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Filed Pursuant to Rule 424(b)(3)
Registration No. 333-31385
PROSPECTUS
TECHNOLOGY SOLUTIONS COMPANY
129,870 SHARES OF COMMON STOCK,
$.01 PAR VALUE
_________________
This Prospectus relates to up to 129,870 shares (the "Shares") of Common
Stock, par value $.01 per share (the "Common Stock"), of Technology Solutions
Company, a Delaware corporation (the "Company"), to be offered for the
account of certain stockholders of the Company (the "Selling Stockholders").
The Shares being offered hereby were issued to the Selling Stockholders in
connection with the acquisition of certain securities from the Selling
Stockholders. See "Selling Stockholders."
The Common Stock is quoted on The Nasdaq National Market (the "NSM")
under the symbol "TSCC." On July 24, 1997, the closing price of the Common
Stock on The Nasdaq National Market was $38.125 per share.
The Selling Stockholders have informed the Company that they intend to
dispose of the Shares in and/or outside of the United States in transactions
through underwriters, brokers, dealers or agents, or through privately
negotiated transactions, including sales or distributions to persons
affiliated with one or more of the Selling Stockholders and direct sales or
distributions to one or more purchasers. The sale or distribution of the
Shares may be effected from time to time in one or more transactions (which
may involve crosses or block transactions) on the NSM, in the
over-the-counter market, on a national securities exchange or otherwise at
fixed prices which may be changed, at market prices prevailing at the time of
sale, at prices related to such market prices or at negotiated prices. The
Selling Stockholders may effect such transactions by selling the Shares to or
through underwriters, brokers, dealers or agents who may receive compensation
in the form of discounts, concessions or commissions from the Selling
Stockholders or the purchasers of the Shares for whom such underwriters,
brokers, dealers or agents may act. To the extent required, the number of
Shares to be sold, the purchase price, the public offering price, if
applicable, the name of any such underwriter, broker, dealer or agent, and
any applicable commissions, discounts or other items constituting
compensation to such underwriters, brokers, dealers, or agents with respect
to a particular offering will be set forth in a supplement or supplements to
this Prospectus (each, a "Prospectus Supplement"). The aggregate proceeds to
the Selling Stockholders from the sale of the Shares so offered will be the
purchase price of the Shares sold less the aggregate commissions, discounts
and other compensation, if any, paid by the Selling Stockholders to
underwriters, brokers, dealers, or agents. See "PLAN OF DISTRIBUTION." The
Selling Stockholders are obligated to apply the proceeds from the sale of the
Shares to satisfy certain indebtedness to the Company. The Company will not
receive any proceeds directly from the sale of the Shares but will bear
certain of the expenses thereof. See "USE OF PROCEEDS" and "PLAN OF
DISTRIBUTION."
All expenses of registration incurred in connection herewith are being
borne by the Company, but all selling and other expenses incurred by the
Selling Stockholders will be borne by the Selling Stockholders.
The Selling Stockholders and any brokers, dealers, or agents that
participate with the Selling Stockholders in the distribution of any of the
Shares may be deemed to be "underwriters" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"), and any discount
or commission received by them and any profit on the resale of the Shares
purchased by them may be deemed to be underwriting commissions or discounts
under the Securities Act.
SEE "RISK FACTORS," BEGINNING ON PAGE 4 OF THIS PROSPECTUS, FOR A
DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CAREFULLY CONSIDERED BY
PROSPECTIVE PURCHASERS OF THE SHARES OFFERED HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is July 25, 1997.
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AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder (collectively, the "Exchange Act") and, in accordance
therewith, files, reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission can be inspected
and copied at the public reference facilities maintained by the Commission at
Room 1024, 450 Fifth Street, N.W., Judiciary Plaza, Washington, D.C. 20549,
and at the Commission's Regional Offices at 7 World Trade Center, 13th Floor,
New York, New York 10048, and Citicorp Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661. Such reports, proxy statements and other
information may also be inspected at the NSM, on which the Common Stock is
listed, at 1735 K. Street, N.W., Washington, D.C. 20006. Copies of such
material also may be obtained by mail from the Public Reference Section of
the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Additionally, the Commission maintains a Web site on the
Internet that contains reports, proxy and information statements and other
information regarding registrants that file electronically with the
Commission and that is located at http://www.sec.gov.
The Company has filed with the Commission a Registration Statement on
Form S-3 (including the exhibits and amendments thereto, the "Registration
Statement") pursuant to the requirements of the Securities Act with respect
to the shares of Common Stock offered hereby. This Prospectus does not
contain all the information set forth in the Registration Statement, certain
portions of which are omitted in accordance with the rules and regulations of
the Commission. Reference is made to the Registration Statement and the
Exhibits thereto for further information. Statements contained or
incorporated by reference herein concerning the provisions of any agreement
or other document filed as an Exhibit to the Registration Statement or
otherwise filed with the SEC are not necessarily complete and reference is
hereby made to the copy thereof so filed for more detailed information, each
such statement being qualified in its entirety by such reference. Copies of
the Registration Statement together with exhibits may be inspected at the
office of the Commission in Washington, D.C. without charge and copies
thereof may be obtained therefrom upon payment of a prescribed fee.
All information contained in this Prospectus relating to the Selling
Stockholders or to the proposed or potential methods of distribution of
Common Stock being offered hereby has been supplied by the Selling
Stockholders.
NO PERSONS HAVE BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER
TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, ANY SECURITIES IN ANY
JURISDICTION TO OR FROM ANY PERSON TO WHOM IT IS NOT LAWFUL TO MAKE ANY SUCH
OFFER OR SOLICITATION IN SUCH JURISDICTION. NEITHER THE DELIVERY OF THIS
PROSPECTUS NOR ANY DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL UNDER ANY
CIRCUMSTANCES CREATE AN IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
FACTS SET FORTH IN THIS PROSPECTUS OR THE AFFAIRS OF THE COMPANY SINCE THE
DATE HEREOF OR THAT THE INFORMATION HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO THE DATE HEREOF.
THIS PROSPECTUS INCORPORATES CERTAIN DOCUMENTS BY REFERENCE WHICH ARE NOT
PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN EXHIBITS TO
SUCH DOCUMENTS UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE)
ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING ANY BENEFICIAL OWNER, TO
WHOM THIS PROSPECTUS IS DELIVERED, UPON WRITTEN OR ORAL REQUEST DIRECTED TO
TECHNOLOGY SOLUTIONS COMPANY, 205 NORTH MICHIGAN AVENUE, SUITE 1500, CHICAGO,
ILLINOIS 60601, ATTENTION: INVESTOR RELATIONS, TELEPHONE NUMBER: (312) 228-4500.
INCORPORATION OF DOCUMENTS BY REFERENCE
The information in the following documents (or specified portion thereof)
filed by the Company with the Commission (File No. 0-19433) pursuant to the
Exchange Act is incorporated by reference in this Prospectus:
(a) The Company's Annual Report on Form 10-K for the fiscal year ended May 31,
1996;
(b) The Company's Quarterly Reports on Form 10-Q for the quarters ended August
31, 1996, November 30, 1996 and February 28, 1997;
(c) The Company's Current Reports on Form 8-K dated June 19, June 26,
September 24, and December 19, 1996 and July 2, 1997; and
(d) The description of the Common Stock contained in the Registration Statement
on Form 8-A filed with the Commission on July 25, 1991, including any
subsequent amendment or any report filed for the purpose of updating such
description.
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All reports and other documents filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the
date of this Prospectus and prior to the filing of a post-effective amendment
to the Registration Statement that indicates that all of the shares of Common
Stock offered hereby have been sold or that deregisters all shares of Common
Stock then remaining unsold shall be deemed to be incorporated by reference
in this Prospectus and to be a part hereof from the date of filing of such
reports and documents.
Any statements made herein or in a report or document incorporated or
deemed to be incorporated by reference herein shall be deemed to be modified
or superseded for purposes of this Prospectus to the extent that a statement
contained herein or in any other subsequently filed report or document which
is also incorporated or deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
FORWARD-LOOKING STATEMENTS
Certain statements included or incorporated by reference herein may be
deemed to constitute "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements involve known and unknown risks, uncertainties and other factors
which may cause the actual results, performance, or achievements of the
Company to be materially different from any future results, performance, or
achievements expressed or implied by such forward-looking statements. Such
risks, uncertainties and factors include, without limitation, risks
associated with the expansion of the Company's business and the management of
growth, dependence on key personnel, growth by acquisitions, changing
economic conditions, rapidly changing technology and the competitive
environment, and other risks, uncertainties and factors described from time
to time in the Company's reports filed with the Commission. Such risks,
uncertainties and factors also include, without limitation, those described
herein under "Risk Factors."
_________________
As used herein, unless the context otherwise clearly requires, the term
"Company" refers to Technology Solutions Company and its consolidated
subsidiaries.
On June 20, 1997, the Company's Board of Directors approved a fifty
percent (50%) stock distribution to be distributed on August 1, 1997, to
stockholders of record, including the Selling Stockholders, as of the close
of business on July 10, 1997. Any reference to shares of Common Stock,
including the Shares, in this Prospectus is on a pre-distribution basis.
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THE COMPANY
The Company provides strategic business and management consulting and
information technology services to major corporations and financial
institutions. These services help manufacturing, technology, health care,
telecommunications, financial services, and other service industry clients
transform their businesses, their internal business processes and their
relationships with customers, suppliers, distributors and employees. The
information technology ("IT") services provided by the Company help these
clients achieve clearly defined business benefits.
The Company's services span a wide range of strategic business and
management consulting services and IT services. The strategic business and
management consulting services offered include business strategic planning,
market research and analysis, new venture growth services, product and
distribution channel planning and organizational restructuring services. The
Company's IT services address the entire spectrum of IT consulting and
systems integration, including the identification of areas of a client's
business that can benefit from computer technology, feasibility studies,
business case justification, business procedure redesign and reengineering,
benchmarking and best practices, project management, architecture, logical
and physical systems design, hardware and software selection, programming,
implementation, change management, education, training, and benefits
realization.
The Company is organized into specific areas of business focus, called
practice areas, to better address the needs of its clients by providing
specialized business and systems knowledge. The Company believes that a
structure based on focused practice areas gives its clients access to very
specialized industry and systems knowledge and allows its employees the
flexibility and opportunity to grow and develop.
The Company is currently organized into the following domestic practice
areas: Call Center; Enterprise Applications; Change & Learning Technologies;
Financial Services; the Strategy Group; Telecommunications; and Products.
Additionally, the Call Center, Financial Services, Enterprise Applications
and Change & Learning Technologies practice areas conduct business in
international markets.
The Company is a corporation formed under the laws of the State of
Delaware. Its principal executive offices are located at 205 North Michigan
Avenue, Suite 1500, Chicago, Illinois 60601, telephone: (312) 228-4500. In
addition to its Chicago office, the Company maintains domestic offices in the
New York; Atlanta; Boston; New Canaan, Connecticut; Minneapolis; San
Francisco; San Jose; Dallas; and Philadelphia metropolitan areas.
International offices are located in Mexico City, Mexico; London, England;
Cologne, Germany; Bogata, Colombia; and Toronto, Canada.
RISK FACTORS
THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY BY PROSPECTIVE
INVESTORS, IN CONJUNCTION WITH THE OTHER INFORMATION INCLUDED AND
INCORPORATED BY REFERENCE IN THIS PROSPECTUS, BEFORE MAKING AN INVESTMENT
DECISION. SEE ALSO "FORWARD-LOOKING STATEMENTS."
RISKS RELATING TO THE BUSINESS
The Company's business is subject to certain risks and uncertainties,
including the need to anticipate changes in technology to provide IT services
on a timely basis, competition from other companies with substantially
greater financial, technical and other resources, relatively low barriers to
entry, the growth in IT services offered by others, and the need to protect
the Company's proprietary rights.
RAPID TECHNOLOGICAL CHANGE
The systems consulting and implementation market has experienced rapid
technological advances and developments in recent years. Failure of the
Company to stay abreast of such advances and developments could materially
adversely affect its business. The Company additionally utilizes a number of
different technologies in developing and providing IT solutions for its
customers. The technologies used by the Company are developing rapidly and
are characterized by evolving industry standards in a wide variety of areas.
While the Company evaluates technologies on an ongoing basis and endeavors to
utilize those that are most effective in developing IT solutions for its
customers, there can be no assurance that the technologies utilized by the
Company and the expertise gained in those technologies will continue to be
applicable in the future. There can be no assurance that new technologies
will be made available to the Company or that such technologies can be
economically applied by the Company. The inability to apply existing
technologies and expertise to subsequent projects could have a material
adverse effect on the Company's business, operating results and financial
condition.
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MANAGEMENT OF GROWTH
The Company's business has grown significantly since its inception, and
the Company anticipates future growth. The growth of the Company's business
and the expansion of its customer base have resulted in a corresponding
growth in the demands on the Company's management and personnel and its
operating systems and internal controls. Any future growth may further
strain existing management resources and operational, financial, human and
management information systems and controls, which may not be adequate to
support the Company's operations.
The Company is currently increasing its expense levels as a result of a
number of factors, including substantial increases in the number of
employees, the opening of new offices, investments in equipment, training of
employees and the development of methodologies, tools, etc. An unexpected
decline in revenues without a corresponding and timely reduction in staffing
and other expenses, or a staffing increase that is not accompanied by a
corresponding increase in revenues, could have a material adverse effect on
the Company's operating results. There can be no assurance that the Company
will be able to manage its recent or future growth successfully. In
addition, there can be no assurance that the Company will continue to grow or
sustain the rate of growth it has experienced in the past.
The Company expects that it will need to develop further its financial
and management controls, reporting systems and procedures to accommodate
future growth. There can be no assurance that the Company will be able to
develop such controls, systems or procedures effectively or on a timely
basis, and the failure to do so would have a material adverse effect on the
Company's business, operating results and financial condition.
ABILITY TO ATTRACT AND RETAIN EMPLOYEES
The Company's business consists mainly of professional services and is
inherently labor intensive. The Company's success depends in large part upon
its ability to attract, retain and motivate highly skilled employees,
particularly senior project managers and other senior personnel, for its
domestic and international operations. Qualified senior project managers
within and outside the United States are in particularly great demand and are
likely to remain a limited resource for the foreseeable future. Several
attributes of the Company's work environment pose challenges to the Company's
ability to attract and retain employees, including (i) extensive travel
requirements, (ii) the Company's intense work environment and culture, (iii)
the Company's standards for employee technical skills and job performance and
(iv) the Company's practice of adjusting the number of technical personnel to
reflect active project levels. Although the Company expects to continue to
attract sufficient numbers of highly skilled employees and to retain its
existing senior project managers and other senior personnel for the
foreseeable future, there can be no assurance that the Company will be able
to do so. Failure to attract and retain key personnel could have a material
adverse effect upon the Company's business, operating results and financial
condition.
GROWTH BY ACQUISITION
The Company may grow in part by acquiring existing businesses. The
success of this plan depends upon, among other things, the ability of the
Company and its management to integrate acquired personnel, operations,
products and technologies into its organization effectively, to retain and
motivate key personnel of acquired businesses and to retain customers of
acquired firms. There can be no assurance that the Company will be able to
identify suitable acquisition opportunities, consummate acquisitions or
successfully integrate acquired personnel and operations into the Company.
In addition, acquisitions by the Company may involve certain other risks,
including potentially dilutive issuances of equity securities and the
diversion of management's attention from other business concerns.
DEPENDENCE ON KEY PERSONNEL
Although the Company does not believe that the loss of any particular
individual would have a material adverse impact on the Company, the loss of
some or all of the Company's senior managers could have a material adverse
impact on the Company, including its ability to secure and complete
engagements. The Company has employment agreements with its President,
Executive Vice Presidents and its Vice Presidents that contain
noncompetition, nondisclosure and nonsolicitation covenants. The employment
agreements with the President and Executive Vice Presidents do not have fixed
expiration dates and may be terminated by either the Company or the employee
on 90 days' written notice. The employment agreements with the other Vice
Presidents generally have a fixed initial term but are automatically renewed
for successively one-year periods unless terminated by either the Company or
the employee on 90 days' written notice. Other senior employees also have
employment agreements that are generally terminable by the Company or the
employee upon 30 to 90 days written notice.
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UNASSIGNED LABOR COSTS
The Company's unassigned labor costs, which represent salaries of, and
other expenses allocated to, systems professionals not assigned to a specific
project, have gradually increased as a percentage of revenues over time. The
Company attempts to reassign employees who meet its performance requirements
to other active projects when they are no longer needed on a particular
project. However, since the Company generally recruits personnel in advance
of the commencement of certain projects in order to meet the needs of such
projects, any cancellation or delays in the anticipated projects could
increase the unassigned labor costs and might cause a material adverse effect
upon the Company's business, operating results and financial condition.
CYCLICALITY
Certain of the Company's customers and potential customers are in
industries that experience cyclical variations in profitability, which may in
turn affect their willingness or ability to fund systems projects such as
those for which the Company may be engaged. The Company's experience
indicates, however, that competitive pressures in cyclical industries
sometimes compel businesses to undertake systems projects even during periods
of losses or reduced profitability.
QUARTERLY RESULTS MAY FLUCTUATE
The Company's results may fluctuate from quarter to quarter as a result
of various factors such as differences in the number of billing days and/or
holidays between quarters, the number of vacation days and sick days taken
by the Company's employees in a particular quarter, and varying weather
conditions. These and other factors can reduce revenues in a given quarter
with a corresponding adverse impact on the Company's margins.
PROJECT RISKS
Because of the project based nature of the Company's work and the fact
that many of the projects undertaken by the Company are large projects, there
is a risk of a material impact on operating results because of the
unanticipated suspension or cancellation of a large project or the financial
difficulties of a client. The suspension or cancellation of a project or the
financial difficulties of a client could result in a drop in revenues, the
need to reassign staff, a potential dispute with a client regarding monies
owed for consulting work and expenses, and a lessening of TSC's reputation.
In addition, because many of the Company's projects are high profile,
mission critical projects for major clients, a failure or inability to meet a
client's expectations with respect to a major project undertaken by the
Company could damage its reputation and affect its ability to attract new
business. Third party products and services are integral to the success of
certain Company projects. To the extent that third parties do not deliver
effective products and services on a timely basis, the Company's project
results could be negatively impacted. Although the Company attempts to limit
this risk in its engagement arrangements with clients and maintains errors
and omissions insurance, the failure of a project could also result in
significant financial exposure to the Company.
COMPETITION
The systems consulting and implementation market comprises a large
number of participants, is subject to rapid changes and is highly
competitive. The Company competes with and faces potential competition from
a number of companies that have significantly greater financial, technical
and marketing resources and greater name recognition than the Company. The
Company also competes with smaller service providers whose specific, more
narrowly focused service offerings may be more attractive to potential
clients than the Company's multi-dimensional approach. The Company's clients
primarily consist of Fortune 1000 and other large corporations and there are
an increasing number of professional services firms seeking systems
consulting and implementation engagements from that client base. The Company
believes that its ability to compete depends in part on a number of factors
outside its control, including the ability of its competitors to hire, retain
and motivate a significant number of senior project managers, the ownership
by competitors of software used by potential clients, the development by
others of software that is competitive with the Company's products and
services, and the price at which others offer comparable services.
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In addition, the Company's clients could develop or acquire in-house
expertise in services similar to those provided by the Company, which would
significantly reduce demand for the Company's services. No assurance can be
given that the Company will be able to maintain its existing client base,
maintain or increase the level of revenue generated by its existing clients
or be able to attract new clients.
SUSCEPTIBILITY TO GENERAL ECONOMIC CONDITIONS
The Company's revenues and results of operations will be subject to
fluctuations based on the general economic conditions of the United States as
well as the foreign countries in which it operates. If there were to be a
general economic downturn or a recession in the United States or the foreign
countries in which it operates, then the Company expects that business
enterprises would cut back on their spending on, or reduce their budget for,
IT services. In the event of such an economic downturn, there can be no
assurance that the Company's business, operating results and financial
condition would not be materially and adversely affected.
COST OVERRUNS
Although the Company's engagement contracts are generally on a time and
material basis, some of its contracts are on a "not-to-exceed" or
fixed-price basis. The failure of the Company to complete a project to the
client's satisfaction within the "not-to-exceed" or fixed fee exposes the
Company to unrecoverable cost overruns, which could have a materially adverse
effect on the Company's business, results of operations and financial
condition.
INTELLECTUAL PROPERTY RIGHTS
A majority of the Company's customers have required the Company, as a
condition to performing services for such customers, to grant to the customer
all proprietary and intellectual property rights with respect to the work
product resulting from the performance of such services, including the
intellectual property rights to any custom software developed by the Company
for such customer. Each such grant of proprietary and intellectual property
rights would limit the Company's ability to reuse work product components and
work product solutions with other customers. In a limited number of such
situations, the Company has obtained, and in the future may attempt to
obtain, ownership interest or a license from its customer to permit the
Company to market custom software for the joint benefit of the customer and
the Company. Such arrangements may be nonexclusive or exclusive, and
licensors to the Company may retain the right to sell products and services
that compete with those of the Company. There can be no assurance, however,
that the Company will be able to negotiate licenses upon terms acceptable to
the Company.
The Company also develops certain foundation and application software
tools and products that are owned by the Company and licensed to its clients.
The Company regards such software as proprietary and protects its rights in
such software where appropriate with copyrights, trademarks, trade secret
laws and contractual restrictions on disclosure and transferring title. To
date, the Company has not filed any applications for the registration of
patents or copyrights on any of its software, although the Company does
presently hold certain registered trademarks for some of its software
products. There can be no assurance that any such steps taken by the Company
in this regard will be adequate to deter misappropriation of its proprietary
rights or independent third party development of functionally equivalent
products.
In addition, the Company's success is dependent upon its specialized
expertise and methodologies. To protect such proprietary information, the
Company relies upon a combination of trade secret and common laws, employee
nondisclosure policies and third party confidentiality agreements. However,
there can be no assurance that any such steps taken by the Company in this
regard will be adequate to deter misappropriation of its specialized
expertise and methodologies.
Although the Company believes that its services and products do not
infringe on the intellectual property rights of others, there can be no
assurance that such a claim will not be asserted against the Company in the
future.
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RISKS OF CONDUCTING INTERNATIONAL OPERATIONS
The Company has been significantly increasing its international
operations in recent years and expects to continue to do so in the future.
Because the cost of doing business abroad is higher for U.S. businesses than
the cost of doing business domestically, the Company could experience a
decline in its operating margins as the significance of its international
operations increases. International operations and the provision of services
in foreign markets are subject to a number of special risks, including
currency exchange rate fluctuations, trade barriers, exchange controls,
national and regional labor strikes, political risks, additional security
concerns and risks of increases in duties, taxes and governmental royalties,
as well as changes in laws and policies governing operations of foreign-based
companies. In addition, the Company's continued success and future growth
internationally will depend upon its ability to attract, develop and retain a
sufficient number of highly skilled, motivated local professional employees
in each of those foreign countries where it conducts operations. Competition
for such local personnel qualified to deliver most of the Company's services
is intense, and there can be no assurance that the Company will be able to
recruit, develop and retain a sufficient number of highly skilled, motivated
local professionals to compete successfully internationally.
POSSIBLE VOLATILITY OF STOCK PRICE; QUARTERLY FLUCTUATIONS IN OPERATING RESULTS
The market price for the Common Stock may be significantly affected by
factors such as the announcement of new products or services by the Company
or its competitors, technological innovation by the Company, its competitors
or other vendors, quarterly variations in the Company's operating results or
the operating results of the Company's competitors, general conditions in the
Company's and its customers' market, changes in earnings estimates by
analysts or reported results that vary materially from such estimates. In
addition, the stock market has experienced significant price fluctuations
that have particularly affected the market prices of equity securities of
many high technology and emerging growth companies and that often have been
unrelated to the operating performance of such companies. These broad market
fluctuations may materially and adversely affect the market price of the
Common Stock. Following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against such a company and its officers and directors. Any such
litigation against the Company could result in substantial costs and a
diversion of management's attention and resources, which could have a
material adverse effect on the Company's business, operating results and
financial condition.
SHARES ELIGIBLE FOR FUTURE SALE
Sales of substantial numbers of shares of Common Stock into the public
market, or the perception that such sales could occur, could materially
adversely affect the market price of the Common Stock or could impair the
Company's future ability to obtain capital through an offering of equity
securities.
As of June 30, 1997, there were 16,690,862 shares of Common Stock
outstanding, of which 16,275,989 were freely tradeable by persons who are not
"affiliates" of the Company within the meaning of Rule 144 under the
Securities Act, and 414,873 (including the Shares offered hereby) were
eligible for public sale, subject to compliance with the restrictions of Rule
144 under the Securities Act. Shares purchased in connection with the
offering made hereby will be freely tradeable without restriction under the
Securities Act by persons who are "affiliates" of the Company within the
meaning of Rule 144 under the Securities Act.
As of June 30, 1997, 5,384,482 shares of Common Stock were issuable upon
exercise of currently outstanding stock options and may become eligible for
public sale at various times when such stock options are exercisable. In
addition, as of June 30, 1997, the Company had available for issuance under
its employee benefit plans an additional 1,918,873 shares of Common Stock
which may also become eligible for public sale at various times.
The Company may also issue an additional 15,584 shares of Common Stock
to the Selling Stockholders. Such shares, if issued, will be eligible for
public sale, subject to compliance with the restrictions of Rule 144 under
the Securities Act. See "Selling Stockholders."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Certificate of Incorporation and
Bylaws (including the authority of the Board of Directors to issue preferred
stock and the staggered terms for members of the Company's Board of
Directors) could make it more difficult for stockholders to effect certain
corporate actions. These provisions and the prohibition against certain
business combinations contained in Section 203 of the Delaware General
Corporation Law could have the effect of delaying, deferring or preventing a
change in control of the Company or the removal of existing management of the
Company.
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ABSENCE OF DIVIDENDS
The Company has never paid dividends on its Common Stock and does not
anticipate paying any such dividends in the foreseeable future.
USE OF PROCEEDS
The Company will not receive any proceeds directly from the sale of any
of the Shares offered hereby. However, each of the Selling Stockholders is
indebted to the Company and to HRM Resources, Inc. ("HRM"), a subsidiary of
the Company, under one or more promissory notes and has agreed under the
Stock Purchase Agreement (as described below--see "SELLING STOCKHOLDERS") and
under certain of the promissory notes to apply the proceeds of any sale,
transfer or disposition of the Shares to paying off his obligations under
those promissory notes. As of the date hereof, the aggregate unpaid
principal amount owed to HRM and the Company under the promissory notes is
$371,995.72, of which $225,251.12 is owed by Edward Catarsi and $146,744.60
is owed by Joseph Alfieri.
SELLING STOCKHOLDERS
In connection with Company's combination (the "Transaction") with HRM,
the Company issued to the Selling Stockholders 374,026 shares ("Issued
Shares") of Common Stock. Under the Stock Purchase Agreement (the "Stock
Purchase Agreement") executed by the Selling Stockholders, HRM and the
Company, the Selling Stockholders may be entitled to an additional 15,584
shares ("Additional Shares") of Common Stock depending on the Company's final
adjustment to the purchase price of the Transaction. Furthermore, under the
Stock Purchase Agreement, the Company has agreed to register a total of
one-third of such Issued and Additional Shares, which are the Shares offered
hereby. From time to time, the Selling Stockholders will determine the number
of the Shares that they may sell. The Selling Stockholders have informed the
Company that the determination to sell will depend on a number of factors,
including the price of the Common Stock from time to time. The information in
the following table sets forth the information provided by the Selling
Stockholders, concerning the Selling Stockholders' ownership of the Shares.
<TABLE>
<CAPTION>
Beneficial Ownership Beneficial Ownership
Prior to the Offering After the Offering
--------------------- --------------------
Number of Percentage of Number of Percentage of
Shares of Common Shares Shares of Common
Name Common Stock(1) Stock Offered Common Stock(1)(2) Stock
- ---- --------------- ------------- ------- ----------------- -------------
<S> <C> <C> <C> <C> <C>
Edward Catarsi 317,922 1.91% 110,390 207,531 1.24%
Joseph Alfieri 56,104 * 19,480 36,622 *
Total 374,026 2.24% 129,870 244,156 1.46%
</TABLE>
- --------------
* Less than one percent.
(1) Does not include the Additional Shares.
(2) Assuming that each Selling Stockholder sells all of the Shares offered
hereby that are owned by him.
In connection with the Transaction, each of the Selling Stockholders and
the Company entered into an Employment Agreement under which the Selling
Stockholders are employed as Vice Presidents of the Company. Other than
their direct and indirect involvement in the Transaction and their employment
relationships, neither of the Selling Stockholders has had any material
relationship with the Company or any of its predecessors or affiliates within
the past three years.
The Selling Stockholders may be deemed to be "underwriters" within the
meaning of the Securities Act, in which case any profit on the resale of the
Shares may be deemed to be underwriting commissions or discounts under the
Securities Act.
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<PAGE>
PLAN OF DISTRIBUTION
The Selling Stockholders have informed the Company that they intend to
dispose of the Shares in and/or outside of the United States in transactions
through underwriters, brokers, dealers or agents, or through privately
negotiated transactions, including sales or distributions to persons
affiliated with one or more of the Selling Stockholders and direct sales or
distributions to one or more purchasers.
The sale or distribution of the Shares may be effected from time to time
in one or more transactions (which may involve crosses or block transactions)
on the NSM, in the over-the-counter market, on a national securities exchange
or otherwise at fixed prices which may be changed, at market prices
prevailing at the time of sale, at prices related to such market prices or at
negotiated prices. The Selling Stockholders have advised the Company that
they may effect such transactions by selling the Shares to or through
underwriters, brokers, dealers or agents who may receive compensation in the
form of discounts, concessions or commissions from the Selling Stockholders
or the purchasers of the Shares for whom such underwriters, brokers, dealers
or agents may act.
At the time a particular sale or distribution is made, a Prospectus
Supplement, to the extent required, will be distributed which will set forth
the aggregate amount of Shares being offered, the names of the Selling
Stockholders, the purchase price, the amount of expenses and the terms of the
sale or distribution, including the name or names of any underwriters,
brokers, dealers or agents, any discounts, commissions and other items
constituting compensation from the Selling Stockholders and any discounts,
commissions or concessions allowed or paid to underwriters, brokers, dealers
or agents.
Underwriters, brokers, dealers and agents may be entitled under
agreements entered into with the Selling Stockholders to indemnification by
the Selling Stockholders against certain civil liabilities, including
liabilities under the Securities Act. Such underwriters, brokers, dealers
and agents may be customers of, may engage in transactions with, or perform
services for the Selling Stockholders in the ordinary course of business.
Any underwriter, broker, dealer or agent participating in the sale or
distribution of the Shares may be deemed to be an underwriter, as that term
is defined in the Securities Act, of the Shares so offered and sold, and any
discounts or commissions received by it from the Selling Stockholders and any
profit realized by it on the distribution, sale or resale of the Shares may
be deemed to be underwriting discounts and commissions under the Securities
Act.
The Selling Stockholders may not bid for, purchase, or attempt to induce
any person to bid for or purchase, shares of Common Stock during a period
commencing one business day prior to the determination of the offering price
of any Shares and ending on the Selling Stockholders' completion of
participation in the distribution. In addition and without limiting the
foregoing, the Selling Stockholders will be subject to applicable provisions
of the Exchange Act and the rules and regulations thereunder including,
without limitation, Regulation M.
The Company has agreed to use its best efforts to keep the Registration
Statement continuously effective and usable until January 15, 1998, or such
shorter period which will terminate when all the Shares covered by the
Registration Statement have been sold pursuant to the Registration Statement.
VALIDITY OF SHARES
The validity of the Shares offered hereby will be passed upon for the
Company by Paul R. Peterson, Senior Vice President, General Counsel and
Secretary of the Company. As of June 30, 1997, Mr. Peterson owned 2,663
shares of Common Stock and had the right to acquire a total of 117,999 shares
of Common Stock through the exercise of stock options granted under stock
option plans of the Company.
EXPERTS
The consolidated financial statements incorporated in this Prospectus by
reference to the Annual Report on Form 10-K for the year ended May 31, 1996,
have been so incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm in auditing and
accounting.
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<PAGE>
_________________________
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS WITH RESPECT TO THE MATTERS DESCRIBED IN THIS PROSPECTUS
OTHER THAN THOSE CONTAINED OR INCORPORATED BY REFERENCE HEREIN, AND, IF GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY EITHER THE COMPANY OR THE SELLING STOCKHOLDERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE SOLICITATION OF
AN OFFER TO BUY ANY SECURITIES IN ANY JURISDICTION TO OR FROM ANY PERSON TO
WHOM IT IS UNLAWFUL TO MAKE ANY SUCH OFFER OR SOLICITATION IN SUCH
JURISDICTION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY DISTRIBUTION OF
SECURITIES HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE
HEREOF OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME
SUBSEQUENT TO ITS DATE.
_________________________
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