SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
Form 10-K
(Mark One)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1996
OR
____ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to ______
Commission file number 0-15389
GROUP 1 SOFTWARE, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 52-1483562
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
4200 Parliament Place, Suite 600, Lanham, MD 20706-1844
(Address of principal executive offices)
(ZIP Code)
Registrant's telephone number, including area code: (301) 731-6300
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock $0.01 par value
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES __X__ NO____
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of the Registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K.
The aggregate market value of the voting stock held by non-
affiliates of the Registrant on June 21, 1996 was $6,861,328.
The number of shares of the Registrant's Common Stock outstanding
on June 21, 1996 was 4,293,697.
DOCUMENTS INCORPORATED BY REFERENCE:
Definitive proxy statement to be filed with the Securities and
Exchange Commission relating to the Company's 1996 Annual Meeting
of Shareholders (Part III of Form 10-K).
<PAGE>
Part I
Item 1. Business
The Company
Group 1 Software, Inc. ("Group 1" or the "Company")
develops, acquires, markets and supports specialized marketing
and mail management software. The Company markets a broad range
of software solutions in each of four major categories: Customer
Information Management, Database Marketing, Electronic Document
Composition and Mailing Efficiency. The operating systems
utilized for Group 1's products vary as to category. Products in
the first two categories - Customer Information Management and
Database Marketing - operate in client/server mode for UNIX or NT
server or workstations with client support in Windows 3.x, 95 and
NT. Electronic Document Systems currently run under MVS on IBM
and IBM-compatible mainframe computers as well as under UNIX and
IBM OS/2 on the PC. Mailing Efficiency products run on IBM and
IBM compatible mainframe computers, IBM AS/400, Digital, UNIX,
Microsoft NT and IBM OS/2 platforms as well as on IBM and IBM-
compatible microcomputers (PCs). The Company's Electronic
Document Systems support Kodak, IBM and Xerox print architectures
(AFP and Metacode) for high-speed, high-volume production laser
printing.
The Company distributes all of its products in North America
and its Electronic Document Systems throughout the world as well;
plans are underway to distribute additional Company products in
Europe. The Company has recently undertaken an initiative to
distribute its products in Latin American and the Pacific rim.
The Company believes it is a leading vendor of mailing efficiency
software products in North America.
Group 1's software products serve the needs of a wide
variety of clients, including those in the financial, insurance,
utility, manufacturing, retailing, hospitality, publishing and
mail order industries, plus service bureaus, associations and
various activities of educational institutions and governmental
agencies. In general, Group 1's software systems are designed to
minimize the costs and maximize the opportunity to sell products
and services to existing and potential customers. Group 1's
software systems also provide solutions where a need exists for
highly accurate name and address data or where address
information must be correlated with demographic or geographic
data. Other Group 1 systems provide highly effective document
preparation for customized forms or personalized correspondence.
This is achieved through the use of advanced document design
workstation software coupled with sophisticated host-based
document composition software, resulting in highly targeted and
individualized documents (e.g., statements, invoices, policies,
direct mail, etc.). The Company believes that the continuing
growth of database marketing, data warehousing and targeted,
direct communication, together with increased postal rates and
postage discounts for coded and/or sorted mail, can expand the
market potential for Group 1's existing and future products.
Group 1 also offers a broad variety of professional services
to its clients, including systems and business analysis,
installation assistance, operations support, programming
services, technical education and training and operational
reviews. These services are designed to assist clients in
obtaining maximum utilization from their Group 1 products and/or
in improving efficiency and effectiveness of their business
operations.
The Company markets its Customer Information Management,
Database Marketing, and Electronic Document System directly to
its clients in North America and in the United Kingdom and
through distributors in Europe. Mailing Efficiency products are
marketed directly for large system configurations and through a
dealer and distributor network for PC applications.
Group 1 Software, Inc. is incorporated under the laws of the
state of Delaware. As of March 31, 1996, COMNET Corporation, a
publicly traded Delaware corporation, owned approximately 81.2%
of the Company's issued and outstanding shares of common stock.
The terms "Group 1" and the "Company" are used herein to refer to
Group 1 Software, Inc. and its wholly owned subsidiaries. The
executive offices of Group 1 are located at 4200 Parliament
Place, Suite 600, Lanham, Maryland 20706-1844, and its telephone
number at that location is (301) 731-2300.
Markets Served
Group 1 markets its products within a broad span of
industries to fulfill customer information management, database
marketing, database publishing/electronic printing and mailing
efficiency requirements. Included among the industry groups
served by Group 1 are banking, insurance, credit card companies
and financial institutions, retailers, hotels, catalog mailers,
publishers, manufacturers, telecommunication companies,
associations, educational institutions, fund raisers and
governmental activities. All of these industry groups use Group
1's mailing efficiency systems, although use by retailers,
catalog mailers and publishers is particularly significant due to
the large volume of heavy and expensive mail pieces typically
involved. Associations, educational institutions and fund
raisers are also extensive users of Group 1's list management and
personalization products. The Smart Marketing Suite recently
introduced for the PC integrates mailing efficiency, file merge
and deduplication, and mail preparation functions in an
integrated desktop marketing tool for small businesses.
The banking and insurance segments, while requiring address
correction products, additionally use Group 1's products to build
and maintain Customer Information Systems (CIS) and to clean
transaction based, operational data prior to loading into a data
warehouse. Both CIS and data warehouses are being built by these
organizations primarily to provide a complete picture of their
customers and their business. Geographic and demographic
overlays may be used to gauge market penetration, demographic
targets and competitive position. Cross-selling opportunities
among groups can also be identified. While banking and insurance
organizations have led in the CIS applications of Group 1
products, such applications have potential within many other
market segments as well. Banking and insurance organizations
also have increasing need for software tools to assist in certain
record keeping and analysis used to demonstrate compliance with
government regulations. These industry segments use Group 1's
geocoding and demographic coding products for Credit Reporting
Act and Home Mortgage Disclosure Act compliance.
Enterprises with large sales organizations are increasingly
in need of a closed-loop sales and marketing automation system
that can track every communication with a prospect or existing
customer. Group 1's multi-module sales and marketing automation
system supports complex global territories plus direct and
indirect sales channels, allowing businesses to manage sales
opportunities more effectively. Businesses may now fully
integrate account, contact, activity and resource management
functions with Oracle Office, Microsoft Office, Lotus Smart Suite
and knowledge based support products to maximize sales results.
Many industries who have adopted database marketing utilize
Group1 products that append demographic and geographic data to
provide enhancements to existing customer databases. Use of
other Group 1 systems provides automated predictive modeling to
identify more precise buying patterns, or by clustering, identify
differences in behavioral characteristics across product lines or
over time.
Hospitality and gaming organizations are becoming aggressive
marketers. Group 1's database marketing system extracts raw
customer data from existing client systems for conversion into a
useful marketing database. Meticulous filtering, correcting and
consolidating of large amounts of operational data from multiple
sources create a highly accurate database. The system provides
the capability to query for relevant customer information, and
to prepare target market profiles and market segmentation
analysis, to help plan more effective media and direct mail
programs. Organizations are able to discover the lifetime value
of each customer, as a guide to the development of stronger
relationships with the more profitable customers.
Information-intensive organizations are seeking automated
solutions that combine their customer data with today's advanced
printing technology to produce individualized, well-designed
business documents. These organizations, which include banks,
credit card processors, insurance companies, public utilities,
health care providers and others, use Group 1's electronic
document composition software (plus, in many instances, Group 1's
consulting services) to generate and manage customized statements
using conditional statement logic. The format, content and
language of each statement may be individually structured
relative to specific information contained in each customer
record; individualized marketing messages can also be
incorporated. Increasing numbers of organizations are
integrating complete marketing strategies with automated document
design and composition systems to improve sales and customer
satisfaction.
Products and Services
As of March 31, 1996, Group 1 offered a total of 89 software
products.
The sales and marketing automation products operate in a
true two-tiered client/server mode. Client support includes
Windows 3.x, 95, and NT. Server operating systems may be UNIX,
NT or Novell. WorldTrak supports Oracle, SYBASE, SQLServer,
SQLBASE databases. The data repository structure features
dynamic configuration. Data sources may be accessed and drilled
on RDBMS through a single interface to all customer-related data.
The database marketing products are offered for a variety of
operating systems. The DataDesigns database marketing system
with a proprietary database operates in a client/server
environment. The server software is the SQLBase RDMS which runs
under Windows 3.x ,95 or NT, OS/2 and Novell Netware; the client
utilizes Windows 3.x or 95. Support for SQLRouters is available
to access Oracle, SYBASE and SQLBASE databases.
The multi-platform electronic document composition system is
offered with enhanced PC-based WYSIWYG technology. The system
directly converts and imports IBM and Xerox laser printing
resources such as fonts, images and overlays. DOC1 can operate
in centralized, or distributed, departmental or desktop
environments under MVS, OS/2, OS/400, and UNIX operating systems.
The system is printer independent and supports AFP, Metacode and
PCL output.
The newest releases of the PC products are developed in a 32-
bit Windows environment. All Group 1 PC products support ".dbf"
files, the industry standard PC database software format.
Most of the mailing efficiency products are offered in an
Open Systems format which ensures that the specific application
operates on all major computer systems from NT to mainframe.
This approach allows the user to migrate from one platform to
another without lost productivity or added training.
The Company's software products can each operate on a stand-
alone basis or in conjunction with other Group 1 products to
create an integrated system tailored to a client's requirements.
In October, 1993, the Company purchased the Canadian mail
management and postal qualification PC software, plus certain
related technology and assets of Promark Software, Inc. In June,
1994, Group 1 purchased the postal discount and POSTNET Barcoding
PC software from PostSaver Systems, Inc. In December, 1994, the
Company purchased Archetype Systems, Ltd. Archetype Systems has
been renamed Group 1 Software Europe, Ltd. (Group 1 Europe). In
August, 1995 the Company purchased the database marketing
software and other assets of DataDesign, Inc. In November, 1995,
the Company purchased the sales and marketing automation software
and certain other assets of Premier One, Inc.
Customer Information Management
Group 1's WorldTrak sales and marketing automation system
provides closed-loop tracking of all prospect and customer
inquiries. World Traks's user-definable workflow allows clients
to tailor the system to match their sales and marketing
processes. Enhanced reporting, campaign management, sales
pipeline management and sales forecasting are streamlined to
provide improved market analysis. A client-server based system,
it maintains closed-loop sales, marketing and service
information to allow for improved management of the prospect,
customer and supplier relationship. WorldTrak records the
characteristics of all types of marketing, sales and support
efforts, including media advertising and telemarketing. This
relationship-driven system consolidates all activity to enable
measurement of the quality of leads, return on marketing
investment and total cost of marketing and selling. WorldTrak
supports international business disciplines, helping to ensure
that language, cultural and geographic issues affecting global
business operations are properly addressed.
To process name and address data for Customer Information
Files (CIF's) reliably, Group 1 offers the NADIS System (Name and
Address Data Integrity Software). An expert system technology,
NADIS offers the most advanced capabilities to ensure data
integrity and to identify all relationships within and across
files.
Database Marketing
Group 1's DataDesigns database marketing system allows its
user to develop a composite profile of the best customers and
prospects. Raw customer data is extracted from existing client
systems and converted into a useful marketing database.
Meticulous filtering, correcting and consolidating of the large
amounts of operational data from multiple sources creates a
highly accurate database. The system provides the capability to
query for relevant customer information and to prepare target
market profiles and market segmentation analyses, to help plan
more effective media and direct mail programs. Organizations are
able to discover the lifetime value of each customer as a guide
to the development of stronger relationships with the most
profitable customers.
Group 1's demographic and geographic systems allow census-
based information and longitude and latitude information compiled
by R.L. Polk & Company and the U.S. Bureau of the Census to be
appended to the customer or prospect database. The Generalized
Selection System provides a flexible method of target marketing
and mailing list manipulation.
The Company offers an automated predictive modeling tool
permitting the analysis of volumes of data quickly, to identify
buying patterns of individuals for more precise, profitable
targeted marketing. This sophisticated system is easy to use,
without the need for complex formulas. Other Group 1 products
provide data analysis and decision support tools to identify
motivational behavioral characteristics and changes across
products or over time.
Electronic Document Systems
Group 1's Electronic Document Composition system (DOC1)
makes possible advanced applications of electronic preparation of
individualized documents for worldwide markets. The software
supports all major printing architectures and can operate in
centralized, distributed or desktop environments under OS/2,
OS/400, MVS, and UNIX operating systems. DOC1 produces,
individualized statements, insurance policies, invoices, medical
bills, letters, etc. that allow one-on-one communication with the
recipient. The system is a truly visual application that allows
the user to place text, images and graphics on the page in a
dynamic WYSIWYG process. DOC1 can be integrated with Group1's
MailStream Plus system to produce output documents in a sequence
that provides USPS presorting discounts.
Group 1's Automated System for Advanced Printing (ASAP) is a
complete system comprising batch and on-line components to
create, print and manage individualized business documents. The
system uses conditional statement logic and variable processing
to generate customized documents such as statements, invoices,
and policies, all based on customer-unique information. The
system is a tailored solution for IBM and IBM-compatible
mainframes, implemented to client specifications. ASAP features
a menu-driven interface that lets users define documents
interactively, as well as manage printer resources and documents
within a secure environment. The system supports all major
printing architectures.
ASAP is used to create, compose, edit and produce direct
mail, mass correspondence and other forms of written material on
a highly individualized basis. Specific information for each
individual can be extracted from computer databases for
incorporation into a mail piece. Words, sentences and/or entire
paragraphs can be automatically added, changed or deleted based
upon the target recipient's information file and the creative
wishes of the user. The resulting personalized letters, forms,
coupons, reports, labels and other correspondence can be produced
economically on high-speed laser, impact or ink-jet printers.
Postal Discount and Mailing Efficiency
Group 1's postal discount and mailing efficiency software
products provide a fully automated means for clients to take
advantage of significant postal discounts offered in both the
United States and Canada for presorted and coded mail. Within
this group of software products are also the tools to improve
lettershop efficiency, palletize mail, and speed mail delivery,
allow in-plant truck loading and produce the necessary United
States Postal Service (USPS) reports and Canada Post Corporation
(CPC) statements of mailing.
All appropriate Group 1 products are Coding Accuracy Support
System (CASS) and Presort Accuracy, Validation and Evaluation
(PAVE) certified by the USPS. These products allow mailers to
qualify for enhanced carrier route, presort and automation postal
discounts and to optimize discounts among various postal rate
categories. Clients can currently save nearly 28% of the cost of
First-Class mail and up to 48% of the cost of Standard mail by
presorting and coding. Significant savings can also be achieved
with other classes of mail. Similar benefits are provided to
Canadian mailers using Group 1's products accepted under the
Software Evaluation and Recognition Program (SERP) of(CPC).
Canadian clients can avoid the $0.05 per piece surcharge by
demonstrating an address accuracy level of at least 90%, and can
qualify for certain other postal rate incentives.
Group 1's list management systems allow clients to convert
name and address lists into desired formats, to standardize
address information, to identify and/or eliminate duplicates on
business and consumer mailing files and to make targeted
demographic and test-cell selections. This software also adds or
verifies ZIP Codes and postal codes for the United States and
Canada.
Group 1's PC-based products include a specialized database
management system designed specifically to handle mailing lists,
and postal discount systems which allow mailers to qualify for
various discounts depending on postal rate category. A stand-
alone product is also available that is designed to remove
duplicates from address lists on the most popular database
management systems; this system can print virtually any type of
label.
Professional Services and Customer Support Services
Professional services are available including operations
support, systems analysis, programming services, technical
education and training, and operational reviews. These services
are designed to assist clients in obtaining maximum utilization
from their Group 1 products and in improving other areas of their
operations.
Group 1 offers with its product licenses an annual service
agreement which provides telephone support and continuing updates
and enhancements, as available, to its products and
documentation. Educational and training seminars specific to
Group 1 products are offered as part of the initial product
licensing agreement at no additional charge; thereafter, such
seminars, together with a variety of more general educational
seminars, are available for a fee.
Pricing
The Customer Information Management and Database Marketing
software products offered by the Company carry one-time perpetual
license fees of $5,000 to $175,000 except for the Demographic
Coding System for which a full national package is priced on an
annual license basis at $50,500 (regional editions are
available). A complete Group 1 mail and list management system
would have a list price of more than $136,000. For PCs, products
are offered for suggested retail prices from $295 to $5,995.
The DOC1 software product carries a one-time perpetual
license fee ranging from $50,000 to over $400,000 depending on
platform chosen, number of workstations and number of composition
systems licensed. Enterprise-wide corporate licenses of DOC1 are
available at additional costs generally exceeding $250,000.
License agreements and products sold to distributors
generally call for payment in full, 30 days after execution,
although extended payment terms may be granted. Alternatively, a
customer may elect an installment payment program (typically from
one to five years) with a minimum down payment of 10% of the
license and first year maintenance fees, and an interest charge
of 10% to 12% per annum depending on credit-worthiness. Actual
prices and terms charged by the Company for its products and
services may reflect volume and other discounts.
To receive maintenance, enhancements and telephone support
for of the Company's software products, a customer must pay an
annual fee in advance which is presently 16.5% (currently 15% in
the U.K. and the European marketplace.) of the then-current license
fee for the product. U.S. and Canadian postal master files are
available for an additional fee. A service and enhancement
agreement is available for an annual fee of $295 each for certain
of the Company's PC products.
Licensing
With the exception of the Demographic Coding System, the
Company's products are licensed on a perpetual "right to use"
basis pursuant to non-exclusive license agreements. The
Demographic Coding System is licensed on an annual basis. The
Company does not sell or transfer title to its software products
to clients. A client is generally entitled to use a product only
for internal purposes on a single computer at a single location.
Client/server implementations are available for DataDesign and
WorldTrak and LAN network versions for PC products are also
available. Multi-site, multi-computer corporate license
agreements are available as well. Certain postal products are
required by the USPS and CPC regulations ("CASS" and "SERP",
respectively) to have an expiration date (quarterly or monthly)
and must be under subscription or re-licensing arrangements with
the Company in order to be used for postal discounts or price
qualification.
The Company warrants that the majority of its products will
perform substantially in accordance with their standard
documentation for the defined warranty period or as long as a
service agreement is in effect, whichever is longer. The
software is generally licensed in conjunction with a first year
maintenance agreement to provide an initial warranty for twelve
months from the date of the license agreement. Microcomputer
software is warranted for ninety days from date of purchase
against defects in material and workmanship and against
operational failures.
Customers
The Company's customer base includes approximately 2100
clients who have licensed one or more of the Company's large
software systems. In addition, over 26,600 of Group 1's PC
software systems have been licensed. The Company believes that
it is a leading vendor of list and mail management software in
North America.
The Company's clients range from small businesses to a large
number and broad variety of the foremost businesses and other
organizations in North America and Internationally. Included are
utilities such as Pacific Gas and Electric and Pepco, telecommunication
companies such as AT&T and MCI; major banks such as Citibank, National
Westminster Bank, Bank One, Chase Manhattan Bank, and Banque Nationale du
Canada; insurance companies such as The Hartford Insurance Group,
Metropolitan Life, and Standard Life of Scotland; publishers such
as Time, Inc., McGraw-Hill, and Encyclopedia Britannica; computer
services companies such as EDS and Neodata; financial services
companies such as Prudential Securities, Charles Schwab and
General Electric Credit; retailers such as Nordstrom and Wal-
Mart; manufacturers such as GTE, Caterpillar, Eastman Kodak,
General Mills and Xerox; governmental bodies such as the U.S.
Senate, U.S. Customs and U.S. Government Printing Office; credit
companies such as GE Data Services and TRW Information Services;
direct marketers such as Publishers Clearing House, Lands End and
L.L. Bean; service companies such as American Express, Trans
World Airlines, Avis and Tru Green Chem Lawn; educational
institutions such as The Johns Hopkins University and MIT; health
and leisure companies such as Nordic Track; non-profit service
groups such as The Girl Scouts of America, National Geographic
Society and AARP; cultural organizations such as the Metropolitan
Museum of Art and Metropolitan Opera Association; and hospitality
and entertainment companies such as Marriott, Mirage Resorts, and
Westin Hotels. The United States Postal Service is also a client
of Group 1.
All of the Company's operations are in the one business
segment broadly defined as marketing support software; during the
fiscal year ended March 31, 1996, four customers individually
accounted for more than 1% of the Company's revenue. No customer
accounted for 3% of revenue. Traditionally, the Company does not
have a material order backlog for its software products at any
given time. The Company recognizes maintenance and enhancement
revenue over the life of the service agreement, usually from one
to five years. International revenues account for less than 10%
of the Company's total revenue, although that percentage is
expected to increase with the continued growth of European
revenue and penetration into the South American market.
Sales and Marketing
Group 1 markets its software products in North America and
Europe through a direct sales and sales support force of 94
representatives located in the U.S., Canada and the United
Kingdom. To serve existing clients and to solicit new additions
to the client base, the Company has two sales and support offices
in the Washington, D.C. area and nine regional offices in the New
York City, Chicago, Los Angeles, Las Vegas, Atlanta, Dallas,
Minneapolis, Toronto and San Juan metropolitan areas. A European
office is located in the London, England metropolitan area.
The Group 1 sales organization is supported by a
comprehensive marketing program administered from the Company's
Lanham, Maryland headquarters. Marketing is conducted through
direct mail, print advertising, trade show exhibitions and
speaking engagements, product training seminars, telemarketing
and a broad variety of public relations activities including the
Group 1 Report and the annual Group 1 Software Users Conference,
which was attended by over 400 customers in fiscal 1996.
The Company has entered into a software distribution
agreement with a Swedish company to serve Scandinavia and an
Australian company to serve the Australian and New Zealand markets.
Through its Group 1 Europe subsidiary, the Company has entered
into software distribution and support agreements for the DOC1
product with companies throughout Europe. These agreements
provide for a royalty payment to the Company, with the
distributor performing sales and marketing, customer service and
support activities. Group 1 continues to pursue additional
international sales and marketing opportunities for its products.
The Company's PC software products are marketed to end-users
through the Company's developing U.S. and Canadian dealer and
distributor network.
The Company has entered into joint marketing agreements with
a number of business partners including IBM, Xerox, Data General
Corp., R.L. Polk, Campaign Mail & Data, the Harris Group,
MapInfo, Advanced Software Application Corp., Software Pursuits,
Mastersoft International Pty., Geographic Data Technology,
Claritas/NPDC and OBIMD International. Generally, the agreements
provide for distribution of Group 1 products in conjunction with
the business partner's products. A sale may arise from either
sales organization, and territories are non-exclusive. The
agreements provide for a commission payment to Group 1 when it
has contributed to a sale of the other company's products.
Conversely, Group 1 may pay a commission when a partner
contributes to a sale of Group 1 products or services.
Support
Group 1 believes that effective support of its customers and
products has been a substantial factor in the Company's success
to date and will continue to be so in the future. As of March
31, 1996, over 85% of the Company's large systems customers were
enrolled in the product maintenance and enhancement program.
Customer support for these software products is provided by
telephone for assistance in product installation and problem
resolution during normal business hours. A telephone support
help line is also provided for PC products. Automated call
tracking, client-specific call routing and on-line bulletin board
services are also provided for maintenance customers. Customer
support is provided by telephone and, if necessary for large
systems, on-site by qualified Company personnel. Group 1 Europe
also has modem links with many of its worldwide customers to
provide even higher levels of mission-critical support. In the
fiscal years ended March 31, 1996, 1995 and 1994, maintenance and
enhancement fees represented approximately 37%, 42% and 43%,
respectively, of the Company's revenue.
Professional services, including operations support,
business analysis, programming services, technical education and
training, and operational reviews, are provided at the client's
location and at Group 1 training facilities throughout the U.S.,
Canada and the U.K.
Product Development
The computer industry is characterized by rapid change in
hardware and software technology and in user needs, requiring a
continuing expenditure for product development. It is likely
that such circumstances will continue in the future.
Accordingly, Group 1 must be able to provide new products and to
modify and to enhance existing products on a continuing basis to
meet the requirements of its customers and of regulatory
agencies, particularly the USPS and CPC. The Company may also
have to adapt its products to accommodate future changes in
hardware. To date, the Company has been able to adapt its
products to such changes and believes that it will be able to do
so in the future. The Company also evaluates externally
developed products that can be acquired or licensed and
subsequently marketed through the Group 1 sales force and
distribution network. Whether the product is developed
internally or acquired from another company, Group 1 considers it
important to control the quality, marketing, distribution,
enhancement and evolution of each of its products. Quality
assurance testing of the Company's new or enhanced products is
conducted by teams of experienced individuals drawn from all
segments of the Company's organization under the direction of
testing specialists.
New product development during fiscal year 1996
Significant investment was made during the year in new
software development for migration of a variety of products to
the Open Systems platform. Additionally, extensive work was
performed on enhancing existing mainframe, midrange and open
system products.
New Open Systems Products
During the year, the Company released Open Systems versions
of Canadian Code-1 Plus, Mail Canada Plus, Generalized Selection
Plus and I/O Jet Plus for use on a variety of platforms.
Existing Open Systems, IBM mainframe and midrange Products
Enhancements were made during fiscal 1996 to on-line and
batch products to improve functionality and ease of use, and to
accommodate changes in the marketplace and in postal regulations.
The personalization products were enhanced to increased
functionality and to take advantage of a broader range of
electronic printing technologies. Additionally, improvements
were made to the Company's existing CODE-1 Plus and the Canadian
mail products to meet new USPS and CPC certification and
regulatory requirements. Significant investment was made in the
MailStream products for all platforms to implement a major
revision in the classification of mail and the discount
structures related to mail preparation. These products were
released to the market in May, 1996.
Enhancements were also made to the previously released Open
Systems versions of CODE-1 Plus, Geographical Coding System,
MailStream Plus, Palletization Plus, POSTNET Barcoding, Labels
Printing Plus, EZ Case Plus and Merge/Purge Plus.
The Company also committed substantial resources to the
development and enhancement of new products:
DOC1 version 2.2 was integrated with the Company's
MailStream Plus presorting product, and also provides additional
operational efficiencies such as direct importation of IBM and
Xerox printer resources, the provision of multiple libraries of
document objects, and enhanced post-processing capabilities. The
new release also has more desktop publishing-like document design
capabilities, eliminating costly design and testing of
conditional documents. Version 2.2 provides dynamic page layout
and direct text importation from PC word processors. Multi-
lingual versions of documents may now be processed within a
single print run.
A Graphical User Interface (GUI) to the Open Systems product
line was introduced to provide enhanced ease of use and reduced
training needs for a large segment of the customer base.
Utilizing Microsoft Windows based technology, these productivity
workstations seamlessly interface with most of the supported Open
Systems hardware platforms.
The DataDesigns database marketing system was integrated
with the Company's Canadian PC address standardization product.
Automation of the data import and installation and system
configuration was undertaken, with completed elements delivered
with current installations. Enhanced reporting and additional
interfaces to 3rd party systems were also completed during the
year. User interfaces were improved to current SQL Windows
standards.
WorldTrak version 3.0, to be released in mid-FY97, will
provide support for Windows 95 and a completely new user
interface. Also included will be enhanced channel management,
opportunity management, reporting and scheduling modules.
PC Products
In March, 1996 Group1 released the Smart Marketing Suite
which seamlessly integrates the individual applications of
AccuMail and ProSort, with anticipated future functionality of
database management and intelligent data merging. The suite is
Windows 95 compliant, using the latest 32-bit technology with a
common interface that allows ease-of-use task processing.
AccuMail 5.0 in 32-bit Windows was released with a smaller
database configuration and improved coding accuracy. Changes
were also made to comply with CASS and other regulatory
requirements.
ProSort 2.0 was released in September, 1995 with increased
speed, second class mail sortation and ASCII file support.
ProSort was also PAVE certified by the USPS. In March, 1996 a 32-
bit Windows version was released.
The Canadian PC products for Windows and DOS were enhanced
for additional functionality and compliance with CPC regulatory changes.
SmartSort 5.0, to be released in early fiscal 1997, is the first
Windows-based mail sortation software for Canadian address lists.
Products acquired during fiscal year 1996
The DataDesigns system is a desktop database marketing
system designed specifically for the hotel and gaming industries
but adaptable to other industry applications. Developed
utilizing GUPTA's SQL Windows and C++ , data is captured from
virtually all computing platforms - from standalone PCs to
networks to midrange and mainframe computers. Data can come from
any relational or non-relational database system including
Informix, Oracle, SYBASE, SQLBASE and DB2. The DataDesigns
system is a client/server configuration; the server can be any NT
server or workstation with a Windows PC as the Client.
The WorldTrak sales and marketing automation system supports
all client/server architectures including Intel and RISC-based
systems, and operating systems supported by RDBMS vendors.
Developed utilizing GUPTA's SQL Windows, the system supports the
most popular databases, including SYBASE, Oracle, Microsoft SQL
Server and SQLBASE. The client system operates under Windows
3.x, 95 and NT.
Products licensed for distribution
In May, 1996 Group 1 and OBIMD International of Paris,
France entered into a joint venture under which Group 1 will
market PC-based Universal Mailing software for address
correction, postal coding, postal sortation and an extensive
postal database developed by OBIMD. The software and database
will allow businesses to manage mailing lists and prepare mail
for more than 190 countries.
Group 1's portfolio of USA and foreign registered and common
law trademarks exceeds seventy marks. Included among those marks
are AccuMail, ArcList, CODE -1 Plus, DOC1 and Group 1 Software
(name and logo). All other trademarks and respective marks
referenced in this report are the property of their respective
owners.
Competition
The computer software and service industry is highly
competitive, and no published data are available regarding the
Company's relative position in the markets in which it operates.
Although no major competitor currently competes against the
Company across its entire product line, competitive products
offer many similar features. The Company's existing and
potential competitors include companies having greater financial,
marketing and technical resources than the Company. The Company
believes that there are at least thirty-four companies which offer
products competitive with one or more of the Company's products.
The Company believes that at least six companies offer customer
information management systems and at least twelve companies
offer database marketing systems. At lease four competitors are
in the document composition and production marketplace. For
mailing efficiency products, at least two competitors offer
products that compete with the Company on Open Systems and
mainframe platforms. During the year, the Company continued to
experience strong competition in the market for postal coding and
presorting software from these competitors. The Company believes
that at least ten companies offer PC products competitive with
one or more of the Company's products. There can be no assurance
that one or more of these competitors will not develop products
that are equal or superior to the products the Company expects to
market. In addition, many potential clients for which the
Company's products are targeted have in-house capability to
develop computer software programs.
The Company believes that the principal, distinguishing
competitive factors in the selection of its software products are
price/performance characteristics, marketing and sales expertise,
ease of use, product features and functions, reliability and
quality of technical support, integration of the product line and
the financial strength of the publisher. The Company believes
that it competes favorably with regard to these factors including
pricing and credit terms. The Company's primary strengths are
the technical capabilities of its personnel and products,
marketing and sales expertise, service and support, and industry
product leadership.
Product Protection
Group 1 regards its software, in source and object code, as
proprietary and relies upon a combination of contract, trade
secret and copyright laws to protect its products and related
manuals and documentation. The license agreements under which
clients use the Company's products generally restrict the
client's use to its own operations and always prohibit
unauthorized disclosure to third persons. Notwithstanding these
restrictions, it may be possible for other persons to obtain
copies of the Company's products. The Company believes that
because of the rapid pace of technological change in the computer
industry and, in addition, changes in postal regulations that
affect several core products, copyright and trade secret
protection are less significant than factors such as the
knowledge and experience of the Company's management and other
personnel and their ability to develop, enhance, market and
acquire new products.
Employees
As of March 31, 1996, Group 1 employed 288 persons on a full-
time basis. Of those employees, 164 were in management,
professional and technical positions, 102 in marketing, sales and
support, and 22 were in administrative positions. These numbers
do not include employees of COMNET Corporation who provide
certain support services to the Company. None of the Company's
employees is represented by a labor union, and the Company has
experienced no work stoppages. The Company believes its employee
relations are satisfactory.
Item 2. Properties
The Company's executive offices and headquarters occupy
approximately 46,600 square feet subleased from COMNET in a
building located at 4200 Parliament Place, Suite 600 in Lanham,
MD 20706-1844, a Washington, D.C. suburb. COMNET's lease expires
in 2004. COMNET has options to lease additional space at
specified periods during the term and to extend its lease. In
addition, the Company leases office space for twelve regional
offices. During the year ended March 31, 1996, rental expenses
for these properties totaled $840,400. See notes 14 & 15 of
notes to consolidated financial statements.
Item 3. Legal Proceedings
The Company is not a party to any legal proceeding which, in
its belief, after review by legal counsel, could have a material
adverse effect on the consolidated financial position or results of
operations of the Company.
Item 4. Submission of Matters to a Vote of Security Holders
The following matters were submitted to, and approved by,
the required vote of security holders of the Company at the
Company's most recent annual Shareholder's meeting held on
September 12, 1995.
1. To elect three (3) directors to hold office until the
third annual meeting of stockholders of the Company
following their election and until the election and
qualification of their successors.
Nominees For Withheld
Joseph R. Sullivan 4,040,487 121,908
Charles A. Crew 4,040,487 121,908
Charles A. Mele 4,040,487 121,908
2. To approve the adoption of the Company's 1995 Incentive
Stock Option, Non-Qualified Stock Option and Stock
Appreciation Unit Plan.
For Against Abstain
3,815,981 339,277 7,137
3. To approve the adoption of the Company's 1995 Non-
Employee Directors' Stock Option Plan.
For Against Abstain
4,016,441 135,392 10,562
<PAGE>
Part II
Item 5. Market for Registrant's Common Stock and Related
Stockholder Matters
The trading of the common stock of the Company is reported
on the Nasdaq National Market System under the symbol GSOF. The
table below sets forth the highest and lowest closing prices
between dealers for the quarter indicated. These prices, as
reported by Nasdaq, do not include retail markup, markdown or
commissions and may not necessarily represent actual
transactions.
<TABLE>
Closing Common Stock Prices
<CAPTION>
1996 High Low 1995 High Low
<S> <C> <C> <S> <C> <C>
First-June 30, 1995 $12.50 $9.50 First-June 30, 1994 $9.75 $7.00
Second-September 30, $26.00 $10.75 Second-September 30, $12.13 $7.25
1995 1994
Third-December 31, $13.50 $8.50 Third-December 31, $10.25 $8.00
1995 1994
Fourth-March 31, 1996 $9.75 $7.50 Fourth-March 31, 1995 $10.00 $9.25
</TABLE>
No cash dividends have been paid on the Company's common
stock. The Board of Directors intends to retain, for the
foreseeable future, the Company's earnings for use in the
development of the business.
At June 21, 1996, there were approximately 560 holders of
record of the Company's common stock, including persons who
wished to be identified as having an interest in shares held or
recorded in "street name" with broker-dealers.
Item 6. Selected Financial Data
<TABLE>
<CAPTION>
(In thousands except per share amounts) Year ending March 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Statement of Earnings Data:
Revenue $45,875 $37,921 $31,312 $31,706 $30,156
Earnings from operations $ 5,653 $ 5,073 $ 3,548 $ 5,814 $ 6,035
Net earnings $ 3,701 $ 3,272 $ 2,474 $ 3,796 $ 4,045
Earnings per share of common $ 0.86 $ 0.76 $ 0.57 $ 0.88 $ 0.94
stock <F1>
Weighted average number of
common shares outstanding: 4,325 4,310 4,312 4,310 4,303
Balance Sheet Data:
Working capital $ 5,424 $ 6,970 $ 8,403 $ 7,887 $ 6,287
Total assets $65,851 $55,181 $45,731 $40,065 $34,108
Long-term debt $ 320 $ 561 $ 719 $ 1,206 $ 388
Stockholders' equity $30,421 $26,624 $23,378 $20,902 $16,562
<FN>
<F1> See Notes 1 and 9 of Notes to Consolidated Financial
Statements.
</TABLE>
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations
1996 as Compared with 1995
For the year ended March 31, 1996, the Company's revenue was
$45,875,000 compared with $37,921,000 for the prior year. Net
earnings for the year were $3,701,000 compared with $3,272,000
for fiscal 1995. Earnings per share for fiscal year 1996 were
$0.86 compared with $0.76 per share for 1995. On December 31,
1994, the Company acquired Archetype Systems, Ltd. (renamed Group
1 Software Europe, Ltd.). The results of operations from that
subsidiary subsequent to the acquisition did not have a material
effect on the consolidated financial statements for fiscal 1995.
All of the Company's operations are in the one business
segment broadly defined as marketing support software; during the
fiscal year ended March 31, 1996, four customers individually
accounted for more than 1% of the Company's revenue. No customer
accounted for 3% of revenue. Traditionally, the Company does
not have a material order backlog for its software products at
any given time. The company recognizes maintenance and
enhancement revenue over the life of the service agreement, usually
from one to five years. International revenues account for less than
10% of the Company's total revenue, although that percentage is
expected to increase with the continued growth of European revenue
and penetration into the South American market.
Software license fees and related revenue of $25,828,000
represented an increase of 24% over the prior year attributable
primarily to new product sales. As a percent of total revenue,
software license and related revenue was 56% and 55% for fiscal
years 1996 and 1995, respectively.
License fees from Customer Information Management Systems
software increased by $808,000 over the prior year due mostly to
NADIS revenues; Database Marketing Systems license fees decreased
by $127,000 due to lower geographic and demographic license fees
offset in part by revenue from the newly-acquired DataDesigns
system. Licensing of Electronic Document Systems contributed
increased revenue of $1,745,000, due primarily to a full year of
European operations versus only four months the prior year.
Mailing Efficiency software revenues increased $2,609,000 over
the prior year due to the continued growth of the Open Systems
product suite; the increase also reflects a growth of $850,000 in
PC software revenue.
Maintenance and other revenue in fiscal 1996 of $20,047,000
increased by 17% over the prior year. Maintenance and other
services accounted for 44% of total revenue in 1996 versus 45% of
total revenue in 1995. Recognized maintenance contract revenue
increased over the prior year by $1,826,000, due primarily to the
continuing growth in the number of customers under maintenance
contracts. The maintenance renewal rate was 85% for fiscal
year 1996 compared with 83% in fiscal 1995.
Total operating costs and expenses for fiscal year 1996 were
$40,222,000 or 88% of total revenue compared with $32,849,000 or
87% of total revenue during the prior year. The increase in
operating costs and expenses as a percent of revenue is primarily
due to increased selling and marketing expenses.
Software license expense increased to $7,582,000 in fiscal
1996 from $6,453,000 the prior year, representing 30% and 31% of
software license and related revenue, respectively. The increase
in software license expense was related to increased amortization
of product development and acquisition cost as well as the direct
sales support activity related the DOC1 and NADIS products. PC
cost of sales also increased for the year due to the cost of
production and shipping.
Maintenance and other service expense increased to
$7,569,000 in the current year from $6,171,000 in 1995,
representing 37% and 36% of maintenance and other revenue,
respectively. The incremental cost was due primarily to an
increase of $1,309,000 in amortization expenses for the current
year reflecting the new and enhanced products released during
fiscal 1996 and fiscal 1995 for all computer platforms.
Amortization was 11% of total revenue in both years. Group 1
expects the amortization of software costs to continue to
increase due to development expenditures capitalized and to
recent software acquisitions. Other direct costs to fulfill new
customer orders and provide updates for existing customers
increased to 6% of total revenue from 5% the prior year due to an
increase in internal product distribution support personnel. The
Company expects the cost of maintenance and other service to
increase as the Company's customer base expands.
Research, development and indirect support expenses totaled
$2,628,000 in fiscal 1996 and $1,895,000 in the prior year, representing 6% and
5% of revenue, respectively. Expenses during fiscal 1996
increased due to additional internal management and technical
support requirements for the growing number of computer platforms
and specialized product applications. The Company expects these
expenses to continue to increase as the Company's product
applications increase.
Selling and marketing expenses totaled $15,897,000 or 35% of
revenue in fiscal year 1995, compared with $12,208,000 or 32% of
revenue the prior year. The increase in expenses reflects higher
sales compensation , travel and direct marketing expenses to
support increased sales activity for new products and markets.
General and administrative expenses increased $643,000 to
$4,928,000 or 11% of revenue, primarily as a result of increased
costs associated with a full year of operations in Europe and
establishing operations in Puerto Rico to address the South
American market. Additionally, professional services and
management fees to the parent increased over the prior year.
The provision for doubtful accounts of $1,618,000
represented a decrease of $219,000 from the prior year. This
expense decrease reflects a lower incidence of client payment
defaults in the current year versus the prior year.
Net non-operating income for the Company totaled $125,000 in
fiscal year 1996, which represents an increase of $51,000 as
compared with fiscal 1995. Interest income and gains on
investments increased $201,000, as compared with fiscal 1995 as
a result of the improved invested cash position of the Company
throughout the year. Interest expense increased $71,000 due to
increased capital lease obligations. Other expense increased by
$26,000 for foreign exchange losses and $53,000 for other items.
The Company's effective tax rate for both the 1996 and 1995
fiscal years was 36%.
1995 as Compared with 1994
For the year ended March 31, 1995, the Company's revenue was
$37,921,000 compared with $31,312,000 for the prior year. Net
earnings for the year were $3,272,000 compared with $2,474,000
for fiscal 1994. Earnings per share for fiscal year 1995 were
$0.76 compared with $0.57 per share for 1994. On December 31,
1994, the Company acquired Archetype Systems, Ltd. (renamed Group
1 Software Europe, Ltd.). The results of operations from that
subsidiary subsequent to the acquisition did not have a material
effect on consolidated financial statements for fiscal 1995.
Software license fees and related revenue of $20,793,000
represented an increase of 27% over the prior year attributable
primarily to new product sales. As a percent of total revenue,
software license and related revenue was 55% and 52% for fiscal
years 1995 and 1994, respectively.
License fees from Customer Information Management systems
software increased by $115,000 over the prior year due mostly to
NADIS revenues; Database Marketing systems license fees increased
by $896,000 due to geographic and demographic licenses fees.
Licensing of Electronic Document Systems contributed increased
revenue of $2,449,000, due primarily to one fiscal quarter of the
new European operations plus six months of DOC1 revenues in the
U.S. versus none in the prior year. Mailing Efficiency software
revenues decreased $413,000 versus the prior year due to the
decline in mainframe license which was partially offset by the
growth of the Open Systems product suite plus an increase of
$1,317,000 in PC software revenue as a result of new products
added during this and the prior year.
Maintenance and other revenue of $17,128,000 increased by
14% over the prior year. Maintenance and other services
accounted for 45% of total revenue in 1995 versus 48% of total
revenue in 1994. Recognized maintenance contract revenue
increased over the prior year by $2,133,000, due primarily to the
continuing growth in the number of customers under maintenance
contracts. The maintenance renewal rate was 83% for the fiscal
year as compared with 82% in fiscal 1994.
Total operating costs and expenses for fiscal year 1995 were
$32,849,000 or 87% of total revenue compared with $27,764,000 or
89% of total revenue during the prior year. The decrease in
operating costs and expenses as a percent of revenue is due to
many operating costs not increasing in proportion to the revenue
increase.
Software license expense increased to $6,453,000 in fiscal
1995 from $4,920,000 the prior year, representing 31% and 30% of
software license and related revenue, respectively. Software
license expense increased primarily due to a greater mix of
royalty related products distributed by the Company. PC cost of
sales also increased for the year due to the increases in sales
volume. The Company expects that royalty expense will continue
to increase as the sales of these products increases.
Maintenance and other service expense increased to
$6,171,000 in the current year from $5,076,000 in 1994,
representing 36% and 34% of maintenance and other revenue,
respectively. The incremental cost was due primarily to an
increase of $882,000 in amortization expenses for the current
year reflecting the new and enhanced products released during
fiscal 1995 and fiscal 1994 for all computer platforms.
Amortization was 9% of total revenue in both years. Group 1
expects the amortization of software costs to continue to
increase due to the development expenditures capitalized and from
recent software acquisitions. Other direct costs to fulfill new
customer orders and provide updates for existing customers
decreased to 5% of total revenue due to the Company's cost
containment efforts in the current year from 6% the prior year.
The Company expects the cost of maintenance and other service to
increase as the Company's customer base expands.
Research, development and indirect support expenses totaled
$1,895,000 and $1,830,000 in the prior year, representing 5% and
6% of revenue, respectively. Although the percent of revenue has
declined, actual expenses during fiscal 1995 increased due to a
reduced rate of total research and development expenditures
capitalized as software development costs. This increased
expense reflects additional internal management and technical
support requirements for the growing number of computer platforms
and specialized product applications.
Selling and marketing expenses totaled $12,208,000 or 32% of
revenue in fiscal year 1995, compared with $11,113,000 or 35% of
revenue the prior year. The increase in expenses reflects higher
sales compensation and direct marketing expenses to support the
increased sales activity for new products and markets.
General and administrative expenses increased $1,391,000 to
$4,285,000 or 11% of revenue, as a result of increased
profitability-based compensation, professional services and
management fees to the parent.
The provision for doubtful accounts of $1,836,000
represented a decrease of $93,000 from the prior year. The
decrease in this expense reflects a lower incidence of client
payment defaults in the current year versus the prior year.
Net non-operating income for the Company totaled $75,000 in
fiscal year 1995, which represents an increase of $99,000 as
compared with an expense of $24,000 for fiscal 1994. Interest
income increased $47,000, as compared with fiscal 1994, as a
result of the improved invested cash position of the Company
throughout the year. Interest expense decreased $26,000 due to
reduced capital lease obligations. Other expense decreased by
$26,000.
The Company's effective tax rate for the 1995 fiscal year
was 36% compared with 30% for fiscal 1994. The increase in the
current year was due to lower research and development credits
versus those in the prior year. The prior year included
retroactive research and development credits available as a
result of changes in the then current tax regulations.
Seasonality and Inflation
The Company in the past has experienced greater sales and
earnings in the January-March quarter, the fourth quarter of its
fiscal year, although there can be no certainty that this will
occur in the future. This seasonal factor is believed to be
attributable to buying patterns of major accounts and also to a
fiscal year incentive program for Company sales representatives.
The Company's revenue and resultant earnings have shown
substantial variation on a quarter-to-quarter basis. A
substantial portion of revenue in any given quarter is comprised
of a relatively limited number of high-value software license
agreements. These license agreements represent the culmination
of a sales cycle averaging three to six months. Any
significant lengthening in the sales cycle can have the effect
of moving revenue from one quarter into the next, contributing to
quarter-to-quarter variations.
Prices remain stable for the Company's products. Inflation
directly affects the Company's cost structure principally in the
areas of employee compensation and benefits, occupancy and
support services and supplies.
Liquidity and Capital Resources
The Company's working capital was $5,424,000 at March 31,
1996 as compared with $6,970,000 the prior year. The decrease in
working capital is due primarily to accruals for incentive
compensation and royalties. The current ratio was 1.2 to 1 at
March 31, 1996, compared with 1.3 to 1 at March 31, 1995. Note
that the current portion of deferred revenue related to
maintenance and enhancement contracts is included in current
liabilities. Accordingly, working capital and current ratios may
not be directly comparable to such data for companies in other
industries where similar revenue deferrals are not typical.
The Company provides for its cash requirements through cash
funds generated from operations. Additionally, the Company
maintains an uncollateralized $5,000,000 line of credit
arrangement with Signet Bank (Maryland), a major Mid-Atlantic
regional bank, with interest at the bank's prime rate. At March
31, 1996 and 1995 there were no short-term borrowings.
During fiscal 1996 net earnings of $3,701,000 plus non-cash
expenses of $8,829,000 provided a total of $12,530,000 cash from
operating activities. This amount was offset by increased
accounts receivable that required $9,786,000 which is the
combined result of higher year-end sales over the prior year-end,
increases in the amount of installment receivables and the
increased mix of large dollar contracts with extended collection
cycles versus the prior year. Deferred revenues increased cash
by $2,400,000, and other working capital items increased cash
provided by operating activities by $3,465,000. Cash flows from
investing activities are primarily expenditures for investments
in software development and capital equipment of $10,030,000.
Cash of $1,843,000 was generated from the sale of marketable
securities. Long-term debt was reduced by $328,000
The Company's practice of accepting license agreements under
installment payment arrangements substantially increases its
working capital requirements. Generally, these arrangements are
for a period of one to five years after a minimum down payment of
10% of the principal amount of the contract. Interest currently
ranges from 10% to 12%. In the years ended March 31, 1996, 1995
and 1994, the principal amount of installment agreements entered
into during the year represented 15%, 17% and 20% of the
Company's revenue, respectively. Installment receivables
included in accounts receivable are $11,769,000 and $8,995,000 at
March 31, 1996 and 1995, respectively. The Company continues to
experience a significant interest in financing of software
purchases by a broad range of customers, in every industry
segment served. The installment receivable balance, in addition
to the Company's policy of offering competitive trade terms of
payment, make it difficult to portray accurately a relationship
between the outstanding accounts receivable balance and the
current year revenues.
The Company continually evaluates the credit and market
risks associated with outstanding receivables. In the course of
this review, the Company considers many factors specific to the
individual client as well as to the concentration of receivables
within industry groups. The Company's installment receivables
are predominately with clients (service bureaus) who provide
computer services to the direct marketing industry (service bureaus).
Many of these clients have limited capital and insufficient assets to secure
their liability with the Company. The service bureaus are highly
dependent on the Company's software and services to offer their
customers the economic benefit of postal discounts and mailing
efficiency. To qualify for the U.S. Postal Service and Canada
Post Corporation postal discounts, service bureaus require
continuous regulatory product updates from the Company. The
service bureau industry is also highly competitive and subject to
general economic cycles, as they impact advertising
and direct marketing expenditures. The Company is aware of no
current market risk associated with the installment receivables.
Service bureau clients represent approximately $8,978,000, or
76%, of the Company's installment receivables at March 31, 1996.
As of March 31, 1996, the Company's capital resource
commitments consisted primarily of non-cancelable operating lease
commitments for office space and equipment. The Company believes
that its current debt services, minimum lease obligations and
other short-term and long-term liquidity needs can be met from
cash flows from operations. The Company believes that its long-
term liquidity needs are minimal and no large capital
expenditures are anticipated, except for the continuing
investment in capitalized software development costs which the
Company believes can be funded from operations. Historically,
the Company has been able to negotiate capital leases for its
acquisition of equipment.
Item 8. Financial Statements and Supplementary Data
See pages 21 through 36.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
___________________
To the Stockholders and
Board of Directors
Group 1 Software, Inc.
We have audited the accompanying consolidated balance sheets
of Group 1 Software, Inc. and Subsidiaries as of March 31, 1996
and 1995, and the related consolidated statements of earnings,
stockholders' equity and cash flows for each of the three years
in the period ended March 31, 1996. 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 Group 1 Software, Inc. and Subsidiaries as
of March 31, 1996 and 1995, and the results of their operations
and their cash flows for each of the three years in the period
ended March 31, 1996, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
June 26, 1996
<PAGE>
<TABLE>
GROUP 1 SOFTWARE, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
MARCH 31,
1996 1995
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,716,495 $ 1,619,119
Marketable securities 1,979,166 3,779,624
Trade and installment accounts receivable,
less allowance of $2,409,000 and $1,633,000 24,303,710 18,426,116
Income taxes receivable - - - 521,090
Deferred income taxes, net 1,931,000 2,060,000
Prepaid expenses and other current assets 2,657,443 2,386,809
---------- ----------
Total current assets 32,587,814 28,792,758
Installment accounts receivable, long-term 5,985,291 3,656,520
Property and equipment, net 3,029,856 2,595,047
Computer software, net 22,241,792 18,556,404
Other assets 2,006,415 1,579,901
---------- ----------
Total assets $ 65,851,168 $ 55,180,630
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,359,210 $ 2,441,638
Current portion of long-term debt 564,934 652,157
Accrued expenses 7,044,296 4,020,414
Accrued compensation 3,386,236 2,812,631
Current deferred revenues 12,649,544 10,899,993
Due to parent company 1,159,721 995,878
---------- ----------
Total current liabilities 27,163,941 21,822,711
Long-term debt, net of current portion 320,115 560,940
Deferred revenues, long-term 4,363,429 3,713,854
Deferred income taxes, net 3,583,000 2,459,000
---------- ----------
Total liabilities $ 35,430,485 $ 28,556,505
---------- ----------
Commitments and contingent liabilities
Stockholders' equity:
Common stock $0.01 par value; 10,000,000
shares authorized; 4,293,697 and 4,292,947
issued and outstanding 42,938 42,930
Preferred stock, $0.01 par value, 1,000,000
shares authorized - none issued and
outstanding - - - - - -
Capital contributed in excess of par value 5,188,873 5,183,913
Retained earnings 25,124,760 21,423,516
Unrealized loss on investments, net (2,175) (44,720)
Cumulative foreign currency translation 66,287 18,486
---------- ----------
Total stockholders' equity 30,420,683 26,624,125
Total liabilities and stockholders' equity $ 65,851,168 $ 55,180,630
========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
<CAPTION>
Year Ended March 31,
1996 1995 1994
<S> <C> <C> <C>
Revenue:
Software license and related revenues $ 25,785,598 $ 20,792,997 $ 16,340,061
Maintenance and other revenue 20,089,782 17,128,462 14,971,991
---------- ---------- ----------
Total revenue 45,875,490 37,921,459 31,312,052
---------- ---------- ----------
Costs and expenses:
Software license expense 7,582,297 6,453,283 4,920,535
Maintenance and service expense 7,569,039 6,170,855 5,076,139
Research, development and indirect 2,627,627 1,895,315 1,830,401
support
Selling and marketing 15,897,343 12,208,007 11,113,418
General and administrative 4,928,434 4,285,154 2,893,932
Provision for doubtful accounts 1,617,637 1,836,344 1,929,424
---------- ---------- ----------
Total costs and expenses 40,222,377 32,848,958 27,763,849
---------- ---------- ----------
Operating earnings 5,653,113 5,072,501 3,548,203
Non-operating income (expense), net 125,131 74,618 (24,252)
---------- ---------- ----------
Earnings before provision for income
taxes 5,778,244 5,147,119 3,523,951
Provision for income taxes 2,077,000 1,875,000 1,050,000
---------- ---------- ----------
Net earnings $ 3,701,244 $ 3,272,119 $ 2,473,951
========== ========== ==========
Earnings per share of common stock $ 0.86 $ 0.76 $ 0.57
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years Ended March 31, 1996, 1995 and 1994
<CAPTION>
Common Stock
Capital Unrealized Equity
$0.01 Contributed Gain/(Loss) Adjustment Total
Par in Excess of Retained from from Stockholders'
Shares Value Par Value Earnings Investments Translation Equity
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, March 31, 1993 4,292,572 $42,926 $5,181,667 $15,677,446 $ -.-.- $ -.-.- $20,902,039
Issuance of stock upon
exercise of options 375 4 2,246 - - - - - - - - - 2,250
Net earnings - - - - - - - - - 2,473,951 - - - - - - 2,473,951
--------- ------- ---------- ----------- -------- -------- -----------
Balance, March 31, 1994 4,292,947 42,930 5,183,913 18,151,397 - - - - - - 23,378,240
Gain on foreign currency
translation 18,486 18,486
Unrealized loss on
investments (44,720) - - - (44,720)
Net earnings - - - - - - - - - 3,272,119 - - - - - - 3,272,119
--------- ------- ---------- ----------- -------- -------- -----------
Balance, March 31, 1995 4,292,947 42,930 5,183,913 21,423,516 (44,720) 18,486 26,624,125
Issuance of stock upon
exercise of options 750 8 4,960 - - - 4,968
Gain on foreign currency
translation 47,801 47,801
Unrealized gain on
investments 42,545 42,545
Net earnings - - - - - - - - - 3,701,244 - - - - - - 3,701,244
--------- ------- ---------- ----------- -------- -------- -----------
Balance, March 31, 1996 4,293,697 $42,938 $5,188,873 $25,124,760 $(2,175) $66,287 $30,420,683
========= ======= ========== =========== ======== ======== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
GROUP 1 SOFTWARE, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended March 31,
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 3,701,244 $ 3,272,119 $ 2,473,951
Adjustments to reconcile earnings
from operations to net cash
provided by operating activities:
Amortization expense 5,073,224 3,774,768 2,905,634
Depreciation expense 837,077 723,011 587,783
Provision for doubtful accounts
receivable 1,617,637 1,836,344 1,929,424
Deferred income taxes 1,253,000 1,332,000 74,000
Net loss on disposal of assets - - - (5,044) - - -
Changes in assets and liabilities:
Increase in accounts receivable (9,786,047) (7,075,125) (1,855,260)
(Increase) decrease in prepaid
expenses and other current assets (308,589) (263,719) 542,843
(Increase) decrease in income
taxes receivable 521,090 (417,474) - - -
(Increase) in other assets
(426,534) (116,925) (129,236)
Increase (decrease) in accounts
payable (82,426) 460,807 344,590
Increase in accrued expenses 2,866,923 3,444,937 152,286
Increase (decrease) due to parent
company 163,843 418,211 (338,377)
Increase (decrease) in taxes
payable 730,584 (51,723) (32,608)
Increase in deferred revenues 2,399,126 1,692,876 2,860,028
---------- ---------- ----------
Net cash provided by operating
activities 8,560,152 9,025,063 9,515,058
---------- ---------- ----------
Cash flows from investing activities:
Purchase and development of computer
software (8,741,794) (5,741,347) (4,869,824)
Purchase of equipment and
improvements (1,288,704) (724,313) (1,223,299)
Purchase of marketable securities (18,067,097) (3,824,344) - - -
Sale of marketable securities 19,910,100
Note receivable from parent - - - 485,243 262,577
Advances to and payment for
acquisition of subsidiary, net of
cash acquired - - - (2,514,945) - - -
---------- ---------- ----------
Net cash used in investing activities (8,187,495) (12,319,706) (5,830,546)
---------- ---------- ----------
Cash flows from financing activities:
Proceeds from short-term borrowings 8,384,995 3,307,458 3,268,812
Reduction of short-term borrowings (8,384,995) (3,307,458) (3,268,812)
Reduction of long-term debt (328,050) (790,739) (517,207)
Proceeds from exercise of common
stock options and warrants 4,968 - - - 2,250
---------- ---------- ----------
Net cash used in financing activities (323,082) (790,739) (514,957)
---------- ---------- ----------
Net increase (decrease) in cash and
cash equivalents 49,575 (4,085,382) 3,169,555
Loss on currency translation 47,801 30,659
Cash and cash equivalents at beginning
of period 1,619,119 5,673,842 2,504,287
---------- ---------- ----------
Cash and cash equivalents at end of
period $ 1,716,495 $ 1,619,119 $ 5,673,842
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
Group 1 Software, Inc.Notes to Consolidated Financial
StatementsYears Ended March 31, 1996, 1995 and 1994
(1) Organization and Summary of Significant Accounting Policies
Organization
Group 1 Software, Inc. ("Group 1" or the "Company")
develops, acquires, markets and supports specialized marketing
and mail management software. The Company distributes all of its products
in North America and its Electronic Document Systems throughout the World.
The Company has recently undertaken an initiative to distribute its
products in Latin American and the Pacific rim.
Principles of Consolidation The consolidated financial
statements of the Company include the accounts of Group 1
Software, Inc. and its wholly-owned subsidiaries ("the Company").
All material intercompany transactions and balances have been
eliminated in consolidation. The Company is 81.2% owned by
COMNET Corporation ("Parent").
Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and reported
amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Revenue Recognition The Company recognizes revenue in accordance
with the American Institute of Certified Public Accountants'
Statement of Position 91-1 on Software Revenue Recognition.
Revenue from perpetual licenses and the portion of royalty
revenues not subject to future obligations is generally
recognized after execution of a licensing agreement and shipment
of the product provided that no significant vendor obligations
remain and the resulting receivable is deemed collectible by
management.
Maintenance and enhancement (post contract support) revenues
are deferred and recognized ratably over the life of each
contract. Costs related to performance under post-contract
support agreements are expensed as incurred. The amount of
deferred revenues at March 31, 1996 to be recognized during
subsequent fiscal years is:
1997 $12,649,544
1998 2,550,088
1999 1,218,991
2000 411,381
2001 and beyond 182,969
-----------
$17,012,973
===========
Contracts for professional services are negotiated
individually and are non-cancelable. The Company recognizes
revenues from professional service contracts using the percentage-
of-completion method as work is performed, measured primarily by
the ratio of labor hours incurred to total estimated labor hours
for each specific contract. When the total estimated cost of a
contract is expected to exceed the contract price, the total
estimated loss is charged to expense in the period when the
information is known.
Contract professional services revenue in the year ended
March 31, 1996 was recognized primarily using the percentage-of-
completion method as the work was performed. For the period
ended March 31, 1995 the completed contract was used; any
difference in revenue resulting from this change in accounting
method was immaterial to the consolidated financial statements
for 1995 and 1994.
Cash Equivalents Cash equivalents consist of investments with
original maturities of 90 days or less, which are readily
convertible into cash.Installment Accounts Receivable License
agreements may be executed under installment contracts, which
provide for interest charges and monthly payments with terms up
to five years. Interest income from such contracts, which is
included in software licenses and related revenue, was $440,000,
$406,000, and $391,000 in 1996, 1995 and 1994,
respectively.Property and Equipment
Property and equipment are stated at cost and are
depreciated using the straight-line method over their estimated
useful lives, ranging from three to ten years. Leasehold
improvements are amortized on a straight-line basis over the
shorter of their useful lives or the lives of the respective
leases.
Research and Product Development Research and product
development costs not subject to Financial Accounting Standards
Board ("FASB") Statement No. 86, "Accounting for the Cost of
Computer Software to be Sold, Leased, or Otherwise Marketed," are
expensed as incurred and relate mainly to the development of new
products and on-going maintenance of existing products.
Software development costs incurred subsequent to establishment
of the software's technological feasibility are capitalized.
Capitalization ceases when the software is available for general
release to customers. All costs not meeting the requirements for
capitalization are expensed in the period incurred. Capitalized
software development costs are amortized by the greater of (a)
the ratio that current gross revenues for the product bear to the
total of current and anticipated future gross revenues for that
product or (b) the straight-line method over the remaining
estimated economic life of the product including the period being
reported on. Costs for research and development incurred in
1996, 1995 and 1994 were approximately $9,068,000 $6,948,000 and
$6,563,000, respectively. Under FASB Statement No. 86, software
development costs amounting to $7,675,000, $5,089,000, and
$4,476,000, respectively, were capitalized. During the years
ended March 31, 1996, 1995 and 1994, amortization of capitalized
internally developed computer software costs, based on an
estimated economic life of no more than five years, was
$4,010,000, $3,430,000 and $2,665,000, respectively.
Marketable Securities
Concurrent with its purchase of investments during fiscal
1995, the Company adopted Statement of Financial Accounting
Standards ("SFAS") Statement No. 115, "Accounting for Certain
Investments and Debt and Equity Securities." The Company has
classified its investments as "available for sale" securities
which require that all unrealized gains and losses be reported,
net of tax, as a separate component of stockholders' equity. The
cost basis of the Company's investment portfolio as of March 31,
1996, which consisted of money market funds and mutual funds exceeded its
market value by approximately $2,100. In management's opinion,
the decline in the value of the investments was a temporary
decline.
Goodwill
The Company has classified as goodwill the cost in excess of
fair value of the net assets of companies acquired in purchase
transactions. Goodwill is being amortized on a straight-line
basis over periods not exceeding 9 years. Amortization charged
to operations amounted to $70,000, $44,000, $23,000, for 1996,
1995 and 1994, respectively. At each balance sheet date, the
Company evaluates the net realizable value of goodwill based upon
expectations of non-discounted cash flows and operating income.
Based upon its most recent analysis, the Company believes that no
impairment of goodwill existed at March 31, 1996.
Foreign Currency Translation
Assets and liabilities of the Company's foreign operation
are translated into U.S. dollars using rates of exchange in
effect at the balance sheet date. Revenues and expenses are
translated at the monthly average exchange rates. Gains and
losses from foreign currency transactions are included in the
results of operation currently, while those resulting from
translation of financial statement amounts are included as a
separate component of stockholders' equity.
Income Taxes The Company is included in the consolidated
Federal income tax return of its parent company, COMNET
Corporation ("COMNET"). The Company entered into a Federal tax
allocation agreement with COMNET, which provides for an
allocation of Federal income tax amounts to the Company based on
a computation of the amount of Federal income tax the Company
would have been required to pay, had the Company filed a separate
Federal income tax return. The Company's provision for Federal
income tax is computed on a separate company basis in a manner
consistent with the tax allocation agreement. The Company
uses the liability method of accounting for income taxes. Under
the liability method, deferred income taxes are recognized for
the tax consequences of temporary differences by applying
currently enacted statutory tax rates applicable to future years
to differences between the financial statements carrying amounts
and the tax bases of existing assets and liabilities.
Earnings Per Share Earnings per common share have been computed
based upon the weighted average number of the common and common
equivalent shares outstanding. Common equivalent shares result
from the dilutive effect of stock options, calculated under the
treasury stock method. The weighted average number of common
shares and equivalents used was 4,324,909 in 1996, 4,309,891 in
1995, and 4,312,423 in 1994.
Concentration of Credit Risk The Company designs, develops,
manufactures, markets and supports computer software systems to
customers in diversified industries. The Company performs
ongoing credit evaluations of its customers' financial condition
and generally requires no collateral. The Company's installment
receivables are predominately to clients who provide computer
services to the direct marketing industry (service bureaus).
Many of these clients have limited capital and insufficient
assets to secure their liability to the Company. The service
bureau industry is also highly competitive and subject to general
economic cycles as they impact advertising and direct marketing
expenditures. These clients represented approximately $8,969,863
or 76% of the installment receivables at March 31, 1996.
New Accounting Standards
The Financial Accounting Standards Board issued SFAS No. 121
regarding accounting for asset impairments. This statement,
which must be adopted by the Company for fiscal years beginning
April 1, 1996, requires that long-lived assets be reviewed for
impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Adoption of SFAS No. 121 is not expected to have a material
impact on the Company's financial statements.
The Financial Accounting Standards Board issued SFAS No. 123
regarding accounting for stock compensation. The Company plans
to adopt the proforma note disclosure requirements as prescribed
in SFAS No. 123 in fiscal 1997.
Reclassification Certain prior year amounts have been
reclassified to conform with the current year presentation.
(2) Accounts Receivable
Accounts receivable are comprised of the following:
March 31,
1996 1995
Trade $20,929,051 $14,721,017
Installment accounts receivable,
interest typically at 8.5% to 13%
11,768,950 8,994,619
Allowance for doubtful accounts (2,409,000) (1,633,000)
------------ ------------
30,289,001 22,082,636
Less non-current portion of
installment accounts receivable 5,985,291 3,656,520
------------ ------------
Current portion $24,303,710 $18,426,116
============ ============
(3) Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets are comprised of
the following:
March 31,
1996 1995
Prepaid expense $ 469,053 $ 632,426
Prepaid commission 801,912 646,935
Prepaid royalty 695,003 989,115
Other assets 691,475 118,333
------------ ------------
$2,657,443 $2,386,809
============ ============
Prepaid commissions and royalties primarily relate to
amounts paid, as of the balance sheet date, on maintenance and
enhancement revenues deferred into future periods.
(4) Property and Equipment
Property and equipment is comprised of the following:
March 31,
1996 1995
Data processing equipment $4,441,088 $3,864,973
Furniture and fixtures 2,258,358 1,672,088
Leasehold improvements 236,305 110,986
------------ ------------
6,935,751 5,648,047
Less accumulated depreciation and
amortization (3,905,895) (3,053,000)
------------ ------------
$3,029,856 $2,595,047
============ ============
(5) Computer Software
Computer software is comprised of the following:
March 31,
1996 1995
Developed software $30,247,944 $22,529,822
Acquired software 6,317,931 5,753,165
Software purchased for internal
use 3,021,556 2,563,162
------------ ------------
39,587,431 30,846,149
Less accumulated amortization (17,345,639) (12,289,745)
------------ ------------
$22,241,792 $18,556,404
============ ============
(6) Accrued Expenses
Accrued expenses are as follows:
March 31,
1996 1995
Accrued sales and other taxes $ 734,798 $ 818,470
Accrued royalties 953,636 1,160,294
Accrued sales incentives 301,556 255,494
Accrued rent abatements 39,402 166,769
Income taxes payable 854,926 124,342
Other accrued expenses 4,159,978 1,495,045
------------ ------------
$7,044,296 $4,020,414
============ ============
(7) Short-term Borrowings At March 31, 1996, the Company
maintained an uncollateralized $5,000,000 bank line of credit
arrangement with interest at the bank's prime rate (8.25% at
March 31, 1996). As of March 31, 1996 and 1995, there were no
borrowings under this line. The line of credit arrangement
requires the Company, among other things, to maintain certain
financial ratios. The Company was in compliance with all terms
of the credit arrangement during the reporting period.(8) Long-
term Debt Long-term debt consists of the following:
March 31,
1996 1995
Installment notes payable $ 702,035 $1,007,671
Capitalized lease obligations 183,014 205,426
------------ ------------
Sub-total 885,049 1,213,097
Less current portion 564,934 652,157
------------ ------------
Long-term portion $ 320,115 $ 560,940
============ ============
Installment notes and capital lease obligations are payable
monthly and bear interest at rates ranging from 6.0% to 10% and
mature in the years ending March 31, 1997 through 1998. The
notes are collateralized by certain equipment with a net book
value that approximates the outstanding loan balance. These lease
obligations were entered into at then current market rates.
Installment notes includes two notes with no interest. These
notes have been discounted to reflect the present value of the
debt. The note for the acquisition of certain assets of Arc
Tangent, Inc. has been discounted at 6% to $291,220 at March 31,
1996. The note payable for the acquisition of certain assets of
Post Saver, Inc. has been discounted at 7.25% to $167,360 at
March 31, 1996. See Note 15.
The aggregate maturities of the long-term debt during the years
subsequent to March 31, 1996 are:
1997 $ 564,934
1998 320,115
------------
$ 885,049
============
The Company believes that there are no material differences
between the carrying accounts and market value of its long-term
obligations.
(9) Stockholders' Equity
Stock Option Plans
The Company has two stock option plans currently in effect,
and two predecessor plans for which option grants are still
outstanding:
The Group 1 Software, Inc. Stock Option Plan of 1995
authorizes the grant of incentive stock options, non-qualified
stock options and stock appreciation rights, at the sole
discretion of the Compensation Committee of the Board of
Directors, to officers and other employees of the Company, and
reserved 300,000 shares of common stock for issuance on exercise
of options under the Plan. The options and rights vest over five
years; however, all options and rights expire ten years after the
date of the grant. No options have been granted under this plan.
The Group 1 Software, Inc. Stock Option Plan of 1986
authorized the grant of incentive stock options, non-qualified
stock options and stock appreciation rights, at the sole
discretion of the Compensation Committee of the Board of Directors,
to officers and other employees of the Company, and reserved
345,000 shares of common stock for issuance on exercise of options
under the Plan. The options and rights vest over five years;
however, all options and rights expire ten years after the date
of the grant. The Plan activity was as follows:
March 31,
1996 1995 1994
Shares under option at beginning
of year - exercise price of $6.00 42,813 42,813 43,188
Options exercised - exercise price
of $6.00 (750) - - - (375)
------- ------- -------
Shares under option at end of year
- - exercise price of $6.00 42,063 42,813 42,813
======= ======= =======
At March 31, 1996, 42,063 shares under option were vested
and exercisable. No stock appreciation rights were granted under
the Plan. As of March 31, 1996, the 1986 Stock Option Plan had
terminated and no future grants of options will be made under the
Plan. No options were granted in fiscal 1996. See Note 14.
The Group 1 Software, Inc. Stock Option Plan for Non-
Employee Directors of 1995 provides for annual automatic grants
of non-qualified stock options to non-employee directors of the
Company, at an exercise price set by the market price of the
stock on the anniversary date of their election as a director,
and reserves 100,000 shares of common stock for issuance on
exercise of options under the Plan. The options vest over five
years and expire ten years after the date of the grant.
The Plan activity was as follows:
Year Ended March 31, 1996
Shares under option, beginning of year - - -
Options granted - exercise price of
$7.75 - $11.00 20,000
Options cancelled - exercise price of
$11.00 (5,000)
----------
Shares under option, end of year -
exercise of $7.75 - $11.00 15,000
15,000
==========
At March 31, 1996 none of these options were exercisable.
Options for 3,000 shares become exercisable in the year ending
March 31, 1997. At March 31, 1996, 85,000 shares were available
for future grants of options.
The Group 1 Software, Inc. Stock Option Plan for Non-
Employee Directors of 1986 provided for annual automatic grants
of non-qualified stock options to non-employee directors of the
Company, at an exercise price set by the market price of the
stock on the anniversary date of their election as a director,
and reserved 162,500 shares of common stock for issuance on
exercise of options under the Plan. The options vest over five
years and expire ten years after the date of the grant.
(9) Stockholders' Equity (continued)
The Plan activity was as follows:
March 31,
1996 1995 1994
Shares under option, beginning of
year 100,000 80,000 60,000
Options granted - exercise price
of $10.125 - $11.00 20,000
Options granted - exercise price
of $8.75 - $9.25 - - - 20,000 - - -
Options cancelled - exercise price
of $8.75 - $13.00 (15,000) - - - - - -
------- ------- -------
Shares under option, end of year -
exercise price of $7.75 - $18.75 85,000 100,000 80,000
======= ======= =======
At March 31, 1996, 56,000 shares under option were
exercisable. Options for 13,000 shares become exercisable in the
year ending March 31, 1997. As of March 31, 1996 the 1986 stock
option plan for Non-Employee Directors had terminated and no
future grants of options will be made under the Plan.
(10) Income Taxes
The provision for income taxes consists of the following
components:
March 31,
1996 1995 1994
Federal:
Current $ 478,000 $ 477,000 $ 895,000
Deferred 803,000 886,000 (78,000)
--------- --------- ---------
1,281,000 1,363,000 817,000
--------- --------- ---------
State:
Current 76,000 66,000 81,000
Deferred 73,000 157,000 72,000
--------- --------- ---------
149,000 223,000 153,000
--------- --------- ---------
Foreign: 647,000 289,000 80,000
--------- --------- ---------
$2,077,000 $1,875,000 $1,050,000
========= ========= =========
The provision for income taxes varied from that computed
using the statutory federal income tax rate as follows:
March 31,
1996 1995 1994
Statutory tax rate 34.0% 34.0% 34.0%
State income taxes, net of federal
income tax benefit 1.8 3.0 3.4
Research and development tax credits (0.9) (4.1) (9.4)
Foreign income taxes 1.4 2.1 2.3
Other, net (0.4) 1.4 (0.5)
----- ----- -----
Effective tax rate 35.9% 36.4% 29.8%
===== ===== =====
The significant components of the current deferred tax
asset and the long-term deferred tax liabilities are as follows:
March 31,
1996 1995
Current:
Deferred maintenance revenue $ 531,000 $1,288,000
Allowance for doubtful accounts 853,000 519,000
Other, net 547,000 253,000
------------ ------------
Total current deferred tax assets $1,931,000 $2,060,000
============ ============
Long-term:
Deferred maintenance revenue -
long-term $ 1,439,000 $ 1,798,000
Capitalized software (5,930,000) (4,713,000)
Depreciation (85,000) (167,000)
Other, net 993,000 623,000
------------ ------------
Total long-term deferred tax
liabilities $(3,583,000) $(2,459,000)
============ ============
The Company has research and development tax credit carry
forwards of $1,134,000, which will expire in 2005 through 2011.
(11) Benefit Program
The Company participates in the COMNET Corporation and
Subsidiaries 401(k) Retirement Savings Plan and Trust (the "401k
Plan"), for the benefit of the Company's employees. The Plan
provides for a contribution to be made by the Company out of
current operating earnings based upon the contributions made by
participating Company employees. Company contributions for the
years ended March 31, 1996, 1995 and 1994 were $206,000, $171,000
and $147,000, respectively.
(12) Quarterly Income Data (Unaudited) Quarterly financial
information for the years ended March 31, 1996 and 1995 was as
follows:
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
(Dollars in thousands except earnings per share)
<S> <C> <C> <C> <C> <C>
Fiscal Year 1996:
Revenue $ 9,385 $10,081 $10,854 $15,555 $45,875
Earnings before 865 1,275 1,015 2,623 5,778
taxes
Net Earnings 539 808 641 1,713 3,701
Earnings per share
<F1> $ 0.12 $ 0.19 $ 0.15 $ 0.40 $ 0.86
Fiscal Year 1995:
Revenue $ 7,643 $ 8,966 $ 9,371 $11,941 $37,921
Earnings before 697 1,260 1,286 1,904 5,147
taxes
Net Earnings 439 781 798 1,254 3,272
Earnings per share
<F1> $ 0.10 $ 0.18 $ 0.19 $ 0.29 $ 0.76
<FN>
<F1> See Note 1 of notes to consolidated financial statements
</TABLE>
(13) Non-operating Income (Expense) and Supplemental Information
Non-operating income and expense is comprised of the following:
March 31,
1996 1995 1994
Interest income $157,274 $265,428 $218,536
Interest expense (144,296) (116,789) (142,326)
Other income (expense),
net 112,153 (74,021) (100,462)
--------- --------- ---------
Total non-operating
income (expense), net $125,131 $ 74,618 $(24,252)
========= ========= =========
The following supplemental information summarizes the
disclosure pertaining to the Statement of Cash Flows:
March 31,
1996 1995 1994
Cash paid during the year for:
Interest $144,888 $107,059 $146,589
Income taxes $257,057 $120,516 $768,871
Non-cash investing and financing
activities:
Notes payable incurred in
connection with the purchase
of the assets of Post Saver
Systems, Inc. - - - $563,795 - - -
Notes payable incurred in
connection with the purchase
of the assets of Data Designs,
Inc. $180,000 - - - - - -
Notes payable incurred in
connection with the purchase
of the assets of World Trak,
Inc. $100,000 - - - - - -
Capital lease obligations
incurred $ 47,102 $138,341 - - -
(14) Transactions with Parent CompanyCOMNET provides
significant management and other services to the Company under a
Management and Services Agreement ("Agreement") entered into in
September, 1986 and renewed as of April 1, 1991 and April 1,
1994, on substantially equivalent terms except for certain
changes in determination of the management fee percentage. For
the three years ended March 31, 1996, the amounts charged to the
Company by COMNET for these services in the accompanying
consolidated financial statements are consistent with the
arrangements of this Agreement and are summarized as follows:
March 31,
1996 1995 1994
Management services:
Finance and personnel $ 817,886 $ 917,515 $ 872,397
Corporate and management 1,040,467 959,706 435,862
Management fee 458,755 379,314 313,121
---------- ---------- ----------
2,317,108 2,256,535 1,621,380
Computer and printing services - - - - - - - - -
Building and occupancy 728,519 674,854 651,553
---------- ---------- ----------
$3,045,627 $2,931,389 $2,272,933
========== ========== ==========
Management Services
COMNET provides finance, legal, personnel, corporate,
stockholder relations and general management services for the
Company. These services include senior management services of
COMNET's chief executive officer, chief financial officer and
general counsel. COMNET charges the Company its actual cost,
including allocation of COMNET's overall costs to perform these
services.
COMNET also charged management fees based on total Company
revenue of 1% for the year ended March 31, 1995, 1994 and 1993
(see Note 1). Under the Agreement, as renewed, the management
fee can range from 1% to 2% of total Company revenue depending
upon Company pretax profit as a percentage of revenue.
Building and Occupancy COMNET charges the Company for
office space occupied by the Company in Maryland and Virginia,
and for related occupancy services. COMNET charges the Company
its actual cost for this office space and these services based on
an allocation of COMNET's cost. The charge includes an
allocation of property taxes and facility maintenance expenses.
Effective April 15, 1996 the Company began leasing additional
office space in Maryland from Comnet. The annual base rent for
this space will increase the building and occupancy expense in
Fiscal 1997 by $261,000 plus allocated taxes and facility
maintenance expense. Other Transactions The Company held a
demand note payable to its parent in the amount of $1,159,721 at
March 31, 1996 and in the amount of $995,878 at March 31, 1995,
which carried an interest rate of prime plus 2% (10.25% and 11%
at March 31, 1996 and 1995, respectively). The note is due and
payable twelve months and one day from demand. Net interest
payments by COMNET to the Company totaled $62,349, $58,129, and
$77,475 during the years ended March 31, 1996, 1995, and 1994,
respectively. During the year ended March 31, 1996, COMNET
granted options to purchase 335,433 shares of its common stock to
employees of the Company at fair market value on the grant date.
These options were granted at the request of the Company's Board
of Directors, consistent with COMNET's policy of granting options
to employees of COMNET and its majority-owned subsidiaries. No
options were granted in the year ended March 31, 1995; 195,000
COMNET options were granted under the plan's terms during the
period ended March 31, 1994.
(15) Commitments Purchased Services Effective April 6, 1994,
the Company entered a three-year contract with a supplier of
computer time-sharing services, which requires the Company to
purchase all of its internal IBM mainframe computer requirements,
from this supplier. The Agreement provides for a fixed monthly
fee. The Company's actual costs of services with this vendor for
the years ended March 31, 1996, 1995, and 1994 were $1,056,000,
$1,017,000, and $1,245,000, respectively. Leasing Arrangements
In addition to the occupancy arrangement with COMNET, the Company
leases other office facilities and some of its equipment under
operating and capital lease arrangements, some of which contain
renewal options and escalation clauses for operating expenses and
inflation. The Company is obligated for the following minimum
operating and capital lease rental payments that have initial and
remaining non-cancelable lease terms in excess of one year.
Operating Capital
1997 $1,153,456 $ 173,452
1998 899,150 74,786
1999 562,987 - - -
2000 and beyond 977,739 - - -
----------- -----------
Total minimum lease payments $3,593,332 $ 248,238
Amount representing interest =========== (65,224)
-----------
Net minimum lease payments 183,014
Current portion of capital lease
obligations 121,557
----------- -----------
Long-term portion of capital lease
obligations $ 61,457
===========
The Company entered into capital lease transactions
aggregating $47,102 and $138,341 for the years ended 1996 and
1995, respectively. No transactions occurred in 1994. As of
March 31, 1996, the book value of assets recorded under capital
leases was $132,801. Total rent expense, under operating
leases, for fiscal years ended March 31, 1996, 1995 and 1994 was
$1,244,558, $523,000 and $510,000, respectively.
Acquisition Agreements In October, 1993, the Company
entered into an agreement with Promark Software, Inc., a British
Columbia corporation, to acquire certain assets including title
to all of Promark's Canadian mail management PC software and
certain related technology. The agreement provides for a full
payment of the purchase price based only on a percentage of
revenues over a period of twenty-seven months. As of March 31,
1996, these fees totaled $344,047 for the twenty-seven month
period.
In June, 1994, the Company entered into an agreement with
Post Saver Systems, Inc., of Michigan, to acquire certain of its
assets including title to all of its postal discount and POSTNET
Barcoding products. The Company agreed to pay $710,000 over
three years, plus a percentage of the Company's sales of these
products if sales exceed $1.5 million in the three years after
closing. As of March 31, 1996 no payment had been made under the
latter provision.
In December, 1994, the Company acquired all of the
outstanding shares of capital stock of Archetype Systems, for
$400,000 cash (net of cash acquired) plus a percentage of
Archetype Systems' sales of the Archetype products, if sales
exceed 2,000,000 pounds in a 12 month period after closing. On April
25, 1996 the Company paid an additional $372,019 cash under the
latter provision. This amount was included as an accrued
liability at March 31, 1996 and included in the goodwill
valuation. The acquisition was accounted for as a purchase and,
accordingly, the purchase price was allocated to the post closing
assets and liabilities based on their estimated fair values,
resulting in $1,072,000 in goodwill, which is included in other
assets. The goodwill will be amortized over a period not to
exceed nine years. The assets acquired and the liabilities
assumed have been included in the accompanying consolidated
balance sheet. Archetype Systems has changed its name to Group 1
Software Europe, Ltd. ("Group 1 Europe") and will continue its
operations based in London, England.
In August, 1995, the Company entered into a definitive
agreement with DataDesigns, Inc. of Las Vegas, Nevada to acquire
certain assets including title to all of its software products.
The Company paid $484,000 in cash at closing and will pay a
percentage of the Company's sales of these products during the
subsequent five years.
In November, 1995, the Company entered into a definitive
agreement with Premier One Consultants, Inc. of Minneapolis,
Minnesota to acquire certain assets including title to all of its
software products. The Company paid $319,000 in cash at closing
and will pay a percentage of the Company's sales of these
products during the subsequent three years.
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
The Directors and executive officers of the Company are as
follows:
Name Age Position
Robert S. Bowen 58 Chairman of the Board of Directors
and Chief Executive Officer
Ronald F. Friedman 52 President, Chief Operating Officer
and Director
Charles A. Crew 53 Vice President, Chief Financial
Officer, Treasurer and Director
Edward Weiss 45 Secretary and General Counsel
Alan P. Slater 40 Executive Vice President
Thomas S. Buchsbaum 46 Director
Joseph R. Sullivan 51 Director
Charles A. Mele 39 Director
The Company knows of no family relationships between any of
the above. The Board of Directors is divided into three
classes. One-third of the Directors will be elected annually,
and Directors serve until the annual meeting of stockholders
three years following their election and until their successors
are elected and qualified. The terms of Mr. Friedman and Mr.
Buchsbaum will expire at the next shareholder's meeting. The
terms of Mr. Bowen will expire in 1996. The terms of Mr. Crew,
Mr. Mele and Mr. Sullivan will expire in 1998. Each of the
officers shall continue in his capacity until his successor is
appointed and qualified. Mr. Robert S. Bowen has been Chairman of
the Board and Chief Executive Officer ("CEO") of the Company
since September, 1986 and a Director since its inception. Mr.
Bowen has also been President and Chief Executive Officer of
COMNET since 1984, and has, in the past year, devoted
approximately 60% of his professional time to the Company since
October 1, 1995. He has devoted approximately 70% of his
professional time to the Company. This allocation of time can
increase as required. Mr. Bowen also serves as a director of
COMNET. Mr. Ronald F. Friedman has been a Director since the
Company's inception, and President and Chief Operating Officer of
the Company and its predecessor since December, 1985. Mr.
Friedman also serves as a director of COMNET. Mr. Charles A.
Crew has been a Director, Chief Financial Officer and Treasurer
of the Company since October, 1990. He has served as Executive
Vice President and Chief Financial Officer of COMNET since 1990.
In the past, he has devoted approximately 90% of his time to the
Company. Mr. Crew also serves as a Director
of COMNET. Mr. Edward Weiss has been Secretary and General
Counsel of the Company for more than five years. He also serves
as Secretary and General Counsel of COMNET. Mr. Richard Eisenberg
has been a Director of the Company since February, 1994. Mr. Eisenberg
has been President of Great Northern/Reiff & Associates since June, 1994.
He has also been President of APCO Corporation, an insurance brokerage
firm since 1985, Vice President of Amalgamated Programs Corporation since
1985 and President of Great Northern Brokerage Corporation for more than
five years. Mr. Thomas S. Buchsbaum has been a Director for more than
five years. He is Executive Vice President of Zenith Data Systems. Mr.
Buchsbaum is also a Director of Dick Blick Company.
Mr. Joseph R. Sullivan has been a Director of the Company
since its inception. He has been Vice President, Marketing and
Business Development, Network Systems with Zenith Electronics
Corporation since 1990.
Mr. Charles A. Mele has been a Director of the Company since
November, 1991. He is Vice President/General Counsel and a
Director of Synetic, Inc. Prior to April 1994, he was Executive
Vice President and General Counsel of Medco Containment Services,
Inc., for more than five years.
Item 11. Executive Compensation The information required in
response to this item is contained in the registrant's definitive
proxy statement, to be filed pursuant to Regulation 14A, under
the caption, "Executive Compensation," and such information is
incorporated herein by reference.Item 12. Security Ownership of
Certain Beneficial Owners and Management The information
required in response to this item is contained in the
registrant's definitive proxy statement, to be filed pursuant to
Regulation 14A, under introductory paragraphs and under the
captions, "Principal Stockholders" and "Election of Directors,"
and such information is incorporated herein by reference.Item 13.
Certain Relationships and Related Transactions The information
required in response to this item is contained in the
registrant's definitive proxy statement, to be filed pursuant to
Regulation 14A, under the caption, "Executive Compensation -
Certain Transactions," and such information is incorporated
herein by reference.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and
Reports on Form 8-K
Page Number
1. Financial Statements:
The following financial statements are
submitted in Item 8:
Report of Independent Accountants on
Financial Statements 18
Consolidated Balance Sheets as of March
31, 1996 and 1995 19
Consolidated Statements of Earnings for
the years ended March 31, 1996, 1995
and 1994 20
Consolidated Statements of Stockholders'
Equity for the years ended March 31,
1996, 1995 and 1994 21
Consolidated Statements of Cash Flows for
the years ended March 31, 1996, 1995
and 1994 22
Notes to Consolidated Financial
Statements 23-32
2. Financial Statement Schedule
The following financial statement
schedule is filed as part of this
report:
Report of Independent Accountants on
Financial Statement Schedule 39
Schedule II: Valuation and Qualifying
Accounts and Reserves for the years
ended March 31, 1996, 1995, and 1994 40
Schedules other than those listed above have been omitted
since they are either not required or the information is included
elsewhere in the financial statements or notes thereto.
<PAGE>
3. Listing of Exhibits
3.1 Certificate of Incorporation.
3.2 By-laws, as amended.
3.3 Certificate of Amendment of Certificate of
Incorporation of Group 1 Software, Inc., dated January
22, 1993.
*3.4 Amendment to By-Laws.
*4.01 1995 Incentive Stock Option, Non-Qualified Stock
Option and Stock Appreciation Unit Plan
*4.02 1995 Non-Employee Directors' Stock Option Plan
10.01 Distribution Agreement with the Computing Group, Ltd.
(incorporated by reference to Exhibit 10.11 to the
Company's Annual Report on Form 10-K for the year
ended March 31, 1991).
10.02 Management and Services Agreement with COMNET
Corporation - 1994, (incorporated by reference to
Exhibit 10.12 to the Company's Annual Report on Form
10-K for the year ended March 31, 1991).
10.03 Tax Sharing Agreement with COMNET Corporation - 1991
(incorporated by reference to Exhibit 10.13 to the
Company's Annual Report on Form 10-K for the year
ended March 31, 1991).
10.04 Employment Agreement between Ronald F. Friedman and
Group 1 Software - 1990, (incorporated by reference to
Exhibit 10.15 to the Company's Annual Report on Form
10-K for the year ended March 31, 1991).
10.05 Revolving Line of Credit with Signet Bank/Maryland,
(incorporated by reference to Exhibit 10.16 to the
Company's Annual Report on Form 10-K for the year
ended March 31, 1991).
10.06 Agreement with R. L. Polk & Company, (incorporated by
reference to Exhibit 10.19 to the Company's Annual
Report on Form 10-K for the year ended March 31,
1991).
10.07 First Amendment to Employment Agreement by and between
Group 1 Software, Inc. and Ronald F. Friedman dated
June 24, 1991, (incorporated by reference to Exhibit
10.24 to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1991).
10.08 Amended and Restated Employment Agreement dated
January 28, 1992 by and between Group 1 Software, Inc.
and Robert S. Bowen (incorporated by reference to
Exhibit 10.25 to the Company's Quarterly Report on
Form 10-Q for the quarter ended December 31, 1991).
10.09 Product Development Agreement by and between Deos,
Inc. and Group 1 Software, Inc. dated November 1,
1990, as amended (incorporated by reference to Exhibit
10.12 to the Company's Annual Report for the year
ended March 31, 1992).
10.10 Distribution Agreement by and between Group 1
Software, Inc. and Cortex Konsultkollegium AB (Sweden)
dated July 18, 1991 (incorporated by reference to
Exhibit 10.19 of the Company's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1992).
10.11 Agreement for the purchase and sale of assets by Group
1 Software, Inc. and Arc Tangent, Inc. signed on
October 15, 1992 (incorporated by reference to Exhibit
10.14 to the Company's Quarterly Report on Form 10-Q
for the quarter ended December 31, 1992).
10.12 Definitive Agreement for purchase of assets of Promark
Software, Inc., dated as of October 14, 1993
(incorporated by reference to Exhibit 10.15 of the
Company's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1993.)
10.13 Agreement for computer services with Computer Data
Systems, Inc. dated April 6, 1994.
10.14 Agreement for purchase and sale of assets by and among
Post Saver Systems, Inc., Theodore Kruse and Group 1
Software, Inc., dated June 23, 1994.
10.15 Letter of Intent between Group 1 Software, Inc. and
Archetype Systems, Ltd. dated as of April 15, 1994.
10.16 Agreement between Group 1 Software, Inc. and Archetype
Systems, Ltd. for acquisition of the entire share
capital of Archetype Systems, Ltd., dated as of
December 30, 1994.
10.17 Fourth Amendment to Employment Agreement, dated as of
March 1, 1994, by and between Group 1 Software, Inc.,
and Ronald F. Friedman.
10.18 Sublease, dated March 1, 1994, by and between COMNET
Corporation and Group 1 Software, Inc.
10.19 Agreement to Extend Management and Services Agreement,
dated April 1, 1994, by and between COMNET Corporation
and Group 1 Software, Inc.
10.25 First Amendment to Sublease dated April 15, 1994, by
and between Group 1 Software, Inc. and COMNET
Corporation
16.1 Change in Registrant's Independent Accountant on Form
8-K dated January 26, 1990, (incorporated by reference
to Exhibit 16.1 of the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1991.)
*11.0 Computation of earnings per share.
*22.0 Subsidiaries of the Registrant.
*23.0 Consent of Independent Accountants.
___________________________________
*Filed herewith
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT
SCHEDULE_________________
To the Stockholders and
Board of Directors
Group 1 Software,Inc.
Our report on the consolidated financial statements of Group 1
Software, Inc. and Subsidiaries is included elsewhere in this
Form 10-K. In connection with our audits of such financial
statements, we have also audited the related financial statement
schedule as listed in the index to the financial statement
schedule of this Form 10-K.
In our opinion, the financial statement schedule referred to above,
when considered in relation to the basic financial statements taken as a
whole, presents fairly, in all material respects, the information required to
be included therein.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
June 26, 1996
<PAGE>
<TABLE>
SCHEDULE II
Group 1 Software, Inc.
Valuation and Qualifying Accounts
For the Years Ended March
31, 1996, 1995, and 1994
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged to Charged to Balance
Beginning Costs and Other Deductions at end
Description of Year Expenses Accounts<F1> Describe<F2> of year
<S> <C> <C> <C> <C> <C>
Year ended March 31,
1996
Allowance for
doubtful accounts $1,633,000 $1,617,637 $281,400 $(1,123,037) $2,409,000
Year ended March 31,
1995
Allowance for
doubtful accounts $1,620,000 $1,836,344 $ - - - $(1,823,344) $1,633,000
Year ended March 31,
1994
Allowance for
doubtful accounts $1,640,000 $1,929,424 $ - - - $(1,949,424) $1,620,000
<FN>
<F1> Other items charged to the other accounts were for the
recoveries of prior year accounts receivable debit memos and payments.
<F2> The decrease in allowance for doubtful accounts is the
result of accounts receivable written off during the year.
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 11
Group 1 Software, Inc.
Computation of Earnings Per Share
For the Years Ended March 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
<S> <C> <C> <C> <C>
Net earnings $3,701,244 $3,272,119 $2,473,951
Primary earnings (A) $3,701,244 $3,272,119 $2,473,951
========== ========== ==========
Fully diluted earnings (B) $3,701,244 $3,272,119 $2,473,951
========== ========== ==========
Weighted average shares
outstanding 4,292,947 4,292,947 4,292,572
Dilutive common stock
equivalents for primary
earnings per share
using the treasury
stock method 31,962 16,944 19,851
---------- ---------- ----------
Weighted average shares
and common equivalent
shares outstanding for
primary earnings
per share (C) 4,324,909 4,309,891 4,312,423
Additional equivalent
shares assuming full
dilution (20,598) 7,011 (11,798)
---------- ---------- ----------
Weighted average shares
and common equivalent
shares outstanding for
fully diluted earnings
per share (D) 4,304,311 4,316,902 4,300,625
========== ========== ==========
Earnings per share
Primary (A)/(C) $ 0.86 $ 0.76 $ 0.57
========== ========== ==========
Fully Diluted (B)/(D) $ 0.86 $ 0.76 $ 0.57
========== ========== ==========
</TABLE>
<PAGE>
Exhibit 22. Subsidiaries of Group 1 Software, Inc.
Group 1 Software Europe, Ltd. of London, England.
Gruco, Inc., a Delaware corporation.
Arw, Inc., a Delaware corporation.
Group One FSC, Ltd. of Barbados.
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
_______________
We consent to the incorporation by reference in the
registration statement of Group 1 Software, Inc. on Form S-8
(File No. 33-28057) of our reports, dated June 26, 1996, on our
audits of the consolidated financial statements and financial
statement schedule of Group 1 Software, Inc. and Subsidiaries as
of March 31, 1996 and 1995 and for each of the three years in the
period ended March 31, 1996, which reports are included in this
Annual Report on Form 10-K.
COOPERS & LYBRAND L.L.P.
Baltimore, Maryland
June 28, 1996
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
GROUP 1 SOFTWARE, INC.
(Registrant)
Date: June 28, 1996 By: /s/ Robert S. Bowen
___________________________
Robert S. Bowen
Chairman of the Board and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange
Act of 1934, this Report has been signed below by the
following persons on behalf of the Registrant and in the
capacities and on the dates indicated.
Signature Title Date
/s/ Robert S. Bowen Chairman of the Board June 28, 1996
Chief Executive Officer
Director
(Principal Executive Officer)
/s/ Ronald F.Friedman President June 28, 1996
Chief Operating Officer
Director
/s/ Charles A. Crew Vice President June 28, 1996
Chief Financial Officer
Director
/s/ Charles Mele Director June 28, 1996
/s/ Thomas S.Buchsbaum Director June 28, 1996
/s/ Joseph R. Sullivan Director June 28, 1996
/s/ Carl I. Kanter Director June 28, 1996
<PAGE>
Index of Exhibits NUMBER
3.4 Amendment to By-Laws. 46
*4.01 1995 Incentive Stock Option, Non-Qualified
Stock Option and Stock Appreciation Unit Plan
*4.02 1995 Non-Employee Directors' Stock Option
Plan
*10.25 First Amendment to Sublease dated April 15,
1995, by and between Group 1 Software, Inc.
and COMNET Corporation.
11.0 Computation of earnings per share. 43
22.0 Subsidiaries of the Registrant. 44
23.0 Consent of Independent Accountants. 45
<PAGE>
EXHIBIT 4.01
1995 GROUP 1 SOFTWARE, INC.
INCENTIVE STOCK OPTION, NON-QUALIFIED
STOCK OPTION AND STOCK APPRECIATION RIGHTS PLAN
Section 1: Purpose.
1.1 This Plan (the "Plan") is intended to provide a means
for the granting of awards (each such award is hereinafter
referred to as the "Award") of stock options and/or stock
appreciation rights to selected full- and part-time employees
(including officers who are also employees) of Group 1 Software,
Inc. (the "Company") and such of its domestic or foreign, present
or future, affiliated companies as shall be designated from time
to time by the Company's Board of Directors (the "Board") (each
such person, upon receipt of an Award is hereinafter referred to
as a "Participant").
1.2 This Plan is designed to (a) provide incentives and
rewards to those persons who are in a position to contribute to
the long-term growth and profitability of the Company; (b) assist
the Company and such affiliated companies (the "Affiliates") to
attract, retain and motivate personnel with experience and
ability; and (c) make the Company's compen-sation program more
competitive with those of other companies. The Company expects
that by providing such Awards it will benefit from the added
interest which such personnel will have in the success of the
Company and/or the Affiliates as a result of their proprietary
interest.
1.3 For purposes of this Plan, an Affiliate shall mean any
corporation defined as a subsidiary corporation under Section
425(f) of the Internal Revenue Code, as amended (the "Code").
Section 2: Administration.
2.1 This Plan shall be administered by the Compensation
Committee of the Board (the "Committee"). Members of the
Committee shall be disinterested within the meaning of SEC Rule
16b-3. No individual may participate as a member of the
Committee in the administration of this Plan if he shall have
been eligible to receive Awards or any other stock options or
stock appreciation rights of the Company or any of its Affiliates
under this Plan or any other discretionary plan of the Company or
its Affiliates at any time within one year prior to serving on
the Committee. Subject to the express provisions of this Plan
and to such orders or resolutions not inconsistent with the
provisions of this Plan as may be issued or adopted from time to
time by the Board, the Committee shall have full power and
authority, in its discretion, to grant Awards; to determine to
whom and the time when Awards will be granted; to designate
Awards as incentive stock options or nonqualified stock options;
to determine the purchase price of the common stock covered by
each option, the term of each option, and the exercisability of
each option; to determine the terms and provisions of the option
agreements (which need not be identical) entered into in
connection with Awards under this Plan; to interpret this Plan;
to supervise the administration of this Plan; to prescribe, amend
and rescind rules and regulations relating to this Plan; and to
make all other determinations and take any other action deemed
necessary or desirable to the proper operation or administration
of this Plan. The Committee may authorize such of the Company's
officers and other persons to perform such functions in the
execution and administration of this Plan (other than the
interpretation of this Plan and the adoption of rules governing
its execution and administration) as the Committee shall
determine from time to time.
2.2 All decisions made by the Committee pursuant to the
powers vested in it by this Plan document and related orders or
resolutions of the Board shall be final and binding on all
persons (including Participants, the Company and any stockholder
and/or employee of the Company or any Affiliate). No member of
the Committee shall be liable for any action or determination
made in good faith with respect to this Plan or any Award granted
under it.
Section 3: Scope and Duration.
3.1 Awards under this Plan may be granted in the form of
incentive stock options (the "ISO's") as provided in Section 422
of the Code or in the form of nonqualified stock options (the
"NQSO's") and/or stock appreciation rights (the "SAR's") as
provided in Section 7. Unless otherwise indicated, references in
this Plan to "Options" include ISO's and NQSO's. As used in the
preceding sentence, the term "stock appreciation rights" means
rights to receive the payment provided for in Section 7, upon the
surrender of an unexercised related Option.
3.2 The total number of shares of common stock of the
Company (the "Stock") as to which Options or SAR's may be granted
under this Plan shall be 300,000 shares subject to adjustments as
provided in this Plan. Issuance of Stock upon exercise of an
option or reduction of the number of shares of Stock subject to
an option upon exercise of an SAR shall reduce the total number
of shares of Stock available under this Plan. There shall not be
counted against this total any shares of Stock covered by an
Option that has lapsed unexercised or has been forfeited as
hereinafter provided.
3.3 Subject to adjustments provided for in Section 12
hereof, shares of Stock as to which Options and SAR's under this
Plan may be granted may be made available by the Company from
authorized but unissued shares of Stock or from shares reacquired
by the Company (including shares purchased in the open market).
Section 4: Eligible Persons. The persons who shall be eligible
to receive Awards under this Plan shall be all full- and part-
time employees (including officers who are also employees) of the
Company or an Affiliate, without limitation as to length of
service ("Eligible Persons").
Section 5: Granting Awards.
5.1 Subject to the limitations of this Plan, the Committee,
at any time and from time to time, and after such consultation
with and consideration of such recommendations of management as
the Committee deems desirable, shall select from Eligible Persons
those persons to be granted Awards and determine the time when
each Award shall be granted, the number of shares of Stock to be
subject to an option and/or SAR and the terms and conditions,
consistent with this Plan, upon which Options and/or SAR's are to
be awarded. The Committee shall make Awards to the Eligible
Persons so selected for the number of options and/or SAR's and
upon the terms and conditions to determined. No Options or SAR's
or underlying shares of Stock shall be issued or distributed
under this Plan unless and until all legal requirements
applicable to the issuance or transfer of such Options, SAR's
and/or Stock have been complied with to the satisfaction of the
Committee and the Company.
5.2 No ISO shall be granted hereunder to any person who, at
the time such Option is to be granted, owns stock of the Company
or of any of its Affiliates possessing more than 10% of the total
combined voting power of all classes of stock of the Company or
of any such Affiliate unless such grant complies with Section 422
of the Code. For purposes of the preceding sentence, the
attribution rules of stock ownership set forth in Section 425(d)
of the Code shall apply.
5.3 No Awards shall be granted under this Plan after its
termination on September 12, 2005, but Awards granted prior to
such termination date may extend beyond that date, and the terms
of this Plan shall continue to apply to such awards.
Section 6: Terms and Conditions of Options.
6.1 General. Each Option granted pursuant to this Plan
shall be subject to all of the terms and conditions hereinafter
provided in this Section 6, all other terms and conditions set
forth in any other Section of this Plan, and such other terms and
conditions ("Discretionary Conditions") as may be specified by
the Committee with respect to the option and the Stock covered
thereby at the time of the making of the Award or as may be
specified thereafter by the Committee in the exercise of its
powers under this Plan. Without limiting the foregoing, it is
understood that the Committee may, at any time and from time to
time after the granting of an Award under this Plan, specify such
additional terms and conditions with respect to such Award as may
be deemed necessary or appropriate to ensure compliance with all
applicable laws, including, but not limited to, terms and
conditions for compliance with Federal and state securities laws
and methods of withholding or providing for the payment of
required taxes. The terms and conditions with respect to any
Participant need not be identical with the terms and conditions
with respect to any other Award, or with respect to any Award to
any other Participant.
6.2 Option Agreement. Receipt of an Option shall be
subject to execution of a written agreement (the "Option
Agreement") between the Company and the Participant, in a form
approved by the Committee, which shall set forth the number of
shares covered by the Option, the exercisability provisions of
the Option, the applicable Option Period (as defined herein), the
conditions provided in this Plan as may be deemed appropriate by
the Committee, including, but not limited to, any such
Discretionary Conditions. A fully executed original counterpart
of the Option Agreement shall be provided to the Company and the
Participant.
6.3 Option Price. The purchase price of the Stock covered
by each option shall be determined by the Committee, but in no
event shall the option Price be less than 100% of the Fair Market
Value of such Stock on the date the Option is granted for ISO's
nor less than 85% of the Fair Market Value of such Stock on the
date the Option is granted for NQSO's. If the Stock is listed on
an established stock exchange, such Fair Market value shall be
deemed to be the closing price of the Stock on such stock
exchange on the day the Option is granted or if no sale of the
Stock shall have been made on any stock exchange on that day, the
next preceding day on which there was a sale of the Stock. If
the Stock is not listed on an established stock exchange but is
traded in the over-the-counter market, the Fair Market Value of
the Stock shall be the closing price as quoted in the National
Association of Securities Dealers' Automated Quotation System
("NASDAQ") on the day the option is granted or if no sale of
Stock is reflected in NASDAQ on that day, on the preceding day on
which there was a sale of Stock reflected in NASDAQ. If no
quotations are available, the Fair Market Value shall be as
determined by the Committee in good faith. The Committee shall
have full authority in fixing the option price, and be fully
protected in doing so.
6.4 Term of Option. The duration of each Option granted
under this Plan shall not be more than 10 years from the date of
grant, as the Committee shall determine, subject to earlier
termination as provided in Sections 9, 10 and 11.
6.5 Exercise and Vesting of Options; Time of Payment.
6.5.1 No ISO or NQSO shall be exercisable during the
year ending on the first anniversary of the Option's grant. Each
ISO and NQSO shall be exercisable thereafter as determined by the
Committee (subject to the terms of this Plan) and set forth in
the Option Agreement.
6.5.2 A Participant wishing to exercise an option
shall give written notice to the Company in the form and manner
prescribed by the Committee, indicating the date of award and
type of Option being exercised, the number of shares to be
exercised, and such other information as shall be required by the
Committee. Full payment for the shares exercised pursuant to the
Option must accompany the written notice. Except as provided in
Sections 9 and 10, no Option may be exercised at any time unless
the Participant is then a full- or a part-time employee of the
Company or an Affiliate.
6.5.3 Issuance of Stock Certificates. As soon as
practicable after the receipt of written notice and payment, the
Company shall, without stock issuance or transfer taxes to the
Participant or to any other person entitled to exercise an option
pursuant to the Plan, deliver to the Participant or such other
person a certificate or certificates for the requisite number of
shares of Stock.
6.5.4 Rights as a Stockholder. A Participant or any
other person entitled to exercise an Option under this Plan shall
have no rights as a stockholder with respect to any Stock covered
by the Option until the date of issuance of a Stock certificate
for such Stock.
6.5.5 Partial Exercise. An Option granted under this
Plan may be exercised as to any lesser number of shares than the
full amount for which it could be exercised. Such a partial
exercise of an Option shall not affect the right to exercise the
Option from time to time in accordance with this Plan as to the
remaining shares subject to the Option.
6.5.6 The Option Price for the shares as to which an
Option is exercised shall be paid to the Company in full on the
date of exercise. At the election of the Participant, such
payment may be (i) in cash, (ii) in shares of Stock owned by the
Participant prior to exercising the Option and having a Fair
Market Value on the date of payment equal to the Option Price for
the shares of Stock being purchased, and satisfying such other
requirements as may be imposed by the Committee or (iii) partly
in cash and partly in such shares of Stock. The Participant
shall also be entitled to make payment by pyramiding the shares
received upon exercise of Options by simultaneously delivering
such shares of stock in payment of the purchase price of shares
subject to additional Options; any share delivered in payment of
the exercise price must have been held of record by the Optionee
for a least six months or such other period as may be required to
avoid any adverse effect on the financial position of the Company
or a Subsidiary as a result of incurring compensation expense or
otherwise.
Such shares, which shall be fully paid and non-assessable
upon the issuance thereof, shall be represented by a certificate
or certificates registered in the name of the Participant and
stamped with any appropriate legend. In addition, prior to
delivery of the shares of Stock, any amount necessary to satisfy
applicable Federal, state or local tax requirements shall be paid
promptly upon notification of the amount due. Stock acquired by
the Participant which is identified as having been obtained
through an ISO under this Plan and still subject to ISO holding
requirements as defined in the Code, may not be tendered in
payment of the Option Price.
6.6 Limitations on ISO's.
6.6.1 The aggregate Fair Market Value (determined as
of the time of grant) of all Stock for which an employee may be
granted ISO's in any calendar year (under this Plan and any other
plan of the Company, any Affiliate or any predecessor of any such
corporation) shall not exceed the limitations imposed by Section
422 of the Code.
6.6.2 ISO's shall also comply with any other
restrictions and limitations imposed by Section 422 of the Code
not otherwise provided in the Plan.
Section 7: Terms and Conditions of SAR's.
7.1 Grants. The Committee may grant SAR's to Eligible
Persons in connection with Options granted under this Plan. Each
SAR shall entitle the Participant upon prior consent of the
Committee (which consent the Committee may withhold as to any
individual SAR in its absolute discretion), to surrender to the
Company an unexercised related Option (or any portion thereof
which the employee from time to time determines to surrender for
this purpose) and to receive from the Company in exchange
therefor, subject to the provisions of this Plan and such rules
and regulations as from time to time may be established by the
Committee, a quantity of shares of Stock equal to the excess of
the Fair Market Value on the exercise date of one share of Stock
over the Option Price per share times the number of shares
covered by the Option, or portion thereof, which is surrendered.
The date a notice of exercise is received by the Company shall be
the exercise date.
7.2 General. Each SAR shall be subject to the same terms
and conditions as the Option to which it relates, shall be
exercisable only to the extent the related option is exercisable
and the Committee consents to its exercise, and shall be subject
to such other terms and conditions as the Committee may
determine.
7.3 Exercise of SAR's.
7.3.1 SAR's may be exercised from time to time as
follows:
7.3.1.1 The Committee must receive written notice of
exercise stating the number of shares of Stock subject to an
exercisable Option with respect to which the SAR is being
exercised.
7.3.1.2 The Committee shall advise the Participant
within five business days after receipt of such written notice
whether or not it will consent to such exercise.
7.3.1.3 If the Committee consents to the exercise, the
SAR will be deemed to have been exercised on the date of the
Company's receipt of the written notice.
7.3.1.4 If the Committee does not notify the
Participant of its decision within such five business day period,
the Committee shall be conclusively presumed to have given its
consent.
7.3.1.5 If the Committee denies its consent, the
Participant shall not have the right to submit another written
notice of exercise until six months after the date of submission
of the previous written notice of exercise.
7.3.2 All shares shall be valued at their Fair Market
Value as of the date of exercise of the SAR; provided, however,
that with respect to exercises of SAR's by a Participant who is
subject to the provisions of Section 16(b) of the Securities
Exchange Act of 1934, during any period commencing on the third
business day following the date of release for publication of any
annual or quarterly summary statements of the Company's sales and
earnings and ending on the twelfth business day following such
date (a "window period"), the Committee shall prescribe whether
payment shall be made in cash or otherwise, and may prescribe, by
rule of general application, such other measure of fair market
value per share as the Committee may, in its discretion,
determine, but not in excess of the highest Fair Market Value (as
defined in Section 6.3) during such window period and, in the
case of SAR's that relate to an ISO, not in excess of the maximum
amount that would be permissible under Section 422A of the Code
without disqualifying such option as an ISO under such Section
422A.
7.3.3 The number of shares of Stock received by a
Participant upon exercise of a SAR may not exceed the number of
shares covered by the Option or portion thereof surrendered. No
cash will be paid in lieu of any fractional share of Stock.
7.3.4 Any amount necessary to satisfy applicable
Federal, state or local tax requirements shall be withheld or
paid promptly upon notification of the amount due and prior to or
concurrently with delivery of a certificate representing shares
of Stock.
7.3.5 Upon exercise of a SAR, the number of shares of
Stock subject to exercise under the related Option shall
automatically be reduced by the number of shares of Stock
represented by the Option or portion thereof surrendered. Shares
of Stock subject to options or portions thereof surrendered upon
the exercise of SAR's shall not be available for subsequent
awards under this Plan.
Section 8. Nontransferability of Options and SAR's.
Options and SAR's granted under this Plan shall not be
transferable by the Participant other than by will or by the laws
of descent and distribution. During the lifetime of a
Participant, Options and SAR's may be exercised only by the
Participant or its representative. Options and SAR's exercisable
after the death of a Participant may be exercised by the
legatees, personal representatives or distributees of the
Participant.
Section 9. Termination of Employment.
9.1 If, prior to the expiration of the Option Period, a
Participant's employment by the Company or an Affiliate
terminates (other than by reason of death or disability), each
Option then outstanding as to that Participant shall remain
exercisable for a period of three (3) months from the date of
termination of employment (but not later than the end of the
Option Period) to the extent it was exercisable on the date of
termination of employment, and thereafter all such Options shall
terminate.
9.2 Notwithstanding any other provisions of this Section 9,
if a participant's employment is terminated for cause, all rights
of the Participant under any Options shall cease immediately.
Section 10. Death or Disability of Participant.
10.1. If, prior to the end of the Option Period, a
Participant's employment by the Company or an Affiliate
terminates by reason of death, each option shall remain
exercisable for a period of six months from the date of death
(but no later than the end of the Option Period) to the extent
that it was exercisable on the date of death.
10.2. If, prior to the end of the Option Period, a
Participant's employment by the Company or an Affiliate
terminates by reason of disability, each option shall remain
exercisable for a period of one year from the date of such
termination (but no later than the end of the Option Period) to
the extent that it was exercisable at the date of termination as
used in this Section 10 and elsewhere in this Plan, the term
"disability" means a physical or mental impairment which comes
within the definition of disability as set forth in Section
22(e)(3) of the Code.
Section 11: Forfeiture Upon Occurrence of Certain Acts.
Notwithstanding any other provisions of this Plan, no
payment under any SAR or issuance of any Stock pursuant to any
Award shall be made and all rights of the Participant who
received such Award (or his designated beneficiary or legal
representatives) under this Plan shall be forfeited if, prior to
the time of such payment or issuance, the Participant (i) shall
be employed without the Company's or Affiliate's consent by a
competitor of, or shall be engaged in any activity in competition
with, the Company or an Affiliate; (ii) divulges without the
consent of the Company any secret or confidential information
belonging to the Company or an Affiliate; (iii) has been
dishonest or fraudulent in any matter affecting the Company or
(iv) has committed any act which, in the sole judgment of the
Committee, has been substantially detrimental to the interests of
the Company. The Company shall give a Participant written notice
of the occurrence of any such event prior to making any such
forfeiture. The determination of the Committee as to the
occurrence of any of the events specified in the foregoing
clauses (i) and (iv) of this Section 11 shall be conclusive and
binding upon all persons for all purposes. Any Award shall be
subject to forfeiture for the reasons provided in this Section in
such manner as shall be provided by the Committee.
Section 12: Stock Adjustments.
12.1 In the event that the shares of Stock shall be changed
into or exchanged for a different number or kind of shares of
stock of the Company or of another corporation (whether by reason
of merger, consolidation, recapitalization, reclassification,
stock split, combination of shares or otherwise), or if the
number of such shares of Stock shall be increased through the
payment of a stock dividend, then there shall be substituted for
or added to each share of Stock subject to, or which may become
subject to, an Option under this Plan, the number and kind of
shares into which each outstanding share of Stock shall be so
changed or for which each such share shall be exchanged, or to
which each such share shall be so entitled, as the case may be.
Outstanding options shall also be appropriately amended as to
Option Price and other terms as may be necessary to reflect the
foregoing events. In the event there shall be any other change
in the number or kind or outstanding shares of the Stock, or of
any shares into which such shares shall have been changed, or for
which they shall have been exchanged, and if the Committee shall,
in its sole discretion, determine that such change equitably
requires an adjustment in any Option theretofore granted or which
may be granted under this Plan, such adjustments shall be made in
accordance with such determination.
12.2 Fractional shares resulting from any adjustment in
Options pursuant to this Section 12 may be settled in cash or
otherwise as the Committee shall determine. Notice of any
adjustment shall be given by the Company to each holder of an
option which shall have been so adjusted and such adjustment
(whether or not such notice is given) shall be effective and
binding for all purposes of this Plan.
12.3 Treatment of Options and SARs.
A. In the event of an occurrence of any of the following
events:
(i) the commencement of a bona fide "tender offer", (other
than by the Company or COMNET Corporation, a Delaware
corporation("COMNET") or COMNET's successor or assign), which
tender offer is acceptable to the Company's Board for the shares
of the Company as provided under Rule 14d-2 promulgated under the
Federal Securities Exchange Act of 1934, as amended, or any
subsequent comparable Federal rule or regulation governing tender
offers;
(ii) a successful tender offer not previously approved by
the Company's Board of Directors resulting in a change of control
of the Board;
(iii) the Company's execution of an agreement concerning
the sale of substantially all of its assets (other than to a
subsidiary in a mere corporate restructuring);
(iv) the Company's adoption of a plan of dissolution or
liquidation; or
(v) the Company's execution of an agreement concerning a
merger or consolidation (with a corporation other than COMNET)
involving the Company in which the Company is not the surviving
corporation or if, immediately following such merger or
consolidation, less than fifty percent (50%) of the surviving
corporation's outstanding voting stock is held by persons who
were shareholders of the Company immediately prior to such merger
or consolidation; upon approval of the Compensation Committee
each Participant shall have the right, immediately following such
occurrence, to exercise his or her Options in full to the extent
not theretofore exercised regardless of any provision herein or
any provision in the Options contract providing for the deferment
of the vesting or exercise thereof.
The Participant shall then be entitled to exercise the
Options regardless of whether the tender offer (described in
12.3A(i)) is successful, regardless of whether the dissolution or
liquidation is consummated, and regardless of whether the other
corporation which is the surviving corporation in a merger or
consolidation shall adopt and maintain any plan under which
options are granted to the Participant. In the event the
agreement concerning the sale of substantially all of its assets
or the agreement concerning a merger or consolidation is not
consummated by the parties, then the options not exercised prior
to the formal determination by the Board that the contemplated
transaction will not be consummated shall on and after the date
of such determination again be subject to the exercise
restrictions set forth in the Option agreement. In the case of a
merger, consolidation, reorganization, reclassification, sale of
assets or similar event, all outstanding Options shall pertain to
the securities or other property to which a holder of the number
of shares of Stock covered by the Option would have been entitled
to receive in connection with such event, and in the case of any
other event specified herein, each outstanding Option shall
remain outstanding and exercisable in accordance with its terms.
B. In the event of any of the occurrences referenced in
Section 12.3A, above, and upon approval of the Compensation
Committee, the Redemption Date with respect to all SARs
theretofore granted hereunder and outstanding at that time shall
be the date of such event, regardless of any provision herein or
any provision in the Stock Unit contract providing for the
deferment of the vesting or redemption of any provision herein or
any provision in the SAR contract providing for the deferment of
the vesting or redemption thereof. The Participant shall be
entitled to redeem the SAR regardless of whether the tender offer
is successful, regardless of whether the dissolution or
liquidation is consummated, and regardless of whether the other
corporation which is the surviving corporation in a merger or
consolidation shall adopt and maintain any plan under which SARs
are granted to the Participant. In the event the agreement
concerning the sale of substantially all of its assets or the
agreement concerning a merger or consolidation is not consummated
by the parties, then the SARs not exercised prior to the formal
determination by the Board that the contemplated transaction will
not be consummated shall on and after the date of such
determination again be subject to the vesting restrictions set
forth in the Option agreement.
In the case of a merger, consolidation, reorganization,
reclassification, sale of assets or similar event, the SARs Value
of any SAR upon the redemption of such SAR shall be determined on
the basis of the difference, if any, between (i) the value of a
single share of the Company's Stock as of the date of grant of
such SAR, and (ii) the current value, as of the Redemption Date
of such SAR, of the shares of stock or other securities into
which a single share of the Company's Stock would have been
converted on the date of such reclassification, consolidation,
merger, reorganization, sale of assets or other similar event.
12.4 In making the adjustments provided for, by this
Section 12, consideration shall be given to applicable tax laws
in order to avoid a premature lapse or disqualifying disposition
of an option due solely to such adjustment.
Section 13: Effective Date, Termination and Amendment of the
Plan.
13.1 This Plan shall become effective September 12, 1995,
after approval by the Company's stockholders. Once effective,
this Plan shall terminate on September 10, 2005.
13.2 The Board may, insofar as permitted by law, from time
to time and at any time, with respect to any shares at the time
not subject to Options, terminate, suspend, alter, amend or
discontinue this Plan, in whole or in part, except that no such
modification, alteration, amendment or discontinuation shall,
without the Participant's consent, impair the rights of any
Participant under any Option granted to such Participant, except
in accordance with the provisions of this Plan and/or the Option
Agreement applicable, to any such Award, and except, further,
that no modification, alteration of amendment shall, without the
approval by the holders of a majority of the then-outstanding
voting stock of the Company represented and entitled to vote at a
stockholders' meeting:
(i) Increase the total number of shares reserved for the
purposes of this Plan, except as provided in Section 12 for this
Plan;
(ii) Decrease the Option Price of ISO's to less than 100%
of Fair Market Value on the date of grant of an Option or the
option Price of NQSO's to less than 85% of Fair Market Value on
the date of grant of an option.
(iii) Change the persons (or class of persons) eligible to
receive options and SAR's under this Plan;
(iv) Materially increase the benefits accruing to
Participants under this Plan.
Section 14: Miscellaneous.
14.1. This Plan does not, directly or indirectly, create
any right for the benefit of any employee or class of employees
to receive any Awards under this Plan, or create in any employee
or class of employees any right with respect to continuation of
employment by the Company or an Affiliate, and it shall not be
deemed to interfere in any way with the Company's or an
Affiliate's right to terminate or otherwise modify an employee's
employment at any time.
14.2 Notwithstanding any other provision of this Plan, no
delivery of Stock with respect to any Award shall be made, and
all rights of the Participant who receives such Award (or his
designated beneficiary or legal representative) to such delivery
of Stock under this Plan shall be forfeited, at the discretion of
the Committee, if, prior to the time of such delivery, the
Participant breaches a restriction or any of the terms,
restrictions and/or conditions of this Plan and/or the Stock
Option Agreement.
14.3 The provisions of this Plan and the terms and
conditions of any Award shall, in accordance with their terms, be
binding upon, and inure to the benefit of, all successors of each
Participant, including, without limitation, such Participant's
estate and the executors, administrators or trustees thereof,
heirs and legatees and any receiver, trustee in bankruptcy or
representative of creditors of such Participant.
14.4 No member of the Committee shall be personally liable
by reason of any contract or other instrument executed by him or
on his behalf in his capacity as a member of the Committee, nor
for any mistake of judgment made in good faith, and the Company
shall indemnify and hold harmless each member of the Committee
and each other officer, employee or director of the Company to
whom any duty or power relating to the administration or
interpretation of this Plan may be allocated or delegated,
against any cost or expense (including counsel fees) or liability
(including any sum paid in settlement of a claim with the
approval of the Board) arising out of any act or omission to act
in connection with this Plan, unless arising out of such person's
own fraud or bad faith.
14.5 Nothing contained in the Plan shall be construed to
preclude the granting of an Option or Options pursuant to Section
5.1 to an Optionee in addition to an Option or options for the
purchase of Shares already held by that Optionee or the granting of
more than one option pursuant to Section 5.1 to an Optionee at the
same time.
14.6. Any and all grants of Options shall be subject to all
applicable rules and regulations of any exchange on which the
Company's Common Stock may then be listed.
14.7 Notwithstanding any provision of the Plan or any Option
Agreement to the contrary, no Option may be granted or exercised at
any time when such Option or the granting or exercise thereof or
payment therefor may result in the violation of any law or
governmental order or regulation.
14.8 Each member of the Board, Compensation Committee and each
officer and employee of the Company in performing duties under the
Plan shall be entitled to rely upon information and reports
furnished in connection with the administration of this Plan by any
duly authorized officer or agent of the Company.
14.9 No a member of the Board, Compensation Committee and no
officer or employee of the Company shall be liable for any action or
determination made in good faith with respect to the Plan or any
Option granted under the Plan.
14.10 Any Option Agreement may include provisions that if the
Company or a Subsidiary shall be required to withhold any amounts by
reason of any federal, state or local tax rules or regulations in
respect of the issuance of Shares pursuant to the exercise of an
Option, the Company or the Subsidiary shall be entitled to deduct
and to withhold such amount from any cash payments to be made to
the Optionee. The Administrator may establish such rules and
procedures, including, without limitation, any rules or procedures
necessary to comply with Rule 16b-3, as it may deem necessary or
advisable in connection with the withholding taxes relating to the
exercise of any option.
14.11 If at any time an Optionee is indebted to or otherwise
obligated to make any payment to the Company or any Subsidiary, the
Company may (a) withhold from the Optionee (i) following the
exercise by the Optionee of an Option, Shares issuable to the
Optionee having a Fair Market Value on the date of exercise up to
the amount of Indebtedness to the Company or (ii) following the sale
by an Optionee of Shares received pursuant to the exercise of an
Option amounts due to an Optionee in connection with the sale of
such Shares up to the amount of the indebtedness to the Company, or
(b) take any substantially similar action. The Company may
establish such rules and procedures as it may deem necessary or
advisable in connection with the taking of any action contemplated
by this Section 14.11.
14.12 The section headings contained herein have no
substantive meaning or content and are not part of this Plan.
<PAGE>
EXHIBIT 4.02
1995 GROUP 1 SOFTWARE, INC.
NON-EMPLOYEE DIRECTORS' STOCK OPTION PLAN
1. Purpose of the Plan
This Stock Option Plan (the "Plan") is intended to promote
the interests of Group 1 SOFTWARE, Inc. (the "Company") by
providing non-employee directors of the Company with incentives
to work for the best interests of the Company and its
stockholders through continuing personal interest in the value of
the common stock.
2. Administration of the Plan
(a) The Plan shall be administered by the Compensation
Committee of the Board of Directors of the Company. Such
administration shall consist of authority to interpret the
provisions of the Plan, to establish such rules and procedures as
may be necessary or advisable to administer the Plan and to make all
determinations necessary or advisable for the administration of the
Plan; provided, however, that no such interpretation or
determination shall change or affect the selection of participants
eligible to receive grants under the Plan, the number of shares
covered by or the timing of any grant of Options under the Plan or
the terms and conditions thereof. The interpretation and
construction by the Committee of any provision of the Plan or of any
Option Agreement shall be final and conclusive.
(b) The Plan is intended to comply with the terms and
provisions of Rule 16b-3 promulgated under the Exchange Act. Any
provision of the Plan or any option Agreement inconsistent with the
terms of such Rule in effect on such date shall be inoperative and
shall not affect the validity of the Plan, such Option Agreement or
any other provision thereof.
3. Stock Subject to the Plan
Under this Plan, options may be granted for shares of the
Company's common stock, $.01 par value ("Shares"). Shares issued
upon exercise of options may be either newly issued Shares or
treasury Shares, at the discretion of the Company. The aggregate
number of Shares under the Plan is 100,000. If any outstanding
option under the Plan expires or is terminated for any reason,
the Shares allocable to the unexercised portion of such option
may again be subject to an option under the Plan.
4. Eligibility; Grant of Options
(a) Each person who becomes a Non-Employee Director at any
time after the effective date of the Plan shall be automatically
granted an option to purchase 5,000 Shares on the date when he
becomes a director.
(b) Each Non-Employee Director who is granted an option
pursuant to Subparagraph 4(a) above shall be automatically
granted an additional option to purchase 5,000 Shares on each
anniversary of the date of his first grant under the Plan if, on
such anniversary, he is then a Non-Employee Director.
5. Terms and Conditions of Options
Stock options granted pursuant to the Plan shall be
evidenced by agreements in such form as the Compensation
Committee shall, from time to time, approve, which agreements
shall comply with and be subject to the following terms and
conditions:
(a) Option Price
The option price of any option granted under the Plan shall
be the fair market value of the Company common stock on the date
of the grant of such option. If the Shares are listed on an
established stock exchange, such fair market value shall be
deemed to be the closing price of Company common stock on such
stock exchange on the day the option is granted or, if no sale of
Company common stock shall have been made on any stock exchange
on that day, the next preceding day on which there was a sale of
such stock. If Company common stock is not listed on an
established stock exchange but is traded in the over-the-counter
market, the fair market value of the Shares shall be the closing
price as quoted in the National Association of Securities
Dealers' Automated Quotation System ("NASDAQ") on the day the
option is granted or, if no sale of Company common stock is
reflected in NASDAQ on that day, on the preceding day on which
there was a sale of such stock reflected in NASDAQ. If no
quotations are available, the fair market value shall be as
determined by a majority of the Board of Directors in good faith.
The Compensation Committee shall have full authority and
discretion in fixing the option price in accordance with any
reasonable method of valuation, and be fully protected in doing
so.
(b) Terms and Exercise of Options
(1) Each option granted under the Plan shall be
exercisable as to 20% of the total number of Shares covered
thereby during each consecutive twelve month period commencing on
a date twelve months after the granting of the option.
(2) To the extent not exercised, installments shall
accumulate and be exercisable, in whole or in part, in any
subsequent period but not more than ten years from the date the
option is granted.
(3) Any option granted under the Plan may be exercised
by notifying the Company of such exercise prior to the
termination of such option. The option price for the number of
Shares for which the option is exercised shall become immediately
due and payable; provided, however, that in lieu of cash an
optionee may exercise his option by tendering to the Company,
shares of Company common stock owned by him (which includes
pyramiding the shares received upon exercise of options by
simultaneously delivering such shares of stock in payment of the
purchase price of shares subject to additional options having a
fair market value equal to the cash exercise price of the Shares
being purchased), provided that any Share delivered in payment of
the exercise price must have been held of record by the Optionee
for a least six months or such other period as may be required to
avoid any adverse effect on the financial position of the Company
or a subsidiary as a result of incurring compensation expense or
otherwise. Such shares, which shall be fully paid and non-
assessable upon the issuance thereof, shall be represented by a
certificate or certificates registered in the name of the
Participant and stamped with any appropriate legend.
(4) During the lifetime of the optionee, the options
shall be exercisable only by him or his representative and shall
not be assignable or transferable by him otherwise than by will
or the laws of descent and distribution.
(c) Effect of Termination of Directorship
(1) In the event that an optionee shall cease to be a Non-
Employee Director of the Company for any reason other than his
death, such optionee shall have the right to exercise his options
at any time within thirty days after he has ceased to be a Non-
Employee Director to the extent of the full number of Shares he
was entitled to purchase under the options on the date of
termination, subject to the condition that no option shall be
exercisable after the expiration of the term of the option.
(2) If the optionee shall die while he is a Non-Employee
Director of the Company or within one month after termination of
such status for any reason, and he shall not have fully exercised
all his options, such options may be exercised at any time within
six months after his death by the executors or administrators of
the optionee or by any person or persons to whom the options are
transferred by will or the applicable laws of descent and
distribution, to the extent of the full number of Shares he was
entitled to purchase under the options on the date of death, and
subject to the condition that no option shall be exercisable
after the expiration of the term of the option.
(d) Adjustment Upon Changes in Stock
If any change is made in the common stock subject to the
Plan, or subject to any option granted under the Plan (through
merger, consolidation, reorganization, recapitalization, stock
dividends, stock splits, combination of shares, exchange of
shares, change in corporate structure, or otherwise) appropriate
adjustments shall be made as to the maximum number of Shares
subject to outstanding options.
(e) Rights As A Stockholder
No person shall have any rights as a stockholder with
respect to any Shares covered by an option granted pursuant to
the Plan until the date of the issuance of a stock certificate to
him for such Shares.
(f) In the event of an occurrence of any of the following
events:
(1) the commencement of a bona fide "tender offer"
(other than by the Company or COMNET Corporation, a Delaware
corporation ("COMNET") or COMNET's successor or assign) which
tender offer is acceptable to the Company's Board for the shares
of the Company as provided under Rule 14d-2 promulgated under the
Federal Securities Exchange Act of 1934, as amended, or any
subsequent comparable Federal rule or regulation governing tender
offers;
(2) a successful tender offer not previously approved
by the Company's Board of Directors resulting in a change of
control of the Board;
(3) the Company's execution of an agreement concerning
the sale of substantially all of its assets (other than to a
subsidiary in a mere corporate restructuring);
(4) the Company's adoption of a plan of dissolution or
liquidation; or
(5) the Company's execution of an agreement concerning
a merger or consolidation (with a corporation other than COMNET)
involving the Company in which the Company is not the surviving
corporation or if, immediately following such merger or
consolidation, less than fifty percent (50%) of the surviving
corporation's outstanding voting stock is held by persons who
were shareholders of the Company immediately prior to such merger
or consolidation; upon approval of the Compensation Committee
each Participant shall have the right, immediately following such
occurrence, to exercise his or her Option in full to the extent
not theretofore exercised regardless of any provision herein or
any provision in the Option contract providing for the deferment
of the vesting or exercise thereof.
The Participant shall then be entitled to exercise the
options regardless of whether the tender offer described in
5(f)(1) is successful, regardless of whether the dissolution or
liquidation is consummated, and regardless of whether the other
corporation which is the surviving corporation in a merger or
consolidation shall adopt and maintain any plan under which
options are granted to the Participant. In the event the
agreement concerning the sale of substantially all of its assets
or the agreement concerning a merger or consolidation is not
consummated by the parties, then the Options not exercised prior
to the formal determination by the Board that the contemplated
transaction will not be consummated shall on and after the date
of such determination again be subject to the exercise
restrictions set forth in the Option agreement. In the case of a
merger, consolidation, reorganization, reclassification, sale of
assets or similar event, all outstanding Options shall pertain to
the securities or other property to which a holder of the number
of shares of Stock covered by the Option would have been entitled
to receive in connection with such event, and in the case of any
other event specified herein, each outstanding Option shall
remain outstanding and exercisable in accordance with its terms.
(g) Treatment of SARs.
In the event of any of the occurrences referenced in Section
5(f), above, the Redemption Date with respect to all SARs
theretofore granted hereunder and outstanding at that time shall
be the date of such event, regardless of any provision herein or
any provision in the Stock Unit contract providing for the
deferment of the vesting or redemption of any provision herein or
any provision in the SAR contract providing for the deferment of
the vesting or redemption thereof. The Participant shall be
entitled to redeem the SAR regardless of whether the tender offer
is successful, regardless of whether the dissolution or
liquidation is consummated, and regardless of whether the other
corporation which is the surviving corporation in a merger or
consolidation shall adopt and maintain any plan under which SARs
are granted to the Participant. In the event the agreement
concerning the sale of substantially of all of its assets or the
agreement concerning a merger or consolidation is not consummated
by the parties, then the SARs not exercised prior to the formal
determination by the Board that the contemplated transaction will
not be consummated shall on and after the date of such
determination again be subject to the vesting restrictions set
forth in the Option agreement.
In the case of a merger, consolidation, reorganization,
reclassification, sale of assets or similar event, the SARs Value
of any SAR upon the redemption of such SAR shall be determined on
the basis of the difference, if any, between (i) the value of a
single share of the Company's Stock as of the date of grant of
such SAR, and (ii) the current value, as of the Redemption Date
of such SAR, of the shares of stock or other securities into
which a single share of the Company's Stock would have been
converted on the date of such reclassification, consolidation,
merger, reorganization, sale of assets or other similar event.
(h) In making the adjustments provided for, by this Section
5, consideration shall be given to applicable tax laws in order
to avoid a premature lapse or disqualifying disposition of an
option due solely to such adjustment.
6. Securities Matters
The exercise of any option granted hereunder shall only be
effective at such time as counsel to the Company shall have
determined that the issuance and delivery of Shares pursuant to
such exercise will not violate any state or federal securities
laws or other laws. The Non-Employee Director desiring to
exercise an option may be required by the Company, as a condition
of the effectiveness of any exercise of an option granted
hereunder, to agree in writing that all Shares to be acquired
pursuant to such exercise shall be held for his own account
without a view to any further distribution thereof, that the
certificates for such Shares shall bear an appropriate legend to
that effect, and that such Shares shall not be transferred or
disposed of except in compliance with applicable federal and
state laws. The Company may, in its sole discretion, defer the
effectiveness of any exercise of any option granted hereunder in
order to allow the issuance of Shares to be made pursuant to
registration or an exemption from registration or other methods
for compliance available under federal or state securities laws.
The Company shall be under no obligation to effect the
registration pursuant to the Securities Act of 1933 of any Shares
to be issued hereunder or to effect similar compliance under any
state laws. The Company shall inform the optionee in writing of
its decision to defer the effectiveness of the exercise of an
option granted hereunder. During the period that the
effectiveness of the exercise of an option has been deferred, the
optionee may, by written notice, withdraw such exercise and
obtain the refund of any amount paid with respect thereto.
7. Amendment or Termination of the Plan.
The Plan may be terminated and may be modified or amended by
the Board at any time and from time to time; provided, however, that
(i) no modification or amendment increasing the aggregate number of
Shares which may be issued under options, materially increasing
benefits accruing to optionees, or materially modifying the
requirements as to eligibility to receive options hereunder or
otherwise instituting a material modification or amendment to the
Plan shall be effective without stockholder approval, (ii) no such
termination, modification, or amendment of the Plan shall alter or
affect the terms of any then outstanding options previously granted
hereunder without the consent of the holder thereof and (iii) the
provisions of Section 5 with respect to the number of Shares for
which Options shall be granted, the timing of such grants and the
Option Price for such Options shall not be amended more than once
every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act of 1974, as amended, or
the rules thereunder.
8. Miscellaneous
(a) Nothing contained in the Plan shall be construed to
preclude the granting of an option or options to an optionee in
addition to an option or options for the purchase of Shares already
held by that optionee or the granting of more than one option to an
optionee at the same time.
(b) Any and all grants of options shall be subject to all
applicable rules and regulations of any exchange on which the
Company's Common Stock may
then be listed.
(c) The Plan shall be effective on September 12, 1995, after
approval by the Company's stockholders at the 1995 annual meeting of
stockholders. No Option shall be granted after September 10, 2005.
(d) Nothing in the Plan nor in any option granted under the
Plan shall confer (or be deemed to confer) any right on any optionee
to continue as a director of the Company or any subsidiary or shall
interfere in any way with the right of the Board or the stockholders
of the Company, or the board of directors or stockholders (including
the Company) of any subsidiary, to terminate such status at any
time, with or without cause and with or without notice except as
otherwise provided by the certificate of incorporation or by laws of
the Company or such Subsidiary or applicable law.
(e) Notwithstanding any provision of the Plan or any option
agreement to the contrary, no option may be granted or exercised at
any time when such option or the granting or exercise thereof or
payment therefore may result in the violation of any law or
governmental order or regulation.
(f) Each member of the Board and each officer and employee of
the Company in performing duties under the Plan shall be entitled to
rely upon information and reports furnished in connection with the
administration of this Plan by any duly authorized officer or agent
of the Company.
(g) No member of the Board and no officer or employee of the
Company shall be
liable for any action or determination made in good faith with
respect to the Plan or any option granted under the Plan.
(h) Any option agreement may include provisions that if the
Company or a subsidiary shall be required to withhold any amounts by
reason of any federal, state or local tax
rules or regulations in respect of the issuance of Shares pursuant
to the exercise of an option, the Company or the Subsidiary shall be
entitled to deduct and to withhold such amount from any cash
payments to be made to the optionee. The Administrator may
establish such rules and procedures, including, without limitation,
any rules or procedures necessary to comply with Rule 16b-3, as it
may deem necessary or advisable in connection with the withholding
taxes relating to the exercise of any option.
(i) The section headings contained herein have no substantive
meaning or content and are not part of this Plan.
<PAGE>
EXHIBIT 10.25
FIRST AMENDMENT TO SUBLEASE
THIS FIRST AMENDMENT TO SUBLEASE (this "Amendment") is made
as of April 15, 1996, by and between COMNET Corporation, a
Delaware corporation having its principal office at 4200
Parliament Place, Suite 600, Lanham, Maryland 20706 ("Sublessor")
and Group 1 Software, Inc., a Delaware corporation having an
office at 4200 Parliament Place, Suite 600, Lanham, Maryland
20706 ("Sublessee").
W I T N E S S E T H
WHEREAS, Quadrangle Development Corporation ("Landlord") and
Sublessor are parties to a lease dated September 25, 1992 (the
"Prime Lease"), covering certain office space located in the
building at 4200 Parliament Place of the Eastpoint I Business
Park (the "Leased Premises"); and
WHEREAS, pursuant to that certain Sublease dated March 15,
1993, (the "Sublease"), Sublessee has leased from Sublessor
approximately 38,208 square feet (the "Subleased Premises"),
which comprises a portion of the Leased Premises and is subject
to the Prime Lease; and
WHEREAS, Sublessor and Sublessee wish to expand the
Subleased Premises to include the Enlargement Space (as defined
and set out in the Third Amendment to the Prime Lease), outlined
on Exhibit A, hereto, and consisting of approximately thirteen
thousand seven hundred seventeen (13,717) square feet, on the
terms and conditions hereinafter set forth.
NOW THEREFORE, in consideration of the foregoing, of the
mutual promises of the parties hereto contained herein, and of
other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, Sublessor and
Sublessee, intending to be legally bound, hereby agree as
follows:
1. All capitalized terms used herein shall have the meanings
ascribed to them in the Sublease, unless otherwise specified
herein.
2. From and after April 15, 1996, the Subleased Premises shall
hereby expand to include, in addition to such space hereto
comprising the Subleased Premises, that additional space
consisting of approximately thirteen thousand seven hundred
seventeen (13,717) square feet of office space located on the
fourth (4th) floor of the Building.
3. The base rent and operating expenses set forth in Section 4
of the Sublease shall be increased to reflect the increased space
occupied by the Sublessee. Sublessee shall be responsible to the
Sublessor for all other expenses generated by occupying this
additional space.
4. All other terms and conditions of the Sublease not
specifically amended or modified hereunder shall remain in full
force and effect.
IN WITNESS WHEREOF, the parties have executed this First
Amendment to the Sublease as of the day and year first written
above.
SUBLESSEE:
GROUP 1 SOFTWARE, Inc.
By: ___________________________
Name: _________________________
Title: __________________________
SUBLESSOR:
COMNET CORPORATION
By: ___________________________
Name: _________________________
Title: __________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE 10-K AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAR-31-1996
<PERIOD-END> MAR-31-1996
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<SECURITIES> 1,979
<RECEIVABLES> 29,889
<ALLOWANCES> 2,409
<INVENTORY> 0
<CURRENT-ASSETS> 32,588
<PP&E> 6,936
<DEPRECIATION> 3,906
<TOTAL-ASSETS> 65,851
<CURRENT-LIABILITIES> 27,164
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0
<COMMON> 0
<OTHER-SE> 30,314
<TOTAL-LIABILITY-AND-EQUITY> 65,851
<SALES> 45,875
<TOTAL-REVENUES> 45,875
<CGS> 40,222
<TOTAL-COSTS> 40,222
<OTHER-EXPENSES> (125)
<LOSS-PROVISION> 1,618
<INTEREST-EXPENSE> 144
<INCOME-PRETAX> 5,778
<INCOME-TAX> 3,701
<INCOME-CONTINUING> 3,701
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<NET-INCOME> 3,701
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
