UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
COMMISSION FILE NO. 0-21963
THE JUDGE GROUP, INC.
(Exact name of registrant as specified in its charter)
PENNSYLVANIA 23-1726661
(State or other jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
TWO BALA PLAZA, SUITE 405
BALA CYNWYD, PENNSYLVANIA 19004
(Address of principal executive offices, including zip code)
(610) 667-7700
(Registrant's telephone number, including area code)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark if registrant has filed all documents and reports
required to be filed by Section 12, 13 or 15(d) of the Securities Exchange Act
of 1934 subsequent to the distribution of securities under a plan confirmed by a
court. Yes____ No_____
As of November 12, 1997, 13,344,239 shares of the Registrant's Common
Stock, $0.01 par value, were outstanding.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
INDEX TO FINANCIAL STATEMENTS
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE(S)
-------
<S> <C>
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS AS OF SEPTEMBER 30, 1997 3
AND DECEMBER 31, 1996
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE 4
MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE 5
MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY FOR THE 6
NINE MONTHS ENDED SEPTEMBER 30, 1997
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE NINE 7
MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS 8-15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND 16-21
RESULTS OF OPERATIONS
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 21
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 22
</TABLE>
2
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
CONDENSED CONSOLIDATED BALANCE SHEETS, SEPTEMBER 30, 1997 AND DECEMBER 31, 1996
<TABLE>
<CAPTION>
September 30, December 31,
1997 1996
---- ----
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents.......................................................... $ 5,659,254 $ 105,069
Accounts receivable, net........................................................... 17,397,311 13,396,495
Inventories........................................................................ 504,690 910,321
Prepaid income taxes and deferred taxes............................................ 330,401 340,603
Notes receivable, officers, employees and related party............................ -- 577,287
Other.............................................................................. 981,267 1,419,758
----------- -----------
Total current assets............................................................... 24,872,923 16,749,533
----------- -----------
PROPERTY AND EQUIPMENT
Property and equipment............................................................. 4,798,638 3,689,626
Less: accumulated depreciation and amortization................................... 2,228,008 1,766,215
----------- -----------
Net property and equipment......................................................... 2,570,630 1,923,411
----------- -----------
OTHER ASSETS
Goodwill, net of accumulated amortization of $348,563, 1997 and $62,982, 1996...... 5,309,829 3,196,220
Other.............................................................................. 268,378 99,844
----------- -----------
Total other assets................................................................. 5,578,207 3,296,064
----------- -----------
Total assets....................................................................... $33,021,760 $21,969,008
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt.................................................. $ 113,477 $ 915,253
Convertible notes.................................................................. -- 500,000
Accounts payable and accrued expenses.............................................. 4,399,025 4,768,269
Payroll and sales taxes............................................................ 806,844 727,118
Income taxes payable............................................................... 211,995 126,538
Other notes payable................................................................ -- 195,477
Deferred revenue................................................................... 1,158,795 1,168,334
Advances from shareholders......................................................... -- 95,862
----------- -----------
Total current liabilities.......................................................... 6,690,136 8,496,851
----------- -----------
LONG-TERM LIABILITIES
Note payable, bank................................................................. -- 9,210,795
Deferred rent obligation........................................................... 118,632 130,402
Debt obligations, net of current portion........................................... 811,371 3,008,846
----------- -----------
Total long-term liabilities........................................................ 930,003 12,350,043
----------- -----------
MINORITY INTEREST -- --
----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY
Common stock: $.01 par value, 50,000,000 shares authorized;
at September 30, 1997, 13,347,969 shares issued and outstanding;
at December 31, 1996, 8,587,739 shares issued and outstanding...................... 133,479 85,877
Preferred stock, $.01 par value, 10,000,000 shares authorized...................... -- --
Additional paid-in capital......................................................... 22,783,940 365,877
Retained earnings.................................................................. 2,484,202 670,360
----------- -----------
Total shareholders' equity......................................................... 25,401,621 1,122,114
----------- -----------
Total liabilities and shareholders' equity......................................... $33,021,760 $21,969,008
=========== ===========
See Notes to Condensed Consolidated Financial Statements.
</TABLE>
3
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
NET REVENUES....................................................................... $74,859,743 $58,914,238
----------- -----------
COSTS AND EXPENSES
Cost of sales (exclusive of items shown separately below).......................... 53,880,755 43,232,381
Selling and operating.............................................................. 11,758,221 10,022,739
General and administrative......................................................... 5,958,121 4,310,467
----------- -----------
Total costs and expenses........................................................... 71,597,097 57,565,587
----------- -----------
INCOME FROM OPERATIONS............................................................ 3,262,646 1,348,651
OTHER INCOME (EXPENSES), NET....................................................... 9,404 (599,597)
----------- -----------
INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST IN NET LOSS OF CONSOLIDATED
SUBSIDIARY......................................................................... 3,272,050 749,054
INCOME TAX EXPENSE................................................................. 1,458,208 614,700
----------- -----------
INCOME BEFORE MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARY............. 1,813,842 134,354
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARY........................... -- 616,752
----------- -----------
NET INCOME......................................................................... $1,813,842 $751,106
=========== ===========
NET INCOME PER SHARE
PRIMARY.................................................................. $ 0.14 $ 0.08
====== ======
FULLY DILUTED............................................................ $ 0.14 $ 0.08
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
4
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
NET REVENUES....................................................................... $ 25,318,768 $ 21,587,072
------------ ------------
COSTS AND EXPENSES
Cost of sales (exclusive of items shown separately below).......................... 17,759,069 15,644,799
Selling and operating.............................................................. 3,627,441 3,658,749
General and administrative......................................................... 2,037,753 1,462,356
------------ ------------
Total costs and expenses........................................................... 23,424,263 20,765,904
------------ ------------
INCOME FROM OPERATIONS ........................................................... 1,894,505 821,168
OTHER INCOME (EXPENSES), NET....................................................... 62,048 (228,158)
------------ ------------
INCOME BEFORE INCOME TAX EXPENSE AND MINORITY INTEREST IN NET LOSS OF CONSOLIDATED
SUBSIDIARY......................................................................... 1,956,553 593,010
INCOME TAX EXPENSE................................................................. 784,125 411,200
------------ ------------
INCOME BEFORE MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARY............. 1,172,428 181,810
MINORITY INTEREST IN NET LOSS OF CONSOLIDATED SUBSIDIARY........................... -- 387,752
------------ ------------
NET INCOME ........................................................................ $ 1,172,428 $ 569,562
============ ============
NET INCOME PER SHARE
PRIMARY.................................................................. $ 0.09 $ 0.06
====== ======
FULLY DILUTED............................................................ $ 0.09 $ 0.06
====== ======
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
5
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
CONDENSED CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
Additional
Paid-In Retained
Common Stock Capital Earnings Total
Shares Amount ---------- -------- -----
------ ------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996............. 8,587,739 $ 85,877 $ 365,877 $ 670,360 $ 1,122,114
Merger Transactions (See Note 1)....... 1,194,230 11,942 2,416,498 -- 2,428,440
Initial Public Offerings (See Note 1).. 3,000,000 30,000 19,207,225 -- 19,237,225
Conversion of Debentures............... 526,000 5,260 494,740 -- 500,000
Conversion of Note Payables (See Note 1) 40,000 400 299,600 -- 300,000
Net income............................. -- -- -- 1,813,842 1,813,842
---------- --------- ------------ ----------- ------------
Balance, September 30, 1997............ 13,347,969 $ 133,479 $ 22,783,940 $ 2,484,202 $ 25,401,621
========== ========= ============ =========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
6
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
OPERATING ACTIVITIES
Net Income for the period......................................................... $ 1,813,842 $ 751,106
Adjustments to reconcile net income to net cash provided by (used in) operating
activities:
Depreciation.................................................................. 461,793 302,470
Amortization.................................................................. 285,581 93,944
Deferred rent................................................................. (11,770) (19,905)
Provision for losses on accounts receivable................................... 153,479 369,528
Stock compensation............................................................ 29,250 --
Minority interest in net loss of consolidated subsidiary...................... -- (616,752)
Changes in operating assets and liabilities:
(Increase) decrease in:
Accounts receivable........................................................... (4,154,295) (3,741,379)
Inventories................................................................... 405,631 (278,728)
Prepaid income taxes......................................................... 10,202 60,687
Other current assets.......................................................... 438,491 (521,312)
Other assets.................................................................. (168,534) (135,877)
Increase (decrease) in:
Accounts payable and accrued expenses......................................... 1,488,756 1,465,440
Payroll and sales taxes....................................................... 79,726 (150,456)
Deferred revenue.............................................................. (9,539) 187,065
Income taxes payable......................................................... 85,457 36,013
Net cash provided by (used in) operating activities......................... 908,070 (2,198,156)
----------- -----------
INVESTING ACTIVITIES
Purchases of property and equipment................................................ (1,109,012) (442,930)
Purchase/acquisition of companies.................................................. -- (554,448)
(Increase) decrease in notes receivable, officers and employees, net............... 577,287 (209,326)
----------- -----------
Net cash used in investing activities....................................... (531,725) (1,206,704)
----------- -----------
FINANCING ACTIVITIES
Cash acquired in business combination.............................................. -- 150,701
Proceeds from (repayments of) notes payable, bank, net............................. (9,960,795) 2,778,669
Proceeds (repayments) of bank overdrafts........................................... (1,858,000) 321,000
Principal payments on long-term debt............................................... (2,144,728) (580,019)
Proceeds from issuance of stock and exercise of warrants, net...................... 19,237,225 16
Repayments from shareholders....................................................... (95,862) (34,643)
Issuance of Series A Preferred Shares, net of costs................................ -- 888,000
----------- -----------
Net cash provided by financing activities.................................. 5,177,840 3,523,724
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS.............................................. 5,554,185 118,864
CASH AND CASH EQUIVALENTS, BEGINNING............................................... 105,069 35,078
----------- -----------
CASH AND CASH EQUIVALENTS, ENDING.................................................. $ 5,659,254 $ 153,942
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest........................................................................... $ 295,000 $600,000
=========== ===========
Income taxes....................................................................... $ 1,329,000 300,000
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
7
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 1. DESCRIPTION OF BUSINESS
The Judge Group, Inc. (the "Company"), (formerly Judge, Inc.) a Pennsylvania
corporation founded in 1970, 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), (ii) computer network and document management system
integration, implementation, maintenance and training (through its "Imaging and
Network Services" business) and (iii) IT training (through its "IT Training"
business) on a range of software and network applications to corporate,
governmental and individual clients. At September 30, 1997, the Company had
offices in Bala Cynwyd, Pennsylvania; Hartford, Connecticut; Foxborough and
Wakefield, Massachusetts; Tampa, Florida; Moorestown and Edison, New Jersey and
Alexandria, Virginia.
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 Services of N.J.,
Inc. ("JTNJ").
The Permanent Placement business includes 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").
The IT Training business is comprised of the operations of The Berkeley
Associates Corp. ("Berkeley"), a company acquired by the Company in September
1996 (see Note 3).
At December 31, 1995 the Company owned 33%, Martin E. Judge, Jr., 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" or "Data Image"), a public 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 held, on a fully diluted basis, a majority of the
outstanding common stock of JIS, which remained a public company.
On September 4, 1996, The Boards of Directors of the Company and JIS approved
the merger of JIS into a newly-formed, wholly-owned subsidiary of the Company
(the "Merger"). The terms of the Merger called for the conversion of each share
of JIS common stock (not already owned by the Company) and Series A preferred
stock into $2.50 of value based on the public offering price of The Judge Group,
Inc. common stock. Based upon the offering price of $7.50 per share, the Company
issued 1,194,230 shares of The Judge Group, Inc. common stock to the
shareholders of JIS at the closing of its initial public offering in 1997. In
accordance with Accounting Principles Board Opinion No. 16 and related
literature, the acquisition by the Company in the Merger of the majority of the
shares of JIS, which were owned by the Company, Martin E. Judge, Jr. or other
owners of the Company securities, was accounted for as a corporate
reorganization of entities under common control, at historical cost, similar to
pooling accounting. However, the acquisition by the Company in the Merger of the
remaining JIS shares (the "Minority Shares") was accounted for in accordance
with "purchase accounting" whereby the pro rata portion of JIS's assets and
liabilities were recorded at their fair values. The excess of the value of the
Company shares issued in exchange for the Minority Shares over the fair value of
the net assets attributable to the minority interest was recorded as goodwill.
The Imaging and Network Services business of the Company consisted of the
operations of JCC prior to the JCC/DI Merger and JIS subsequent to the merger.
See Notes 3 and 10. In addition, the Company purchased the net assets and
liabilities of Systems Automation, Inc. ("Systems Automation") in September 1996
(see Note 3), a company that provides imaging and document management systems
and services located in Wakefield, Massachusetts.
8
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 1. DESCRIPTION OF BUSINESS--(Continued)
During 1996, the Company engaged an investment banking firm to assist it in an
initial public offering of its common stock. On September 30, 1996, the Company
filed a Registration Statement on Form S-1 with the Securities and Exchange
Commission under the Securities Act of 1933. Effective February 20, 1997 the
Company successfully completed its initial public offering of common shares. The
Company sold 3,000,000 common shares at a price of $7.50 per share, realizing
approximately $20,906,000 in proceeds net of underwriting discounts and
commissions. Immediately prior to the initial public offering the holders of
$500,000 of convertible notes exchanged them for 526,000 Company common shares.
The Company issued 40,000 common shares in lieu of $300,000 of notes payable to
Berkeley, in accordance with the purchase agreement with Berkeley. In connection
with the initial public offering, the Company incurred approximately $1,669,000
of accounting, legal, printing and other costs as of September 30, 1997 and such
costs have been charged to additional paid in capital as a reduction of the
proceeds from the initial public offering. As of December 31, 1996 approximately
$1,017,000 of such costs were included in other current assets.
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 financial statements as of September 30, 1997 and for the three months and
nine months ended September 30, 1997 and 1996 are unaudited; however, in the
opinion of management, such statements include all adjustments, consisting
solely of normal recurring adjustments, necessary for a fair presentation of the
results for the periods presented. All significant intercompany accounts and
transactions have been eliminated.
The interim financial statements should be read in conjunction with the
financial statements for the fiscal year ended December 31, 1996 and notes
thereto.
The results of operations for the interim periods are not necessarily indicative
of the results that might be expected for the future interim periods or for the
full year ended December 31, 1997.
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.
Accounts Receivable and Accounts Payable
Accounts receivable at September 30, 1997 and December 31, 1996 were net of
allowances for doubtful accounts of $724,000 and $661,000, respectively.
Included in accounts receivable was unbilled work-in-process of approximately
$529,000 and $524,000 at September 30, 1997 and December 31, 1996, respectively.
Included in accounts payable and accrued expenses was approximately $380,000 and
$283,000 of accrued employee and contractor payroll principally relating to
unbilled work-in-process at September 30, 1997 and December 31, 1996,
respectively.
9
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES--(Continued)
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").
Cash and Cash Equivalents
Cash and cash equivalents consist of cash in bank and other short-term
investments with original maturities of three months or less.
Intangible Assets
Goodwill represents the excess of the cost of companies acquired over the fair
value of their net assets at the date of acquisition and is being amortized on
the straight-line method over ten years for Systems Automation and over fifteen
years for JIS and Berkeley. The Systems Automation and Berkeley acquisitions
were effective September 30, 1996 and the JIS acquisition was effective February
20, 1997 (See Note 3). Amortization of goodwill for the nine months ended
September 30, 1997 was approximately $286,000 and is included in general and
administrative expense in the consolidated statement of operations.
Recently Issued Accounting Standards
In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement No. 128, "Earnings per Share" (the "Statement") which specifies new
computation, presentation, and disclosure requirements for earnings per share
(EPS) for entities with publicly held common stock or potential common stock.
The Statement is effective for financial statements issued for periods ending
after December 15, 1997, including interim periods. The Company has not yet
determined the effect that the Statement is expected to have on the Company's
computation and presentation of earnings per share.
Earnings Per Share
The number of shares used in the earnings per share calculation and convertible
note share conversion (see Note 7) has been adjusted for the 52.6 for 1.0 stock
split which occurred in September 1996.
Primary earnings per share amounts for the nine months ended September 30, 1997
and 1996 were computed based on the weighted average number of shares actually
outstanding. The number of shares used in the computation were approximately
12,563,000 and 8,588,000 in 1997 and 1996, respectively. The number of shares
used in the computation for the three months ended September 30, 1997 and 1996
were approximately 13,348,000 and 8,588,000 respectively.
Fully diluted earnings per share amounts for the nine months ending September
30, 1997 and 1996 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 notes (see
Note 7). The number of shares used in the computation were approximately
12,650,000 in 1997 and 9,114,000 in 1996. The number of shares used in the
computation for the three months ended September 30, 1997 and 1996 were
approximately 13,348,000 and 9,114,000 respectively.
NOTE 3. BUSINESS COMBINATIONS AND PRO-FORMA RESULTS OF OPERATIONS
On September 13, 1995, JCC and DI signed a Letter of Intent relating to the
JCC/DI Merger. 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.
10
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 3. BUSINESS COMBINATIONS AND PRO-FORMA RESULTS OF OPERATIONS--(Continued)
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. Accordingly, the historical financial statements included
in the consolidation prior to the acquisition are those of the acquirer, JCC,
and are those of JIS for the period subsequent to the merger. Operating results
for the Company for the three and nine months ended September 30, 1996, on a pro
forma basis as though DataImage had been acquired as of January 1, 1996, are
shown below.
Effective September 30, 1996, the Company purchased 100% of the issued and
outstanding stock of Berkeley. Berkeley, founded in 1980, is a provider of IT
training services to corporate, governmental and individual clients. The total
acquisition cost was $2,232,200. As of September 30, 1997, $828,400 of the
acquisition cost is still outstanding, of which $256,200 has been converted into
a note payable. The remaining portion of the balance of $572,200 is contingent
on Berkeley attaining certain pre-tax income amounts in 1997. The acquisition
was accounted for as a purchase and results of operations of Berkeley are
included in the statement of operations for the three and nine months ended
September 30, 1997. The excess of acquisition cost over the fair value of net
assets, assumed to equal their carrying value, was approximately $2,220,000,
which is being amortized over fifteen years, beginning in October 1996.
Operating results for the Company for the three and nine months ended September
30, 1996, on a pro forma basis as though Berkeley had been acquired as of
January 1, 1996, are shown below.
Also effective September 30, 1996, the Company purchased substantially all of
the tangible and intangible assets, and assumed all of the liabilities, of
Systems Automation. Systems Automation is a provider of 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, project management and advanced
applications development. The total acquisition cost was $547,252. The
acquisition was accounted for as a purchase and results of operations of Systems
Automation are included in the statement of operations for the three and nine
months ended September 30, 1997. The excess of acquisition cost over the fair
value of net assets, assumed to equal their carrying value, was approximately
$1,040,000, which is being amortized over ten years, beginning in October 1996.
Operating results for the Company for the three and nine months ended September
30, 1996, on a pro forma basis as though Systems Automation had been acquired as
of January 1, 1996, are shown below.
As described in Note 1, upon the successful completion of the Company's initial
public offering in February 1997, JIS was merged into the Company.
The following sets forth the combined results for the Company, DataImage,
Berkeley, JIS and Systems Automation for the three and nine months ended
September 30, 1997 and 1996, as if the business combinations occurred at January
1, 1997 and 1996, respectively.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
1997 1996 1997 1996
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net revenues............................. $ 25,318,768 $ 22,551,867 $ 74,859,743 $ 61,947,988
============ ============ ============ ============
Income from operations................... $ 1,894,505 $ 637,468 $ 3,235,988 $ 1,022,133
============ ============ ============ ============
Net Income (loss) ....................... $ 1,172,428 $ 67,732 $ 1,801,597 ($ 87,800)
============ ============ ============ ============
</TABLE>
Pro-forma adjustments include adjustments to interest expense,
amortization expense (goodwill), income tax expense/benefit and elimination of
minority interest.
12
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 3. BUSINESS COMBINATIONS AND PRO-FORMA RESULTS OF OPERATIONS--(Continued)
Primary and fully diluted net income per share of common stock is calculated as
follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
------------------------------ ------------------------------
1997 1996 1997 1996
------------ -------------- ------------ ----------
<S> <C> <C> <C> <C>
Net Income (loss) attributable to common
shareholders............................ $ 1,172,428 $ 67,732 $ 1,801,597 ($ 87,800)
============ ============== ============ ==========
Weighted average number of shares........... 13,347,969 13,347,969 13,347,969 13,347,969
============ ============== ============ ==========
Net Income (loss) per share attributable to
common shareholders..................... $0.09 $0.01 $0.13 ($0.01)
============ ============== ============ ==========
</TABLE>
Weighted average number of shares includes actual shares outstanding increased
by the number of shares issued in respect to the conversion of Company
convertible debentures, the number of shares issued in the Company's initial
public offering, the number of shares issued in the JIS merger, and the number
of shares issued in conjunction with the Berkeley acquisition.
NOTE 4. NOTE PAYABLE, BANK
Note payable, Bank, consists of advances to the Company, JTS and JIS under a
$11,000,000 credit facility, of which $10,000,000 represents a line of credit
and $1,000,000 represents a term loan. At December 31, 1996, the line of credit
bore interest at the prime rate plus 1% per annum. Maximum permitted borrowings
thereunder is the lesser of $10,000,000 or 80% of qualified accounts receivable,
as defined in the line of credit agreement. Upon completion of the initial
public offering in February 1997, the Company repaid all obligations related to
its note payable, bank. In accordance with the line of credit agreement, the
Company has the full amount available for future borrowing needs. In addition,
the shareholder guarantees have been released, and future borrowings will bear
interest at the bank's prime rate.
Included in accounts payable and accrued expenses at December 31, 1996 were
approximately $1,858,000 of bank overdrafts.
Interest expense charged to operations was approximately $11,000 and $228,000
for the three months ended September 30, 1997 and 1996, respectively, and
$202,000 and $600,000 for the nine months ended September 30, 1997 and 1996,
respectively.
NOTE 5. LONG-TERM DEBT
With a portion of the proceeds from the initial public offering, the Company
paid off a significant amount of its long-term debt in 1997.
NOTE 6. ADVANCES FROM SHAREHOLDERS
JIS/JCC had advances from shareholders of $95,862 at December 31, 1996 all of
which was repaid with a portion of the proceeds from the Company's initial
public offering.
12
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 7. CONVERTIBLE NOTES
In 1994, the Company received $500,000 from a group of investors in the form of
10% convertible senior subordinated promissory notes. The notes were exchanged
for 526,000 Company common shares, immediately prior to the Offering (see Note
1). The notes bear 10% interest per annum and were scheduled to mature in July
1997. In accordance with the note purchase agreement, since the Company effected
a successful initial public offering before July 31, 1997, the financial advisor
who arranged such financing was paid a fee equal to 1% of the proceeds of the
initial public offering (approximately $225,000) in February 1997.
NOTE 8. INCOME TAXES
The Company files a consolidated Federal income tax return with most of its
wholly-owned subsidiaries. In prior years, JTS and JCC/JIS were not included in
the Company's consolidated Federal income tax return, as the Company previously
owned less than 80% of each such Company's outstanding common shares. Under
Internal Revenue regulations, JTS and JCC/JIS were not part of the consolidated
group for tax purposes and filed their own Federal income tax returns. Effective
January 1, 1997, JTS will file as part of the consolidated group and effective
February 20, 1997, JIS will also file as part of the consolidated group. State
income taxes are determined on the basis of filing separate returns for each
company as required by the applicable state regulations.
In accordance with APB 28 (Interim Financial Reporting) income taxes are
calculated at the estimated effective annual (federal and state) rates of
approximately 40% for the nine months ended September 30, 1997 and 1996.
The effective tax rate for 1997 and 1996 is higher than the applicable statutory
tax rate of 34% due primarily to net operating losses for JCC/JIS, a company
consolidated for financial reporting but not tax reporting purposes in 1996 and
in 1997 through February 20, 1997, the date of the merger of JIS with the
Company.
For income tax reporting purposes, as of December 31, 1996, JIS had an unused
operating loss carryforward of approximately $3,900,000, which may be applied
against future taxable income of JIS, subject to certain Federal income tax
limitations. These carryforwards expire between 2002 and 2011.
13
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 9. SHAREHOLDERS' EQUITY
Dividends
In accordance with the provisions of its line of credit (see Note 4), the
Company is not permitted to declare or pay any cash dividends on its common
stock.
Additional Paid-In Capital
During 1996, additional paid-in capital decreased $175,910 due to the JCC/DI
merger which was accounted for as a reverse acquisition (Notes 1 and 3).
Capital Structure
On September 4, 1996, the Company's Board of Directors voted to (i) modify the
Company's capital structure to increase the number of authorized common shares
to 50,000,000, (ii) adjust the par value per share from $.005 to $.01, (iii)
authorize the issuance of 10,000,000 preferred shares with a par value of $.01
per share, (iv) authorize a 52.6 for 1.0 split of the outstanding common shares
for shareholders of record on September 23, 1996, (v) authorize a change in the
Company's name from "Judge, Inc." to "The Judge Group, Inc." and (vi) authorize
the formation of a new subsidiary, Judge, Inc., and the contribution of
substantially all the assets related to the Permanent Placement business to this
new subsidiary.
Stock Option Plan
On September 4, 1996, the Company adopted an Incentive Stock Option and
Non-Qualified Stock Option Plan (the "Incentive Plan") for key employees and
non-employee directors. Options may be granted under the Incentive 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. Simultaneous with the
completion of the initial public offering, options to purchase a total of
593,000 common shares were granted at the initial public offering price of $7.50
per common share.
NOTE 10. CAPITAL STRUCTURE OF JCC/JIS
The JCC preferred shares (which eliminated in consolidation) bore cumulative
dividends at an annual rate of $.005 per share. No dividends were declared or
paid in 1996. 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.
In February 1996, JCC's Board of Directors authorized new 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.
In February 1996, JCC raised approximately $1,097,000 ($888,000, net of costs)
in a private offering of 822,628 Series A convertible preferred shares ("JCC
Series A Preferred") at a purchase price per share of $1.33. At the effective
time of the JCC/DI Merger, these preferred shares were converted into the same
number of JIS Series A preferred shares ("JIS Series A Preferred"). The JIS
Series A Preferred shares carry a cumulative dividend of 7% per year
(aggregating approximately $45,000 at December 31, 1996). In conjunction with
the Company's initial public offering, these preferred shares were converted
into common shares in February 1997 (see Notes 1 and 3). At December 31, 1996,
the JIS Series A Preferred stock is presented at $-0- as "minority interest" in
the accompanying consolidated balance sheet. Approximately $617,000 of JIS
losses have been allocated to this minority interest in the accompanying
consolidated statement of operations for the nine months ended September 30,
1996.
14
<PAGE>
THE JUDGE GROUP, INC. AND SUBSIDIARIES
(FORMERLY JUDGE, INC.)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
NOTE 11. STATEMENT OF CASH FLOWS
Supplemental disclosure of non-cash investing and financing transactions:
During the nine months ended September 30, 1997, the Company entered into the
following non-cash transactions:
o incurred goodwill of $2,399,190 in the business combination with JIS;
o converted $300,000 of long-term debt to equity in accordance with the
Berkeley agreement;
o converted $500,000 of convertible debentures into 526,000 shares of common
stock.
During the nine months ended September 30, 1996, the Company entered into the
following non-cash transactions:
o entered into certain financing arrangements for the purchase of property
and equipment in the amount of approximately $432,000;
o incurred long-term debt ($2,379,452) for certain business combinations
(Note 3);
o termed out $1,000,000 of the existing line of credit into long-term debt.
Effective February 29, 1996, JCC and DI effected a Business Combination (see
Note 3) and effective September, 1996, the Company and Berkeley and Systems
Automation effected business combinations (see Note 3):
Acquisition of Business:
Inventories........................................ $ 118,476
Accounts receivable................................ 704,007
Property and equipment, net........................ 374,616
Other assets....................................... 96,204
----------
1,293,303
----------
Accounts payable and accrued expenses.............. (644,170)
Due to the Company................................. (100,000)
Deferred revenue and customer deposits............. (849,234)
Debt obligations................................... (402,198)
----------
(1,995,602)
----------
Net assets acquired (liabilities
assumed) in business combination................... ($ 702,299)
==========
15
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
1997 COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
The following discussion should be read in conjunction with the condensed
consolidated financial statements of The Judge Group, Inc. (the "Company") and
related notes thereto appearing elsewhere in this Report.
OVERVIEW
The Company achieved overall revenue growth rates of 17.3% and 27.1%
for the three months and nine months ended September 30, 1997, respectively,
compared to prior year periods, with all four of the Company's businesses
experiencing revenue growth. In the Company's largest business, Contract
Placement, revenues increased by 7.2% in the three months ended September 30,
1997 compared to the prior year period due primarily to higher average billing
rates. This growth rate was slightly below Company expectations due to a focus
of sales efforts on higher margin placements which enabled this business to
achieve higher operating income. Operating income in the Contract Placement
business increased by 59.8% in the three months ended September 30, 1997
compared to the prior year period. Management expects this trend of higher
margin placements to continue in the Contract Placement business. As a result,
management expects modest revenue growth in the fourth quarter and overall
annual revenue growth consistent with historical rates. Due to the Company's
emphasis on higher margin placements, the Company expects operating income in
this business to grow annually at approximately the current quarterly growth
rate. During the three months ended September 30, 1997, the Contract Placement
business opened two new offices in Alexandria, Virginia, serving metropolitan
Washington, D.C., and in New York City and incurred certain expenses related to
these office openings. The Company anticipates that these two new offices will
generate revenue during the fourth quarter of 1997.
During the third quarter of 1997, the Company's Imaging and Network
Services business achieved operating income of $27,000 compared to a loss of
$329,000 in the prior year period. This increase in operating income was
attributable to reduced overhead costs including the reduction of
administrative, production and sales personnel and the closing of its Tampa,
Florida office. The revenue growth of 33% experienced by the Company's Imaging
and Network Services business in the nine months ended September 30, 1997 was
attributed to the sales efforts of the retained sales and production support
personnel. The Company will continue to adjust its pricing and cost structure in
its Imaging and Network Services business to achieve sustained profitability.
While the Company believes that the Imaging and Network Services business will
ultimately achieve sustained profitability, it cannot predict the timing of such
profitability.
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 net revenues, for the
periods indicated:
<TABLE>
<CAPTION>
NINE MONTHS ENDED THREE MONTHS ENDED
September 30, September 30,
(Unaudited) (Unaudited
------------------------------------------ -------------------------------------------
(Dollars in thousands) 1997 1996 1997 1996
------------------------------------------ -------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net Revenues:
Permanent Placement $ 6,201 8.3% $ 4,265 7.2% $ 2,118 8.4% $ 1,650 7.7%
Contract Placement 53,247 71.1% 44,622 75.8% 17,179 67.9% 16,019 74.2%
Imaging and Network Services 13,338 17.8% 10,027 17.0% 5,276 20.8% 3,918 18.1%
IT Training 2,074 2.8% -- -- 746 2.9% -- --
-------- ------ -------- ------ -------- ------ -------- ------
Consolidated Net Revenues $ 74,860 100.0% $ 58,914 100.0% $ 25,319 100.0% $21,587 100.0%
======== ====== ======== ====== ======== ====== ======== ======
Income (loss) From Operations:
Permanent Placement $ 1,066 17.2% $ 499 11.7% $ 436 20.6% $ 299 18.1%
Contract Placement 5,091 9.6% 2,635 5.9% 1,975 11.5% 1,236 7.7%
Imaging and Network Services (1,147) (8.6%) (709) (7.1%) 27 .5% (329) (8.4%)
IT Training (30) (1.4%) -- -- 7 .9% -- --
Corporate Overhead Expense (1,718) N/A (1,076) N/A (551) N/A (383) N/A
-------- ------ -------- ------ -------- ------ -------- ------
Consolidated Income From Operations $ 3,262 4.4% $ 1,349 2.3% $ 1,894 7.5% $ 821 3.8%
======== ====== ======== ====== ======== ====== ======== ======
</TABLE>
16
<PAGE>
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, legal, human resources, management information
systems and marketing personnel. Also included in corporate overhead is
amortization of goodwill related to two acquisitions completed in September 1996
and the JIS merger completed in February 1997. There was no charge for goodwill
for the nine months and quarter ending September 30, 1996.
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>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30 SEPTEMBER 30
-------------------- ------------------
1997 1996 1997 1996
-------------------- ----------- ------
<S> <C> <C> <C> <C>
Net Revenues 100.0% 100.0% 100.0% 100.0%
Cost of Sales 70.1% 72.5% 72.0% 73.4%
(exclusive of items shown separately
below)
Selling and Operating 14.4% 16.9% 15.7% 17.0%
General and Administrative 8.0% 6.8% 7.9% 7.3%
------ ------ ------ ------
Total Cost and Expenses 92.5% 96.2% 95.6% 97.7%
Income From Operations 7.5% 3.8% 4.4% 2.3%
Interest Income (Expense) and Other, Net .2% (1.1%) --% (1.0%)
------ ------ ------ ------
Income Before Income Taxes 7.7% 2.7% 4.4% 1.3%
====== ====== ====== ======
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1996
Net Revenues. Consolidated net revenues increased by 17.3%, or $3.7
million, for the three months ended September 30, 1997 compared to the prior
year period. Revenue for the Contract Placement business increased by 7.2%, or
$1.2 million, for the three months ended September 30, 1997, compared to the
prior year period. Revenues for Contract Placement business increased primarily
due to a 17.0% increase in average bill rates. Revenue for the Permanent
Placement business increased by 28.4%, or approximately $468,000, for the three
months ended September 30, 1997, compared to the prior year period due primarily
to increased sales per recruiter and an increase in average placement fees.
Revenue for the Imaging and Network Services business increased by 34.7%, or
$1.4 million, for the three months ended September 30, 1997 compared to the
prior year period. This increase in revenues was primarily attributable to the
approximately $763,000 contributed in 1997 by the imaging and document
management business acquired in September 1996. The IT Training business,
acquired in September 1996, generated net revenues of $746,000 for the three
months ended September 30, 1997.
Cost of Sales. Consolidated cost of sales increased by 13.5%, or $2.1
million, for the three months ended September 30,1997 compared to the prior year
period. Cost of sales as a percentage of consolidated net revenues decreased to
70.1% from 72.5%. In the Company's Contract Placement business, cost of sales as
a percentage of its revenue decreased to 76.4% from 79.3% primarily as a result
of the Contract Placement business focusing its sales efforts on higher margin
services and increased average gross profit margins obtained by the Boston and
National offices, where average profit margins increased by approximately 1.8
and 1.1 percentage points, respectively, during the three months ended September
30, 1997 compared to the prior year period. 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. In the
Company's Imaging and Network Services business cost of sales as a percentage of
its revenue increased to 75.9% from 75.0%, primarily related to the two State of
New Jersey contracts which contributed 1.1 percentage point increase in cost of
sales for the three months ended September 30, 1997 compared to prior year
period. The IT Training business, acquired in September 1996, also contributed
an additional $639,000 in cost of sales, representing 85.6% of that business'
revenues.
Selling and Operating. Consolidated selling and operating expenses
decreased by 0.9%, or $31,300, for the three months ended September 30, 1997
compared to the prior year period. Selling and operating expenses as a
percentage of consolidated net revenues decreased to 14.4% from 16.9% for the
three months ended September 30, 1997 compared to the prior year period. Selling
and operating expenses as a percentage of revenues for the Contract Placement
business decreased to 8.2% from 9.8% for the three months ended September 30,
1997 compared to the prior year period. This decrease was mainly attributable to
a lower number of sales and recruiting personnel on staff and decreased bad debt
expense during the three months ended September 30 1997 as compared to the three
17
<PAGE>
months ended September 30, 1996. Selling and operating expenses as a percentage
of revenues for the Permanent Placement business decreased to 67.4% from 70.4%
for the three months ended September 30, 1997 compared to the prior year period,
which was attributed to management's efforts to control selling costs. Selling
and operating expenses as a percentage of revenues for the Imaging and Network
Services business decreased to 13.7% from 22.3% for the three months ended
September 30, 1997 compared to the prior year period, primarily due to a
reduction in sales personnel in the first quarter of 1997.
General and Administrative. Consolidated general and administrative
expenses increased 39.3%, or $575,000, for the three months ended September 30,
1997, compared to the prior year period. General and administrative expenses as
a percentage of consolidated net revenues, increased to 8.0% from 6.8% for the
three months ended September 30, 1997 compared to the prior year period.
Contributing to this increase was the expansion of the Company's corporate
staff, specifically management information systems, accounting, legal and human
resources personnel hired in 1996 and 1997 which added approximately $213,000 to
corporate overhead for the three months ended September 30, 1997, compared to
the prior year period. In addition, the amortization of goodwill related to the
acquisitions increased corporate overhead costs by $103,000 in the three months
ended September 30, 1997 compared to the prior year period. As a result of the
two acquisitions in September 1996 and increased office space in the Edison, New
Jersey office, rent expense increased by approximately $156,000 for the three
months ended September 30, 1997 compared to prior year period. The IT Training
business, acquired in September of 1996, incurred general and administrative
expenses for the three months ended September 30, 1997 of approximately
$100,000.
Interest. Interest expense was $11,000 and $228,000 for the three
months ended September 30, 1997 and 1996, respectively. Interest income was
$73,000 and $0 for the three months ended September 30, 1997 and 1996,
respectively. This decrease in interest expense and increase in interest income
was attributable to the Company's repayment of its debt following the Offering
and the interest earned on the unused portion of the Offering proceeds.
Income Taxes. The effective tax rates for the three months ended
September 30, 1997 and 1996 were 40.1% and 69.3% respectively. Since the
Company's merger with JIS (which includes the Imaging and Network Services
business) on February 20, 1997, this business units losses have been
consolidated for tax purposes and any future losses generated by the Imaging and
Network Services business will be used in the calculation of income tax expense
or benefit.
NINE MONTHS ENDED SEPTEMBER 30, 1997 COMPARED TO NINE MONTHS ENDED
SEPTEMBER 30, 1996
Net Revenues. Consolidated net revenues increased by 27.1%, or $15.9
million, for the nine months ended September 30, 1997 compared to the prior year
period. Revenue for the Contract Placement business increased by 19.3%, or $8.6
million, for the nine months ended September 30, 1997, compared to the prior
year period. Contract Placement revenues increased primarily due to a 18.7%
increase in average bill rates and an increase in sales-per-recruiter. Revenue
for the Permanent Placement business increased by 45.4%, or $1.9 million, for
the nine months ended September 30, 1997, compared to the prior year period.
Contributing to this increase was an increase in the number of placements, a
14.9% increase in the average placement fee and a 47% increase in the number of
recruiters in the nine months ended September 30, 1997 compared to the prior
year period. Revenue for the Imaging and Network Services business increased by
33.0%, or $3.3 million, for the nine months ended September 30, 1997 compared to
the prior year period, which was attributable to two contracts with the State of
New Jersey obtained in the second quarter of 1997 and approximately $1.5 million
of the revenue contributed in 1997 by the imaging and document management
business acquired in September 1996. The IT Training business, acquired in
September 1996, generated net revenues of $2.1 million for the nine months ended
September 30, 1997.
Cost of Sales. Consolidated cost of sales increased by 24.6%, or $10.6
million, for the nine months ended September 30,1997 compared to the prior year
period. Cost of sales as a percentage of consolidated net revenues decreased to
72.0% from 73.4%. In the Company's Contract Placement business, cost of sales as
a percentage of its revenue decreased to 78.3% from 80.0%. This decrease was
primarily a result of the Contract Placement business focusing its sales efforts
on higher margin services. Average gross profit margins obtained by the Contract
Placement's metropolitan Boston and National offices increased by approximately
2.1 and 2.2 percentage points, respectively, during the nine months ended
September 30, 1997 compared to the prior year period. 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. In the Company's Imaging and Network Services business, cost of sales as
a percentage of its revenue increased to 77.8% from 75.1%, primarily as a result
of the two State of New Jersey contracts received in the second quarter of 1997
which contributed a 1.1 percentage point increase in cost of sales for the nine
months ended September 30, 1997 compared to the prior year period. The IT
Training business, acquired in September 1996, also contributed an additional
$1.8 million in cost of sales, representing 86.0% of that business' revenues.
Selling and Operating. Consolidated selling and operating expenses
increased by 17.3%, or $1.7 million, for the nine months ended September 30,
1997 compared to the prior year period. Selling and operating expenses as a
percentage of consolidated net revenues decreased to 15.7% from 17.0% for the
nine months ended September 30, 1997 compared to the prior year period. Selling
18
<PAGE>
and operating expenses as a percentage of revenues for the Contract Placement
business decreased to 9.0% from 10.3% for the nine months ended September 30,
1997 compared to the prior year period. This decrease was mainly attributable to
a lower number of sales and recruiting personnel and a decrease of approximately
$371,000 in bad debt expense for this business in the nine months ended
September 30, 1997 compared to the prior year period. Selling and operating
expenses as a percentage of revenues for the Permanent Placement business
decreased to 71.6% from 75.3% for the nine months ended September 30, 1997
compared to prior year period, attributable primarily to management's efforts to
control selling costs. Selling and operating expenses as a percentage of
revenues for the Imaging and Network Services business decreased to 18.4% from
20.5% for the nine months ended September 30, 1997 compared to the prior year
period, due primarily to a reduction of sales personnel in the first quarter of
1997.
General and Administrative. Consolidated general and administrative
expenses increased 38.2%, or $1.6 million, for the nine months ended September
30, 1997 compared to the prior year period. General and administrative expenses
as a percentage of consolidated net revenues, increased to 7.9% from 7.3% for
the nine months ended September 30, 1997 compared to the prior year period.
Contributing to this increase was $548,000 of personnel and related
administrative expenses in the Imaging and Network Services business, primarily
due to the acquisition of the imaging and document management company on
September 30, 1996. Expansion of the Company's corporate staff, specifically
management information systems, accounting, legal and human resources personnel
hired in 1996 and 1997, increased corporate overhead by $356,000 for the nine
months ended September 30, 1997 compared to prior year period. In addition, the
amortization of goodwill related to the two acquisitions in September 1996 and
the JIS merger in February 1997 increased corporate overhead costs by $286,000
in the nine months ended September 30, 1997 compared to the prior year period.
As a result of the acquisitions and increased office space in the Edison, New
Jersey office, rent expense increased by approximately $407,000 for the nine
months ended September 30, 1997 compared to the prior year period. The IT
Training business, acquired in September of 1996, general and administrative
expenses for the nine months ended September 30, 1997 were approximately
$330,000, or 15.5% of that business' revenues.
Interest. Interest expense was $202,000 and $600,000 for the nine
months ended September 30, 1997 and 1996, respectively. Interest income was
$211,000 and $0 for the nine months ended September 30, 1997 and 1996,
respectively. This decrease in interest expense and increase in interest income
was attributable to the Company's repayment of its debt following the Offering
and the interest earned on the unused portion of the Offering proceeds.
Income Taxes. The effective tax rates for the nine months ended
September 30, 1997 and 1996 of 44.6% and 82.1%, respectively, are higher than
the applicable statutory tax rate of 34%, primarily due to our state tax
liabilities and the net operating losses for the Imaging and Network Services
business, which are consolidated for financial but not for tax reporting
purposes in 1996 and also for the period of January 1, 1997 through February 20,
1997. However, since the Company's merger with JIS (which includes the Imaging
and Network Services business) on February 20, 1997, this business unit is now
consolidated for tax purposes and any future losses generated by the Imaging and
Network Services business will also be used in the calculation of income tax
expense or benefit. If the Imaging and Network Services business is able to
achieve profitability, it will be able to utilize approximately $3.9 million (as
of December 31, 1996) in federal operating loss carryforwards, which will expire
between 2002 and 2011.
LIQUIDITY AND CAPITAL RESOURCES
Historically, the Company's need for working capital has increased as
its revenues have grown and it has used borrowings under its credit facility to
fund working capital. In the nine months ended September 30, 1997, however, the
funds available for working capital purposes increased substantially as a result
of the receipt of the proceeds from its initial public offering. The Company
continues to use the proceeds from the Offering as well as its cash flow from
operations to fund its working capital needs. The Company typically maintains
minimal cash balances, however the proceeds from the Company's Offering has
currently increased its cash and cash equivalents as of September 30, 1997 to
$5.7 million from approximately $105,000 at December 31, 1996 and $154,000 as of
September 30, 1996. Most of the cash is invested in short-term, investment grade
securities.
The Company generated cash from operations of $0.9 million for the nine
months ended September 30, 1997, as compared to a use of cash of $2.2 million
for the same periods last year. This result is attributable to several factors,
including an increase in net income of $1.1 million for the nine months ended
September 30, 1997 compared to prior year period and an increase in cash from
operations. Specifically, the Company was able to reduce inventory purchases and
other current assets and increased its deferred revenue/customer deposits while
still allowing for customary increases in accounts receivable related to
increases in revenues.
The Company currently has a $11.0 million revolving advance facility
(the "Line of Credit") with PNC Bank, N.A. (successor to Midlantic Bank, NA).
The Line of Credit expires on May 31, 1998 and carries interest at the prime
rate. This facility allows the Company to borrow the lesser of 80% of eligible
receivables, or $11.0 million. As of September 30, 1997 the Company has no
borrowings against the Line of Credit. The Line of Credit is secured by
substantially all of the Company's assets and contains customary restrictive
covenants, including limitations on loans the Company may extend to officers and
employees, the incurrence of additional debt and the payment of dividends on the
Company's common shares.
19
<PAGE>
Cash purchases of fixed assets for the nine months ended September 30,
1997 and 1996 were $1.1 million and $443,000 respectively, related primarily to
purchases of computers, software, and imaging equipment to upgrade the Company's
technology infrastructure.
During the first quarter of 1997, the Company completed its Offering of
common shares. From the proceeds of $20,906,000 (net of underwriting discounts
and commission) the Company paid approximately $1,669,000 of accounting, legal,
financial advisory, printing and other costs associated with the Offering. The
Company repaid in full its note payable due to the bank in the amount of $10.0
million and repaid other long term debt of $2.1 million, which includes payments
related to the notes payable for the two acquisitions.
The Company anticipates that its primary uses of capital in future
periods will fund increases in accounts receivable, finance acquisitions and the
development of its corporate level sales force. The Company believes that the
proceeds from the Offering 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.
FORWARD LOOKING INFORMATION
This report and other reports and statements filed by the Company from
time to time with the Securities and Exchange Commission (collectively, "SEC
Filings") contain or may contain certain forward-looking statements and
information that are based on beliefs of, and information currently available
to, the Company's management as well as estimates and assumptions made by the
Company's management. When used in SEC Filings, the words "anticipate,"
"believe," "estimate," "expect," "future," "intend," "plan" and similar
expressions as they relate to the Company or the Company's management, identify
forward-looking statements. Such statements reflect the current views of the
Company with respect to future events and are subject to certain risks,
uncertainties and assumptions relating to the Company's operations and results
of operations, competitive factors and pricing pressures, shifts in market
demand, the performance and needs of the industries served by the Company, and
other risks and uncertainties, including, in addition to any uncertainties
specifically identified in the text surrounding such statements and those
identified below, uncertainties with respect to changes or developments in
social, economic, business, industry, market, legal and regulatory circumstances
and conditions and actions taken or omitted to be taken by third parties,
including the Company's stockholders, customers, suppliers, business partners,
competitors, and legislative, regulatory, judicial and other governmental
authorities and officials. Should one or more of these risks or uncertainties
materialize, or should the underlying assumptions prove incorrect, actual
results may vary significantly from those anticipated, believed, estimated,
expected, intended or planned.
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.
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 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.
20
<PAGE>
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.
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, experienced a loss from operations of
approximately $1.1 million for the nine month period ended September 30, 1997,
and at September 30, 1997 had an accumulated deficit of $5.1 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, 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. Specifically, the costs associated with building this division's
imaging and document management capabilities have included the hiring of sales
and technical personnel, the opening and closing of a new office, and the costs
associated with the acquisition and integration of two imaging and document
management companies. 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, but cannot
provide any assurances as to when it will achieve sustained profitability, if at
all. 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 sustained
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. In addition,
if the Imaging and Network Services business is unable to achieve sustained
profitability, it will not realize the federal tax benefit of its $3.9 million
operating loss carryforward at December 31, 1996 which will expire between 2002
and 2011.
Dependence on Contract Placement Business The Company's Contract
Placement business was responsible for 84.4%, 80.3% and 75.0% of total Company
revenues for the years ended December 31, 1994, 1995 and 1996, respectively. In
addition, for the years ended 1995 and 1996, one customer of the Contract
Placement business, Merck, accounted for approximately 8.0% and 10.0% of total
Contract Placement revenues, respectively, and 6.4% and 7.5% of total Company
revenues, respectively. There can be no assurance that the Company will be able
to retain this level of revenue from this client. The ability of the Company to
sustain or increase revenues in the Contract Placement business is subject to
various factors, including its ability to attract and retain qualified technical
consultants, to hire, integrate and retain qualified managers in existing and
new markets and to apply its management practices to a significantly larger
organization. There can be no assurance that the Company will be able to sustain
or increase its Contract Placement revenues. Furthermore, a decline in the level
of Contract Placement revenues would have a material adverse effect on the
Company.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Not applicable.
21
<PAGE>
PART II
ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following exhibits are filed as a part of this Quarterly Report on Form
10-Q.
Exhibit No. Description of Document
2.1 Agreement and Plan of Merger, among the Company, Judge Acquisition,
Inc. and Judge Imaging Systems, Inc. Incorporate by reference to
Exhibit 2.1 to the Registrant's Form S-4 (File No. 333-13753)
originally filed on October 9, 1996, as amended.
3.1 Amended and Restated Articles of Incorporation. Incorporated by
reference to Exhibit 3.1 of the Registrant's Form S-1 (File No.
333-13109) originally filed on September 30, 1996, as amended.
3.2 Bylaws. Incorporated by reference to Exhibit 3.2 of the Form S-1.
4.2 Form of common stock certificate for Company Common Shares.
Incorporated by reference to Exhibit 4.2 of the Form S-1.
4.3 Fourth Amended and Restated Loan and Security Agreement, dated
December 10, 1996, between the Company and PNC Bank, N.A.
Incorporated by reference to Exhibit 4.3 to the Form S-1.
10.11 Stock Option Agreement between the Company and Martin E. Judge, Jr.
10.12 Stock Option Agreement between the Company and Richard T. Furlano
10.13 Stock Option Agreement between the Company and Michael A. Dunn
10.14 Stock Option Agreement between the Company and Jeffrey J. Andrews
10.15 Stock Option Agreement between the Company and Katharine A.
Wiercinski
11.1 Statement re Computation of Earnings Per Share.
27.1 Financial Data Schedule.
No reports were filed by the Registrant on Form 8-K during the quarter
ended September 30, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned,
Dated: November 14, 1997
THE JUDGE GROUP, INC. THE JUDGE GROUP, INC.
By: /s/Jeffrey J. Andrews By: /s/Martin E. Judge, Jr.
------------------ --------------------
Jeffrey J. Andrews Martin E. Judge, Jr.
Chief Financial Officer Chairman of the Board and
Chief Executive Officer
22
<PAGE>
EXHIBIT INDEX
Exhibit No. Description of Document
11.1 Statement re Computation of Earnings Per Share.
27.1 Financial Data Schedule.
10.11 Stock Option Agreement between the Company and Martin E. Judge, Jr.
10.12 Stock Option Agreement between the Company and Richard T. Furlano
10.13 Stock Option Agreement between the Company and Michael A. Dunn
10.14 Stock Option Agreement between the Company and Jeffrey J. Andrews
10.15 Stock Option Agreement between the Company and Katharine A.
Wiercinski
23
Exhibit 10.11
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT made as of the 14th day of
February 1997 (the "Grant Date"), between The Judge Group, Inc., a Pennsylvania
corporation (the "Company"), and Martin E. Judge, Jr., a Key Employee of the
Company and/or a Related Corporation (the "Employee").
WHEREAS, the Company desires to afford the Employee an
opportunity to purchase shares of common stock of the Company ("Common Stock")
as hereinafter provided, in accordance with the provisions of The Judge Group,
Inc. 1996 Incentive Stock Option and Non-Qualified Stock Option Plan for Key
Employees and Non-Employee Directors (the "Plan"), a copy of which is attached.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration the legal
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereunder, agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase all or any part of an aggregate
of 50,000 shares of Common Stock. The Option is in all respects limited and
conditioned as hereinafter provided, and is subject in all respects to the terms
and conditions of the Plan now in effect and as they may be amended, from time
to time in accordance with the Plan (which terms and conditions are and
automatically shall be incorporated herein by reference and made a part hereof
and shall control in the event of any conflict with any other terms of this
Option Agreement). It is intended that the Option granted hereunder be an
incentive stock option ("ISO") meeting the requirements of the Plan and section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the shares
of Common Stock covered by the Option shall be $7.50. It is the determination of
the Company's Stock Option Committee (the "Committee") that on the Grant Date
the Option price was not less than the higher of one hundred percent (100%) (or
in the case of a Key Employee who owns more than ten percent (10%) of the total
<PAGE>
combined voting power of all shares of stock of the Company or of a Related
Corporation, one hundred ten percent (110%)) of the fair market value of the
Common Stock, or the par value thereof.
3. Term. Unless earlier terminated pursuant to any provision
of the Plan or of this Option Agreement, this Option shall expire on February
14, 2002 (the "Expiration Date"), which date is not more than ten (10) years (or
in the case of a Key Employee who 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, five (5) years) from the Grant Date. This Option shall not be
exercisable on or after the Expiration Date.
4. Exercise of Option. This Option may be exercised in such
installments and on such dates, not less than six (6) months from the Grant
Date, as follows:
Number of Shares Date Exercisable
---------------- ----------------
12,500 2/14/98
12,500 2/14/99
12,500 2/14/00
12,500 2/14/01
Options that become exercisable in accordance with the foregoing shall remain
exercisable, subject to the provisions contained in the Plan and in this Option
Agreement, until the expiration of the term of this Option as set forth in
Paragraph 3 or until other termination of the Option
5. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement and the Plan, the Option may be exercised by
written notice to the Company, at its principal office, which is located at 2
Bala Plaza, Suite 405, Bala Cynwyd, Pennsylvania 19004. Such notice (a suggested
form of which is attached) shall state the election to exercise the Option and
the number of shares with respect to which it is being exercised; shall be
signed by the person or persons so exercising the Option; shall, unless the
Company otherwise notifies the Employee, be accompanied by the investment
certificate referred to in Paragraph 6; and shall be accompanied by payment of
the full Option price of such shares.
The Option price shall be paid to the Company:
(a) In cash or its equivalent;
(b) By delivering 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. THE
PAYMENT PROCEDURE SPECIFIED IN CLAUSE (b) IS CONSIDERED A SALE BY
EMPLOYEES SUBJECT TO SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF
1934 ("SECTION 16(b)") WHICH MAY BE MATCHED WITH ANY NON-EXEMPT
PURCHASE WITHIN THE SIX-MONTH PERIOD BEFORE OR AFTER THE
BROKER-FINANCED TRANSACTION.
Upon receipt of such notice and payment, the Company, as
promptly as practicable, shall deliver or cause to be delivered a certificate or
certificates representing the shares with respect to which the Option is so
exercised. The certificate or certificates for the shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and Employee's spouse,
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised by any person or persons after the legal
disability or death of the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable by the Company.
6. Shares to be Purchased for Investment. Unless the Company
has theretofore notified the Employee that a registration statement covering the
shares to be acquired upon the exercise of the Option has become effective under
the Securities Act of 1933 and the Company has not thereafter notified the
Employee that such registration statement is no longer effective, it shall be a
condition to any exercise of this Option that the shares acquired upon such
exercise be acquired for investment and not with a view to distribution, and the
person effecting such exercise shall submit to the Company a certificate of such
investment intent, together with such other evidence supporting the same as the
Company may request. The Company shall be entitled to restrict the
transferability of the shares issued upon any such exercise to the extent
<PAGE>
necessary to avoid a risk of violation of the Securities Act of 1933 (or of any
rules or regulations promulgated thereunder) or of any state laws or
regulations. Such restrictions may, at the option of the Company, be noted or
set forth in full on the share certificates.
7. Non-Transferability of Option. This Option is not
assignable or transferable, in whole or in part, by the Employee otherwise than
by will or by the laws of descent and distribution, and during the lifetime of
the Employee the Option shall be exercisable only by the Employee or by his
guardian or legal representative
8. Termination of Employment. If the Employee's employment
with the Company and all related corporations, as defined in the Plan, is
terminated for any reason other than death or disability prior to the Expiration
Date of this Option as set forth in Paragraph 3, this Option may be exercised,
to the extent of the number of shares with respect to which the Employee could
have exercised it on the date of such termination of employment, or to any
greater extent permitted by the Committee, by the Employee at any time prior to
three (3) months after the date of such termination of employment.
9. Disability. If the Employee becomes disabled, as defined in
the Plan, during his or her employment and, prior to the Expiration Date of this
Option as set forth in Paragraph 3, the Employee's employment is terminated as a
consequence of such disability, this Option may be exercised, to the extent of
the number of shares with respect to which the Employee could have exercised it
on the date of such termination of employment, or to any greater extent
permitted by the Committee in its discretion, by the Employee, or in the event
of the Employee's legal disability, by the Employee's legal representative, at
any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3; or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than the
date of such termination of employment and shall not be later than one
(1) year after the date of such termination of employment.
10. Death. If the Employee dies during his or her employment
and prior to the Expiration Date of this Option as set forth in Paragraph 3, or
if the Employee's employment is terminated for any reason (as described in
<PAGE>
Paragraphs 8 or 9 above) and the Employee dies following his or her termination
of employment but prior to the earliest of the Expiration Date of this Option as
set forth in Paragraph 3 above, the expiration of the period determined under
Paragraph 8 or 9 above, or three (3) months following the date of the Employee's
termination of employment, this Option may be exercised, to the extent of the
number of shares with respect to which the Employee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee, by the Employee's estate, personal representative or beneficiary who
acquired the right to exercise this Option by bequest or inheritance or by
reason of the Employee's death, at any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3, or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than one
(1) year, nor later than three (3) years, after the date of the
Employee's death
11. [Intentionally Left Blank]
12. Disqualifying Disposition of Option Shares. The Employee
agrees to give written notice to the Company, at its principal office, if a
"disposition" of the shares acquired through exercise of the Option granted
hereunder occurs at any time within two (2) years after the Grant Date or within
one (1) year after the transfer to the Employee of such shares. For purposes of
this Paragraph 12, the term "disposition" shall have the meaning assigned to
such term by section 424(c) of the Code.
13. Withholding of Taxes. The obligation of the Company to
deliver shares upon the exercise of the 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 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"). Such election must be made in compliance with and
<PAGE>
subject to the Withholding Rules, and the Committee may not withhold shares in
excess of the number necessary to satisfy the minimum federal, state, and/or
local 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 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.
14. Governing Law. This Option Agreement shall, to the maximum
extent possible, be construed in a manner consistent with the Code provisions
concerning ISOs, and its interpretation shall be governed by applicable federal
law and otherwise by the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive
Stock Option Agreement to be duly executed by its officers thereunto duly
authorized, and the Employee has hereunto set his hand and seal, all on the day
and year first above written.
ATTEST: THE JUDGE GROUP, INC.
\s\Katharine A. Wiercinski By: \s\Martin E. Judge, Jr.
- -------------------------- -----------------------
Secretary Chief Executive Officer
EMPLOYEE
\s\Karen M. Keating \s\Martin E. Judge, Jr.
- ------------------- -----------------------
Witness Martin E. Judge, Jr.
Exhibit 10.12
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT made as of the 14th day of
February 1997 (the "Grant Date"), between The Judge Group, Inc., a Pennsylvania
corporation (the "Company"), and Richard T. Furlano, a Key Employee of the
Company and/or a Related Corporation (the "Employee").
WHEREAS, the Company desires to afford the Employee an
opportunity to purchase shares of common stock of the Company ("Common Stock")
as hereinafter provided, in accordance with the provisions of The Judge Group,
Inc. 1996 Incentive Stock Option and Non-Qualified Stock Option Plan for Key
Employees and Non-Employee Directors (the "Plan"), a copy of which is attached.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration the legal
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereunder, agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase all or any part of an aggregate
of 41,000 shares of Common Stock. The Option is in all respects limited and
conditioned as hereinafter provided, and is subject in all respects to the terms
and conditions of the Plan now in effect and as they may be amended, from time
to time in accordance with the Plan (which terms and conditions are and
automatically shall be incorporated herein by reference and made a part hereof
and shall control in the event of any conflict with any other terms of this
Option Agreement). It is intended that the Option granted hereunder be an
incentive stock option ("ISO") meeting the requirements of the Plan and section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the shares
of Common Stock covered by the Option shall be $7.50. It is the determination of
the Company's Stock Option Committee (the "Committee") that on the Grant Date
the Option price was not less than the higher of one hundred percent (100%) (or
in the case of a Key Employee who owns more than ten percent (10%) of the total
<PAGE>
combined voting power of all shares of stock of the Company or of a Related
Corporation, one hundred ten percent (110%)) of the fair market value of the
Common Stock, or the par value thereof.
3. Term. Unless earlier terminated pursuant to any provision
of the Plan or of this Option Agreement, this Option shall expire on February
14, 2007 (the "Expiration Date"), which date is not more than ten (10) years (or
in the case of a Key Employee who 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, five (5) years) from the Grant Date. This Option shall not be
exercisable on or after the Expiration Date.
4. Exercise of Option. This Option may be exercised in such
installments and on such dates, not less than six (6) months from the Grant
Date, as follows:
Number of Shares Date Exercisable
---------------- ----------------
10,250 2/14/98
10,250 2/14/99
10,250 2/14/00
10,250 2/14/01
Options that become exercisable in accordance with the foregoing shall remain
exercisable, subject to the provisions contained in the Plan and in this Option
Agreement, until the expiration of the term of this Option as set forth in
Paragraph 3 or until other termination of the Option.
5. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement and the Plan, the Option may be exercised by
written notice to the Company, at its principal office, which is located at 2
Bala Plaza, Suite 405, Bala Cynwyd, Pennsylvania 19004. Such notice (a suggested
form of which is attached) shall state the election to exercise the Option and
the number of shares with respect to which it is being exercised; shall be
signed by the person or persons so exercising the Option; shall, unless the
Company otherwise notifies the Employee, be accompanied by the investment
certificate referred to in Paragraph 6; and shall be accompanied by payment of
the full Option price of such shares.
The Option price shall be paid to the Company:
(a) In cash or its equivalent;
<PAGE>
(b) By delivering 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. THE
PAYMENT PROCEDURE SPECIFIED IN CLAUSE (b) IS CONSIDERED A SALE BY
EMPLOYEES SUBJECT TO SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF
1934 ("SECTION 16(b)") WHICH MAY BE MATCHED WITH ANY NON-EXEMPT
PURCHASE WITHIN THE SIX-MONTH PERIOD BEFORE OR AFTER THE
BROKER-FINANCED TRANSACTION.
Upon receipt of such notice and payment, the Company, as
promptly as practicable, shall deliver or cause to be delivered a certificate or
certificates representing the shares with respect to which the Option is so
exercised. The certificate or certificates for the shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and Employee's spouse,
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised by any person or persons after the legal
disability or death of the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable by the Company.
6. Shares to be Purchased for Investment. Unless the Company
has theretofore notified the Employee that a registration statement covering the
shares to be acquired upon the exercise of the Option has become effective under
the Securities Act of 1933 and the Company has not thereafter notified the
Employee that such registration statement is no longer effective, it shall be a
condition to any exercise of this Option that the shares acquired upon such
exercise be acquired for investment and not with a view to distribution, and the
person effecting such exercise shall submit to the Company a certificate of such
investment intent, together with such other evidence supporting the same as the
Company may request. The Company shall be entitled to restrict the
<PAGE>
transferability of the shares issued upon any such exercise to the extent
necessary to avoid a risk of violation of the Securities Act of 1933 (or of any
rules or regulations promulgated thereunder) or of any state laws or
regulations. Such restrictions may, at the option of the Company, be noted or
set forth in full on the share certificates.
7. Non-Transferability of Option. This Option is not
assignable or transferable, in whole or in part, by the Employee otherwise than
by will or by the laws of descent and distribution, and during the lifetime of
the Employee the Option shall be exercisable only by the Employee or by his
guardian or legal representative.
8. Termination of Employment. If the Employee's employment
with the Company and all related corporations, as defined in the Plan, is
terminated for any reason other than death or disability prior to the Expiration
Date of this Option as set forth in Paragraph 3, this Option may be exercised,
to the extent of the number of shares with respect to which the Employee could
have exercised it on the date of such termination of employment, or to any
greater extent permitted by the Committee, by the Employee at any time prior to
three (3) months after the date of such termination of employment.
9. Disability. If the Employee becomes disabled, as defined in
the Plan, during his or her employment and, prior to the Expiration Date of this
Option as set forth in Paragraph 3, the Employee's employment is terminated as a
consequence of such disability, this Option may be exercised, to the extent of
the number of shares with respect to which the Employee could have exercised it
on the date of such termination of employment, or to any greater extent
permitted by the Committee in its discretion, by the Employee, or in the event
of the Employee's legal disability, by the Employee's legal representative, at
any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3; or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than the
date of such termination of employment and shall not be later than one
(1) year after the date of such termination of employment.
10. Death. If the Employee dies during his or her employment
and prior to the Expiration Date of this Option as set forth in Paragraph 3, or
if the Employee's employment is terminated for any reason (as described in
<PAGE>
Paragraphs 8 or 9 above) and the Employee dies following his or her termination
of employment but prior to the earliest of the Expiration Date of this Option as
set forth in Paragraph 3 above, the expiration of the period determined under
Paragraph 8 or 9 above, or three (3) months following the date of the Employee's
termination of employment, this Option may be exercised, to the extent of the
number of shares with respect to which the Employee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee, by the Employee's estate, personal representative or beneficiary who
acquired the right to exercise this Option by bequest or inheritance or by
reason of the Employee's death, at any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3, or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than one
(1) year, nor later than three (3) years, after the date of the
Employee's death.
11 [Intentionally Left Blank]
12. Disqualifying Disposition of Option Shares. The Employee
agrees to give written notice to the Company, at its principal office, if a
"disposition" of the shares acquired through exercise of the Option granted
hereunder occurs at any time within two (2) years after the Grant Date or within
one (1) year after the transfer to the Employee of such shares. For purposes of
this Paragraph 12, the term "disposition" shall have the meaning assigned to
such term by section 424(c) of the Code.
13. Withholding of Taxes. The obligation of the Company to
deliver shares upon the exercise of the 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 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"). Such election must be made in compliance with and
<PAGE>
subject to the Withholding Rules, and the Committee may not withhold shares in
excess of the number necessary to satisfy the minimum federal, state, and/or
local 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 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.
14. Governing Law. This Option Agreement shall, to the maximum
extent possible, be construed in a manner consistent with the Code provisions
concerning ISOs, and its interpretation shall be governed by applicable federal
law and otherwise by the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive
Stock Option Agreement to be duly executed by its officers thereunto duly
authorized, and the Employee has hereunto set his hand and seal, all on the day
and year first above written.
ATTEST: THE JUDGE GROUP, INC.
\s\Katharine A. Wiercinski By: \s\Martin E. Judge, Jr.
- -------------------------- -----------------------
Secretary Chief Executive Officer
EMPLOYEE
\s\Karen M. Keating \s\Richard T. Furlano
- ------------------- ---------------------
Witness Richard T. Furlano
Exhibit 10.13
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT made as of the 14th day of
February 1997 (the "Grant Date"), between The Judge Group, Inc., a Pennsylvania
corporation (the "Company"), and Michael A. Dunn, a Key Employee of the Company
and/or a Related Corporation (the "Employee").
WHEREAS, the Company desires to afford the Employee an
opportunity to purchase shares of common stock of the Company ("Common Stock")
as hereinafter provided, in accordance with the provisions of The Judge Group,
Inc. 1996 Incentive Stock Option and Non-Qualified Stock Option Plan for Key
Employees and Non-Employee Directors (the "Plan"), a copy of which is attached.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration the legal
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereunder, agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase all or any part of an aggregate
of 26,000 shares of Common Stock. The Option is in all respects limited and
conditioned as hereinafter provided, and is subject in all respects to the terms
and conditions of the Plan now in effect and as they may be amended, from time
to time in accordance with the Plan (which terms and conditions are and
automatically shall be incorporated herein by reference and made a part hereof
and shall control in the event of any conflict with any other terms of this
Option Agreement). It is intended that the Option granted hereunder be an
incentive stock option ("ISO") meeting the requirements of the Plan and section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the shares
of Common Stock covered by the Option shall be $7.50. It is the determination of
the Company's Stock Option Committee (the "Committee") that on the Grant Date
the Option price was not less than the higher of one hundred percent (100%) (or
in the case of a Key Employee who owns more than ten percent (10%) of the total
<PAGE>
combined voting power of all shares of stock of the Company or of a Related
Corporation, one hundred ten percent (110%)) of the fair market value of the
Common Stock, or the par value thereof.
3. Term. Unless earlier terminated pursuant to any provision
of the Plan or of this Option Agreement, this Option shall expire on February
14, 2002 (the "Expiration Date"), which date is not more than ten (10) years (or
in the case of a Key Employee who 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, five (5) years) from the Grant Date. This Option shall not be
exercisable on or after the Expiration Date.
4. Exercise of Option. This Option may be exercised in such
installments and on such dates, not less than six (6) months from the Grant
Date, as follows:
Number of Shares Date Exercisable
---------------- ----------------
6,500 2/14/98
6,500 2/14/99
6,500 2/14/00
6,500 2/14/01
Options that become exercisable in accordance with the foregoing shall remain
exercisable, subject to the provisions contained in the Plan and in this Option
Agreement, until the expiration of the term of this Option as set forth in
Paragraph 3 or until other termination of the Option.
5. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement and the Plan, the Option may be exercised by
written notice to the Company, at its principal office, which is located at 2
Bala Plaza, Suite 405, Bala Cynwyd, Pennsylvania 19004. Such notice (a suggested
form of which is attached) shall state the election to exercise the Option and
the number of shares with respect to which it is being exercised; shall be
signed by the person or persons so exercising the Option; shall, unless the
Company otherwise notifies the Employee, be accompanied by the investment
certificate referred to in Paragraph 6; and shall be accompanied by payment of
the full Option price of such shares.
The Option price shall be paid to the Company:
(a) In cash or its equivalent;
<PAGE>
(b) By delivering 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. THE
PAYMENT PROCEDURE SPECIFIED IN CLAUSE (b) IS CONSIDERED A SALE BY
EMPLOYEES SUBJECT TO SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF
1934 ("SECTION 16(b)") WHICH MAY BE MATCHED WITH ANY NON-EXEMPT
PURCHASE WITHIN THE SIX-MONTH PERIOD BEFORE OR AFTER THE
BROKER-FINANCED TRANSACTION.
Upon receipt of such notice and payment, the Company, as
promptly as practicable, shall deliver or cause to be delivered a certificate or
certificates representing the shares with respect to which the Option is so
exercised. The certificate or certificates for the shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and Employee's spouse,
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised by any person or persons after the legal
disability or death of the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable by the Company.
6. Shares to be Purchased for Investment. Unless the Company
has theretofore notified the Employee that a registration statement covering the
shares to be acquired upon the exercise of the Option has become effective under
the Securities Act of 1933 and the Company has not thereafter notified the
Employee that such registration statement is no longer effective, it shall be a
condition to any exercise of this Option that the shares acquired upon such
exercise be acquired for investment and not with a view to distribution, and the
person effecting such exercise shall submit to the Company a certificate of such
investment intent, together with such other evidence supporting the same as the
Company may request. The Company shall be entitled to restrict the
<PAGE>
transferability of the shares issued upon any such exercise to the extent
necessary to avoid a risk of violation of the Securities Act of 1933 (or of any
rules or regulations promulgated thereunder) or of any state laws or
regulations. Such restrictions may, at the option of the Company, be noted or
set forth in full on the share certificates.
7. Non-Transferability of Option. This Option is not
assignable or transferable, in whole or in part, by the Employee otherwise than
by will or by the laws of descent and distribution, and during the lifetime of
the Employee the Option shall be exercisable only by the Employee or by his
guardian or legal representative.
8. Termination of Employment. If the Employee's employment
with the Company and all related corporations, as defined in the Plan, is
terminated for any reason other than death or disability prior to the Expiration
Date of this Option as set forth in Paragraph 3, this Option may be exercised,
to the extent of the number of shares with respect to which the Employee could
have exercised it on the date of such termination of employment, or to any
greater extent permitted by the Committee, by the Employee at any time prior to
three (3) months after the date of such termination of employment.
9. Disability. If the Employee becomes disabled, as defined in
the Plan, during his or her employment and, prior to the Expiration Date of this
Option as set forth in Paragraph 3, the Employee's employment is terminated as a
consequence of such disability, this Option may be exercised, to the extent of
the number of shares with respect to which the Employee could have exercised it
on the date of such termination of employment, or to any greater extent
permitted by the Committee in its discretion, by the Employee, or in the event
of the Employee's legal disability, by the Employee's legal representative, at
any time prior to the earlier of
(a) The Expiration Date specified in Paragraph 3; or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than the
date of such termination of employment and shall not be later than one
(1) year after the date of such termination of employment.
10. Death. If the Employee dies during his or her employment
and prior to the Expiration Date of this Option as set forth in Paragraph 3, or
if the Employee's employment is terminated for any reason (as described in
<PAGE>
Paragraphs 8 or 9 above) and the Employee dies following his or her termination
of employment but prior to the earliest of the Expiration Date of this Option as
set forth in Paragraph 3 above, the expiration of the period determined under
Paragraph 8 or 9 above, or three (3) months following the date of the Employee's
termination of employment, this Option may be exercised, to the extent of the
number of shares with respect to which the Employee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee, by the Employee's estate, personal representative or beneficiary who
acquired the right to exercise this Option by bequest or inheritance or by
reason of the Employee's death, at any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3, or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than one
(1) year, nor later than three (3) years, after the date of the
Employee's death.
11. [Intentionally Left Blank]
12. Disqualifying Disposition of Option Shares. The Employee
agrees to give written notice to the Company, at its principal office, if a
"disposition" of the shares acquired through exercise of the Option granted
hereunder occurs at any time within two (2) years after the Grant Date or within
one (1) year after the transfer to the Employee of such shares. For purposes of
this Paragraph 12, the term "disposition" shall have the meaning assigned to
such term by section 424(c) of the Code.
13. Withholding of Taxes. The obligation of the Company to
deliver shares upon the exercise of the 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 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"). Such election must be made in compliance with and
<PAGE>
subject to the Withholding Rules, and the Committee may not withhold shares in
excess of the number necessary to satisfy the minimum federal, state, and/or
local 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 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.
14. Governing Law. This Option Agreement shall, to the maximum
extent possible, be construed in a manner consistent with the Code provisions
concerning ISOs, and its interpretation shall be governed by applicable federal
law and otherwise by the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive
Stock Option Agreement to be duly executed by its officers thereunto duly
authorized, and the Employee has hereunto set his hand and seal, all on the day
and year first above written.
ATTEST: THE JUDGE GROUP, INC.
\s\Katharine A. Wiercinski By: \s\Martin E. Judge, Jr.
- -------------------------- ---------------------------
Secretary Chief Executive Officer
EMPLOYEE
\s\Susan Rowdon \s\Michael A. Dunn
- --------------- ------------------
Witness Michael A. Dunn
Exhibit 10.14
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT made as of the 14th day of
February 1997 (the "Grant Date"), between The Judge Group, Inc., a Pennsylvania
corporation (the "Company"), and Jeffrey J. Andrews, a Key Employee of the
Company and/or a Related Corporation (the "Employee").
WHEREAS, the Company desires to afford the Employee an
opportunity to purchase shares of common stock of the Company ("Common Stock")
as hereinafter provided, in accordance with the provisions of The Judge Group,
Inc. 1996 Incentive Stock Option and Non-Qualified Stock Option Plan for Key
Employees and Non-Employee Directors (the "Plan"), a copy of which is attached.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration the legal
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereunder, agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase all or any part of an aggregate
of 15,000 shares of Common Stock. The Option is in all respects limited and
conditioned as hereinafter provided, and is subject in all respects to the terms
and conditions of the Plan now in effect and as they may be amended, from time
to time in accordance with the Plan (which terms and conditions are and
automatically shall be incorporated herein by reference and made a part hereof
and shall control in the event of any conflict with any other terms of this
Option Agreement). It is intended that the Option granted hereunder be an
incentive stock option ("ISO") meeting the requirements of the Plan and section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the shares
of Common Stock covered by the Option shall be $7.50. It is the determination of
the Company's Stock Option Committee (the "Committee") that on the Grant Date
the Option price was not less than the higher of one hundred percent (100%) (or
in the case of a Key Employee who owns more than ten percent (10%) of the total
<PAGE>
combined voting power of all shares of stock of the Company or of a Related
Corporation, one hundred ten percent (110%)) of the fair market value of the
Common Stock, or the par value thereof.
3. Term. Unless earlier terminated pursuant to any provision
of the Plan or of this Option Agreement, this Option shall expire on February
14, 2007 (the "Expiration Date"), which date is not more than ten (10) years (or
in the case of a Key Employee who 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, five (5) years) from the Grant Date. This Option shall not be
exercisable on or after the Expiration Date.
4. Exercise of Option. This Option may be exercised in such
installments and on such dates, not less than six (6) months from the Grant
Date, as follows:
Number of Shares Date Exercisable
---------------- ----------------
3,750 2/14/98
3,750 2/14/99
3,750 2/14/00
3,750 2/14/01
Options that become exercisable in accordance with the foregoing shall remain
exercisable, subject to the provisions contained in the Plan and in this Option
Agreement, until the expiration of the term of this Option as set forth in
Paragraph 3 or until other termination of the Option.
5. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement and the Plan, the Option may be exercised by
written notice to the Company, at its principal office, which is located at 2
Bala Plaza, Suite 405, Bala Cynwyd, Pennsylvania 19004. Such notice (a suggested
form of which is attached) shall state the election to exercise the Option and
the number of shares with respect to which it is being exercised; shall be
signed by the person or persons so exercising the Option; shall, unless the
Company otherwise notifies the Employee, be accompanied by the investment
certificate referred to in Paragraph 6; and shall be accompanied by payment of
the full Option price of such shares.
The Option price shall be paid to the Company:
(a) In cash or its equivalent;
<PAGE>
(b) By delivering 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. THE
PAYMENT PROCEDURE SPECIFIED IN CLAUSE (b) IS CONSIDERED A SALE BY
EMPLOYEES SUBJECT TO SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF
1934 ("SECTION 16(b)") WHICH MAY BE MATCHED WITH ANY NON-EXEMPT
PURCHASE WITHIN THE SIX-MONTH PERIOD BEFORE OR AFTER THE
BROKER-FINANCED TRANSACTION.
Upon receipt of such notice and payment, the Company, as
promptly as practicable, shall deliver or cause to be delivered a certificate or
certificates representing the shares with respect to which the Option is so
exercised. The certificate or certificates for the shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and Employee's spouse,
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised by any person or persons after the legal
disability or death of the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable by the Company.
6. Shares to be Purchased for Investment. Unless the Company
has theretofore notified the Employee that a registration statement covering the
shares to be acquired upon the exercise of the Option has become effective under
the Securities Act of 1933 and the Company has not thereafter notified the
Employee that such registration statement is no longer effective, it shall be a
condition to any exercise of this Option that the shares acquired upon such
exercise be acquired for investment and not with a view to distribution, and the
person effecting such exercise shall submit to the Company a certificate of such
investment intent, together with such other evidence supporting the same as the
Company may request. The Company shall be entitled to restrict the
<PAGE>
transferability of the shares issued upon any such exercise to the extent
necessary to avoid a risk of violation of the Securities Act of 1933 (or of any
rules or regulations promulgated thereunder) or of any state laws or
regulations. Such restrictions may, at the option of the Company, be noted or
set forth in full on the share certificates.
7. Non-Transferability of Option. This Option is not
assignable or transferable, in whole or in part, by the Employee otherwise than
by will or by the laws of descent and distribution, and during the lifetime of
the Employee the Option shall be exercisable only by the Employee or by his
guardian or legal representative.
8. Termination of Employment. If the Employee's employment
with the Company and all related corporations, as defined in the Plan, is
terminated for any reason other than death or disability prior to the Expiration
Date of this Option as set forth in Paragraph 3, this Option may be exercised,
to the extent of the number of shares with respect to which the Employee could
have exercised it on the date of such termination of employment, or to any
greater extent permitted by the Committee, by the Employee at any time prior to
three (3) months after the date of such termination of employment.
9. Disability. If the Employee becomes disabled, as defined in
the Plan, during his or her employment and, prior to the Expiration Date of this
Option as set forth in Paragraph 3, the Employee's employment is terminated as a
consequence of such disability, this Option may be exercised, to the extent of
the number of shares with respect to which the Employee could have exercised it
on the date of such termination of employment, or to any greater extent
permitted by the Committee in its
<PAGE>
discretion, by the Employee, or in the event of the Employee's legal disability,
by the Employee's legal representative, at any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3; or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than the
date of such termination of employment and shall not be later than one
(1) year after the date of such termination of employment.
10. Death. If the Employee dies during his or her employment
and prior to the Expiration Date of this Option as set forth in Paragraph 3, or
if the Employee's employment is terminated for any reason (as described in
Paragraphs 8 or 9 above) and the Employee dies following his or her termination
of employment but prior to the earliest of the Expiration Date of this Option as
set forth in Paragraph 3 above, the expiration of the period determined under
Paragraph 8 or 9 above, or three (3) months following the date of the Employee's
termination of employment, this Option may be exercised, to the extent of the
number of shares with respect to which the Employee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee, by the Employee's estate, personal representative or beneficiary who
acquired the right to exercise this Option by bequest or inheritance or by
reason of the Employee's death, at any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3, or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than one
(1) year, nor later than three (3) years, after the date of the
Employee's death.
11. [Intentionally Left Blank]
12. Disqualifying Disposition of Option Shares. The Employee
agrees to give written notice to the Company, at its principal office, if a
"disposition" of the shares acquired through exercise of the Option granted
hereunder occurs at any time within two (2) years after the Grant Date or
<PAGE>
within one (1) year after the transfer to the Employee of such shares. For
purposes of this Paragraph 12, the term "disposition" shall have the meaning
assigned to such term by section 424(c) of the Code.
13. Withholding of Taxes. The obligation of the Company to
deliver shares upon the exercise of the 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 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"). Such election must be made in compliance with and
subject to the Withholding Rules, and the Committee may not withhold shares in
excess of the number necessary to satisfy the minimum federal, state, and/or
local 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 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.
14. Governing Law. This Option Agreement shall, to the maximum
extent possible, be construed in a manner consistent with the Code provisions
concerning ISOs, and its interpretation shall be governed by applicable federal
law and otherwise by the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive
Stock Option Agreement to be duly executed by its officers thereunto duly
authorized, and the Employee has hereunto set his hand and seal, all on the day
and year first above written.
ATTEST: THE JUDGE GROUP, INC.
\s\Katharine A. Wiercinski By: \s\Martin E. Judge, Jr.
- -------------------------- -----------------------
Secretary Chief Executive Officer
EMPLOYEE
\s\Karen M. Keating \s\Jeffrey J. Andrews
- ------------------- ---------------------
Witness Jeffrey J. Andrews
Exhibit 10.15
THE JUDGE GROUP, INC.
1996 INCENTIVE STOCK OPTION AND
NON-QUALIFIED STOCK OPTION PLAN
FOR
KEY EMPLOYEES AND NON-EMPLOYEE DIRECTORS
INCENTIVE STOCK OPTION AGREEMENT
INCENTIVE STOCK OPTION AGREEMENT made as of the 14th day of
February 1997 (the "Grant Date"), between The Judge Group, Inc., a Pennsylvania
corporation (the "Company"), and Katharine A. Wiercinski, a Key Employee of the
Company and/or a Related Corporation (the "Employee").
WHEREAS, the Company desires to afford the Employee an
opportunity to purchase shares of common stock of the Company ("Common Stock")
as hereinafter provided, in accordance with the provisions of The Judge Group,
Inc. 1996 Incentive Stock Option and Non-Qualified Stock Option Plan for Key
Employees and Non-Employee Directors (the "Plan"), a copy of which is attached.
NOW, THEREFORE, in consideration of the mutual covenants
hereinafter set forth and for other good and valuable consideration the legal
sufficiency of which is hereby acknowledged, the parties hereto, intending to be
legally bound hereunder, agree as follows:
1. Grant of Option. The Company hereby grants to the Employee
the right and option (the "Option") to purchase all or any part of an aggregate
of 16,000 shares of Common Stock. The Option is in all respects limited and
conditioned as hereinafter provided, and is subject in all respects to the terms
and conditions of the Plan now in effect and as they may be amended, from time
to time in accordance with the Plan (which terms and conditions are and
automatically shall be incorporated herein by reference and made a part hereof
and shall control in the event of any conflict with any other terms of this
Option Agreement). It is intended that the Option granted hereunder be an
incentive stock option ("ISO") meeting the requirements of the Plan and section
422 of the Internal Revenue Code of 1986, as amended (the "Code").
2. Purchase Price. The purchase price per share of the shares
of Common Stock covered by the Option shall be $7.50. It is the determination of
the Company's Stock Option Committee (the "Committee") that on the Grant Date
the Option price was not less than the higher of one hundred percent (100%) (or
in the case of a Key Employee who owns more than ten percent (10%) of the total
<PAGE>
combined voting power of all shares of stock of the Company or of a Related
Corporation, one hundred ten percent (110%)) of the fair market value of the
Common Stock, or the par value thereof.
3. Term. Unless earlier terminated pursuant to any provision
of the Plan or of this Option Agreement, this Option shall expire on February
14, 2007 (the "Expiration Date"), which date is not more than ten (10) years (or
in the case of a Key Employee who 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, five (5) years) from the Grant Date. This Option shall not be
exercisable on or after the Expiration Date.
4. Exercise of Option. This Option may be exercised in such
installments and on such dates, not less than six (6) months from the Grant
Date, as follows:
Number of Shares Date Exercisable
---------------- ----------------
4,000 2/14/98
4,000 2/14/99
4,000 2/14/00
4,000 2/14/01
Options that become exercisable in accordance with the foregoing shall remain
exercisable, subject to the provisions contained in the Plan and in this Option
Agreement, until the expiration of the term of this Option as set forth in
Paragraph 3 or until other termination of the Option.
5. Method of Exercising Option. Subject to the terms and
conditions of this Option Agreement and the Plan, the Option may be exercised by
written notice to the Company, at its principal office, which is located at 2
Bala Plaza, Suite 405, Bala Cynwyd, Pennsylvania 19004. Such notice (a suggested
form of which is attached) shall state the election to exercise the Option and
the number of shares with respect to which it is being exercised; shall be
signed by the person or persons so exercising the Option; shall, unless the
Company otherwise notifies the Employee, be accompanied by the investment
certificate referred to in Paragraph 6; and shall be accompanied by payment of
the full Option price of such shares.
The Option price shall be paid to the Company:
(a) In cash or its equivalent;
<PAGE>
(b) By delivering 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. THE
PAYMENT PROCEDURE SPECIFIED IN CLAUSE (b) IS CONSIDERED A SALE BY
EMPLOYEES SUBJECT TO SECTION 16(b) OF THE SECURITIES EXCHANGE ACT OF
1934 ("SECTION 16(b)") WHICH MAY BE MATCHED WITH ANY NON-EXEMPT
PURCHASE WITHIN THE SIX-MONTH PERIOD BEFORE OR AFTER THE
BROKER-FINANCED TRANSACTION.
Upon receipt of such notice and payment, the Company, as
promptly as practicable, shall deliver or cause to be delivered a certificate or
certificates representing the shares with respect to which the Option is so
exercised. The certificate or certificates for the shares as to which the Option
shall have been so exercised shall be registered in the name of the person or
persons so exercising the Option (or, if the Option shall be exercised by the
Employee and if the Employee shall so request in the notice exercising the
Option, shall be registered in the name of the Employee and Employee's spouse,
jointly, with right of survivorship) and shall be delivered as provided above to
or upon the written order of the person or persons exercising the Option. In the
event the Option shall be exercised by any person or persons after the legal
disability or death of the Employee, such notice shall be accompanied by
appropriate proof of the right of such person or persons to exercise the Option.
All shares that shall be purchased upon the exercise of the Option as provided
herein shall be fully paid and non-assessable by the Company.
6. Shares to be Purchased for Investment. Unless the Company
has theretofore notified the Employee that a registration statement covering the
shares to be acquired upon the exercise of the Option has become effective under
the Securities Act of 1933 and the Company has not thereafter notified the
Employee that such registration statement is no longer effective, it shall be a
condition to any exercise of this Option that the shares acquired upon such
exercise be acquired for investment and not with a view to distribution, and the
person effecting such exercise shall submit to the Company a certificate of such
investment intent, together with such other evidence supporting the same as the
Company may request. The Company shall be entitled to restrict the
<PAGE>
transferability of the shares issued upon any such exercise to the extent
necessary to avoid a risk of violation of the Securities Act of 1933 (or of any
rules or regulations promulgated thereunder) or of any state laws or
regulations. Such restrictions may, at the option of the Company, be noted or
set forth in full on the share certificates.
7. Non-Transferability of Option. This Option is not
assignable or transferable, in whole or in part, by the Employee otherwise than
by will or by the laws of descent and distribution, and during the lifetime of
the Employee the Option shall be exercisable only by the Employee or by his
guardian or legal representative.
8. Termination of Employment. If the Employee's employment
with the Company and all related corporations, as defined in the Plan, is
terminated for any reason other than death or disability prior to the Expiration
Date of this Option as set forth in Paragraph 3, this Option may be exercised,
to the extent of the number of shares with respect to which the Employee could
have exercised it on the date of such termination of employment, or to any
greater extent permitted by the Committee, by the Employee at any time prior to
three (3) months after the date of such termination of employment.
9. Disability. If the Employee becomes disabled, as defined in
the Plan, during his or her employment and, prior to the Expiration Date of this
Option as set forth in Paragraph 3, the Employee's employment is terminated as a
consequence of such disability, this Option may be exercised, to the extent of
the number of shares with respect to which the Employee could have exercised it
on the date of such termination of employment, or to any greater extent
permitted by the Committee in its discretion, by the Employee, or in the event
of the Employee's legal disability, by the Employee's legal representative, at
any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3; or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than the
date of such termination of employment and shall not be later than one
(1) year after the date of such termination of employment.
10. Death. If the Employee dies during his or her employment
and prior to the Expiration Date of this Option as set forth in Paragraph 3, or
if the Employee's employment is terminated for any reason (as described in
<PAGE>
Paragraphs 8 or 9 above) and the Employee dies following his or her termination
of employment but prior to the earliest of the Expiration Date of this Option as
set forth in Paragraph 3 above, the expiration of the period determined under
Paragraph 8 or 9 above, or three (3) months following the date of the Employee's
termination of employment, this Option may be exercised, to the extent of the
number of shares with respect to which the Employee could have exercised it on
the date of his or her death, or to any greater extent permitted by the
Committee, by the Employee's estate, personal representative or beneficiary who
acquired the right to exercise this Option by bequest or inheritance or by
reason of the Employee's death, at any time prior to the earlier of:
(a) The Expiration Date specified in Paragraph 3, or
(b) An accelerated termination date determined by the
Committee, in its discretion, except that, subject to Section 9 of the
Plan, such accelerated termination date shall not be earlier than one
(1) year, nor later than three (3) years, after the date of the
Employee's death.
11. [Intentionally Left Blank]
12. Disqualifying Disposition of Option Shares. The Employee
agrees to give written notice to the Company, at its principal office, if a
"disposition" of the shares acquired through exercise of the Option granted
hereunder occurs at any time within two (2) years after the Grant Date or within
one (1) year after the transfer to the Employee of such shares. For purposes of
this Paragraph 12, the term "disposition" shall have the meaning assigned to
such term by section 424(c) of the Code.
13. Withholding of Taxes. The obligation of the Company to
deliver shares upon the exercise of the 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 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"). Such election must be made in compliance with and
<PAGE>
subject to the Withholding Rules, and the Committee may not withhold shares in
excess of the number necessary to satisfy the minimum federal, state, and/or
local 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 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.
14. Governing Law. This Option Agreement shall, to the maximum
extent possible, be construed in a manner consistent with the Code provisions
concerning ISOs, and its interpretation shall be governed by applicable federal
law and otherwise by the laws of the Commonwealth of Pennsylvania.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Incentive
Stock Option Agreement to be duly executed by its officers thereunto duly
authorized, and the Employee has hereunto set his hand and seal, all on the day
and year first above written.
ATTEST: THE JUDGE GROUP, INC.
\s\Katharine A. Wiercinski By: \s\Martin E. Judge, Jr.
- -------------------------- -----------------------
Secretary Chief Executive Officer
EMPLOYEE
\s\Karen M. Keating \s\Katharine A. Wiercinski
- ------------------- --------------------------
Witness Katharine A. Wiercinski
Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
Three Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Primary
Weighted average common shares outstanding 13,348,000 8,588,000
=========== ===========
Net income after adjustment for preferred dividends earned
on JIS stock $ 1,172,428 $ 556,124
=========== ===========
Primary net income per common share $ 0.09 $ 0.06
====== ======
Fully diluted
Weighted average common shares outstanding 13,348,000 9,114,000
=========== ===========
Net income after adjustment for preferred dividends earned
on JIS stock and interest expense on convertible debentures $ 1,172,428 $ 563,624
=========== ===========
Fully diluted net income per common share $ 0.09 $ 0.06
====== ======
</TABLE>
- ------------------
(1) All per share and share amounts reflect a 52.6 for 1.0 stock split
which occurred on September 23, 1996.
<PAGE>
Exhibit 11.1
COMPUTATION OF EARNINGS PER SHARE (1)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1997 1996
---- ----
<S> <C> <C>
Primary
Weighted average common shares outstanding 12,563,000 8,588,000
=========== ===========
Net income after adjustment for preferred dividends
earned on JIS stock $ 1,807,123 $ 710,791
=========== ===========
Primary net income per common share $ 0.14 $ 0.08
====== ======
Fully diluted:
Weighted average common shares outstanding 12,650,000 9,114,000
============ ===========
Net income after adjustment for preferred dividends
earned on JIS stock and interest expense on convertible
debentures $ 1,810,873 $ 733,291
============ ===========
Fully diluted net income per common share $ 0.14 $ 0.08
====== ======
</TABLE>
- --------------------
(1) All per share and share amounts reflect a 52.6 for 1.0 stock split
which occurred on September 23, 1996.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE JUDGE GROUP, INC. QUARTERLY REPORT ON FORM
10-Q FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 5,659,254
<SECURITIES> 0
<RECEIVABLES> 18,121,311
<ALLOWANCES> 724,000
<INVENTORY> 504,690
<CURRENT-ASSETS> 24,872,923
<PP&E> 4,789,638
<DEPRECIATION> 2,228,008
<TOTAL-ASSETS> 33,021,760
<CURRENT-LIABILITIES> 6,690,136
<BONDS> 0
0
0
<COMMON> 133,479
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 33,021,760
<SALES> 0
<TOTAL-REVENUES> 74,859,743
<CGS> 53,880,755
<TOTAL-COSTS> 71,597,097
<OTHER-EXPENSES> 9,404
<LOSS-PROVISION> 153,479
<INTEREST-EXPENSE> 9,404
<INCOME-PRETAX> 3,272,050
<INCOME-TAX> 1,458,208
<INCOME-CONTINUING> 1,813,842
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,813,842
<EPS-PRIMARY> 0.14
<EPS-DILUTED> 0.14
</TABLE>
