to which the current premiums are
paid, plus any dividend accumulations and the cash value of any paid up
additions as of the due date of the current premiums.
At any time following the Insured's death the Corporation's "Policy
Interest" with respect to a policy is that amount which is equal to the lesser
of (I) the aggregate amount paid by Corporation prior to the execution of this
agreement and under Article 5 of this Agreement towards the premium payments due
with respect to each Policy listed on Exhibit "A" to this Agreement, less any
amounts reimbursed by the Owner to the Corporation prior to or following the
execution of this Agreement under such Article 5, and (ii) an amount equal to
the cash surrender value of such Policy immediately prior to the Insured's
death, plus any dividend accumulations and the cash value of any paid up
additions immediately prior to the Insured's death.
2. Policy of Insurance. The parties hereto shall take any action which
may be necessary to cause the Policy to conform to the provisions of this
Agreement. The parties hereto agree that the Policy shall be subject to the
terms and conditions of this Agreement and of any collateral assignment filed
with the Insurer relating to the Policy. The terms of this Agreement shall be
applicable to any policy of insurance received in exchange for an interest in
the Policy listed on Exhibit "A" attached hereto, provided all sums available to
the Owner under an old policy are applied to the new policy received in such
exchange. Owner shall notify the Corporation of any such exchange and the terms
Policy hereunder shall thereafter include such new policy.
3. Ownership of Insurance.
a. Owner is the sole and absolute owner of the Policy, and may
exercise all ownership rights granted to the owner thereof by the terms of the
Policy, except as hereinafter provided.
b. It is the intention of the parties to this Agreement and any
collateral assignments executed by Owner to Corporation in connection herewith
that Owner shall retain all rights that the Policy grants to the owner thereof,
except Corporation's right to its Policy Interest with respect to the Policy as
hereinbefore defined. Specifically, but without limitation, Corporation shall
neither have nor exercise any right as collateral assignee of the Policy which
could in any way defeat or impair any of the following
BE:29442_1.WP5
<PAGE>
rights of the Owner:
(1) the right to surrender the Policy;
(2) the right to receive the cash surrender value or the death
proceeds of the Policy in excess of the amount due Corporation hereunder, if
any;
(3) the right to collect from the Insurer any disability benefit
payable in cash that does not reduce the amount of insurance;
(4) the right to designate and change the beneficiary with
respect to the Policy, and the right to elect any optional mode of settlement
permitted by the Policy or allowed by the Insurer;
(5) the right to exercise all non-forfeiture rights permitted by
the terms of the Policy or allowed by the Insurer and to receive all benefits
and advantages derived therefrom;
(6) the right to borrow upon the cash value of the Policy; and
(7) the right to obtain one or more loans or advances on the
Policy, either from the Insurer or, at any time, from other persons, or to
pledge or assign the Policy as security for such loans or advances.
It is the expressed intention of the parties that this agreement shall
be construed so that the Corporation has absolutely no incidents of ownership in
the Policy. All provisions of this Agreement and of any collateral assignment
executed in conjunction with this agreement shall be construed so as to carry
out such intention.
4. Application of Dividends.
a. Dividends declared by Insurers on the Policy shall be accumulated
at interest by Insurer until Owner elects a dividend opinion and directs how the
accumulated dividends and interest earned thereon shall be applied.
b. Owner shall elect a dividend option, as provided in Paragraph (a)
of this Article, subject to any subsequent assignment of the Policy.
5. Premium Payment.
a. Except as otherwise provided herein, on or before the due date of
each Policy premium, or within the grace period provided therein, Corporation
shall pay the full amount of the premium due to each Insurer, and shall, upon
request, promptly furnish Owner
BE:29442_1.WP5
<PAGE>
evidence of timely payment of such premium.
b. Thirty (30) days prior to the due date of each premium for the
Policy, Corporation shall notify Owner of the exact amount equal to the annual
cost of current life insurance protection under the Policy on the life of the
Insured, measured by the lower of the PS-58 rate, set forth in Revenue Ruling
55-747 (or the corresponding applicable provision of any future Revenue Ruling),
or the Insurer's current lowest published premium rate for annually renewable
term insurance for standard risks at the age of the Insured. Owner shall pay
such amount to Corporation prior to the premium due date. If Owner shall not
make such payment, Corporation shall make Owner's portion of the premium
payment, which payment shall be recovered by Corporation as provided herein. The
Corporation shall annually furnish to the Employee and to the Owner a statement
of the amount of income reportable by the Corporation for federal and state
income tax purposes as a result of such premium payments, indicating the amount
net of any payments by Owner under this Section 5(b), and including any
additional economic benefit to the Employee from this agreement or the Policy
that is reportable as income for federal and state income tax purposes.
6. Collateral Assignment. To secure the payment to Corporation of its
Policy Interest with respect to the Policy, as hereinbefore defined, Owner will,
upon the request of Corporation, assign the Policy to Corporation as collateral,
under the forms used by Insurer for such assignment, and such collateral
assignment shall specifically limit the right of Corporation thereunder to
payment of its Policy Interest with respect to the Policy. If this Agreement is
terminated, or upon the surrender of the Policy, such payment shall be made from
the cash surrender value of the Policy (as defined therein). Upon the death of
the Insured such payment shall be made from the death proceeds of the Policy.
In no event shall Corporation have any right to borrow against the
Policy. Any collateral assignment of the Policy to Corporation hereunder shall
not be terminated, altered or amended by Owner, without the express written
consent of Corporation. The parties hereto agree to take all action necessary to
cause any collateral assignment to conform to the provisions of this Agreement.
7. Owner's Rights in Policy.
a. Owner shall take no action with respect to the Policy, which
would in any way compromise or jeopardize Corporation's right to be paid its
Policy Interest with respect to each Policy, as hereinbefore defined, without
the express written consent of Corporation.
b. Owner shall have the sole right to surrender or cancel the
Policy, and to receive the full cash surrender value of the Policy directly from
Insurer Upon the surrender or cancellation of the
BE:29442_1.WP5
<PAGE>
Policy, Corporation shall have the unqualified right to receive an amount equal
to the Policy Interest with respect to the Policy. Immediately upon receipt of
the cash value, Owner shall pay to Corporation the portion of such cash value to
which it is entitled hereunder, and shall retain the balance, if any.
8. Death of Insured.
a. Upon the death of the Insured, Corporation and Owner shall
promptly take all action necessary to obtain the death benefit provided under
the Policy; when such benefit has been collected and paid as provided therein,
this Agreement shall thereupon terminate.
b. Corporation shall have the unqualified right to receive a portion
of such death benefit received with respect to the Policy equal to its Policy
Interest. The balance of the death benefit provided under the Policy, if any,
shall be paid directly to the beneficiary or beneficiaries designated by Owner,
in the manner and in the amount or amounts provided in the beneficiary
designation provision of the Policy. In no event shall the amount payable to
Corporation hereunder exceed the proceeds of the Policy payable at the death of
the Insured. No amount shall be paid from such death benefit to the beneficiary
or beneficiaries designated by Owner until the full amount due Corporation
hereunder has been paid. The parties hereto agree that the beneficiary
designation provisions of the Policy shall not be inconsistent with the
provisions hereof as modified by the collateral assignment.
c. Notwithstanding any provision hereof to the contrary, in the
event that, for any reason whatsoever, no death benefit is payable under the
Policy upon the death of the Employee and in lieu thereof the Insurer refunds
all or any part of the premiums paid for the Policy, the Corporation and the
Owner shall have the unqualified right to share such premiums based on their
respective cumulative contributions thereto.
9. Termination of Agreement.
a. This Agreement shall terminate, without notice, upon the
occurrence of any one of the following events:
(1) Total cessation of the business of Corporation; or
(2) Bankruptcy, receivership or dissolution of Corporation.
b. In addition, either the Owner or the Corporation shall have the
right to terminate this Agreement by written notice to the other party hereto.
Such termination shall be effective as of the date of such notice.
BE:29442_1.WP5
<PAGE>
10. Release of Collateral Assignment.
a. For sixty (60) days after the date of the termination of this
Agreement, Owner shall have the option of obtaining the release by Corporation
of any collateral assignment of the Policy. To obtain such release, Owner shall
pay to Corporation the amount of Corporation's Policy Interest in the policy.
Upon receipt of such amount with respect to the Policy, Corporation shall
release the collateral assignment of the Policy, by the execution and delivery
of an appropriate instrument of release.
b. If Owner fails to exercise such option within such sixty (60)
day period, then, at the request of Corporation, Owner shall execute any
document or documents required by the Insurer to transfer the interest of Owner
in the Policy to Corporation.
11. Release of Insurer Insurer shall be fully discharged from its
obligations with respect to the Policy by payment of the death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any subsequent modification or amendment hereof, shall in any
way be construed as enlarging, changing, varying, or in any other way affecting
the obligations of Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by any collateral
assignment executed by Owner and filed with the Insurer in connection herewith.
12. Fiduciary.
a. Corporation is hereby designated as the named fiduciary, under
this agreement. The named fiduciary shall have authority to control and manage
the operation and administration of this Agreement, and it shall be responsible
for establishing and carrying out a funding policy and method consistent with
the objectives hereof.
b. Corporation shall make all determinations concerning rights to
benefits hereunder. Any decision by Corporation denying a claim by Owner or a
designated beneficiary for benefits hereunder shall be stated in writing and
delivered or mailed to Owner or such beneficiary. Such decision shall set forth
the specific reasons for the denial, written to the best of Corporation's
ability in a manner that may be understood without legal or actuarial counsel.
In addition, Corporation shall afford a reasonable opportunity to Owner or such
beneficiary for a full and fair review of the decision denying such claim.
13. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
successors or assigns, and may not
BE:29442_1.WP5
<PAGE>
be otherwise terminated except as provided herein.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Corporation, Employee, Insured and Owner, and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.
15. Notice. Any notice, consent or demand required or permitted to be
given under provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.
16. Governing Law. This Agreement and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
17. Captions. The captions appearing in this Agreement are for
convenience only, and do not in any way define, limit or describe the scope of
this Agreement, or the intent of any provision thereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
ATTEST: JUDGE INC.
______________________________ By:___________________________
Secretary Title
- ------------------------------ ------------------------------
Witness Ann L. Judge, Trustee Under
Agreement of Trust Dated
December 20, 1995 of Martin E.
Judge, Jr., Settlor, known as
the Ann L. Judge Trust
BE:29442_1.WP5
<PAGE>
EXHIBIT "A"
Company Policy Number
Guardian 3808143
BE:29442_1.WP5
<PAGE>
SPLIT-DOLLAR AGREEMENT
THIS AGREEMENT made this ______ day of _________________, 1996 , by and between
JUDGE INC., Two Bala Plaza, Bala Cynwyd, Pennsylvania, ("Corporation") and D.
Michael Carmody, Trustee of the Irrevocable Agreement of Trust of Michael Dunn,
Settlor, dated June 19, 1996, ("Owner").
WITNESSETH THAT:
WHEREAS, Michael Dunn ("Employee") is employed by Corporation; and
WHEREAS, Employee wishes to provide life insurance protection for his
family in the event of the death of him and his wife, under a policy of life
insurance listed on Exhibit "A" attached hereto and made a part hereof
(hereinafter referred to as the "Policy"), which is on the lives of Michael Dunn
and Kathleen Dunn (Metropolitan Life Insurance Company is hereinafter referred
to as the "Insurer", and Michael Dunn and Kathleen Dunn are hereinafter referred
to as the"Insureds"); and
WHEREAS, Corporation has paid and is willing to continue to pay a
portion of the premiums due on the Policy as an additional employment benefit
for the Employee, on the terms and conditions hereinafter set forth; and
WHEREAS, the Owner is the owner of the Policy and, as such, possesses
all incidents of ownership in and to the Policy; and
WHEREAS, Corporation may wish to have the Policy collaterally assigned
to it by Owner, in order to secure the payment of its Policy Interest, as
hereinafter defined; and
WHEREAS, the parties intend that by this Agreement and such collateral
assignment the Corporation shall receive only the right to such repayment with
the Owner retaining all other ownership rights in the Policy; and
WHEREAS, the parties intend that this arrangement shall constitute a
split-dollar agreement as described in Revenue Ruling 64-32~, 1964-2 C.B. 11;
NOW, THEREFORE, in consideration of the premises and of the mutual
promises contained herein, the parties hereto agree as follows:
<PAGE>
1. Definition of Policy Interest. At any time prior to the death of the
survivor of the Insureds, the Corporation's "Policy Interest" with respect to a
Policy is an amount equal to the lesser of (I) the aggregate amount paid by
Corporation prior to the execution of this Agreement and under Article S of this
Agreement towards the premium payments due with respect to each Policy listed on
Exhibit "A" to this Agreement, less any amounts reimbursed by the Owner to the
Corporation prior to or following the execution of this Agreement under such
Article 5, and (ii) an amount equal to the cash surrender value of the Policy as
of the end of the Policy year with respect to which the current premiums are
paid, plus any dividend accumulations and the cash value of any paid up
additions as of the due date of the current premiums.
At any time following the death of the survivor of the Insureds, the
Corporation's "Policy Interest" with respect to a policy is that amount which is
equal to the lesser of (I) the aggregate amount paid by Corporation prior to the
execution of this Agreement and under Article 5 of this Agreement towards the
premium payments due with respect to each Policy listed on Exhibit "A" to this
Agreement, less any amounts reimbursed by the Owner to the Corporation prior to
or following the execution of this Agreement under such Article 5, and (ii) an
amount equal to the cash surrender value of such Policy immediately prior to the
death of the survivor of the Insureds, plus any dividend accumulations and the
cash value of any paid up additions immediately prior to the death of the
survivor of the Insureds.
2. Policy of Insurance. The parties hereto shall take any action which
may be necessary to cause the Policy to conform to the provisions of this
Agreement. The parties hereto agree that the Policy shall be subject to the
terms and conditions of this Agreement and of any collateral assignment filed
with the Insurer relating to the Policy. The terms of this Agreement shall be
applicable to any policy of insurance received in exchange for an interest in
the Policy listed on Exhibit "A" attached hereto, provided all sums available to
the Owner under an old policy are applied to the new policy received in such
exchange. Owner shall notify the Corporation of any such exchange and the terms
Policy hereunder shall thereafter include such new policy.
3. Ownership of Insurance.
a. Owner is the sole and absolute owner of the Policy, and may
exercise all ownership rights granted to the owner thereof by the terms of the
Policy, except as hereinafter provided.
b. It is the intention of the parties to this Agreement and
any collateral assignments executed by Owner to Corporation in connection
herewith that Owner shall retain all rights that the Policy grants to the owner
thereof, except Corporation's
<PAGE>
right to its Policy Interest with respect to the Policy as hereinbefore defined.
Specifically, but without limitation, Corporation shall neither have nor
exercise any right as collateral assignee of the Policy which could in any way
defeat or impair any of the following rights of the Owner:
(1) the right to surrender the Policy;
(2) the right to receive the cash surrender value or
the death proceeds of the Policy in excess of the amount due Corporation
hereunder, if any;
(3) the right to collect from the Insurer any
disability benefit payable in cash that does not reduce the amount of insurance;
(4) the right to designate and change the beneficiary
with respect to the Policy, and the right to elect any optional mode of
settlement permitted by the Policy or allowed by the Insurer;
(5) the right to exercise all non-forfeiture rights
permitted by the terms of the Policy or allowed by the Insurer and to receive
all benefits and advantages derived therefrom;
(6) the right to borrow upon the cash value of the
Policy; and
(7) the right to obtain one or more loans or advances
on the Policy, either from the Insurer or, at any time, from other persons, or
to pledge or assign the Policy as security for such loans or advances.
It is the expressed intention of the parties that this Agreement shall
be construed so that the Corporation has absolutely no incidents of ownership in
the Policy. All provisions of this Agreement and of any collateral assignment
executed in conjunction with this Agreement shall be construed so as to carry
out such intention.
4. Application of Dividends.
a. Dividends declared by Insurers on the Policy shall be
accumulated at interest by Insurer until Owner elects a dividend option and
directs how the accumulated dividends and interest earned thereon shall be
applied.
b. Owner shall elect a dividend option as provided in
Paragraph (a) of this Article, subject to any subsequent assignment of the
Policy.
<PAGE>
5. Premium Payment.
a. Except as otherwise provided herein, on or before the due
date of each Policy premium, or within the grace period provided therein,
Corporation shall pay the full amount of the premium due to each Insurer, and
shall, upon request, promptly furnish Owner evidence of timely payment of such
premium.
b. Thirty (30) days prior to the due date of each premium for
the Policy, Corporation shall notify Owner of the exact amount equal to the
annual cost of current life insurance protection under the Policy on the lives
of the Insureds, measured by the lower of the PS-58 rate, set forth in Revenue
Ruling 55-747 (or the corresponding applicable provision of any future Revenue
Ruling), or the Insurer's current lowest published premium rate for annually
renewable term insurance for standard risks at the ages of the Insureds. Owner
shall pay such amount to Corporation prior to the premium due date. If Owner
shall not make such payment, Corporation shall make Owner's portion of the
premium payment, which payment shall be recovered by Corporation as provided
herein. The Corporation shall annually furnish to the Employee and to the Owner
a statement of the amount of income reportable by the Corporation for federal
and state income tax purposes as a result of such premium payments, indicating
the amount net of any payments by Owner under this Section 5(b), and including
any additional economic benefit to the Employee from this Agreement or the
Policy that is reportable as income for federal and state income tax purposes.
6. Collateral Assignment. To secure the payment to Corporation of its
Policy Interest with respect to the Policy, as hereinbefore defined, Owner will,
upon the request of Corporation, assign the Policy to Corporation as collateral,
under the forms used by Insurer for such assignment, and such collateral
assignment shall specifically limit the right of Corporation thereunder to
payment of its Policy Interest with respect to the Policy. If this Agreement is
terminated, or upon the surrender of the Policy, such payment shall be made from
the cash surrender value of the Policy (as defined therein). Upon the death of
the survivor of the Insureds such payment shall be made from the death proceeds
of the Policy.
In no event shall Corporation have any right to borrow against the
Policy. Any collateral assignment of the Policy to Corporation hereunder shall
not be terminated, altered or amended by Owner, without the express written
consent of Corporation. The parties hereto agree to take all action necessary to
cause any collateral assignment to conform to the provisions of this Agreement.
<PAGE>
7. Owner's Rights in Policy.
a. Owner shall take no action with respect to the Policy,
which would in any way compromise or jeopardize Corporation's right to be paid
its Policy Interest with respect to each Policy, as hereinbefore defined,
without the express written consent of Corporation.
b. Owner shall have the sole right to surrender or cancel the
Policy, and to receive the full cash surrender value of the Policy directly from
Insurer. Upon the surrender or cancellation of the Policy, Corporation shall
have the unqualified right to receive an amount equal to the Policy Interest
with respect to the Policy. Immediately upon receipt of the cash value, Owner
shall pay to Corporation the portion of such cash value to which it is entitled
hereunder, and shall retain the balance, if any.
8. Death of Survivor of Insureds.
a. Upon the death of the survivor of the Insureds, Corporation
and Owner shall promptly take all action necessary to obtain the death benefit
provided under the Policy; when such benefit has been collected and paid as
provided therein, this Agreement shall thereupon terminate.
b. Corporation shall have the unqualified right to receive a
portion of such death benefit received with respect to the Policy equal to its
Policy Interest. The balance of the death benefit provided under the Policy, if
any, shall be paid directly to the beneficiary or beneficiaries designated by
Owner, in the manner and in the amount or amounts provided in the beneficiary
designation provision of the policy. In no event shall the amount payable to
Corporation hereunder exceed the proceeds of the Policy payable at the death of
the survivor of the Insureds. No amount shall be paid from such death benefit to
the beneficiary or beneficiaries designated by Owner until the full amount due
Corporation hereunder has been paid. The parties hereto agree that the
beneficiary designation provisions of the Policy shall not be inconsistent with
the provisions hereof as modified by the collateral assignment.
c. Notwithstanding any provision hereof to the contrary, in
the event that, for any reason whatsoever, no death benefit is payable under the
Policy upon the death of the Employee and in lieu thereof the Insurer refunds
all or any part of the premiums paid for the Policy, the Corporation and the
Owner shall have the unqualified right to share such premiums based on their
respective cumulative contributions thereto.
<PAGE>
9. Termination of Agreement.
a. This Agreement shall terminate, without notice, upon
the occurrence of any one of the following events:
(1) Total cessation of the business of
Corporation; or
(2) Bankruptcy, receivership or dissolution of
Corporation.
b. In addition, either the Owner or the Corporation shall have
the right to terminate this Agreement by written notice to the other party
hereto. Such termination shall be effective as of the date of such notice.
10. Release of Collateral Assignment.
a. For sixty (60) days after the date of the termination of
this Agreement, Owner shall have the option of obtaining the release by
Corporation of any collateral assignment of the Policy. To obtain such release,
Owner shall pay to Corporation the amount of Corporation's Policy Interest in
the policy. Upon receipt of such amount with respect to the Policy, Corporation
shall release the collateral assignment of the Policy, by the execution and
delivery of an appropriate instrument of release.
b. If Owner fails to exercise such option within such sixty
(60) day period, then, at the request of Corporation, Owner shall execute any
document or documents required by the Insurer to transfer the interest of Owner
in the Policy to Corporation.
11. Release of Insurer. Insurer shall be fully discharged form its
obligations with respect to the Policy by payment of the death benefit to the
beneficiary or beneficiaries named in the Policy, subject to the terms and
conditions of the Policy. In no event shall Insurer be considered a party to
this Agreement, or any modification or amendment hereof. No provision of this
Agreement, nor of any subsequent modification or amendment hereof, shall in any
way be construed as enlarging, changing, varying, or in any other way affecting
the obligations of Insurer as expressly provided in the Policy, except insofar
as the provisions hereof are made a part of the Policy by any collateral
assignment executed by Owner and filed with the Insurer in connection herewith.
12. Fiduciary
a. Corporation is hereby designated as the named fiduciary
under this Agreement. The named fiduciary shall have authority to control and
manage the operation and administration
<PAGE>
of this Agreement, and it shall be responsible for establishing and carrying out
a funding policy and method consistent with the objectives hereof.
b. Corporation shall make all determinations concerning rights
to benefits hereunder. Any decision by Corporation denying a claim by Owner or a
designated beneficiary for benefits hereunder shall be stated in writing and
delivered or mailed to Owner or such beneficiary. Such decision shall set forth
the specific reasons for the denial, written to the best of Corporation's
ability in a manner that may be understood without legal or actuarial counsel.
In addition, Corporation shall afford a reasonable opportunity to Owner or such
beneficiary for a full and fair review of the decision denying such claim.
13. Amendment. This Agreement may not be amended, altered or modified,
except by a written instrument signed by the parties hereto, or their respective
sucessors or assigns, and may not be otherwise terminated except as provided
herein.
14. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of Corporation, Employee, Insureds and Owner, and their respective
successors, assigns, heirs, executors, administrators and beneficiaries.
15. Notice. Any notice, consent or demand required or permitted to be
given under provisions of this Agreement shall be in writing, and shall be
signed by the party giving or making the same. If such notice, consent or demand
is mailed to a party hereto, it shall be sent by United States certified mail,
postage prepaid, addressed to such party's last known address as shown on the
records of Corporation. The date of such mailing shall be deemed the date of
notice, consent or demand.
16. Governing Law. This Agreement and the rights of the parties
hereunder, shall be governed by and construed in accordance with the laws of the
Commonwealth of Pennsylvania.
17. Captions. The captions appearing in this Agreement are for
convenience only, and do not in any way define, limit or describe the scope of
this Agreement, or the intent of any provision thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement, in
duplicate, as of the day and year first above written.
ATTEST: JUDGE INC.
- ---------------------------------- -----------------------------------
Secretary Title:
- ---------------------------------- -----------------------------------
Witness D.Michael Carmody, Trustee Under
Agreement of Trust dated
June 19, 1996 of
Michael Dunn, Settlor
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is being made effective the second day of October, 1995,
by and between JUDGE COMPUTER CORPORATION (hereinafter referred to as
"Employer") and WENDY GREENBERG (hereinafter referred to as "Employee"),
intending to be legally bound hereby.
B A C K G R O U N D
A. Employer is a corporation, organized and existing under the laws of
the State of New Jersey engaged in the business of the sale of computers,
computer supplies, and parts and services, with its principal place of business
located at 102 Executive Drive, Suite 7, Moorestown, New Jersey 08057.
B. Employee is an individual residing at 137 Washington Avenue,
Havertown, Pennsylvania 19083.
C. Employee, as of the date of this Agreement, is presently employed by
Employer pursuant to an Employment Agreement dated July 1, 1993. Pursuant to
that Agreement, Employee received grants of 120,000 shares of the Employer's
common stock and was to receive additional stock grants. Employer has agreed to
accelerate the grant of 80,000 shares of common stock as of the effective date
of this Agreement in return for the execution by Employee of this Agreement.
Both parties acknowledge that the acceleration of the stock grant reflects
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<PAGE>
adequate consideration for the obligations and covenants contained herein.
D. The parties are desirous of providing for the rights and obligations
of Employer and Employee hereunder and for the growth and future stability of
Employer's business and in setting forth in writing their agreement with respect
thereto.
TERMS
1. Employment and Duties.
(a) Employer has employed Employee as President of Judge Computer
Corporation, with such specific authority and obligations as are assigned to
Employee by Employer from time to time. Generally, Employee's authority and
obligations in this capacity shall encompass all of the usual and ordinary
activities incidental to a President of a well-organized business similar to
Employer's and such specific authority and responsibilities as are delegated to
her from time to time by the Employer.
(b) Employee shall devote all of her time, energy, skill and
experience to the performance of her duties during the working hours as
established by regulation or custom of Employer from time to time, and shall not
during the term of this Agreement engage in any other business which would
interfere with the performance of the duties as are assigned to her.
(c) Employee, without the express consent of Employer, shall have no
apparent or implied authority to pledge the credit
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<PAGE>
of Employer; bind the Employer under any contract, note, mortgage or other
agreement outside the ordinary course of Employer's business; release or
discharge any debt due Employer; or sell, mortgage, transfer or otherwise
dispose of any assets of Employer.
(d) Employee's responsibilities and obligations shall include, but
not be limited to those described in Schedule A.
(e) Employee acknowledges that Employer anticipates merging with and
into DataImage, Inc. and Employee agrees to the substitution of the surviving
corporation of that merger as the Employer under this Agreement upon the Closing
of such merger between Employer and DataImage, Inc.
2. Compensation and Benefits.
Employee shall receive in consideration of the performance of her
obligations under this Agreement, compensation as set forth in Schedule A.
Compensation shall be reviewed and may be adjusted from time to time as
justified by Employee's performance and as permitted or required by Employer's
financial condition. Adjustments in compensation and the award of additional
benefits, if any, shall be completely within the discretion of Employer.
3. Prior Agreements.
Employee acknowledges that she neither holds nor claims any stock
options, warrants, grants or rights of any kind whatsoever for any shares of
Employer's stock other than the 200,000 shares of common stock referred to
above.
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<PAGE>
4. Term and Termination.
(a) Employee's employment under this Agreement shall extend for a
period of four (4) years from the date of this Agreement, subject to Paragraphs
4(b) and 4(c).
(b) Employee's employment hereunder may be terminated by Employer
without prior notice, at any time during the term hereof, but only for cause.
"Cause" shall include any of the following:
(i) Theft, misappropriation, misuse or embezzlement of
Employer's assets;
(ii) Conviction of a first degree misdemeanor or felony;
(iii) Failure of Employee to render adequate performance of her
duties under this Agreement despite written warning and
reasonable opportunity to correct such deficiencies; or
(iv) Insubordination, failure or refusal to carry out
instructions of supervisors, or the failure of Employee to
conform to accepted business or professional standards.
(c) Employee's employment hereunder shall also be terminated by her
death or disability which prevents Employee from performing her duties hereunder
for a period in excess of forty-five (45) working days in any given year (not
including permitted leave, vacation, or sick days).
(d) Employee's employment under this Agreement shall not terminate
upon the expiration date in the absence of written notice by either party to the
other at least thirty (30) days prior thereto. In such event, Employee's
employment and all the
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<PAGE>
terms and conditions of this Agreement shall continue for an additional period
of one (1) year and so on from year to year until the giving of such written
notice.
5. Stock Grant.
As of the effective date hereof, Employer has granted to Employee
80,000 shares of its common stock.
6. Inventions and Improvements.
Employee will promptly disclose to Employer all ideas, processes,
trademarks, inventions and improvements coming within the scope of the
Employer's business or relating to any experimental work carried on by the
Employer or to any problems specifically assigned to the Employee, conceived by
her alone or with others during the term of this Agreement, and whether or not
conceived during regular working hours. All such ideas, processes, trademarks,
inventions and improvements shall be the sole and exclusive property of the
Employer. In the event any such idea, process, invention or improvement shall be
deemed by the Employer to the patentable, the Employee shall, at the expense of
the Employer, assist the Employer to obtain a patent or patents thereon and
execute all documents and do all things necessary or proper to obtain letters
patent and to vest the Employer with full title thereto. Without diminishing
Employer's rights as set forth in this paragraph, Employee shall be granted due
acknowledgment for the part said Employee plays in these activities.
-5-
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<PAGE>
7. Restrictive Covenant.
(a) Employee, because of the nature of her responsibilities will in
the course of time acquire valuable information and skill with respect to the
business operations of Employer and its trade secrets, including by way of
illustration but not limitation:
customer and client lists and information with respect
thereto, work methods, pricing formulas, forms of agreements and contracts used
in business operations, advertising and marketing methods and techniques,
scheduling and customer relations.
(b) It is further recognized that Employer will suffer irreparable
injury if any of its trade secrets, as illustrated but not limited to those
referred to in subparagraph (a) above, are obtained by any competing person or
entity or should Employee compete with Employer.
(c) Employee shall not during the term of her employment, directly
or indirectly, become engaged in any business in competition with Employer's
business.
(d) Employee recognizes and acknowledges that Employer's trade
secrets as referred to above together with all written or recorded records
applicable thereto, are valuable, special and unique assets of Employer's
business. Employee will not, during or after the term of her employment,
directly or indirectly divulge or disclose any information with regard to such
trade secrets or the written or recorded materials pertinent thereto, to any
person, firm, corporation, association or other
-6-
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<PAGE>
entity for any reason or purpose whatsoever. Employee further covenants that she
will not at any time remove or otherwise appropriate any written or recorded
information containing trade secrets or any written records pertinent thereto or
the contents thereof from Employer's premises unless specifically approved by
Employer in advance, for a specified temporary period.
(e) For a period of one (1) year from the expiration date of this
Agreement, as extended pursuant to Paragraph 4(d), or the termination of
Employee's employment by Employee or Employer, Employee shall not within a 200
mile radius of any office of Employer, directly or indirectly, own, manage,
operate, control, be employed by, consult with, participate in, or be connected
in any manner with the ownership, management, operation, or control of any
business which designs, manufactures, and/or sells computers, their parts,
supplies, or servicing parts or which in any way competes with the business
operations of Employer as conducted at the time of termination or expiration of
Employee's employment. Employee further covenants that subsequent to termination
of her employment she will not at any time contact or solicit any of Employer's
customers for the purpose of inducing them to terminate their relationship with
Employer and/or commence such a relationship with Employee or any business which
employs, directly or indirectly, Employee or which Employee, directly or
indirectly owns, manages, operates, is employed by, consults with, participates
in or is connected with in any manner. Employee may work directly or indirectly
with a
-7-
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<PAGE>
distributor, vendor or client so long as the distributor, vendor or client is
not directly or indirectly in competition with the Employer.
(f) During or subsequent to the expiration of this Agreement or the
termination of Employee's employment by either party for any reason, Employee
shall not contact, solicit or attempt to contact or solicit any person who is
employed by Employer at the time of the termination of employment for the
purpose of inducing them to terminate their employment with Employer and/or
accept employment with Employee or any business which employs, directly or
indirectly, Employee, or which Employee directly or indirectly, owns, manages,
operates, is employed by, consults with, participates in or is connected with in
any manner.
(g) Both parties agree that the breach of this restrictive covenant
by Employee will cause irreparable harm and injury to Employer and that the only
effective and adequate remedy available to Employer for such breach is by
injunctive relief both preliminary and final and both parties agree to the
jurisdiction of the equitable powers of the appropriate court to obtain such
relief. The parties further agree that the restrictive covenant set forth herein
shall extend for a period of time equal to any period of time during which the
Employee is in violation of its provisions.
(h) Notwithstanding the equitable relief available to Employer, both
parties, in the event of the breach of this
-8-
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<PAGE>
covenant, understand and agree that the uncertainties and delay inherent in
legal process would result in a continuing breach for some period of time, and
therefore, continuing injury to Employer until and unless it can obtain such
equitable relief. Therefore, Employer shall be entitled to monetary damages for
any said period of breach until the termination of such breach, equitable relief
or the expiration of this covenant, in an amount deemed reasonable by the Court
to cover all actual losses, all monies received by Employee as a result of said
breach, and all costs and attorney's fees incurred by Employer in enforcing this
Agreement. In the event Employee should use or reveal to any other person or
entity Employer trade secrets, this will be considered a continuing violation on
a daily basis for so long a period of time as such list or the contents thereof
are made use of by Employee or any other person or entity.
(i) It is agreed by Employer and Employee that if any portion of
this restrictive covenant is held by a court to be unreasonable, arbitrary or
against public policy, the covenant not to compete may be construed to be
divisible both as to time and geographical area; and, each month of the
specified period shall be deemed to be a separate period of time, and each
municipality in the restricted area shall be deemed to be a separate
geographical area, so that the maximum lesser period and area shall remain
effective so long as the time or area is not determined to be unreasonable,
arbitrary or against public policy.
-9-
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<PAGE>
8. Binding Effect.
This Agreement shall be binding upon and the benefits shall
accrue to the parties hereto, their respective heirs, administrators, successors
and assigns.
9. Waiver.
The waiver by Employer of the breach of any provision of this Agreement
by Employee shall not operate or be construed as a waiver of any subsequent
breach by Employee.
10. Entire Agreement.
This Agreement contains the entire agreement of the parties. It may not
be changed orally but only by an agreement in writing signed by the party
against whom enforcement of any such change, waiver, modification, construction,
extension or discharge is sought. Notwithstanding the foregoing, this Agreement
shall not be construed to supersede or terminate Sections 5 or 6 of the
Employment Contract dated July 1, 1993 which shall continue in full force and
effect.
11. Provisions Severable.
All of the provisions of this Agreement are distinct and severable, and
if any provisions should, for any reason, be held to be invalid or
unenforceable, then the valid and enforceable provisions hereof shall continue
in full force and effect.
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<PAGE>
12. Headings.
The headings preceding the paragraphs of this Agreement are intended
solely for convenience in reference and form no part of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have set their hands and seals the day and year first above written.
EMPLOYER:
JUDGE COMPUTER CORPORATION
Attest:____________________ By:____________________________
, Secretary
EMPLOYEE:
--------------------------------
WENDY GREENBERG
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<PAGE>
SCHEDULE "A"
TO
EMPLOYMENT AGREEMENT BETWEEN
JUDGE COMPUTER CORPORATION
AND
WENDY GREENBERG
1. SALARY
Employee shall be entitled to a salary in the amount of $100,000.00 per year.
2. VACATION
Employee shall be entitled to three (3) weeks annually for vacation.
3. WORKING HOURS
8:30 - 5:00
4. RESPONSIBILITIES AND OBLIGATIONS
SCHEDULE "A"
BE:28699_1.WP5
<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is being made effective the 1st day of May, 1996, by and between
JUDGE IMAGING SYSTEMS, INC. (hereinafter referred to as "Employer") and Jeff
Andrews (hereinafter referred to as "Employee"), intending to be legally bound
hereby.
BACKGROUND
A. Employer is a corporation, organized and existing under the laws of
the State of Delaware engaged in the business of the sale of computers, computer
supplies, and parts and services, with its principal place of business located
at 2 Bala Plaza, Suite 800, Bala Cynwyd, PA 19004.
B. Employee is an individual residing at 580 Woodland Drive, Radnor, PA
19087.
C. The parties are desirous of providing for the rights and obligations
of Employer and Employee hereunder and for the growth and future stability of
Employer's business and is setting forth in writing their agreement with respect
hereto.
TERMS
1. Employment and Duties.
(a) Employer has employed Employee as Chief Financial Officer, with such
specific authority and obligations as are assigned to Employee by Employer from
time to time. Generally, Employee's authority and obligations in this capacity
shall encompass all of the usual and ordinary activities incidental to
BE:28699_1.WP5
<PAGE>
a Chief Financial Officer of a well organized business similar to Employer's and
such specific authority and responsibilities as are delegated to
him from time to time by the Employer.
(b) Employee shall devote all of his time, energy, skill and experience to
the performance of his duties during the working hours as established by
regulation or custom of Employer from time to time, and shall not during the
term of this Agreement engage in any other business which would interfere with
the performance of the duties as are assigned to him.
(c) Employee, without the express consent of Employer, shall have no apparent
or implied authority to pledge the credit of Employer; bind the Employer under
any contract, note, mortgage or other agreement outside the ordinary course of
Employer's business; release or discharge any debt due Employer; or sell,
mortgage, transfer or otherwise dispose of any assets of Employer.
(d) Employee's responsibilities and obligations shall include, but not be
limited to those described in Schedule A.
2. Compensation and Benefits.
Employee shall receive in consideration of the performance of his obligations
under this Agreement, compensation as set forth in Schedule A. Compensation
shall be reviewed and may be adjusted from time to time as justified by
Employee's performance and as permitted or required by Employer's financial
condition. Adjustments in compensation and the award of
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<PAGE>
additional benefits, if any, shall be completely within the discretion of
Employer.
3. Term and Termination.
(a) Employee's employment under this agreement shall extend for a period
of ______ years from the date of this Agreement, subject to Paragraphs 3(b) and
3(c).
(b) Employee's employment hereunder may be terminated by Employer without
prior notice, at any time during the term hereof, but only for cause. "Cause"
shall include any of the following:
(i) Theft, misappropriation, misuse or embezzlement of
Employer's assets;
(ii) Conviction of a first degree misdemeanor or felony;
(iii) Failure of Employee to render adequate performance of his duties
under this agreement despite written warning and reasonable
opportunity to correct such deficiencies; or
(iv) Insubordination, failure or refusal to carry out instructions of
supervisors, or the failure of Employee to conform to accepted
business or professional standards.
(c) Employee's employment hereunder shall also be terminated by his death
or disability which prevents Employee from performing his duties hereunder for a
period in excess of forty-five (45) working days in any given year (not
including permitted leave, vacation, or sick days).
(d) Employee's employment under this Agreement shall not terminate upon
the expiration date in the absence
of written notice by either party to the other at least thirty (30) days
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<PAGE>
prior thereto. In such event, Employee's employment and all the terms and
conditions of this Agreement shall continue for an additional period of one (1)
year and so on from year to year until the giving of such written notice.
4. Inventions and Improvements.
Employee will promptly disclose to Employer all ideas, processes, trademarks,
inventions and improvements coming within the scope of the Employer's business
or relating to any experimental work carried on by the Employer or to any
problems specifically assigned to the Employee, conceived by him alone or with
others during the term of this Agreement, and whether or not conceived during
regular working hours. All such ideas, processes, trademarks, inventions, and
improvements shall be the sole and exclusive property of the Employer. In the
event any such idea, process, invention, or improvement shall be deemed by the
Employer to the patentable, the Employee shall, at the expense of the Employer,
assist the Employer to obtain a patent or patents thereon and execute all
documents and do all things necessary or proper to obtain letters patent and to
vest the Employer with full title thereto. Without diminishing Employer's rights
as set forth in this paragraph, Employee shall be granted due acknowledgment for
the part said Employee plays in these activities.
5. Restrictive Covenant.
(a) Employee, because of the nature of his responsibilities will in the
course of time acquire valuable
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<PAGE>
information and skill with respect to the business operations of Employer and
its trade secrets, including by way of illustration but not limitation:
customer and client lists and information with respect thereto, work
methods, pricing, formulas, forms of agreements and contracts used in business
operations, advertising and marketing methods and techniques, scheduling and
customer relations, financial statements and analysis reports.
(b) It is further recognized that Employer will suffer irreparable injury
if any of its trade secrets, as illustrated but not limited to those referred to
in subparagraph (a) above, are obtained by any competing person or entity or
should employee compete with Employer.
(c) Employee shall not during the term of his employment, directly or
indirectly, become engaged in any business in competition with Employer's
business.
(d) Employee recognizes and acknowledges that Employer's trade secrets as
referred to above together with all written or recorded records applicable
thereto, are valuable, special and unique assets of Employer's business.
Employee will not, during or after the term of his employment, directly or
indirectly divulge or disclose any information with regard to such trade secrets
or the written or recorded material pertinent thereto, to any person, firm,
corporations, associations or other entity for any reason or purpose whatsoever.
Employee further covenants that he will not at any time remove or otherwise
appropriate any
-5-
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<PAGE>
written or recorded information containing trade secrets or any written records
pertinent thereto or the contents thereof from Employer's premises unless
specifically approved by Employer in advance, for a specified temporary period.
(e) For a period of one (1) year from the expiration date of this
Agreement, as extended pursuant to Paragraph 4(d), or the termination of
Employee's employment by Employee or Employer, Employee shall not within a 200
mile radius of any office of Employer, directly or indirectly, own, manage,
operate, control, be employed by, consult with, participate in, or be connected
in any manner with the ownership, management, operation, or control of any
business which designs, manufactures, and/or sells computers, their parts,
supplies, or servicing parts or which in any way competes with the business
operations of Employer as conducted at the time of termination or expiration of
Employee's employment. Employee further covenants that subsequent to termination
of his employment he will not at any time contact or solicit any of Employer's
customers for the purpose of inducing them to terminate their relationship with
Employer and/or commence such a relationship with Employee or any business which
employs, directly or indirectly, Employee or which Employee, directly or
indirectly owns, manages, operates, is employed by, consults with, participates
in or is connected with in any manner. Employee may work directly or indirectly
with a distributor, vendor or client so long as the distributor, vendor
-6-
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<PAGE>
or client is not directly or indirectly in competition with the
Employer.
(f) During or subsequent to the expiration of this Agreement or the
termination of Employee's employment by either party for any reason, Employee
shall not contact, solicit or attempt to contact or solicit any person who is
employed by Employer at the time of the termination of employment for the
purpose of inducing them to terminate their employment with Employer and/or
accept employment with Employee or any business which employs, directly or
indirectly, Employee, or which Employee directly or indirectly, owns, manages,
operates, is employed by, consults with, participates in or is connected with in
any manner.
(g) Both parties agree that the breach of this restrictive covenant by
Employee will cause irreparable harm and injury to Employer and that the only
effective and adequate remedy available to Employer for such breach is by
injunctive relief both preliminary and final and both parties agree to the
jurisdiction of the equitable powers of the appropriate court to obtain such
relief. The parties further agree that the restrictive covenant set forth herein
shall extend for a period of time equal to any period of time during which the
Employee is in violation of its provisions.
(h) Notwithstanding the equitable relief available to Employer, both
parties, in the event of the breach of this covenant, understand and agree that
the uncertainties and delay
-7-
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<PAGE>
inherent in legal process would result in a continuing breach for some period of
time, and therefore, continuing injury to Employer until and unless it can
obtain such equitable relief.
Therefore, Employer shall be entitled to monetary damages for any said
period of breach until the termination of such breach, equitable relief or the
expiration of this covenant, in an amount deemed reasonable by the Court to
cover all actual losses, all monies received by Employee as a result of said
breach, and all costs and attorney's fees incurred by Employer in enforcing this
Agreement. In the event Employee should use or reveal to any other person or
entity Employer trade secrets, this will be considered a continuing violation on
a daily basis for so long a period of time as such list or the contents thereof
are made use of by Employee or any other person or entity.
(i) It is agreed by Employer and Employee that if any portion of this
restrictive covenant is held by a court to be unreasonable, arbitrary or against
public policy, the covenant not to compete may be construed to be divisible both
as to time and geographical area; and, each month of the specified period shall
be deemed to be a separate period of time, and each municipality in the
restricted area shall be deemed to be a separate geographical area, so that the
maximum lesser period and area shall remain effective so long as the time or
area is not determined to be unreasonable, arbitrary or against public policy.
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<PAGE>
6. Binding Effect.
This Agreement shall be binding upon and the benefits shall accrue to the
parties hereto, their respective heirs, administrators, successors and assigns.
7. Waiver.
The waiver by Employer of the breach of any provision of this Agreement by
Employee shall not operate or be construed as a waiver of any subsequent breach
by Employee.
8. Entire Agreement.
This Agreement contains the entire agreement of the parties. It may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any such change, waiver, modifications, construction,
extension or discharge is sought.
9. Provisions Severable.
All of the provisions of this Agreement are distinct and severable, and if
any provisions should, for any reason, be held to be invalid or unenforceable,
then the valid and enforceable provisions hereof shall continue in full force
and effect.
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<PAGE>
10. Headings.
The headings preceding the paragraphs of this Agreement are intended solely
for convenience in reference and form no part of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have set their hands and seals the day and year first above written.
EMPLOYER:
JUDGE IMAGING SYSTEMS, INC.
Attest:_____________________ By:______________________________
, Secretary
EMPLOYEE:
----------------------------------
JEFF ANDREWS
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<PAGE>
Schedule A
CORPORATION: JIS
DIVISION: JIS
NAME: Jeffrey Andrews
START DATE: May 1, 1996
EFFECTIVE DATE: May 1, 1996
TITLE: Chief Financial Officer
SALARY: $3,125 per semi-monthly pay period (Based on
annual salary of $75,000)
COMMISSION: N/A
EMPLOYMENT
AGREEMENT: Signed
BENEFITS: Vacation: 2 weeks for 1996
Medical: Eligible on June 1, 1996
401K: Participation after 1 year of
service
Additional: Cafeteria Plan
REVIEW: Performance and compensation review six months
from start date (November 1, 1996) then yearly
from that date (November 1, 1997, etc.)
REMARKS: This agreement may be terminated at any time by
either party.
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<PAGE>
EMPLOYMENT AGREEMENT
THIS AGREEMENT is being made effective the 1st day of May, 1996, by and between
JUDGE IMAGING SYSTEMS, INC. (hereinafter referred to as "Employer") and Jeff
Andrews (hereinafter referred to as "Employee"), intending to be legally bound
hereby.
BACKGROUND
A. Employer is a corporation, organized and existing under the laws of
the State of Delaware engaged in the business of the sale of computers, computer
supplies, and parts and services, with its principal place of business located
at 2 Bala Plaza, Suite 800, Bala Cynwyd, PA 19004.
B. Employee is an individual residing at 580 Woodland Drive, Radnor, PA
19087.
C. The parties are desirous of providing for the rights and obligations
of Employer and Employee hereunder and for the growth and future stability of
Employer's business and is setting forth in writing their agreement with respect
hereto.
TERMS
1. Employment and Duties.
(a) Employer has employed Employee as Chief Financial Officer, with such
specific authority and obligations as are assigned to Employee by Employer from
time to time. Generally, Employee's authority and obligations in this capacity
shall encompass all of the usual and ordinary activities incidental to
BE:28699_1.WP5
<PAGE>
a Chief Financial Officer of a well organized business similar to Employer's and
such specific authority and responsibilities as are delegated to
him from time to time by the Employer.
(b) Employee shall devote all of his time, energy, skill and experience to
the performance of his duties during the working hours as established by
regulation or custom of Employer from time to time, and shall not during the
term of this Agreement engage in any other business which would interfere with
the performance of the duties as are assigned to him.
(c) Employee, without the express consent of Employer, shall have no apparent
or implied authority to pledge the credit of Employer; bind the Employer under
any contract, note, mortgage or other agreement outside the ordinary course of
Employer's business; release or discharge any debt due Employer; or sell,
mortgage, transfer or otherwise dispose of any assets of Employer.
(d) Employee's responsibilities and obligations shall include, but not be
limited to those described in Schedule A.
2. Compensation and Benefits.
Employee shall receive in consideration of the performance of his obligations
under this Agreement, compensation as set forth in Schedule A. Compensation
shall be reviewed and may be adjusted from time to time as justified by
Employee's performance and as permitted or required by Employer's financial
condition. Adjustments in compensation and the award of
-2-
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additional benefits, if any, shall be completely within the discretion of
Employer.
3. Term and Termination.
(a) Employee's employment under this agreement shall extend for a period
of ______ years from the date of this Agreement, subject to Paragraphs 3(b) and
3(c).
(b) Employee's employment hereunder may be terminated by Employer without
prior notice, at any time during the term hereof, but only for cause. "Cause"
shall include any of the following:
(i) Theft, misappropriation, misuse or embezzlement of
Employer's assets;
(ii) Conviction of a first degree misdemeanor or felony;
(iii) Failure of Employee to render adequate performance of his duties
under this agreement despite written warning and reasonable
opportunity to correct such deficiencies; or
(iv) Insubordination, failure or refusal to carry out instructions of
supervisors, or the failure of Employee to conform to accepted
business or professional standards.
(c) Employee's employment hereunder shall also be terminated by his death
or disability which prevents Employee from performing his duties hereunder for a
period in excess of forty-five (45) working days in any given year (not
including permitted leave, vacation, or sick days).
(d) Employee's employment under this Agreement shall not terminate upon
the expiration date in the absence
of written notice by either party to the other at least thirty (30) days
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prior thereto. In such event, Employee's employment and all the terms and
conditions of this Agreement shall continue for an additional period of one (1)
year and so on from year to year until the giving of such written notice.
4. Inventions and Improvements.
Employee will promptly disclose to Employer all ideas, processes, trademarks,
inventions and improvements coming within the scope of the Employer's business
or relating to any experimental work carried on by the Employer or to any
problems specifically assigned to the Employee, conceived by him alone or with
others during the term of this Agreement, and whether or not conceived during
regular working hours. All such ideas, processes, trademarks, inventions, and
improvements shall be the sole and exclusive property of the Employer. In the
event any such idea, process, invention, or improvement shall be deemed by the
Employer to the patentable, the Employee shall, at the expense of the Employer,
assist the Employer to obtain a patent or patents thereon and execute all
documents and do all things necessary or proper to obtain letters patent and to
vest the Employer with full title thereto. Without diminishing Employer's rights
as set forth in this paragraph, Employee shall be granted due acknowledgment for
the part said Employee plays in these activities.
5. Restrictive Covenant.
(a) Employee, because of the nature of his responsibilities will in the
course of time acquire valuable
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information and skill with respect to the business operations of Employer and
its trade secrets, including by way of illustration but not limitation:
customer and client lists and information with respect thereto, work
methods, pricing, formulas, forms of agreements and contracts used in business
operations, advertising and marketing methods and techniques, scheduling and
customer relations, financial statements and analysis reports.
(b) It is further recognized that Employer will suffer irreparable injury
if any of its trade secrets, as illustrated but not limited to those referred to
in subparagraph (a) above, are obtained by any competing person or entity or
should employee compete with Employer.
(c) Employee shall not during the term of his employment, directly or
indirectly, become engaged in any business in competition with Employer's
business.
(d) Employee recognizes and acknowledges that Employer's trade secrets as
referred to above together with all written or recorded records applicable
thereto, are valuable, special and unique assets of Employer's business.
Employee will not, during or after the term of his employment, directly or
indirectly divulge or disclose any information with regard to such trade secrets
or the written or recorded material pertinent thereto, to any person, firm,
corporations, associations or other entity for any reason or purpose whatsoever.
Employee further covenants that he will not at any time remove or otherwise
appropriate any
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<PAGE>
written or recorded information containing trade secrets or any written records
pertinent thereto or the contents thereof from Employer's premises unless
specifically approved by Employer in advance, for a specified temporary period.
(e) For a period of one (1) year from the expiration date of this
Agreement, as extended pursuant to Paragraph 4(d), or the termination of
Employee's employment by Employee or Employer, Employee shall not within a 200
mile radius of any office of Employer, directly or indirectly, own, manage,
operate, control, be employed by, consult with, participate in, or be connected
in any manner with the ownership, management, operation, or control of any
business which designs, manufactures, and/or sells computers, their parts,
supplies, or servicing parts or which in any way competes with the business
operations of Employer as conducted at the time of termination or expiration of
Employee's employment. Employee further covenants that subsequent to termination
of his employment he will not at any time contact or solicit any of Employer's
customers for the purpose of inducing them to terminate their relationship with
Employer and/or commence such a relationship with Employee or any business which
employs, directly or indirectly, Employee or which Employee, directly or
indirectly owns, manages, operates, is employed by, consults with, participates
in or is connected with in any manner. Employee may work directly or indirectly
with a distributor, vendor or client so long as the distributor, vendor
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or client is not directly or indirectly in competition with the
Employer.
(f) During or subsequent to the expiration of this Agreement or the
termination of Employee's employment by either party for any reason, Employee
shall not contact, solicit or attempt to contact or solicit any person who is
employed by Employer at the time of the termination of employment for the
purpose of inducing them to terminate their employment with Employer and/or
accept employment with Employee or any business which employs, directly or
indirectly, Employee, or which Employee directly or indirectly, owns, manages,
operates, is employed by, consults with, participates in or is connected with in
any manner.
(g) Both parties agree that the breach of this restrictive covenant by
Employee will cause irreparable harm and injury to Employer and that the only
effective and adequate remedy available to Employer for such breach is by
injunctive relief both preliminary and final and both parties agree to the
jurisdiction of the equitable powers of the appropriate court to obtain such
relief. The parties further agree that the restrictive covenant set forth herein
shall extend for a period of time equal to any period of time during which the
Employee is in violation of its provisions.
(h) Notwithstanding the equitable relief available to Employer, both
parties, in the event of the breach of this covenant, understand and agree that
the uncertainties and delay
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<PAGE>
inherent in legal process would result in a continuing breach for some period of
time, and therefore, continuing injury to Employer until and unless it can
obtain such equitable relief.
Therefore, Employer shall be entitled to monetary damages for any said
period of breach until the termination of such breach, equitable relief or the
expiration of this covenant, in an amount deemed reasonable by the Court to
cover all actual losses, all monies received by Employee as a result of said
breach, and all costs and attorney's fees incurred by Employer in enforcing this
Agreement. In the event Employee should use or reveal to any other person or
entity Employer trade secrets, this will be considered a continuing violation on
a daily basis for so long a period of time as such list or the contents thereof
are made use of by Employee or any other person or entity.
(i) It is agreed by Employer and Employee that if any portion of this
restrictive covenant is held by a court to be unreasonable, arbitrary or against
public policy, the covenant not to compete may be construed to be divisible both
as to time and geographical area; and, each month of the specified period shall
be deemed to be a separate period of time, and each municipality in the
restricted area shall be deemed to be a separate geographical area, so that the
maximum lesser period and area shall remain effective so long as the time or
area is not determined to be unreasonable, arbitrary or against public policy.
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<PAGE>
6. Binding Effect.
This Agreement shall be binding upon and the benefits shall accrue to the
parties hereto, their respective heirs, administrators, successors and assigns.
7. Waiver.
The waiver by Employer of the breach of any provision of this Agreement by
Employee shall not operate or be construed as a waiver of any subsequent breach
by Employee.
8. Entire Agreement.
This Agreement contains the entire agreement of the parties. It may not be
changed orally but only by an agreement in writing signed by the party against
whom enforcement of any such change, waiver, modifications, construction,
extension or discharge is sought.
9. Provisions Severable.
All of the provisions of this Agreement are distinct and severable, and if
any provisions should, for any reason, be held to be invalid or unenforceable,
then the valid and enforceable provisions hereof shall continue in full force
and effect.
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<PAGE>
10. Headings.
The headings preceding the paragraphs of this Agreement are intended solely
for convenience in reference and form no part of this Agreement.
IN WITNESS WHEREOF, the parties hereto, intending to be legally bound
hereby, have set their hands and seals the day and year first above written.
EMPLOYER:
JUDGE IMAGING SYSTEMS, INC.
Attest:_____________________ By:______________________________
, Secretary
EMPLOYEE:
----------------------------------
JEFF ANDREWS
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<PAGE>
Schedule A
CORPORATION: JIS
DIVISION: JIS
NAME: Jeffrey Andrews
START DATE: May 1, 1996
EFFECTIVE DATE: May 1, 1996
TITLE: Chief Financial Officer
SALARY: $3,125 per semi-monthly pay period (Based on
annual salary of $75,000)
COMMISSION: N/A
EMPLOYMENT
AGREEMENT: Signed
BENEFITS: Vacation: 2 weeks for 1996
Medical: Eligible on June 1, 1996
401K: Participation after 1 year of
service
Additional: Cafeteria Plan
REVIEW: Performance and compensation review six months
from start date (November 1, 1996) then yearly
from that date (November 1, 1997, etc.)
REMARKS: This agreement may be terminated at any time by
either party.
BE:28699_1.WP5
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
To the Board of Directors
The Judge Group, Inc.
Bala Cynwyd, Pennsylvania
We consent to the use of our report included herein and to the references to our
firm under the headings 'Selected Consolidated Financial Data' and 'Experts' in
the prospectus.
/s/ Rudolph, Palitz LLP
Plymouth Meeting, Pennsylvania
September 30, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JUN-30-1996
<PERIOD-START> MAR-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 7,578
<SECURITIES> 0
<RECEIVABLES> 2,135,494
<ALLOWANCES> 20,000
<INVENTORY> 679,366
<CURRENT-ASSETS> 3,017,844
<PP&E> 439,957
<DEPRECIATION> 49,880
<TOTAL-ASSETS> 3,477,404
<CURRENT-LIABILITIES> 1,919,656
<BONDS> 1,467,451
1,520,000
8,266
<COMMON> 39,801
<OTHER-SE> (1,477,730)
<TOTAL-LIABILITY-AND-EQUITY> 3,477,404
<SALES> 3,685,156
<TOTAL-REVENUES> 3,685,156
<CGS> 2,663,126
<TOTAL-COSTS> 3,771,398
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 10,000
<INTEREST-EXPENSE> 42,632
<INCOME-PRETAX> (128,874)
<INCOME-TAX> 0
<INCOME-CONTINUING> (185,574)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (185,574)
<EPS-PRIMARY> ($.05)
<EPS-DILUTED> ($.05)
</TABLE>
