<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 2, 1998
REGISTRATION NO. 333-53381
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
COMPUTER HORIZONS CORP.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
NEW YORK 7371 132638902
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of
Incorporation or Organization) Classification Code Number) Identification No.)
COMPUTER HORIZONS CORP. JOHN J. CASSESE
49 Old Bloomfield Avenue Computer Horizons Corp.
Mountain Lakes, New Jersey 07046-1495 49 Old Bloomfield Avenue
(973) 299-4000 Mountain Lakes, New Jersey 07046-1495
(973) 299-4000
(Address, including zip code, and telephone (Name, address, including zip code, and
number, telephone
including area code, of registrant's principal number, including area code, of agent for
executive offices) service)
</TABLE>
---------------------
COPIES TO:
ERICA H. STEINBERGER, ESQ.
LATHAM & WATKINS
885 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 906-1200
---------------------
Approximate date of commencement of proposed sale to the public. From time
to time after this Registration Statement becomes effective.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
================================================================================
<PAGE> 2
THIS OFFER DOCUMENT IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION.
WHEN CONSIDERING WHAT ACTION YOU SHOULD TAKE, YOU ARE RECOMMENDED TO SEEK YOUR
OWN FINANCIAL ADVICE FROM YOUR STOCKBROKER, BANK MANAGER, SOLICITOR, ACCOUNTANT
OR OTHER INDEPENDENT FINANCIAL ADVISER DULY AUTHORISED UNDER THE FINANCIAL
SERVICES ACT 1986.
This Offer Document should be read in conjunction with the accompanying Form of
Acceptance.
If you have sold or transferred all your holding of Spargo Shares, please
forward this Offer Document and the accompanying Form of Acceptance and
reply-paid envelope as soon as possible to the purchaser or transferee or to the
stockbroker, bank or other agent through whom the sale or transfer was effected
for transmission to the purchaser or transferee. HOWEVER, SUCH DOCUMENTS SHOULD
NOT BE FORWARDED OR TRANSMITTED IN, INTO OR FROM THE UNITED STATES, CANADA,
AUSTRALIA OR JAPAN.
- --------------------------------------------------------------------------------
RECOMMENDED OFFER
BY
BROADVIEW ASSOCIATES
ON BEHALF OF
COMPUTER HORIZONS CORP.
FOR
SPARGO CONSULTING PLC
- --------------------------------------------------------------------------------
The Offer is not being made, directly or indirectly, in or into the United
States, Canada, Australia or Japan and this document and the Form of Acceptance
are not being, and must not be, mailed or transmitted in or into the United
States, Canada, Australia or Japan.
A letter from the Chairman of Spargo recommending shareholders to accept the
Offer is set out on pages 1 to 3 of this Offer Document.
The procedure for acceptance is set out on pages 12 to 14 of this Offer Document
and in the accompanying Form of Acceptance. To accept the Offer, the Form of
Acceptance must be completed and returned as soon as possible and in any event
so as to be received no later than 3:00 p.m. (UK time) on 24 June 1998.
See Appendix VII for definitions of terms used in this Offer Document.
THE SHAREHOLDERS OF SPARGO ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY
THIS OFFER DOCUMENT IN ITS ENTIRETY, INCLUDING THE MATTERS REFERRED TO UNDER
"INFORMATION REGARDING COMPUTER HORIZONS -- RISK FACTORS" BEGINNING ON PAGE 15
OF THIS OFFER DOCUMENT.
THE SECURITIES TO BE ISSUED IN CONNECTION WITH THE OFFER HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SEC OR THE SECURITIES COMMISSION OF ANY STATE OF THE
UNITED STATES NOR HAS THE SEC OR ANY SUCH STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS OFFER DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENCE.
Broadview Associates, which is regulated in the United Kingdom by The Securities
and Futures Authority Limited, is acting for Computer Horizons and no-one else
in connection with the Offer and will not be responsible to anyone other than
Computer Horizons for providing the protections afforded to customers of
Broadview Associates or for giving advice in relation to the Offer or any matter
referred to herein.
Peel Hunt, which is regulated in the United Kingdom by The Securities and
Futures Authority Limited, is acting for Spargo and no-one else in connection
with the Offer and will not be responsible to anyone other than Spargo for
providing the protections afforded to customers of Peel Hunt or for giving
advice in relation to the Offer or any matter referred to herein.
CERTAIN MARKET MAKERS ON THE LSE THAT ARE AFFILIATED WITH THE FINANCIAL ADVISERS
TO SPARGO MAY ENGAGE IN "MARKET MAKING" TRANSACTIONS ON THE LSE IN SPARGO SHARES
DURING THE OFFER PERIOD.
<PAGE> 3
AVAILABLE INFORMATION
Computer Horizons has filed with the SEC the Registration Statement with respect
to the offering of Computer Horizons Common Stock to be issued in connection
with the Offer. This Offer Document constitutes a part of the Registration
Statement and, in accordance with the rules of the SEC, omits certain of the
information contained in the Registration Statement. For such information,
reference is made to the Registration Statement and the exhibits thereto.
Computer Horizons is subject to the information requirements of the Exchange Act
and in accordance therewith files reports, proxy statements and other
information with the SEC. The Registration Statement, as well as such reports,
proxy statements and other information, can be inspected and copied at the
public reference facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549, and at the SEC's regional offices at Citicorp Center,
500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and at Seven World
Trade Center, Suite 1300, New York, New York 10048. Copies of such material can
also be obtained from the Public Reference Section of the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. The SEC also maintains
a WorldWide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the SEC.
The site and this Registration Statement may be accessed at http://www.sec.gov.
Computer Horizons Common Stock is traded on NASDAQ, and such materials and other
information concerning Computer Horizons also can be inspected at the offices of
NASDAQ at 1735 K Street, N.W., Washington, D.C. 20006. The Registration
Statement may also be inspected at the offices of Norton Rose, Kempson House,
Camomile Street, London EC3A 7AN, England, during normal business hours on any
weekday (English public holidays excepted) while the Offer remains open for
acceptance.
INCORPORATION OF DOCUMENTS BY REFERENCE
THIS OFFER DOCUMENT INCORPORATES BY REFERENCE CERTAIN DOCUMENTS THAT ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. COMPUTER HORIZONS HEREBY UNDERTAKES TO
PROVIDE WITHOUT CHARGE TO EACH PERSON, INCLUDING ANY BENEFICIAL OWNER OF SPARGO
SHARES, TO WHOM A COPY OF THIS OFFER DOCUMENT IS DELIVERED, UPON WRITTEN OR ORAL
REQUEST OF SUCH PERSON, A COPY OF ANY AND ALL DOCUMENTS AND INFORMATION THAT
HAVE BEEN INCORPORATED BY REFERENCE HEREIN (NOT INCLUDING EXHIBITS THERETO
UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN). SUCH DOCUMENTS AND INFORMATION ARE AVAILABLE
IN THE UNITED STATES UPON REQUEST FROM COMPUTER HORIZONS, 49 OLD BLOOMFIELD
AVENUE, MOUNTAIN LAKES, NEW JERSEY 07046-1495 USA, ATTENTION: DENNIS DIVENUTA,
TELEPHONE: 973-299-4000 AND IN THE UNITED KINGDOM UPON REQUEST FROM NORTON ROSE,
KEMPSON HOUSE, CAMOMILE STREET, LONDON EC3A 7AN, ENGLAND, ATTENTION: FABIO
MAZZOCCHETTI, TELEPHONE: 0171-283 6000. IN ADDITION, SUCH DOCUMENTS AND
INFORMATION MAY ALSO BE INSPECTED AT THE OFFICES OF NORTON ROSE, KEMPSON HOUSE,
CAMOMILE STREET, LONDON EC3A 7AN, ENGLAND DURING NORMAL BUSINESS HOURS ON ANY
WEEKDAY (ENGLISH PUBLIC HOLIDAYS EXCEPTED) WHILE THE OFFER REMAINS OPEN FOR
ACCEPTANCE. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS, ANY REQUEST
SHOULD BE MADE BY 19 JUNE 1998.
The following documents filed by Computer Horizons with the SEC are hereby
incorporated by reference in this Offer Document:
(a) Annual Report on Form 10-K for the fiscal year ended 31 December
1997 (the "1997 10-K");
(b) the portions of Computer Horizons' 1997 Annual Report to
Stockholders that have been incorporated by reference into the
1997 10-K;
(c) Report on Form 10-Q for the three months ended 31 March 1998;
(d) Computer Horizons' Proxy Statement for its 1998 Annual Meeting of
Stockholders;
(e) Current Report on Form 8-K dated 13 March 1998; and
(f) Current Report on Form 8-K/A dated 17 March 1998.
All documents filed by Computer Horizons pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act after the date of this Offer Document and prior to
the date on which the Offer becomes or is declared unconditional in all respects
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing thereof. Any statement contained herein or in any
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Offer Document to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein,
modifies or supersedes such statement. Any such
ii
<PAGE> 4
statement so modified or superseded shall not be deemed to constitute a part of
this Offer Document except as so modified or superseded.
------------------------
RULE 8 NOTICES
Any person who, alone or acting together with any other person(s) pursuant to
any agreement or understanding (formal or informal), owns or controls, or
becomes the owner or controller of, directly or indirectly, 1 per cent. or more
of any relevant securities (as such term is defined on page V-5 of this Offer
Document) is required, under the provisions of Rule 8 of the City Code, to
notify the Company Announcements Office of the LSE, which will notify the Panel
and the United Kingdom press, by no later than 12:00 noon on the business day
following the date of the relevant transaction, of every dealing in any relevant
securities until the First Closing Date of the Offer or (if later) such time as
the Offer becomes or is declared unconditional as to acceptances or lapses, in
accordance with Rule 8. Dealings by "associates" (within the meaning of the City
Code) of Computer Horizons or Spargo in relevant securities until such time must
also be disclosed. Please consult your legal counsel immediately if you believe
Rule 8 may be applicable to you.
------------------------
FINANCIAL INFORMATION
The extracts from the consolidated financial statements of, and other
information about, Computer Horizons appearing in this Offer Document are
presented in US dollars ($) and have been prepared in accordance with US GAAP.
Save where this Offer Document indicates to the contrary, the extracts from the
consolidated financial statements of, and other information about, Spargo
appearing in this Offer Document are presented in pounds sterling (L) and have
been prepared in accordance with UK GAAP. All US GAAP information for Spargo
appearing in this Offer Document is unaudited. US GAAP and UK GAAP differ in
certain significant respects (See "Information regarding Spargo -- Spargo
Management's Discussion and Analysis of Financial Condition and Results of
Operations -- Reconciliation of US to UK GAAP".
The mid-point of the closing spread of the dollar to sterling spot rate, as
shown in the Financial Times (UK edition) on 21 May 1998, the day before the
announcement of the Offer, was 1.6318 and on 1 June 1998, the latest practicable
date prior to the posting of this Offer Document, was 1.6307. The noon buying
rate in New York City for cable transfers in pounds sterling as certified for
customs purposes by the Federal Reserve Bank of New York on these dates was
1.6305 and 1.6392, respectively. This information is provided for the
convenience of the reader and may differ from the actual rates in effect during
the periods covered by the Spargo financial information discussed herein.
iii
<PAGE> 5
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Letter from the Chairman of Spargo to Spargo Shareholders... 1
Offer Letter from Broadview Associates to Spargo
Shareholders.............................................. 4
1. Introduction.......................................... 4
2. The Offer............................................. 4
3. Dealing Facility...................................... 5
4. Financial Effects of the Offer........................ 5
5. Spargo Share Option Scheme............................ 5
6. Accounting Treatment.................................. 6
7. Illustrative Comparative Per Share Data............... 6
8. Information regarding Computer Horizons............... 8
9. Information regarding Spargo.......................... 8
10. Background to and Reasons for the Offer............... 8
11. Employees............................................. 9
12. Taxation.............................................. 10
13. Procedure for Acceptance.............................. 12
14. Settlement............................................ 14
15. Further Information................................... 14
Information Regarding Computer Horizons..................... 15
1. Risk Factors.......................................... 15
2. Selected Financial Information of Computer Horizons... 21
3. Computer Horizons Management's Discussion and Analysis
of Financial Condition and Results of Operations.... 22
4. Nature of Trading Market.............................. 28
Information Regarding Spargo................................ 29
1. Business.............................................. 29
2. Selected Financial Information of Spargo.............. 29
3. Spargo Management's Discussion and Analysis of
Financial Condition and Results of Operations....... 30
4. Nature of Trading Market.............................. 31
</TABLE>
APPENDICES
<TABLE>
<S> <C> <C>
APPENDIX I Conditions and Further Terms of the Offer................... I-1
APPENDIX II Computer Horizons Financial Statements...................... II-1
APPENDIX III Spargo Financial Statements................................. III-1
APPENDIX IV Certain Market and Dividend Information..................... IV-1
APPENDIX V Additional Information...................................... V-1
APPENDIX VI Description of Computer Horizons Capital Stock and Changes
in the Rights of Spargo Shareholders...................... VI-1
APPENDIX VII Definitions................................................. VII-1
</TABLE>
<PAGE> 6
31 Beaufort Court, Admirals Way,
Waterside, South Quay,
London E14 9XL
Telephone: 0171 - 538 3388
Facsimile: 0171 - 538 1847
E-mail: [email protected]
[Spargo Consulting PLC Letterhead] Web site: www.spargo.com
(Registered in England: No. 2337791)
Directors:
A L R Morton F.C.A. (Chairman)
W A R Spargo (Chief Executive)
C P Gouveia F.C.C.A (Finance Director)
M E W Jackson F.C.A. (Non-Executive)
N Whitmey (Non-Executive)
R M Lewis (Non-Executive)
Registered Office:
31 Beaufort Court
Admirals Way
Waterside
South Quay
London E14 9XL
3 June 1998
To Spargo Shareholders and, for information only, to participants in the Spargo
Share Option Scheme
Dear Shareholder
RECOMMENDED OFFER BY COMPUTER HORIZONS FOR SPARGO
The Boards of Spargo and Computer Horizons announced on 22 May 1998 that they
had agreed the terms of a recommended share for share offer to be made by
Broadview Associates on behalf of Computer Horizons for the whole of the share
capital of Spargo. I am writing to explain the background to the Offer and the
reasons why your directors consider that the terms of the Offer are fair and
reasonable and, accordingly, why they unanimously recommend that you accept the
Offer.
BACKGROUND TO AND REASONS FOR THE RECOMMENDATION
Since its flotation in June 1994, Spargo has grown its business and now it is
one of the leading information technology consultancy services providers in the
United Kingdom. Offering a range of services in software applications
encompassing design, build, maintenance and enhancement, Spargo now employs some
170 staff and contractors, largely working with its blue chip client base and
some 19 staff working in sales, administration and support, accounting and
recruitment.
Against this background, the Board of Spargo has for some time been exploring
the strategic options available to maximise shareholder value whilst managing
risk.
Spargo is a relatively small company in a global multi-billion dollar market. A
merger with Computer Horizons provides the benefits of being part of a larger
organisation with all of the benefits that flow therefrom, whilst retaining many
of the elements of independence which have been beneficial in creating the
essential elements of the growth which Spargo has enjoyed.
Following an initial approach from Computer Horizons in the summer of 1997,
which was not progressed, a new approach in April 1998 has led to agreement on
the terms of the Offer which your Board considers is fair and reasonable having,
in particular, taken into account the constraints facing Spargo as an
independent company.
The Board considers that Computer Horizons represents a partner which has both
the financial and development resources to enable Spargo to take full advantage
of the opportunities available to it. The Board believes that the combination of
Spargo's and Computer Horizons' operations and the financial resources which
Computer Horizons can provide will result in a business better able to offer
successful and highly competitive services to customers.
1
<PAGE> 7
UNDERTAKINGS TO ACCEPT THE OFFER
Irrevocable undertakings to accept the Offer have been received in respect of
all the Spargo Shares currently in issue in which Spargo Directors are
interested (including Spargo Shares held, directly or indirectly, by or in trust
for the benefit of members of their families) amounting in total to 9,376,500
Spargo Shares, representing approximately 75.01 per cent. of Spargo's issued
share capital.
TERMS OF THE OFFER
The formal Offer, which is set out in the letter from Broadview Associates
beginning on page 4 of this Offer Document, is being made on the following
basis:
FOR EACH SPARGO SHARE 0.15096 OF A SHARE OF COMPUTER HORIZONS COMMON STOCK
As of 1 June 1998 (the latest practicable date prior to the posting of this
Offer Document), based on the closing Computer Horizons Common Stock price on
NASDAQ on such date and the Illustrative Exchange Rate, the sterling equivalent
value of the Offer would be 312p per Spargo Share. This would value the whole of
Spargo at approximately L39.7 million on a fully diluted basis. An Offer value
of 312p per Spargo Share represents a premium of 7.6 per cent. over the closing
middle market price of 290p per Spargo Share as derived from SEDOL on 6 May
1998, the day before the announcement by Spargo that it had received an approach
that might or might not lead to an agreed merger proposal.
DEALING FACILITY
The New Computer Horizons Common Stock will be traded on NASDAQ but will not be
listed or traded on the LSE. Since Spargo Shareholders may not be able to deal
easily or economically in the US market, it is anticipated that Spargo
Shareholders should, shortly after the date of this Offer Document, receive
information regarding a dealing facility developed by IRG Trustees Limited
utilising the services of BT Alex. Brown Inc. This arrangement will enable
Spargo Shareholders who wish to sell all of their New Computer Horizons Common
Stock to deal through BT Alex. Brown Inc.
MANAGEMENT AND EMPLOYEES
Computer Horizons has given assurances to the Board of Spargo that the existing
employment rights, including pension rights, of employees of the Spargo Group
will be fully safeguarded.
SPARGO SHARE OPTION SCHEME
The Offer extends to any Spargo Shares which are issued or unconditionally
allotted while the Offer remains open for acceptance, including any such shares
unconditionally allotted or issued as a result of the exercise of options under
the Spargo Share Option Scheme. If the Offer becomes or is declared
unconditional in all respects, under the rules of the Spargo Share Option Scheme
all outstanding Spargo Options will (irrespective of their date of grant) become
exercisable.
If the Offer becomes or is declared unconditional in all respects, Computer
Horizons intends to offer to holders of unexercised Spargo Options, in
accordance with the rules of the Spargo Share Option Scheme, the opportunity
(but such Optionholders will not be obliged) to exchange such Spargo Options for
options over shares of Computer Horizons Common Stock, with such options in all
other respects continuing to be governed by the provisions of the Spargo Share
Option Scheme. It is intended that the aggregate value of the shares of Computer
Horizons Common Stock the subject of such options and the aggregate exercise
price of such options will equal the current aggregate value of the Spargo
Options so exchanged and the current aggregate exercise price of such Spargo
Options, and that the ratio of exchange will reflect the terms of the Offer.
However, the actual terms of options over Computer Horizons Common Stock to be
offered will be subject to approval by the Inland Revenue, and may therefore
vary from those described above. Computer Horizons intends to notify
participants in the Spargo Share Option Scheme of the definitive terms of the
options over Computer Horizons Common Stock promptly following the date on which
the Offer becomes or is declared unconditional in all respects.
2
<PAGE> 8
ACTION TO BE TAKEN TO ACCEPT THE OFFER
The procedure for acceptance of the Offer is set out under "Procedure for
Acceptance" in paragraph 13 of the letter from Broadview Associates beginning on
page 4 of this Offer Document. IN ORDER TO ACCEPT THE OFFER, YOU SHOULD RETURN
YOUR COMPLETED FORM OF ACCEPTANCE IN ACCORDANCE WITH THE INSTRUCTIONS THEREON AS
SOON AS POSSIBLE AND, IN ANY EVENT, SO AS TO BE RECEIVED BY IRG NOT LATER THAN
3.00 P.M. ON 24 JUNE 1998. You must also take the other action described in
paragraph 13 of the letter from Broadview Associates.
TAXATION
Your attention is drawn to the discussion under "Taxation" in paragraph 12 of
the letter from Broadview Associates beginning on page 10 of this Offer
Document. IF YOU ARE IN ANY DOUBT AS TO YOUR TAX POSITION, YOU SHOULD CONSULT
YOUR INDEPENDENT PROFESSIONAL ADVISER.
CURRENT TRADING AND PROSPECTS
Spargo has maintained the significant progress made in the second half of last
year and current trading is at a record level with the continuing gain of new
clients and a growing billable head count.
Market conditions for Spargo's services remain buoyant and Spargo's new employee
recruitment division is being very successful in engaging new personnel to
service Spargo's clients' growing needs.
RECOMMENDATION
YOUR DIRECTORS, WHO HAVE BEEN SO ADVISED BY PEEL HUNT, CONSIDER THE TERMS OF THE
OFFER TO BE FAIR AND REASONABLE. IN PROVIDING ADVICE TO THE DIRECTORS OF SPARGO,
PEEL HUNT HAS TAKEN INTO ACCOUNT THE COMMERCIAL ASSESSMENTS OF THE DIRECTORS OF
SPARGO.
YOUR DIRECTORS THEREFORE UNANIMOUSLY RECOMMEND YOU TO ACCEPT THE OFFER.
IRREVOCABLE UNDERTAKINGS TO ACCEPT THE OFFER HAVE BEEN RECEIVED BY COMPUTER
HORIZONS IN RESPECT OF ALL THE SPARGO SHARES CURRENTLY IN ISSUE IN WHICH SPARGO
DIRECTORS ARE INTERESTED (INCLUDING SPARGO SHARES HELD, DIRECTLY OR INDIRECTLY,
BY OR IN TRUST FOR THE BENEFIT OF MEMBERS OF THEIR FAMILIES) AMOUNTING IN TOTAL
TO 9,376,500 SPARGO SHARES, REPRESENTING APPROXIMATELY 75.01 PER CENT. OF
SPARGO'S ISSUED SHARE CAPITAL.
Yours sincerely
Bob Morton
Chairman
3
<PAGE> 9
[BROADVIEW ASSOCIATES LETTERHEAD]
3 June 1998
To Spargo Shareholders and, for information only, to participants in
the Spargo Share Option Scheme
Dear Shareholder
RECOMMENDED OFFER FOR SPARGO CONSULTING PLC
1 INTRODUCTION
It was announced on 22 May 1998 that the Boards of Computer Horizons
and Spargo had reached agreement on the terms of a recommended share
for share offer to be made by Broadview Associates on behalf of
Computer Horizons for the whole of the share capital of Spargo. This
letter contains the formal offer from Broadview Associates on behalf
of Computer Horizons.
YOUR ATTENTION IS DRAWN TO THE LETTER FROM YOUR CHAIRMAN, BOB
MORTON, BEGINNING ON PAGE 1 OF THIS OFFER DOCUMENT, FROM WHICH YOU
WILL SEE THAT THE BOARD OF SPARGO CONSIDERS THE TERMS OF THE OFFER
TO BE FAIR AND REASONABLE AND UNANIMOUSLY RECOMMENDS SPARGO
SHAREHOLDERS TO ACCEPT THE OFFER.
IRREVOCABLE UNDERTAKINGS TO ACCEPT THE OFFER HAVE BEEN RECEIVED IN
RESPECT OF ALL THE SPARGO SHARES CURRENTLY IN ISSUE IN WHICH SPARGO
DIRECTORS ARE INTERESTED (INCLUDING SPARGO SHARES HELD, DIRECTLY OR
INDIRECTLY, BY OR IN TRUST FOR THE BENEFIT OF MEMBERS OF THEIR
FAMILIES) AMOUNTING IN TOTAL TO 9,376,500 SPARGO SHARES,
REPRESENTING APPROXIMATELY 75.01 PER CENT. OF SPARGO'S ISSUED SHARE
CAPITAL.
2 THE OFFER
The Offer is being made on and subject to the terms and conditions
set out in this Offer Document and the Form of Acceptance on the
following basis:
FOR EACH SPARGO SHARE 0.15096 OF A SHARE OF COMPUTER HORIZONS
COMMON STOCK
As of 1 June 1998 (the latest practicable date prior to the posting
of this Offer Document), based on the closing Computer Horizons
Common Stock price on NASDAQ on such date and the Illustrative
Exchange Rate, the sterling equivalent value of the Offer would be
312p per Spargo Share. An Offer value of 312p per Spargo Share
represents a premium of 7.6 per cent. over the closing middle market
price of 290p per Spargo Share as derived from SEDOL on 6 May 1998,
the day before the announcement by Spargo that it had received an
approach that might or might not lead to an agreed merger proposal.
On the basis of full acceptance of the Offer on a fully diluted
basis, the Offer would involve the issue of 1,920,928 shares of
Computer Horizons Common Stock, representing 6.2 per cent. of the
number of shares of Computer Horizons Common Stock outstanding
immediately following, and giving effect to, such issue.
Spargo Shareholders should bear in mind that the sterling equivalent
value of any investment in Computer Horizons Common Stock will be
affected by the dollar/sterling exchange rate. See "Information
Regarding Computer Horizons -- Risk Factors -- Risks Relating to the
Offer -- Risks Associated with Currency Exchange Rate Fluctuations"
beginning on page 15 of this Offer Document.
The Spargo Shares which are the subject of the Offer will be
acquired fully paid and free from all liens, charges, equitable
interests, rights of pre-emption and other third party rights of any
nature and together with all rights attaching thereto, including the
right to receive all dividends and other distributions declared,
paid or made after 22 May 1998.
4
LOGO
<PAGE> 10
(I) TREATMENT OF FRACTIONS
If the Offer becomes or is declared unconditional in all respects, fractions of
a share of Computer Horizons Common Stock will not be issued to accepting Spargo
Shareholders who will instead receive an amount in cash from Computer Horizons
(in sterling calculated at the Settlement Exchange Rate) in lieu of any
entitlement to fractions of shares of Computer Horizons Common Stock. However,
individual entitlements of less than L3.00 will not be paid to Spargo
Shareholders but will be retained for the benefit of the Enlarged Computer
Horizons Group.
(II) COMPUTER HORIZONS COMMON STOCK
The New Computer Horizons Common Stock will be issued credited as fully paid and
will rank pari passu in all respects with the existing Computer Horizons Common
Stock, including the right to any dividend or other distribution declared, paid
or made after 22 May 1998. The New Computer Horizons Common Stock will be issued
free from all liens, equities, charges, encumbrances and other interests.
3 DEALING FACILITY
The New Computer Horizons Common Stock will be traded on NASDAQ but will not be
listed or traded on the LSE. Since Spargo Shareholders may not be able to deal
easily or economically in the US market, it is anticipated that Spargo
Shareholders should, shortly after the date of this Offer Document, receive
information regarding a dealing facility developed by IRG Trustees Limited
utilising the services of BT Alex. Brown Inc. This arrangement will enable
Spargo Shareholders who wish to sell all of their New Computer Horizons Common
Stock to deal through BT Alex. Brown Inc.
4 FINANCIAL EFFECTS OF THE OFFER
(A) CAPITAL VALUE
The following table illustrates, on the bases and assumptions set out in the
Notes thereto, the increase in capital value under the Offer for a holder of 100
Spargo Shares who accepts the Offer if the Offer becomes or is declared
unconditional in all respects:
<TABLE>
<S> <C>
Sterling equivalent value of New Computer Horizons Common
Stock issued in exchange for 100 Spargo Shares under the
Offer(1).................................................. L312
Market value of 100 Spargo Shares(2)........................ L290
--------------
Increase in value(3)........................................ L22
--------------
Percentage increase(3)...................................... 7.6 per cent.
</TABLE>
Notes:
(1) The sterling equivalent value of New Computer Horizons Common Stock is based
on the closing Computer Horizons Common Stock price on NASDAQ of $33.75 on 1
June 1998 (the latest practicable date prior to the posting of this Offer
Document) and the Illustrative Exchange Rate.
(2) The market value attributed to one Spargo Share is based on the closing
middle market price of a Spargo Share of 290p as derived from SEDOL on 6 May
1998, the day before the announcement that Spargo had received an approach
that might or might not lead to an agreed merger proposal.
(3) No account has been taken of any liability to taxation or for the treatment
of fractional entitlements to Computer Horizons Common Stock.
(B) INCOME
Computer Horizons intends to continue its policy of retaining earnings for use
in its operations and in the expansion of its business and therefore does not
anticipate paying any cash dividends or making any other form of distribution of
income for the foreseeable future. Historically, Computer Horizons has never
paid a cash dividend.
With respect to the year ended 31 December 1997, a holder of 100 Spargo Shares
would have received net dividend income totalling L6.00.
5 SPARGO SHARE OPTION SCHEME
The Offer extends to any Spargo Shares which are issued or unconditionally
allotted while the Offer remains open for acceptance, including any such shares
unconditionally allotted or issued as a result of the exercise of options under
the Spargo Share Option Scheme. If the Offer becomes or is declared
unconditional in all
5
<PAGE> 11
respects, under the rules of the Spargo Share Option Scheme all outstanding
Spargo Options will (irrespective of their date of grant) become exercisable.
If the Offer becomes or is declared unconditional in all respects, Computer
Horizons intends to offer to holders of unexercised Spargo Options, in
accordance with the rules of the Spargo Share Option Scheme, the opportunity
(but such Optionholders will not be obliged) to exchange such Spargo Options for
options over shares of Computer Horizons Common Stock, with such options in all
other respects continuing to be governed by the provisions of the Spargo Share
Option Scheme. It is intended that the aggregate value of the shares of Computer
Horizons Common Stock the subject of such options and the aggregate exercise
price of such options will equal the current aggregate value of the Spargo
Options so exchanged and the current aggregate exercise price of such Spargo
Options, and that the ratio of exchange will reflect the terms of the Offer.
However, the actual terms of options over Computer Horizons Common Stock to be
offered will be subject to approval by the Inland Revenue, and may therefore
vary from those described above. Computer Horizons intends to notify
participants in the Spargo Share Option Scheme of the definitive terms of the
options over Computer Horizons Common Stock promptly following the date on which
the Offer becomes or is declared unconditional in all respects.
6 ACCOUNTING TREATMENT
POOLING OF INTERESTS
It is a condition of the Offer that Computer Horizons receives a letter from
Grant Thornton, Computer Horizons' auditors, dated as of the date on which the
Offer otherwise becomes or is declared unconditional in all respects, confirming
that they continue to concur with Computer Horizons management's conclusion that
the acquisition of Spargo may be accounted for as a pooling of interests under
US GAAP.
Grant Thornton have confirmed to Computer Horizons as of the date of this Offer
Document that they concur with Computer Horizons management's current conclusion
that the acquisition of Spargo may be accounted for as a pooling of interests
under US GAAP.
AFFILIATE AGREEMENTS
The shares of Computer Horizons Common Stock to be issued pursuant to the Offer
have been registered under the Securities Act pursuant to a Registration
Statement on Form S-4, thereby allowing such shares to be traded without
restriction by any former holder of Spargo Shares if such holder (i) is not
deemed to be an "affiliate" (as defined in Rule 144 under the Securities Act) of
Spargo at any time during the period commencing 30 days prior to the
announcement by Spargo that it had received an approach that might or might not
lead to an agreed merger proposal and ending on the date on which the Offer
becomes or is declared unconditional in all respects, and (ii) does not become
an affiliate of Computer Horizons.
In order that the acquisition of Spargo may be treated as a pooling of interests
under US GAAP, the Directors of Spargo and certain persons associated with them
have entered into Affiliate Agreements with Computer Horizons in respect of a
total of 9,376,500 Spargo Shares (representing approximately 75.01 per cent. of
Spargo's issued share capital). Under the terms of the Affiliate Agreements, the
Affiliates agree not to deal in their Spargo Shares (other than to accept the
Offer) or their New Computer Horizons Common Stock until Computer Horizons has
published financial statements incorporating at least 30 days of combined
operations of Computer Horizons and Spargo. Financial statements reflecting the
combined operations of Computer Horizons and Spargo are required to be included
in Computer Horizons' Quarterly Report on Form 10-Q, filed with the SEC, for the
quarter in which the Offer becomes or is declared unconditional in all respects.
7 ILLUSTRATIVE COMPARATIVE PER SHARE DATA
The following table illustrates certain historical and pro forma comparative per
share data of Computer Horizons and Spargo giving effect to the Offer as a
pooling of interests for accounting purposes. In addition, the following
unaudited information reflects Spargo on a pro forma equivalent basis. The
unaudited pro forma data presented is for comparative purposes only and is not
necessarily indicative of future combined earnings or the financial position
that would have been reported had the Offer become or been declared
unconditional in all respects at the beginning of the respective periods or as
of the dates for which such unaudited pro forma information is presented. For
the convenience of the reader, the financial information of Spargo used in the
preparation of the pro forma information appearing below has been adjusted to
comply with US GAAP and contains translations of pounds sterling amounts into US
dollars at rates specified in "Information Regarding Spargo -- Selected Spargo
Financial Information". Such translations should not be construed as representa-
6
<PAGE> 12
tions that the pounds sterling amounts represent, or have been, or could be,
converted into US dollars at that or any other rate. Pro forma information for
the three months ended 31 March 1998 has not been provided because historical
financial information of Spargo for such period is not available. Spargo will
constitute an insignificant foreign subsidiary of Computer Horizons following
consummation of the Offer.
<TABLE>
<CAPTION>
YEAR ENDED YEAR ENDED YEAR ENDED
31 DECEMBER 1997 31 DECEMBER 1996 31 DECEMBER 1995
---------------- ---------------- ----------------
<S> <C> <C> <C>
Computer Horizons Historical(1), (2), (3)
Net income per common share(4):
Basic................................... $0.88 $0.48 $0.46
Diluted................................. $0.84 $0.46 $0.44
Book value per common share(5)............. $6.60
Cash dividends declared per common
share(4)................................ $0.00 $0.00 $0.00
Spargo Historical(6)
Net income per common share(4):
Basic................................... $0.15 $0.10 $0.06
Diluted................................. $0.15 $0.10 $0.06
Book value per common share(5)............. $0.29
Cash dividends declared per common
share(4)................................ $0.10 $0.08 $0.06
Computer Horizons/Spargo Pro Forma
Combined(7), (8)
Net income per common share(4):
Basic................................... $0.89 $0.50 $0.46
Diluted................................. $0.85 $0.47 $0.43
Book value per common share(5)............. $6.30
Cash dividends declared per common
share(4)................................ $0.04 $0.04 $0.03
Spargo Equivalent Pro Forma(9)
Net income per common share(4):
Basic................................... $1.01 $0.63 $0.43
Diluted................................. $1.00 $0.63 $0.42
Book value per common share(5)............. $1.89
Cash dividends declared per common
share(4)................................ $0.65 $0.51 $0.41
</TABLE>
Notes:
(1) On 28 February 1998 a wholly-owned subsidiary of Computer Horizons merged
with and into Princeton Softech, Inc. ("Princeton"), as a result of which
Princeton became a wholly-owned subsidiary of Computer Horizons in a
stock-for-stock transaction which was accounted for as an immaterial pooling
of interests. The results of Princeton have been included in the historical
financial data for Computer Horizons as of 1 January 1998. The financial
data for the years ended 31 December 1997, 1996 and 1995 have not been
restated.
(2) The year ended 31 December 1997 included a one-time charge for merger
related costs of $976,000.
(3) All per share data have been adjusted retroactively to reflect Computer
Horizons' three-for-two stock splits declared May 1997, December 1995 and
April 1995.
(4) Basic net income and cash dividends declared per share data were calculated
based on the weighted average number of shares outstanding without
consideration of common stock equivalents. Diluted net income was calculated
based on the weighted average number of common and common equivalent shares
outstanding. The calculation takes into account the shares that may be
issued upon exercise of stock options, reduced by the shares that may be
repurchased with the funds received from the exercise, based on the average
trading price of shares of common stock during the year.
(5) The historical book value per common share is computed by dividing total
stockholders' equity by the number of shares of common stock outstanding at
the end of the period. The pro forma book value per common share is computed
by dividing pro forma stockholders' equity by the pro forma number of shares
of common stock as of the end of each of the periods presented.
(6) Pound sterling amounts have been converted into US dollars at either the
exchange rate at the end of the period presented or the weighted average
exchange rate, as appropriate. See "Information Regarding Spargo -- Selected
Financial Information of Spargo" for the pound-dollar exchange rate at the
end of certain financial periods, the average rate for each period and the
range of high and low rates for each period.
(7) Excludes merger-related costs, which will be charged to combined operations
during the period in which the combination is consummated. Also excluded are
restructuring costs associated with the integration of Computer Horizons'
and Spargo's operations. An estimate of these costs has not yet been
determined as management are still in the process of finalising their plans.
(8) The pro forma data presents Computer Horizons' historical data combined with
Spargo's historical data assuming the combination of Computer Horizons and
Spargo had occurred on 1 January 1995.
(9) The Spargo equivalent pro forma per share information is calculated by
dividing the Spargo historical per share amounts by 0.15096, the fraction of
a share of Computer Horizons Common Stock that will be exchanged for each
Spargo Share.
7
<PAGE> 13
8 INFORMATION REGARDING COMPUTER HORIZONS
Computer Horizons is a diversified information technology services and products
company providing its clients with resource augmentation and advanced technology
solutions to business problems through applications development, client/server
migration, network management, emerging technologies and legacy systems
maintenance, including "Year 2000" services.
Computer Horizons employs over 4,000 people across an international network of
45 offices. Computer Horizons' clients include AT&T, Chase Manhattan
Corporation, Citicorp, Dow Chemical Company, Florida Power & Light Company, Ford
Motor Company, International Business Machines Corporation, MCI Communications
Corporation, NYNEX Corporation and Prudential Insurance Company of America. See
"Information Regarding Computer Horizons" beginning on page 15 of this Offer
Document for additional information.
For the year ended 31 December 1997, Computer Horizons generated income before
taxes of $40.2 million (L24.6 million at the Illustrative Exchange Rate) on
revenues of $334.7 million (L205.1 million at the Illustrative Exchange Rate).
As at 31 December 1997 Computer Horizons had total stockholders' equity
(shareholders' funds) of $182.5 million (L111.8 million at the Illustrative
Exchange Rate). See "Information Regarding Computer Horizons -- Selected
Financial Information of Computer Horizons" beginning on page 21 of this Offer
Document and Appendix II for Computer Horizons' results for the three months
ended 31 March 1998.
Computer Horizons Common Stock is traded on NASDAQ under the symbol "CHRZ" and
Computer Horizons had a market capitalisation of approximately $977.1 million
(L598.8 million at the Illustrative Exchange Rate) as of 1 June 1998, the latest
practicable date prior to the posting of this Offer Document, based on the
closing Computer Horizons Common Stock price on NASDAQ of $33.75 on such date.
See Appendix IV for additional information regarding the historical trading
price of Computer Horizons Common Stock.
The Board of Computer Horizons believes that Computer Horizons will benefit from
the IT industry's positive growth pattern and is optimistic about its prospects
for the future.
On 26 May 1998 Computer Horizons announced that it had decided to sell its 50
per cent. share in the Joint Venture to its partner for $5.75 million. In 1995,
Computer Horizons invested $500,000 to start the Joint Venture. The sale is
pending Indian government approval, which Computer Horizons expects to receive
early in the summer 1998.
9 INFORMATION REGARDING SPARGO
Spargo is one of the leading information technology consultancy services
providers in the United Kingdom offering a range of services in software
applications which encompass design, build, maintenance and enhancement to a
largely blue chip client base in the United Kingdom. See "Information Regarding
Spargo" beginning on page 29 of this Offer Document for additional information.
Spargo's target customer base is large computer users comprising major blue chip
companies, financial institutions and leading consulting companies based in the
UK, the US and Western Europe. Spargo's clients include Lloyds TSB Plc, Xerox
Limited, J.P. Morgan, J.H. Marsh & McLellan Limited and Ladbroke Racing Limited.
For the year ended 31 December 1997, Spargo's turnover was L9.5 million and
reported profit before tax was L1.7 million. At that date the Spargo Group's net
assets were L1.7 million. See "Information Regarding Spargo -- Selected
Financial Information of Spargo" beginning on page 29 of this Offer Document and
Appendix III for additional information.
10 BACKGROUND TO AND REASONS FOR THE OFFER
Having grown strongly since its foundation in 1969, Computer Horizons has
succeeded in organically building a services infrastructure across the United
States to service its corporate client base, making selective acquisitions in
specific areas where it felt the opportunity warranted such action. In line with
its strategy for growth, it engaged Broadview Associates LLC on 19 November 1996
to assist it in managing an ongoing proactive corporate development program
covering the US.
As many of Computer Horizons' major clients (including AT&T, Chase Manhattan
Corporation, Citicorp, Dow Chemical Company, Ford Motor Company and
International Business Machines Corporation) operate
8
<PAGE> 14
internationally and have substantial UK activities, Computer Horizons entered
the UK market in the first quarter of 1997, setting up its own office in London,
which currently employs five staff.
Computer Horizons has since experienced rapid growth in demand for its services
in the UK and faces challenges in recruiting sufficient staff and building its
infrastructure in a timely fashion. Against this background, Computer Horizons
therefore requested that Broadview Associates LLC expand its efforts to cover
the UK. As a result of Broadview Associates' research into the UK market,
Computer Horizons requested on 9 May 1997 that Broadview Associates approach
Spargo to discuss possible business opportunities. These discussions were
subsequently halted in August 1997.
Following a review by Computer Horizons during the spring of 1998 of both its
overall corporate development programme and the continuing growth in demand for
its services in the UK, Computer Horizons reassessed its position with respect
to an acquisition of Spargo and reopened discussion with Spargo through
Broadview Associates with respect to the possibility of a combination of
Computer Horizons and Spargo.
On 13 April 1998, a discussion took place by telephone between Broadview
Associates and Bob Morton, Chairman of Spargo, during which the parties
discussed the valuation of Spargo. Following such discussion, Computer Horizons
issued a non-binding proposal to Spargo detailing general terms and conditions
under which it would consider a business combination with Spargo, which was
acknowledged by Spargo on 14 April 1998.
On 22 April 1998, Bob Morton and Tony Spargo, Chief Executive of Spargo, met
with John J Cassese, Chief Executive Officer of Computer Horizons, and William J
Murphy, Chief Financial Officer of Computer Horizons, and Broadview Associates
to discuss the valuation of Spargo and further terms and conditions to closing.
Subsequent to this meeting, Spargo engaged Peel Hunt as its financial adviser in
connection with discussions regarding a potential offer by Computer Horizons for
the shares of Spargo. Between 23 April and 7 May 1998 a series of meetings took
place between, inter alios, various senior officers of Computer Horizons and
Spargo, Broadview Associates, Peel Hunt, the firms of Norton Rose and Latham &
Watkins, legal advisers to Computer Horizons, and Theodore Goddard, legal
advisers to Spargo, and Grant Thornton and KPMG Audit Plc, the independent
accountants to Computer Horizons and Spargo, respectively. The purpose of these
meetings was to discuss matters relating primarily to the terms and structure of
any potential offer for Spargo, regulatory requirements relating to any such
offer, the due diligence investigation to be performed by Computer Horizons in
order to assess the perceived benefits of a potential combination with Spargo,
and the required documentation necessary for a formal offer to be made by
Computer Horizons for Spargo.
On 7 May 1998, Spargo announced that it had received an approach which might or
might not lead to an agreed merger proposal being put to it. This announcement
was felt to be necessary following a period commencing 22 April 1998 during
which the Spargo share price rose by over 20 per cent.
Following Spargo's announcement on 7 May 1998, the parties entered into further
discussion regarding valuation and Computer Horizons began to conduct due
diligence with a view to reaching a definitive agreement on the terms of the
Offer. On 21 May 1998, the parties completed due diligence.
On 21 May 1998, the board of directors of each of Computer Horizons and Spargo
approved the terms of the Offer, the form of the Offer Document and related
documents, and the board of directors of Computer Horizons approved the filing
of the Registration Statement with the SEC.
On 22 May 1998, Computer Horizons and Spargo issued a press release announcing
the terms of the Offer and filed the Registration Statement with the SEC.
Computer Horizons is making the Offer because it is consistent with Computer
Horizons' policy of growth through both internal development and strategic
acquisitions of complementary businesses. Computer Horizons believes that a
combination with Spargo will complement Computer Horizons' existing strength in
the US market and will permit it to service in the UK its existing customers
sooner than by relying on internal growth alone. Furthermore, Computer Horizons
believes that there is a significant potential enhancement of the strategic and
market position of the combined companies beyond that achievable by Computer
Horizons alone.
11 EMPLOYEES
The existing employment rights, including pension rights, of all of the
employees of the Spargo Group will be fully safeguarded.
9
<PAGE> 15
12 TAXATION
The following discussion of taxation is included for general information and
only relates to the position of a person who is a UK Resident and who is the
absolute beneficial owner of Spargo Shares. In particular, the following does
not discuss all of the tax consequences that may be relevant to a Spargo
Shareholder in light of such shareholder's particular circumstances or to
holders subject to special rules, such as life insurance companies or dealers in
securities. The explanation of UK and US tax laws set out below is based on laws
and, in the case of the UK, practice at present in effect, including the Treaty,
and, in the case of both the UK and the US, judicial and administrative
precedent as of 1 June 1998. This explanation is subject to any changes in those
laws (which may apply retroactively) or in the interpretation thereof by the
relevant taxation authorities, practice (in the case of the UK) and precedent
occurring after that date and does not discuss any tax laws other than those of
the UK and the US. Spargo Shareholders who are in any doubt as to their taxation
position or are subject to taxation in any jurisdiction other than the UK or the
US are urged to consult their professional advisers as to the specific tax
consequences to them of the Offer.
UK Taxation
The following discussion summarises in general terms for a Spargo Shareholder
who is a UK Resident and who holds Spargo Shares as an investment the principal
UK tax consequences associated with the exchange of securities pursuant to the
Offer.
Taxation of Capital Gains. The exchange of Spargo Shares by a Spargo
Shareholder in return for New Computer Horizons Common Stock will not be treated
as a disposal of Spargo Shares for the purposes of UK taxation of capital gains,
provided that the Spargo Shareholder, together with persons connected with him,
owns not more than 5 per cent. of, or of any class of, the shares in or
debentures of Spargo. The New Computer Horizons Common Stock will instead be
treated as the same asset as the Spargo Shares, acquired as and when the Spargo
Shares were acquired.
Each Spargo Shareholder who, either alone or together with persons connected
with him, holds more than five per cent. of the shares in, or any class of the
shares in or debentures of, Spargo is advised that the Inland Revenue has
granted a tax clearance under section 138 of the Taxation of Chargeable Gains
Act 1992 which confirms that the Inland Revenue is satisfied that the exchange
of securities pursuant to the Offer is being effected for bona fide commercial
reasons and not for tax avoidance purposes. As a result of the granting of this
clearance any such holder of Spargo Shares will be treated in the manner
described in the previous paragraph.
A Spargo Shareholder will, to the extent that he receives cash in lieu of a
fraction of a share of New Computer Horizons Common Stock, be treated as making
a part disposal of his Spargo Shares which may, depending upon his individual
circumstances, give rise to a liability to UK taxation of capital gains.
A subsequent disposal of New Computer Horizons Common Stock by a UK Resident may
give rise to a liability to UK taxation of capital gains.
Stamp Duty and Stamp Duty Reserve Tax. No UK stamp duty or stamp duty reserve
tax will be payable by a Spargo Shareholder on the transfer of Spargo Shares to
Computer Horizons. Any liability to UK stamp duty or stamp duty reserve tax on
the transfer of such Spargo Shares to Computer Horizons will be borne by
Computer Horizons. No UK stamp duty or stamp duty reserve tax will be payable on
the issue of New Computer Horizons Common Stock.
Dividends. A UK Resident will generally be liable to income tax or corporation
tax in the UK on the aggregate of any dividend received from Computer Horizons
and any tax withheld at source in the US (see below under "Taxation of UK
Residents-US Taxation") and any tax withheld in the UK (see below). In computing
that liability to taxation, credit will be given for any tax withheld in the US
and any tax withheld in the UK. No repayment of the US tax credit will be
available to a UK Resident. In the case of a corporate UK Resident which
controls 10 per cent. or more of the voting stock of Computer Horizons, credit
will also be available for underlying tax against UK taxes in respect of the
dividend.
Special rules apply to UK Residents who are not domiciled in the UK.
An agent in the UK who, on behalf of a UK Resident, collects a dividend paid by
Computer Horizons may be required to withhold a sum on account of UK income tax
or corporation tax, currently at the rate of 20 per cent. Regulations, however,
allow credit to be given for tax withheld in the US, thereby reducing the
aggregate withholding to 20 per cent. of the gross dividend.
10
<PAGE> 16
Inheritance Tax. Where Computer Horizons Common Stock is held by an individual
who is neither domiciled nor deemed to be domiciled in the UK, no liability to
UK inheritance tax will arise. Where Computer Horizons Common Stock is held by
an individual who is either domiciled or deemed to be domiciled in the UK,
liability to UK inheritance tax may arise on the death of, or on a gift (or
disposal at an undervalue) of the Computer Horizons Common Stock by, that
individual.
US Taxation
The following is a general summary of certain US federal income tax consequences
expected to result under current law from the ownership, sale and disposition of
Computer Horizons Common Stock by UK shareholders who are not "United States
persons" for the purposes of US federal income tax. This summary does not
address foreign, state or local tax consequences. Spargo Shareholders are urged
to consult their tax advisors regarding the US federal, state and local income
and other tax consequences of owning Computer Horizons Common Stock.
US Tax Treatment of the Offer and Related Transactions. Computer Horizons plans
to structure the Spargo Acquisition in a manner which would permit the Spargo
Acquisition to be treated as a qualified stock purchase within the meaning of
the United States Internal Revenue Code of 1986, as amended. IT IS STRONGLY
RECOMMENDED THAT SPARGO SHAREHOLDERS WHO ARE "UNITED STATES PERSONS" (FOR
PURPOSES OF US FEDERAL INCOME TAX), IF ANY, CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE IMPACT OF SUCH TREATMENT ON SUCH SHAREHOLDERS. However, such
structure would not have any impact on the tax consequences described herein
with respect to Spargo Shareholders who are not "United States persons".
Dividends. UK persons acquiring Computer Horizons Common Stock will be subject
to US taxation on dividends received from Computer Horizons. Generally, such
dividends would be subject to a 30 per cent. withholding tax. However, under the
terms of the Treaty, with respect to UK residents (as defined in the Treaty) the
rate of withholding tax may be reduced to 15 per cent. of the gross dividend or,
in the case of any corporate UK resident shareholder of Computer Horizons
controlling at least 10 per cent. of the voting stock of Computer Horizons, the
rate of withholding tax may be reduced to 5 per cent. of the gross dividend.
Such tax will be withheld by Computer Horizons in its capacity as withholding
agent. Under the currently applicable United States Treasury regulations,
dividends paid to an address in the UK will be presumed to be paid to a resident
of the UK for purposes of the withholding (unless Computer Horizons has
knowledge to the contrary) and, under the current interpretation of United
States Treasury regulations, for purposes of determining the applicability of a
tax treaty rate. However, under the recently issued United States Treasury
regulations (which will become effective for payments made after 31 December
1999, subject to certain transition rules), a UK resident of Computer Horizons
Common Stock who wishes to claim the benefit of the applicable treaty rate
discussed above would be required to satisfy certain certification and other
requirements. Dividends paid to a UK resident shareholder of Computer Horizons
Common Stock that are effectively connected with a United States trade or
business conducted by such UK shareholder (or, under the Treaty, attributable to
a permanent establishment maintained in the United States by such UK
shareholder) are taxed at the graduated rates applicable to United States
citizens, resident aliens and domestic corporations, and are not subject to
withholding tax if the UK shareholder gives an appropriate statement to Computer
Horizons or its paying agent in advance of the dividend payment. In addition to
the graduated tax described above, unless the benefit of the Treaty could be
claimed as income attributable to a permanent establishment, effectively
connected dividends received by a UK shareholder that is a corporation may also
be subject to an additional branch profits tax at a rate of 30 per cent.
Sale or Disposition. A UK shareholder of Computer Horizons Common Stock
generally will not be subject to United States federal income tax or withholding
on gain recognised upon the sale or other disposition of Computer Horizons
Common Stock unless, subject to applicable provisions of the Treaty,: (i) the
gain is effectively connected with the conduct of a trade or business (or, under
the Treaty, is attributable to a permanent establishment maintained) within the
United States by the UK shareholder, (ii) in the case of a UK shareholder who is
a non-resident individual for US tax purposes and holds the Computer Horizons
Common Stock as a capital asset, such holder is present in the United States for
183 or more days in the taxable year and certain other conditions are met; or
(iii) the Computer Horizons Common Stock constitutes a United States real
property interest by reason of Computer Horizons' status as a "United States
real property holding corporation" ("USRPHC") for US federal income tax purposes
at any time within the shorter of the five-year period preceding such
disposition or such UK shareholder's holding period for such Computer Horizons
Common Stock. Computer Horizons does not believe that it is or it will become a
USRPHC for US federal income tax purposes.
11
<PAGE> 17
Information and Backup Withholding. Computer Horizons will, where required,
report to the holders of Computer Horizons Common Stock and the US Internal
Revenue Service the amount of any dividend paid on Computer Horizons Common
Stock in each calendar year and the amounts of tax withheld, if any, with
respect to such payments. Dividends paid to a UK shareholder that are subject to
the 30 per cent. or reduced US withholding tax previously discussed will be
exempt from US backup withholding tax. Otherwise a backup withholding tax at a
rate of 31 per cent may apply to dividends paid to UK shareholders that are not
"exempt recipients" and that fail to provide certain information regarding their
foreign status. In addition, gain on sale or disposition may also be subject to
information reporting and backup withholding. Backup withholding, if applied, is
not an additional tax. If backup withholding results in an overpayment of US
taxes, a refund may be obtained, provided that the required information is
furnished to the US Internal Revenue Service.
13 PROCEDURE FOR ACCEPTANCE
THIS SECTION SHOULD BE READ TOGETHER WITH THE NOTES ON THE FORM OF ACCEPTANCE.
You should note that, if you hold Spargo Shares in both certificated form and
uncertificated form (that is, in CREST), you should complete a separate Form of
Acceptance for each holding. If you hold Spargo Shares in uncertificated form,
but under different member account IDs, you should complete a separate Form of
Acceptance in respect of each member account ID. Similarly, if you hold Spargo
Shares in certificated form but under different designations, you should
complete a separate Form of Acceptance in respect of each designation.
TO ACCEPT THE OFFER
To accept the Offer, the Form of Acceptance must be completed and returned,
whether or not your Spargo Shares are in CREST. You should complete Boxes 1 and
3 and (if your Spargo Shares are in CREST) Box 4, and in all cases sign Box 2 of
the Form of Acceptance in the presence of a witness, who should also sign in
accordance with the instructions printed therein.
RETURN OF FORM OF ACCEPTANCE
The completed Form of Acceptance, together, if your Spargo Shares are in
certificated form, with your share certificate(s) for such Spargo Shares and/or
other document(s) of title, should be returned by post or (during normal
business hours) by hand to IRG Plc, Balfour House, 390-398 High Road, Ilford,
Essex IG1 1NQ as soon as possible but in any event so as to be received not
later than 3:00 p.m. (UK time) on 24 June 1998. A reply-paid envelope is
enclosed for your convenience and may be used by Spargo Shareholders for
returning the Form of Acceptance within the UK. No acknowledgment of receipt of
documents will be given. The instructions printed on the Form of Acceptance
shall be deemed to form part of the terms of the Offer.
SHARES IN UNCERTIFICATED FORM (THAT IS, IN CREST)
If your Spargo Shares are in uncertificated form, you should insert in Box 4 of
the enclosed Form of Acceptance the participant ID and member account ID under
which such shares are held by you in CREST and otherwise complete and return the
Form of Acceptance as described above. In addition, you should take (or procure
to be taken) the action set out below to transfer the Spargo Shares in respect
of which you wish to accept the Offer to an escrow balance, specifying IRG Plc
(in its capacity as a CREST participant under its participant ID referred to
below) as the escrow agent, as soon as possible and in any event so that the
transfer to escrow settles not later than 3:00 p.m. on 24 June 1998.
If you are a CREST sponsored member, you should refer to your CREST sponsor
before taking any action. Your CREST sponsor will be able to confirm details of
your participant ID and the member account ID under which your Spargo Shares are
held. In addition, only your CREST sponsor will be able to send the TTE
instruction to CRESTCo in relation to your Spargo Shares.
You should send (or, if you are a CREST sponsored member, procure that your
CREST sponsor sends) a TTE instruction to CRESTCo. This must be properly
authenticated in accordance with CRESTCo's specifications and must contain, in
addition to the other information that is required for a TTE instruction to
settle in CREST, the following details:
- - the number of Spargo Shares to be transferred to an escrow balance;
- - your member account ID. This must be the same member account ID as the member
account ID that is inserted in Box 4 of the Form of Acceptance;
12
<PAGE> 18
- - your participant ID. This must be the same participant ID as the participant
ID that is inserted in Box 4 of the Form of Acceptance;
- - the participant ID of the escrow agent, IRG, in its capacity as a CREST
receiving agent. This is RA06;
- - the member account ID of IRG. This is CRYS;
- - the Form of Acceptance Reference Number. This is the Reference Number that
appears on page 3 of the Form of Acceptance. This Reference Number should be
inserted in the first eight characters of the shared note field on the TTE
instruction. Such insertion will enable IRG to match the transfer to escrow to
your Form of Acceptance. You should keep a separate record of this Reference
Number for future reference; and
- - the intended settlement date. This should be as soon as possible and in any
event not later than 3:00 p.m. on 24 June 1998.
After settlement of the TTE instruction, you will not be able to access the
Spargo Shares concerned in CREST for any transaction or charging purposes. If
the Offer becomes or is declared unconditional in all respects, IRG will
transfer the Spargo Shares concerned to itself in accordance with paragraph (e)
of Part C of Appendix I.
You are recommended to refer to the CREST Manual published by CRESTCo for
further information on the CREST procedure outlined above. For ease of
processing, you are requested, wherever possible, to ensure that a Form of
Acceptance relates to only one transfer to escrow.
If no Form of Acceptance Reference Number, or an incorrect Form of Acceptance
Reference Number, is included on the TTE instruction, Computer Horizons may
treat any amount of Spargo Shares transferred to an escrow balance in favour of
IRG specified above from the participant ID and member account ID identified in
the TTE instruction as relating to any Form of Acceptance which relates to the
same member account ID and participant ID (up to the amount of Spargo Shares
inserted or deemed to be inserted on the Form of Acceptance concerned).
YOU SHOULD NOTE THAT CRESTCO DOES NOT MAKE AVAILABLE SPECIAL PROCEDURES, IN
CREST, FOR ANY PARTICULAR CORPORATE ACTION. NORMAL SYSTEM TIMINGS AND
LIMITATIONS WILL THEREFORE APPLY IN CONNECTION WITH A TTE INSTRUCTION AND ITS
SETTLEMENT. YOU SHOULD THEREFORE ENSURE THAT ALL NECESSARY ACTION IS TAKEN BY
YOU (OR BY YOUR CREST SPONSOR) TO ENABLE A TTE INSTRUCTION RELATING TO SPARGO
SHARES TO SETTLE PRIOR TO 3:00 P.M. ON 24 JUNE 1998. IN THIS CONNECTION YOU ARE
REFERRED IN PARTICULAR TO THOSE SECTIONS OF THE CREST MANUAL CONCERNING
PRACTICAL LIMITATIONS OF THE CREST SYSTEM AND TIMINGS.
Computer Horizons will make an appropriate announcement if any of the details
contained under "Procedure for Acceptance -- Shares in Uncertificated Form (that
is, in CREST)" alter for any reason.
SHARE CERTIFICATES NOT READILY AVAILABLE OR LOST
If your Spargo Shares are in certificated form but your share certificate(s)
and/or other document(s) of title is/are not readily available or is/are lost,
the Form of Acceptance should nevertheless be completed, signed and returned as
stated above so as to arrive not later than 3:00 p.m. on 24 June 1998, together
with any share certificate(s) and/or other document(s) of title that you have
available, accompanied by a letter stating that the balance will follow or that
you have lost one or more of your share certificate(s) and/or document(s) of
title. You should then arrange for the relevant share certificate(s) and/or
other document(s) of title to be forwarded as soon as possible thereafter. No
acknowledgment of receipt of documents will be given. In the case of loss, you
should write as soon as possible to Spargo's registrars, Lloyds Bank Registrars,
The Causeway, Worthing, West Sussex BN99 6DA, for a letter of indemnity for lost
share certificate(s) and/or other document(s) of title which, when completed in
accordance with the instructions given, should be returned to IRG Plc at Balfour
House, 390-398 High Road, Ilford, Essex IG1 1NQ.
DEPOSITS OF SPARGO SHARES INTO, AND WITHDRAWALS OF SPARGO SHARES FROM, CREST
Normal CREST procedures (including timings) will be applied in relation to any
Spargo Shares that are, or are to be, converted from uncertificated to
certificated form, or from certificated to uncertificated form, during the
course of the Offer (whether any such conversion arises as a result of a
transfer of Spargo Shares or otherwise). Spargo Shareholders who are proposing
so to convert any such shares are recommended to ensure that the conversion
procedure is implemented in sufficient time to enable the person holding or
acquiring the shares as a result of the conversion to take all necessary steps
in connection with an acceptance of the Offer (in particular, as regards
delivery of share certificate(s) and/or other document(s) of title or transfers
to an escrow balance as described above) prior to 3:00 p.m. on 24 June 1998.
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<PAGE> 19
VALIDITY OF ACCEPTANCE
Subject to provisions of the City Code and without prejudice to paragraph 5 of
Part B of Appendix I, Computer Horizons reserves the right to treat as valid any
acceptance of the Offer which is not entirely in order or which is not
accompanied by the relevant transfer to escrow or (as applicable) the relevant
share certificate(s) and/or other document(s) of title. However, in that event,
no shares of Computer Horizons Common Stock will be issued, and no payment of
cash (if applicable) made, under the Offer until after the relevant transfer to
escrow has settled or (as applicable) the relevant share certificate(s) and/or
other document(s) of title or indemnities satisfactory to Computer Horizons have
been received.
OVERSEAS SHAREHOLDERS
The attention of shareholders who are citizens or residents of jurisdictions
outside the United Kingdom is drawn to paragraph 7 of Part B and Part C of
Appendix I and to the relevant provisions of the Form of Acceptance, including
Box 5.
FORMS OF ACCEPTANCE SHOULD BE RETURNED AS SOON AS POSSIBLE AND IN ANY EVENT SO
AS TO BE RECEIVED BY NO LATER THAN 3:00 P.M. (UK TIME) ON 24 JUNE 1998.
IF YOU ARE IN ANY DOUBT AS TO THE PROCEDURE FOR ACCEPTANCE, PLEASE CONTACT IRG
PLC BY TELEPHONE ON 0181 639 2000 OR AT THE ADDRESS REFERRED TO ABOVE. YOU ARE
REMINDED THAT, IF YOU ARE A CREST MEMBER, YOU SHOULD CONTACT YOUR CREST SPONSOR
BEFORE TAKING ANY SPONSORED ACTION.
14 SETTLEMENT
Subject to the Offer becoming or being declared unconditional in all respects
and, in the case of Spargo Shareholders who are citizens, nationals or residents
of jurisdictions outside the UK or who are in the United States, Canada, Japan
or Australia, except as provided in paragraph 7 of Part B of Appendix I,
settlement of the consideration to which any Spargo Shareholder is entitled
under the Offer will be effected (i) in the case of acceptances received,
complete in all respects, by the date on which the Offer becomes or is declared
unconditional in all respects, within 14 days of such date or (ii) in the case
of acceptances of the Offer received, complete in all respects, after the date
on which the Offer becomes or is declared unconditional in all respects but
whilst it remains open for acceptance, within 14 days of such receipt.
Certificates for New Computer Horizons Common Stock and, where applicable,
cheques representing fractional entitlements will be dispatched to Spargo
Shareholders or as they may direct. In the case of joint holders of Spargo
Shares, these will be dispatched to the joint holder whose name appears first in
the register of members. All documents will be sent by pre-paid post at the risk
of the person entitled thereto. Dealings in New Computer Horizons Common Stock
are expected to commence on NASDAQ shortly after the Offer becomes or is
declared unconditional in all respects. Pending dispatch of certificates,
transfers of New Computer Horizons Common Stock will be certified against the
register of members of Computer Horizons.
If the Offer does not become or is not declared unconditional in all respects,
(i) share certificate(s) and/or other document(s) of title will be returned by
post (or such other method as may be approved by the Panel) within 14 days of
the Offer lapsing to the person or agent whose name and address outside the
United States, Canada, Japan and Australia is set out in Box 6 of the Form of
Acceptance or, if none is set out, to the first named holder at his or her
registered address outside the United States, Canada, Japan and Australia and
(ii) IRG will, as soon as reasonably practicable after the lapsing of the Offer
(or within such longer period, not exceeding 14 days after the Offer lapsing, as
the Panel may approve), give TFE instructions to CRESTCo to transfer all Spargo
Shares held in escrow balances to the original available balances of the Spargo
Shareholders concerned.
All documents and remittances sent by, to, or from Spargo Shareholders or their
appointed agents will be sent at their own risk.
15 FURTHER INFORMATION
Your attention is drawn to the Appendices contained in this Offer Document which
contain certain additional relevant information.
Yours faithfully
for and on behalf of Broadview Associates
Patrick Seely
Managing Director
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<PAGE> 20
INFORMATION REGARDING COMPUTER HORIZONS
1 RISK FACTORS
Statement Regarding Forward-Looking Statements. This Offer Document and the
documents incorporated by reference herein contain forward-looking statements
that involve risks and uncertainties. The statements contained in this Offer
Document that are not purely historical are forward-looking statements within
the meaning of Section 27A of the Securities Act, and Section 21E of the
Exchange Act, including without limitation statements regarding Computer
Horizons' expectations, beliefs, intentions or strategies regarding the future.
All forward-looking statements included in this document are based on
information available to Computer Horizons on the date hereof, and Computer
Horizons assumes no obligation to update any such forward-looking statements.
Computer Horizons' actual results could differ materially from those anticipated
in these forward-looking statements due to the factors set forth in this section
and elsewhere in this Offer Document. In evaluating Computer Horizons' business,
prospective investors should consider carefully the factors set forth below in
addition to the other information set forth in this Offer Document.
RISKS RELATING TO THE OFFER
Risks Associated with the Exchange Ratio. Upon exchange, each Spargo Share will
be exchanged for a fraction of a share of Computer Horizons Common Stock. The
exchange ratio is a fixed ratio and will not be adjusted in the event of any
increases or decreases in the price of either Spargo Shares or Computer Horizons
Common Stock. Computer Horizons Common Stock and Spargo Shares historically have
been subject to volatility, particularly in the weeks prior to the posting of
this Offer Document. A decrease in the price of Computer Horizons Common Stock
would result in a reduction of the premium over the trading price of Spargo
Shares as of 6 May 1998 available under the Offer, depending on the exchange
rate of US dollars for pounds sterling at the time of determination. See "Risks
Associated with Currency Exchange Rate Fluctuations." Moreover, a holder of
Spargo Shares accepting the Offer will be subject to significant restrictions on
such holder's ability to withdraw such acceptance in the event of a decline in
the price of shares of Computer Horizons Common Stock and/or an increase in the
price of Spargo Shares. The market prices of Computer Horizons Common Stock and
Spargo Shares as of various recent dates are set forth herein under "Financial
Effects of the Offer" in paragraph 4 of the letter from Broadview Associates
included in this Offer Document, under "Information Regarding Computer
Horizons -- Nature of Trading Market", "Information Regarding Spargo -- Nature
of Trading Market" and in "Appendix IV -- 1. Market and Price Data." Spargo
Shareholders are advised to obtain recent market quotations for Computer
Horizons Common Stock and Spargo Shares. No assurance can be given as to the
market prices of Computer Horizons Common Stock or Spargo Shares at any time.
Risks Associated with Currency Exchange Rate Fluctuations. No market for the
shares of Computer Horizons Common Stock being offered under the Offer exists in
the UK or anywhere else outside of the US. The Computer Horizons Common Stock is
traded in the US on NASDAQ, and the price at which such shares may from time to
time be purchased and sold are quoted on NASDAQ in US dollars. Consequently, a
reduction in the value of the US dollar relative to the local currency of any
location outside of the US would result in a decrease in the local currency
value of shares of Computer Horizons Common Stock held by a person resident in
such location.
Effect of Offer on Operating Results, Customers and Partners. Certain of
Spargo's existing customers or strategic partners may take the opportunity
following a change of control of Spargo to review their contractual
relationships. Such a review could result in delayed or lost revenues to either
Computer Horizons or Spargo.
Rights of Holders of Spargo Shares Following the Offer. Following the
completion of the Spargo Acquisition, Spargo Shareholders will become holders of
Computer Horizons Common Stock. Certain differences exist between the rights of
Spargo Shareholders under Spargo's Articles of Association and the rights of
Computer Horizons Stockholders under Computer Horizons' Certificate of
Incorporation and Computer Horizons' Bylaws. See Appendix VI.
Failure to Qualify for Pooling of Interests Accounting Treatment. The Offer is
intended to qualify for pooling of interests treatment under US GAAP. Under
pooling of interests treatment, the accounts of Computer Horizons will be
combined with those of Spargo at their historical carrying amounts and Computer
Horizons' financial statements for all prior periods will be restated, if
material, to reflect the accounts of Computer Horizons as if the two companies
had been combined for all periods.
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<PAGE> 21
Computer Horizons anticipates that most of the requirements necessary for the
transaction to be treated as a pooling of interests will be met at the date that
the Offer becomes or is declared unconditional in all respects. Certain
requirements will continue after such date, including the requirement that no
Affiliate of either company may reduce its risk relative to its shareholdings
within the period beginning 30 days prior to the date that the Offer becomes or
is declared unconditional in all respects and ending when financial results
covering at least 30 days of post-combination operations have been published.
Computer Horizons has entered into Affiliate Agreements with Spargo's Directors
and certain persons associated with them to restrict the disposition of shares
by such persons to the extent necessary to preserve pooling of interests
treatment. There can be no assurance, however, that the acquisition of Spargo,
if consummated, will qualify for pooling of interests treatment.
Should the transaction become or be declared unconditional in all respects and
not qualify for pooling of interests treatment, the purchase method of
accounting would be applied. Under that method, the fair market value of the New
Computer Horizons Common Stock issued to effect the transaction would be
recorded as the cost of acquiring Spargo's business. That cost would be
allocated to the individual assets acquired and liabilities assumed according to
their respective fair values. The fair market value of the New Computer Horizons
Common Stock to be issued in the transaction is in excess of the amounts at
which the net assets are carried in Spargo's accounts, and such excess would be
amortised over subsequent periods. Such treatment could have a material adverse
impact on the reported operating results of the combined companies as compared
to that under pooling of interests treatment.
Future Sales of Shares Issued under the Offer. Assuming full acceptance of the
Offer on a fully diluted basis, if the Offer becomes or is declared
unconditional in all respects, 1,920,928 shares of Computer Horizons Common
Stock will be issued. Such shares will not be subject to any restrictions on
transfer arising under the Securities Act, except for shares issued to persons
who may be deemed to be "affiliates" of Computer Horizons or Spargo pursuant to
Rule 144 and/or Rule 145 under the Securities Act. Spargo's Directors and
certain persons associated with them have entered into agreements with Computer
Horizons providing that such persons will not transfer any shares of New
Computer Horizons Common Stock (a) except in compliance with the Securities Act
and (b) until Computer Horizons has published financial results covering at
least 30 days of combined operations. Sales of a substantial number of the
shares of Computer Horizons Common Stock issued in connection with the Offer
within a short period of time could adversely affect the market price of
Computer Horizons Common Stock.
RISKS RELATING TO COMPUTER HORIZONS' BUSINESS
Potential Volatility of Stock Price. The trading price of Computer Horizons'
Common Stock has been subject to significant fluctuations in the past. In
addition, the stock market has from time to time experienced extreme price and
volume fluctuations, particularly among technology companies, which often have
been unrelated to the operating performance of particular companies. Any
announcement with respect to any unfavourable variance in revenues or net income
from levels generally expected by securities analysts or investors for a given
period would have an immediate and significant effect on the trading price of
Computer Horizons Common Stock. In addition, factors such as announcements of
technological innovations or new services or products by Computer Horizons, its
competitors or other third parties, rumours of such innovations or new services
or products, changing market conditions in the IT services industry, changes in
estimates by securities analysts, announcements of extraordinary events, such as
acquisitions or litigation, or general economic conditions may have a
significant impact on the market price of Computer Horizons Common Stock. In the
past, following periods of volatility in the market price of a particular
company's securities, securities class action litigation has often been brought
against such companies. There can be no assurance that such litigation will not
occur in the future with respect to Computer Horizons. Such litigation could
result in substantial costs and a significant diversion of management's
attention and resources, which could have a material adverse effect upon
Computer Horizons' business, operating results and financial condition.
Fluctuations in Quarterly Operating Results. Computer Horizons' revenues and
operating results are subject to significant variation from quarter to quarter.
Revenues are subject to fluctuation based upon a number of factors, including
the timing and number of client projects commenced and completed during the
quarter, delays incurred in connection with projects, Computer Horizons' ability
to retain key personnel, the ability of Computer Horizons to develop, introduce
and market new and enhanced services, announcements by Computer Horizons or its
competitors, the growth rate of the market for IT staffing and solution
services, including Year 2000 services, and general economic conditions.
Unanticipated termination of a project or the decision by a client not to
proceed to the stage of a project anticipated by Computer Horizons could result
in decreased revenues and lower employee utilisation rates which could have a
material adverse effect on
16
<PAGE> 22
Computer Horizons' business, operating results and financial condition. For
example, in the second quarter of 1996, Computer Horizons lost a contract with a
major client which resulted in a decline in solutions revenues and net income.
There can be no assurance that Computer Horizons will not experience a similar
loss in the future. The principal factors affecting Computer Horizons' gross
margin are the level of salary and other compensation related expenses necessary
to attract and retain qualified technical personnel and the mix of staffing
versus solutions business during the quarter. Compensation levels can be
impacted by a variety of factors including competition for highly-skilled
employees and inflation. Computer Horizons' operating results are also subject
to fluctuation as a result of other factors including the accuracy of estimates
of fixed-price projects, employee utilisation rates and extraordinary events
such as acquisitions or litigation. Computer Horizons' operating results may
also be affected in the future by the licensing of its Signature 2000 Toolset
which it has recently begun to offer to third parties. To date, Computer
Horizons has only licensed the software to two clients and there can be no
assurance that it will be successful in its future licensing activities.
However, to the extent Computer Horizons does license its software, the revenues
from such licensing activities may result in significant fluctuations in
Computer Horizons' revenues and operating results.
Due to all of the foregoing factors, in some future quarter or quarters Computer
Horizons' operating results may be below the expectations of securities analysts
and investors. For example, in the second quarter of 1996, Computer Horizons
failed to meet the expectations of securities analysts as a result of the loss
of a contract with a major client. Failure of Computer Horizons to meet such
expectations would have a material adverse effect on the price of Computer
Horizons Common Stock. See "Potential Volatility of Stock Price."
Recruitment and Retention of IT Professionals. Computer Horizons' business is
labour intensive and depends to a large extent on its ability to attract, train,
motivate and retain highly-skilled IT professionals and project managers.
Computer Horizons must continually identify and recruit technical personnel for
both its staffing and solutions businesses to fill new positions and to replace
employees who have left Computer Horizons. Qualified IT professionals are in
great demand worldwide and are likely to remain a limited resource for the
foreseeable future. In addition, the IT services industry has experienced high
employee turnover rates which have increased in recent periods and Computer
Horizons' experience has been consistent with such trends. There can be no
assurance that Computer Horizons will be successful in attracting a sufficient
number of highly-skilled employees in the future, or that it will be successful
in retaining existing and future employees, and the failure to do so could have
a material adverse effect on Computer Horizons' business, operating results and
financial condition. In addition, to the extent that the number of companies in
the IT services industry increases and such companies seek to expand their
employee bases, the competition for skilled employees and the compensation being
offered to such employees is likely to increase. As a result of the foregoing,
Computer Horizons may in the future be required to incur higher recruiting
expenses and increase its compensation levels, either of which could have a
material adverse effect on its business, operating results and financial
condition.
Risks Associated with Year 2000 Business; Risks Associated with New
Services. Computer Horizons expects to derive a significant percentage of its
solutions revenues from Year 2000 services through at least 1999. There can be
no assurance that Computer Horizons will be successful in increasing its Year
2000 business or, to the extent that such business increases, that Computer
Horizons will be able to meet the demand for such services on a timely basis.
Any failure of Computer Horizons to increase such business or meet such demand
could have a material adverse effect on Computer Horizons' business, operating
results and financial condition. While a substantial majority of Computer
Horizons' current solutions bookings are for Year 2000 projects, Computer
Horizons expects this demand to begin to decrease as the implementation and
testing of many Year 2000 conversion projects is completed. Any such decrease,
to the extent it is not offset by an increase in Computer Horizons' other
businesses, could have a material adverse effect on Computer Horizons' business,
operating results and financial condition. In addition, by devoting significant
resources to its Year 2000 services business, Computer Horizons' ability to
develop, introduce and market new services could be adversely affected. Computer
Horizons is seeking to leverage its knowledge of clients' IT systems and
applications obtained during Year 2000 projects into additional engagements
involving other solutions services including services not previously provided by
Computer Horizons. Computer Horizons' ability to develop new services
successfully depends on a number of factors, including its ability to identify
and integrate effectively new services into Computer Horizons' existing
operating structure. The identification and offering of new services in which
Computer Horizons has little or no experience or expertise could result in a
significant diversion of management's attention and place disproportionate
demands on Computer Horizons' operational, administrative and financial
resources. There can be no assurance that Computer Horizons will be successful
in generating additional business from its Year 2000 clients for other services
or that the performance of any
17
<PAGE> 23
new service offerings will meet management's expectations or provide the same
gross margins as Computer Horizons' existing operations.
Dependence on Staffing Business. In the years ended 31 December 1996 and 31
December 1997, Computer Horizons' staffing business accounted for approximately
75 per cent. and 67 per cent. of revenues respectively. As a result, Computer
Horizons' future operating results depend in large part on the continued growth
and profitability of Computer Horizons' staffing business. Any decline in
Computer Horizons' staffing business, or failure of such business to grow at
anticipated rates, as a result of competition or otherwise, would have a
material adverse effect on Computer Horizons' business, operating results and
financial condition.
Concentration of Revenues; Dependence on Large Projects. Computer Horizons has
derived, and believes that it will continue to derive, a significant portion of
its revenues from a limited number of large clients. In each of the years ended
31 December 1996 and 31 December 1997, Computer Horizons' ten largest clients
accounted for approximately 38 per cent. and 43 per cent., respectively, of its
revenues. One customer, AT&T, accounted for approximately 9 per cent. and 12 per
cent. of revenues in the years ended 31 December 1996 and 31 December 1997,
respectively. The volume of work performed for specific clients is likely to
vary from year to year, and a major client in one year may not use Computer
Horizons' services in a subsequent year. For example, in the second quarter of
1996, Computer Horizons lost a contract with a major client which resulted in a
decline in solutions revenues and net income. The loss of any large client could
have a material adverse effect on Computer Horizons' business, operating results
and financial condition.
Most of Computer Horizons' contracts are terminable by the client following
limited notice and without significant penalty. In addition, each stage of a
project represents a separate contractual commitment at the end of which the
client may elect not to proceed to the next stage of the project. There can be
no assurance that in the future one or more of Computer Horizons' major clients
will not terminate a contract, reduce the scope of a large project or elect not
to proceed to the stage of a project anticipated by Computer Horizons. The
cancellation or significant reduction in the scope of a large project could have
a material adverse effect on Computer Horizons' business, operating results and
financial condition.
Competition. The markets for Computer Horizons' services are highly
competitive. Computer Horizons believes that the market for IT staffing services
is highly fragmented and regionalised. As a result, in addition to competing
with larger providers of IT staffing services such as Cap Gemini SA, Computer
Task Group, Inc., Keane, Inc. and Mastech Corporation, Computer Horizons also
competes with a large number of regional providers of staffing services. In
addition, Computer Horizons competes for staffing projects with the information
systems groups of its prospective clients. In its solutions business, including
its Year 2000 services business, Computer Horizons competes with consulting and
system integration firms, including Analysts International Corporation, Andersen
Consulting, CIBER, Inc., Computer Sciences Corporation, Electronic Data Systems
Corp., Information Management Resources, Inc., International Business Machines
Corporation, Keane, Inc. and certain internationally recognised accounting
firms. Computer Horizons also competes in the IT solutions market with vendors
of application software. In addition, there are relatively low barriers to entry
into Computer Horizons' markets and Computer Horizons has faced, and expects to
continue to face, additional competition from other established and emerging
companies. Increased competition may result in greater pricing pressure which
could have a material adverse effect on Computer Horizons' operating results.
Computer Horizons believes competition will continue to intensify as the market
for IT services continues to develop and competitors focus on additional service
offerings such as Year 2000 services and European Monetary Union ("EMU")
conversion services. There can be no assurance that other companies will not
develop services, products and marketing approaches that will be more successful
than those of Computer Horizons. Many of Computer Horizons' current and
potential competitors have significantly greater financial, technical, marketing
and other resources than Computer Horizons. As a result, they may be able to
respond more quickly to new or emerging technologies and changes in clients'
requirements, or to devote greater resources to the development, promotion, sale
and support of their services and products than Computer Horizons. In addition,
current and potential competitors may establish cooperative relationships among
themselves or with third parties to increase the ability of their services or
products to address the staffing and solutions needs of Computer Horizons'
prospective clients. Accordingly, it is possible that new competitors, alliances
among competitors or alliances between competitors and third parties may emerge
and acquire significant market share. If this were to occur, it could have a
material adverse effect on Computer Horizons' business, operating results and
financial condition.
Computer Horizons believes that the principal competitive factors in its market
include quality of services and deliverables, speed of development and
implementation, price, project management capability and technical and business
expertise. Computer Horizons believes that its ability to compete also depends
in part on a
18
<PAGE> 24
number of competitive factors outside its control, including the ability of its
competitors to hire, retain and motivate project managers and other IT
professional staff, the development by others of software that is competitive
with Computer Horizons' services and products and the extent of its competitors'
responsiveness to client needs. There can be no assurance that Computer Horizons
can maintain its competitive position against current and potential competitors
or that competitive pressures faced by Computer Horizons will not have a
material adverse effect on Computer Horizons' business, operating results and
financial condition.
Risks of Technological Change and Evolving Industry Standards. The IT services
industry is characterised by rapid technological change, changing client
requirements and new service and product introductions. The introduction of
competitive IT solutions embodying new technologies and the emergence of new
industry standards may render Computer Horizons' existing IT solutions or
underlying technologies obsolete or unmarketable. As a result, Computer Horizons
will be dependent in large part upon its ability to develop new IT solutions
that address the increasingly sophisticated needs of its clients, keep pace with
new competitive service and product offerings and emerging industry standards
and achieve broad market acceptance. There can be no assurance that Computer
Horizons will be successful in developing and marketing new IT solutions that
respond to technological change, changing client requirements or evolving
industry standards, that Computer Horizons will not experience difficulties that
could delay or prevent the successful development, introduction and marketing of
these new IT solutions or that its IT solutions will adequately meet the
requirements of the marketplace and achieve market acceptance.
Fixed-Price Contracts. Computer Horizons offers certain of its services on a
fixed-price rather than on a time and materials or best efforts basis. Although
Computer Horizons draws upon the past experience of its project managers and
senior technical personnel to estimate the cost of performing fixed-price
projects, Computer Horizons has a limited history upon which to base such
estimates. Since under the terms of such contracts Computer Horizons bears the
risk of cost overruns and inflation in connection with these projects, Computer
Horizons' failure to estimate accurately the resources and time required for a
project or its failure to complete its contractual obligations within the
timeframe committed could have a material adverse effect on Computer Horizons'
operating results and financial condition. In the past, Computer Horizons has
been required to commit unanticipated additional resources to complete certain
projects, which negatively affected Computer Horizons' profitability on such
projects, and there can be no assurance that Computer Horizons will not
experience similar situations in the future.
Risks Associated with Failure to Manage Growth and a Changing
Business. Computer Horizons has recently experienced a period of significant
growth that has placed, and could continue to place, a significant strain on its
management and operations. From December 1996 to December 1997, the number of
Computer Horizons' billable consultants has increased from approximately 2,600
to 3,100 full-time employees and independent contractors, and further increases
are expected during 1998. Computer Horizons has also expanded geographically,
through acquisitions similar to the Spargo Acquisition and by opening new
offices, and it intends to make additional acquisitions and open additional
offices which will require that Computer Horizons successfully replicate its
current business model in remote locations. In addition, Computer Horizons is
seeking to further expand its solutions business. Computer Horizons' ability to
manage future growth, if any, will require Computer Horizons to continually
enhance its operational and financial control systems, implement new systems as
necessary, and will depend on its ability to attract, train, assimilate and
retain qualified personnel. Computer Horizons has selected and is currently
implementing a new accounting and information system in order to provide it with
the flexibility to address the variations in billing arrangements required for
its solutions business. Although Computer Horizons intends to run its existing
and new systems in parallel for some period of time, there can be no assurance
that Computer Horizons will not experience difficulties in the operation of its
new accounting system which could result in delays or disruptions in billing its
clients. Any significant delays or disruptions in Computer Horizons' billing
cycle could have a material adverse effect on Computer Horizons' operating
results in the affected period. The failure of Computer Horizons' management to
respond effectively to future growth, if any, and the changing nature of its
business could have a material adverse effect on Computer Horizons' business,
operating results and financial condition.
Risks Associated with Acquisitions. As part of Computer Horizons' growth
strategy, it has consummated three acquisitions since December 1997, and intends
to continue to pursue strategic acquisitions such as the Spargo Acquisition. The
Spargo Acquisition and such other acquisitions could present significant
challenges to Computer Horizons' management. There is significant competition
for acquisition opportunities in the IT services industry which may make the
completion of such acquisitions more difficult and expensive. In addition, some
competitors for these acquisition candidates have greater resources than
Computer Horizons. If Computer Horizons is successful in completing the Spargo
Acquisition or any other such acquisition, it will
19
<PAGE> 25
face numerous risks, including difficulties assimilating new operations and
personnel, the need to manage geographically remote businesses and the diversion
of management attention from other business concerns. Any other acquisition,
depending on its size, could result in the use of a significant portion of
Computer Horizons' cash, or if such acquisition is made utilising Computer
Horizons' securities, could result in significant dilution to Computer Horizons'
shareholders. Furthermore, there can be no assurance that any acquired service
capacity or technology acquired in other transactions will gain acceptance in
Computer Horizons' markets. Should Computer Horizons' management fail to respond
effectively to these challenges, the Spargo Acquisition or any other such
acquisition could have a material adverse effect on Computer Horizons' business,
operating results and financial condition.
Dependence on Key Personnel. Computer Horizons is dependent to a significant
extent on the efforts, direction and guidance of its senior management,
including John J Cassese, Computer Horizons' Chairman of the Board, President
and Chief Executive Officer, and other key personnel. Computer Horizons has
entered into employment agreements with its executive officers, each of which
contains provisions limiting these employees' rights to compete with Computer
Horizons and hire its employees. Computer Horizons maintains and is the
beneficiary under a key person life insurance policy in the amount of $3.8
million with respect to Mr. Cassese. The loss of any of Computer Horizons'
senior management or key personnel and, in particular, Mr. Cassese, or the
inability to attract and retain key management personnel in the future, could
have a material adverse effect on Computer Horizons' business, operating results
and financial condition.
Increasing Significance of Non-US Operations and Risks Associated with
International Operations. Computer Horizons anticipates that over the next
several years it will increase its investment in international operations,
through acquisitions such as the Spargo Acquisition and otherwise, and that an
increasing percentage of its revenues may be generated outside of the US.
Computer Horizons' international operations depend greatly upon business,
immigration and technology transfer laws in those countries, and upon the
continued development of technology infrastructure. As a result, Computer
Horizons' business is subject to the risks generally associated with non-US
operations, including unexpected changes in regulatory environments,
difficulties in managing international operations, dependence on foreign
partners, fluctuations in currency exchange rates, longer accounts receivable
payment cycles and greater difficulties in collecting accounts receivable,
potential foreign tax consequences, including the impact of repatriation of
earnings, tariffs and other trade barriers, political unrest and changing
conditions in countries in which Computer Horizons' services are provided or
facilities are located. If as Computer Horizons' non-US operations increase any
such factors were to render the conduct of business in a particular country
undesirable or impracticable, there could be a material adverse effect on
Computer Horizons' business, operating results and financial condition.
Risks Associated with IT Industry Trend Toward Preferred Vendor
Relationships. To reduce their need to manage a large number of IT service
providers and to obtain more favourable pricing, certain businesses are seeking
to use a limited number of "preferred vendors." Computer Horizons believes that
this trend toward preferred vendors will become increasingly common in the
marketplace, may result in pricing pressure and will decrease the number of
available business opportunities. Computer Horizons is aggressively pursuing
preferred vendor contracts in order to obtain new or additional business from
large clients. However, there can be no assurance that Computer Horizons will be
awarded preferred vendor contracts, and Computer Horizons' inability to win such
contracts could have a material adverse effect on Computer Horizons' business,
operating results and financial condition. In addition, while preferred vendor
contracts often generate higher volumes, they may result in lower gross margins.
As a result, there can be no assurance that Computer Horizons will be able to
maintain its gross margin if it is awarded preferred vendor contracts. Computer
Horizons' inability to sustain its gross margins on such contracts could have a
material adverse effect on Computer Horizons' business, operating results and
financial condition.
Risk of Increased Government Regulation of Immigration. Computer Horizons has
relied and in the future expects to rely increasingly upon attracting and
retaining individuals with technical and project management skills from other
countries. There is a limit to the number of new H-1B petitions that the
Immigration and Nationalization Service may approve in any government fiscal
year, and in years, such as 1997, in which the limit is reached, Computer
Horizons may be unable to obtain H-1B visas necessary to bring critical foreign
employees to the US with existing US immigration laws, or changes in such laws
making it more difficult to hire foreign nationals or limiting the ability of
Computer Horizons to retain H-1B employees in the US, could increase competition
for technical personnel and increase Computer Horizons' cost of recruiting and
retaining the requisite number of IT professionals which could have a material
adverse effect on Computer Horizons' business, operating results and financial
condition.
20
<PAGE> 26
Risks Related to Intellectual Property Protection. While Computer Horizons to
date has not received any claims that its intellectual property rights infringe
on the intellectual property rights of others, there can be no assurance that
such a claim will not be asserted against Computer Horizons in the future, that
the assertion of such a claim will not result in litigation or that Computer
Horizons would prevail in such litigation or be able to obtain a license for the
use of any infringed intellectual property from a third party on commercially
reasonable terms. The risk of infringement claims against Computer Horizons will
increase if other parties are able to successfully obtain patents for software
products and processes related to Computer Horizons' business. Any such claims,
regardless of their outcome, could result in substantial cost to Computer
Horizons, require Computer Horizons to modify the manner in which it provides
services and divert management's attention from Computer Horizons' operations,
any of which could have a material adverse effect on Computer Horizons'
business, operating results and financial condition.
Potential Liability to Clients. Much of Computer Horizons' business involves
projects that are critical to the operations of its clients' businesses and
provide benefits that may be difficult to quantify. Any failure in a client's
system could result in a claim for substantial damages against Computer
Horizons, regardless of Computer Horizons' responsibility for such failure.
While Computer Horizons attempts to limit its liability for damages arising from
its IT services contractually, there can be no assurance the limitations of
liability set forth in its service contracts will be enforceable in all
instances or would otherwise protect Computer Horizons from liability for
damages. While Computer Horizons currently maintains general liability
insurance, including coverage for errors and omissions, there can be no
assurance that Computer Horizons will avoid significant claims and attendant
publicity. Furthermore, there can be no assurance that Computer Horizons'
insurance coverage will be adequate or that such coverage will remain available
at acceptable costs. Successful claims brought against Computer Horizons in
excess of its insurance coverage could have a material adverse effect on
Computer Horizons' business, operating results and financial condition.
Employment Liability Risks. As a provider of staffing services, Computer
Horizons places employees (and independent contractors) at its clients'
businesses. Risks associated with this activity include possible claims of
discrimination and harassment, liabilities for errors and omissions by Computer
Horizons' employees (and independent contractors), misuse of client proprietary
information or intellectual property, injury to Company or client employees,
misappropriation of client property, other criminal activity, torts and other
similar claims. In certain circumstances, Computer Horizons may be held
responsible for the actions of persons not under Computer Horizons' direct
control. While Computer Horizons has not had significant problems with respect
to such employment liability, there can be no assurance that Computer Horizons
will not experience such problems in the future.
Anti-Takeover Provisions. Computer Horizons' Board of Directors has the
authority to issue up to 200,000 shares of preferred stock (the "Preferred
Stock") and to determine the rights, preferences, privileges and restrictions,
including voting and conversion rights of such shares, without any further vote
or action by the shareholders. The issuance of Preferred Stock could have the
effect of making it more difficult for a third party to acquire a majority of
the outstanding voting stock of Computer Horizons. Computer Horizons has no
present plan to issue Preferred Stock. Computer Horizons is also subject to the
anti-takeover provisions of Section 912 of the New York Business Corporation
Law, which will prohibit Computer Horizons from engaging in a "business
combination" with an "interested shareholder" for a period of five years after
the date of the transaction in which the person became an interested
shareholder, unless the business combination is approved in a prescribed manner.
The application of Section 912 could have the effect of delaying or preventing a
change in control of Computer Horizons. In addition, Computer Horizons has
adopted a shareholder rights plan or "poison pill" which would have certain
anti-takeover effects. The distribution of the Preferred Stock Purchase Rights,
under the terms of the Rights Agreement dated 9 July 1989, as amended, would
cause substantial dilution to a person or group that attempts to acquire
Computer Horizons on terms not approved by the Board of Directors of Computer
Horizons. See "Appendix VI -- Computer Horizons Preferred Stock Rights Plan."
Furthermore, Computer Horizons' option plans also provide for acceleration upon
certain events resulting in changes of control. Each of the foregoing provisions
could delay or make more difficult a merger, tender offer or proxy contest
involving Computer Horizons. There can be no assurance that such provisions will
not have an adverse effect on the value received by the holders of Computer
Horizons' Common Stock.
2 SELECTED FINANCIAL INFORMATION OF COMPUTER HORIZONS
The following tables summarise certain consolidated historical financial data of
Computer Horizons. The selected consolidated historical financial data as of 31
December 1997 and 31 December 1996 and for the years ended 31 December 1997,
1996 and 1995 are derived from the historical financial statements of
21
<PAGE> 27
Computer Horizons included in Appendix II and should be read in conjunction with
such historical financial statements and the notes thereto. The income statement
data for the year ended 31 December 1994 and the balance sheet data as of 31
December 1995 and 1994 have been restated to reflect the business combination of
Computer Horizons and CG Computer Services ("CG") which occurred in 1997 and are
derived from the audited consolidated financial statements of Computer Horizons
and CG. The income statement data for the year ended 31 December 1993 and the
balance sheet data as of 31 December 1993 have been restated to reflect the
business combination of Computer Horizons and CG and all other adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
management, necessary to present fairly the data as of such date and for such
period and are derived from the audited consolidated financial statements of
Computer Horizons and the unaudited statements of CG. The selected financial
data as of 31 March 1998 and 1997 are unaudited and reflect all adjustments
(consisting solely of normal recurring adjustments) which are, in the opinion of
management, necessary to present fairly the data as of such dates and for such
periods. The results for interim periods are not necessarily indicative of
results to be expected for the year.
<TABLE>
<CAPTION>
AS OF AND FOR THE
QUARTER ENDED 31 MARCH AS OF AND FOR THE YEAR ENDED 31 DECEMBER
------------------------- -------------------------------------------------------------------
(UNAUDITED)
-------------------------
1998(1) 1997 1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
INCOME STATEMENT
DATA(2):
Revenues............ $ 107,101 $ 73,940 $ 334,729 $ 249,152 $ 213,165 $ 163,987 $ 131,936
Net income.......... 8,174 4,265 22,644 11,864 10,425 5,919 3,749
Net income per
common share(3)
Basic............. 0.28 0.17 0.88 0.48 0.46 0.29 0.17
Diluted........... 0.27 0.16 0.84 0.46 0.44 0.27 0.17
BALANCE SHEET DATA:
Total assets........ 232,072 96,389 211,601 91,760 78,984 51,103 42,347
Long term debt,
including current
portion........... 2,010 3,299 1,432 3,299 5,684 5,852 7,656
Stockholders'
equity............ 195,395 76,144 182,532 70,993 55,814 30,947 26,504
----------- ----------- ----------- ----------- ----------- ----------- -----------
Weighted number of
shares:(3)
Basic............... 28,827,000 24,848,000 25,680,000 24,493,000 22,425,000 20,559,000 21,160,000
Diluted............. 30,367,000 26,174,000 27,102,000 26,028,000 23,931,000 21,962,000 23,074,000
</TABLE>
- ---------------
Notes
(1) The results of Princeton Softech, Inc., which is being accounted for as an
immaterial pooling of interests, are included from 1 January 1998.
(2) Computer Horizons has never paid dividends.
(3) All share and per share data have been adjusted retroactively to reflect
Computer Horizons' three-for-two stock splits declared May 1997, December
1995 and April 1995.
3 COMPUTER HORIZONS MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected Financial
Information of Computer Horizons" and the Computer Horizons Financial
Statements, including the notes related thereto, appearing elsewhere in this
Offer Document. Certain statements set forth below constitute "forward-looking
statements" for purposes of the "safe harbor" provisions of the Private
Securities Litigation Reform Act of 1995 that involve risks and uncertainties
that could cause actual results to differ materially. See "Information Regarding
Computer Horizons -- Risk Factors -- Statement Regarding Forward-Looking
Statements."
22
<PAGE> 28
RESULTS OF OPERATIONS
QUARTERS ENDED 31 MARCH 1998 AND 1997
Revenues
Revenues increased to $107.1 million in the first quarter of 1998 from $73.9
million in the first quarter of 1997, an increase of $33.2 million or 44.9 per
cent. Staffing revenues increased to $58.6 million in the first quarter of 1998
from $53.0 million in the first quarter of 1997, an increase of $5.6 million or
10.6 per cent. Total solutions revenues, including Year 2000 revenues, increased
to $45.0 million in the first quarter of 1998 from $20.9 million in the first
quarter of 1997, an increase of $24.1 million or 115.3 per cent. Year 2000
services revenues increased to $33.2 million in the first quarter of 1998 from
$11.4 million in the first quarter of 1997, an increase of $21.8 million.
Computer Horizons' Year 2000 business accounted for 31.0 per cent. of total
revenues in the first quarter of 1998 versus 15.4 per cent. of total revenues in
the first quarter of 1997. Solutions revenues, excluding Year 2000 services,
increased to $11.8 million in the first quarter of 1998 from $9.5 million in the
first quarter of 1997, an increase of $2.3 million or 24.2 per cent. Computer
Horizons' product revenues totaled $3.5 million for the first quarter of 1998.
Direct Costs
Direct costs increased to $68.2 million in the first quarter of 1998 from $50.4
million in the first quarter of 1997. Gross margin increased to 36.3 per cent.
in the first quarter of 1998 from 31.8 per cent. in the first quarter of 1997.
The increase in gross margin was primarily due to stable margins in Computer
Horizons' staffing business and an increase in Computer Horizons' higher margin
Year 2000 business. Computer Horizons' margins are subject to fluctuations due
to a number of factors, including the level of salary and other compensation
necessary to attract and retain qualified technical personnel, and the mix of
staffing versus solutions business during a particular quarter.
Selling, General and Administrative
Selling, general and administrative expenses (excluding merger-related expenses)
increased to $23.3 million in the first quarter of 1998 from $16.3 million in
the first quarter of 1997, an increase of $7.0 million or 42.9 per cent. As a
percentage of revenues, selling, general and administrative expenses decreased
slightly to 21.8 per cent. of revenues in the first quarter of 1998 from 22.0
per cent. of revenues in the first quarter of 1997. The increase in dollars in
selling, general and administrative expenses was primarily a result of salaries
and commissions for additional sales and recruiting personnel and, to a lesser
extent, growth in Computer Horizons' general and administrative infrastructure.
In the first quarter of 1998, Computer Horizons incurred merger-related expenses
of approximately $1.3 million, or 1.2 per cent. of revenues.
Income from Operations
Operating margins increased to 13.3 per cent. in the first quarter of 1998 from
9.8 per cent. in the first quarter of 1997. These increases were primarily due
to increases in Computer Horizons' higher margin Year 2000 business, partially
offset by merger-related expenses in the first quarter of 1998. Computer
Horizons' business is labour-intensive and, as such, is sensitive to
inflationary trends. This sensitivity applies to client billing rates, as well
as to payroll costs.
Other Income
Other income increased to $1.2 million in the first quarter of 1998 from $0.2
million in the first quarter of 1997, an increase of $1.0 million. This increase
was primarily the result of increased interest income resulting from the
follow-on offering of approximately $84 million completed in the third quarter
of 1997. This increase was partially offset by a decrease in earnings from the
Joint Venture. The Joint Venture's decreased earnings in 1998 were primarily due
to costs associated with increased headcount, particularly in marketing and
project management personnel as it expanded its solutions business.
Provision for Income Taxes
The effective tax rate for Federal, state and local income taxes was 47.1 per
cent. and 42.5 per cent. for the first quarter of 1998 and 1997, respectively.
The increase in the 1998 rate was primarily due to certain non-deductible
merger-related expenses incurred during the quarter.
23
<PAGE> 29
Net Income
Net income increased to $8.2 million for the first quarter of 1998 from $4.3
million for the first quarter of 1997, an increase of $3.9 million or 90.7 per
cent. Net income per share (diluted) was $0.27 versus $0.16 for the first
quarter of 1998 and 1997, respectively. The effect of merger-related expenses
amounted to $.04 per share for the first quarter of 1998.
YEARS ENDED 31 DECEMBER 1997, 1996 AND 1995
The following table sets forth certain operating data as a percentage of
consolidated revenues for the periods indicated. All percentages include the
operations of CG, acquired by Computer Horizons on 19 December 1997. This
acquisition has been accounted for as a pooling of interests. Comparisons with
prior years are based on restated combined results:
<TABLE>
<CAPTION>
YEAR ENDED 31 DECEMBER
-----------------------
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Revenues.................................................... 100.0% 100.0% 100.0%
Costs and expenses:
Direct costs.............................................. 67.0 69.3 69.7
Selling, general and administrative....................... 21.1 22.9 21.6
Merger-related expenses................................... 0.3
Income from operations...................................... 11.6 7.8 8.7
Other income (expense):
Interest income/(expense), net............................ 0.4 (0.1) (0.2)
Equity in net earnings of joint venture................... -- 0.4 0.2
Income before income taxes.................................. 12.0 8.1 8.7
Income taxes:
Current................................................... 5.5 3.5 4.0
Deferred.................................................. (0.3) (0.2) (0.2)
Net income.................................................. 6.8 4.8 4.9
</TABLE>
YEAR ENDED 31 DECEMBER 1997 COMPARED TO YEAR ENDED 31 DECEMBER 1996
Revenues
Revenues increased to $334.7 million in the year ended 31 December 1997 from
$249.2 million in the year ended 31 December 1996, an increase of $85.5 million
or 34 per cent. Staffing revenues increased to $224.5 million in the year ended
31 December 1997 from $186.0 million in the year ended 31 December 1996, an
increase of $38.5 million or 21 per cent. Revenues from the acquisition of CG
amounted to approximately $17.4 million in 1997 and $15.3 million in 1996.
Solutions revenues, including Year 2000 services, increased to $110.3 million in
the year ended 31 December 1997 from $63.2 million in the year ended 31 December
1996, an increase of $47.1 million or 75 per cent. Year 2000 services revenues
increased to $72.1 million in the year ended 31 December 1997, an increase of
$61.7 million from $10.4 million in the year ended 31 December 1996. Computer
Horizons' Year 2000 business accounted for approximately 22 per cent. of total
revenues in the year ended 31 December 1997 versus approximately 4 per cent. of
total revenues in 1996. Solutions revenues, excluding Year 2000 services,
decreased to $38.1 million for the year ended 31 December 1997 from $52.7
million for the year ended 31 December 1996, a decrease of $14.6 million or 28
per cent. Computer Horizons' solutions revenues were impacted by a shift in
client demand, Computer Horizons' increased focus on its Year 2000 business, as
well as the unexpected termination of a large contract in the second quarter of
1996.
Direct Costs
Direct costs increased to $224.1 million in the year ended 31 December 1997 from
$172.7 million in the year ended 31 December 1996. Gross margin increased to
33.0 per cent. in the year ended 31 December 1997 from 30.7 per cent. in the
year ended 31 December 1996. The increase in gross margin was primarily due to
stable margins in Computer Horizons' staffing business and an increase in
Computer Horizons' higher margin Year 2000 business.
24
<PAGE> 30
Selling, General and Administrative
Selling, general and administrative expenses (excluding merger-related expenses)
increased to $70.7 million in the year ended 31 December 1997 from $56.9 million
in the year ended 31 December 1996, an increase of $13.8 million or 24.2 per
cent. As a percentage of revenues, selling, general and administrative expenses
decreased to 21.1 per cent. of revenues in the year ended 31 December 1997 from
22.9 per cent. of revenues in the year ended 31 December 1996. The increase in
selling, general and administrative expenses in dollars was primarily a result
of salaries and commissions for additional sales and recruiting personnel and,
to a lesser extent, growth in Computer Horizons' administrative infrastructure.
In the fourth quarter of 1997, Computer Horizons incurred merger-related
expenses of approximately $1.0 million or 0.3 per cent. of total 1997 revenues.
Income from Operations
Operating margins increased to 11.6 per cent. in the year ended 31 December 1997
from 7.8 per cent. in the year ended 31 December 1996. This increase was
primarily due to an increase in Computer Horizons' higher margin Year 2000
business and lower selling, general and administrative expenses as a percentage
of revenue. Computer Horizons' business is labour intensive and, as such, is
sensitive to inflationary trends. This sensitivity applies to client billing
rates, as well as to payroll costs.
Other Income
Other income increased to $1.3 million in the year ended 31 December 1997 from
$0.7 million in the year ended 31 December 1996, an increase of $0.6 million or
82 per cent. This increase was primarily the result of increased interest income
resulting from the follow-on offering of approximately $84 million completed in
the third quarter of 1997. This increase was partially offset by a decrease in
earnings from the Joint Venture. The Joint Venture's decreased earnings in the
year ended 31 December 1997 were primarily due to costs associated with
increased headcount, particularly in marketing and project management personnel
as it expanded its solutions business.
Provision for Income Taxes
The effective tax rate for Federal, state and local income taxes was 43.6 per
cent. and 41.3 per cent. in the years ended 31 December 1997 and 1996
respectively. The increase in the 1997 effective tax rate was partially due to
certain non-deductible merger-related expenses incurred in the fourth quarter of
1997. The 1997 rate also reflects a decrease in undistributed earnings of the
Joint Venture, for which taxes were not provided.
Net Income
Net income increased to $22.6 million in the year ended 31 December 1997 from
$11.9 million in the year ended 31 December 1996, an increase of $10.7 million,
or 90 per cent. Net income per share (diluted) increased to $0.84 in the year
ended 31 December 1997 from $0.46 in the year ended 31 December 1996 on higher
weighted average shares outstanding (27.1 million in 1997 versus 26.0 million in
1996). The effect of merger-related expenses amounted to $.03 per share in 1997.
All net income per share and share amounts have been adjusted to reflect a
three-for-two common stock split, effected as a 50 per cent. stock distribution,
distributed on 9 June 1997.
YEAR ENDED 31 DECEMBER 1996 COMPARED TO YEAR ENDED 31 DECEMBER 1995
Revenues
Revenues increased to $249.2 million in the year ended 31 December 1996 from
$213.2 million in the year ended 31 December 1995, an increase of $36.0 million
or 17 per cent. Staffing revenues increased to $186.0 million in the year ended
31 December 1996 from $154.0 million in the year ended 31 December 1995, an
increase of $32.0 million or 21 per cent. Revenues from the acquisition of CG
amounted to approximately $15.3 million in 1996 and $13.1 million in 1995.
Solutions revenues, including Year 2000 services, increased to $63.2 million in
the year ended 31 December 1996 from $59.1 million in the year ended 31 December
1995, an increase of $4.1 million or 7 per cent. Year 2000 revenues increased to
$10.4 million in the year ended 31 December 1996 from nil in the year ended 31
December 1995. Solutions revenues, excluding Year 2000 services, decreased to
$52.7 million in the year ended 31 December 1996 from $59.1 million in the year
ended 31 December 1995, a decrease of $6.4 million or 11 per cent. The decrease
in solutions revenues, excluding
25
<PAGE> 31
Year 2000 services, was primarily related to the unexpected termination of a
large contract in the second quarter of 1996.
Direct Costs
Direct costs increased to $172.7 million in the year ended 31 December 1996 from
$148.5 million in the year ended 31 December 1995. Gross margin increased to
30.7 per cent. in the year ended 31 December 1996 from 30.3 per cent. in the
year ended 31 December 1995. The increase in gross margin was primarily due to
stable margins in Computer Horizons' staffing business and an increase in
Computer Horizons' higher margin Year 2000 business. Computer Horizons' margins
are subject to fluctuation due to a number of factors, including the level of
salary and other compensation-related expenses necessary to attract and retain
qualified technical personnel and the mix of staffing versus solutions business
during the year.
Selling, General and Administrative
Selling, general and administrative expenses increased to $56.9 million in the
year ended 31 December 1996 from $46.2 million in the year ended 31 December
1995, an increase of $10.7 million or 23.2 per cent. As a percentage of
revenues, selling, general and administrative expenses increased to 22.9 per
cent. in the year ended 31 December 1996, from 21.6 per cent. in the year ended
31 December 1995. The increase in selling, general and administrative expenses
in 1996 was primarily a result of salaries and commissions for additional
personnel, infrastructure necessary to pursue large, high-profile opportunities,
and marketing expenses incurred to raise Computer Horizons' visibility through
public relations, trade shows and conferences.
Income from Operations
Income from operations increased to $19.5 million in the year ended 31 December
1996 from $18.5 million in the year ended 31 December 1995, an increase of $1.0
million or 5.4 per cent. Operating margins decreased to 7.8 per cent. in the
year ended 31 December 1996 from 8.7 per cent. in the year ended 31 December
1995. The increase in dollars was attributable to increased revenues and
improved gross margins, offset by the impact of the unexpected termination of a
large contract in the second quarter of 1996 and the increase in selling,
general and administrative expenses in 1996. Computer Horizons' business is
labour-intensive and, as such, is sensitive to inflationary trends. This
sensitivity applies to client billing rates, as well as to payroll costs.
Other Income
Other income increased to $0.7 million in the year ended 31 December 1996 from
nil in the year ended 31 December 1995. This increase was primarily a result of
reduced interest expense as Computer Horizons reduced its outstanding debt with
a portion of the net proceeds from its June 1995 follow-on offering and by the
increased earnings of the Joint Venture.
Provision for Income Taxes
The effective tax rate for Federal, state and local income taxes was 41.3 per
cent. and 43.5 per cent. in the years ended 31 December 1996 and 1995
respectively. The 1996 rate reflects an increase in undistributed earnings of
the Joint Venture for which taxes have not been provided.
Net Income
Net income increased to $11.9 million in the year ended 31 December 1996 from
$10.4 million in the year ended 31 December 1995, an increase of $1.5 million or
14.4 per cent. Net income increased to $0.46 per share (diluted) in the year
ended 31 December 1996 from $0.44 per share (diluted) in the year ended 31
December 1995. All net income per share and share amounts have been adjusted to
reflect a three-for-two common stock split, effected as a 50 per cent. stock
distribution, distributed on 9 June 1997.
LIQUIDITY AND CAPITAL RESOURCES
Since 1995, Computer Horizons has financed its operations primarily through cash
generated from operations and the public sale of its common stock. At 31 March
1998, Computer Horizons had $166.1 million in working capital, of which $101.2
million was cash, cash equivalents and short-term investments. At 31 December
1997, Computer Horizons had $157.4 million in working capital, of which $101.8
million was cash, cash equivalents and short-term investments (including $83.7
million of net proceeds of its public
26
<PAGE> 32
offering of common stock completed on 23 September 1997). There were no
borrowings under its bank lines of credit.
Net cash provided by operating activities in the first three months of 1998 was
$1.8 million, consisting primarily of net income, offset in part by an increase
in accounts receivable. During the first three months of 1997, net cash used in
operating activities was $5.8 million, primarily as a result of an increase in
accounts receivable, largely due to growth in Computer Horizons' solutions
business. Net cash provided by operating activities was $14.2 million, $5.3
million and $2.2 million, for the years ended 31 December 1997, 1996 and 1995
respectively, consisting primarily of net income, offset in part by an increase
in accounts receivable.
Net cash used in investing activities in the first three months of 1998 was
$11.6 million, consisting primarily of the purchase of short-term investments,
as well as purchases of equipment. During the first three months of 1997, cash
used in investing activities consisted of equipment purchases, offset by a
decrease in other assets. Net cash used in investing activities was $22.0
million, $2.5 million and $6.2 million in the years ended 31 December 1997, 1996
and 1995 respectively. Net cash used in investing activities in 1997 consisted
primarily of the purchase of short-term investments. In addition, on 31 December
1997, Computer Horizons acquired the assets of Millennium Computer Technology
("Millennium"), a Chattanooga-based IT services provider, for approximately $5
million. Net cash used in investing activities in the year ended 31 December
1996 consisted primarily of purchases of furniture and equipment. Net cash used
in investing activities in 1995 consisted primarily of approximately $3.0
million of additional goodwill resulting from earn-out provisions in connection
with Computer Horizons' acquisition of Unified Systems Solutions, Inc. and
Strategic Outsourcing Services, Inc., the purchase of furniture and equipment
and the establishment of client-specific outsourcing centres.
Net cash provided by financing activities was $0.2 million for the first three
months of 1998, with proceeds received from stock option exercises exceeding the
amount of repayment of long-term debt. For the first three months of 1997, net
cash provided by financing activities was $0.9 million, consisting of proceeds
received from stock option exercises. Net cash provided by financing activities
was $84.4 million and $11.1 million in the years ended 31 December 1997 and 31
December 1995 respectively, consisting primarily of $83.7 million and $13.3
million in net proceeds from Computer Horizons' public offerings of common
stock, offset in part by the repayment following the offering of outstanding
bank debt of $6.0 million in 1995. For the year ended 31 December 1996, net cash
used in financing activities was $0.7 million, resulting primarily from the
scheduled repayment of long-term debt.
At 31 March 1998, Computer Horizons had a current ratio position of 6.1 to 1,
approximately $1.0 million of long-term debt and no outstanding borrowings under
its two unsecured discretionary lines of credit of $15.0 million and $10.0
million.
At 31 December 1997, Computer Horizons had a current ratio position of 6.9 to 1,
no long-term debt and no outstanding borrowings under its two unsecured
discretionary lines of credit. Computer Horizons also had outstanding two notes,
each bearing interest at a rate of 9.55 per cent. As of 31 December 1997,
approximately $1.4 million remained outstanding under the notes, which became
due on 15 April 1998.
Computer Horizons' accounts receivable were $79.5 million and $56.4 million at
31 December 1997 and 31 December 1996 respectively. Days sales outstanding were
75 days at 31 December 1997 and 77 days at 31 December 1996, based on fourth
quarter sales.
Computer Horizons is currently implementing a new firmwide
accounting/information system. In addition to being Year 2000 compliant, the
system will support Computer Horizons' future growth. The implementation is
expected to be completed in late 1998, and the related cost is not expected to
have a material impact on Computer Horizons' financial condition or results of
operations.
Computer Horizons believes that its cash and cash equivalents and short-term
investments, lines of credit and internally generated funds will be sufficient
to meet its working capital needs through 1998.
27
<PAGE> 33
4 NATURE OF TRADING MARKET
The following table sets forth, for the periods indicated, the high and low
closing prices per share of Computer Horizons Common Stock on NASDAQ,
retroactively adjusted to reflect the three-for-two common stock split declared
by the Board of Directors of Computer Horizons in May 1997.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1996
First Quarter............................................. $25.67 $12.67
Second Quarter............................................ 36.00 22.00
Third Quarter............................................. 28.17 10.00
Fourth Quarter............................................ 25.83 16.17
1997
First Quarter............................................. 25.42 16.83
Second Quarter............................................ 38.88 19.67
Third Quarter............................................. 44.13 32.13
Fourth Quarter............................................ 45.50 27.00
1998
First Quarter............................................. 52.19 39.50
Second Quarter (through 1 June 1998)...................... 51.75 30.38
</TABLE>
28
<PAGE> 34
INFORMATION REGARDING SPARGO
1 BUSINESS
Spargo is one of the leading information technology consultancy services
providers in the United Kingdom offering a range of services in software
applications which encompass design, build, maintenance and enhancement to a
largely blue chip client base in the United Kingdom. Spargo's strengths include
the implementation of change in applications software together with the ongoing
maintenance of existing software.
Spargo was established in March 1989 by Tony Spargo and Bob Morton, its chief
executive and chairman respectively, to provide information technology
consultancy services primarily for the design, build, maintenance and
enhancement of applications software.
Spargo was listed on the LSE in June 1994 and was capitalised (at the then
placing price) at L11.875 million.
Spargo's target customer base is large computer users comprising major blue chip
companies, financial institutions and leading consulting companies based in the
UK, the US and Western Europe. Spargo's clients include Lloyds TSB Plc, Xerox
Limited, J.P. Morgan, J.H. Marsh & McLellan Limited and Ladbroke Racing Limited.
Spargo's directors believe that by concentrating on this sector of the market,
Spargo's marketing activities can be tightly focused; its profile is enhanced by
the standing of its customer base; its professional resources can be spread more
efficiently across a relatively small number of customers; it is better able to
win long term and/or follow on assignments; and its bad debt exposure is
minimised.
2 SELECTED FINANCIAL INFORMATION OF SPARGO
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR ENDED 31 DECEMBER
-------------------------------------------
1997 1996 1995 1994 1993
------- ------- ------- ------- -------
(IN L'000 EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
PROFIT AND LOSS ACCOUNT DATA
Turnover................................................... 9,512 7,853 7,379 6,016 4,869
Operating profit........................................... 1,652 1,159 867 1,201 482
Profit on ordinary activities before taxation.............. 1,740 1,204 902 1,211 483
Profit for the year attributable to ordinary
shareholders............................................. 1,152 771 554 786 323
Earnings per share......................................... 9.22p 6.17p 4.43p 6.29p 2.58p
Dividends per share........................................ 6.00p 4.50p 4.00p 3.60p nil
BALANCE SHEET DATA
Total assets............................................... 3,718 2,812 2,680 2,205 1,260
Net assets................................................. 1,677 1,275 1,067 850 514
</TABLE>
The following table shows certain of the above items for Spargo's last three
financial years adjusted for US GAAP.
<TABLE>
<CAPTION>
AS OF AND FOR THE YEAR
ENDED 31 DECEMBER
----------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Earnings per share
Basic..................................................... 9.29p 6.14p 4.07p
Diluted................................................... 9.24p 6.09p 4.06p
Net assets (L'000).......................................... 2,168 1,608 1,363
</TABLE>
See Appendix III for additional information.
29
<PAGE> 35
The following table shows a five year summary of net dividends per share
paid in full and stated in both pounds sterling and US dollars based on the
exchange rate at each payment date(1):
<TABLE>
<CAPTION>
PAID IN RESPECT OF THE FINANCIAL
YEAR ENDED 31 DECEMBER
------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Dividend (pence)........................................ 4.75 4.25 3.75 1.60 --
Dividend (cents)........................................ 7.67 6.47 5.95 2.49 --
</TABLE>
- ---------------
(1) The pounds sterling to US dollar exchange rate used in this table is the
noon buying rate used in New York City for cable transfers in pounds
sterling as certified for customs purposes by the Federal Reserve Bank of
New York.
The following table shows the pound-dollar exchange rate at the end of
certain financial periods, the average rate for each period and the range of
high and low rates for each period(1):
<TABLE>
<CAPTION>
AS OF AND FOR THE
FINANCIAL YEAR ENDED 31 DECEMBER
----------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
End of financial period..................... 1.6427 1.7123 1.5535 1.5665 1.4775
Average for period.......................... 1.6370 1.5610 1.5780 1.5320 1.5900
High........................................ 1.7035 1.7123 1.6440 1.6368 1.5020
Low......................................... 1.5775 1.4948 1.5302 1.4615 1.4175
</TABLE>
- ---------------
(1) The pounds sterling to US dollar exchange rate used in this table is the
noon buying rate used in New York City for cable transfers in pounds
sterling as certified for customs purposes by the Federal Reserve Bank of
New York.
3 SPARGO MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion should be read in conjunction with "Selected
Financial Information of Spargo" and the Spargo Financial Statements, including
the notes related thereto, appearing elsewhere in this Offer Document.
Overview
Spargo provides computer related consultancy services to major corporate
accounts. Spargo services essentially a blue chip client base which currently
consists of about 40 accounts.
Spargo has been able to build a number of long-term relationships which provide
a valuable source of steady business, whilst at the same time attracting new
accounts. Spargo has developed considerable knowledge and consulting experience
in a wide variety of industries including banking, financial services,
pharmaceuticals, insurance, manufacturing, oil and telecommunications.
The business can be broadly split between Development and Enhancement,
Maintenance & Support and Applications Facilities Management. Spargo's
consultants are predominantly based at the client's site within the client's own
IT department. In addition, Spargo provides an off-site facilities Management
and Development centre at one of its premises.
Solid growth has been achieved particularly in the banking and financial
services sector of the business and Spargo has gained a number of new customers.
The growth of Spargo's client portfolio continues to strengthen the customer
base, which in turn gives a good spread of business in proportion to total
revenue.
During the latter part of 1997 Spargo enhanced its corporate structure and
instigated strategic plans to further expand in its chosen markets through
continued organic growth. By the end of 1997 both the sales team and the
recruitment department had been substantially strengthened.
RESULTS OF OPERATIONS -- YEARS ENDED 31 DECEMBER 1997, 31 DECEMBER 1996, 31
DECEMBER 1995
Turnover (Revenue)
Currently revenue consists of about 90 per cent. time and materials based
services. The remainder of revenue is mainly derived from fixed priced support
and maintenance work. Revenue increased by 6.4 per cent. from L7.38 million in
1995 to L7.85 million in 1996 and by 21.1 per cent. from L7.85 million in 1996
to L9.51 million in 1997.
30
<PAGE> 36
Costs
The cost of services provided consists of billable personnel representing direct
costs, sales, recruitment, marketing and administrative costs, and general costs
associated with being a public company.
Costs increased by 17.4 per cent. to L7.86 million in 1997 from L6.69 million in
1996, which itself represented an increase of 8.2 per cent. from L6.19 million
in 1995. The increase in 1996 was mainly due to the additional time and manpower
invested in account management. The increases in 1997 were attributable to
investing in the enhancement of the sales team and the development of the
recruitment department.
Operating Profit
Operating profit increased by 33.7 per cent. from L867,000 in 1995 to L1.16
million in 1996, and by 42.5 per cent. from L1.16 million to L1.65 million in
1997. The growth in 1996, however, reflected an exceptional cost in 1995 of
L323,000 which represented a settlement of a dispute with the Inland Revenue for
PAYE on round sum allowances. The substantial increase in the operating profit
in 1997 reflected improved margins from the increased ratio of employees over
independent contractors on billable work.
Profit on Ordinary Activities before Taxation
Spargo's profit on ordinary activities before taxation increased in 1997 by 44.5
per cent. to L1.74 million from L1.20 million in 1996, which itself represented
an increase of 33.5 per cent. from L902,000 in 1995. After adjusting for
exceptionals in 1995, the figure in 1996 indicates a flat year with no real
growth. The result in 1997, however, reflects good growth in Spargo's activities
combined with an excellent improvement in operating margins.
Taxation on Profit on Ordinary Activities
The effective tax rate was 38.7 per cent., 36.5 per cent. and 33.9 per cent. for
financial years 1995, 1996 and 1997 respectively. The high effective rates of
tax are due to disallowable expenditure which is attributable to some marketing
and entertaining costs. This type of expenditure is an integral part of winning
and enhancing the business.
Profit for the Financial Year before Distributions (Net Income)
For the reasons stated above net income increased by 49.4 per cent. in 1997 to
L1.15 million from L771,000 in 1996, which itself represented an increase of
39.2 per cent. from L554,000 in 1995.
LIQUIDITY AND CAPITAL RESOURCES
Spargo has enjoyed solid growth in its cash balances from L802,000 in 1995 to
L1.25 million in 1996 and to L2.10 million in 1997. Spargo also reported
improved debtor days outstanding over these years. Spargo is enjoying good
corporate health and is well placed to continue developing its growth.
Spargo's business is cash generative. The nature of the business is essentially
labour intensive with a minimal capital expenditure requirement. Improved
turnover and margins over the years 1995, 1996 and 1997 has had a direct impact
on cash balances. The increasing cash position over these years has led to
increased interest receivables from deposits held on short term bank accounts.
This has led to further improvements in profit before taxation.
RECONCILIATION OF UK TO US GAAP
Certain profit and loss and balance sheet items in the UK published accounts of
Spargo have been adjusted for the purposes of this Offer Document principally to
reflect the different treatment of proposed dividends, deferred tax and share
options for earnings per share calculations under UK GAAP and US GAAP. US GAAP
does not permit the recognition of dividends until paid. US GAAP requires the
recognition of deferred tax assets, whereas UK GAAP does not. UK GAAP requires
fully diluted earnings per share to be stated only if materially different to
the basic figure, whereas US GAAP requires both figures to be stated
irrespective of the size of the difference. This reconciliation is shown in
Section 2 above.
4 NATURE OF TRADING MARKET
Spargo Shares have been traded on the LSE since 9 June 1994. There is no trading
market for Spargo Shares outside the UK.
31
<PAGE> 37
The following table sets out, for the quarters indicated, the reported highest
and lowest middle market quotations for Spargo Shares, as derived from SEDOL:
<TABLE>
<CAPTION>
PER SPARGO SHARE
--------------------
QUARTER HIGH(P) LOW(P)
------- -------- --------
<S> <C> <C>
1 April 1996-30 June 1996................................. 170.0 151.0
1 July 1996-30 September 1996............................. 160.5 146.0
1 October 1996-31 December 1996........................... 162.5 145.5
1 January 1997-31 March 1997.............................. 174.5 142.5
1 April 1997-30 June 1997................................. 143.5 110.0
1 July 1997-30 September 1997............................. 122.5 108.5
1 October 1997-31 December 1997........................... 152.5 119.5
1 January 1998-31 March 1998.............................. 265.5 147.5
</TABLE>
32
<PAGE> 38
APPENDIX I
CONDITIONS AND FURTHER TERMS OF THE OFFER
PART A
CONDITIONS OF THE OFFER
The Offer is subject to the following conditions:
(a) valid acceptances being received (and not, where permitted, withdrawn) by
not later than 3.00 p.m. on the 24 June 1998 (or such later time(s) and/or
date(s) as Computer Horizons may, subject to the rules of the City Code,
decide) in respect of not less than 90 per cent. (or such lesser percentage
as Computer Horizons may decide) of the Spargo Shares to which the Offer
relates, provided that this condition will not be satisfied unless Computer
Horizons and/or its wholly-owned subsidiaries shall have acquired or agreed
to acquire (pursuant to the Offer or otherwise) Spargo Shares carrying in
aggregate more than 50 per cent. of the voting rights then exercisable at a
general meeting of Spargo. For the purposes of this condition, Spargo
Shares which have been unconditionally allotted shall be deemed to carry
the voting rights they will carry upon their being entered in the register
of members of Spargo;
(b) the approval for listing on NASDAQ, subject to official notice of issuance,
of the New Computer Horizons Common Stock;
(c) Computer Horizons having received a letter from Grant Thornton, dated as of
the date on which the Offer otherwise becomes or is declared unconditional
in all respects (with Grant Thornton having received a supporting letter
from KPMG Audit Plc, Spargo's auditors), confirming Grant Thornton's
earlier letter to Computer Horizons that Grant Thornton concurs with
Computer Horizons management's conclusion that the acquisition of Spargo
may be accounted for as a pooling of interests under US GAAP;
(d) the board of the Inland Revenue having given clearance under section 138 of
the Taxation of Chargeable Gains Act 1992 in relation to transfers of
Spargo Shares under the Offer;
(e) the Registration Statement, and any post-effective amendments thereto,
having become effective under the Securities Act and no stop order
suspending the effectiveness of such Registration Statement or any part
thereof having been issued and no proceeding for that purpose having been
initiated or threatened by the SEC;
(f) no Third Party having instituted, implemented or threatened, or having
decided to institute, implement or threaten, any action, proceeding, suit,
investigation, inquiry or reference or having made, proposed or enacted or
required any action to be taken or information to be provided, and there
not continuing to be outstanding any statute, regulation, order or
decision, which would or might reasonably be expected to:
<TABLE>
<C> <S>
(i) make the Offer or the acquisition by Computer Horizons of
any or all Spargo Shares, or control of Spargo by Computer
Horizons, void, illegal or unenforceable, or otherwise,
directly or indirectly, restrict, prohibit, materially delay
or otherwise interfere with the implementation of, or impose
additional material conditions or obligations with respect
to, or otherwise materially challenge, the Offer or the
acquisition of any or all Spargo Shares or control of Spargo
by Computer Horizons;
(ii) require or prevent the divestiture by the Wider Computer
Horizons Group or by the Wider Spargo Group of all or any
material portion of their respective businesses, assets or
properties or impose any material limitation on the ability
of any of them to conduct their respective businesses or to
own their respective assets or property or any part of them;
(iii) impose any limitation on the ability of any member of the
Wider Computer Horizons Group to acquire, directly or
indirectly, or to hold or exercise effectively all or any
rights of ownership of Spargo Shares or on the ability of
Spargo or any member of the Wider Spargo Group or Computer
Horizons to hold or exercise effectively any rights of
ownership of shares in any member of the Wider Spargo Group
held or owned by it;
(iv) result in a delay in the ability of any member of the Wider
Computer Horizons Group, or render any member of the Wider
Computer Horizons Group unable, to acquire some or all of
the Spargo Shares;
(v) save pursuant to the Offer or Part XIIIA of the Companies
Act, require any member of the Wider Computer Horizons Group
or of the Wider Spargo Group to offer to acquire any shares
in any member of the Wider Spargo Group owned by any third
party; or
</TABLE>
I-1
<PAGE> 39
<TABLE>
<C> <S>
(vi) otherwise materially and adversely affect the business,
profits or prospects of any member of the Wider Spargo
Group,
</TABLE>
and all applicable waiting periods during which any Third Party could
institute, implement or threaten any such action, proceeding, suit,
investigation, inquiry or reference under the laws of any jurisdiction
having expired, lapsed or been terminated;
(g) all necessary filings having been made and all appropriate waiting periods
under any applicable legislation and regulations in any jurisdiction having
expired, lapsed or been terminated and no notice of any intention to revoke
any of the same having been received, in each case as may be necessary in
connection with the Offer or the acquisition by any member of the Wider
Computer Horizons Group of any shares in, or control of, Spargo and all
authorisations, orders, recognitions, grants, consents, clearances,
confirmations, licences, permissions and approvals necessary or appropriate
for or in respect of the Offer or the proposed acquisition of Spargo by any
member of the Wider Computer Horizons Group having been obtained in terms
and in a form reasonably satisfactory to Computer Horizons from all
appropriate Third Parties and all such authorisations, orders,
recognitions, grants, consents, clearances, confirmations, licences,
permissions and approvals remaining in full force and effect at the time
the Offer becomes or is declared otherwise unconditional and there being no
intimation of any intention to revoke or amend or not to renew the same in
connection with the Offer under the laws or regulations of any jurisdiction
and all necessary statutory or regulatory obligations in any jurisdiction
having been complied with;
(h) except as Computer Horizons and Spargo have agreed in writing has been
disclosed to Computer Horizons prior to 22 May 1998, there being no
provision of any arrangement, agreement or other instrument to which any
member of the Wider Spargo Group or any partnership or company in which any
member of the Wider Spargo Group is interested (an "associate") is a party
or by or to which any member or associate or any of their respective assets
may be bound or be subject which could, in consequence of the Offer or the
proposed acquisition of Spargo Shares by Computer Horizons, result in:
<TABLE>
<C> <S>
(i) any moneys borrowed by or any other indebtedness, actual or
contingent, of any such member or associate becoming
repayable or capable of being declared repayable immediately
or prior to the stated repayment date in such arrangement,
agreement or instrument or the ability of such member or
associate to incur any indebtedness being withdrawn or
inhibited;
(ii) the creation of any mortgage, charge or other security
interest over the whole or any part of the business,
property or assets of any such member or associate or any
such security (whenever arising or having arisen) becoming
enforceable;
(iii) any such arrangement, agreement or instrument being
terminated or adversely modified or any action of an adverse
nature being taken or onerous obligation arising thereunder;
(iv) any assets or interests of any such member or associate
being or falling to be disposed of or charged, or any right
arising under which any such asset or interest could be
required to be disposed of or charged, otherwise than in the
ordinary course of business;
(v) the respective financial or trading position, profits or
prospects of any such member or associate being prejudiced
or adversely affected;
(vi) the interests or business of any such member or associate in
or with any other person, firm or company (or any
arrangements relating to such interests or business) being
adversely affected; or
(vii) any such member or associate ceasing to be able to carry on
business under any name under which it presently does so,
</TABLE>
and in any such case the result will be adverse to and material in the
context of the Wider Spargo Group taken as a whole;
(i) except as disclosed in the Annual Report and Accounts of Spargo for the year
ended 31 December 1997 or as publicly announced to the LSE prior to 22 May
1998 or as Computer Horizons and Spargo have agreed in writing has been
disclosed to Computer Horizons prior to 22 May 1998, no member of the
Spargo Group having since 31 December 1997:
<TABLE>
<C> <S>
(i) save for transactions solely with wholly-owned subsidiaries
of Spargo, issued or agreed to or authorised or proposed the
issue of additional shares of any class, or securities
convertible into, or rights, warrants or options to
subscribe for or acquire, any such shares or convertible
securities save for options granted, and the issue of shares
pursuant to the exercise of options granted, on or before 21
May 1998 under the Spargo Share Option Scheme;
</TABLE>
I-2
<PAGE> 40
<TABLE>
<C> <S>
(ii) save for the final dividend of 3.75p in respect of the
period to 31 December 1997 paid on 1 May 1998, declared,
paid or made or proposed to declare, pay or make any bonus,
dividend or other distribution, whether payable in cash or
otherwise, other than to Spargo or wholly-owned subsidiaries
of Spargo;
(iii) authorised, proposed or announced an intention to authorise
or propose any merger or acquisition, demerger, disposal or
transfer of assets (other than in the ordinary course of
trading);
(iv) authorised, proposed or announced its intention to authorise
or propose any change to its share or loan capital (save for
any Spargo Shares allotted upon the exercise of options
granted on or before 21 May 1998 under the Spargo Share
Option Scheme);
(v) disposed of or transferred, mortgaged or encumbered any
assets or any right, title or interest in any asset (save in
the ordinary course of trading) which in any such case is
adverse to and material in the context of the Spargo Group
taken as a whole;
(vi) issued or proposed the issue of any debentures or (save in
the ordinary course of business) incurred any indebtedness
or contingent liability which in any such case is adverse to
and material in the context of the Spargo Group taken as a
whole;
(vii) entered into any arrangement, agreement, transaction or
commitment (whether in respect of capital expenditure,
trading obligations or otherwise) which is of a loss making,
long term, onerous or unusual nature or which involves or
could involve an obligation of such a nature or magnitude
which in any such case is adverse to and material in the
context of the Spargo Group taken as a whole;
(viii) entered into or varied the terms of any service agreement or
agreement for services with any director of Spargo;
(ix) purchased any of its own shares or other securities
convertible into or exchangeable for its own shares;
(x) proposed any voluntary winding-up;
(xi) waived or compromised any claim which is adverse to and
material in the context of the Spargo Group taken as a
whole;
(xii) terminated or varied the terms of any agreement or
arrangement between any member of the Wider Spargo Group and
any other person in a manner which would or might be
expected to have a material adverse effect on the position
or prospects of the Spargo Group;
(xiii) entered into any arrangement, agreement or commitment or
passed any resolution with respect to any of the
transactions, matters or events referred to in this
paragraph (i); or
(xiv) proposed, agreed to provide or modified the terms of any
share option scheme, incentive scheme or other benefit
relating to the employment or termination of employment of
any person employed by the Spargo Group which, taken as a
whole, are adverse to and material in the context of the
Spargo Group taken as a whole.
</TABLE>
(j) except as disclosed in the Annual Report and Accounts of Spargo for the year
ended 31 December 1997, or as publicly announced to the LSE prior to 22 May
1998 or as Computer Horizons and Spargo have agreed in writing has been
disclosed to Computer Horizons prior to 22 May 1998, since 31 December 1997
and prior to the date on which the Offer becomes or is declared otherwise
unconditional:
<TABLE>
<C> <S>
(i) there having been no adverse change in the business,
financial or trading position or profits or prospects of any
member of the Wider Spargo Group; and
(ii) no litigation, arbitration proceedings, prosecution or other
legal proceedings having been threatened, announced,
intimated or instituted by or remaining outstanding against
any member of the Wider Spargo Group (whether as plaintiff,
defendant or otherwise); and
(iii) no claim being made, and no circumstance having arisen which
might lead to a claim being made, under the insurance of any
member of the Wider Spargo Group which would or might
reasonably be expected to have an effect on the Wider Spargo
Group; and
(iv) no contingent liability having arisen or become apparent
which might be likely in either case to have an adverse
effect on any member of the Wider Spargo Group,
</TABLE>
which in any such case or in the aggregate is adverse to and material in
the context of the Spargo Group taken as a whole; and
I-3
<PAGE> 41
(k) except as Computer Horizons and Spargo have agreed in writing has been
disclosed to Computer Horizons prior to 22 May 1998, Computer Horizons not
having discovered that the financial, business or other information
publicly disclosed at any time by or on behalf of any member of the Wider
Spargo Group contains a misrepresentation of material fact or omits to
state a material fact necessary to make the information contained therein
not materially misleading.
Computer Horizons reserves the right (but shall be under no obligation) to waive
all or any of conditions (f) to (k) both inclusive, in whole or in part. In
order for the Offer not to lapse, conditions (f) to (k) both inclusive must be
satisfied as at, or waived on or before midnight on, the 21st day after the
later of 24 June 1998 and the date on which condition (a) is satisfied (or in
each case such later date as the Panel may agree). Computer Horizons shall be
under no obligation to waive or treat as satisfied any of conditions (f) to (k)
both inclusive by a date earlier than the latest date specified above for the
satisfaction thereof notwithstanding that the other conditions of the Offer may
at such earlier date have been waived or fulfilled and that there are at such
earlier date no circumstances indicating that the relevant condition may not be
capable of satisfaction.
If Computer Horizons is required by the Panel to make an offer or offers for
Spargo Shares under the provisions of Rule 9 of the City Code, Computer Horizons
may make such alterations to the terms and conditions of the Offer, including
condition (a) above, as are necessary to comply with the provisions of that
Rule.
PART B
FURTHER TERMS OF THE OFFER
The following further terms apply in this Part B and Part C of this Appendix I
and in the Form of Acceptance, unless the context otherwise requires, and
references to:
(a) the "Offer" shall mean the Offer and any revision thereof or extension
thereto;
(b) "the Offer becoming unconditional" shall include references to the Offer
being declared unconditional;
(c) "the Offer becoming unconditional" or "the Offer becoming or being declared
unconditional" shall be construed as the Offer becoming or being declared
unconditional as to acceptances, whether or not any other condition of the
Offer remains to be fulfilled;
(d) the "acceptance condition" shall mean the condition as to acceptances set
out in paragraph (a) of Part A of this Appendix I; and
(e) "acceptances of the Offer" shall include deemed acceptances of the Offer.
Any reference to any hour of the day shall refer to such time in the UK.
1 ACCEPTANCE PERIOD
(a) The Offer will initially be open for acceptance until 3:00 p.m. on 24 June
1998. Although no revision is envisaged, if the Offer is revised it will
remain open for acceptance for a period of at least 14 days from the date
on which written notification of the revision is posted to Spargo
Shareholders (or such other period as may be permitted by the Panel).
Except with the consent of the Panel, no such written notification may be
posted after 19 July 1998, or if later, the date falling 14 days prior to
the last date on which the Offer is capable of becoming unconditional.
(b) The Offer, whether revised or not, shall not be capable of becoming
unconditional after midnight on 2 August 1998 (or any earlier time and/or
date beyond which Computer Horizons has stated, and has not withdrawn such
statement, that the Offer will not be extended) nor of being kept open
after that time unless it has previously become unconditional, provided
that Computer Horizons reserves the right, with the permission of the
Panel, to extend the Offer to a later time(s) and/or date(s). Except with
the permission of the Panel, Computer Horizons may not, for the purpose of
determining whether the acceptance condition has been satisfied, take into
account acceptances of the Offer received or purchases of shares made
unless all relevant documentation is received by IRG no later than 1:00
p.m. on 2 August 1998 (or any earlier time and/or date beyond which
Computer Horizons has stated that the Offer will not be extended and in
respect of which it has not withdrawn that statement) or such later time(s)
and/or date(s) as Computer Horizons, with the permission of the Panel, may
determine.
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<PAGE> 42
(c) If the Offer becomes unconditional, it will remain open for acceptance for
not less than 14 days from the date on which it would otherwise have
expired. If the Offer has become unconditional and it is stated that the
Offer will remain open until further notice, then not less than 14 days
written notice will be given prior to the closing of the Offer. If a
competitive situation arises after Computer Horizons has made a "no
increase" and/or "no extension" statement in relation to the Offer,
Computer Horizons may, if it specifically reserves the right to do so at
the time such statement is made, withdraw such statement if it announces
such withdrawal within four business days after the announcement of the
competing offer and notifies Spargo Shareholders in writing thereof (or, in
the case of Spargo Shareholders with registered addresses outside the UK,
or whom Computer Horizons knows to be a nominee, trustee or custodian
holding Spargo Shares for such persons, by an announcement in the UK) at
the earliest opportunity. Computer Horizons may choose not to be bound by
the terms of a "no increase" or "no extension" statement if, having
reserved the right to do so, it posts an increased or improved offer which
is recommended for acceptance by the Spargo Board or in other circumstances
permitted by the Panel.
(d) Unless otherwise determined by the Panel, Computer Horizons shall be
entitled at any particular time to decide that the acceptance condition is
then satisfied taking account only of those Spargo Shares which have been
unconditionally allotted or issued before that time and written notice of
the allotment or issue of which, containing all relevant details, has been
received before that time by IRG on behalf of Computer Horizons from Spargo
or its agents at the address specified in sub-paragraph 3(a) of this Part
B. Telex, e-mail or facsimile transmission will not be sufficient.
2 ANNOUNCEMENTS
(a) Without prejudice to sub-paragraph 3(a) of this Part B, by 8:30 a.m. on the
business day (the "Relevant Day") following the day on which the Offer is
due to expire or become unconditional or is revised or extended, as the
case may be, (or such later time(s) or date(s) as the Panel may agree),
Computer Horizons will make an appropriate announcement and simultaneously
inform the LSE of the position. Such announcement will (unless otherwise
permitted by the Panel) state (as nearly as practicable) the total number
of Spargo Shares and rights over Spargo Shares:
<TABLE>
<C> <S>
(i) for which acceptances of the Offer have been received (and
to what extent such acceptances have been received from
persons acting in concert with Computer Horizons for the
purposes of the Offer);
(ii) acquired or agreed to be acquired by or on behalf of
Computer Horizons (or by persons acting in concert with
Computer Horizons for the purposes of the Offer) during the
Offer Period; and
(iii) held by or on behalf of Computer Horizons (or by persons
acting in concert with Computer Horizons for the purposes of
the Offer) prior to the Offer Period,
</TABLE>
and will specify the percentage of Spargo's ordinary share capital
represented by each of these figures.
(b) Any decision to extend the date by which the acceptance condition has to be
fulfilled may be made at any time up to, and will be announced not later
than, 8:30 a.m. on the Relevant Day (or such later time(s) and/or date(s)
as the Panel may agree) and the announcement will state the next expiry
date (unless the Offer is unconditional, in which case a statement may
instead be made that the Offer will remain open until further notice). In
computing the number of Spargo Shares represented by acceptances and
purchases there may be included or excluded for announcement purposes,
subject to sub-paragraph 5(a) of this Part B, acceptances and purchases not
in all respects in order or subject to verification.
(c) In this Appendix I, references to the making of an announcement by or the
giving of notice by or on behalf of Computer Horizons include the release
of an announcement to the press by public relations consultants or by
Broadview Associates and the delivery by hand or telephone, facsimile,
telex or other electronic transmission of an announcement to the LSE. An
announcement made otherwise than to the LSE shall be notified
simultaneously to the LSE.
3 RIGHTS OF WITHDRAWAL
(a) If Computer Horizons, having announced the Offer to be unconditional, fails
to comply by 3.30 p.m. on the Relevant Day (or such later time(s) and/or
date(s) as the Panel may agree) with any of the other relevant requirements
specified in sub-paragraph 2(a) of this Part B, an accepting Spargo
Shareholder may (unless the Panel otherwise agrees) immediately thereafter
withdraw his acceptance(s) of the Offer by written notice given by post or
by hand to IRG Plc, Balfour House, 390-398 High Road Ilford, Essex IG1 1NQ.
Subject to sub-paragraph 1(b) of this Part B, this right of withdrawal may
be terminated not
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less than eight days after the Relevant Day by Computer Horizons
confirming, if such be the case, that the Offer is still unconditional and
complying with the other requirements specified in sub-paragraph 2(a) of
this Part B. If any such confirmation is given, the first period of 14 days
referred to in sub-paragraph 1(c) of this Part B will run from the date of
such confirmation and compliance.
(b) If by 3:00 p.m. on 15 July 1998 (or such later time(s) and/or date(s) as the
Panel may agree) the Offer has not become unconditional, an accepting
Spargo Shareholder may withdraw his acceptance(s) at any time thereafter by
written notice received by IRG on behalf of Computer Horizons at the
address and in the manner referred to in subparagraph 3(a) of this Part B,
until the earlier of (i) the time when the Offer becomes unconditional; and
(ii) the final time for lodgement of acceptances of the Offer which can be
taken into account in accordance with sub-paragraph 1(b) of this Part B.
(c) If a "no increase" and or "no extension" statement has been withdrawn in
accordance with sub-paragraph 1(c) of this Part B, any Spargo Shareholder
who accepts the Offer after such statement is made may withdraw that
acceptance thereafter in the manner referred to in sub-paragraph 3(a) of
this Part B not later than the eighth day after the posting of written
notice of such withdrawal to Spargo Shareholders.
(d) Except as provided by this paragraph 3 and sub-paragraph 7(c) of this Part
B, acceptances and elections shall be irrevocable.
(e) In this paragraph 3, "written notice" (including any letter of appointment,
direction or authority) means notice in writing bearing the original
signature(s) of the relevant accepting Spargo Shareholder(s), or his/their
agent(s) duly appointed in writing (evidence of whose appointment is
produced with the notice in a form reasonably satisfactory to Computer
Horizons). Telex, e-mail or facsimile transmission or copies will not be
sufficient to constitute written notice. No notice which is postmarked in,
or otherwise appears to Computer Horizons or its agents to have been sent
from, the United States, Canada, Australia or Japan will be treated as
valid.
4 REVISED OFFER
(a) Although no such revision is envisaged, if the Offer (in its original or any
previously revised form) is revised and such revision represents, on the
date on which such revision is announced, (on such basis as Broadview
Associates may consider appropriate) an improvement (or no diminution) in
the value of the Offer as so revised compared with the value of the overall
consideration or terms previously offered, the benefit of the revised Offer
will, subject as provided in sub-paragraphs 4(b) and 4(c) and paragraph 7
of this Part B, be made available to Spargo Shareholders who have accepted
the Offer in its original or any previously revised form(s) (each a
"Previous Acceptor"). The acceptance by or on behalf of a Previous Acceptor
of the Offer in its original or any previously revised form(s) shall,
subject as provided in sub-paragraphs 4(b), (c), (d) and (e) of this Part B
and subject to any election for alternative forms of consideration made as
provided in the remainder of this paragraph 4(a), be treated as an
acceptance of the Offer as so revised and shall also constitute the
separate appointment of Computer Horizons and/or any director of Computer
Horizons and/or Broadview Associates and/or any director of Broadview
Associates as his attorney and agent with authority to accept any such
revised Offer on behalf of the Previous Acceptor and, if such revised Offer
includes alternative forms of consideration, to make an election as to the
form of consideration and/or the proportion thereof on behalf of a Previous
Acceptor as such attorney and agent in his absolute discretion thinks fit
and to execute on behalf of and in the name of such Previous Acceptor all
such further documents (if any) as may be required to give effect to such
acceptances and/or elections. In making any such election, such attorney
and agent shall take into account the nature of any previous acceptances
and/or elections made by the Previous Acceptor and such other facts or
matters as he may reasonably consider relevant.
(b) The deemed acceptance referred to and authorities conferred by sub-paragraph
4(a) of this Part B shall not apply or (as the case may be) be exercised if
as a result thereof the Previous Acceptor would (on such basis as Broadview
Associates may consider appropriate) thereby receive less in aggregate in
consideration under the revised Offer than he would have received in
aggregate in consideration as a result of acceptance of the Offer in the
form in which it was originally accepted by him having regard to any
election or previous acceptance originally made by him, unless the Previous
Acceptor has previously agreed in writing to receive less aggregate
consideration.
(c) The deemed acceptance referred to and exercise of the powers of attorney and
agency so conferred by this paragraph 4 shall be ineffective to the extent
that a Previous Acceptor shall lodge, within 14 days of the
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<PAGE> 44
posting of the document pursuant to which the revision of the Offer is made
available to Spargo Shareholders (or such later date as Computer Horizons
may determine), a form in which he validly elects (to the extent possible)
to receive the consideration receivable by him under the revised Offer in
some other manner.
(d) Subject to sub-paragraph 4(c) of this Part B, the authorities referred to in
this paragraph 4 and any acceptance of a revised Offer and any election
pursuant thereto shall be irrevocable unless and until the Previous
Acceptor becomes entitled to withdraw his acceptance under paragraph 3 of
this Part B and duly does so.
(e) Computer Horizons reserves the right to treat an executed Form of Acceptance
relating to the Offer (in its original or any previously revised form(s))
which is received after the announcement or issue of the Offer in any
revised form as a valid acceptance of the revised Offer and/or, where
applicable, a valid election for or acceptance of any of the alternative
forms of consideration and such acceptance shall constitute an authority
and request in the terms of paragraph 4(a) of this Part B, mutatis
mutandis, on behalf of the relevant Spargo Shareholder.
5 ACCEPTANCES AND PURCHASES
Except as otherwise agreed by the Panel:
(a) an acceptance of the Offer shall not be treated as valid for the purposes of
the acceptance condition unless the requirements of Note 4 and, if
applicable, Note 6 of Rule 10 of the City Code are satisfied in respect of
it;
(b) a purchase of Spargo Shares by Computer Horizons or its nominee(s) or any
person acting in concert with it or its or their nominees will only be
treated as valid for the purposes of the acceptance condition if the
requirements of Note 5 and, if applicable, Note 6 of Rule 10 of the City
Code are satisfied in respect of it; and
(c) before the Offer may become unconditional, IRG must have issued a
certificate to Computer Horizons and/or to Broadview Associates which
states the number of Spargo Shares in respect of which acceptances have
been received and which comply with paragraph 5(a) of this Part B, and the
number of Spargo Shares otherwise acquired, whether before or during the
Offer Period, which comply with paragraph 5(b) of this Part B. Copies of
such certificate will be sent to the Panel and to the financial advisers of
Spargo as soon as possible after issue.
6. GENERAL
(a) Save with the consent of the Panel, the Offer will lapse unless all the
conditions have been satisfied or (if capable of waiver) waived or, where
appropriate, have been determined by Computer Horizons in its reasonable
opinion to be or remain satisfied by, or where appropriate at, midnight on
15 July 1998 or on the date which is 21 days after the date on which the
Offer becomes unconditional, whichever is the later, or such later date as
Computer Horizons may, with the consent of the Panel, decide. In such a
case the Offer shall cease to be capable of further acceptance, and
Computer Horizons and Broadview Associates and Spargo Shareholders shall
thereupon cease to be bound by prior acceptances.
(b) The expression "Offer Period" when used in this Offer Document means, in
relation to the Offer, the period commencing on 7 May 1998 and ending on
whichever of the following times shall be the latest:
(i) 3:00 p.m. on 24 June 1998; and
(ii) the earlier of:
(A) the time at which the Offer lapses; and
(B) the time at which the Offer becomes unconditional.
(c) Except with the consent of the Panel, settlement of the consideration to
which any Spargo Shareholder is entitled under the Offer will be
implemented in full in accordance with the terms of the Offer without
regard to any lien, right of set-off, counterclaim or other analogous right
to which Computer Horizons may otherwise be, or claim to be, entitled as
against any such shareholder.
(d) The terms, provisions, instructions and authorities contained in or deemed
to be incorporated in the Form of Acceptance constitute part of the terms
of the Offer. Words and expressions defined in this Offer
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<PAGE> 45
Document have the same meanings when used in the Form of Acceptance unless
the context otherwise requires.
(e) The Offer and the Form of Acceptance and all acceptances of the Offer and
elections in respect thereof and all contracts made pursuant to the Offer
and action taken or deemed to be taken under any of the foregoing shall be
governed by and construed in accordance with English law.
(f) Execution by or on behalf of a Spargo Shareholder of a Form of Acceptance
will constitute his submission, in relation to all matters arising out of
the Offer and the Form of Acceptance, to the jurisdiction of the courts of
England and the relevant shareholder's agreement that nothing shall limit
the right of Computer Horizons or Broadview Associates to bring any action,
suit or proceeding arising out of or in connection with the Offer and the
Form of Acceptance in any other manner permitted by law or in any court of
competent jurisdiction.
(g) All references in this Offer Document and in the Form of Acceptance to 24
June 1998 shall (except in sub-paragraph 6(b) of this Part B and except
where the context otherwise requires) be deemed, if the expiry date of the
Offer be extended, to refer to the expiry date of the Offer as so extended.
(h) Any omission to despatch the Offer Document and/or the Form of Acceptance or
any notice required to be despatched under the terms of the Offer to, or
any failure to receive the same by, any person to whom the Offer is being
made shall not invalidate the Offer in any way or create any implication
that the Offer has not been made to any such person, and any such person to
whom the Offer Document, the Form of Acceptance and any related documents
have not been despatched or who has not received such documents may,
subject to the provisions of paragraph 7 of this Part B, collect copies of
such documents from IRG at the address set out in paragraph 3(a) of this
Part B.
(i) Computer Horizons and Broadview Associates reserve the right to notify
Spargo Shareholders regarding any matter, including the making of the
Offer, to all or any Spargo Shareholders with a registered address outside
the UK or whom Spargo knows to be a nominee, trustee or custodian holding
Spargo Shares for persons outside the UK, by announcement or paid
advertisement in a daily newspaper published and circulated in the UK, or
any part thereof, in which event such notice shall be deemed to have been
sufficiently given, notwithstanding any failure by any such shareholder(s)
to receive or see such notice, and all references in the Offer Document to
notice or the provision of information in writing by or on behalf of
Computer Horizons and/or Broadview Associates and/or their respective
agents shall be construed accordingly.
(j) Due completion of a Form of Acceptance will constitute an instruction to
Computer Horizons, on the Offer becoming unconditional in all respects, to
cancel all mandates and other instructions entered in the records of Spargo
in force relating to holdings of Spargo Shares. Such mandates and other
instructions will not continue in force in relation to New Computer
Horizons Common Stock issued to such shareholders.
(k) Without prejudice to any other provisions of this Part B, Computer Horizons
and Broadview Associates reserve the right to treat acceptances as valid if
received by or on behalf of either of them at any place or places or in any
manner which may be otherwise than as set out herein or in the Form of
Acceptance.
(l) If sufficient acceptances are received and/or sufficient Spargo Shares are
otherwise acquired, Computer Horizons intends to apply the provisions of
sections 428-430F of the Companies Act to acquire compulsorily any
outstanding Spargo Shares and to apply for the cancellation of the listing
of such shares on the LSE.
(m) All powers of attorney, appointment of agents and authorities on the terms
conferred by or referred to in this Appendix I or in the Form of Acceptance
are given by way of security for the performance of the obligations of the
Spargo Shareholder concerned and are irrevocable in accordance with section
4 of the Powers of Attorney Act 1971 except in the circumstances where the
grantor of such power of attorney, appointment or authority is entitled to
withdraw his acceptance in accordance with paragraph 3 of this Part B and
duly does so.
(n) No acknowledgment of receipt of any Form of Acceptance, transfer by means of
CREST, share certificate(s) or other document(s) will be given by or on
behalf of Computer Horizons. All communications, notices, certificates,
documents of title and remittances to be delivered by or sent to or from
Spargo Shareholders (or their designated agent(s)) will be delivered by or
sent to or from them (or their designated agent(s)) at their own risk.
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<PAGE> 46
(o) If the Offer does not become unconditional in all respects or lapses:
(i) the Form of Acceptance, share certificate(s) and other document(s) of
title will be returned by post (or by such other method as may be
approved by the Panel) within 14 days of the Offer lapsing, at the
risk of the person entitled thereto, to the person or agent whose name
and address is set out in Box 6 on the Form of Acceptance or, if none
is set out, to the first-named holder at his registered address; and
(ii) IRG will, immediately after the lapsing of the Offer (or within such
longer period as the Panel may permit, not exceeding 14 days of the
lapsing of the Offer), give instructions to CRESTCo to transfer all
Spargo Shares held in escrow balances and in relation to which it is
the escrow agent for the purposes of the Offer to the original
available balances of Spargo Shareholders concerned.
(p) The Spargo Shares which are the subject of the Offer will be acquired fully
paid and free from all liens, charges, equitable interests, rights of
pre-emption and other third party rights of any nature and together with
all rights attaching thereto, including the right to receive all dividends
and other distributions declared, paid or made after 22 May 1998.
(q) Save, in the case of any New Computer Horizons Common Stock to be issued to
any Affiliate, as agreed under the terms of the Affiliate Agreements with
respect to restrictions on transfer:
(i) the New Computer Horizons Common Stock will be issued free from all
liens, charges and other encumbrances or other equitable interests;
and
(ii) the New Computer Horizons Common Stock will rank pari passu in all
respects with existing Computer Horizons Common Stock, including the
right to receive in full all dividends (which are payable in US
dollars), if any, and other distributions declared, paid or made on
such shares after the date hereof.
(r) The Offer is made at 3:00 p.m. on 3 June 1998 and is capable of acceptance
from and after that time. Copies of this Offer Document and Forms of
Acceptance are available at IRG from that time at the address set out in
paragraph 3(a) of this Part B.
(s) In relation to any acceptance of the Offer in respect of a holding of Spargo
Shares which are in uncertificated form, Computer Horizons reserves the
right to make such alterations, additions or modifications as may be
necessary or desirable to give effect to any purported acceptance of the
Offer, whether in order to comply with the facilities or requirements of
CREST or otherwise, provided such alterations, additions or modifications
are consistent with the requirements of the City Code or are otherwise made
with the consent of the Panel.
(t) All references in this Appendix I to statutory provisions shall include a
statute or statutory provision which corrects, consolidates or replaces the
same (whether before or after the date hereof).
7 OVERSEAS SHAREHOLDERS
(a) The making of the Offer in, or to persons resident in or nationals of or
citizens of jurisdictions outside the UK or who are nominees of, or
custodians or trustees for, citizens or nationals of other countries
("overseas shareholders") may be affected by the laws of the relevant
jurisdictions. Such overseas shareholders should inform themselves about
and observe any applicable legal requirements. It is the responsibility of
any overseas shareholder wishing to accept the Offer to satisfy
himself/herself as to the full observance of the laws and regulatory
requirements of the relevant jurisdiction in connection therewith,
including the obtaining of any governmental, exchange control or other
consents which may be required, or the compliance with other necessary
formalities needing to be observed and the payment of any issue, transfer
or other taxes or duties due in such jurisdiction. Any such overseas
shareholder will be responsible for any such issue, transfer or other taxes
or other payments by whomsoever payable and Computer Horizons and Broadview
Associates (and any person acting on behalf of either of them) shall be
fully indemnified and held harmless by such overseas shareholder for any
such issue, transfer of other taxes or duties as Computer Horizons or
Broadview Associates (and any person acting on behalf of either of them)
may be required to pay.
(b) In particular, the Offer is not being made, directly or indirectly, in or
into the United States, Canada, Australia or Japan. Furthermore, no steps
have been taken to qualify the New Computer Horizons Common Stock for
distribution in Japan or any province or territory of Canada and no
prospectus in relation to the New Computer Horizons Common Stock has been,
or will be, lodged with or registered by
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<PAGE> 47
the Australian Securities Commission. Computer Horizons will not (unless
otherwise determined by Computer Horizons in its sole discretion and save
as provided for in paragraph 7(c) below) mail or deliver, or authorise the
mailing or delivery of, this Offer Document, the Form of Acceptance or any
related offering document in or into the United States, Canada, Australia
or Japan, including to Spargo Shareholders with registered addresses in the
United States, Canada, Australia or Japan or to persons whom Computer
Horizons knows to be trustees, nominees or custodians holding Spargo Shares
for persons in the United States, Canada, Australia or Japan ("Restricted
Overseas Person"). Persons receiving such documents (including, without
limitation, trustees, nominees or custodians) should not distribute or send
them in or into the United States, Canada, Australia or Japan or use such
mails or any such means or instrumentality for any purpose directly or
indirectly in connection with the Offer and so doing may invalidate any
purported acceptance. Persons wishing to accept the Offer should not use
such mails or any such means or instrumentality for any purpose directly or
indirectly related to acceptance of the Offer. Envelopes containing the
Form of Acceptance should not be postmarked in the United States, Canada,
Australia or Japan or otherwise despatched from the United States, Canada,
Australia or Japan and all acceptors must provide addresses outside the
United States, Canada, Australia or Japan for the receipt of the
consideration available under the Offer or for the return of the Form of
Acceptance, certificate(s) for Spargo Shares and/or other document(s) of
title. Unless an exemption under the relevant securities laws is available,
Computer Horizons will not issue New Computer Horizons Common Stock or
authorise the delivery of any document(s) of title in respect of New
Computer Horizons Common Stock to (i) any person who is, or who Computer
Horizons has reason to believe is, a Restricted Overseas Person, or (ii) to
any person who is unable or fails to give the warranty set out in paragraph
(b) of Part C below or (iii) to any person with a registered address in the
United States, Canada, Australia or Japan. Computer Horizons is not aware
of any Spargo Shareholder with a registered address in the United States or
which holds Spargo Shares as nominee for any beneficial holder with a
registered address in the United States.
(c) These provisions and any other terms of the Offer relating to overseas
shareholders may be waived, varied or modified as regards specific Spargo
Shareholders or on a general basis by Computer Horizons in its absolute
discretion. Subject thereto, the provisions of this paragraph 7 supersede
any terms of the Offer inconsistent therewith. References in this paragraph
7 to a Spargo Shareholder include references to the person or persons
executing a Form of Acceptance and, in the event of more than one person
executing the Form of Acceptance, the provisions of this paragraph 7 shall
apply to them jointly and severally.
PART C
FORM OF ACCEPTANCE
Each Spargo Shareholder by whom, or on whose behalf, a Form of Acceptance is
executed irrevocably undertakes, represents, warrants and agrees to and with
Computer Horizons, Broadview Associates and IRG, so as to bind such shareholder,
such shareholder's personal representatives, heirs, successors and assigns, to
the following effect:
(a) that the execution of a Form of Acceptance (whether or not any boxes therein
are completed) shall constitute:
(i) an acceptance of the Offer in respect of the number of Spargo Shares
inserted or deemed to be inserted in Box 1 of the Form of Acceptance,
(ii) an undertaking to execute any further documents and give any further
assurances which may be required to enable Computer Horizons to obtain
the full benefit of this Part C and for Computer Horizons and/or any
of its directors and/or Broadview Associates and/or any of its
directors and/or IRG and/or any of its directors to perfect any of the
authorities to be given hereunder,
in each case on and subject to the terms and conditions set out in this Offer
Document and the Form of Acceptance and, subject only to the rights of
withdrawal set out in paragraph 3 of Part B of this Appendix I, each such
acceptance shall be irrevocable;
(b) unless "YES" is put in Box 5 of the Form of Acceptance, such Spargo
Shareholder has not received or sent copies of this Offer Document, the Form
of Acceptance or any related offering documents in, into or from the United
States, Canada, Australia or Japan;
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(c) that the Spargo Shares in respect of which the Offer is accepted or deemed
to be accepted are fully paid up and are sold free from all liens, equitable
interests, charges, restrictions (including restrictions imposed by law),
third party rights and encumbrances and together with all rights now or
hereafter attaching thereto, including voting rights and the right to all
dividends and other distributions hereafter declared, paid or made;
(d) that the execution of the Form of Acceptance constitutes, subject to the
Offer becoming unconditional in all respects in accordance with its terms
and to the accepting Spargo Shareholder not having validly withdrawn his
acceptance, the irrevocable separate appointment of Computer Horizons and/or
any of its directors and/or Broadview Associates and/or any of its directors
and/or IRG and/or any of its directors as such Spargo Shareholder's attorney
and/or agent, and an irrevocable instruction to the attorney and/or agent to
complete and execute all or any form(s) of transfer and/or other document(s)
at the attorney's and/or agent's discretion in relation to the Spargo Shares
referred to in sub-paragraph (a)(i) of this Part C held in (or subsequently
converted into) certificated form in favour of Computer Horizons or such
other person or persons as Computer Horizons may direct and to deliver such
form(s) of transfer and/or other document(s) at the attorney's and/or
agent's discretion together with the share certificate(s) and/or other
document(s) relating to such Spargo Shares for registration within 6 months
of the Offer becoming or being declared unconditional in all respects and to
do all such other acts and things as may in the opinion of such attorney
and/or agent be necessary or expedient for the purposes of or in connection
with the acceptance of the Offer and to vest in Computer Horizons or any
subsidiary or nominee(s) of such company the Spargo Shares as aforesaid;
(e) that the execution of the Form of Acceptance constitutes the irrevocable
appointment of IRG as such shareholder's attorney and/or agent and an
irrevocable instruction and authority to the attorney and/or agent (i)
subject to the Offer becoming unconditional in all respects in accordance
with its terms and to an accepting Spargo Shareholder not having validly
withdrawn his acceptance, to transfer to itself (or to such other person or
persons as Computer Horizons or its agents may direct) by means of CREST all
or any of the Relevant Spargo Shares (but not exceeding the number of Spargo
Shares in respect of which the Offer is accepted or deemed to be accepted)
and (ii), if the Offer does not become unconditional in all respects, to
give instructions to CRESTCo, immediately after the lapsing of the Offer (or
within such longer period as the Panel may permit, not exceeding 14 days of
the lapsing of the Offer), to transfer all Relevant Spargo Shares to the
original available balance of the accepting Spargo Shareholder. "Relevant
Spargo Shares" means Spargo Shares in uncertificated form and in respect of
which a transfer or transfers to escrow has or have been effected pursuant
to the procedures described in the letter from Broadview Associates
contained in this Offer Document and where the transfer(s) to escrow was or
were made in respect of Spargo Shares held under the same member account ID
and participant ID as the member account ID and participant ID relating to
the Form of Acceptance concerned (but irrespective of whether or not any
Form of Acceptance Reference Number, or a Form of Acceptance Reference
Number corresponding to that appearing on the Form of Acceptance concerned,
was included in the TTE instruction concerned);
(f) that the execution of the Form of Acceptance constitutes, subject to the
Offer becoming or being declared unconditional in all respects in
accordance with its terms and to the accepting Spargo Shareholder not
having validly withdrawn his acceptance, an irrevocable authority and
request:
(i) to Spargo or its agents to procure the registration of the transfer of
the Spargo Shares pursuant to the Offer and, if applicable, the
delivery of the share certificate(s) and/or other document(s) of title
in respect thereof to Computer Horizons or as it may direct;
(ii) to Computer Horizons or its agents to procure that such Spargo
Shareholder's name is entered on the share register of Computer
Horizons in respect of New Computer Horizons Common Stock to which
such shareholder becomes entitled under the Offer (subject to the
provisions of Computer Horizons' certificate of incorporation and
bylaws); and
(iii) to Computer Horizons or its agents to procure the despatch by post
(or by such other method as may be approved by the Panel) of the
document(s) of title for any New Computer Horizons Common Stock to
which an accepting Spargo Shareholder becomes entitled pursuant to
such Spargo Shareholder's acceptance of the Offer, at the risk of
such Spargo Shareholder, to the person whose name and address is set
out in Box 6 of the Form of Acceptance or, if none is set out, to the
first-named holder at such holder's registered address, or otherwise
as such Spargo Shareholder may elect, provided in each case that this
is outside the United States, Canada, Australia or Japan;
I-11
<PAGE> 49
(g) that the execution of the Form of Acceptance constitutes separate authority
to Computer Horizons and/or its directors and/or Broadview Associates
and/or its directors and/or their respective agents and the irrevocable
appointment of Computer Horizons and/or its directors and/or Broadview
Associates and/or its directors as such shareholder's attorney and agent
within the terms of paragraph 4 of Part B of this Appendix I in respect of
those Spargo Shares in respect of which the Offer has been accepted and
such acceptance has not been validly withdrawn;
(h) that Computer Horizons shall be entitled, after the Offer has become
unconditional in all respects (or if the Offer would become or be declared
unconditional in all respects or lapse immediately upon the outcome of the
resolution in question or if the Panel otherwise gives its consent) and
pending registration, to direct the exercise of any votes and any or all
other rights and privileges (including the right to requisition the
convening of a general meeting of Spargo or of any class of its
shareholders) attaching to any Spargo Shares in respect of which the Offer
has been accepted and such acceptance has not been validly withdrawn, and
with regard to any such Spargo Shares, the execution of the Form of
Acceptance will constitute an authority to Spargo from such Spargo
Shareholder to send any notice, warrant or other document or communication
(including any share certificate(s) and/or other document(s) of title
issued as a result of conversion of such Spargo Shares into certificated
form) which may be required to be sent to him (as a member of Spargo) to
Computer Horizons at its registered office or such other address nominated
by Computer Horizons, and an authority to Computer Horizons or any person
appointed by Computer Horizons to sign any consent to short notice of a
general or separate class meeting on his behalf and/or execute a form of
proxy in respect of such Spargo Shares appointing and/or to appoint any
person determined by Computer Horizons to attend general meetings and
separate class meetings of Spargo or its members or any of them (and any
adjournment thereof) and to exercise the votes attaching to such Spargo
Shares on his behalf, where relevant, such votes to be cast so far as
possible to satisfy any outstanding condition of the Offer, and will also
(subject as aforesaid) constitute the agreement of such Spargo Shareholder
not to exercise any of such rights without the consent of Computer Horizons
and the irrevocable undertaking of such shareholder not to appoint a proxy
for or to attend any such general meetings or separate class meetings;
(i) that he will deliver to IRG at the address given in paragraph 3(a) of Part B
of this Appendix I his share certificate(s) and or other document(s) of
title in respect of the Spargo Shares referred to in sub-paragraph (a)(i)
of this Part C held by him in (or subsequently converted into) certificated
form or an indemnity acceptable to Computer Horizons in lieu thereof, as
soon as possible and in any event within six months of the Offer becoming
or being declared unconditional in all respects;
(j) that he will take (or procure to be taken) the action set out in paragraph
13 of the letter from Broadview Associates contained in this Offer Document
to transfer all Spargo Shares in respect of which the Offer has been
accepted or is deemed to have been accepted and not validly withdrawn held
by him in (or subsequently converted into) uncertificated form to an escrow
balance as soon as possible and in any event so that the transfer to escrow
settles within 6 months of the Offer becoming unconditional in all
respects;
(k) that if, for any reason, any Spargo Shares in respect of which a transfer to
an escrow balance has been effected in accordance with paragraph 13 of the
letter from Broadview Associates contained in this Offer Document are
converted to certificated form, he will (without prejudice to paragraph (g)
of this Part C) immediately deliver or procure the immediate delivery of
the share certificate(s) or other document(s) of title in respect of all
such Spargo Shares as so converted to IRG at the address referred to in
paragraph 3(a) of Part B of this Appendix I or to Computer Horizons at its
registered office or as Computer Horizons or its agents may direct;
(l) that the execution of the Form of Acceptance constitutes his submission, in
relation to all matters arising out of the Offer and the Form of
Acceptance, to the jurisdiction of the courts of England;
(m) that on execution the Form of Acceptance shall take effect as a deed;
(n) that the terms of this Part C and the Offer generally shall be incorporated
in and form part of the Form of Acceptance, which shall be read and
construed accordingly;
(o) that, if he accepts the Offer, he shall do all such acts and things as shall
be necessary or expedient to vest in Computer Horizons or its subsidiaries
or nominees or such other persons as it may decide the Spargo Shares
aforesaid and all such acts and things as may be necessary or expedient to
enable IRG to perform its functions as escrow agent for the purposes of the
Offer;
I-12
<PAGE> 50
(p) that he agrees to ratify each and every act or thing which may be done or
effected by Computer Horizons and/or any of its directors and/or Broadview
Associates and/or any of its directors and/or IRG or their respective
agents or Spargo or its agents, as the case may be, in the proper exercise
of any of his or its powers and/or authorities hereunder; and
(q) that he undertakes, if any provisions of Part B of this Appendix I or this
Part C shall in any way be unenforceable, invalid or not operate so as to
afford Computer Horizons and/or Broadview Associates and/or IRG and/or
their respective agents the full benefit of the authorities expressed be
given herein, with all practicable speed to do all such acts and things and
execute all such documents as may be required or desirable to enable
Computer Horizons and/or any of its directors and/or Broadview Associates
and/or any of its directors and/or IRG to secure the full benefit of the
authorities and powers of attorney conferred by or referred to in Part B of
this Appendix I or this Part C.
References in this Part C to a Spargo Shareholder shall include references to
the person or persons executing a Form of Acceptance and in the event of more
than one person executing a Form of Acceptance the provisions of this Part C
shall apply to them jointly and to each of them.
I-13
<PAGE> 51
APPENDIX II
COMPUTER HORIZONS FINANCIAL STATEMENTS
INDEX TO COMPUTER HORIZONS FINANCIAL STATEMENTS
<TABLE>
<S> <C> <C>
(i) Computer Horizons Unaudited Results for Quarter Ended 31
March 1998.................................................. II-2
(ii) Report of Independent Certified Public Accountants.......... II-6
(iii) Computer Horizons Audited Financial Statements.............. II-7
</TABLE>
II-1
<PAGE> 52
(I) COMPUTER HORIZONS UNAUDITED RESULTS FOR QUARTER ENDED 31 MARCH 1998
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1998 1997
--------- ------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents................................. $ 78,992 $ 88,633
Short-term investments.................................... 22,199 13,165
Accounts receivable, net of allowance for doubtful
accounts of $1,859,000 and $1,742,000 at March 31, 1998
and December 31, 1997, respectively.................... 94,046 79,526
Deferred income tax benefit............................... 1,937 1,818
Other..................................................... 1,201 1,087
-------- --------
TOTAL CURRENT ASSETS................................... 198,375 184,229
-------- --------
PROPERTY AND EQUIPMENT...................................... 16,294 12,479
Less accumulated depreciation............................. 8,031 7,101
-------- --------
8,263 5,378
-------- --------
OTHER ASSETS -- NET:
Goodwill.................................................. 16,939 17,090
Deferred income tax benefit............................... 947 816
Other..................................................... 7,548 4,088
-------- --------
TOTAL OTHER ASSETS..................................... 25,434 21,994
-------- --------
TOTAL ASSETS...................................... $232,072 $211,601
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Current portion of long-term debt......................... $ 1,010 $ 1,432
Accrued payroll, payroll taxes and benefits............... 17,502 17,526
Accounts payable.......................................... 2,187 1,830
Income taxes payable...................................... 7,090 3,394
Other accrued expenses.................................... 4,493 2,634
-------- --------
TOTAL CURRENT LIABILITIES.............................. 32,282 26,816
-------- --------
LONG-TERM DEBT.............................................. 1,000 --
-------- --------
OTHER LIABILITIES........................................... 3,395 2,253
-------- --------
SHAREHOLDERS' EQUITY
Preferred stock, $.10 par; authorized and unissued 200,000
shares, including 50,000 Series A
Common stock, $.10 par; authorized 60,000,000 shares;
issued 30,314,282 shares and 29,360,069 shares at March
31, 1998 and December 31, 1997, respectively........... 3,031 2,936
Additional paid-in capital................................ 117,533 117,718
Retained earnings......................................... 86,531 75,750
-------- --------
207,095 196,404
Less shares held in treasury, at cost; 1,427,198 shares
and 1,692,253 shares at March 31, 1998 and December 31,
1997, respectively..................................... (11,700) (13,872)
-------- --------
TOTAL SHAREHOLDERS' EQUITY............................. 195,395 182,532
-------- --------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY........ $232,072 $211,601
======== ========
</TABLE>
See notes to unaudited consolidated financial statements.
II-2
<PAGE> 53
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------
MARCH 31, 1998 MARCH 31, 1997
-------------- --------------
(DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<S> <C> <C>
REVENUES:
Services.................................................. $103,563 $73,940
Products.................................................. 3,538 --
----------- -----------
107,101 73,940
----------- -----------
COSTS AND EXPENSES:
Direct costs -- Services.................................. 67,584 50,418
Direct costs -- Products.................................. 593 --
Selling, general and administrative....................... 23,329 16,291
Merger-related expenses................................... 1,328 --
----------- -----------
92,834 66,709
----------- -----------
INCOME FROM OPERATIONS...................................... 14,267 7,231
----------- -----------
OTHER INCOME AND EXPENSE:
Interest income........................................... 1,310 112
Interest expense.......................................... (41) (80)
Equity in Joint Venture net earnings (loss)............... (90) 150
----------- -----------
1,179 182
----------- -----------
INCOME BEFORE INCOME TAXES.................................. 15,446 7,413
----------- -----------
INCOME TAXES
Current................................................... 7,596 3,097
Deferred.................................................. (324) 51
----------- -----------
7,272 3,148
----------- -----------
NET INCOME.................................................. $8,174 $4,265
=========== ===========
EARNINGS PER SHARE:
Basic..................................................... $0.28 $0.17
Diluted................................................... $0.27 $0.16
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING:
Basic..................................................... 28,827,000 24,848,000
=========== ===========
Diluted................................................... 30,367,000 26,174,000
=========== ===========
</TABLE>
See notes to unaudited consolidated financial statements.
II-3
<PAGE> 54
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------
MARCH 31, MARCH 31,
1998 1997
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES........................ $ 1,794 $(5,734)
-------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of short-term investments....................... (8,384) 0
Purchases of property and equipment....................... (2,786) (383)
(Increase) decrease in other assets....................... (465) 424
-------- -------
(11,635) 41
-------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repayment of long-term debt............................... (1,432) 0
Stock options exercised................................... 1,632 886
-------- -------
200 886
-------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS................... (9,641) (4,807)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD............ 88,633 11,993
-------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD.................. $ 78,992 $ 7,186
======== =======
</TABLE>
See notes to unaudited consolidated financial statements.
II-4
<PAGE> 55
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE QUARTERS ENDED MARCH 31, 1998 AND 1997
The information furnished reflects all adjustments which, in the opinion of
Computer Horizons, are necessary to present fairly its consolidated financial
position and the results of its operations and changes in financial position for
the periods indicated.
Reference is made to Computer Horizons' annual financial statements for the year
ended December 31, 1997, for a description of the accounting policies, which
have been continued without change. Also refer to the footnotes with those
annual statements for additional details of Computer Horizons' financial
condition, results of operations and changes in cash flows. The details in those
notes have not changed except as a result of normal transactions in the interim.
The results of operations for 1997 have been retroactively adjusted to reflect
the three-for-two common stock split in the form of a 50% stock distribution
declared by Computer Horizons on May 7, 1997, as well as the acquisition of CG
Computer Services Corp., which has been accounted for as a pooling of interests.
The results of Princeton Softech, Inc., which is being accounted for as an
immaterial pooling of interests, are included from January 1, 1998.
Earnings per Share: Basic Earnings Per Share ("EPS") is based on the weighted
average number of common shares outstanding without consideration of common
stock equivalents. Diluted earnings per share is based on the weighted average
number of common and common equivalent shares outstanding. The calculation takes
into account the shares that may be issued upon exercise of stock options,
reduced by the shares that may be repurchased with the funds received from the
exercise, based on the average price during the year.
In accordance with SFAS No. 128, the table below presents both basic and diluted
earnings per share:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED MARCH 31,
------------------------
1997 1998
---------- ----------
<S> <C> <C>
Numerator:
Net income................................................ $8,174 $4,265
Denominator:
Denominator for basic earnings per share
Weighted average shares outstanding.................... 28,827,000 24,848,000
Effect of stock options..................................... 1,540,000 1,326,000
Dilutive potential earnings per share:
Denominator for diluted earnings per share
Adjusted weighted average shares outstanding and
assumed conversions.................................. 30,367,000 26,174,000
Basic earnings per share.................................... $0.28 $0.17
Diluted earnings per share.................................. $0.27 $0.16
</TABLE>
The computation of diluted earnings per share excludes options with exercise
prices greater than the average market price. All options to purchase shares of
common stock were included in the computation of diluted earnings per share in
1998. During 1997, there were 33,750 excluded options outstanding at March 31,
1997, with an exercise price of $38.50 per share.
SUBSEQUENT EVENTS
At Computer Horizons' annual meeting of shareholders on May 6, 1998, the
shareholders approved an amendment to Computer Horizons' Certificate of
Incorporation, increasing the number of shares of common stock authorized for
issuance to 100,000,000 from 60,000,000. At that same meeting, shareholders
approved an amendment to Computer Horizons' 1991 Director's Stock Option Plan,
as amended, to decrease the number of options granted to a director upon his or
her initial election to the Board, to 10,000 options from 75,938 options. The
amendment also eliminated the maximum number of Annual Grants that could be made
to a director, which had been five prior to the amendment.
II-5
<PAGE> 56
(II) REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Shareholders
Computer Horizons Corp.
We have audited the accompanying consolidated balance sheets of Computer
Horizons Corp. and subsidiaries as of December 31, 1997 and 1996, and the
related consolidated statements of income, shareholders' equity and cash flows
for each of the three years in the period ended December 31, 1997. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Computer Horizons
Corp. and subsidiaries as of December 31, 1997 and 1996 and the consolidated
results of their operations and their consolidated cash flows for each of the
three years in the period ended December 31, 1997, in conformity with generally
accepted accounting principles.
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Parsippany, New Jersey
January 29, 1998
(except for Note 2, as to which
the date is February 27, 1998)
II-6
<PAGE> 57
(III) COMPUTER HORIZONS AUDITED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------
1997 1996 1995
----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
REVENUES............................................... $334,729 $249,152 $213,165
Costs and expenses:
Direct costs...................................... 224,123 172,734 148,530
Selling, general and administrative............... 70,741 56,903 46,156
Merger-related expenses........................... 976
-------- -------- --------
295,840 229,637 194,686
-------- -------- --------
INCOME FROM OPERATIONS................................. 38,889 19,515 18,479
-------- -------- --------
Other income (expense):
Interest income................................... 1,543 307 266
Interest expense.................................. (263) (480) (642)
Equity in net earnings of joint venture (Note
4).............................................. 13 885 361
-------- -------- --------
1,293 712 (15)
-------- -------- --------
INCOME BEFORE INCOME TAXES............................. 40,182 20,227 18,464
-------- -------- --------
Income taxes (Notes 1 and 7):
Current........................................... 18,485 8,737 8,533
Deferred.......................................... (947) (374) (494)
-------- -------- --------
17,538 8,363 8,039
-------- -------- --------
NET INCOME............................................. $ 22,644 $ 11,864 $ 10,425
======== ======== ========
Earnings per share (Notes 1 and 8):
Basic............................................. $.88 $.48 $.46
====== ====== ======
Diluted........................................... $.84 $.46 $.44
====== ====== ======
Weighted average number of shares outstanding:
Basic............................................. 25,680,000 24,493,000 22,425,000
========= ========= =========
Diluted........................................... 27,102,000 26,028,000 23,931,000
========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
II-7
<PAGE> 58
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1997 1996
---------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................................. $ 88,633 $11,993
Short-term investments (Note 1)........................... 13,165 --
Accounts receivable (Note 3).............................. 79,526 56,378
Deferred income tax benefits (Note 7)..................... 1,818 1,119
Other..................................................... 1,087 979
-------- -------
Total current assets................................... 184,229 70,469
Property and equipment:
Furniture, equipment and other......................... 12,479 9,685
Less accumulated depreciation.......................... 7,101 5,389
-------- -------
5,378 4,296
Other assets -- net:
Goodwill (Note 1)...................................... 17,090 13,322
Deferred income tax benefit (Note 7)................... 816 568
Other (Note 4)......................................... 4,088 3,105
-------- -------
21,994 16,995
-------- -------
Total Assets......................................... $211,601 $91,760
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt (Note 5)................ $ 1,432 $ 1,867
Accrued payroll, payroll taxes and benefits............... 17,526 12,775
Accounts payable.......................................... 1,830 1,217
Income taxes payable...................................... 3,394 1,100
Other accrued expenses.................................... 2,634 749
-------- -------
Total current liabilities.............................. 26,816 17,708
-------- -------
Long-term debt (Note 5)................................... -- 1,432
-------- -------
Other liabilities (Note 9)................................ 2,253 1,627
-------- -------
Commitments (Note 10)
-------- -------
Shareholders' equity:
Preferred stock, $.10 par; authorized and unissued,
200,000 shares, including 50,000 Series A
Common stock $.10 par; authorized, 60,000,000 shares;
issued 29,360,069 shares and 26,485,029 shares at
December 31, 1997 and 1996, respectively............... 2,936 2,648
Additional paid-in capital................................ 117,718 29,887
Retained earnings......................................... 75,750 53,106
-------- -------
196,404 85,641
Less shares held in treasury, at cost; 1,692,253 shares
and 1,786,883 shares at December 31, 1997 and 1996,
respectively........................................... (13,872) (14,648)
-------- -------
Total shareholders' equity............................. 182,532 70,993
-------- -------
Total Liabilities and Shareholders' Equity........ $211,601 $91,760
======== =======
</TABLE>
The accompanying notes are an integral part of these statements.
II-8
<PAGE> 59
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TREASURY STOCK
------------------- PAID-IN RETAINED -------------------
SHARES AMOUNT CAPITAL EARNINGS SHARES AMOUNTS
---------- ------ ---------- -------- --------- -------
(DOLLARS IN THOUSANDS EXCEPT SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1994, AS
PREVIOUSLY REPORTED........... 7,739,576 $ 774 $ 13,940 $29,851 1,786,883 14,648
Pooling of interests with CG
Computer Services
Corporation................ 167,901 17 46 966
---------- ------ -------- ------- --------- -------
BALANCE, DECEMBER 31, 1994, AS
RESTATED...................... 7,907,477 791 13,986 30,817 1,786,883 14,648
Three-for-two stock split
declared:
April 1995................. 3,086,949 309 (309)
December 1995.............. 5,332,803 533 (533)
Stock options exercised....... 318,063 32 1,138
Sale of common stock, net of
expenses................... 1,140,000 114 13,159
Net income for the year....... 10,425
---------- ------ -------- ------- --------- -------
BALANCE, DECEMBER 31, 1995...... 17,785,292 1,779 27,441 41,242 1,786,883 14,648
Stock options exercised....... 467,022 46 1,680
Tax benefits related to stock
option plans............... 1,589
Net income for the year....... 11,864
---------- ------ -------- ------- --------- -------
BALANCE, DECEMBER 31, 1996...... 18,252,314 1,825 30,710 53,106 1,786,883 14,648
Three-for-two stock split
declared May 1997.......... 8,232,715 823 (823)
Stock options exercised....... 375,040 38 1,759 (94,630) (776)
Tax benefits related to stock
option plans............... 2,610
Sale of common stock, net of
expenses................... 2,500,000 250 83,462
Net income for the year....... 22,644
---------- ------ -------- ------- --------- -------
BALANCE, DECEMBER 31, 1997...... 29,360,069 $2,936 $117,718 $75,750 1,692,253 $13,872
========== ====== ======== ======= ========= =======
</TABLE>
The accompanying notes are an integral part of this statement.
II-9
<PAGE> 60
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------
1997 1995 1996
-------- ------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income................................................ $ 22,644 $11,864 $ 10,425
Adjustments to reconcile net income to net cash provided
by operating activities:
Deferred taxes......................................... (947) (374) (494)
Depreciation........................................... 1,711 1,216 704
Amortization of intangibles............................ 602 587 505
Provision for bad debts................................ 575 54 170
Changes in assets and liabilities, net of acquisitions:
Accounts receivable.................................... (22,829) (9,869) (14,768)
Other current assets................................... (108) 13 (519)
Accrued payroll, payroll taxes and benefits............ 4,751 1,555 3,266
Accounts payable....................................... 371 (582) 1,198
Income taxes payable................................... 4,904 959 725
Other accrued expenses................................. 1,885 (637) 578
Other liabilities...................................... 626 465 424
-------- ------- --------
Net cash provided by operating activities............ 14,185 5,251 2,214
-------- ------- --------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of furniture and equipment...................... (2,363) (1,373) (1,521)
Acquisitions, net of cash................................. (5,467) (363) (2,966)
Change in other assets.................................... (968) (761) (1,673)
Purchases of short-term investments....................... (13,165)
-------- ------- --------
Net cash used in investing activities................ (21,963) (2,497) (6,160)
-------- ------- --------
CASH FLOWS FROM FINANCING ACTIVITIES
Notes payable -- banks, net............................... (3,200)
Long-term debt............................................ (1,867) (2,385) (168)
Stock options exercised................................... 2,573 1,727 1,170
Proceeds from issuance of stock........................... 83,712 13,273
-------- ------- --------
Net cash provided by (used in) financing
activities........................................ 84,418 (658) 11,075
-------- ------- --------
Net increase in cash and cash equivalents............ 76,640 2,096 7,129
Cash and cash equivalents at beginning of year.............. 11,993 9,897 2,768
-------- ------- --------
CASH AND CASH EQUIVALENTS AT END OF YEAR.................... $ 88,633 $11,993 $ 9,897
======== ======= ========
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the year for:
Interest............................................... $ 236 $ 443 $ 608
Income taxes........................................... 12,950 7,592 6,840
- -------------------------------------------------------------------------------------------
Details of Acquisition:
Fair value of assets...................................... $ 5,590
Liabilities............................................... 242
-------- ------- --------
Cash paid for acquisition................................. $ 5,348
======== ======= ========
</TABLE>
The accompanying notes are an integral part of these statements.
II-10
<PAGE> 61
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
DECEMBER 31, 1997, 1996 AND 1995
DESCRIPTION OF BUSINESS
Computer Horizons Corp. is a diversified information technology services company
that provides clients with resource augmentation and advanced technology
solutions to business problems through applications development, client/server
migration, network management, emerging technologies, and legacy systems
maintenance, including its solution to the millennium date-change problem,
Computer Horizons' Signature 2000(TM).
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Computer Horizons
and its wholly-owned subsidiaries (for purposes of this Appendix II Computer
Horizons and its wholly-owned subsidiaries shall be referred to collectively as
"Computer Horizons"). Computer Horizons' investment in a joint venture (Note 4)
is accounted for under the equity method of accounting. All material
intercompany accounts and transactions have been eliminated.
REVENUE RECOGNITION
Computer Horizons recognizes revenues as professional services are performed. On
fixed fee engagements, revenue and gross profit adjustments are made to reflect
revisions in estimated total costs and contract values. Estimated losses are
recorded when identified.
RECRUITMENT COSTS
Recruitment costs are charged to operations as incurred.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents include all highly liquid instruments with a maturity
of three months or less at the time of purchase and consist of the following at
December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash........................................................ $ 3,448 $ 2,053
Money market funds.......................................... 45,460 5,926
Commercial paper............................................ 21,924 1,247
Demand obligations.......................................... 17,801 2,767
------- -------
$88,633 $11,993
======= =======
</TABLE>
SHORT-TERM INVESTMENTS
Computer Horizons classifies investments with an original maturity of more than
three months at the time of purchase as short-term investments. Short-term
investments are classified as held-for-sale and carried at cost, which
approximates fair value. At December 31, 1997, short-term investments maturing
within one year consist of:
<TABLE>
<CAPTION>
FAIR
COST VALUE
------- -------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Commercial paper............................................ $ 8,711 $ 8,711
Corporate bonds............................................. 2,452 2,450
Government bonds............................................ 2,002 2,000
------- -------
$13,165 $13,161
======= =======
</TABLE>
CONCENTRATIONS OF CREDIT RISK
Financial instruments, which potentially subject Computer Horizons to
concentrations of credit risk, regardless of the degree of such risk, consist
principally of cash and cash equivalents, short-term investments and trade
accounts receivable. Computer Horizons invests the majority of its excess cash
in money market
II-11
<PAGE> 62
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
funds, commercial paper and demand obligations of high-credit, high-quality
financial institutions or companies, with certain limitations as to the amount
that can be invested in any one entity.
Computer Horizons maintains its cash balances principally in three financial
institutions located in New York, New Jersey and California. These balances are
insured by the Federal Deposit Insurance Corporation up to $100,000 for each
entity at each institution. At December 31, 1997, uninsured amounts held at
these financial institutions total approximately $7,312,000.
Computer Horizons' customers are generally very large, Fortune 500 companies in
many industries and with wide geographic dispersion. Computer Horizons' largest
customer accounts for approximately 4% of billed accounts receivable at December
31, 1997. Computer Horizons establishes an allowance for doubtful accounts based
upon factors surrounding the credit risk of specific customers, historical
trends, and other information.
Computer Horizons' largest client accounted for 11.7%, 9.2% and 7.3%,
respectively, of Computer Horizons' consolidated revenues in 1997, 1996 and
1995. No other client accounted for more than 8% in those years.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments (principally consisting of cash and
cash equivalents, short-term investments, accounts receivable and payable and
long-term debt) approximates fair value because of the short maturities or, as
to long-term debt, the rates currently offered to Computer Horizons.
PROPERTY AND EQUIPMENT AND DEPRECIATION
Property and equipment are stated at cost. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets.
GOODWILL
Goodwill, the cost in excess of the net assets of acquired businesses, is being
amortized by the straight-line method, primarily over thirty years. Accumulated
amortization is $4,523,000 and $3,921,000 at December 31, 1997 and 1996,
respectively. On an ongoing basis, management reviews the valuation and
amortization of goodwill. As part of this review, Computer Horizons estimates
the value and future benefits of income generated, to determine that no
impairment has occurred.
INCOME TAXES
Computer Horizons and its domestic subsidiaries file a consolidated Federal
income tax return. The foreign subsidiaries file in each of their local
jurisdictions.
Deferred income taxes result from temporary differences between income reported
for financial and income tax purposes. These temporary differences result
primarily from the allowance for doubtful accounts provision and certain accrued
expenses which are deductible, for tax purposes, only when paid.
Tax benefits from early disposition of the stock by optionees under incentive
stock options and from exercise of non-qualified options are credited to
additional paid-in capital.
Computer Horizons intends to permanently reinvest the unremitted earnings at
December 31, 1997 from its foreign corporate joint venture and, accordingly, has
not provided deferred taxes on these amounts. Computer Horizons' Canadian and
United Kingdom subsidiaries have no unremitted earnings at December 31, 1997.
EARNINGS PER SHARE
In 1997, Computer Horizons adopted SFAS No. 128, "Earnings Per Share," which
requires public companies to present basic earnings per share and, if
applicable, diluted earnings per share. In accordance with SFAS No. 128, all
comparative periods have been restated as of December 31, 1997. Basic EPS is
based on the weighted average number of common shares outstanding without
consideration of common stock equivalents. Diluted earnings per share is based
on the weighted average number of common and common equivalent shares
outstanding. The calculation takes into account the shares that may be issued
upon exercise of stock options, reduced by the shares that may be repurchased
with the funds received from the exercise, based on the average price during the
year.
II-12
<PAGE> 63
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
USE OF ESTIMATES IN FINANCIAL STATEMENTS
In preparing financial statements in conformity with generally accepted
accounting principles, management makes estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosures of contingent
assets and liabilities at the date of the financial statements, as well as the
reported amounts of revenues and expenses during the reported period. Actual
results could differ from those estimates.
NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 130 ("SFAS No. 130"), "Reporting Comprehensive Income,"
governing the reporting and display of comprehensive income and its components,
and Statement of Financial Accounting Standards No. 131 ("SFAS No. 131"),
"Disclosures About Segments of an Enterprise and Related Information," requiring
that all public businesses report financial and descriptive information about
their reportable operating segments. Both statements are applicable to fiscal
years beginning after December 15, 1997. The impact of adopting SFAS No. 130 is
not expected to be material to the consolidated financial statements or notes to
consolidated financial statements. Management is currently evaluating the effect
of SFAS No. 131 on consolidated financial statement disclosures.
NOTE 2 ACQUISITIONS
On December 31, 1997, Computer Horizons acquired, for approximately $5 million
cash, certain assets from Millennium Computer Technology, Inc. ("Millennium"), a
Chattanooga-based IT services provider. The acquisition was recorded under the
purchase method of accounting. Had the acquisition of Millennium occurred on
January 1, 1997, the effect on revenues and net income would have been
immaterial.
On December 19, 1997, Computer Horizons acquired all the common stock of CG
Computer Services Corporation ("CG") in exchange for 566,666 shares of Computer
Horizons common stock. CG provides IT provisioning and staffing solutions with
offices in San Francisco, Los Angeles, Chicago, and Parsippany, New Jersey. This
transaction was accounted for as a pooling of interests and, accordingly, the
consolidated financial statements for the periods presented have been restated
to include the accounts of CG.
The reconciliation below details the effects of the pooling noted above on the
previously reported revenues, net income and earnings per share of the separate
companies for the periods preceding the acquisition:
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 27, YEAR ENDED YEAR ENDED
1997 1996 1995
--------------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Revenues
Computer Horizons Corp. ....................... $226,846 $233,858 $200,050
CG............................................. 12,820 15,294 13,115
-------- -------- --------
Combined....................................... $239,666 $249,152 $213,165
======== ======== ========
Net Income
Computer Horizons Corp. ....................... $ 14,903 $ 11,232 $ 9,907
CG............................................. 468 632 518
-------- -------- --------
Combined....................................... $ 15,371 $ 11,864 $ 10,425
======== ======== ========
Earnings per share
Basic
Computer Horizons Corp......................... $ .61 $ .47 $ .45
CG............................................. .00 .01 .01
-------- -------- --------
Combined....................................... $ .61 $ .48 $ .46
======== ======== ========
Diluted
Computer Horizons Corp......................... $ .58 $ .44 $ .42
CG............................................. .00 .02 .02
-------- -------- --------
Combined....................................... $ .58 $ .46 $ .44
======== ======== ========
</TABLE>
II-13
<PAGE> 64
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
In June 1994, Computer Horizons acquired the net shares of Strategic Outsourcing
Services, Inc. ("SOS"), a New Jersey-based provider of data processing services,
for approximately $250,000. The acquisition agreement also provides for
contingent consideration based on the future performance of SOS, through 1998.
The acquisition was accounted for as a purchase. In 1997, 1996 and 1995,
Computer Horizons recorded contingent consideration, totaling approximately
$119,000, $137,000 and $202,000, respectively, as additional goodwill.
In January 1993, Computer Horizons acquired Unified Systems Solutions, Inc.
("USS"), a New Jersey-based provider of systems and network integration
services, for approximately $750,000. The acquisition agreement also provided
for contingent consideration based on the future performance of USS through
1996. The acquisition was accounted for as a purchase. The excess of cash over
the fair value of assets acquired, totaling approximately $509,000, was recorded
as goodwill in 1994. In 1995 and 1994, Computer Horizons recorded contingent
consideration, totaling approximately $390,000 and $245,000, as additional
goodwill. These contingent consideration payments are not dependent upon the
continued employment of the former shareholders. Also in 1995, Computer Horizons
entered into an agreement with the former shareholders of USS to pay
approximately $2,396,000, plus interest, in lieu of any amounts that may have
been due for the remaining contingent period ending March 31, 1996. The
$2,396,000 was also recorded as goodwill in 1995.
Subsequent Event
On February 27, 1998, Computer Horizons acquired all of the common stock of
Princeton Softech, Inc. ("Princeton") in exchange for 954,213 shares of Computer
Horizons common stock. Princeton specializes in relational databases, data
synchronization, intelligent data migration and data management tools, and is
based in Princeton, New Jersey. This transaction will be accounted for as a
pooling of interests.
NOTE 3 ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Billed...................................................... $58,253 $39,096
Unbilled.................................................... 23,015 18,485
------- -------
81,268 57,581
Less allowance for doubtful accounts........................ 1,742 1,203
------- -------
$79,526 $56,378
======= =======
</TABLE>
NOTE 4 INVESTMENT IN JOINT VENTURE
In 1995, Computer Horizons entered into a software development and services
joint venture with the Birla Group, a large multinational conglomerate located
in India. The foreign joint venture, known as Birla Horizons International
("BHI"), is headquartered in New Delhi, India and currently has operations in
India, the United States, the United Kingdom and Canada.
Computer Horizons and the Birla Group each made cash contributions of $500,000
and each received a 50% interest in the joint venture. The Birla Group has also
contributed the net assets of its then existing information technology company
to the joint venture and Computer Horizons is providing technological and
management support.
Computer Horizons' total investment in BHI is $1,672,000 and $1,746,000 at
December 31, 1997 and 1996, respectively, representing the initial cost plus
equity in the undistributed net earnings since formation, and is included in
other noncurrent assets. BHI provided consultants to Computer Horizons at a
total cost of $5,017,000, $4,216,000 and $2,686,000 in 1997, 1996 and 1995,
respectively. Approximately $374,000 was included in accounts payable at
December 31, 1997.
II-14
<PAGE> 65
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 5 LONG-TERM DEBT AND LINES OF CREDIT
Long-term debt consists of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
--------- ---------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
9.55% senior notes.......................................... $ 1,432 $ 2,860
Notes payable at prime...................................... 439
------- -------
1,432 3,299
Less current maturities..................................... 1,432 1,867
------- -------
$ -- $ 1,432
------- -------
</TABLE>
In 1988, Computer Horizons issued two senior notes aggregating $10,000,000
bearing interest at 9.55%, payable semiannually. The notes are payable in annual
installments of $1,428,000 from April 15, 1992 through 1997 with a final payment
of $1,432,000 due April 15, 1998, and are subject to the provisions of the loan
agreement, including, among other things, restrictions on additional borrowings,
prepayments, dividends and stock purchases (which were waived in connection with
certain purchases of treasury stock), and maintenance of a minimum net worth of
$13,500,000.
The notes payable consist of notes to the four former shareholders of USS. In
1995, an agreement was signed (Note 2) resulting in $957,000 being due in April
1996 and $439,000 in April 1997, with 8.75% imputed interest.
At December 31, 1997, Computer Horizons has two unused bank lines of credit
totaling $25,000,000 at rates below the banks' prime lending rates. During 1997,
Computer Horizons had no borrowings against either line.
NOTE 6 SHAREHOLDERS' EQUITY
Authorized Shares
On May 7, 1997, Computer Horizons approved an amendment to Computer Horizons'
Certificate of Incorporation increasing the authorized number of shares of
Computer Horizons' common stock from 30,000,000 to 60,000,000.
Stock Splits
The Board of Directors of Computer Horizons has declared three-for-two common
stock splits in the form of 50% stock distributions as follows:
<TABLE>
<CAPTION>
DATE DECLARED SHAREHOLDER OF RECORD DATE DATE PAYABLE
------------- -------------------------- ---------------
<S> <C> <C>
May 7, 1997 May 22, 1997 June 9, 1997
December 12, 1995 December 22, 1995 January 9, 1996
April 24, 1995 May 9, 1995 May 30, 1995
</TABLE>
Amounts equal to the $.10 par value of the common shares distributed have been
retroactively transferred from additional paid-in capital to common stock. All
references in the financial statements with regard to number of shares of common
stock, common stock prices and per share amounts have been restated to reflect
the above-mentioned stock splits.
Stock Options and SFAS No. 123 Pro Forma Disclosure
In 1994, Computer Horizons adopted a stock option plan which provides for the
granting, to officers and key employees, of options for the purchase of a
maximum of 7,594,000 shares of common stock and stock appreciation rights
(SARs). Options and SARs generally expire five years from the date of grant and
become exercisable in specified amounts during the life of the respective
options. No SARs have been granted as of December 31, 1997. This plan, which
replaces Computer Horizons' 1985 Plan, will terminate on June 15, 2004. There
were 5,555,000 shares available for option at December 31, 1997.
In 1994, Computer Horizons amended the non-qualified Directors' Stock
Option Plan increasing the maximum number of shares of common stock that may be
acquired pursuant to the exercise of options granted under the plan from 379,000
to 844,000, and providing that each new director of Computer Horizons who is not
an employee of Computer Horizons (i) shall immediately receive options to
purchase 75,938 shares
II-15
<PAGE> 66
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
of its common stock and (ii) shall receive up to five annual grants to purchase
10,125 shares of its common stock. The plan expires on March 4, 2001. There were
504,000 share available for option at December 31, 1997.
The exercise price per share on all options and/or SARs granted may not be less
than the fair value at the date of the option grant. Accordingly, no
compensation cost has been recognized for the plans. Had compensation cost for
the plans been determined based on the fair value of the options at the grant
dates consistent with the method of SFAS No. 123, Computer Horizons' net income
and earnings per share would have been reduced to the pro forma amounts
indicated below:
<TABLE>
<CAPTION>
1997 1996 1995
----------- ----------- -----------
<S> <C> <C> <C> <C>
Net Income.................... As reported $22,644,000 $11,864,000 $10,425,000
Pro Forma 19,749,000 9,533,000 9,619,000
Earnings per share:
Basic....................... As reported $.88 $.48 $.46
Pro Forma .77 .39 .43
Diluted..................... As reported $.84 $.46 $.44
Pro Forma .73 .37 .40
</TABLE>
The fair value of each option grant is estimated on the date of grant using the
Black-Scholes options-pricing model with the following weighted-average
assumptions used for grants in 1997, 1996 and 1995, respectively: expected
volatility of 61%, 97% and 70%; risk-free interest rates of 5.47%, 6.28% and
6.27%; and expected lives of 5.0, 4.9 and 4.5 years. A summary of the status of
Computer Horizons' stock option plans as of December 31, 1997, 1996 and 1995,
and changes during the years ending on those dates is presented below:
<TABLE>
<CAPTION>
1997 1996 1995
----------------- ----------------- -----------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
(000) (000) (000)
<S> <C> <C> <C> <C> <C> <C>
Outstanding -- January 1............................. 2,169 $ 6.87 2,214 $ 3.69 2,182 $2.03
Granted.............................................. 328 23.55 885 14.65 783 6.01
Exercised............................................ (462) 5.37 (678) 2.50 (749) 1.29
Canceled/forfeited................................... (36) 13.36 (252) 17.95 (2) 6.78
----- ------ ----- ------ ----- -----
Outstanding -- December 31........................... 1,999 $ 9.84 2,169 $ 6.87 2,214 $3.69
===== ====== ===== ====== ===== =====
Options exercisable -- December 31................... 833 $ 7.10 764 $ 4.94 999 $2.42
===== ====== ===== ====== ===== =====
Weighted average fair value of options granted during
the year........................................... $23.54 $11.65 $3.64
</TABLE>
The following information applies to options outstanding at December 31, 1997:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------- -----------------------
WEIGHTED
OUTSTANDING AVERAGE WEIGHTED EXERCISABLE WEIGHTED
AS OF REMAINING AVERAGE AS OF AVERAGE
DECEMBER 31, CONTRACTUAL EXERCISE DECEMBER 31, EXERCISE
RANGE OF EXERCISE PRICES 1997 LIFE (YEARS) PRICE 1997 PRICE
------------------------ ------------ ------------ -------- ------------ --------
(000) (000)
<S> <C> <C> <C> <C> <C>
$0.00-$14.99.............................. 1,518 5.0 $ 6.13 708 $ 4.55
15.00-29.99............................... 480 6.3 21.53 125 21.47
30.00 and over............................ 1 4.7 35.38 -- --
----- --- ------ --- ------
1,999 5.3 $ 9.84 833 $ 7.10
===== === ====== === ======
</TABLE>
Certain officers have the right to borrow from Computer Horizons against the
exercise price of options exercised.
Computer Horizons has issued warrants to purchase shares of its common stock to
two outside business/legal consulting firms. Warrants for 8,625, 30,000 and
10,125 shares were granted, respectively, in 1997, 1996 and 1995. The exercise
price is the fair value at the date of grant.
II-16
<PAGE> 67
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Shareholder Rights Plan
In July 1989, the Board of Directors declared a dividend distribution of .131
preferred stock purchase right on each outstanding share of common stock of
Computer Horizons. The rights were amended on February 13, 1990. Each right
will, under certain circumstances, entitle the holder to buy one one-hundredth
( 1/100) of a share of Series A preferred stock at an exercise price of $30.00
per one one-hundredth ( 1/100) share, subject to adjustment. Each one
one-hundredth ( 1/100) of a share of Series A preferred stock has voting,
dividend and liquidation rights and preferences substantively equivalent to one
share of common stock.
The rights will be exercisable and transferable separately from the common stock
only if a person or group acquires 20% or more, subject to certain exceptions,
of Computer Horizons' outstanding common stock or announces a tender offer that
would result in the ownership of 20% or more of the common stock. If a person
becomes the owner of at least 20% of Computer Horizons' common shares (an
"Acquiring Person"), each holder of a right other than the Acquiring Person is
entitled, upon payment of the then current exercise price per right (the
"Exercise Price"), to receive shares of common stock (or common stock
equivalents) having a market value equal to twice the Exercise Price.
Additionally, if Computer Horizons subsequently engages in a merger or other
business combination with the Acquiring Person in which Computer Horizons is not
the surviving corporation, or in which the outstanding shares of Computer
Horizons' common stock are changed or exchanged, or if more than 50% of Computer
Horizons' assets or earning power is sold or transferred, a right would entitle
a Computer Horizons Corp. shareholder, other than the Acquiring Person and its
affiliates, to purchase upon payment of the Exercise Price, shares of the
Acquiring Person having a market value of twice the Exercise Price. Prior to a
person becoming an Acquiring Person, the rights may be redeemed at a redemption
price of one cent per right, subject to adjustment. The rights are subject to
amendment by the Board. No shareholder rights have become exercisable. The
rights will expire on July 16, 1999.
NOTE 7 INCOME TAXES
The provision for income taxes consists of the following for the years ended
December 31:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal............................................... $13,927 $6,629 $6,180
State................................................. 4,558 2,108 2,353
Deferred:
Federal............................................... (703) (341) (358)
State................................................. (244) (33) (136)
------- ------ ------
$17,538 $8,363 $8,039
======= ====== ======
</TABLE>
Deferred tax assets and liabilities consist of the following at December 31:
<TABLE>
<CAPTION>
1997 1996
------ ------
(DOLLARS IN
THOUSANDS)
<S> <C> <C>
Deferred tax assets:
Accrued insurance......................................... $ 588 $ 291
Accrued payroll and benefits.............................. 1,413 1,011
Deferred lease obligations................................ 48 72
Allowance for doubtful accounts........................... 469 249
Other..................................................... 239 95
------ ------
2,757 1,718
Deferred tax liabilities:
Depreciation.............................................. 123 31
------ ------
Deferred tax assets, net.................................... $2,634 $1,687
====== ======
</TABLE>
II-17
<PAGE> 68
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
A reconciliation of income taxes, as reflected in the accompanying statements,
with the statutory Federal income tax rate of 35% for the years ended December
31, 1997, 1996 and 1995 is as follows:
<TABLE>
<CAPTION>
1997 1996 1995
------- ------ ------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Statutory Federal income taxes.......................... $14,064 $7,079 $6,462
State and local income taxes, net of Federal tax
benefit............................................... 2,804 1,349 1,441
Amortization of goodwill................................ 203 201 180
Equity in net earnings of joint venture................. (310) (126)
Other, net.............................................. 467 44 82
------- ------ ------
$17,538 $8,363 $8,039
======= ====== ======
</TABLE>
Deferred income taxes of approximately $413,000 have not been provided on
undistributed earnings of a foreign joint venture in the amount of $1,181,000,
as the earnings at December 31, 1997 are considered to be permanently
reinvested.
NOTE 8 EARNING PER SHARE DISCLOSURE
<TABLE>
<CAPTION>
PER
INCOME SHARES SHARE
FOR THE YEAR ENDED (NUMERATOR) (DENOMINATOR) AMOUNT
- ------------------ -------------- ---------------- ---------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
December 31, 1997
Net income.............................................. $22,644
------- ---------- ----
Basic earnings per share
Income available to common shareholders................. $22,644 25,680,000 $.88
Effect of diluted securities
Options................................................. 1,422,000
------- ---------- ----
Diluted earnings per share
Income available to common shareholders plus assumed
conversions.......................................... $22,644 27,102,000 $.84
------- ---------- ----
December 31, 1996
Net income.............................................. $11,864
------- ---------- ----
Basic earnings per share
Income available to common shareholders................. $11,864 24,493,000 $.48
Effect of diluted securities
Options................................................. 1,535,000
------- ---------- ----
Diluted earnings per share
Income available to common shareholders plus assumed
conversions.......................................... $11,864 26,028,000 $.46
------- ---------- ----
December 31, 1995
Net income.............................................. $10,425
------- ---------- ----
Basic earnings per share
Income available to common shareholders................. $10,425 22,425,000 $.46
Effect of diluted securities
Options................................................. 1,506,000
------- ---------- ----
Diluted earnings per share
Income available to common shareholders plus assumed
conversions.......................................... $10,425 23,931,000 $.44
------- ---------- ----
</TABLE>
Options to purchase 8,713 and 27,375 shares of common stock in 1997 and 1996,
respectively, ranging from $25.67 to $35.58, and $18.00 to $33.33 per share were
outstanding during 1997 and 1996, respectively, but were not included in the
computation of diluted earnings per share because the options' exercise prices
were greater than the average market price of common shares. The options which
expire between December 31,
II-18
<PAGE> 69
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
2001 and January 1, 2007 were still outstanding at December 31, 1997. All
options to purchase shares of common stock were included in the computation of
diluted earnings per share in 1995.
NOTE 9 SAVINGS PLAN AND OTHER RETIREMENT PLANS
Computer Horizons maintains a defined contribution savings plan covering
eligible employees. Computer Horizons makes contributions up to a specific
percentage of participants' contributions. Computer Horizons contributed
approximately $469,000, $345,000 and $246,000 in 1997, 1996 and 1995,
respectively.
In 1995, Computer Horizons instituted a Supplemental Executive Retirement Plan
whereby key executives are entitled to receive lump-sum payments (or, if they
elect, a ten-year payout) upon reaching the age of 65 and being in the employ of
Computer Horizons. The maximum commitment if all plan members remain in the
employ of Computer Horizons until age 65 is approximately $9.7 million. Benefits
accrue and vest based on a formula which includes total years with Computer
Horizons and total years possible until age 65. The plan is non-qualified and
not formally funded. Life insurance policies on the members are purchased to
assist in funding the cost. The deferred compensation expense is charged to
operations during the remaining service lives of the members and amounted to
approximately $183,000, $97,000 and $82,000 in 1997, 1996 and 1995,
respectively.
In addition, Computer Horizons adopted a Deferred Compensation Plan for Key
Executives that permits the individuals to defer a portion of their annual
salary or bonus for a period of at least five years. There is no effect on
Computer Horizons' operating results since any amounts deferred would have
previously been expensed. Amounts deferred as of December 31, 1997 have been
included in other non-current liabilities.
NOTE 10 COMMITMENTS
Leases
Computer Horizons leases office space under long-term operating leases expiring
through 2006. As of December 31, 1997, approximate minimum rental commitments
were as follows:
<TABLE>
<CAPTION>
(DOLLARS IN
YEAR ENDING THOUSANDS)
- ----------- --------------
<S> <C>
1998........................................... $ 3,833
1999........................................... 3,141
2000........................................... 1,286
2001........................................... 976
2002........................................... 700
Thereafter..................................... 729
-------
$10,665
=======
</TABLE>
Office rentals are subject to escalations based on increases in real estate
taxes and operating expenses. Aggregate rent expense for operating leases
approximated $3,610,000, $2,799,000, and $2,176,000 in the years ended December
31, 1997, 1996 and 1995, respectively.
Other
In 1994, the Vice Chairman and Executive Vice President of Computer Horizons
announced his resignation effective February 15, 1995. Computer Horizons
recorded approximately $400,000 of deferred compensation in 1994 which is to be
paid beginning March 1998 through 2005. Computer Horizons also agreed to retain
this former officer as a consultant for a three-year period for approximately
$75,000 each year and entered into a noncompetition agreement for that period.
II-19
<PAGE> 70
NOTES TO AUDITED CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
NOTE 11 SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
For the years ended December 31, 1997 and 1996, selected quarterly
financial data is as follows:
<TABLE>
<CAPTION>
QUARTERS
----------------------------------------
FIRST SECOND THIRD FOURTH
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
1997
Revenues............................................ $73,940 $79,934 $85,792 $95,063
Direct costs........................................ 50,418 53,850 57,190 62,665
Selling, general and administrative................. 16,291 17,449 17,847 19,154
Merger-related costs................................ 976
Income from operations.............................. 7,231 8,635 10,755 12,268
Interest income/(expense), net...................... 32 (2) 74 1,176
Equity in net earnings of joint venture............. 150 63 (75) (125)
Income before income taxes.......................... 7,413 8,696 10,754 13,319
Income taxes........................................ 3,148 3,715 4,630 6,045
Net income.......................................... $ 4,265 $ 4,981 $ 6,124 $ 7,274
Earnings per share:
Basic............................................. $0.17 $0.20 $0.24 $0.26
Diluted........................................... 0.16 0.19 0.23 0.25
1996
Revenues............................................ $60,648 $59,910 $61,092 $67,502
Direct costs........................................ 41,654 42,341 42,147 46,592
Selling, general and administrative................. 13,314 13,802 14,289 15,498
Income from operations.............................. 5,680 3,767 4,656 5,412
Interest income/(expense), net...................... (44) (85) (18) (26)
Equity in net earnings of joint venture............. 213 230 200 242
Income before income taxes.......................... 5,849 3,912 4,838 5,628
Income taxes........................................ 2,473 1,666 2,032 2,192
Net income.......................................... $ 3,376 $ 2,246 $ 2,806 $ 3,436
Earnings per share:
Basic............................................. $0.14 $0.09 $0.11 $0.14
Diluted........................................... 0.13 0.09 0.11 0.13
</TABLE>
II-20
<PAGE> 71
APPENDIX III
SPARGO FINANCIAL STATEMENTS
INDEX TO SPARGO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
(i) Report of Independent Chartered Accountants............. III-2
(ii) Spargo Audited Annual Results.......................... III-3
(a) Profit and Loss Accounts.............................. III-3
(b) Statements of Movement on Reserves.................... III-3
(c) Balance Sheet......................................... III-4
(d) Group Cash Flow Statement............................. III-4
(e) Reconciliation of Net Cash Flow to Movements in Net III-5
Funds..................................................
(f) Notes................................................. III-5
</TABLE>
III-1
<PAGE> 72
(I) EXTRACTS FROM THE REPORT OF INDEPENDENT CHARTERED ACCOUNTANTS CONTAINED IN
SPARGO'S AUDITED FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 1997
The following is an extract from the Report of KPMG Audit Plc contained in
Spargo's audited financial statements for the year ended 31 December 1997.
"We have audited the financial statements on pages 16 to 25.
RESPECTIVE RESPONSIBILITIES OF DIRECTORS AND AUDITORS
As described on page 12, the Company's Directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
BASIS OF OPINION
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements. It
also includes an assessment of the significant estimates and judgements made by
the Directors in the preparation of the financial statements, and of whether the
accounting policies are appropriate to the Group's circumstances, consistently
applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
OPINION
In our opinion the financial statements give a true and fair view of the state
of affairs of the Company and the Group as at 31 December 1997 and of the profit
of the Group for the year then ended and have been properly prepared in
accordance with the Companies Act 1985.
KPMG AUDIT PLC
Chartered Accountants
Registered Auditor
Leicester
3 March 1998"
III-2
<PAGE> 73
(II) SPARGO AUDITED ANNUAL RESULTS
(a) PROFIT AND LOSS ACCOUNT
<TABLE>
<CAPTION>
31 DECEMBER 1995 31 DECEMBER 1996 31 DECEMBER 1997
---------------- ---------------- ----------------
NOTE L000 L000 L000 L000 L000 L000
---- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C>
Turnover -- continuing
operations.................... 2 7,379 7,853 9,512
Cost of sales -- normal......... (4,490) (4,917) (5,770)
-- exceptional.... (323) -- --
------
(4,813) (4,917) (5,770)
------
Gross profit.................... 2,566 2,936 3,742
------
Selling and distribution
costs......................... (433) (370) (312)
Administrative expenses......... (1,266) (1,407) (1,778)
------
Operating profit -- continuing
operations.................... 867 1,159 1,652
------
Interest receivable and similar
income........................ 6 51 62 96
Interest payable and similar
charges....................... 7 (16) (17) (8)
------
Profit on ordinary activities
before taxation............... 3 902 1,204 1,740
Taxation on profit on ordinary
activities.................... 8 (348) (433) (588)
------
Profit for the financial year... 554 771 1,152
Interim dividend paid
1995: 1.75p; 1996: 2.00p;
1997: 2.25p per ordinary
share......................... (56) (250) (281)
Proposed final dividend
1995: 2.25p; 1996: 2.50p;
1997: 3.75p per ordinary
share......................... (281) (313) (469)
------
Retained profit for the
financial year................ 217 208 402
======
</TABLE>
(B) STATEMENT OF MOVEMENT ON RESERVES
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
----- ----- -----
<S> <C> <C> <C>
Retained profit brought forward............................. 725 942 1,150
Retained profit for the year................................ 217 208 402
----- ----- -----
Retained profit carried forward............................. 942 1,150 1,552
===== ===== =====
Earnings per ordinary share................................. 4.43p 6.17p 9.22p
</TABLE>
III-3
<PAGE> 74
(C) BALANCE SHEET
<TABLE>
<CAPTION>
31 DECEMBER 31 DECEMBER
1996 1997
-------------- --------------
NOTE L000 L000 L000 L000
---- ------ ----- ------ -----
<S> <C> <C> <C> <C> <C>
FIXED ASSETS
Tangible assets........................................... 10 198 196
CURRENT ASSETS
Debtors................................................... 11 1,368 1,420
Cash at bank and in hand.................................. 12 1,246 2,102
------ ------
2,614 3,522
CREDITORS: amounts falling due within one year............ 13 (1,531) (2,023)
------ ------
NET CURRENT ASSETS........................................ 1,083 1,499
----- -----
TOTAL ASSETS LESS CURRENT LIABILITIES..................... 1,281 1,695
CREDITORS: amounts falling due after more than one year... 14 (6) (18)
----- -----
NET ASSETS................................................ 1,275 1,677
===== =====
CAPITAL AND RESERVES
Called up share capital................................... 15 125 125
Profit and loss account................................... 1,150 1,552
----- -----
SHAREHOLDERS' FUNDS....................................... 16 1,275 1,677
===== =====
</TABLE>
(D) SPARGO GROUP CASH FLOW STATEMENT
<TABLE>
<CAPTION>
31 DECEMBER 31 DECEMBER
1996 1997
------------ --------------
NOTE L000 L000 L000 L000
---- ---- ----- ---- ------
<S> <C> <C> <C> <C> <C>
Net cash inflow from operating activities................... 17 1,451 1,909
RETURNS ON INVESTMENTS AND SERVICING OF FINANCE
Interest received........................................... 62 96
Interest element of finance lease payments.................. (17) (8)
--- ---
Net cash inflow from returns on investment and servicing of
finance................................................... 45 88
----- ------
1,496 1,997
TAXATION
Corporation tax paid (including advance corporation tax).... (400) (454)
INVESTING ACTIVITIES
Proceeds from disposal of tangible fixed assets............. -- 9
Purchase of tangible fixed assets........................... (21) (43)
--- ---
(21) (34)
EQUITY DIVIDENDS PAID....................................... (531) (594)
----- ------
Net cash inflow before use of liquid resources and
financing................................................. 544 915
MANAGEMENT OF LIQUID RESOURCES
Increase in term deposits................................... -- (1,255)
FINANCING
Capital element of finance lease rental payments............ (100) (59)
----- ------
(DECREASE)/INCREASE IN CASH................................. 18 444 (399)
===== ======
</TABLE>
III-4
<PAGE> 75
(E) RECONCILIATION OF NET CASH FLOW TO MOVEMENTS IN NET FUNDS (NOTE 18)
<TABLE>
<CAPTION>
1996 1997
L000 L000
----- -----
<S> <C> <C>
(Decrease)/increase in cash in the period................... 444 (399)
Cash outflow from change in liquid resources................ -- 1,255
Cash outflow from investment in finance leases.............. 100 59
----- -----
CHANGE IN NET FUNDS RESULTING FROM CASH FLOWS............... 544 915
New finance leases.......................................... (78) (37)
----- -----
CHANGE IN NET FUNDS IN THE PERIOD........................... 466 878
Net funds 1 January......................................... 715 1,181
----- -----
Net funds 31 December....................................... 1,181 2,059
===== =====
</TABLE>
(F) NOTES
(forming part of the financial statements)
1 ACCOUNTING POLICIES
The following accounting policies have been applied consistently in dealing with
items which are considered material in relation to the Spargo Group's financial
statements.
BASIS OF PREPARATION
The financial statements have been prepared under the historical cost convention
and in accordance with applicable accounting standards.
CONSOLIDATION
The Spargo Group accounts consolidate the financial statements of Spargo
Consulting PLC and its subsidiary undertaking. The acquisition method of
accounting has been adopted.
In accordance with Section 230 of the Companies Act 1985 a separate profit and
loss account of Spargo is not presented.
FIXED ASSETS AND DEPRECIATION
Depreciation is provided by the Spargo Group to write off the cost less the
estimated residual value of tangible fixed assets by equal installments over
their estimated useful economic lives as follows:
<TABLE>
<S> <C> <C>
Computer equipment -- between 20% and 33% per annum
Office equipment -- between 20% and 50% per annum
Motor vehicles -- 25% per annum
Leasehold improvements -- 10% per annum
</TABLE>
LEASES
Where the Spargo Group enters into a lease which entails substantially all the
risks and rewards of ownership of an asset, the lease is treated as a "finance
lease". The asset is recorded in the balance sheet as a tangible fixed asset and
is depreciated over its estimate useful life. Future installments under such
leases, net of finance charges, are included with creditors. Rentals payable are
apportioned between the finance element, which is charged to the profit and loss
account, and the capital element which reduces the outstanding obligation for
future installments. All other leases are accounted for as "operating leases"
and the rental payments are charged to the profit and loss account on a straight
line basis over the life of each lease.
Taxation
The charge for taxation is based on the profit for the year and takes into
account taxation deferred because of timing differences between the treatment of
certain items for taxation and accounting purposes. Provision is made for
deferred tax only to the extent that it is probable that an actual liability
will crystallise.
III-5
<PAGE> 76
Turnover
Turnover represents the amounts (excluding value added tax) derived from the
provision of services to customers.
2 TURNOVER
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
----- ----- -----
<S> <C> <C> <C>
Analysis of turnover by geographical market of destination:
United Kingdom............................................ 7,301 7,711 9,458
Rest of Europe............................................ 78 142 54
----- ----- -----
7,379 7,853 9,512
===== ===== =====
</TABLE>
The Spargo Group has one class of business, being the supply of computer
software consultancy services. Analysis of the Spargo Group's turnover,
operating profit and net assets by geographical origin are not produced as all
operations emanate from the United Kingdom.
3 PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
---- ---- ----
<S> <C> <C> <C>
Profit on ordinary activities before taxation is stated
after charging:
Auditors' remuneration...................................... 9 9 10
Non-audit fees paid to the auditors and their associates.... 4 2 6
Depreciation................................................ 83 97 89
Operating lease rentals paid: Other......................... 62 61 67
==== ==== ====
</TABLE>
Profit after tax for the financial year dealt with in the financial statements
of Spargo was L1,152,000 (1996: L771,000; 1995: L554,000)
4 STAFF NUMBERS AND COSTS
<TABLE>
<CAPTION>
1995 1996 1997
NO NO NO
---- ---- ----
<S> <C> <C> <C>
The average number of persons employed by the Spargo Group
(including Directors) during the year was................. 114 112 126
</TABLE>
The aggregate payroll costs of these persons were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
----- ----- -----
<S> <C> <C> <C>
Wages and salaries.......................................... 3,464 3,750 4,298
Social security costs....................................... 363 391 434
----- ----- -----
3,827 4,141 4,732
===== ===== =====
</TABLE>
5 DIRECTOR'S EMOLUMENTS
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
---- ---- ----
<S> <C> <C> <C>
Salaries and benefits....................................... 376 417 340
==== ==== ====
</TABLE>
There was no Directors' Pension scheme operating during the above periods.
The emoluments of the highest paid Director were as follows:
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
---- ---- ----
<S> <C> <C> <C>
Salaries and benefits....................................... 162 170 166
==== ==== ====
</TABLE>
6 INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
---- ---- ----
<S> <C> <C> <C>
Bank interest receivable.................................... 51 62 96
==== ==== ====
</TABLE>
III-6
<PAGE> 77
7 INTEREST PAYABLE AND SIMILAR CHARGES
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
---- ---- ----
<S> <C> <C> <C>
On lease purchase contracts................................. 16 17 8
==== ==== ====
</TABLE>
8 TAXATION
<TABLE>
<CAPTION>
1995 1996 1997
L000 L000 L000
---- ---- ----
<S> <C> <C> <C>
UK Corporation Tax at 33.9% (1996: 36.5%, 1995: 38.7%)...... 349 439 589
Adjustment relating to prior year Corporation Tax........... (1) (6) (1)
---- ---- ----
348 433 588
==== ==== ====
</TABLE>
9 EARNINGS PER ORDINARY SHARE
Earnings per share have been calculated on the profit for the financial year of
L1,152,000 (1996: L771,000, 1995: L554,000) and the average number of ordinary
shares in issue during the year of 12,500,000 1 pence shares (1996: 12,500,000,
1995: 12,500,000). Earnings per share on a fully diluted basis are not
materially different.
10 TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
OFFICE
EQUIPMENT,
LEASEHOLD FURNITURE AND COMPUTER MOTOR
IMPROVEMENTS FITTINGS EQUIPMENT VEHICLES TOTAL
SPARGO GROUP AND COMPANY: L000 L000 L000 L000 L000
------------------------- ------------ ------------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
COST
At 31 December 1996............................ 28 71 42 290 431
Additions...................................... -- 19 24 56 99
Disposals...................................... -- -- -- (90) (90)
-- -- -- --- ---
At 31 December 1997............................ 28 90 66 256 440
DEPRECIATION
At 31 December 1996............................ 20 57 27 129 233
Charge for year................................ 2 9 11 67 89
On disposals................................... -- -- -- (78) (78)
-- -- -- --- ---
At 31 December 1997............................ 22 66 38 118 244
</TABLE>
<TABLE>
<CAPTION>
OFFICE
EQUIPMENT,
LEASEHOLD FURNITURE AND COMPUTER MOTOR
IMPROVEMENTS FITTINGS EQUIPMENT VEHICLES TOTAL
SPARGO GROUP AND COMPANY: L000 L000 L000 L000 L000
------------------------- ------------ ------------- --------- -------- -----
<S> <C> <C> <C> <C> <C>
COST
At 31 December 1995............................ 28 88 28 240 384
Additions...................................... -- 7 14 116 137
Disposals...................................... -- (24) -- (66) (90)
-- --- -- --- ---
At 31 December 1996............................ 28 71 42 290 431
DEPRECIATION
At 31 December 1995............................ 17 67 19 101 204
Charge for year................................ 3 14 8 72 97
On disposals................................... -- (24) -- (44) (68)
-- --- -- --- ---
At 31 December 1996............................ 20 57 27 129 233
NET BOOK VALUE
At 31 December 1997............................ 6 24 28 138 196
== === == === ===
At 31 December 1996............................ 8 14 15 161 198
== === == === ===
At 31 December 1995............................ 11 21 9 139 180
== === == === ===
</TABLE>
III-7
<PAGE> 78
The total net book value of motor vehicles of L138,000 (1996 : L161,000 , 1995 :
L139,000) is in respect of assets acquired under finance lease purchase
contracts. Depreciation for the year on these assets was L67,000 (1996 :
L72,000, 1995 : L56,000).
11 DEBTORS
<TABLE>
<CAPTION>
1996 1997
SPARGO GROUP AND COMPANY: L000 L000
------------------------- ----- -----
<S> <C> <C>
Trade debtors............................................... 1,217 1,230
Prepayments and accrued income.............................. 73 73
ACT recoverable after more than one year.................... 78 117
----- -----
1,368 1,420
===== =====
</TABLE>
12 CASH AT BANK AND IN HAND
<TABLE>
<CAPTION>
1996 1997
SPARGO GROUP AND COMPANY: L000 L000
------------------------- ----- -----
<S> <C> <C>
Cash........................................................ 1,246 847
Short term deposits......................................... -- 1,255
----- -----
1,246 2,102
===== =====
</TABLE>
13 CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR
<TABLE>
<CAPTION>
1996 1997
SPARGO GROUP AND COMPANY: L000 L000
------------------------- ----- -----
<S> <C> <C>
Obligations under finance leases and hire purchase
contracts................................................. 59 25
Trade creditors............................................. 258 232
Other creditors including taxation and social security:
Corporation tax........................................... 384 557
Other taxes and social security........................... 346 429
Proposed dividend........................................... 313 469
Accruals and deferred income................................ 171 311
----- -----
1,531 2,023
===== =====
</TABLE>
14 OBLIGATIONS UNDER FINANCE LEASES AND HIRE PURCHASE CONTRACTS
<TABLE>
<CAPTION>
1996 1997
SPARGO GROUP AND COMPANY: L000 L000
------------------------- ---- ----
<S> <C> <C>
The maturity of obligations under finance leases and hire
purchase contracts net of finance charges, is as follows:
Within one year........................................... 59 25
In the second to fifth years.............................. 6 18
-- --
65 43
== ==
</TABLE>
15 CALLED UP SHARE CAPITAL
<TABLE>
<CAPTION>
1996 1997
L000 L000
---- ----
<S> <C> <C>
Authorised.................................................. 167 167
--- ---
Allotted, called up and fully paid:
Ordinary shares of 1p each................................ 125 125
=== ===
</TABLE>
III-8
<PAGE> 79
16 RECONCILIATION OF MOVEMENT IN SHAREHOLDER'S FUNDS
<TABLE>
<CAPTION>
1996 1997
SPARGO GROUP AND COMPANY: L000 L000
------------------------- ----- -----
<S> <C> <C>
At 1 January................................................ 1,067 1,275
Profit for the financial year............................... 771 1,152
Dividends paid and proposed................................. (563) (750)
----- -----
At 31 December.............................................. 1,275 1,677
===== =====
</TABLE>
17 RECONCILIATION OF OPERATING PROFIT TO NET CASH INFLOW FROM OPERATING
ACTIVITIES
<TABLE>
<CAPTION>
1996 1997
SPARGO GROUP AND COMPANY: L000 L000
------------------------- ---- ----
<S> <C> <C>
Operating profit............................................ 1,159 1,652
Depreciation charge......................................... 97 89
(Increase)/decrease in debtors.............................. 338 (13)
Increase/(decrease) in creditors............................ (127) 197
(Profit) on sale of fixed assets............................ (16) (16)
----- -----
Net cash inflow from operating activities................... 1,451 1,909
===== =====
</TABLE>
18 ANALYSIS OF CHANGES IN NET FUNDS
<TABLE>
<CAPTION>
BALANCE AT
BALANCE AT OTHER NON CASH 31 DECEMBER
1 JANUARY 1997 CASH FLOW CHANGES 1997
L000 L000 L000 L000
-------------- --------- -------------- -----------
<S> <C> <C> <C> <C>
Cash at bank and in hand................. 1,246 (399) -- 847
Term deposits............................ -- 1,255 -- 1,255
Finance leases........................... (65) 59 (37) (43)
----- ----- --- -----
Net funds................................ 1,181 915 (37) 2,059
===== ===== === =====
</TABLE>
<TABLE>
<CAPTION>
BALANCE AT
BALANCE AT OTHER NON CASH 31 DECEMBER
1 JANUARY 1996 CASH FLOW CHANGES 1997
L000 L000 L000 L000
-------------- --------- -------------- -----------
<S> <C> <C> <C> <C>
Cash at bank and in hand................. 802 444 -- 1,246
Term deposits............................ -- -- -- --
Finance leases........................... (87) 100 (78) (65)
----- ----- --- -----
Net funds................................ 715 544 (78) 1,181
===== ===== === =====
</TABLE>
19 FINANCIAL COMMITMENTS
Contracted capital expenditure at the year end amounted to L10,925 (1996:
L15,000)
Annual commitments under operating leases were as follows:
<TABLE>
<CAPTION>
1996 1997
------------------ ------------------
LAND AND LAND AND
BUILDINGS OTHER BUILDINGS OTHER
L000 L000 L000 L000
--------- ----- --------- -----
<S> <C> <C> <C> <C>
Operating leases which expire in the second to fifth
years.................................................. 66 1 87 1
== == == ==
</TABLE>
III-9
<PAGE> 80
APPENDIX IV
CERTAIN MARKET AND DIVIDEND INFORMATION
1 MARKET AND PRICE DATA
The following table sets out the closing middle market quotations for a Spargo
Share (as derived from SEDOL) and the closing Computer Horizons Common Stock
price on NASDAQ, in each case for the first dealing day that both the LSE and
NASDAQ were open for business in each month from January 1998 to June 1998 (with
1 June 1998 also being the latest practicable date before the posting of this
Offer Document) and for 6 May 1998 (the day before the announcement by Spargo
that it had received an approach that might or might not lead to an agreed
merger proposal):
<TABLE>
<CAPTION>
COMPUTER
SPARGO HORIZONS
SHARE PRICE COMMON STOCK
DATE (IN PENCE) DATE PRICE (IN DOLLARS)
- ---- ----------- ---- ------------------
<S> <C> <C> <C>
2 January 1998................. 156.0 2 January 1998................. 42.063
2 February 1998................ 157.5 2 February 1998................ 43.188
2 March 1998................... 217.5 2 March 1998................... 50.875
1 April 1998................... 265.5 1 April 1998................... 50.375
1 May 1998..................... 279.0 1 May 1998..................... 37.125
6 May 1998..................... 290.0 6 May 1998..................... 35.688
1 June 1998.................... 285.0 1 June 1998.................... 33.750
</TABLE>
2 DIVIDEND POLICY
No cash dividends have ever been paid on Computer Horizons' Common Stock.
Computer Horizons' current policy is to retain earnings for use in its business.
Any payment of cash dividends in the future will depend upon the financial
condition, capital requirements and earnings of Computer Horizons, as well as
other factors as the Board of Directors of Computer Horizons may deem relevant.
IV-1
<PAGE> 81
APPENDIX V
ADDITIONAL INFORMATION
1 RESPONSIBILITY
(a) The directors of Computer Horizons (whose names are set out in paragraph
2(a) below) accept responsibility for the information contained in this
Offer Document, except for the information in this Offer Document concerning
Spargo, its subsidiaries and their respective businesses, the directors of
Spargo and persons acting in concert with, and associates of, Spargo.
Subject as aforesaid, to the best of the knowledge and belief of the
directors of Computer Horizons (who have taken all reasonable care to ensure
that such is the case), the information contained in this Offer Document for
which they are responsible is in accordance with the facts and does not omit
anything likely to affect the import of such information.
(b) The directors of Spargo (whose names are set out in paragraph 2(b) below)
accept responsibility for the information contained in this Offer Document
relating to Spargo, its subsidiaries and their respective businesses,
themselves, and persons acting in concert with, and associates of, Spargo.
To the best of the knowledge and belief of the directors of Spargo (who have
taken all reasonable care to ensure that such is the case), the information
contained in this Offer Document for which they are responsible is in
accordance with the facts and does not omit anything likely to affect the
import of such information.
(c) The statements set out in paragraphs (a) and (b) above are included solely
to comply with the requirements of Rule 19.2 of the City Code and shall not
be deemed to establish or expand any liability under the Securities Act.
2 DIRECTORS
(a) The directors of Computer Horizons are:
<TABLE>
<S> <C>
John J Cassese -- Chairman and President
Thomas J Berry -- Non-Executive
Rocco J Marano -- Non-Executive
</TABLE>
The executive offices of Computer Horizons are located at 49 Old Bloomfield
Avenue, Mountain Lakes, New Jersey 07046-1495.
(b) The directors of Spargo are:
<TABLE>
<S> <C>
Arthur Leonard Robert Morton -- Executive Chairman
Winston Anthony Richard Spargo -- Chief Executive
Carl Patrick Gouveia -- Finance Director
Michael Edward Wilson Jackson -- Non-Executive
Nicholas Whitmey -- Non-Executive
Richard Mark Lewis -- Non Executive
</TABLE>
The registered office of Spargo, which is also the business address of its
directors, is 31 Beaufort Court, Admiral Way, Waterside, South Quay, London E14
9XL.
3 DISCLOSURES OF INTERESTS AND DEALINGS
(a) At the close of business on 1 June 1998 (the latest practicable date prior
to the posting of this Offer Document), the interests of the directors of
Spargo (within the meaning of Parts VI and X of the Companies Act), all of
which (save as noted below) are beneficial, in Spargo Shares which have been
notified to Spargo pursuant to section 324 or 328 of the Companies Act or
are required to be entered in
V-1
<PAGE> 82
the register of Spargo directors' interests maintained under the provisions
of section 325 of the Companies Act were as follows:
<TABLE>
<CAPTION>
PERCENTAGE
NAME NO. OF SPARGO SHARES OF ISSUED SHARE CAPITAL
---- --------------------- -----------------------
<S> <C> <C>
W A R Spargo(1)........................ 5,000,000 40.0
A L R Morton(2)........................ 4,349,000 34.8
C P Gouveia............................ nil --
M E W Jackson.......................... 17,500 0.1
N Whitmey(3)........................... 10,000 --
R M Lewis.............................. nil --
</TABLE>
-----------------------
Notes:
(1) All of the Spargo Shares attributable to WAR Spargo are held on
trust on behalf of WAR Spargo and his family.
(2) 4,324,000 of the Spargo Shares attributable to ALR Morton are held
on trust on behalf of his children, and his wife is the beneficial
owner of the remainder.
(3) All of the Spargo Shares attributable to N Whitmey are held by his
wife (or by a nominee on her behalf).
Irrevocable undertakings to accept the Offer have been received in respect
of all the Spargo Shares set out above, representing in aggregate
approximately 75.01 per cent. of the issued share capital of Spargo.
(b) As at the close of business on 1 June 1998 (the latest practicable date
prior to the posting of this Offer Document) the following options and
awards over Spargo Shares had been granted to certain directors of Spargo
and remain outstanding under the Spargo Share Option Scheme:
<TABLE>
<CAPTION>
NUMBER OF
SPARGO SHARES EXERCISE DATES
NAME DATE OF GRANT UNDER OPTION PRICE EXERCISABLE
---- ------------- --------------- -------- ------------------------------
<S> <C> <C> <C> <C>
C P Gouveia............ 21 April 1995 40,000 81p 21 April 1998 to 20 April 2005
</TABLE>
SPARGO PHANTOM SHARE OPTION AGREEMENT
Spargo has entered into a Phantom Share Option Agreement dated 29 July 1997
pursuant to which it has granted rights to certain individuals to receive cash
based on the excess of (a) the market price of a Spargo Share on the day before
the date of exercise over (b) the exercise price per Spargo Share subject to
such right. If the Offer becomes or is declared unconditional, such rights will
become exercisable for a period of 30 days following the date on which the Offer
becomes unconditional. Any such rights that are not exercised during such 30-day
period shall lapse and be of no further force or effect.
(c) There have been no dealings by directors of Spargo or their connected
persons in Spargo Shares during the disclosure period, save as follows:
<TABLE>
<CAPTION>
NAME DATE TRANSACTION NO. OF SPARGO SHARES PRICE PER SHARE
---- ------------ ----------- --------------------- ---------------
<S> <C> <C> <C> <C>
N Whitmey....................... 24 July 1997 Purchase 7,400 117p
</TABLE>
V-2
<PAGE> 83
(d) Peel Hunt (in its capacity as non-exempt market maker) has dealt for value
in Spargo Shares during the disclosure period as follows:
<TABLE>
<CAPTION>
NUMBER OF PRICE PER NUMBER OF PRICE PER
SPARGO SHARES SPARGO SHARE SPARGO SHARES SPARGO SHARE
DATE PURCHASED (P) SOLD (P)
---- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
April 1997........................ 25,300 123-125 17,154 127-128
May 1997.......................... -- -- 9,230 127-128
June 1997......................... 25,000 126 10,000 128
July 1997......................... 13,000 105-108 12,900 114-117
August 1997....................... 30,000 116 27,000 116.5-117
September 1997.................... -- -- 12,435 119-135
October 1997...................... 23,000 124-135 14,405 125-139
November 1997..................... -- -- 14,340 126-147
December 1997..................... -- -- 2,000 151
January 1998...................... 19,900 145-161 8,500 155-162
February 1998..................... 6,162 190-208 33,529 160-215
March 1998........................ 118,985 253 111,056 213-265
2 April 1998...................... 500 262 -- --
3 April 1998...................... 5,000 263 -- --
7 April 1998...................... 5,000 258 -- --
14 April 1998..................... 5,000 258 -- --
15 April 1998..................... 3,000 245 5,000 245
3,000 247
16 April 1998..................... 7,000 245 -- --
17 April 1998..................... 3,500 243 -- --
20 April 1998..................... 3,000 240 -- --
22 April 1998..................... -- -- 4,716 249
28 April 1998..................... 2,000 255 -- --
1 May 1998........................ 2,500 277 5,000 280
5 May 1998........................ 1,000 285 3,000 292
6 May 1998........................ -- -- 3,000 293
7 May 1998........................ 2,500 325 3,027 295
10,000 317 6,000 320
10,000 322
8 May 1998........................ 2,500 312 5,000 324
2,500 317 20,000 320
25,500 320
11 May 1998....................... 1,970 312 -- --
12 May 1998....................... 8,500 310 -- --
14 May 1998....................... -- -- 1,500 313
18 May 1998....................... 1,000 305 10,000 312
19 May 1998....................... 10,000 308 -- --
2,800 305
20 May 1998....................... 1,400 297 5,000 300
21 May 1998....................... 2,500 297 -- --
22 May 1998....................... -- -- 1,500 303
26 May 1998....................... 3,413 300 -- --
28 May 1998....................... 29,000 273 17,500 275
10,000 282
</TABLE>
V-3
<PAGE> 84
(e) As of 1 June 1998 (the latest practicable date before posting this Offer
Document), the interests (within the meaning of Parts VI and X of the
Companies Act) of the directors of Computer Horizons in Computer Horizons
Common Stock (excluding options exercisable for Computer Horizons Common
Stock, which are addressed in (f) below) were as follows:
<TABLE>
<CAPTION>
NO. OF SHARES OF PERCENTAGE
COMPUTER HORIZONS OF ISSUED SHARE
NAME COMMON STOCK CAPITAL
---- ------------------------ ---------------
<S> <C> <C>
John J Cassese(1).......................... 1,071,967 3.7
Thomas J Berry............................. 5,194 --
Rocco J Marano............................. 16,500 --
</TABLE>
- ---------------
(1) 22,950 shares of Computer Horizons Common Stock attributable to John J
Cassese are held by his wife in trust on behalf of his children.
(f) As at the close of business on 1 June 1998 (the latest practicable date
prior to the posting of this Offer Document) the following options and
awards over Computer Horizons Common Stock had been granted to certain
directors of Computer Horizons and remain outstanding:
<TABLE>
<CAPTION>
NUMBER OF SHARES
OF COMPUTER HORIZONS
COMMON STOCK EXERCISE
NAME DATE OF GRANT UNDER OPTION PRICE EXERCISE PERIOD
---- ----------------- -------------------- -------- --------------------------
<S> <C> <C> <C> <C>
John J Cassese......... 24 February 1993 189,845 $1.25 Date of grant-23 Feb 2003
17 February 1994 16,293 $2.81 Date of grant-17 Feb 2004
17 February 1994 110,273 $2.81 Date of grant-17 Feb 2004
9 February 1995 118,125 $4.44 Date of grant-9 Feb 2005
17 January 1996 7,142 $14.00 Date of grant-17 Jan 2006
17 January 1996 67,859 $14.00 Date of grant-17 Jan 2006
30 January 1997 70,239 $21.00 Date of grant-30 Jan 2007
30 January 1997 4,761 $21.00 Date of grant-30 Jan 2007
12 January 1998 2,531 $39.50 Date of grant-12 Jan 2008
12 January 1998 72,469 $39.50 Date of grant-12 Jan 2008
Thomas J Berry......... 5 March 1991 6,244 $1.79 Current-5 Mar 2001
1 January 1994 10,125 $2.32 Current-1 Jan 2004
1 January 1995 10,125 $4.00 Current-1 Jan 2005
1 January 1996 10,125 $16.89 Current-1 Jan 2006
1 January 1997 10,125 $25.67 Current-1 Jan 2007
Rocco J Marano......... 3 August 1995 22,563 $9.00 Current-3 Aug 2005
3 August 1995 15,187 $9.00 3 Aug 1998-3 Aug 2005
3 August 1995 15,188 $9.00 3 Aug 1999-3 Aug 2005
1 January 1997 10,125 $25.67 Current-1 Jan 2007
1 January 1998 10,125 $45.50 Current-1 Jan 2008
</TABLE>
(g) There have been no dealings for value by the directors of Computer Horizons
in Computer Horizons Common Stock during the disclosure period, save as
follows:
<TABLE>
<CAPTION>
NO. OF SHARES OF
COMPUTER HORIZONS PRICE PER
NAME DATE TRANSACTION COMMON STOCK SHARE($)
---- ----------------- ------------------ ------------------------ ---------
<S> <C> <C> <C> <C>
John J Cassese........... 25 June 1997 Sale 5,000 $37.50
7 July 1997 Sale 5,000 37.50
8 July 1997 Sale 37,000 38.06
9 July 1997 Sale 53,000 37.11
23 September 1997 Sale 492,500 33.72(1)
12 January 1998 Grant of option 2,531 39.50
12 January 1998 Grant of option 72,469 39.50
</TABLE>
V-4
<PAGE> 85
<TABLE>
<CAPTION>
NO. OF SHARES OF
COMPUTER HORIZONS PRICE PER
NAME DATE TRANSACTION COMMON STOCK SHARE($)
---- ----------------- ------------------ ------------------------ ---------
<S> <C> <C> <C> <C>
Thomas J Berry........... 28 July 1997 Sale 15,000 37.25
3 February 1998 Sale 5,700 44.60
22 July 1997 Exercise of option 15,000 1.79
26 January 1998 Exercise of option 5,700 1.79
20 April 1998 Exercise of option 5,194 1.79
Rocco J Marano........... 28 July 1997 Exercise of option 11,000 9.00
1 January 1998 Grant of option 10,125 45.50
17 March 1998 Sale 6,500 44.63
</TABLE>
- ---------------
Note: (1) These shares were sold as part of a follow-on public offering. The
price was $35.50, less a 5 per cent. broker commission.
(h) In addition to John J Cassese, the following table sets out certain
information with respect to the beneficial ownership (determined in accordance
with Rule 13d-3 under the Exchange Act) of Computer Horizons Common Stock on the
dates set out in the notes below by any person known to Computer Horizons to own
beneficially more than 5 per cent. of the outstanding Computer Horizons Common
Stock:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES PERCENTAGE(I)
- ---- ---------- -------------
<S> <C> <C>
FMR Corp(ii)................................................ 3,154,190 11.64
Pilgrim Baxter(iii)......................................... 2,558,308 9.44
Putnam(iv).................................................. 1,997,916 7.0
(i) Based upon information supplied on Schedules 13G filed with
the SEC. Applicable percentage based on 28,949,672 shares of
Computer Horizons Common Stock outstanding as of 21 May 1998
(the latest practicable date prior to the posting of this
document).
(ii) Based on information provided in a Schedule 13G filed on 14
February 1998.
(iii) Based on information provided in a Schedule 13G filed on 11
February 1998.
(iv) Based on information provided in a Schedule 13G filed on 27
January 1998.
</TABLE>
(i) Save as disclosed above:
<TABLE>
<C> <S>
(i) neither Computer Horizons nor any subsidiary of Computer
Horizons owns any Spargo Shares;
(ii) no Director of Computer Horizons or Spargo is interested (as
defined in Parts VI and X of the Companies Act), directly or
indirectly, in relevant securities (as defined below);
(iii) no person acting in concert with Computer Horizons owns or
controls any relevant securities;
(iv) no person who has irrevocably committed to accept the Offer
owns or controls any relevant securities;
(v) Spargo owns no relevant securities;
(vi) no subsidiary of Spargo, nor any pension fund of Spargo or
of any of its subsidiaries, nor any bank, stockbroker,
financial or other professional adviser (excluding exempt
market-makers) to Spargo or to any subsidiary of Spargo or
to any associated company of Spargo or any persons
controlling, controlled by, or under the same control as any
such bank, stockbroker, financial or other professional
adviser, owns or controls or is interested, directly or
indirectly, in any relevant securities; and
(vii) no person mentioned in sub-paragraphs (i) to (v) above has
dealt for value in relevant securities during the disclosure
period and no person mentioned in sub-paragraph (vi) has
dealt for value in relevant securities between 7 May 1998
and 1 June 1998 (the latest practicable date before posting
this Offer Document).
</TABLE>
(j) For purposes of the above:
<TABLE>
<C> <S> <C>
(i) "relevant securities" include:
(A) Spargo Shares;
(B) securities convertible into (A), rights to subscribe for (A)
and options (including traded options) in respect of, or
derivatives referenced to, (A);
(C) equity share capital of Computer Horizons;
</TABLE>
V-5
<PAGE> 86
(D) securities of Computer Horizons which carry substantially
the same rights as those to be issued under the Offer; and
(E) securities convertible into (C) or (D), rights to subscribe
for (C) or (D) and options (including traded options) in
respect of, or derivatives referenced to, (C) or (D);
(ii) "bank" means any bank whose relationship to any relevant party is
not solely the provision of normal commercial banking services;
and
"disclosure period" means the period commencing on 7 May 1997 and
(iii) ending on 1 June 1998 being respectively the date 12 months
preceding the announcement by Spargo that it had received an
approach that might or might not lead to an agreed merger
proposal and the latest practicable date before the posting of
this Offer Document.
4 SERVICE CONTRACTS OF SPARGO DIRECTORS
(a) WAR Spargo has a service agreement with Spargo and ALR Morton has a
consultancy agreement with Spargo, both of which commenced on 1 June 1994.
Both agreements are terminable by either party giving not less than 12
months' notice in writing. WAR Spargo is entitled to receive an annual
salary of L150,000 and ALR Morton is entitled to receive an annual fee of
L30,000, both reviewable annually with effect from 1 June each year. WAR
Spargo's service agreement contains certain post termination restrictions.
WAR Spargo is entitled to 10 per cent. of the increase in net profit over
the agreed budget of Spargo for 1998, paid monthly in arrears, with any
profit shortfall each month carried forward on a cumulative basis and
applied to any further payments arising.
(b) MEW Jackson, N Whitmey and RM Lewis were all appointed non-executive
directors of Spargo with effect from 1 June 1994. Each appointment is
continuous, but subject to the provisions of Spargo's Articles of
Association dealing with the appointment and retirement of directors by
rotation. Each non-executive director is entitled to receive an annual fee
of L7,500.
(c) Save as disclosed above, there are no service or services agreements between
any Director of Spargo having more than twelve months to run, and no such
contract has been entered into or amended or replaced within the six months
preceding the date of this Offer Document.
5 MATERIAL CONTRACTS
The following contracts (not being contracts entered into in the ordinary course
of business) have been entered into by the Computer Horizons Group since 7 May
1996 and are or may be material:
(a) Pursuant to the Agreement and Plan of Merger, dated as of 2 December 1997,
among Computer Horizons, CG Computer Services Corporation, a California
corporation ("CG"), CHC Acquisition Corp., a California corporation and
wholly-owned subsidiary of Computer Horizons ("CG Sub"), Alan R Grushcow and
Sabina Ephraim (the "CG Merger Agreement"), the merger of CG Sub with and
into CG (the "CG Merger") was consummated on 19 December 1997. Pursuant to
the CG Merger, CG became a wholly-owned subsidiary of Computer Horizons and
each of the shares of common stock, no par value, of CG that were
outstanding immediately prior to the consummation of the CG Merger were
converted into the right to receive 0.79033 shares of Computer Horizons
Common Stock. As a result of the CG Merger, Alan R Grushcow and Sabina
Ephraim, the sole stockholders of CG (the "CG Stockholders"), received a
total of 566,666 shares of Computer Horizons Common Stock for all of the
outstanding shares of CG. Approximately 56,666 of such shares of Computer
Horizons Common Stock are being held in escrow in the event Computer
Horizons shall be entitled to indemnification for certain breaches by the CG
Stockholders of representations, warranties or obligations made by them in
the CG Merger Agreement. Subject to any claims for indemnification, one-half
of such escrowed shares (or if such shares have been liquidated, the cash
value thereof) were delivered to the CG Stockholders upon the issuance of an
audit report with respect to the consolidated financial statements of
Computer Horizons for the fiscal year ending 31 December 1997 and the
balance of such escrowed shares shall be delivered to the CG Stockholders
upon the first anniversary of consummation of the CG Merger.
(b) Pursuant to the Agreement and Plan of Merger, dated as of 4 February 1998
(the "Princeton Merger Agreement"), by and among Computer Horizons, PS
Merger Corp., a New Jersey corporation ("Princeton Sub"), Princeton Softech,
Inc., a New Jersey corporation ("Princeton") and the stockholders of
Princeton (the "Princeton Stockholders"), the merger of Princeton Sub with
and into Princeton (the "Princeton Merger") was consummated on 27 February
1998. Pursuant to the Princeton Merger, Princeton became a wholly-owned
subsidiary of Computer Horizons, and each share of common stock,
V-6
<PAGE> 87
no par value, of Princeton that was outstanding immediately prior to the
consummation of the Princeton Merger was converted into the right to receive
1.1626 shares of Computer Horizons Common Stock, subject to adjustment to
ensure the issuance of a whole number of shares of Computer Horizons Common
Stock to each Princeton Stockholder. As a result of the Princeton Merger,
Computer Horizons issued to the Princeton Stockholders a total of 954,213
shares of Computer Horizons Common Stock for all of the outstanding shares
of Princeton. 95,409 of such shares of Computer Horizons Common Stock are
being held in escrow for the purpose of satisfying the indemnification
obligations of the Princeton Stockholders for certain breaches of
representations, warranties and covenants of the Princeton Stockholders and
Princeton set forth in the Princeton Merger Agreement. Subject to any claims
for indemnification, such escrowed shares shall be delivered to the
Princeton Stockholders upon the first anniversary of consummation of the
Princeton Merger.
6 COMPULSORY ACQUISITION
If, on or before the expiration of four months from the date of posting of this
Offer Document, Computer Horizons has, as a result of acceptances of the Offer
or, subject to certain conditions, otherwise acquired or contracted to acquire,
at least 90 per cent. in value of the Spargo Shares to which the Offer relates
then (i) Computer Horizons will be entitled, and intends, to acquire
compulsorily the remainder of the outstanding Spargo Shares in accordance with
sections 428-430F of the Companies Act, and (ii) in such circumstances a holder
of Spargo Shares may require Computer Horizons to purchase his or her Spargo
Shares in accordance with the procedures and time limits described in section
430A of the Companies Act.
7 LEGAL MATTERS
Certain legal matters with respect to the validity of the Computer Horizons
Common Stock registered hereby are being passed upon by Latham & Watkins, New
York, New York.
8 EXPERTS
(a) The consolidated financial statements and schedule of Computer Horizons and
subsidiaries as of 31 December 1996 and 31 December 1997 and for each of the
years in the three-year period ended 31 December 1997 have been audited and
included or incorporated by reference herein in reliance upon the reports of
Grant Thornton, independent certified public accountants and upon the
authority of said firm as experts in accounting and auditing.
(b) The consolidated financial statements of the Spargo Group as of 31 December
1996 and 31 December 1997 and for both of the years in the two-year period
ended 31 December 1997 included herein have been audited by KPMG Audit Plc,
Chartered Accountants and Registered Auditors, and are included herein in
reliance upon the authority of said firm in giving said reports. The
consolidated financial statements for the year ended 31 December 1995 were
audited by KPMG, Chartered Accountants and Registered Auditors, in a similar
capacity.
9 GENERAL
(a) Broadview Associates, Peel Hunt and Latham & Watkins have given and not
withdrawn their written consent to the issue of this Offer Document with the
references to their names, and Grant Thornton and KPMG Audit Plc,
independent auditors, have given and have not withdrawn their consent to the
inclusion of their opinions, each in the form and context in which they are
included.
(b) Save as disclosed in this Offer Document, no agreement, arrangement or
understanding (including any compensation arrangement) exists between
Computer Horizons or any party acting in concert with Computer Horizons for
the purposes of the Offer and any of the directors or recent directors,
shareholders or recent shareholders of Spargo having any connection with or
dependence on the Offer.
(c) Except with respect to the transfer of Spargo Shares to any of Computer
Horizons' subsidiaries, there is no agreement, arrangement or understanding
whereby the beneficial ownership of any of the Spargo Shares to be acquired
by Computer Horizons pursuant to the Offer will be transferred to any other
person.
(d) Save as disclosed in this Offer Document, neither Computer Horizons nor any
person acting in concert with Computer Horizons nor Spargo nor any associate
of Spargo has any arrangement (including any indemnity or option
arrangement), agreement or understanding (formal or informal) of whatever
nature
V-7
<PAGE> 88
relating to relevant securities (as defined in paragraph 3(g) above), which
may be an inducement to deal or refrain from dealing.
In this sub-paragraph (d):
<TABLE>
<C> <S>
(i) references to an "associate" are to:
(A) subsidiaries and associated companies of Computer Horizons
and Spargo respectively and companies of which any such
subsidiaries or associated companies are associated
companies;
(B) banks, financial and other professional advisers (including
stockbrokers) to Computer Horizons and Spargo respectively
or a company covered in (A) above, including persons
controlling, controlled by or under the same control as such
banks, financial or other professional advisers;
(C) the directors (together with their close relatives and
related trusts) of Computer Horizons and Spargo respectively
or a company covered in (A) above; and
(D) the pension funds of Computer Horizons and Spargo
respectively or a company covered in (A) above;
(ii) references to a "bank" do not apply to a bank whose sole
relationship with Computer Horizons and Spargo respectively
or a company covered in (A) above is the provision of normal
commercial banking services or such activities in connection
with the Offer as handling acceptances and other
registration work; and
(iii) ownership or control of 20 per cent. or more of the equity
share capital of a company is regarded as the test of
associated status and "control" means a holding, or
aggregate holdings, of shares carrying 30 per cent. or more
of the voting rights attributable to the share capital of a
company which are currently exercisable at a general
meeting, irrespective of whether the holding or aggregate
holding gives de facto control.
</TABLE>
(e)No proposal exists in connection with the Offer that any payment or other
benefit shall be made or given to any director of Spargo as compensation for
loss of office or as consideration for or in connection with his retirement
from office.
(f)The total emoluments receivable by the Directors of Computer Horizons will
not be varied as a result of the proposed acquisition of Spargo or by any
other associated transactions.
<TABLE>
<S> <C> <C>
(g) (i) So far as the Directors of Computer Horizons are aware, save
as disclosed in this Offer Document, there have been no
material changes in the financial or trading position of
Computer Horizons since 31 December 1997 (the date to which
its latest published audited accounts were prepared).
(ii) So far as the Directors of Spargo are aware, save as
disclosed in this Offer Document (in particular in the
Chairman's letter to Spargo Shareholders), there have been
no material changes in the financial or trading position of
Spargo since 31 December 1997 (the date to which its latest
published audited accounts were prepared).
</TABLE>
(h) Broadview Associates, which is regulated in the United Kingdom by The
Securities and Futures Authority Limited, has approved the contents of this
Offer Document solely for the purposes of section 57 of the Financial
Services Act 1986.
10 DOCUMENTS AVAILABLE FOR INSPECTION
Copies of the following documents will be available for inspection during normal
business hours on any weekday (English public holidays excepted) at the offices
of Norton Rose, Kempson House, Camomile Street, London EC3A 7AN while the Offer
remains open for acceptance:
(a) the Certificate of Incorporation and Bylaws of Computer Horizons;
(b) the Memorandum and Articles of Association of Spargo;
(c) the published audited consolidated accounts of Spargo for the two financial
years ended 31 December 1997;
(d) the Form 10-K of Computer Horizons for the two financial years ended 31
December 1996 and 31 December 1997;
V-8
<PAGE> 89
(e) Computer Horizons' Annual Report to Stockholders for the two financial years
ended 31 December 1996 and 31 December 1997;
(f) the Quarterly Report on Form 10-Q of Computer Horizons in respect of the
quarter ended 31 March 1998;
(g) the Definitive Proxy Statement of Computer Horizons in connection with
Computer Horizons' 1997 Annual Meeting of Shareholders;
(h) the Current Report on Form 8-K of Computer Horizons dated 13 March 1998 and
the Current Report on Form 8-K/A dated 17 March, 1998;
(i) the irrevocable undertakings to accept the Offer referred to on pages 2, 3,
4 and V-2 of this Offer Document;
(j) the service contracts referred to in paragraph 4 of this Appendix V;
(k) the material contracts of Computer Horizons referred to in paragraph 5 of
this Appendix V;
(l) the letters of consent referred to in paragraph 9 of this Appendix V;
(m) the Affiliate Agreements referred to on page 6 of this Offer Document;
(n) this Offer Document and the Form of Acceptance;
(o) the rules of the Spargo Share Option Scheme; and
(p) all documents filed by Computer Horizons pursuant to Sections 13(a), 13(c),
14 or 15(d) of the Exchange Act after the date of this Offer Document and
prior to the date on which the Offer becomes or is declared unconditional in
all respects.
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APPENDIX VI
DESCRIPTION OF COMPUTER HORIZONS CAPITAL STOCK AND
CHANGES IN THE RIGHTS OF SPARGO SHAREHOLDERS
1 DESCRIPTION OF THE CAPITAL STOCK OF COMPUTER HORIZONS
1.1 COMPUTER HORIZONS COMMON STOCK
As of 21 May 1998, 28,949,672 shares of Computer Horizons Common Stock were
outstanding, out of a total authorised share capital of 100,000,000 shares of
Computer Horizons Common Stock. All outstanding shares of Computer Horizons
Common Stock are fully paid and nonassessable.
1.2 AUTHORIZED BUT UNISSUED PREFERRED STOCK
The Computer Horizons Board of Directors has the authority, without further
action by the Computer Horizons Stockholders, to issue up to 200,000 shares of
preferred stock, par value $.01, in one or more series and to fix the rights,
preferences, privileges and restrictions thereof, including dividend rights,
conversion rights, voting rights, terms of redemption, liquidation preferences,
and the number of shares constituting any series or the designation of such
series. Issuance of Computer Horizons preferred stock, while providing desirable
flexibility in connection with possible acquisitions and other corporate
purposes, could make it more difficult for a third party to acquire a majority
of the outstanding voting stock of Computer Horizons. There are currently no
shares of preferred stock issued or outstanding.
1.3 COMPUTER HORIZONS PREFERRED STOCK RIGHTS PLAN
Pursuant to a Rights Agreement dated as of 6 July 1989, as amended ("Rights
Agreement"), between Computer Horizons and Chase Manhattan Bank (formerly
Chemical Bank), as Rights Agent, each outstanding share of Computer Horizons
Common Stock has attached to it .131 of one right (the "Right" or "Rights")
which entitles the registered holder of such share to purchase from Computer
Horizons one one-hundredth ( 1/100) of a share of Series A Preferred Stock, par
value $.10 per share, (the "Series A Preferred"), at a price of $30.00 per one
one-hundredth ( 1/100) of a share (the "Purchase Price"), subject to adjustment.
The Rights are attached to all certificates representing shares of Computer
Horizons Common Stock and no separate Rights Certificates (as defined below) are
distributed nor will be distributed until the earlier to occur of: (i) 10 days
following a public announcement that a person or group of affiliated or
associated persons has acquired, or obtained the right to acquire beneficial
ownership of 20 per cent. or more of the outstanding Computer Horizons Common
Stock (an "Acquiring Person"); or (ii) 10 business days (or such later day as
may be determined by action of the Board of Directors prior to such time as any
person or group becomes an Acquiring Person) following the commencement of a
tender offer or exchange offer if, upon consummation thereof, any person or
group would be the beneficial owner of 20 per cent. or more of the outstanding
Computer Horizons Common Stock (the earlier of such dates being called the
"Distribution Date"). The date of announcement of the existence of an Acquiring
Person referred to in clause (i) above is hereinafter referred to as the "Share
Acquisition Date."
The Rights Agreement provides that, until the Distribution Date, the Rights will
be transferred with and only with Computer Horizons Common Stock. Until the
Distribution Date (or earlier redemption, exchange or expiration of the Rights),
all new Computer Horizons Common Stock certificates issued upon the transfer or
new issuance of shares of Computer Horizons Common Stock, including certificates
issued in connection with the Offer, will contain a notation incorporating the
Rights Agreement by reference. Until the Distribution Date (or earlier
redemption, exchange or expiration of the Rights) the surrender for transfer of
any certificates for Computer Horizons Common Stock outstanding will also
constitute the transfer of the Rights associated with Computer Horizons Common
Stock represented by such certificate. As soon as practicable following the
Distribution Date, separate certificates evidencing the Rights (the "Rights
Certificates") will be mailed to holders of record of Computer Horizons Common
Stock on the Distribution Date and, thereafter, such separate Rights
Certificates alone will evidence the Rights.
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on 16 July 1999 (the "Final Expiration Date"), unless the
Final Expiration Date is extended or unless the Rights are redeemed or exchanged
by Computer Horizons as described below.
In the event that any person or group of affiliated or associated persons
becomes an Acquiring Person, the Rights Agreement provides that proper
provisions shall be made so that each holder of a Right, except as
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provided below, shall thereafter have the right to receive, upon exercise,
shares of Computer Horizons Common Stock (or, at Computer Horizons' option,
Computer Horizons Common Stock Equivalents, as such term is defined in the
Rights Agreement) having a value equal to two times the exercise price of the
Right. Upon the occurrence of the event described in the first sentence of this
paragraph, any Rights beneficially owned by: (i) an Acquiring Person or an
Associate or Affiliate (as such terms are defined in the Rights Agreement) of an
Acquiring Person; (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee after the Acquiring Person
becomes such; or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) who becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and receives such Rights pursuant to either
(a) a transfer (whether or not for consideration) from the Acquiring Person to
holders of equity interests in such Acquiring Person or to any person with whom
the Acquiring Person has any continuing agreement, arrangement or understanding
regarding the transferred Rights or (b) a transfer which the Board of Directors
of Computer Horizons has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of the
Rights Agreement, shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of the Rights Agreement or otherwise.
In the event that, following the earlier of the Distribution Date and the Share
Acquisition Date: (i) Computer Horizons engages in a merger or other business
combination transaction in which Computer Horizons is not the surviving
corporation; (ii) Computer Horizons engages in a merger or other business
combination transaction with another person in which Computer Horizons is the
surviving corporation, but in which Computer Horizons Common Stock is changed or
exchanged; or (iii) more than 50 per cent. of Computer Horizons' assets or
earning power is sold or transferred, the Rights Agreement provides that proper
provision shall be made so that each holder of a Right (except Rights which
previously have been voided as described above) shall thereafter have the right
to receive, upon exercise thereof at the then current exercise price of the
Right, common stock of the acquiring company having a value equal to two times
the exercise price of the Right.
The Purchase Price payable, and the number of shares of Series A Preferred or
other securities issuable, upon exercise of the Rights are subject to adjustment
from time to time to prevent dilution: (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Series A Preferred;
(ii) upon the grant to holders of the Series A Preferred of certain rights,
options or warrants to subscribe for shares of Series A Preferred or convertible
securities at less than the current market price of the Series A Preferred; or
(iii) upon the distribution to holders of Series A Preferred of evidences of
indebtedness, shares of Preferred Stock, assets or cash (excluding a regular
semiannual cash dividend) or of subscription rights, options or warrants (other
than those referred to above).
The number of outstanding Rights and the number of shares of Series A Preferred
issuable upon exercise of each Right are also subject to adjustment in the event
of a stock split of Computer Horizons Common Stock or a stock dividend on
Computer Horizons Common Stock payable in shares of Computer Horizons Common
Stock or subdivisions, consolidations or combinations of Computer Horizons
Common Stock occurring, in any such case, prior to the Distribution Date.
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments require an adjustment of at least 1 per cent. in
such Purchase Price. No fractional shares shall be issued (other than fractions
which are integral multiples of one one-hundredth of a share of Series A
Preferred, which may, at the election of Computer Horizons, be evidenced by
depository receipts) and, in lieu thereof, an adjustment in cash will be made
based on the market price of the Series A Preferred on the last trading date
prior to the date of exercise.
At any time prior to the Share Acquisition Date, the Board of Directors of
Computer Horizons may redeem the Rights in whole, but not in part, at a price of
$.01 per Right (the "Redemption Price"). Before the redemption period expires,
it may be extended by the Board of Directors. Immediately upon the action of the
Board of Directors of Computer Horizons ordering the redemption of the Rights,
the Rights will terminate and the only right to the holders of Rights will be to
receive the Redemption Price. At any time after the time that any person or
group of affiliated or associated persons becomes an Acquiring Person, the Board
of Directors of Computer Horizons may exchange the Rights (except Rights which
previously have been voided as described above), in whole, but not in part, at
an exchange ratio of one share of Computer Horizons Common Stock (or one
Computer Horizons Common Stock Equivalent) per Right.
Until a Right is exercised, the holder thereof, as such, will have no rights as
a shareholder of Computer Horizons, including, without limitation, the right to
vote or to receive dividends. The terms of the Rights may
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be amended by Computer Horizons and the Rights Agent, provided, that, following
the earlier of the Share Acquisition Date and the Distribution Date, the
amendment does not adversely affect the interests of holders of Rights (other
than an Acquiring Person) and provided that no amendment shall be made which
decreases the Redemption Price.
The Rights have certain anti-takeover effects. The Rights would cause
substantial dilution to a person or group that attempts to acquire Computer
Horizons without conditioning the offer on the Rights being redeemed. The Rights
should not interfere with any merger or other business combination approved by
Computer Horizons because the Rights may be redeemed by the Board of Directors
of Computer Horizons at any time prior to such time as any entity becomes an
Acquiring Person. See "Information Regarding Computer Horizons -- Risk
Factors -- Risks Relating to Computer Horizons' Business -- Anti-Takeover
Provisions."
1.4 WARRANTS
As of 1 June 1998 (the latest practicable date before the posting of this Offer
Document), warrants to purchase an aggregate of 45,130 shares of Computer
Horizons Common Stock were outstanding.
2 DESCRIPTION OF COMPUTER HORIZONS COMMON STOCK
The following is a brief description of certain rights of holders of Computer
Horizons Common Stock. For a complete understanding of these rights,
stockholders are referred to the constitutional documents of Computer Horizons,
the New York General Business Corporation Law ("NYBCL") and the laws and
applicable regulations and listing requirements of NASDAQ.
2.1 GENERAL
Computer Horizons is incorporated in the State of New York, United States, and
operates in accordance with the NYBCL. The rights of Computer Horizons
Stockholders are determined by the NYBCL, the securities and other legislation
of the United States, Computer Horizons' Certificate of Incorporation and
Computer Horizons' By-Laws. Computer Horizons Common Stock is traded on NASDAQ.
2.2 CERTIFICATES
Computer Horizons Common Stock is issued in registered form. Every holder of
Computer Horizons Common Stock is entitled to a share certificate.
2.3 DIVIDENDS
Subject to preferences applicable to any outstanding Computer Horizons preferred
stock, holders of Computer Horizons Common Stock are entitled to receive ratably
such dividends as may be declared by the Computer Horizons Board of Directors
out of funds legally available for this purpose.
2.4 MEETINGS
Annual meetings of the Computer Horizons Stockholders are held on the date
designated by the Computer Horizons Board of Directors. Written notice must be
mailed to each stockholder entitled to vote not less than ten nor more than
sixty days before the date of the meeting. The presence in person or by proxy of
the holders of record of a majority of the issued and outstanding shares of
Computer Horizons entitled to vote at such meeting constitutes a quorum for the
transaction of business at meetings of the stockholders. Special meetings of the
stockholders may be called for any purpose by the Board of Directors, the
Chairman of the Board or the President and shall be called by the Chairman of
the Board, the President or the Secretary upon the written request of
stockholders holding of record at least 50 per cent. of the outstanding shares
of stock of Computer Horizons entitled to vote at such meeting.
2.5 VOTING RIGHTS
The holders of Computer Horizons Common Stock are entitled to one vote for each
share held of record. Stockholders may vote by proxy.
2.6 LIQUIDATION, DISSOLUTION OR WINDING UP
In the event of a liquidation, dissolution or winding up of Computer Horizons,
after payment shall have been made to holders of preferred stock of the full
amounts to which they shall be entitled, the holders of Computer Horizons Common
Stock are entitled, to the exclusion of the holders of preferred stock, to share
ratably
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according to the number of shares held by them in all remaining assets available
for distribution to the Computer Horizons stockholders.
2.7 TRANSFERS
The Computer Horizons By-Laws do not allow the Board of Directors to refuse to
register transfers of shares.
2.8 OTHER RIGHTS
Holders of Computer Horizons Common Stock have no preemptive, redemption,
conversion or other subscription rights.
3 DIFFERENCES BETWEEN COMPUTER HORIZONS COMMON STOCK AND SPARGO SHARES
There are a number of differences between the rights attaching to Computer
Horizons Common Stock, as detailed above, and those attaching to Spargo Shares.
Certain rights attaching to Spargo Shares, where those differences exist, are
identified below. Such differences may arise from the differences between the
legislation governing Spargo and Computer Horizons as well as between the
constitutional documents of the two companies. The following is not a complete
description of the differences between the rights associated with Spargo Shares
compared to Computer Horizons Common Stock. Further, it does not address the
differing rights of holders of Computer Horizons preferred stock should any be
issued. For a complete understanding of such differences, Stockholders are
referred to the laws and applicable regulations of England and the NYBCL, the
rules of the LSE and NASDAQ, and the constitutional documents of both Spargo and
Computer Horizons.
3.1 GENERAL
Spargo is incorporated in England and operates in accordance with the Companies
Act. Rules and regulations governing trading of Spargo Shares differ from those
relating to Computer Horizons.
3.2 DIVIDENDS
Pursuant to Spargo's Articles of Association, and subject to the restrictions of
English law, dividends may be declared by the Board of Spargo, or by Spargo, on
the recommendation of the Spargo Board, by ordinary resolution in an amount not
to exceed that recommended by the Spargo Board.
3.3 MEETINGS
The holders of not less than one tenth of the paid up voting capital of Spargo
have the right to requisition general meetings of shareholders.
3.4 TRANSFERS
The Spargo Articles of Association allow the Spargo Board, in its absolute
discretion, and without giving any reason for so doing to refuse to register
certain transfers of Spargo Shares, being the transfer of any share which is not
fully paid up to any person whom they shall not approve as transferee and the
transfer of any share, whether or not fully paid up, on which Spargo has a lien.
The Spargo Board may also decline to register a transfer in favour of more than
four joint transferees.
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APPENDIX VII
DEFINITIONS
In this Offer Document and the accompanying Form of Acceptance the following
definitions apply, unless the context requires otherwise:
"AFFILIATE" when used in relation to a specified person, a
person that directly or indirectly through one or
more intermediaries, controls or is controlled by,
or is under common control with, such specified
person
"AFFILIATE AGREEMENTS" agreements between Computer Horizons and persons
deemed by Computer Horizons to be Affiliates of
Spargo, inter alia, restricting the ability of such
persons to deal in Spargo Shares or Computer
Horizons Common Stock
"AUSTRALIA" the Commonwealth of Australia and its dependent
territories
"BOARD" OR "DIRECTORS" OR
"BOARD OF DIRECTORS" the board of directors of Computer Horizons or
Spargo, as the case may be
"BROADVIEW ASSOCIATES" BVA Associates Limited
"CANADA" Canada, its possessions and territories and all
areas subject to its jurisdiction or any political
sub-division thereof
"CERTIFICATED" OR
"IN CERTIFICATED FORM" not in uncertificated form
"CITY CODE" The City Code on Takeovers and Mergers of the
United Kingdom
"COMPANIES ACT" Companies Act 1985 of Great Britain, as amended
"COMPULSORY ACQUISITION" compulsory acquisition by Computer Horizons,
pursuant to sections 428 to 430F in each case
inclusive of the Companies Act on the same terms as
the Offer, of all outstanding Spargo Shares to
which the Offer relates
"COMPUTER HORIZONS" Computer Horizons Corp.
"COMPUTER HORIZONS COMMON
STOCK" $0.10 par value common stock of Computer Horizons
"COMPUTER HORIZONS GROUP" Computer Horizons and its affiliates
"COMPUTER HORIZONS
STOCKHOLDERS" holders of Computer Horizons Common Stock
"CREST" the relevant system (as defined in the Regulations)
in respect of which CRESTCo is the Operator (as
defined in the Regulations)
"CRESTCO" CRESTCo Limited
"CREST MEMBER" a person who has been admitted by CRESTCo as a
system-member (as defined in the Regulations)
"CREST PARTICIPANT" a person who is, in relation to CREST, a
system-participant (as defined in the Regulations)
"CREST SPONSOR" a CREST participant admitted to CREST as a CREST
sponsor
"CREST SPONSORED MEMBER" a CREST member admitted to CREST as a sponsored
member
"DOLLARS" OR "$" US dollars
"ENLARGED COMPUTER HORIZONS
GROUP" the Computer Horizons Group following the
acquisition of Spargo pursuant to the Offer
"EXCHANGE ACT" United States Securities Exchange Act of 1934, as
amended, and the rules and regulations thereunder
"FORM OF ACCEPTANCE" the form of acceptance relating to the Offer
"GRANT THORNTON" Grant Thornton LLP
"INLAND REVENUE" the UK Inland Revenue
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"ILLUSTRATIVE EXCHANGE
RATE" L1:$1.6318, being the mid-point of the closing
spread of the dollar to sterling spot rate, as
shown in the Financial Times (UK edition) on 21 May
1998 being the latest practicable date prior to the
announcement by Computer Horizons of its intention
to make the Offer
"IRC" The United States Internal Revenue Code of 1986, as
amended
"IRG" IRG Plc
"JAPAN" Japan, its cities, prefectures, territories and
possessions
"JOINT VENTURE" Birla Horizons International, an entity organized
under the laws of India 50 per cent. of the
interests of which are held by Computer Horizons
"LSE" London Stock Exchange Limited
"MEMBER ACCOUNT ID" the identification code or number attached to any
member account in CREST
"NASDAQ" the National Market System operated by Nasdaq Inc.
"NEW COMPUTER HORIZONS
COMMON STOCK" Computer Horizons Common Stock to be issued
pursuant to the Offer
"OFFER" the recommended offer by Broadview Associates on
behalf of Computer Horizons to acquire all the
Spargo Shares on the terms and subject to the
conditions set out in this Offer Document and the
Form of Acceptance, including, where the context so
requires, any subsequent revision, variation,
extension or renewal thereof
"OFFER DOCUMENT" this document (including the Appendices hereto)
"OFFER PERIOD" has the meaning given to such term in paragraph
6(b) of Part B of Appendix I
"OPTIONHOLDERS" holders of options under the Spargo Share Option
Scheme
"PANEL" the Panel on Takeovers and Mergers of the United
Kingdom
"PARTICIPANT ID" the identification code or membership number used
in CREST to identify a particular CREST member or
other CREST participant
"PEEL HUNT" Peel, Hunt & Company Limited
"POUNDS", "POUNDS
STERLING",
"STERLING" OR "L" UK pounds sterling
"REGISTRATION STATEMENT" the Registration Statement on Form S-4 relating to
the Offer filed by Computer Horizons with the SEC
under the Securities Act
"REGULATIONS" the Uncertificated Securities Regulations 1995 (SI
1995 No. 95/3272) of the United Kingdom
"SEC" United States Securities and Exchange Commission
"SECURITIES ACT" United States Securities Act of 1933, as amended,
and the rules and regulations thereunder
"SEDOL" the London Stock Exchange Daily Official List
"SETTLEMENT EXCHANGE RATE" the mid-point of the closing spread of the dollar
to sterling spot rate, as shown in the Financial
Times (UK edition), as of the date on which the
Offer becomes or is declared unconditional in all
respects
"SPARGO" Spargo Consulting PLC
"SPARGO ACQUISITION" the acquisition of Spargo Shares pursuant to the
Offer
"SPARGO GROUP" Spargo and its subsidiaries
"SPARGO OPTIONS" options over Spargo Shares under the Spargo Share
Option Scheme
"SPARGO SHARES" existing issued and fully paid ordinary shares of
1p each in Spargo and any further such shares which
are unconditionally allotted or issued before the
date on which the Offer closes (or such earlier
date as Computer Horizons may, subject to the City
Code, determine)
"SPARGO SHAREHOLDERS" holders of Spargo Shares
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"SPARGO SHARE OPTION
SCHEME" Spargo Executive Share Option Scheme 1994
"SPARGO SHARES TO
WHICH THE OFFER RELATES" the aggregate of (a) the Spargo Shares which have
been unconditionally allotted or issued on the date
on which the Offer is made and (b) Spargo Shares
unconditionally allotted or issued after such date
but on or before the date on which the Offer closes
(or such earlier date as Computer Horizons may,
subject to the City Code, decide) but excluding
Spargo Shares which at the date of the Offer are
held by Computer Horizons and/or its associates
(within the meaning of section 430E of the
Companies Act) or which, at such date, Computer
Horizons and/or its associates have (otherwise than
under such a contract as is described in section
428(5) of the Companies Act) contracted to acquire
"TFE INSTRUCTION" a Transfer from Escrow instruction (as defined by
the CREST Manual issued by CRESTCo)
"TTE INSTRUCTION" a Transfer to Escrow instruction (as defined by the
CREST Manual issued by CRESTCo)
"THIRD PARTY" a government or governmental, quasi-governmental,
supranational, statutory, regulatory or
investigative body, trade agency, professional
association, institution, court or any other
similar person or body whatsoever in any
jurisdiction
"TREATY" US-UK double tax convention relating to income and
capital gains
"UNCERTIFICATED" OR
"IN UNCERTIFICATED FORM" for the time being recorded on the register of
members of Spargo as being held in uncertificated
form and title to which, by virtue of the
Regulations, may be transferred by means of CREST
"UK GAAP" UK generally accepted accounting principles
"UK RESIDENT" a person who is resident in the UK for tax purposes
and, in the case of UK taxation of capital gains, a
person who is ordinarily resident in the UK for tax
purposes
"UNITED KINGDOM" OR "UK" United Kingdom of Great Britain and Northern
Ireland
"UNITED STATES" OR "US" United States of America, its territories and
possessions, any State of the United States and the
District of Columbia and all other areas subject to
its jurisdiction
"US GAAP" US generally accepted accounting principles
"US RESIDENT" a person that is any of the following: (1) a
citizen of the US, (2) a resident alien (for US
federal income tax purposes), (3) a corporation,
partnership or other entity created or organised in
or under the laws of the US or any political
subdivision thereof, and (4) an estate or trust the
income of which is subject to US federal income
taxation regardless of source and that is not
resident in the UK for tax purposes
"WIDER COMPUTER HORIZONS
GROUP" Computer Horizons, its subsidiaries and any
companies in which Computer Horizons or any of its
subsidiaries has a direct or indirect interest in
20 per cent. or more of the voting capital
"WIDER SPARGO GROUP" Spargo and its subsidiaries and any companies in
which Spargo or any of its subsidiaries has a
direct or indirect interest in 20 per cent. or more
of the voting capital
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Computer Horizons' Certificate of Incorporation, as amended (the "Certificate of
Incorporation") provides, as permitted by Section 402(b) of the New York
Business Corporation Law (the "BCL") that no director shall be personally liable
to Computer Horizons or any shareholder for damages for any breach of duty as a
director, provided that the Certificate of Incorporation does not eliminate or
limit the liability of any director if a judgment or other final adjudication
adverse to him establishes that (i) his acts or omissions were in bad faith or
involved intentional misconduct or a knowing violation of law, (ii) he
personally gained in fact a financial profit or other advantage to which he was
not legally entitled or (iii) his acts violated Section 719 of the BCL.
The Certificate of Incorporation also provides, in accordance with Section 722
of the BCL, that each person who was or is made a party or is threatened to be
made a party to or is involved in any action, suit or proceeding, whether civil,
criminal, administrative or investigative (hereinafter a "proceeding"), by
reason of the fact that he, or a person of whom he is the legal representative,
(1) is or was a director or officer of Computer Horizons or (2) is or was
serving at the request of Computer Horizons as a director, officer, employee or
agent of another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to employee benefit plans (whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent), shall be indemnified and held harmless by
Computer Horizons to the fullest extent authorized or permitted by applicable
law, as the same exists or may hereafter be amended (but, in the case of any
such amendment, only to the extent that such amendment permits Computer Horizons
to provide broader indemnification rights than said law permitted Computer
Horizons to provide prior to such amendment), against all expense, liability and
loss (including attorneys' fees, judgements, fines, ERISA excise taxes or
penalties and amounts paid or to be paid in settlement) actually and reasonably
incurred or suffered by such person in connection therewith and such
indemnification shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of his heirs,
executors and administrators, provided, however, that, except for actions
brought to enforce such indemnification rights, Computer Horizons shall
indemnify any such person seeking indemnification in connection with a
proceeding (or part thereof) initiated by such person only if such proceeding
(or part thereof) was authorized by the Board of Directors of Computer Horizons.
The right to indemnification conferred in the Certificate of Incorporation is a
contract right and includes the rights to be paid by Computer Horizons the
expenses incurred in defending any such proceeding in advance of its final
disposition, provided, however, that, if the BCL requires, the payment of such
expenses incurred by a director or officer in his capacity as such (and not in
any other capacity in which service was or is rendered by such person while a
director or officer, including, without limitation, service with respect to an
employee benefit plan) in advance of the final disposition of a proceeding,
shall be made only upon delivery to Computer Horizons of an undertaking by or on
behalf of such director or officer to repay all amounts so advanced as to which
it shall ultimately be determined that such director or officer is not entitled
to be indemnified.
The Certificate of Incorporation further provides, in accordance with the BCL,
that the indemnification rights provided therein are not exclusive of any other
rights that any person may have, and that Computer Horizons may, subject to
certain restrictions imposed by the BCL, maintain insurance to protect itself
and its officers and directors against expenses, liabilities and losses, whether
or not Computer Horizons would be permitted to indemnify such person against
such expenses, liabilities and losses under the BCL.
Computer Horizons currently has a $15,000,000 directors' and officers'
liability insurance policy.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is
therefore unenforceable.
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ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
The following documents are filed as part of or incorporated by reference in
this Registration Statement.
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<C> <S> <C>
3(a-1) Certificate of Incorporation as amended Exhibit 3(a) to Registration Statement
through 1971. on Form S-1 (File No. 2-42259).
3(a-2) Certificate of Amendment dated May 16, Exhibit 3(a-2) to Form 10K for the
1983 to Certificate of Incorporation. fiscal year ended February 28, 1983.
3(a-3) Certificate of Amendment dated June 15, Exhibit 3(a-3) to Form 10K for the
1988 to Certificate of Incorporation. fiscal year ended December 31, 1988.
3(a-4) Certificate of Amendment dated July 6, Exhibit 3(a-4) to Form 10K for the
1989 to Certificate of Incorporation. fiscal year ended December 31, 1994.
3(a-5) Certificate of Amendment dated February Exhibit 3(a-5) to Form 10K for the
14, 1990 to Certificate of fiscal year ended December 31, 1989.
Incorporation.
3(a-6) Certificate of Amendment dated May 1, Exhibit 3(a-6) to Form 10K for the
1991 to Certificate of Incorporation. fiscal year ended December 31, 1994.
3(a-7) Certificate of Amendment dated July 12, Exhibit 3(a-7) to Form 10K for the
1994 to Certificate of Incorporation. fiscal year ended December 31, 1994.
3(b) Bylaws, as amended and presently in Exhibit 3(b) to Form 10K for the year
effect. ended December 31, 1988.
4(a) Rights Agreement dated as of July 6, Exhibit 1 to Registration Statement on
1989 between Computer Horizons and Form 8-A dated July 7, 1989.
Chemical Bank, as Rights Agent ("Rights
Agreement") which includes the form of
rights Certificate as Exhibit B.
4(b) Amendment No. 1 dated as of February 13, Exhibit 1 to Amendment No. 1 on Form 8
1990 to Rights Agreement. dated February 13, 1990 to Registration
Statement on Form 8-A.
4(c) Amendment No. 2 dated as of August 10, Exhibit 4(c) to Form 10K for the fiscal
1994 to Rights Agreement. year ended December 31, 1994.
4(d) Employee's Savings Plan and Amendment Exhibit 4.4 to Registration Statement on
Number One. Form S-8 dated December 5, 1995.
4(e) Employee's Savings Plan Trust Agreement Exhibit 4.5 to Registration Statement on
as Amended and Restated Effective Form S-8 dated December 5, 1995.
January 1, 1996.
5 Opinion of Latham & Watkins. Filed herewith.
10(a) Employment Agreement dated as of Exhibit 10(a) to Form 10K for the year
February 16, 1990 between the Company ended December 31, 1989.
and John J Cassese.
10(b) Employment Agreement dated as of January Exhibit 10(g) to Form S-3 dated August
1, 1997 between the Company and William 14, 1997.
J Murphy.
10(c) Employment Agreement dated as of March Exhibit 10(c) to Form 10K for the year
6, 1997 between the Company and Michael ended December 31, 1996.
J Shea.
10(d) Note Agreement dated as of March 15, Exhibit 10(i) to Form 10K for the year
1988 between the Company and ended December 31, 1988.
Massachusetts Mutual Life Insurance
Company.
10(e) 1991 Directors' Stock Option Plan, as Exhibit 10(g) to Form 10K for the fiscal
amended. year ended December 31, 1994.
10(f) 1994 Incentive Stock Option and Exhibit 10(h) to Form 10K for the fiscal
Appreciation Plan. year ended December 31, 1994.
</TABLE>
II-2
<PAGE> 99
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<C> <S> <C>
10(g) $15,000,000 Discretionary Line of Credit Exhibit 10(h) to Form S-3a dated
payable to Chase Manhattan Bank dated as September 23, 1997.
of June 30, 1997.
10(h) $10,000,000 Discretionary Line of Credit Exhibit 10(h) to Form 10K for the fiscal
from PNC Bank. year ended December 31, 1996.
23(a) Consent of Latham & Watkins (included in Filed herewith.
its opinion filed as Exhibit 5).
23(b) Consent of Grant Thornton LLP. Filed herewith.
23(c) Consent of KPMG Peat Marwick. Filed herewith.
24 Power of Attorney (included on page II-4 Previously filed.
of this Registration Statement).
99(a) Press Announcement. Previously filed.
99(b) Form of Acceptance. Previously filed.
</TABLE>
(b) Financial Statement Schedules
None
ITEM 22. UNDERTAKINGS.
(a) (1) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of
the prospectus which is part of this registration statement, by any person
or party who is deemed to be an underwriter within the meaning of Rule
145(c), the issuer undertakes that such reoffering prospectus will contain
the information called for by the applicable registration form with respect
to reofferings by persons who may be deemed underwriters, in additions to
the information called for by the other items of the applicable form.
(2) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (1) immediately proceeding, or (ii) that purports to
meet the requirement of Section 10(a)(3) of the Act and is used in
connection with an offering of securities subject to Rule 415, will be
filed as a part of an amendment to the registration statement and will not
be used until such amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration statement
relating other securities offering therein, and the offering of such
securities at the time shall be deemed to be the initial bona fide offering
thereof.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant
to Item 4, 10(b), 11 or 13 of this form, within one business day of receipt
of such request, and to send the incorporated documents by first class mail
or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration
statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
II-3
<PAGE> 100
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-4 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, on the first day of June, 1998.
COMPUTER HORIZONS CORP.
By: /s/ JOHN J CASSESE
------------------------------------
Name: John J Cassese
----------------------------------
Chairman of the Board and
President
Pursuant to the requirements of the Securities Act of 1933, this Registration
Statement has been signed by the following persons in the capacities and as of
the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ JOHN J CASSESE Chairman of the Board and President June 1, 1998
- --------------------------------------------------- (Principal Executive Officer) and
John J Cassese Director
* Executive Vice President, Chief June 1, 1998
- --------------------------------------------------- Financial Officer and Secretary
William J Murphy (Principal Accounting Officer)
* Vice President and Controller June 1, 1998
- ---------------------------------------------------
Michael J Shea
* Director June 1, 1998
- ---------------------------------------------------
Thomas J Berry
* Director June 1, 1998
- ---------------------------------------------------
Rocco J Marano
*By: /s/ JOHN J CASSESE
----------------------------------------------
John J Cassese
Attorney-in-fact
</TABLE>
II-4
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<S> <C> <C>
3(a-1) Certificate of Incorporation as amended Exhibit 3(a) to Registration Statement
through 1971. on Form S-1 (File No. 2-42259).
3(a-2) Certificate of Amendment dated May 16, Exhibit 3(a-2) to Form 10K for the
1983 to Certificate of Incorporation. fiscal year ended February 28, 1983.
3(a-3) Certificate of Amendment dated June 15, Exhibit 3(a-3) to Form 10K for the
1988 to Certificate of Incorporation. fiscal year ended December 31, 1988.
3(a-4) Certificate of Amendment dated July 6, Exhibit 3(a-4) to Form 10K for the
1989 to Certificate of Incorporation. fiscal year ended December 31, 1994.
3(a-5) Certificate of Amendment dated February Exhibit 3(a-5) to Form 10K for the
14, 1990 to Certificate of ended fiscal year December 31, 1989.
Incorporation.
3(a-6) Certificate of Amendment dated May 1, Exhibit 3(a-6) to Form 10K for the
1991 to Certificate of Incorporate. fiscal year ended December 31, 1994.
3(a-7) Certificate of Amendment dated July 12, Exhibit 3(a-7) to Form 10K for the
1994 to Certificate of Incorporation. fiscal year ended December 31, 1994
3(b) Bylaws, as amended and presently in Exhibit 3(b) to Form 10K for the year
effect. ended December 31, 1988.
4(a) Rights Agreement dated as of July 6, Exhibit 1 to registration Statement on
1989 between Computer Horizons and form 8-A dated July 7, 1989.
Chemical Bank, as Rights Agent ("Rights
Agreement") which includes the form of
rights Certificate as Exhibit B.
4(b) Amendment No. 1 dated as of February Exhibit 1 to Amendment No. 1 on Form 8
13, 1990 to Rights Agreement. dated February 13, 1990 to Registration
Statement on Form 8-A.
4(c) Amendment No. 2 dated as of August 10, Exhibit 4(c) to Form 10K for the fiscal
1994 to Rights Agreement. year ended December 31, 1994.
4(d) Employee's Savings Plan and Amendment Exhibit 4.4 to Registration Statement
Number One. on Form S-8 dated December 5, 1995.
4(e) Employee's Savings Plan Trust Agreement Exhibit 4.5 to Registration Statement
as Amended and Restated Effective on Form S-8 dated December 5, 1995.
January 1, 1996.
5 Opinion of Latham & Watkins. Filed herewith.
10(a) Employment Agreement dated as of Exhibit 10(a) to Form 10K for the year
February 16, 1990 between the Company ended December 31, 1989.
and John J Cassese.
10(b) Employment Agreement dated as of Exhibit 10(g) to Form S-3 dated August
January 1, 1997 between the Company and 14, 1997.
William J Murphy.
10(c) Employment Agreement dated as of March Exhibit 10(c) to Form 10K for the year
6, 1997 between the Company and Michael ended December 31, 1996.
J Shea.
10(d) Note Agreement dated as of March 15, Exhibit 10(i) to Form 10K for the year
1988 between the Company and ended December 31, 1988.
Massachusetts Mutual Life Insurance
Company.
10(e) 1991 Directors' Stock Option Plan, as Exhibit 10(g) to Form 10K for the
amended. fiscal year ended December 31, 1994.
10(f) 1994 Incentive Stock Option and Exhibit 10(h) to Form 10K for the
Appreciation Plan. fiscal year ended December 31, 1994.
</TABLE>
<PAGE> 102
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION INCORPORATED BY REFERENCE TO
- ------- ----------- ----------------------------
<S> <C> <C>
10(g) $15,000,000 Discretionary Line of Exhibit 10(h) to Form S-3a dated
Credit payable to Chase Manhattan Bank September 23, 1997.
dated as of June 30, 1997.
10(h) $10,000,000 Discretionary Line of Exhibit 10(h) to Form 10K for the
Credit from PNC Bank. fiscal year ended December 31, 1996.
23(a) Consent of Latham & Watkins (included Filed herewith.
in its opinion filed as Exhibit 5).
23(b) Consent of Grant Thornton LLP. Filed herewith.
23(c) Consent of KPMG Peat Marwick. Filed herewith.
24 Power of Attorney (included on page Previously filed.
II-4 of this Registration Statement).
99(a) Press Announcement Previously filed.
99(b) Form of Acceptance Previously filed.
</TABLE>
<PAGE> 1
Exhibit 5
[LATHAM & WATKINS LETTERHEAD]
LATHAM & WATKINS
ATTORNEYS AT LAW
53rd AT THIRD, SUITE 1000
885 THIRD AVENUE
NEW YORK, NEW YORK 10022-4802
TELEPHONE (212) 906-1200
FAX (212) 751-4864
__________
June 2, 1998
Computer Horizons Corp.
49 Old Bloomfield Avenue
Mountain Lakes, New Jersey 07046-1495
Re: Registration Statement on Form S-4
Computer Horizons Corp.
Ladies and Gentlemen:
In connection with the registration of 1,920,928 shares of common
stock, par value $0.10 per share (the "Shares"), of Computer Horizons Corp., a
New York corporation (the "Company"), under the Securities Act of 1933, as
amended (the "Act"), by the Company on Form S-4 with respect to an exchange
offer (the "Offer") to be made for the ordinary shares of 1 p. each in Spargo
Consulting Plc ("Spargo") filed with the Securities and Exchange Commission (the
"Commission") on May 22, 1998 (Registration No. 333-53381), as amended by
Amendment No. 1 thereto, filed with the Commission on June 2, 1998 (together,
the "Registration Statement"), you have requested our opinion with respect to
the matters set forth below.
In rendering this opinion, we have made such legal and factual
examinations and inquiries, including an examination of originals or copies
certified or otherwise identified to our satisfaction of such documents,
corporate records and instruments, as we have deemed necessary or appropriate
for purposes of this opinion.
<PAGE> 2
LATHAM & WATKINS
Computer Horizons Corp.
June 2, 1998
Page 2
In our examination, we have assumed the genuineness of all
signatures, the authenticity of all documents submitted to us as originals, and
the conformity to authentic original documents of all documents submitted to us
as copies.
We are opining herein as to the effect on the subject transaction
only of the internal laws of the State of New York, and we express no opinion
with respect to the applicability thereto, or the effect thereon, of the laws of
any other jurisdiction or as to any matters of municipal law or laws of any
local agencies within any state.
Subject to the foregoing, it is our opinion that the Shares have
been duly authorized and, when issued and delivered in exchange for ordinary
shares of Spargo in accordance with the terms of the Offer, will be validly
issued, fully paid and nonassessable.
We consent to your filing this opinion as an exhibit to the
Registration Statement and to the reference to our firm contained under the
heading "Legal Matters."
Very truly yours,
/s/ LATHAM & WATKINS
---------------------------------
Latham & Watkins
<PAGE> 1
Exhibit 23(b)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated January 29, 1998 (except for Note 2, as to
which the date is February 27, 1998), accompanying the consolidated financial
statements incorporated by reference in the Annual Report of Computer Horizons
Corp. on Form 10-K for the year ended December 31, 1997, and our report dated
January 29, 1998 (except for Note 2, as to which the date is February 27,
1998), accompanying the financial statement schedule included in that Form
10-K, which are incorporated by reference in this Registration Statement. We
consent to the incorporation by reference in the Registration Statement of the
aforementioned reports and to the use of our name as it appears under the
caption "Experts."
/s/ Grant Thornton LLP
GRANT THORNTON LLP
Parsippany, New Jersey
June 1, 1998
<PAGE> 1
Exhibit 23(C)
[KPMG AUDIT PLC LETTERHEAD]
Private & confidential
The Directors
Spargo Consulting PLC
31 Beaufort Court
Admirals Way
Waterside
South Quay
London
E14 9XL
2 June 1998
Dear Sirs
We consent to the inclusion in the registration statement (No. 333-53381) on
Form S-4 of Computer Horizons Corp. of our report dated 3 March 1998, with
respect to the financial statements of Spargo Consulting PLC for the year ended
31 December 1997 and to the reference to our firm as experts.
Yours faithfully
/s/ KPMG Audit Plc
KPMG Audit Plc
