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Approximate date of commencement of proposed sale to the public: As soon as practicable after this registration statement becomes effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. o

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. o

If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. o

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the securities and exchange commission is effective. This prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.

We are offering 4,250,000 shares of our common stock under this prospectus in a firm commitment underwriting at a price of $ per share. Our common stock is listed on the Nasdaq National Market under the symbol “ORCI.” The last reported sale price of our common stock on April 26, 2005 was $7.06 per share.

Investing in our common stock involves risks. See “Risk Factors” beginning on page 8 of this prospectus to read about the risks you should consider before buying shares of our common stock.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities, or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

We have granted to the underwriters an option to purchase up to an additional 637,500 shares of common stock from us at the public offering price, less the underwriting discount, within 30 days from the date of this prospectus solely to cover over-allotments, if any.

The underwriters expect that the shares of our common stock offered by this prospectus will be ready for delivery to purchasers on or about , 2005.

You should rely only on the information contained or incorporated by reference in this prospectus. We have not authorized anyone to provide you with information that is different from that contained in this prospectus. We are offering to sell, and seeking offers to buy, shares of our common stock only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sales of our common stock.

PROSPECTUS SUMMARY

This summary highlights information more fully described elsewhere in this prospectus and may not contain all the information that may be important to you. You should read the entire prospectus carefully, including the consolidated financial statements and related notes and other financial data included in this prospectus before making an investment decision. You should also carefully consider the information set forth under “Risk Factors” beginning on page 8. In addition, some statements included in this prospectus are forward-looking statements that involve risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” on page 16. Except as otherwise noted, all information in this prospectus assumes that the underwriters’ over-allotment option is not exercised.

Opinion Research Corporation

Our Company

We provide research services to governments and commercial clients in North America, Europe and Asia. We collect customer, market, employee, and demographic data by utilizing computer-assisted telephone interviews, internet-based data collection techniques, personal interviews, mail questionnaires, and other means. After collecting the data, we analyze, develop and present to our clients cohesive reports which provide insights regarding their programs, operations, products, or services. Our services are designed to help our clients manage and evaluate public policy programs and funding decisions, sell products, and improve their corporate image and competitive position. Our government clients include some of the largest U.S. federal agencies including the Substance Abuse and Mental Health Services Administration, the United States Agency for International Development, the Centers for Disease Control and Prevention, and the National Institutes of Health. We have served some of these clients for over 20 years. Our commercial clients include a diverse base of Fortune 500 corporations in the automotive, consumer goods and services, financial services, health care, information technology, retail and trade, and telecommunications industries. We have served the commercial research market since 1938. We also provide telemarketing services for clients in the membership services, financial services, information technology, and entertainment industries.

We currently have four segments for financial reporting purposes:

• social research;

• U.K. market research;

• U.S. market research; and

• teleservices.

In the social research segment, we perform research and provide information technology services, public health awareness services, and other research and consulting services, primarily to agencies of the U.S. federal government and state and local governments. The majority of our government projects are in the areas of health, education and international aid. Our work benefits government policy decision makers and public healthcare professionals by providing them with the information, research and analysis they need to measure the effectiveness of existing social programs, assess the need for new programs, and provide constituents with useful information.

Through our U.K. market research segment, we provide market research services and data management services to our commercial clients in the U.K. and Europe and our government clients in the U.K. We create and host websites, utilizing the internet to gather and analyze data and disseminate survey information for our clients. Additionally, we provide other services to our clients such as customer satisfaction surveys, employment satisfaction surveys and market assessment surveys, and we have the ability to maintain research archives for our clients.

In the U.S. market research segment, we assist commercial clients in the evaluation, monitoring and optimization of their marketing and sales efforts, addressing issues such as customer loyalty and retention, customer satisfaction, market demand, market assessment, corporate image and competitive positioning.

In the teleservices segment, we provide services for large volume clients in a variety of industries, including the membership services, financial services, information technology and entertainment industries. Presently, we provide primarily outbound telemarketing services, where we initiate a call and our objective is to sell a product or service. In addition, we have upgraded our call stations to enable us to provide inbound telemarketing services where we accept incoming calls on behalf of our clients for information gathering, sales or other purposes.

For the year ended December 31, 2004, our consolidated revenues were $195.6 million, our operating income was $11.7 million, and our earnings per share were $0.38. For the year ended December 31, 2003, our consolidated revenues were $179.6 million, our operating loss was $6.1 million, and our loss per share was $1.47. In the second quarter of 2004, we recorded a non-cash write-off of financing costs of $2.5 million in connection with a refinancing of our indebtedness, which reduced net income by $1.6 million and diluted earnings per share by $0.26. At December 31, 2004, our total backlog, which relates to both government and commercial contracts, was $282.7 million, of which $165.9 million was unfunded. We define backlog as the total contract value of our engagements that our management believes to be firm, less previously recognized revenues. Our backlog includes the amounts of our commercial contracts, the funded and unfunded amounts of our government contracts, and options to renew or extend government contracts that we expect our clients to exercise. For more information about our backlog, see “Our Business — Backlog” in this prospectus.

Revenues of our largest segment, social research, grew at a compound annual rate of approximately 10.4% from December 31, 2001 to December 31, 2004. Over this same time period, operating income as a percentage of revenues for this segment increased from 7.7% to 10.5%. This upward trend in social research revenues continued during 2004, with revenues increasing from $115.6 million to $128.2 million, or 10.9%, compared to 2003. We believe that this strong revenue growth in the social research segment will continue as a result of the U.S. federal government’s increased focus on public health issues such as HIV-AIDS awareness, health promotion and disease prevention activities, and foreign aid for promoting democracy and improving health conditions.

Revenues in our U.S. market research segment decreased from $41.3 million in 2001 to $26.0 million in 2004, and we incurred losses in the U.S. market research segment in each of those years. We believe that the decline in revenues in the U.S. market research segment was due to the slow economy and resulting reductions in our clients’ discretionary market research budgets. Backlog for this segment has increased 97.8% from $4.2 million at December 31, 2003 to $8.4 million at December 31, 2004. We believe that revenues attributable to this segment will increase as the economy improves, and, because we maintained our fixed-cost structure of research professionals through the slow years, we expect that operating income as a percentage of revenues in this segment will improve as our revenues increase.

Our Competitive Position

Our key competitive advantages are:

• our experience and reputation with agencies of the U.S. federal government, our ranking as the 16th largest market research company in the world based on 2003 market research revenues, and our access to senior executives, which we believe make us a leader in both social research and commercial market research;

• our diversified client base: we have more than 450 active contracts and task orders with various U.S. federal and state government agencies and more than 1,000 engagements with commercial clients in over 13 different industries;

• our long-standing client relationships and the recurring nature of our revenues: we derived approximately 82.8% of our revenues in 2004 from multi-year contracts and/or from clients for whom we have done work in each year in the three-year period ended December 31, 2004;

• our diverse service offerings enable us to respond to a broad range of requests for proposals, attract additional business from our existing clients, win bids and engagements from new


		clients, and make us attractive to clients who find it convenient to deal with one service provider for a wide range of services;

	•	our history of successful acquisitions, with more than $141 million of our revenues in 2004 attributable to companies we acquired in the last seven years; and

	•	our experienced management team, with executive officers averaging approximately 20 years of experience in the research industry and approximately 16 years of experience with us.

Our Strategy

Key elements of our business strategy are:

• to further expand our strong presence in the research industry by capitalizing on our long-term client relationships and our reputation with our government and commercial clients in order to expand existing client relationships and attract new clients;

• to continue our successful integration of research and technology by collecting and delivering useful real-time data to our clients;

• to take advantage of substantial opportunities for us to acquire companies in the highly fragmented research industry; and

• to strengthen our balance sheet by reducing our debt and significantly increasing the amount of our equity.

Risks

As part of your evaluation of us, you should take into account not only our business approach and strategy, but also the special risks we face in our business and industry. The following represent some, but not all, of the risks that we confront:

• a number of factors beyond our control, such as declining government expenditures and weak economic conditions, could decrease the demand of our existing clients for our services and impair our ability to attract new clients;

• our clients generally may terminate the services we provide to them at any time, and the loss of one or more of our large clients, or a significant reduction in business from those clients, could hurt our business;

• we have incurred losses in recent years and may incur them again;

• our current credit agreements contain customary financial and operating covenants which could adversely affect our business by limiting our operational and financial flexibility;

• our business is substantially dependent upon contracts with the U.S. federal government, and we face a number of risks inherent in doing business with the U.S. federal government; and

• as a government contractor, our operations are affected by shifts in government spending priorities.

You should consider carefully all the risk factors together with all the other information included in this prospectus when making a decision to invest in our company. For more information about these and other risks, see “Risk Factors” beginning on page 7.

General Information

Our principal executive offices are located at 600 College Road East, Suite 4100, Princeton, New Jersey 08540. Our telephone number at that address is (609) 452-5400, and our principal website address is www.opinionresearch.com. The information contained on our website does not constitute part of, nor is it incorporated into, this prospectus. References in this prospectus to “we,” “our” and “us” refer to Opinion Research Corporation.

The Offering



Common stock offered by us in this offering⁽¹⁾		4,250,000 shares



Common stock to be outstanding after this offering^(2)(3)(4)		10,659,346 shares



Use of Proceeds		We expect to use the net proceeds we receive from this offering, which we estimate to be approximately $27.3 million, to repurchase securities of ours held by LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P., and to repay a portion of our senior credit facility. See “Use of Proceeds.”



Over-allotment Option		We have granted the underwriters an option to purchase up to an additional 637,500 shares of our common stock solely to cover over- allotments, if any.


Nasdaq National Market Symbol		ORCI

(1) 4,887,500 shares if the underwriters exercise their over-allotment option in full.

(2) 11,296,846 shares if the underwriters exercise their over-allotment option in full.

(3) Based on the number of shares outstanding at March 24, 2005. This does not include the following shares:

• 836,979 shares issuable upon exercise of outstanding options, with a weighted average exercise price of $6.67 per share;

• 537,029 shares issuable upon exercise of outstanding warrants, with an exercise price of $5.42 per share;

• 740,500 shares issuable to LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. upon exercise of warrants, with an exercise price of $12.00 per share, which we intend to repurchase following the completion of this offering;

• an aggregate of 440,104 shares available for future awards under our 1997 Stock Incentive Plan; and

• 1,008,136 shares available for future issuance under our stock purchase plans for our directors, employees and consultants.


(4)	Includes 932,772 shares of our common stock which we intend to repurchase from LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. following the completion of this offering. See “Use of Proceeds.”

Summary Financial Data

The following table provides summary historical consolidated financial data for the periods indicated. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited consolidated financial statements and the related notes that are included in this prospectus beginning on page F-1.

The summary consolidated statements of operations data for each of the years ended December 31, 2002, 2003 and 2004 and the summary consolidated balance sheet data at December 31, 2003 and 2004 are derived from our audited consolidated financial statements, which are included elsewhere in this prospectus. The summary consolidated statement of operations data for each of the years ended December 31, 2000 and 2001 and the summary consolidated balance sheet data at December 31, 2000, 2001 and 2002 are derived from audited consolidated financial statements not included in this prospectus.



		Years Ended December 31,

		2000⁽¹⁾		2001		2002			2003			2004


		(in thousands, except per share data)
Operating Data:
Total revenues		$	160,909	$	176,909	$	175,260		$	179,557		$	195,554
Cost of revenues			105,975		121,525		120,705			125,890			140,143

Gross profit			54,934		55,384		54,555			53,667			55,411
Selling, general and administrative expenses			36,004		38,128		39,736			39,437			39,770
Depreciation and amortization			7,278		8,431		4,596			4,024			3,979
Goodwill impairment charges⁽²⁾			—		—		5,938			16,317			—

Operating income (loss)			11,652		8,825		4,285			(6,111	)		11,662
Interest and other non-operating expenses, net			5,681		5,413		4,707			4,996			4,710
Unamortized loan fees⁽³⁾			—		—		77			—			2,506

Income (loss) before provision (benefit) for income taxes and cumulative effect of accounting change			5,971		3,412		(499	)		(11,107	)		4,446
Provision (benefit) for income taxes			2,667		1,796		2,122			(2,165	)		2,020
Cumulative effect of accounting change⁽⁴⁾			—		—		(292	)		—			—

Net income (loss)		$	3,304	$	1,616	$	(2,913	)	$	(8,942	)	$	2,426

Basic earnings (loss) per share		$	0.70	$	0.28	$	(0.49	)	$	(1.47	)	$	0.39

Diluted earnings (loss) per share		$	0.65	$	0.27	$	(0.49	)	$	(1.47	)	$	0.38

Weighted average number of common shares outstanding:
	Basic		4,691,859		5,762,383		5,948,797			6,078,535			6,254,517

	Diluted		5,053,217		5,991,566		5,948,797			6,078,535			6,445,301



	Years Ended December 31,

	2000⁽¹⁾		2001		2002		2003		2004


	(in thousands, except per share data)
Balance Sheet Data:
Total assets	$	115,957	$	113,957	$	103,745	$	97,574	$	97,683
Total debt⁽⁵⁾		51,842		55,462		46,892		45,436		42,808
Total liabilities		82,097		77,624		68,930		70,575		66,440
Redeemable equity		8,900		8,900		8,900		8,900		8,900
Total stockholders’ equity		24,960		27,433		25,915		18,099		22,343

(1) We acquired C/ J Research, Inc. in August 2000 and Social and Health Services, Ltd. in October 2000; accordingly, the consolidated statement of operations includes only 4-month operating results of C/J Research, Inc. and 2-month operating results of Social and Health Services, Ltd.

(2) We recorded a non-cash impairment charge of $5.9 million in 2002 to reduce the carrying value of goodwill in our U.S. market research segment and $16.3 million in 2003 to reduce the carrying value of goodwill in our teleservices segment by $10.0 million, our U.S. market research segment by $6.0 million and our Korean market research subsidiary by $317,000.

(3) As a result of the amendment of our credit facility in the third quarter of 2002, we experienced a $77,000 expense associated with the write-off of unamortized loan fees. In the second quarter of 2004 we refinanced our debt and recognized an expense of $2.5 million for the write-off of unamortized loan fees.

(4) On January 1, 2002, we recorded a goodwill impairment charge in our Mexican subsidiary of $292,000 as a cumulative effect of a change in accounting principle upon adoption of FASB Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

(5) Amounts include capital leases.

Recent Developments — Earnings Release

On April 27, 2005, we announced our financial results for the three months ended March 31, 2005, including our selected consolidated historical financial and other data contained in the following tables at the dates and for the periods indicated. You should read this information in conjunction with the audited consolidated financial statements included in this document. The information in these tables is unaudited.

The decline in net income of $796,000 in the first quarter of 2005 as compared to the first quarter of 2004 is primarily attributable to a charge incurred in connection with a refinancing of certain of our indebtedness. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Recent Development.” For additional information regarding our financial results for the three months ended March 31, 2005, we refer you to our Current Report on Form 8-K filed on April 27, 2005.

Consolidated Statements of Income



		For the Three Months
		Ended March 31,

		2004		2005


		(in thousands, except share
		and per share amounts)
Revenues		$	47,961	$	48,938
Cost of revenues, exclusive of depreciation			33,718		34,841

	Gross profit		14,243		14,097
Selling, general and administrative expenses			9,898		10,645
Depreciation and amortization			942		969

	Operating income		3,403		2,483
Interest and other non-operating expenses, net			1,599		1,048
Refinancing charges			—		1,175

	Income before provision for income taxes		1,804		260
Provision for income taxes			866		118

Net income		$	938	$	142

Net income per common share:
	Basic	$	0.15	$	0.02

	Diluted	$	0.15	$	0.02

Weighted average shares outstanding:
	Basic		6,148,927		6,404,723
	Diluted		6,334,952		6,605,578

Before making an investment in our common stock, you should carefully consider the risks described below, as well as the other information set forth in this prospectus, including our consolidated financial statements and related notes. Some of the following risks relate principally to the industry in which we operate and to our business. Other risks relate principally to the securities markets and ownership of our stock. Any of the risk factors described below could significantly and negatively affect our business, prospects, financial condition or operating results, which could cause the trading price of our common stock to decline and could cause you to lose all or part of your investment.

A number of factors beyond our control could decrease the demand of our existing clients for our services and impair our ability to attract new clients. These include marketing budgets, general economic conditions, business consolidations, government spending, and other industry-specific trends. Changes in management or ownership of an existing client are also factors that could affect the client’s demand for our services. As a result, we may provide different levels of services to our clients from year to year, and these differences can cause a decline in or contribute to fluctuations in our operating results.

The Substance Abuse and Mental Health Services Administration, or SAMHSA, and the United States Agency for International Development, or USAID, are our largest clients. SAMHSA represented 17.8% of our revenues for the year ended December 31, 2004 and 24.7% of our backlog at December 31, 2004. USAID, our second largest client, represented 12.3% of our revenues for the year ended December 31, 2004 and 40.9% of our backlog at December 31, 2004. Services we provided to various U.S. federal and state governmental departments and agencies, including SAMHSA and USAID, generated approximately 60.7% of our revenues in 2004. Our clients generally may terminate the services we provide to them at any time. If we lose one or more of our large clients, such as SAMHSA or USAID, or if one or more of our large clients reduces its business with us, our revenues could decline.

We incurred net losses of $2.9 million in 2002 and $8.9 million in 2003. We may not be able to attain or increase profitability in the future on a quarterly or annual basis. Any future losses may adversely affect our business and the market price of our stock.

Our present credit agreements contain customary financial and operating covenants. These covenants limit or prohibit, among other things, our ability to incur additional debt, prepay specified types of indebtedness, pay dividends, make investments, sell assets, or engage in mergers and acquisitions. These covenants could adversely affect our business by limiting our operational and financial flexibility.

We have evaluated, and expect to continue to evaluate, a wide array of possible acquisitions. We cannot assure you that any acquisition we make in the future will provide us with the benefits we


	•	difficulties in integrating the operations and personnel of the acquired companies;

	•	maintenance of acceptable standards, controls, procedures and policies;

	•	potential disruption of ongoing business and distraction of management;

	•	impairment of relationships with employees and customers as a result of any integration of new management and other personnel;

	•	inability to maintain relationships with customers of the acquired business;

	•	difficulties in incorporating acquired technology and rights into our services;

	•	unexpected expenses resulting from the acquisition;

	•	potential unknown liabilities associated with acquired businesses; and

	•	unanticipated expenses related to acquired technology and its integration into our existing technology.

In addition, acquisitions may result in the incurrence of debt, restructuring charges and large one-time write-offs, such as write-offs for acquired in-process research and development costs. Acquisitions may also result in goodwill and other intangible assets that are subject to impairment tests, which could result in future impairment charges. Furthermore, if we finance acquisitions by issuing convertible debt or equity securities, the holdings of our existing stockholders may be diluted and earnings per share may decline.

A number of factors, many of which are outside our control, may cause or contribute to significant fluctuations in our quarterly and annual revenue and operating results. These fluctuations may make financial planning and forecasting more difficult. In addition, these fluctuations may result in unanticipated decreases in our available cash, which could negatively impact our operations. These fluctuations also could increase the volatility of our stock price. A number of factors cause our revenues, cash flow and operating results to vary from quarter to quarter, including:


	•	fluctuations in revenues earned and expenses incurred on fixed-price contracts and contracts with a performance-based fee structure;

	•	commencement, completion or termination of contracts during any particular quarter;

	•	variable purchasing patterns under government and commercial contracts; and

	•	changes in policy or budgetary measures that adversely affect government and commercial contracts in general.

Changes in the number of contracts commenced, completed or terminated during any quarter may cause significant variations in our revenues and, because a relatively large amount of our expenses are fixed, in our operating results. In addition, payments due to us from government agencies may be delayed due to billing cycles or as a result of delayed approvals of governmental budgets by legislative, executive or other governmental bodies.

Goodwill related to acquisitions represents a substantial portion of our total assets. In the fourth quarter of 2003, we wrote off impaired goodwill in the aggregate amount of $16.3 million. At December 31, 2004, the net goodwill amount on our consolidated balance sheet represented 33.5% of our total assets. Goodwill is an intangible asset and represents the excess of the purchase price that we paid for

We are a service business, and as such we are dependent upon the efforts and skills of our senior executives and other key employees. The cumulative effect of losing several of these individuals could hurt our business. We do not currently maintain key person life insurance policies on any of our executives other than John F. Short, our Chief Executive Officer. Competition for senior management is intense, and in the future we may not be successful in retaining key personnel or in attracting and retaining other personnel that we may require.

A majority of our revenues result from services we provide to the U.S. federal government; therefore, our business depends upon continued U.S. federal government expenditures. A significant decline in government expenditures, or a shift of expenditures away from programs for which we provide services, could adversely affect our business. In addition, it has been our experience that our commercial clients generally view their expenditures for our services as discretionary. If our commercial clients’ budgets for discretionary spending on programs for which we provide services decrease or if their priorities for spending shift in a manner that results in a significant decline in research expenditures, our business could be adversely affected by the loss of revenues.

We presently have approximately 450 active contracts and task orders with the U.S. federal government which represented approximately 55.6% of our revenues for the year ended December 31, 2004. There are inherent risks in contracting with the U.S. federal government which could have an adverse effect on our business. All contracts with the U.S. federal government contain provisions, and/or are subject to laws and regulations, that give the government rights and remedies not typically found in our commercial contracts, including rights that allow the government to:


	•	claim rights in and ownership of products and systems that we produce;

	•	adjust contract costs and fees on the basis of audits completed by its agencies;

	•	suspend or debar us from doing business with the U.S. federal government; and

	•	release information obtained from us in response to a Freedom of Information Act request.

The U.S. federal government has the right to terminate its contracts with us at any time. If the U.S. federal government terminates a contract, we may recover only our incurred or committed costs, settlement expenses and profit on work completed before the termination. If the government terminates a contract for default, we may not recover even those amounts, and instead may be liable for excess costs incurred by the government in procuring undelivered items and services from another source. Additionally, most of our backlog could be reduced by any modification or termination of contracts that we have with the U.S. federal government or, in cases where we are a subcontractor, contracts that our prime contractors have with the U.S. federal government.

As a contractor to the U.S. federal government, we are subject to various laws and regulations that are more restrictive than those applicable to non-government contractors. We are required to obtain and maintain material governmental authorizations and approvals to conduct our business as it is currently conducted. New or more stringent laws or governmental regulations concerning government contracts could hurt our business by limiting our flexibility and by potentially causing us to incur additional expenses.

We also must comply with and are affected by laws and regulations relating to the formation, administration and performance of U.S. federal government contracts. These laws and regulations affect how we do business with our U.S. federal government clients and may result in added costs for our business. For example, we are required to comply with the Federal Acquisition Regulations and all supplements, which comprehensively regulate the formation, administration and performance of U.S. federal government contracts, and the Truth in Negotiations Act, which requires certification and disclosure of cost and pricing data in connection with contract negotiations. If a government review or investigation uncovers improper or illegal activities, we may be subject to civil and criminal penalties and administrative sanctions, including:


	•	termination of contracts;

	•	forfeiture of profits;

	•	suspension of payments;

	•	fines; and

	•	suspension or debarment from doing business with U.S. federal government agencies.

Any of these sanctions could adversely affect our business, prospects, financial condition, or operating results.

We define backlog as the total contract value of our engagements that our management believes to be firm, less previously recognized revenues. Our backlog includes the amounts of our commercial contracts, the funded and unfunded amounts of our government contracts, and options to renew or extend government contracts that we expect our clients to exercise. However, the maximum contract value specified under each contract that we enter into is not necessarily indicative of the revenues that we will realize under that contract. Because we may not receive the full amount we expect under a contract, our estimates of our backlog may not prove to be accurate since the actual recognition of revenues on programs included in backlog may never occur or may change. Estimates of future revenues included in backlog are not necessarily precise and the receipt and timing of any of the revenues are subject to contingencies, many of which are beyond our control. For a discussion of these contingencies, see “Special Note Regarding Forward-Looking Statements” in this prospectus.

A unique feature of U.S. federal government contracting allows a contractor that loses a prime contract award to protest the contract award to its competitor and obtain an independent review of the agency’s decision-making process. A contractor may also protest the terms of a bid solicitation if it believes those terms to be unfair or anticompetitive. If one or more of our competitors challenges a contract awarded to us, the government may ultimately determine that it is necessary for the contract to undergo a new round of evaluation and competition, and our contract with the government may be

The U.S. federal government audits and reviews our performance on contracts, pricing practices, cost structure and compliance with applicable laws, regulations and standards. Responding to governmental audits, inquiries or investigations may involve significant expense and divert the attention of our management. An audit of our work, including an audit of work performed by companies we have acquired or may acquire, could result in a substantial adjustment to our revenues because any costs determined by the government to be improperly allocated to a specific contract will not be reimbursed, and revenues we have already recognized may need to be refunded. If a U.S. federal government audit results in allegations of improper or illegal activities by us or our employees and if we are unable to successfully defend against those allegations, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension, or debarment from doing business with U.S. federal government agencies. In addition, we could suffer serious harm to our reputation if allegations of impropriety were made against us regardless of the merits of any such allegation. In addition, the U.S. federal government may conduct non-audit reviews on a majority of our government contracts, which in turn could lead to full audit reviews by the government.

We enter into three types of contracts with our clients: fixed-price, cost-reimbursement and time-and-materials. For the year ended December 31, 2004, we derived approximately 39.8% of our consolidated revenues from fixed-price contracts, 45.9% of our consolidated revenues from cost-reimbursement contracts and 14.3% of our consolidated revenues from time-and-materials contracts. Under fixed-price contracts, we provide specified services for a fixed price. Compared to cost-reimbursement contracts, fixed-price contracts generally offer higher margin opportunities, but involve greater financial risk because we bear the impact of cost overruns. Our profits could be adversely affected if our costs under any of these contracts exceed the assumptions we used in bidding for or negotiating the contract. Under cost-reimbursement contracts, we are reimbursed for allowable costs and paid a fee, which may be fixed or performance-based. To the extent that the actual costs incurred in performing a cost-reimbursement contract are within the contract ceiling and allowable under the terms of the contract and applicable regulations, we are entitled to reimbursement of our costs, plus a profit. However, if our costs exceed the ceiling or are not allowable under the terms of the contract or, in the case of government contracts, by applicable regulations, our income may be adversely affected because we may not be able to recover those costs. Under time-and-materials contracts, we are reimbursed for labor at negotiated hourly billing rates and for expenses. We assume financial risk on time-and-materials contracts because we assume the risk of performing those contracts at negotiated hourly rates.

We are exposed to the risk that employee fraud or other misconduct could occur and would expose us, as well as the individual employee, to various penalties and liabilities, including those under the Federal False Claims Act. Misconduct by employees could include intentional or unintentional failures to comply with U.S. federal government procurement regulations or failure to disclose unauthorized or unsuccessful activities to us. It is not always possible to deter employee misconduct, and the precautions we take to prevent and detect this activity — including our policies and procedures — may not be effective in controlling unknown or unmanaged risks or losses.

Our competitors may be able to obtain confidential information about us, such as our cost or pricing policies, in a request under the Freedom of Information Act. The competitor could use this information as the basis for a successful challenge to the award of a contract to us or to gain a competitive business advantage that it might use to our detriment in future bid solicitations.

Approximately 14.8% of our revenues for the year ended December 31, 2004 were generated from contracts performed outside of the U.S., and a portion of those revenues was denominated in currencies other than the U.S. dollar. We are exposed to foreign currency risk to the extent that the results of our foreign operations may decline in value as measured in U.S. dollars. It has not been our practice to enter into foreign exchange contracts to protect against adverse foreign currency fluctuations, and we cannot predict whether future exchange rate fluctuations will significantly harm our operations or financial results. In addition to adverse fluctuations in foreign currency exchange rates, we are exposed to further risks inherent in doing business abroad, including limitations on asset transfers, changes in foreign regulations and political turmoil, all of which could adversely affect our operating results.

On December 2, 2004, several of our purported stockholders filed a derivative complaint against us and our directors in the Chancery Court of the State of Delaware alleging, among other things, that our directors breached their fiduciary duties of good faith and loyalty to us and our stockholders by approving this offering and the repurchase of the LLR Interests. The lawsuit seeks injunctive relief, rescissory damages and costs related to the suit. We could incur significant costs defending the lawsuit, and management attention could be diverted from other important business concerns. An adverse determination in the lawsuit may harm our business. For more information about this lawsuit, see “Our Business — Legal Proceedings” in this prospectus.

Many of our clients treat all or a portion of their marketing research expenditures as discretionary. If general economic conditions worsen and these companies seek to control variable costs, research projects for which we have been engaged to collect data may be delayed or cancelled, and new project bookings may decrease. As a result, our revenues may decline.

We face competition in connection with most of the services we provide. Other companies, including some with greater financial resources than we have, may offer a range of services similar to those offered by us, or may otherwise compete more effectively in the research and information services industry. We regularly experience significant competition for clients seeking research services from a large number of our competitors. These competitors include market research companies, advertising agencies, and business consulting firms. We compete for research clients with a large number of firms that vary in size as well as with not-for-profit organizations. For telemarketing services clients, we compete with a large number of telemarketing companies.

Our business may be restricted by the development of various U.S. federal and state “do not call” lists and other privacy regulations that permit consumers to protect themselves from unsolicited telemarketing telephone calls. In 2003, the Federal Trade Commission amended its rules to establish a national “do not call” registry. Generally, vendors are prohibited from calling anyone on that registry unless the consumer has initiated the contact, has given prior consent or has an ongoing business relationship with the vendor for whom the calls have been made. Although “do not call” list regulations do not currently apply to market research phone calls, new legislation or regulation could eliminate the current market research exemption. If “do not call” list regulations become applicable to market research phone calls, our results of operations may be adversely affected by the loss of revenues.

The price of our common stock after this offering may fluctuate widely, depending upon many factors, including:


	•	adverse market reaction to the reduction in our earnings per share that will result from our intended use of proceeds to repurchase securities of ours held by LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P.;

	•	the market’s perception of our prospects and the prospects of other companies in our industry;

	•	differences between our actual financial and operating results and those expected by investors and analysts;

	•	adverse market reactions to any increased indebtedness we may incur in the future;

	•	additions or departures of key management personnel;

	•	the sale of our common stock by large stockholders;

	•	changes in general valuations for companies in our industry; and

	•	changes in general economic or market conditions and broad market fluctuations.

If the price of our common stock declines, you could lose some or all of your investment in our company.

Historically, there has been a limited market for our common stock. It could be difficult for you to sell shares of our common stock because historically only small quantities of our shares are bought and sold regularly and news media and securities analyst coverage about us is limited. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of our common stock.

We grant stock options to our employees and other individuals. At March 24, 2005, we had options outstanding to purchase 836,979 shares of our common stock, at exercise prices ranging from $3.63 to $8.88 per share, 1,277,529 shares of our common stock issuable upon exercise of outstanding warrants, having a weighted average exercise price of $9.23 per share, including 740,500 shares issuable to LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. upon exercise of warrants which we intend to repurchase with a portion of the proceeds of this offering, and an aggregate of 1,448,240 shares available

Our by-laws provide for a classified board, with the board members serving staggered three-year terms. In addition, our board of directors has adopted a stockholder rights plan, commonly referred to as a “poison pill.” Finally, our certificate of incorporation provides that the board of directors may issue preferred stock without stockholder approval. Our classified board, the stockholder rights plan and our ability to issue preferred stock could make it more difficult for a third party to acquire us without board approval. These provisions also could limit the price that some investors might be willing to pay in the future for our common stock. In addition, Section 203 of the Delaware General Corporation Law, which prohibits business combinations between us and one or more significant stockholders unless specified conditions are met, may discourage, delay or prevent a third-party from acquiring us, even though it may be in the best interests of the stockholders.

These and other anti-takeover provisions of our certificate of incorporation and our by-laws and under Delaware law may prevent or frustrate any attempt by our stockholders to change our management or the direction of our business. Under the Delaware General Corporation Law, in the case of a corporation with a classified board of directors, stockholders may remove a director only for cause. This provision, in combination with a provision of our by-laws authorizing only the board of directors to fill a vacant directorship, will preclude a stockholder from removing incumbent directors without cause and simultaneously gaining control of the board of directors by filling the vacancies created by such removal with its own nominees. Because our board of directors is responsible for appointing the members of our management team, these provisions could in turn affect any attempt to replace the current management team, even though it may be in the best interests of the stockholders. In addition, our certificate of incorporation limits stockholder action by written consent, and our by-laws establish advance notice requirements for nominations for election to the board of directors and for proposing matters that can be acted upon by stockholders at stockholder meetings. These provisions may preclude some stockholders from bringing matters before the stockholders relating to the future of our business or making nominations for directors at an annual or special meeting.

This prospectus includes forward-looking statements. In general, statements other than statements of historical facts contained in this prospectus, including statements regarding revenues, selling, general and administrative expenses, profitability, financial position, business strategy, and plans and objectives of management for future operations, are forward-looking statements. The words “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “expect” and similar expressions, as they relate to us, are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, and financial needs. These forward-looking statements are subject to a number of risks, uncertainties and assumptions described under the heading “Risk Factors” and elsewhere in this prospectus, including, among other things:


	•	fluctuations in demand for our services;

	•	competition;

	•	our dependence on key personnel;

	•	government funding of social research projects;

	•	leverage and debt service (including sensitivity to fluctuations in interest rates);

	•	domestic and global economic, credit and capital market conditions;

	•	foreign exchange fluctuations;

	•	changes in federal or state tax laws or the administration of these laws;

	•	regulatory or judicial proceedings;

	•	the outcome of the stockholders’ derivative litigation; and

	•	certain other risks described in this prospectus under the heading “Risk Factors.”

This list of risks is not exhaustive. Other sections of this prospectus include additional factors which could adversely affect our business and financial performance. In addition, we operate in a very competitive and rapidly changing environment. New risk factors emerge from time to time and it is not possible for our management to predict all risk factors, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements. We caution you not to place undue reliance on forward-looking statements, which speak only as of the date of this prospectus. We assume no obligation to update any forward-looking statements after the date of this prospectus as a result of new information, future events or developments, except as required by federal securities laws.

We estimate that the net proceeds to us from the sale of our common stock in this offering, based upon an assumed public offering price of $7.06 per share, the last reported price of our common stock on the Nasdaq National Market on April 26, 2005, will be approximately $27.3 million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us of approximately $950,000. If the underwriters exercise the over-allotment option in full, we estimate the net proceeds to us will be approximately $31.5 million.



	•	to repurchase, for an aggregate cash purchase price of $18.0 million, all of the interests of LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. (which together are sometimes referred to in this prospectus as the “LLR Partnerships”) in us, other than limited registration rights and shares of our common stock with a value of $2.0 million (approximately 283,286 shares of our common stock assuming a public offering price of $7.06 per share), which have no special rights or privileges and which the LLR Partnerships shall retain. The interests of the LLR Partnerships in us that are being repurchased are sometimes referred to in this prospectus as the “LLR Interests.” The LLR Interests are more fully described later in this section and under the heading “Description of Capital Stock — Preferred Stock”; and



	•	the remainder of the proceeds will be used to repay a portion of the amount outstanding under our senior revolving credit facility, which was $25.2 million at April 26, 2005.

We have reached an agreement with the LLR Partnerships to purchase the LLR Interests. Our agreement with the LLR Partnerships expires on May 13, 2005, unless otherwise extended by the parties. An earlier agreement with the LLR Partnerships, on substantially the same terms as the current agreement, expired on January 31, 2005. The purchase price of $18.0 million in cash that we are required to pay for the LLR Interests under this agreement is less than the amount we would have to pay if the LLR Partnerships, on or after September 1, 2005, were to exercise their right to exchange their shares of common stock into shares of the Series C Preferred Stock and we were to exercise the Series C Call Option described below and under “Description of Capital Stock — Series C Preferred Stock” in this prospectus. Assuming no adjustments to the conversion price under the terms of the Series C Preferred Stock Designation, the price of the Series C Call Option at September 1, 2005 will be the greater of fair market value and $30.5 million, or $25.94 per share of our common stock on an as-converted basis. If we do not exercise the Series C Call Option, dividends are payable on the Series C Preferred Stock at an annual rate of $1.2 million. We have obtained the opinion of Janney Montgomery Scott LLC that our repurchase of the LLR Interests is fair, from a financial point of view, to our stockholders other than the LLR Partnerships. See “Certain Relationships and Related Party Transactions — Opinion of Financial Advisor” in this prospectus.

Closing under our agreement with the LLR Partnerships is contingent upon the closing of an offering of our equity securities and our receipt of resignations from the directors appointed to our board of directors by the LLR Partnerships, Seth J. Lehr and John J. Gavin. See also “Certain Relationships and Related Party Transactions” in this prospectus.



	•	932,772 shares of our common stock (assuming a public offering price of $7.06 per share).


	•	The right to exchange each share of our common stock presently held by the LLR Partnerships, on or after September 1, 2005 or upon the occurrence of other events specified in our agreement with the LLR Partnerships, into one-half share of our Series C Preferred Stock. No shares of the Series C Preferred Stock are currently issued or outstanding. The terms of the Series C Preferred Stock provide for annual dividends of $2.04 per share and a liquidation preference of $17.00 per share. Each share of Series C Preferred Stock is convertible at any time and from time to time, at the option of the holder, into shares of common stock based on a formula set forth in the terms of the Series C Preferred Stock. The conversion formula is


		adjusted for dilutive issues of additional shares of our common stock. As a result, if we were to issue shares below the current conversion price of $8.50 per share, the conversion price would be adjusted lower and the holders of the Series C Preferred Stock would be able to convert their shares into a greater number of common shares. Holders of the Series C Preferred Stock as a class are entitled to nominate and elect two directors to our board of directors and to a number of votes equal to the number of shares of common stock into which the holder’s shares of Series C Preferred Stock could be converted as of the record date for the meeting. In addition to any other required vote or consent, the affirmative vote or written consent of the holders of Series C Preferred Stock would be necessary to effect specified corporate actions, including an amendment of the certificate of incorporation adversely affecting the Series C Preferred Stock and the creation of the new class of shares which has rights senior to the Series C Preferred Stock. For more information about the Series C Preferred Stock, see “Description of Capital Stock — Series C Preferred Stock” in this prospectus.

	•	All outstanding shares of our Series B Preferred Stock. Holders of our Series B Preferred Stock, as a class, are entitled to nominate and elect two members of our board of directors. In addition, the affirmative vote or written consent of the holders of Series B Preferred Stock is necessary to effect specified corporate actions, including an amendment of the certificate of incorporation adversely affecting the Series B Preferred Stock and the creation of a new class of shares which has rights senior to the Series B Preferred Stock. For more information about the Series B Preferred Stock, see “Description of Capital Stock — Series B Preferred Stock” in this prospectus.

	•	Warrants held by the LLR Partnerships to purchase 740,500 shares of our common stock at a price of $12.00 per share at any time on or before September 1, 2010. The warrants include anti-dilution provisions that provide for a reduction of the exercise price of the warrants and an increase in the number of underlying shares in the event of dilutive issues of our common stock at a price below $12.00 per share.

	•	Anti-dilution warrants held by the LLR Partnerships pursuant to which the LLR Partnerships may purchase additional shares of our common stock at an exercise price of $.01 per share in the event there is a dilutive issuance of our common stock. If we were to issue shares of our common stock below a price of $8.50 per share, the LLR Partnerships would be able to purchase additional shares of our common stock at a nominal purchase price.

A summary of the LLR Interests to be repurchased, including a computation of the difference we believe will be included in calculating net income available to common shares, is set forth below. The annual rate of return on the LLR Partnerships’ investment through the estimated date of our repurchase of the LLR Interests is expected to be approximately 16.0%.



(1)	Assumes an offering price of $7.06 per share. Book value is $7.338 per share.


(2)	Net Income Available to Common Shares.

Our $35.0 million senior revolving credit facility is provided by Citizens Bank of Pennsylvania and First Horizon Bank, expires on May 4, 2007 and may be prepaid at any time. At April 26, 2005, we had an aggregate of $25.2 million of borrowings outstanding under this $35.0 million senior credit facility, which bore interest at a weighted average annual interest rate of 6.29% at such date. We entered into a Business Loan and Security Agreement with Citizens Bank of Pennsylvania and First Horizon Bank with respect to our senior revolving credit facility on May 4, 2004. We used the initial borrowings under our senior revolving credit facility to repay outstanding debt on that date.

Pending our actual use of proceeds, we may invest the net proceeds of this offering in short-term, investment grade, interest-bearing securities or guaranteed obligations of the United States or its agencies.

Our common stock is currently quoted on the Nasdaq National Market under the symbol “ORCI.” The table below sets forth the high and low prices for our common stock on the Nasdaq National Market for the periods indicated:

The closing price of our common stock on April 26, 2005 was $7.06 per share. At April 5, 2005, there were 96 holders of record of our common stock and approximately 638 beneficial owners of our common stock.

We have not paid any dividends on our common stock during the last two fiscal years or during the current fiscal year. Our credit facilities prohibit us from paying cash dividends to holders of our common stock. Further, we currently intend to retain any earnings of our company for the future operation and growth of our business. Therefore, we do not anticipate paying any cash dividends on our common stock in the foreseeable future. However, our board of directors, at its discretion, may decide to declare a dividend at an appropriate time in the future. A decision to pay a dividend would depend, among other factors, upon our results of operations, financial condition and cash requirements, the terms of our credit facility, and other financing agreements at the time a payment of dividends is considered.

The following table sets forth our actual capitalization at December 31, 2004 and as adjusted as of that date to give effect to the issuance and sale of 4,250,000 shares of our common stock offered by this prospectus and the application of the estimated net proceeds from this offering, based on an assumed public offering price of $7.06 per share, which was the last reported price of our common stock on the Nasdaq National Market on April 26, 2005. You should read this table in conjunction with our consolidated financial statements and notes to our consolidated financial statements included in this prospectus beginning on page F-1.



(1)	Assumes no exercise of the underwriters’ over-allotment option to purchase up to an additional 637,500 shares of our common stock.



(2)	We expect to use the net proceeds we receive from this offering to repurchase 932,772 shares of our common stock (assuming a public offering price of $7.06 per share) and all outstanding shares of our Series B Preferred Stock, as well as other interests, held by the LLR Partnerships. See “Use of Proceeds” in this prospectus.



(3)	Assumes a deduction to net income, before calculating net income available to common shares, of $8.5 million as a result of the purchase of the LLR Interests. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Effect of this Offering and the Use of Proceeds” in this prospectus.

The following table provides summary historical consolidated financial data for the periods indicated. You should read this information in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus.


(1)	We acquired C/J Research, Inc. in August 2000 and Social and Health Services, Ltd. in October 2000; accordingly, the consolidated statement of operations includes only 4-month operating results of C/J Research, Inc. and 2-month operating results of Social and Health Services, Ltd.

(2)	We recorded a non-cash impairment charge of $5.9 million in 2002 to reduce the carrying value of goodwill in our U.S. market research segment and $16.3 million in 2003 to reduce the carrying value of goodwill in our teleservices segment by $10.0 million, our U.S. market research segment by $6.0 million and our Korean market research subsidiary by $317,000.


(3)	As a result of the amendment of our credit facility in the third quarter of 2002, we experienced a $77,000 expense associated with the write-off of unamortized loan fees. In the second quarter of 2004 we refinanced our debt and recognized an expense of $2.5 million for the write-off of unamortized loan fees.

(4)	On January 1, 2002, we recorded a goodwill impairment charge in our Mexican subsidiary of $292,000 as a cumulative effect of a change in accounting principle upon adoption of FASB Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”

(5)	Amounts include capital leases.

We identify our segments based on our internal reporting to management and our board of directors which reflects our geographic locations and the industries in which we operate. We currently have four segments for financial reporting purposes:


	•	social research;

	•	U.K. market research;

	•	U.S. market research; and

	•	teleservices.

We measure segment profits as operating profit, which is defined as income before interest and other non-operating expenses and income taxes. Information on segments and a reconciliation to the consolidated total, are as follows:

We provide research services to governments and commercial clients in North America, Europe and Asia. We collect customer, market, employee, and demographic data by utilizing computer-assisted telephone interviews, internet-based data collection techniques, personal interviews, mail questionnaires and other means. After collecting the data, we analyze, develop and present to our clients cohesive reports which provide insights regarding their programs, operations, products or services. Our services are designed to help our clients manage and evaluate public policy programs and funding decisions, sell products, and improve their corporate image and competitive position. Our government clients include some of the largest U.S. federal agencies, including SAMHSA, USAID, the Centers for Disease Control and Prevention, or CDC, and the National Institutes of Health, or NIH. We have served some of these clients for over 20 years. Our commercial clients include a diverse base of Fortune 500 corporations in the automotive, consumer goods and services, financial services, health care, information technology, retail and trade, and telecommunications industries. We have served the commercial research market since 1938. We also provide telemarketing services for clients in the membership services, financial services, information technology, and entertainment industries.

We were established in 1938 to apply the principles of general public opinion polling to marketing issues facing America’s largest companies. We completed our initial public offering in October 1993. Between 1993 and 1997, as part of our strategy to expand internationally, we established our presence in the United Kingdom, Asia and Mexico through various acquisitions. In January 1998, we acquired ProTel Marketing, Inc., or ORC ProTel, a telemarketing company based in Lansing, Illinois. In May 1999, we acquired Macro International Inc., or ORC Macro, a research, consulting and technology company based in the Washington, D.C. area. The acquisition of ORC Macro substantially increased our presence in the public sector. In August 2000, we acquired C/J Research, Inc., and in October 2000, we acquired Social and Health Services, Ltd. The two acquisitions in 2000 allowed us to expand our service offerings into the areas of consumer research and communications services and to further expand in the area of information management.


	•	social research;

	•	U.K. market research;

	•	U.S. market research; and

	•	teleservices.

While our consolidated revenues grew from 2002 to 2004, our performance has varied from segment to segment. We have achieved strong performance in our social research segment, which has benefited from the U.S. federal government’s increased spending on health-related research and our success in winning new projects and renewing existing projects. During this period, our U.S. market research segment experienced a decline in revenues due to weak economic conditions in the U.S. Our U.K. market research segment experienced stable revenues due to the strength of the global research market. The teleservices segment experienced a decline in revenues due to weak economic conditions in the U.S. as well as factors unique to the telemarketing industry, such as the enactment of new laws regulating the industry and competition from call centers outside of the U.S.

Our operating income grew from 2002 to 2004, reflecting the strong performance in our social research segment. The loss of revenues over the past three years in the U.S. market research and teleservices segments led to the write-off of goodwill in these segments and our Korean subsidiary, which reduced operating income by $5.9 million in 2002 and $16.3 million in 2003. Operating income increased

We believe that the decline in revenues in the U.S. market research segment was due to the slow economy and resulting reductions in our clients’ discretionary market research budgets. This situation has improved recently, with revenues in 2004 increasing to $26.0 million from $25.8 million in 2003. Backlog for this segment has increased 97.8% from $4.2 million at December 31, 2003 to $8.4 million at December 31, 2004. We believe that revenues attributable to this segment will increase if the economy continues to improve, and, because we maintained our fixed-cost structure of research professionals through the slow years, we expect that operating income as a percentage of revenues in this segment will improve as our revenues increase.

The decrease in operating income levels from 2001 to 2003 led to difficulty in complying with our loan agreement covenants and the resulting incurrence of amendment fees. As a result of a default under our senior credit facility in 2003, we incurred forbearance fees and refinancing fees. In 2004 we refinanced all of our debt to extend our debt maturities, reduce our borrowing costs, and relax certain financial covenants. See “— Liquidity and Capital Resources — Credit Facilities” below.

Revenues: We generate our revenues from the hourly billings of professional labor, including part-time labor, from call center services, and from charging our clients for the out-of-pocket costs and subcontracted services incurred for projects. In our market research and social research segments, revenues under fixed-price contracts are recognized on a proportional performance basis. Revenues under time-and-materials contracts and cost-reimbursement contracts are recognized as costs are incurred. For the teleservices segment we recognize revenues at the time the services are performed. The level of our revenues is affected by government spending patterns, general economic conditions, the competitiveness of our service offerings in the marketplace and general market conditions that influence the demand for our specific services and pricing.

Cost of revenues: All costs directly attributable to a project are included in cost of revenues. These include the salary, benefits and incentive compensation expense for our professional staff and the hourly wages and benefits of our part-time staff engaged in project work. The cost of our professional staff is relatively fixed over the short-term, and fluctuations in our gross margin may occur due to changes in project margins, the mix of project work that we perform, the level of part-time labor and other variable costs, and the utilization rates of our staff. In addition, we include project-related telephone expense and out-of-pocket expenses, including travel, and subcontracted services incurred for project work, in cost of revenues, and the level of these expenditures impacts our gross margin.

Selling, general and administrative expenses: These include expenses that are not directly related to project performance, including salaries, benefits and incentive compensation for executive management and support services including marketing, information technology, finance and human resources. Also included are external expenses including insurance, legal, marketing and audit, office space and support service expenses, travel and training costs, directors’ fees and other non-project related expenses.

Goodwill impairment: Our results in 2002 and 2003 were impacted by goodwill impairment charges for our teleservices and U.S. market research segments based on the decline in revenues and earnings for these segments.

Interest expense: Our results in 2002, 2003 and 2004 were impacted by fees charged by our lenders to renegotiate the terms of our credit agreements and by the non-cash write-off of unamortized loan fees when we refinanced our credit agreements in 2004.

Our intended use of the net proceeds we receive from this offering, which is to repurchase the LLR Interests and to repay a portion of the outstanding amount under our senior revolving credit facility, will

The issuance of the shares offered in this prospectus and the net proceeds from this offering will allow us to reduce our debt and significantly increase the amount of equity on our balance sheet. Additionally, we believe that we may be able to negotiate more favorable terms from the lenders under our senior revolving credit facility as a result of our recapitalization.

The following table sets forth, for the periods indicated, selected operating data as a percentage of revenue:

Consolidated revenues increased $16.0 million, or 8.9%, from $179.6 million in 2003 to $195.6 million in 2004. Revenues increased $12.6 million, or 10.9%, in our social research business due to increased activity on contracts for our primary customers, including USAID and SAMHSA. Revenues decreased $2.1 million, or 14.4%, in the teleservices business reflecting continued weakness in this market segment. Revenues increased $181,000 or 0.7%, in U.S. market research, and increased $2.5 million, or 12.0%, in U.K. market research. For U.K. market research, the decline of the U.S. dollar relative to the U.K. pound increased revenues by $2.4 million. Except for U.K. market research, where the increase in revenues was due to exchange rate fluctuations, the increase or decrease in revenues in the various operating segments is primarily due to higher or lower demand for services.

Consolidated cost of revenues increased $14.3 million, or 11.3%, from $125.9 million in 2003 to $140.1 million in 2004. Gross profit as a percentage of revenues declined from 29.9% in 2003 to 28.3% in 2004 due primarily to reduced profitability in the U.S. market research segment. In U.S. market research, cost of revenues increased 16.3% from $18.8 million in 2003 to $21.8 million in 2004 and the gross profit percentage decreased from 27.3% in 2003 to 16.0% in 2004. The decrease in profitability in U.S. market research was due to a large cost overrun on one particular contract, operational difficulties in our phone centers and underutilized professional staff. Because cost overruns of the magnitude experienced in 2004 have occurred infrequently in the past and because we have instituted new procedures to identify cost overruns at an earlier stage and believe we have corrected the operational difficulties in our phone centers, we do not expect profitability in U.S. market research to continue to decrease. We expect that our increased backlog will be performed by presently underutilized professional staff, resulting in increased revenues and gross profits. For U.K. market research, cost of revenues increased 14.9% from $12.7 million in 2003 to $14.6 million in 2004 primarily due to the decline of the U.S. dollar relative to the U.K. pound which increased cost of revenues by approximately $1.5 million. Gross profit as a percentage of revenues decreased from 38.2% in 2003 to 36.6% in 2004. For the social research business, cost of revenues increased 9.8% from $84.9 million in 2003 to $93.2 million in 2004 and gross profit as a percentage of revenues increased from 26.6% in 2003 to 27.3% in 2004. In the teleservices business, cost of revenues

SG&A increased $333,000, or 0.8%, from $39.4 million in 2003 to $39.8 million in 2004. As a percentage of revenues, consolidated SG&A decreased from 22.0% in 2003 to 20.3% in 2004. The decrease in SG&A expenses as a percentage of revenues was principally due to the cost reduction efforts implemented in U.S. market research, which included headcount reductions and cutbacks in discretionary spending. For the social research business, SG&A increased from $17.0 million in 2003 to $20.1 million in 2004, and as a percentage of revenues, increased from 14.7% in 2003 to 15.7% in 2004. For U.K. market research, the increase in 2004 versus 2003 SG&A of $1.0 million, or 16.9%, was principally attributable to exchange rate fluctuations.

Depreciation and amortization expense remained stable at $4.0 million for both 2003 and 2004.

In October 2003, we performed our annual goodwill impairment test in accordance with the Financial Accounting Standards Board’s (the “FASB”) Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets (“Statement No. 142”). Based upon the initial results of this test, we determined that there was a goodwill impairment charge in our Korean subsidiary of $317,000. In addition, we determined that the recorded book values of U.S. market research and teleservices exceeded their fair values, as determined by a weighting of comparable company analyses and discounted cash flow models. Upon completion of the assessments, we recorded non-cash impairment charges of $10.0 million to reduce the carrying value of the goodwill in teleservices and $6.0 million in U.S. market research. See Note 3 to the Consolidated Financial Statements, “Goodwill and Other Intangibles,” for additional information.

We believe that the decline in the fair value of our U.S. market research business can be attributed to the following:


	•	A deterioration in general economic conditions;

	•	An even greater decline in business to business market research activity; and

	•	An expectation that recovery will be prolonged.

We believe that the decline in the fair value of our teleservices business can be attributed to the following:


	•	A deterioration in general economic conditions;

	•	An adverse impact on the outbound telemarketing industry arising from various federal and state regulations, including “do-not-call” and privacy regulations; and

	•	Client concentration risks.

In October 2004, as part of our annual impairment test based on Statement No. 142, we performed our annual goodwill impairment test. Based upon the results of this test we determined that the estimated fair values of our business segments exceeded their book values as determined by a weighting of comparable company analyses and discounted cash flow models.

We cannot provide assurance that an additional impairment charge will not be required in the future if the U.S. market research and teleservices businesses do not recover as projected.

Interest and other non-operating expenses increased $2.2 million, or 44.4%, from $5.0 million in 2003 to $7.2 million in 2004. The increase was principally due to a $2.5 million charge for debt fees, principally the non-cash write-off of unamortized loan fees, related to debt that was refinanced during the second quarter of 2004.

The (benefit) provision for income taxes for 2003 was $(2.2 million) and $2.0 million for 2004. Excluding the effect of tax benefits of $4.8 million resulting from the goodwill impairment charges in 2003, the provisions for these years are higher than the amounts that result from applying the federal statutory rate to income before income taxes, due to our not recognizing tax benefits for certain state and non-U.S. losses as well as increased state taxes from profitable business segments.

At December 31, 2003 we recorded a net valuation allowance of $2.2 million and at December 31, 2004 we recorded a net valuation allowance of $2.7 million against state deferred tax assets related to certain subsidiaries because the realization of these future state tax benefits is not deemed to be more likely than not.

As a result of the foregoing, we recorded a net loss for 2003 of $8.9 million and net income for 2004 of $2.4 million. The 2003 results were negatively impacted by a goodwill impairment charge of $11.5 million, net of tax benefits. The 2004 results were negatively impacted by the debt fees discussed above totaling $2.5 million, or $1.6 million net of tax benefits.

Consolidated revenues for 2003 increased $4.3 million, or 2.5%, from $175.3 million in 2002 to $179.6 million in 2003. Revenues increased $10.1 million, or 9.6%, in the social research business. Revenues decreased $728,000, or 4.7%, in the teleservices business. Revenues decreased $7.2 million, or 21.9%, in U.S. market research and increased $1.5 million, or 7.9%, in U.K. market research. For U.K. market research, the decline of the U.S. dollar relative to the U.K. pound increased revenues by $1.7 million. Except for U.K. market research where the increase in revenues was due to exchange rate fluctuations, the increase or decrease in revenues in the various operating segments was primarily due to higher or lower demand for services, with approximately $4.2 million of the decline in U.S. market research revenues arising from the reduced scope of three client contracts and $1.3 million from the non-renewal of two client contracts.

Consolidated cost of revenues increased $5.2 million, or 4.3%, from $120.7 million in 2002 to $125.9 million in 2003. Gross profit as a percentage of revenues declined from 31.1% in 2002 to 29.9% in 2003. For the social research business, cost of revenues increased 9.6% from $77.4 million in 2002 to $84.9 million in 2003 and gross profit as a percentage of revenues was stable at 26.6% in both 2002 and 2003. In U.S. market research, cost of revenues decreased 15.6% from $22.2 million in 2002 to $18.8 million in 2003 and gross profit as a percentage of revenues decreased from 32.6% in 2002 to 27.3% in 2003, reflecting reduced efficiencies and lower pricing. For U.K. market research, cost of revenues increased 2.8% from $12.3 million in 2002 to $12.7 million in 2003 and the decline of the U.S. dollar relative to the U.K. pound increased cost of revenues by $1.0 million. Gross profit as a percentage of revenues increased from 35.1% in 2002 to 38.2% in 2003, reflecting improved efficiencies. In the teleservices business, cost of revenues decreased 2.6% from $7.8 million in 2002 to $7.6 million in 2003

SG&A decreased $299,000, or 0.8%, from $39.7 million in 2002 to $39.4 million in 2003. As a percentage of revenues, consolidated SG&A decreased from 22.7% in 2002 to 22.0% in 2003. The decrease in SG&A was principally due to the cost reduction efforts implemented in U.S. market research, which included headcount reductions and cutbacks in discretionary spending. For the social research business, while SG&A increased from $16.2 million in 2002 to $17.0 million in 2003, SG&A as a percentage of revenues was generally stable at 15.4% in 2002 and 14.7% in 2003. For U.K. market research, the increase in SG&A of $587,000, or 10.5%, was principally attributable to exchange rate fluctuations.

Depreciation and amortization expense decreased by $572,000, or 12.4%, from $4.6 million in 2002 to $4.0 million in 2003. The decrease was due to assets which were fully depreciated or amortized by the end of 2002.

In October 2003, we performed the annual goodwill impairment test in accordance with Statement No. 142. Based upon the initial results of this test, we determined that there was a goodwill impairment charge in our Korean subsidiary of $317,000. In addition, we determined that the recorded book values of U.S. market research and teleservices exceeded their fair values, as determined by a weighting of comparable company analyses and discounted cash flow models. Upon completion of the assessments, we recorded non-cash impairment charges of $10.0 million to reduce the carrying value of the goodwill in teleservices and $6.0 million in U.S. market research. See Note 3 to our Consolidated Financial Statements, “Goodwill and Other Intangibles,” for additional information.

In October 2002, as part of our annual impairment test based on Statement No. 142, we determined that the recorded book value of U.S. market research exceeded its fair value, as determined by a weighting of comparable company analyses and discounted cash flow models. Upon completion of the assessment, we recorded a non-cash impairment charge of $5.9 million to reduce the carrying value of goodwill in U.S. market research.

We believe that the decline in the fair value of our U.S. market research business can be attributed to the following:


	•	A deterioration in general economic conditions;

	•	An even greater decline in business to business market research activity; and

	•	An expectation that recovery will be prolonged.

We believe that the decline in the fair value of our teleservices business can be attributed to the following:


	•	A deterioration in general economic conditions;

	•	An adverse impact on the outbound telemarketing industry arising from various federal and state regulations, including “do-not-call” and privacy regulations; and

	•	Client concentration risks.

Interest and other non-operating expenses increased $212,000, or 4.4%, from $4.8 million in 2002 to $5.0 million in 2003. The increase was due to an increase in interest expense of $258,000 attributable to higher borrowing costs partially offset by a decrease of $46,000 in other non-operating expenses.

The provision (benefit) for income taxes was $2.1 million for 2002 and $(2.2 million) for 2003. Excluding the effect of tax benefits of $4.8 million resulting from the goodwill impairment charges in 2003, the provisions for these years are higher than the amounts that result from applying the federal statutory rate to income before income taxes, due to our not having provided tax benefits for certain state and non-U.S. losses as well as increased state taxes from profitable business segments.

With the adoption of Statement No. 142 on January 1, 2002, we recorded as a cumulative effect of a change in accounting principle, goodwill impairment related to our Mexican subsidiary of $292,000, or $(0.05) per share.

As a result of the foregoing, net loss was $2.9 million for 2002 and $8.9 million for 2003. The 2002 results were negatively impacted by a goodwill impairment charge and the cumulative effect of an accounting change of $6.2 million, net of tax benefits. The 2003 results were negatively impacted by a goodwill impairment charge of $11.5 million, net of tax benefits.

At December 31, 2004, working capital was $23.4 million. Net cash provided by operating activities for 2003 was $7.0 million as compared to $5.6 million for 2004. For 2003, the net cash provided by operating activities was primarily generated by a net loss, after adjusting for depreciation and amortization, goodwill impairment charge and other non-cash items, totaling $8.1 million, an increase of $2.1 million in payables and accrued expenses and $658,000 in deferred revenues and in other liabilities, offset by an increase in receivables of $3.7 million, and an increase in other assets of $181,000. Growth in accounts receivable was primarily related to growth in fourth quarter 2003 revenues of $1.4 million and a decline in collections in our U.S. market research segment due to normal fluctuations in project billing and payment cycles. For 2004, the net cash provided by operating activities was primarily generated by net income, after adjusting for depreciation and amortization, and other non-cash items, totaling $11.5 million, an increase of $742,000 in payables, offset by an increase in receivables of $2.9 million, a decrease of $3.2 million in accrued expenses and other liabilities and an increase in other assets of $773,000. The decrease in accrued expenses was due to the timing of expenses and their payment and had no impact on our net income. The reduced accruals resulted primarily from a $2.0 million reduction in taxes payable as a result of tax planning and previous overpayments that generated a refund, a $921,000 reduction in accrued payroll due to the timing of payroll periods, a reduction of $617,000 for bonus accrual in our U.K. market research segment due to performance targets not being achieved in 2004, a $439,000 reduction in accrued interest as a result of lower borrowing rates following our May 2004 refinancing, and $308,000 in rent adjustments and service charges in connection with one of our U.K. properties. These variances, along with other miscellaneous reductions in accruals of $977,000 and increases in other liabilities of $2.0 million, resulted in a decrease of $3.2 million in accrued expenses and other liabilities. Growth in accounts receivable was due to the growth in fourth quarter 2004 revenues.

Investing activities for 2003 included capital expenditures of $3.4 million. Investing activities for 2004 included capital expenditures of $4.4 million. The majority of the spending on capital items was for the ongoing maintenance and replacement of technology.

In 2003, financing activities included a net reduction in borrowings totaling $2.1 million, payment of loan fees of $1.8 million and proceeds from the sale of our common stock under our various stock purchase plans and the exercises of stock options totaling $502,000. In 2004, financing activities included a net reduction in borrowings totaling $2.6 million, payment of loan fees of $1.9 million and proceeds from the sale of our common stock under our various stock purchase plans and the exercises of stock options totaling $892,000.

In May 2004, we entered into a secured revolving credit facility of $35.0 million with Citizens Bank of Pennsylvania and First Horizon Bank (the “Senior Revolving Facility”). The Senior Revolving Facility is for a three-year term and is secured by substantially all of our assets. The Senior Revolving Facility carries an interest rate at our discretion of either the financial institution’s designated base rate (5.25% at December 31, 2004) plus 100 basis points or LIBOR (3-month LIBOR was 2.56% at December 31, 2004) plus 300 basis points. As of April 26, 2005, we had approximately $9.8 million of additional credit available under the Senior Revolving Facility.

In May 2004, we also issued $10.0 million of secured subordinated notes (the “Secured Subordinated Notes”) and $12.0 million of unsecured subordinated notes (the “Unsecured Subordinated Notes”) to Allied Capital Corporation (“Allied Capital”). We used the proceeds of the borrowings under the Senior Revolving Facility, the Secured Subordinated Notes and the Unsecured Subordinated Notes to repay all debt outstanding at May 4, 2004. At December 31, 2004, the Secured Subordinated Notes carried an interest rate of 10.0%, required principal payments of $500,000 per quarter and were set to mature in November 2007. At December 31, 2004, the Unsecured Subordinated Notes carried a fixed interest rate of 15.5%; 13.0% payable quarterly in cash, and 2.5%, at our discretion, payable in cash or able to be deferred and included in the outstanding principal balance until maturity in May 2009. In exchange for consideration received in connection with this debt, we extended the term of existing warrants held by Allied Capital and Allied Investment Corporation (together, “Allied”) from May 2007 to the later of May 2009 or the third anniversary of the repayment date. These warrants were issued in 1999 to Allied and are for the purchase of 437,029 shares of our common stock at an exercise price of $5.422 per share. The extension of these warrants was valued at $616,000 and will be accreted through interest expense over the life of the Unsecured Subordinated Notes. As described in “— Recent Development” below, effective March 15, 2005, we used the proceeds from the Term Loan, together with proceeds obtained from a drawdown of the Senior Revolving Facility, to pay off the outstanding balance under the Secured Subordinated Notes and the Unsecured Subordinated Notes.

We are required to maintain certain financial covenants under our credit facilities, such as minimum earnings, debt-to-earnings, interest coverage, and other financial ratios. For the measuring period ended December 31, 2004, we were in compliance with all of the financial covenants. In addition, covenants under our credit facilities limit or prohibit our ability to incur additional debt, prepay specified types of indebtedness, pay dividends, make investments, sell assets, or engage in mergers and acquisitions.

In conjunction with our May 2004 refinancing, we incurred additional costs of approximately $1.4 million which are included in other long-term assets in our consolidated financial statements and are being amortized over the remaining terms of the facilities, commencing in the second quarter of 2004, and we wrote off unamortized loan fees of approximately $2.5 million as interest expense, which included a cash payment of $345,000 made in 2004.

During the third quarter of 2003, it came to our attention and the attention of our lenders that we had inadvertently failed to make a payment in the amount of $1.7 million under a provision of our then existing senior credit facility that required us to make payments out of “excess cash flow.” Pursuant to a Forbearance Agreement we entered into with our senior lenders, the senior lenders allowed us to make the

We entered into a joint venture agreement with Ratrix Analytics LLC (the “Joint Venture”) during 2001 for the purpose of developing new research-based products. As of December 31, 2004, we had a 44.8% ownership interest in the Joint Venture and a 50% voting interest in the Joint Venture. In 2003, we contributed $495,000 in services and cash and, since inception, have contributed an aggregate of $1.7 million. We did not fund the Joint Venture in 2004, and we are not obligated for any future funding of the Joint Venture. All amounts funded to date have been expensed.

We currently have no material capital expenditure commitments and no acquisition-related commitments. We have no off-balance sheet financing arrangements. We believe that our current sources of liquidity and capital will be sufficient to fund our long-term obligations and working capital needs until May 2007, the time at which our revolving credit facility matures.

In March 2005, we entered into a new secured term loan of $15.0 million with Citizens Bank of Pennsylvania and First Horizon Bank (the “Term Loan”). The Term Loan is for a five-year term and is secured by substantially all of our assets. The Term Loan carries an interest rate of LIBOR plus 350 basis points, requires principal payments of $750,000 per quarter and matures in 2010. We used the proceeds from the Term Loan and a drawdown from the Senior Revolving Facility to prepay the Secured Subordinated Notes and the Unsecured Subordinated Notes in the combined amount of $20.5 million. We wrote-off unamortized fees in the amount of $813,000 and incurred prepayment penalties in the amount of $362,000 in connection with this transaction in the first quarter of 2005.

The following table represents our contractual obligations at December 31, 2004:

As of December 31, 2004, long-term debt obligations included expected interest payments on the Secured Subordinated Notes, the Unsecured Subordinated Notes and the Senior Revolving Facility. The interest on the Senior Revolving Facility is based on LIBOR plus 300 basis points, which totaled 5.56% as of December 31, 2004, or the prime interest rate plus 100 basis points, which totaled 6.25% as of

Pursuant to the terms of a Purchase Agreement dated September 1, 2000, we sold and the LLR Partnerships purchased in a private placement (1) 1,176,458 shares of our Common Stock, (2) 10 shares of the Series B Preferred Stock, (3) warrants to purchase 740,500 shares of our Common Stock at an exercise price of $12.00 per share, and (4) anti-dilution warrants to purchase shares of our Common Stock at an exercise price of $.01 per share, for aggregate gross proceeds of $10 million. At any time on or after September 1, 2005, the LLR Partnerships may exchange each share of Common Stock for one-half of a share of our Series C Preferred Stock. After conversion, the holders of Series C Preferred Stock are entitled to receive cumulative quarterly cash dividends at an annual rate of $2.04 per share, or an aggregate of $1.2 million per annum.

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. We base our estimates on historical experience and on assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates, and the estimates will change under different assumptions or conditions.

We believe that the implementation of the following critical accounting policies, used in the preparation of our consolidated financial statements, introduces the most significant levels of judgments and estimates.

Service revenue is recognized when earned, generally as work is performed in accordance with the provisions of Staff Accounting Bulletin No. 104. Services performed vary from contract to contract and are not uniformly performed over the term of the arrangement. In our market research and social research segments, revenues under fixed-price contracts are recognized on a proportional performance basis. Performance is based on the ratio of costs incurred to total estimated costs where the costs incurred represent a reasonable surrogate for output measures of contract performance, including survey design, data collection, survey analysis and presentation of deliverables to the client. Progress on a contract is matched against project costs and costs to complete on a periodic basis. Provision for estimated contract losses, if any, is made in the period such losses are determined. Customers are obligated to pay as services are performed, and in the event that a client cancels the contract, the client is responsible for payment for services performed through the date of cancellation.

Revenues under cost-reimbursement contracts are recognized as costs are incurred. Applicable estimated profits are included in earnings in the proportion that incurred costs bear to total estimated costs. Incentives, award fees or penalties related to performance are also considered in estimating revenues and profit rates based on actual and anticipated awards. See “Our Business — Government Contracts” for a discussion of the types of contracts we have with the U.S. federal government.

Revenues under time-and-materials contracts are recognized as costs are incurred.

In our teleservices segment, revenues are recognized at the time services are performed.

We have significant intangible assets related to goodwill. In assessing the recoverability of our goodwill and other identifiable intangibles, we must make assumptions regarding estimated future cash flows and other factors, such as trading and transaction multiples, and for other identifiable assets, valuation estimates for items such as backlog and outstanding proposals, to determine the fair value of the respective assets. If these estimates or their related assumptions change in the future, we may be required to record impairment charges for these assets. On January 1, 2002, we adopted Statement No. 142, which requires us to analyze our goodwill for impairment on an annual basis. At the date of adoption, we reclassified assembled workforce intangible assets with an unamortized balance of $865,000 to goodwill and recorded as a cumulative effect of a change in accounting principle, goodwill impairment related to our Mexican subsidiary of $292,000, or $(0.05) per share. During 2002 we identified other intangible assets with useful lives that could no longer be determined. As a result, we reclassified $480,000 from other intangible assets to goodwill in the fourth quarter of 2002. In the fourth quarter of 2002, we recorded a non-cash impairment charge of $5.9 million to reduce the carrying value of goodwill in U.S. market research.

In the fourth quarter of 2003, we recorded non-cash impairment charges to reduce the carrying values of goodwill in the amount of $10.0 million in teleservices, $6.0 million in U.S. market research and $317,000 in our Korean subsidiary.

The significant assumptions used in determining the market value of the teleservices business were as follows:


	•	0.3 times trailing twelve-month revenues for comparable publicly-traded companies;

	•	3.7 times trailing twelve-month earnings before interest, taxes, depreciation and amortization for comparable publicly-traded companies;

	•	0.5 times trailing twelve-month revenues for comparable sales transactions;

	•	multiples of earnings before interest, taxes, depreciation and amortization for comparable sales transactions were not included given the absence of profitable comparable companies;

	•	for a five-year financial projection, a discount rate of 20.0%; an exit multiple of 2.5 times earnings before interest, taxes, depreciation and amortization; a compound growth rate for revenues of 6.4% and an improvement in operating income as a percentage of revenues from 13.3% to 15.4%; and

	•	in the overall evaluation, the publicly-traded comparable data was discounted 45.0% to reflect the netting of discounts for marketability, company size and customer concentration and a control premium.

The significant assumptions used in determining the market value of the U.S. market research business were as follows:


	•	1.2 times trailing twelve-month revenues for comparable publicly-traded companies;

	•	9.6 times trailing twelve-month earnings before interest, taxes, depreciation and amortization for comparable publicly-traded companies;

	•	0.6 times trailing twelve-month revenues for comparable sales transactions;

	•	6.6 times trailing earnings before interest, taxes, depreciation and amortization for comparable sales transactions;


	•	for a five-year financial projection, a discount rate of 16.0%; an exit multiple of 6.0 times earnings before interest, taxes, depreciation and amortization; a compound growth rate for revenues of 7.5% and no improvement in operating income as a percentage of revenues; and

	•	in the overall evaluation, the publicly-traded comparable data was discounted 15.0% to reflect the netting of discounts for marketability and company size and a control premium.

The valuation metric assumptions used in the goodwill impairment analyses performed on our teleservices and U.S. market research segments differed significantly for two principal reasons. First, because these two segments were and continue to be engaged in very different types of business, they were and must continue to be compared to very different types of companies and transactions. In performing this analysis of market comparables, we determined that both the public-trading comparables and the relevant-sale transaction comparables were very different for these two segments at the time of comparison. Second, because the two segments had very different types of operating risks at the time, we used different weighted average costs of capital and different discount rates for lack of marketability in these analyses. One of the most significant differences in operating risks between these two segments was the nature and mix of the client contracts when viewed in the context of the then-current market conditions. Both of these factors led to the use of lower valuation metric assumptions for the teleservices segment at the time we performed the analyses.

Deferred tax assets and liabilities are determined based on the temporary differences between the financial statement and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the temporary differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered to be more likely than not to be realized in future periods.

At December 31, 2004 we had net deferred tax assets of $6.3 million before the application of a valuation allowance. Of this amount, $2.7 million is made up of state deferred tax assets of subsidiaries that have not been profitable. We recognize that it is not more likely than not that the future tax benefits of these assets will be realized. Accordingly, we have recorded a $2.7 million valuation allowance against these assets. We believe that all of the deferred tax assets for federal and non-U.S. income tax purposes will be fully realized. In order to fully realize these tax assets, we must have pre-tax earnings in the U.S. of $10.2 million and pre-tax earnings outside of the U.S. of $497,000.

Effective January 1, 2003, we adopted FASB Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities” (“Statement No. 146”), which requires liabilities for costs associated with exit or disposal activities to be recognized when the liabilities are incurred, rather than when an entity commits to an exit plan. Statement No. 146 also establishes that the liability should initially be measured and recorded at fair value. This rule changed the timing of liability and expense recognition related to exit or disposal activities, but not the ultimate amount of such expenses.

In 2003, we reduced our workforce in the U.S. market research operating segment and, as a result, incurred one-time termination benefits of approximately $705,000 for the termination of certain employees. These termination benefits were recognized in accordance with Statement No. 146 and included in our results of operations for the year ended December 31, 2003. During 2004, we paid out all previously accrued termination benefits from 2003.

In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an interpretation of Accounting Research Bulletin No. 51” (“Interpretation No. 46”). Interpretation No. 46 requires the consolidation of entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally

In December 2003, the FASB issued Interpretation No. 46(R) (“Interpretation No. 46(R)”), which clarified and amended Interpretation No. 46. Interpretation No. 46(R) requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risk among the parties involved. Interpretation No. 46(R) also enhances the disclosure requirements related to variable interest entities. Interpretation No. 46 applied immediately to variable interest entities created after January 31, 2003 and, with respect to variable interest entities created before February 1, 2003, Interpretation No. 46(R) applied for the quarter ended March 31, 2004.

During 2001, we formed the Joint Venture with Ratrix Analytics LLC for the purpose of developing new research-based products. As of December 31, 2004, we had a 44.8% ownership interest and 50% voting interest in the Joint Venture. In 2004, we contributed $0 in services and cash and, since inception, have contributed an aggregate of $1.7 million. All amounts funded to date have been expensed. We are not obligated for future funding of the Joint Venture.

As the Joint Venture has a sufficient amount of equity to absorb the entity’s expected loss, the equity owners as a group are able to make decisions about the entity’s activities, and the equity owners have the obligation to absorb expected losses and the rights to receive the expected residual returns, we believe that the Joint Venture is not a variable interest entity under the principal criteria as set forth in Interpretations No. 46 and 46(R) and, accordingly, we are not required to apply the consolidation provision under Interpretations No. 46 and 46(R). The application of Interpretations No. 46 and 46(R) in 2003 and 2004 had no impact on our results of operations, financial position or cash flows.

In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“Statement No. 150”). Statement No. 150 requires that certain financial instruments with characteristics of both liabilities and equity, including mandatory redeemable financial instruments, be classified as a liability. Any amounts paid or to be paid to holders of these financial instruments in excess of the initial measurement amount shall be reflected in interest cost. Statement No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise will be effective at the beginning of the first interim period beginning after June 15, 2003. We adopted Statement No. 150 on July 1, 2003. The adoption of this statement had no impact on our results of operations, financial position or cash flows.

In December 2004, the FASB issued Statement No. 123(R), Share-Based Payment (“Statement No. 123(R)”). Statement No. 123(R) requires that the costs of employee share-based payments be measured at fair value on the awards’ grant date using an option-pricing model and recognized in the financial statements over the requisite service period. Statement No. 123(R) does not change the accounting for stock ownership plans, which is subject to American Institute of Certified Public Accountants SOP 93-6, “Employer’s Accounting for Employee Stock Ownership Plans.” Statement No. 123(R) supersedes Opinion 25, Accounting for Stock Issued to Employees and its related interpretations, and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting, which we currently use.

Statement No. 123(R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement No. 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement No. 123(R). The second method is the modified retrospective application, which requires that we restate prior period financial statements. The modified retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of Statement No. 123(R). We are currently determining which transition method we will

In December 2004, the FASB issued FSP 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provisions within the American Jobs Creation Act of 2004” (the “Act”). The Act was signed into law on October 22, 2004. The Act provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated (as defined by the Act) in either an enterprise’s last tax year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. At December 31, 2004, unremitted earnings of our foreign subsidiaries that could qualify for this special one-time tax deduction of 85% were approximately $384,000. Because at this time it is our intention to indefinitely reinvest these earnings, no U.S. taxes have been provided. If, upon further evaluation of this provision, we conclude that we will repatriate these unremitted foreign earnings, the tax expense recognized would be approximately $20,000.

Inflation has not had a significant impact on our operating results to date, nor do we expect it to have a significant impact through 2005. Foreign currency exchange fluctuations did not have a material impact on our operating results from 2002 to 2004. As we continue to expand our international operations, exposures to gains and losses from foreign currency fluctuations will increase. It has not been our practice to enter into foreign exchange contracts, but such contracts may be used in the future if we deem them to be an appropriate resource to manage our exposure to movements in foreign currency exchange rates.

Market risks relating to our operations result primarily from changes in interest rates and changes in foreign exchange rates. We monitor interest rate and foreign exchange rate exposures on an ongoing basis. We have in the past entered into interest rate hedging contracts and will continue to evaluate their appropriateness. As of December 31, 2004, we were not a party to any interest rate hedging contracts.

It has not been our practice to enter into foreign exchange contracts, but we may use such contracts in the future if we deem them to be an appropriate resource to manage our exposure to movements in foreign currency exchange rates. We do not consider our current foreign exchange exposure, which is primarily related to changes between the U.S. dollar and the U.K. pound, to be material. Although the impact of changes in foreign exchange rates may be significant to our revenues, cost of revenues and operating expenses when considered individually, the net impact on our results of operations has not been significant.

The following table provides information about our financial instruments that are sensitive to changes in interest rates. For debt obligations, the table presents principal cash flows and related weighted average interest rates as of December 31, 2004 by expected maturity dates.

See “— Recent Development” above for a discussion of our March 2005 debt refinancing.

The Audit Committee of our board of directors dismissed Ernst & Young LLP as our independent public accountants, effective as of August 12, 2004.

Ernst & Young’s reports on our financial statements for the fiscal years ended December 31, 2002 and December 31, 2003 contained no adverse opinion or a disclaimer of opinion, and were not qualified or modified as to uncertainty, audit scope or accounting principles.

During our last two fiscal years and the subsequent interim period to the date hereof, there were no disagreements between us and Ernst &Young on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of Ernst &Young, would have caused it to make reference to the subject matter of the disagreements in connection with its reports on our financial statements for such years. During such time period, there were no “reportable events” as that term is described in Item 304(a)(1)(v) of Regulation S-K.

We provided Ernst & Young with a copy of the foregoing statements. Ernst & Young stated its agreement with such statements in a letter to the Securities and Exchange Commission dated August 12, 2004, which is filed as an exhibit to our Current Report on Form 8-K dated August 13, 2004.

The Audit Committee of our board of directors appointed Grant Thornton LLP as our independent public accountants, also effective as of August 12, 2004.

During the fiscal years ended December 31, 2002 and December 31, 2003 and the subsequent interim period until the date of their appointment, we did not consult Grant Thornton LLP with respect to the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, or any other matters or reportable events as set forth in Item 304(a)(2)(i) and (ii) of Regulation S-K.

The change in accountants was made as a result of significant proposed rate increases in the auditing fees charged by Ernst & Young LLP.

We provide research services to governments and commercial clients in North America, Europe and Asia. We collect customer, market, employee, and demographic data by utilizing computer-assisted telephone interviews, internet-based data collection techniques, personal interviews, mail questionnaires, and other means. After collecting the data, we analyze, develop and present to our clients cohesive reports which provide insights regarding their programs, operations, products, or services. Our services are designed to help our clients manage and evaluate public policy programs and funding decisions, sell products, and improve their corporate image and competitive position. Our government clients include some of the largest U.S. federal agencies, including SAMHSA, USAID, CDC, and NIH. We have served some of these clients for over 20 years. Our commercial clients include a diverse base of Fortune 500 corporations in the automotive, consumer goods and services, financial services, health care, information technology, retail and trade, and telecommunications industries. We have served the commercial research market since 1938. We also provide telemarketing services for clients in the membership services, financial services, information technology, and entertainment industries.

For the 12 months ended December 31, 2004, our revenues were $195.6 million, our operating income was $11.7 million and our earnings per share were $0.38. For the 12 months ended December 31, 2003, our revenues were $179.6 million, our operating loss was $6.1 million, and our loss per share was $1.47. In the second quarter of 2004, we recorded a non-cash write-off of financing costs of $2.5 million in connection with a refinancing of our indebtedness, which reduced net income by $1.6 million and diluted earnings per share by $0.26. At December 31, 2004, our total backlog, which relates to both government and commercial contracts, was $282.7 million, of which $165.9 million related to unfunded U.S. federal and state government contracts. See “— Backlog” below.


	•	social research;

	•	U.K. market research;

	•	U.S. market research; and

	•	teleservices.

For financial information regarding each of our reportable segments, see “Selected Financial Information — Segments” in this prospectus.

In the social research segment, we perform research and provide information technology services, public health awareness services, and other research and consulting services primarily to agencies of the U.S. federal government and state and local governments. The majority of our government projects are in the areas of health, education and international aid. Our work benefits government policy decision makers and public healthcare professionals by providing them with the information, research and analysis they need to measure the effectiveness of existing social programs, assess the need for new programs, and provide constituents with useful information.

Our reputation for providing quality services to our clients has allowed us to develop long-term relationships with our government agency clients. We believe that our extensive expertise with regard to social issues, such as substance abuse and HIV-AIDS awareness, enables us to provide reliable customer, market and demographic information and advisory services to clients.

The following are examples of services we provide for our social research clients:


	•	Our largest contract is with USAID, with which we have been working since 1985. This work, which is under contract for $107 million, extends from September 2003 to September 2008.


		Under this contract we collect data on population, health, nutrition, fertility and family planning practices in developing nations throughout the world, enabling USAID, host countries and donor organizations to monitor and evaluate programs designed to improve health and nutrition conditions. We have performed this work in over 55 countries.

	•	We work with the CDC for which we operate the National Program of Cancer Registries. This work, which is under contract for $3.7 million, extends from September 2004 to August 2007. Under this contract, we collect data via the internet on cancer incidence, which will provide CDC with epidemiological and statistical support in analyzing cancer incidence, mortality and risk factors. This contract with CDC is the second three-year contract we have entered into to perform this work. In 2003, we processed over 7 million cancer records under the prior contract with CDC. We also operate cancer registries for the Department of Defense and the states of Maryland and Delaware.

Revenues from our social research segment were $115.6 million for the year ended December 31, 2003 and $128.2 million for the year ended December 31, 2004. Social research accounted for 64.4% of our total revenues for the year ended December 31, 2003 and 65.6% of our total revenues for the year ended December 31, 2004. For the year ended December 31, 2004, cost-reimbursable contracts represented approximately 70.0%, fixed-price contracts represented approximately 18.1% and time-and-materials contracts represented approximately 11.9% of total social research revenues.

At December 31, 2004, our total social research backlog, which relates to both government and commercial contracts, was $267.1 million. Of our social research backlog at December 31, 2004, our unfunded backlog, which relates to unfunded U.S. federal and state government contracts, was $165.9 million.

The following are examples of services we provide for our U.K. market research clients:



	•	We have created a program providing a customer satisfaction survey for a large multi-national information technology company and its distributors across Europe. We collect data through telephone interviews in approximately 30 countries for more than 300 business distributors. The survey results are disseminated on the internet, allowing information to be passed directly among our client, its distributors and us. We supply each distributor with a unique customer feedback survey, and we supply the management team of our client with a measurement of each distributor’s performance in dealing with end-user customers. Annual revenues for this project are approximately $300,000. This approach also is being used in projects for other clients.


	•	We provide services to a department of the U.K. government by consolidating information from a number of disparate sources into a single database, which enables the client to analyze data relating to its operations over a period of years. This contract began in January 1998 for approximately $350,000 per year and has been extended through May 2006. We have a dedicated team of 13 employees working on this project, which currently generates annual revenues in excess of $2.0 million.

Revenues from our U.K. market research segment were $20.5 million for the year ended December 31, 2003 and $22.9 million for the year ended December 31, 2004. U.K. market research

The following are examples of services we provide for our U.S. market research clients:


	•	We are conducting a study in the United States for a leading global information technology company in which we will interview more than 4,000 business respondents and more than 2,000 consumer respondents for the purpose of measuring the brand ratings for our client and its competitors in the marketplace. The survey schedule, progress, questionnaire, data and reports are accessible through an electronic portal that is automatically updated on a daily basis. Reports will be provided to our client’s brand managers and to its management. The initial phase is expected to generate over $1.0 million in annual revenues, and we anticipate expanding this work to additional countries.

	•	Beginning in early 2004 we launched an international research program on behalf of a global energy services corporation in connection with a new product introduction. We have conducted research in 10 countries in North America, Europe and Asia. Respondents are surveyed on site at our client’s fuel service stations and questioned about their levels of awareness, usage and satisfaction with the firm’s products. We anticipate that this program will generate approximately $1.0 million in annual revenues and continue into 2006.

Revenues from our U.S. market research segment were $25.8 million for the year ended December 31, 2003 and $26.0 million for the year ended December 31, 2004. U.S. market research accounted for 14.4% of our total revenues for the year ended December 31, 2003 and 13.3% of our total revenues for the year ended December 31, 2004.

At December 31, 2004, our U.S. market research backlog was $8.4 million. We expect our U.S. market research backlog to increase as companies continue to increase their market research budgets.

In the teleservices segment, we provide telemarketing services for large volume clients in a variety of industries, including the membership services, financial services, information technology and entertainment industries. Presently, we provide primarily outbound telemarketing services, where we initiate a call and our objective is to sell a product or service. In addition, we have upgraded our call stations to enable us to provide inbound telemarketing services, where we accept incoming calls on behalf of our clients for information gathering, sales or other purposes. We have maintained relationships with several of our largest teleservices clients for many years.

For the year ended December 31, 2003 revenues from our teleservices segment were $14.9 million, which accounted for 8.3% of our total revenues. For the year ended December 31, 2004, revenues from our teleservices segment were $12.7 million, which accounted for 6.5% of total revenues.


	•	*Recognized Market Leader.* We believe we are a recognized leader in both social research and commercial market research. We have contracts with various agencies of the Department of Health and Human Services, or HHS, including SAMHSA, which generate approximately


		$58 million in aggregate revenues per year, and with USAID, which generate approximately $24 million in aggregate revenues per year. Also, according to the August 2004 issue of Inside Research, we are ranked as the 16th largest market research company in the world based on 2003 market research revenues. We provide market research services to many multi-national Fortune 500 companies throughout North America, Europe and Asia. Our research professionals have direct access to many senior executives and provide highly regarded, reliable, value-added customer, market and demographic information and services which have resulted in our long-standing reputation as a premier service provider in the market research industry.


	•	*Long-Standing Relationships and Recurring Nature of Revenues.* We have developed long-standing relationships with many of our clients. The five largest clients in our social research segment in 2004 have been working with us for an average of over 18 years. The five largest clients in our U.S. market research segment in 2004 have been working with us for an average of over 7 years. This is the result of our success in winning government contracts that are re-bid, the renewal of commercial projects, and new contracts and projects with existing clients. In 2004, approximately 82.8% of our revenues were derived from multi-year contracts and/or from clients for whom we have done work in each year in the three-year period ended 2004.


	•	*Diversified Client Base.* We have more than 450 active contracts and task orders with various U.S. federal and state government agencies. Additionally, we have more than 1,000 engagements with commercial clients in over 13 different industries. While 17.8% of our revenues are attributable to our many contracts with SAMHSA, 12.3% of our revenues are attributable to USAID, and 9.8% of our revenues are attributable to one contract with USAID, our many other clients and discrete contracts represent a diverse source of revenues. Our diverse client base and our many discrete contracts generally lower our dependence on any one contract.

	•	*Diverse Service Offering.* We have diverse service offerings that enable us to respond to a broad range of requests for proposals, attract additional business from our existing clients, and win bids and engagements from new clients. We believe that the diversity of our service offerings is attractive to clients who find it convenient to deal with one service provider for a wide range of services. See the full list of services we provide, along with brief descriptions of our services, under the heading “— Services,” below.

	•	*Track Record of Successful Acquisitions.* More than $141 million of our 2004 revenues were derived from companies we acquired in the last seven years. We have successfully integrated these acquisitions without disruptions to our business and we have been highly successful at retaining key senior executives from the acquired businesses. We believe that retaining senior executives from our acquisitions is important because they bring additional client relationships and professional capabilities.

	•	*Experienced Management Team.* We have an experienced management team. Our executive officers have an average of approximately 20 years of experience in the research industry, and have been with us or our predecessors for an average of approximately 16 years. The knowledge, relationships and reputation of our management team help us maintain and build our client base.


	•	*Further Expand Our Strong Presence in the Research Industry.* We have established a leading position in the fragmented research industry through pioneering research since 1938. We believe the key to our success is exceptional client service and satisfaction. We intend to capitalize on our long-term client relationships and our reputation with our government and commercial clients to expand our relationships with existing clients and to attract new clients.


		We have a successful performance record and demonstrated technical expertise, both of which we believe give us credibility with prospective clients.

	•	*Integrate Research and Technology.* We intend to grow our research business by using technology for gathering data, managing programs online, creating interactive real-time reporting systems and delivering analyses. By integrating research and technology, we are able to offer our clients faster access to information that is presented in a more user friendly manner. We are also able to increase our efficiency by using a common software platform to present data in a consistent manner across all of our business units. Our strategy of continuously utilizing technology to enhance our research also includes the use of the internet to improve set-up, management and communication of research programs, the continued use of our state-of-the-art call centers and the use of personal digital assistant, or PDA, devices for data collection in the field.

	•	*Pursue Acquisitions.* Although we do not presently have any plans to acquire specific companies, we intend to pursue acquisitions in the social research and commercial research industries that complement our business. Acquisitions benefit our business because they bring senior executives who add professional capabilities and established client relationships. More than $141 million of our 2004 revenues were derived from companies we acquired in the last seven years and we have been highly successful at retaining key senior executives from the acquired companies. We believe that the industry is fragmented and that we are highly desirable as an acquirer because of our culture and work environment.

	•	*Strengthen our Balance Sheet.* We expect that the net proceeds from this offering will allow us to reduce our debt and that this offering will significantly increase the amount of equity on our balance sheet. Additionally, we expect that we may be able to negotiate more favorable terms from our existing lenders as a result of our recapitalization. If we are able to strengthen our balance sheet and obtain less restrictive debt covenants, we anticipate that we will have increased financial flexibility to pursue acquisition opportunities, using either borrowed money or our stock, that may not be currently available to us.

	•	*Enter into Strategic Alliances.* We plan to augment our core research services by pursuing strategic alliances with other service providers in a manner that will allow us to share information and work together with our alliance partners when bidding on certain contracts. We believe that these strategic alliances will allow us to offer more services and thus enable us to bid on work that we may not be able to obtain otherwise.

We provide research services to many agencies within the government. Most of our contracts are with the following federal agencies:


	•	SAMHSA;

	•	USAID;

	•	CDC;

	•	NIH;

	•	the Department of Education;

	•	the Department of Housing and Urban Development;

	•	the Department of Commerce; and

	•	the Department of Defense.

These agencies have experienced growth in expenditures over many years as the federal government has continued to increase funding to a broad range of social and domestic programs and defense activities. For example, there has been continuing and growing emphasis on public health issues and growing support for the government’s involvement in information dissemination, health promotion and disease prevention activities. We believe this increase has been caused by several key trends, including strong support among politicians, advocacy groups and the general public for improving the nation’s health status, as well as concerns about the rapid growth in U.S. healthcare costs. We believe that there is now a stronger national priority in support of foreign aid to promote the growth of democracy, reduce poverty rates, improve education and improve health conditions in developing countries. International efforts to combat public health issues such as HIV-AIDS infection is an area of growing emphasis and concern, and funding has increased to support these efforts.

According to the “Communications Industry Forecast & Report” issued by Veronis Suhler Stevenson, the marketing information services industry grew from $15.0 billion in annual revenues in 1998 to $19.4 billion in annual revenues in 2003 and is expected to reach $27.4 billion in annual revenues in 2008. This represents an annual growth rate of 5.3% from 1998 to 2003 and a projected annual growth rate of 7.1%.

According to the same report, the marketing information services industry grew 6.4% in 2003 over 2002, and growth is expected in the future as a result of companies strengthening their marketing efforts to take advantage of the improving economy. Going forward, we believe that market research firms that provide their clients with more flexible and customized products, integrating content, software and other services should be the most successful. We expect these clients to demand greater real-time access to data to facilitate their decision making.

We believe that there will be spending growth in the commercial market research industry, driven by:


	•	improving economic conditions;

	•	the need for increased decision making support;

	•	increased outsourcing of services;

	•	globalization, which requires an in-depth knowledge of multiple markets;

	•	shorter product life cycles to drive the need for faster and more accurate information; and

	•	customer relationship management issues.

According to the April 2002 IMAP “Focus Group Business Services Report,” outsourced call center industry revenue was $6.0 billion in 1995 and grew to over $27.0 billion in 2001. This report included a prediction of more modest annual growth of 4.4% from 2001 to 2008 as a result of economic and political conditions. Although growth in the industry has been slowed by “do not call” legislation and economic conditions, we believe the outsourced call center industry should continue to grow if the economy continues to recover and expand. Frost & Sullivan, in a report entitled North American Outsourced Contact Center Services Market, estimated that outsourced call center revenue was $22.0 billion in 2002 and projected industry revenue to reach $25.7 billion by 2009.

Our largest clients in terms of revenues generated include prominent multinational corporations and agencies of the U.S. and U.K. governments. At times, we perform multiple projects for different subsidiaries or business units of the same client. In general, our clients have the right to terminate our engagements at any time, with the expectation of cost recovery for work completed by us. We may perform services for our commercial clients pursuant to verbal understandings, project terms that are outlined in writing, purchase orders, or detailed written contracts. Most commercial projects are completed within a few months, but we may complete some projects in just several days or in as long as several years. Our arrangements with government clients are in the form of detailed contracts. Most government contracts are completed over a one- to five-year period.

Our largest single client, SAMHSA, accounted for 15.6% of revenues in 2002, 16.9% of revenues in 2003, 17.8% of revenues in 2004, and an average of 16.8% of our revenues for the last three years. We have 25 contracts with SAMHSA, none of which constitutes more than 5.1% of our revenues. We have contracts with each of the three component centers within SAMHSA: the Center for Mental Health Services, the Center for Substance Abuse Prevention and the Center for Substance Abuse Treatment. We provide a wide variety of services to SAMHSA’s three centers. Our services relate to substance abuse and mental health issues, including quantitative and qualitative research, evaluation of program effectiveness, development and operation of public health websites, and dissemination of public health materials and messages. Our second largest client, USAID, accounted for 10.6% of revenues in 2002, 11.4% of revenues in 2003, and 12.3% of revenues in 2004, and an average of 11.4% of our revenues for the last three years. We have three major contracts with USAID. Our largest contract with USAID began in September 2003 and extends through September 2008 and is a cost-plus-award-fee contract to perform demographic and health surveys in developing countries. We perform our second major contract with USAID as a subcontractor. This contract began in September 2003 and extends through September 2008 and is a cost-plus-fixed-fee contract to evaluate the effectiveness of public health interventions in developing countries. Our evaluations are used by the government of the developing country, USAID and other organizations to assist in resource allocation decisions. The third major contract with USAID began in September 2004 and extends through September 2009 and is a time-and-materials contract under which we provide technical assistance to non-governmental charitable organizations in the area of children’s health programs. In addition, revenues generated by our teleservices business segment were primarily from two key clients.

During the year ended December 31, 2004, approximately 55.6% of our revenues were attributable to contracts with various departments and agencies of the U.S. federal government. The funding of government programs depends on Congressional appropriations. Congress generally appropriates funds on a fiscal year basis, even though a program may be designed to continue for many years. Consequently, programs are often only partially funded initially and additional funds are committed only as Congress makes further appropriations.

Government contracts are subject to oversight audits by government representatives. Provisions in these contracts permit termination, in whole or in part, without prior notice, at the government’s convenience. Compensation in the event of a termination for convenience is limited to work completed at the time of termination. In the event of a termination, the contractor will receive an allowance for profit on the work performed. In general, all of our clients, including the U.S. federal government, have the right to terminate their contracts with us at any time. In addition to this general right to terminate, all contracts with the U.S. federal government contain provisions, and/or are subject to laws and regulations, that give the government rights and remedies not typically found in our commercial contracts, including rights that allow the government to:


	•	claim rights in and ownership of products and systems that we produce;

	•	adjust contract costs and fees on the basis of audits completed by its agencies;

	•	suspend or debar us from doing business with the U.S. federal government; and

	•	release information obtained from us in response to a Freedom of Information Act request.

Our U.S. federal government contracts include fixed-price contracts, time-and-materials contracts and cost-reimbursement contracts, including cost-plus-fixed-fee, cost-plus-award-fee and cost-plus-incentive-fee.


	•	Fixed-price Contracts. This type of contract provides for a firm pricing arrangement established by the parties at the time of contracting. These contracts are not subject to adjustment by reason of costs incurred in the performance of the contract. With this type of contract, we assume the risk that we will be able to perform at a cost below the fixed-price, except for costs incurred because of contract changes ordered by the client.

	•	Time-and-Materials Contracts. This type of contract provides for the provision of supplies or services on the basis of (1) direct labor hours at specified hourly rates that include direct and indirect costs, such as wages, overhead, general and administrative expenses, and profit, and (2) materials at cost. With these contracts, we assume the risk that we will be able to perform at the negotiated hourly rates.

	•	Cost-reimbursement Contracts. This type of contract calls for payment to the contractor of allowable incurred costs to the extent provided in the contract. There are three variations of this type of contract:


	•	Cost-plus-fixed-fee contracts provide for payment to us of a negotiated fee that is fixed at the inception of the contract. This fixed fee does not vary with actual cost of the contract, but may be adjusted as a result of changes in the work to be performed under the contract. This contract poses less risk than a fixed price contract, but our ability to win future contracts from the procuring agency may be adversely affected if we fail to perform within the maximum cost set forth in the contract.

	•	Cost-plus-award-fee contracts provide for a fee consisting of a base amount (which may be zero) fixed at inception of the contract and an award amount, based upon the government’s satisfaction with our performance under the contract. With this type of contract, we assume the risk that we may not be awarded the award fee, or that we may be awarded only a portion of it, if we do not perform satisfactorily.


	•	Cost-plus-incentive-fee contracts provide for an initially negotiated fee to be adjusted later by a formula based on the relationship of total allowable costs to total target costs. As is the case with all cost-reimbursement contracts, we assume the risk that, if our costs are not allowable under the terms of the contract or applicable regulations, we may not be able to recover the costs.

We are subject to various statutes and regulations governing government contracts. These statutes and regulations carry substantial penalty provisions, including suspension or debarment from government contracting or subcontracting for a period of time, if we are found to have violated any of these regulations. Among the causes for debarment are violations of various statutes, including those related to the following:


	•	procurement integrity;

	•	export control;

	•	government security regulations;

	•	employment practices;

	•	protection of the environment;

	•	accuracy of records; and

	•	recording of costs.

We carefully monitor all of our contracts and contractual efforts to minimize the possibility of any violation of these regulations.

As a government contractor, we are subject at any time to government audits, inquiries and investigations. We generally are subject to audits for up to three years following the final payment under our U.S. federal government contracts. We have experienced minimal audit adjustments over the past ten years. The most recent cost-rate audit, performed by HHS, was through the year ended December 31, 2002, and there were no audit adjustments.

We believe that the social research markets in which we participate will continue to be important to the government in future years. We cannot assure you, however, that federal appropriations will continue to exist at their current levels or that our services will be utilized in the future.

For business to business market research, we believe that we compete for clients based on a variety of factors, including the following:


	•	name recognition;

	•	reputation;

	•	expertise in a variety of industries;

	•	ability to access executives and other key constituencies;

	•	ability to collect accurate and representative data;

	•	ability to enhance the value of the data collected through analysis and consulting;

	•	technological competence;

	•	reliability;

	•	promptness; and

	•	efficiency.

In our experience, our typical clients are interested in the quality and utility of the service received, as well as price.

For consumer market research services, we regularly experience significant competition from a large number of competitors, including marketing and research departments of various companies, advertising agencies and business consulting firms. Price, reputation, and quality of service are the dominant considerations.

For social research services, we compete with a large number of firms that vary in size as well as with not-for-profit organizations. The competition varies depending upon the agency for which the work is being conducted and the services to be provided. Technical competence is the key differentiator.

For outbound telemarketing services, we compete with a large number of telemarketing companies. Quality and reliability of service are the key differentiators.

Many other firms provide some of the services that we provide. While bidding on a project we may find ourselves at a competitive disadvantage. In some circumstances, a competitor has an advantage over us because:


	•	the competitor has a lower cost structure or profit objective which enables it to offer lower prices;

	•	the competitor is larger and better known than we are and therefore may be perceived as being able to offer more services and handle larger contracts;

	•	the competitor has a larger sales force that may result in more aggressive selling of services;

	•	the competitor has product offerings that may be more attractive to some clients; and

	•	the competitor has what is perceived as superior technology, methodologies or proprietary approaches that may enable it to provide services that we cannot.

Any one or more of these advantages may influence the decision of one of our clients or potential clients to obtain services from a competitor rather than from us.

Information regarding financial data by operating and geographic segments, including revenues from external customers, is set forth under “Selected Financial Data — Segments” in this prospectus.

We define backlog as the total contract value of our engagements that our management believes to be firm less previously recognized revenues. Our backlog includes the amounts of our commercial contracts, the funded and unfunded amounts of our government contracts, and options to renew or extend

The amount of our total backlog and funded backlog may vary as a result of the execution of new contracts or the extension of existing contracts, exercise of options, reductions from contracts that end or are completed, reductions from the early termination of contracts and adjustments to estimates of previously included contracts. The amount of our funded backlog is also affected by the funding of the U.S. federal government.

All of the 2004 backlog in the market research business is expected to be recognized as revenues by December 31, 2005. Revenues from social research backlog are expected to be recognized over the next five years. Our engagements generally are terminable by the client at any time, with the expectation of cost recovery for work completed by us.

At December 31, 2004, we employed a total of approximately 1,538 full-time employees and 438 full-time equivalent part-time hourly employees. The part-time employees work as telephone and field interviewers and data processors. At December 31, 2004, of the full-time employees, approximately 981 were professionals engaged in direct client service, 300 were telemarketing representatives, and 257 were engaged in support, administration and executive oversight.

None of our employees are subject to a collective bargaining agreement, nor have we experienced any work stoppages. We believe that our relationship with our employees is good.

Our executive offices are located in leased space in Princeton, New Jersey. We lease additional facilities throughout the world. The following table sets forth information relating to these properties:

Our U.S. telephone interviewing facilities serve both our U.S. market research and our social research operating units.

We presently have a combined total of 708 computer assisted telephone interviewing stations worldwide dedicated to market research and an additional 345 telemarketing stations. All of these facilities are equipped with state-of-the-art hardware and software.

We believe that our properties are sufficient for our current operational needs.

On December 2, 2004, several persons who purport to be stockholders of our company filed a derivative complaint against us and our directors in the Chancery Court of the State of Delaware. The plaintiffs allege, among other things, that this offering is unfairly dilutive to their holdings of our common stock and that the purchase price we intend to pay for the LLR Interests constitutes a waste of corporate assets. The complaint further alleges that, in approving the offering and the repurchase of the LLR Interests, our directors did not act on our behalf or on behalf of our stockholders but, rather, breached their fiduciary duties of good faith and loyalty to us and our stockholders. Finally, the complaint alleges that Janney materially overvalued the LLR Interests in its opinion to our board of directors that our repurchase of the LLR Interests is fair, from a financial point of view, to our stockholders other than the LLR Partnerships. The plaintiffs seek the following:


	•	a declaration that our directors have violated their fiduciary duties;

	•	to enjoin this offering and the proposed repurchase of the LLR Interests or, if these transactions are completed, to rescind the transactions, compel the payment of unspecified damages or compel the issuance of new shares to plaintiffs to compensate for their dilution;

	•	an accounting from the defendants, jointly and severally, to us, the plaintiffs and our other stockholders for all monetary damages suffered by us by reason of the alleged misconduct;

	•	the award of costs and disbursements of their action, including reasonable attorneys’ and experts’ fees; and

	•	such other and further relief as the court may determine is just and proper.

We believe this suit is without merit and intend to vigorously defend against it. We have moved to dismiss the plaintiffs’ complaint.

Except for the foregoing lawsuit, we are not a party to any litigation that we believe could have a material adverse effect on us.

We were established in 1938 to apply the principles of general public opinion polling to marketing issues facing America’s largest companies. We completed our initial public offering in October 1993. Between 1993 and 1997, as part of our strategy to expand internationally, we established our presence in the United Kingdom, Asia and Mexico through various acquisitions. In January 1998, we acquired ORC Protel, a telemarketing company based in Lansing, Illinois. In May 1999, we acquired ORC Macro, a research, consulting and technology company based in the Washington, D.C. area. The acquisition of ORC Macro substantially increased our presence in the public sector. In August 2000, we acquired C/J Research, Inc., and in October 2000, we acquired Social and Health Services, Ltd. The two acquisitions in 2000 allowed us to expand our service offerings into the areas of consumer research and communications services and to further expand in the area of information management.

Our directors and executive officers, their ages and their positions with us, are as follows:

Our by-laws provide for the board of directors to be divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors will be elected each year. The terms of Messrs. Short, Greyser and Geiger continue until 2005, the terms of Messrs. Quirk and LeBlanc run until 2006 and the terms of Messrs. Florio and Ladin continue until 2007. Messrs. Lehr and Gavin were elected by the holders of our Series B Preferred Stock pursuant to the terms of the Series B Preferred Stock. Messrs. Gavin and Lehr have agreed to resign from our board of directors upon our repurchase of the LLR Interests.

Below is a short summary of the business experience of each of our directors and executive officers:

Mr. Short has served as our Chief Executive Officer and Chairman of our board of directors since 1999. Mr. Short joined our company and was appointed as our Chief Financial Officer in 1989. He was elected to the board of directors in 1991. Mr. Short was later appointed Vice Chairman in 1992 and President in 1998. Prior to joining our company, Mr. Short served as the Chief Financial Officer of Hay Systems, Inc., a management consulting company and a wholly owned subsidiary of the Hay Group.

Mr. Quirk has served as our President since November 2003 and was elected to our board of directors in June 2000. Mr. Quirk joined our company in 1999 with the acquisition of ORC Macro, where he served, and continues to serve, as the Chief Executive Officer since 1980. Under his direction ORC Macro has grown from $3 million in annual revenues to over $128 million in 2004. Mr. Quirk received an M.B.A. from Cornell University.

Mr. Cox has served as our Executive Vice President and Chief Financial Officer since October 1998 and as our Secretary since 1999. Prior to joining us, Mr. Cox spent ten years as Senior Vice President and Chief Financial Officer of Elf Atochem North America, Inc., a specialty chemical company. Mr. Cox serves on the board of directors of Daou Systems, Inc., a publicly traded information technology consulting company. Mr. Cox holds an M.B.A. from the Wharton School of the University of Pennsylvania.

Mr. Cornelius has served as Managing Director of O.R.C. International Ltd. since 2003. Mr. Cornelius joined us in 1993 when we acquired Gordon Simmons Research Group Limited, a U.K. research company. Mr. Cornelius was appointed Managing Director of Gordon Simmons Research in 1996, Deputy Managing Director of our combined U.K. operations in 1998, and Managing Director of O.R.C. International Ltd. in 2003.

Mr. Croke has served as our Executive Vice President since 1998 and as our Treasurer since 1999. Mr. Croke joined us in 1991 as Controller, and he has since served in various capacities in our finance department. Mr. Croke served as our Director of Finance from 1995 until his appointment as Executive Vice President in 1998. Mr. Croke holds an M.B.A. from Case Western Reserve University.

Dr. Holden has served as the President of ORC Macro since 2003. He joined us in 1999 with our acquisition of ORC Macro, in which he then held the position of Technical Director. In 2002, Dr. Holden was appointed Senior Vice President and Managing Director of our Applied Research Division. Dr. Holden holds a Ph.D. in Clinical/ Community Psychology from the University of South Carolina.

Ms. Wolf has served as the Chief Executive Officer of ORC ProTel since 1998. She joined us in 1998 with our acquisition of ORC ProTel, which she co-founded in 1988. Ms. Wolf has over 30 years of experience in telemarketing.

Mr. Florio was elected to our board of directors in July 1999. Mr. Florio is an attorney and co-founder of the Princeton Public Affairs Group, a firm specializing in public relations, public affairs, and government relations. Immediately prior to co-founding the Princeton Public Affairs Group in 1987, Mr. Florio was responsible for managing Philip Morris’ state and local government affairs program throughout all 50 states. Before joining Philip Morris, Mr. Florio served as federal public affairs representative with the National Association of Manufacturers and as an administrative assistant to a member of the New Jersey General Assembly. Mr. Florio received a law degree from Seton Hall Law School.

Mr. Gavin was elected to our board of directors by the holders of our Series B Preferred Stock in October 2000 pursuant to the terms of the Opinion Research Corporation Designation of Series B Preferred Stock. Until February 2004, Mr. Gavin was President and Chief Operating Officer of Right Management Consultants, Inc. Right Management Consultants, Inc. is the world’s largest career management and outplacement firm with revenues in excess of $450 million. Mr. Gavin joined Right Management Consultants, Inc. in 1996 as Executive Vice President. Prior to joining Right Management Consultants, Inc., Mr. Gavin was a Partner with Andersen Worldwide. Mr. Gavin joined Andersen Worldwide in 1978 and was made Partner in 1990. Mr. Gavin serves on the boards of directors of Catholic Health East and Interline Brands, Inc., a publicly traded direct marketing and specialty distribution company, and is on the Advisory Board of Temple University’s School of Business. Mr. Gavin is a certified public accountant.

Mr. Geiger was elected to our board of directors in December 2003. Mr. Geiger is a Managing Director with the Hermes Group, a private merchant banking firm. Prior to joining the Hermes Group Mr. Geiger was Executive Vice President and Chief Financial Officer of Claneil Enterprises, Inc., a privately owned, diversified holding company investing in both publicly and privately held corporations, from November 1997 to March 2004. Prior to joining Claneil, he was Vice President Finance and Chief Financial Officer for The Liposome Company, Inc., a Princeton, New Jersey based biopharmaceutical company. Prior to joining Liposome in 1995, Mr. Geiger spent 24 years with Johnson & Johnson, serving as Chief Financial Officer for various Johnson & Johnson companies. Mr. Geiger currently serves on the board of directors of Immunicon Corporation, a publicly traded medical diagnostics company, and is also a member of the board of advisors of FEI Corporation, a women’s healthcare company. Mr. Geiger received an M.B.A. from Seton Hall University and is a certified management accountant.

Professor Greyser has been a member of our board of directors since 1993. Professor Greyser is the Richard P. Chapman Professor (Marketing/Communications) Emeritus at Harvard Business School, where he has been on the faculty for over 35 years. Professor Greyser was associated with the Harvard

Mr. Ladin was elected to our board of directors in December 2003. Mr. Ladin retired in 2004 as Chairman, President and Chief Executive Officer of Clinical Analysis Corporation, or CAC, a medical diagnostic products development company. Prior to joining CAC in 2002, Mr. Ladin was Vice President and Chief Financial of Sybron Chemicals, Inc., a specialty chemical company, for three years. Prior to joining Sybron Chemicals in 1998, Mr. Ladin was Controller of Dupont Merck Pharmaceuticals Company since its inception in 1990. Mr. Ladin joined DuPont Merck Pharmaceuticals after 14 years with DuPont in various financial positions. Mr. Ladin has public accounting experience with Arthur Andersen & Co. and serves on the Board of Trustees of Delaware Hospice, Inc. Mr. Ladin is a certified public accountant.

Mr. LeBlanc was elected to our board of directors in December 2003. Mr. LeBlanc retired in March 2003 as President and Chief Executive Officer of Handy & Harman, a diversified industrial manufacturer, and as Executive Vice President and a Director of Handy & Harman’s parent company, WHX Corporation. Prior to joining Handy & Harman in 1996, Mr. LeBlanc spent 12 years with Elf Atochem North America, Inc., a specialty chemicals company, where he was an Executive Vice President. Mr. LeBlanc currently serves on the board of directors of Church & Dwight Co., Inc., a publicly traded consumer goods manufacturing company.

Mr. Lehr was elected to our board of directors by the holders of our Series B Preferred Stock in October 2000 pursuant to the terms of the Opinion Research Corporation Designation of Series B Preferred Stock. Mr. Lehr is a founding partner of LLR Equity Partners, L.P., a $620 million private equity fund founded in 1999. Prior to forming LLR, Mr. Lehr was a Managing Director and group head of the investment banking division of Legg Mason Wood Walker from 1992 to 1999. Mr. Lehr currently serves on the board of directors of ICT Group, Inc., a publicly traded telemarketing company. Mr. Lehr is involved in a number of charitable activities and has served on various community boards. Mr. Lehr received his M.B.A. from the Wharton School of the University of Pennsylvania.

For 2004, each director who was not one of our employees, which we sometimes refer to in this prospectus as an outside director, was entitled to receive $15,000 per year. In addition, each outside director was paid $5,000 for chairing a committee, $1,500 for each board meeting attended, and $1,250 for each committee meeting attended. All directors were entitled to be reimbursed for incidental travel expenses incurred in attending board and committee meetings.

Pursuant to our 1997 Stock Incentive Plan, we automatically grant to each outside director the “formula number” of shares of common stock during each year. The exercise price for these options is equal to the fair market value of the underlying shares on the date of grant. The options are non-qualified stock options.

The outside directors’ options become exercisable on the first anniversary of the date of grant, provided the outside director is a member of the board of directors on that date. The “formula number” of the stock option grants for 2004 was 5,000 for each director. In addition, during each year each director who chairs a committee is granted options to purchase an additional 5,000 shares of common stock.

Our business is managed under the direction of our board of directors, which meets regularly during the year to review significant developments affecting our business and act on matters requiring the board of

The board of directors has established the six standing committees set forth below:


	•	an Executive Committee;

	•	an Audit Committee;

	•	a Compensation Committee;

	•	a Stock Option Committee (Executive Officers);

	•	a Stock Option Committee (Non-Executive Officers); and

	•	a Nominating Committee.

The Audit Committee, Compensation Committee and Nominating Committee have the responsibilities set forth in written charters adopted by the board of directors. We make available copies of each of these charters on our website, which is located at www.opinionresearch.com. We do not include the information contained in our website as part of, or incorporate such information in, this prospectus.

The Executive Committee was established to perform such duties as the board of directors may from time to time direct and, with certain limitations, to exercise the authority of the full board of directors. Mr. Short (Chairman) and Professor Greyser serve as members of the Executive Committee. The Executive Committee did not meet during 2004.

The Audit Committee’s purposes are to provide independent review and oversight of our financial reporting processes and financial statements, the system of internal controls, the audit process and results of operations and our financial condition. In doing so, the Audit Committee is responsible for providing an open avenue of communication between the board of directors, management and the independent auditors. In connection with its responsibilities, the Audit Committee is directly and solely responsible for the appointment, compensation, retention, termination, and oversight of the independent auditors. Messrs. Ladin (Chairman), Gavin and Geiger, all of whom have been determined to be independent by our board of directors under applicable Nasdaq National Market listing standards and SEC rules, serve as members of the Audit Committee. We expect that an existing independent member of our board of directors who is qualified to serve on the Audit Committee will replace Mr. Gavin after he resigns following our anticipated repurchase of the LLR Interests. The board of directors has determined that Mr. Ladin qualifies as an “audit committee financial expert,” as defined in SEC rules. In addition, each of the other members of the Audit Committee may also qualify as an audit committee financial expert. The Audit Committee met eight times during 2004.

The Audit Committee Charter provides that the Audit Committee must pre-approve all audit and non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services, and other services. The Audit Committee has delegated pre-approval authority to the Chairman, and the Chairman must report any pre-approval decisions to the Audit Committee at its next meeting.

The Compensation Committee is responsible for establishing salaries, bonuses and other compensation for our executive officers. Professor Greyser (Chairman) and Messrs. Florio and LeBlanc serve as members of the Compensation Committee. The Compensation Committee met one time during 2004. The board of directors has determined that all members of the Compensation Committee are independent under applicable Nasdaq National Market listing standards.

The Stock Option Committee (Executive Officers) and the Stock Option Committee (Non-Executive Officers) together serve as the Committee described in the 1997 Stock Incentive Plan (the “Plan”). The Stock Option Committee (Executive Officers) administers the Plan solely with respect to persons who are directors or principal officers as defined in the Plan, and the Stock Option Committee (Non-Executive Officers) administers the Plan solely with respect to other persons. Professor Greyser (Chairman) and Messrs. Florio and LeBlanc serve as members of the Stock Option Committee (Executive Officers). Mr. Short serves as the Stock Option Committee (Non-Executive Officers).

The Nominating Committee was established to consider and make recommendations to the board of directors regarding board qualifications, structure and membership. Professor Greyser (Chairman) and Messrs. Florio and LeBlanc serve as members of the Nominating Committee. The Nominating Committee did not meet during 2004. The board of directors has determined that all of the members of the Nominating Committee are independent under applicable Nasdaq National Market listing standards.

We intend to seek the assistance of FBR with respect to the identification of appropriate candidates for consideration by the Nominating Committee to fill a vacancy on our board of directors.

The following table sets forth, for our last three fiscal years, the cash compensation paid by us, as well as certain other compensation paid as accrued for those years, to the following named executive officers.


(1)	Amounts in this column represent the dollar value of the difference between the price paid by the named executive officer for shares of our common stock purchased under the Opinion Research Corporation Stock Purchase Plan for Non-Employee Directors and Designated Employees and Consultants (the “Non-Qualified Plan”) and the fair market value of such shares on the date of


	purchase. The Non-Qualified Plan provides for purchases of the Common Stock at the same percentage discount as is offered to all qualified employees under the Opinion Research Corporation Employee Stock Purchase Plan.

(2)	Amounts in this column consist of contributions by us under various profit sharing and retirement plans for each named executive officer.

(3)	Includes payments by us on behalf of Mr. Short of $4,313 to cover the premiums payable on a supplemental disability policy and a matching payment under our Defined Contribution Plan of $5,764 in 2002, and $5,125 in 2003 and 2004.

(4)	We have an agreement with a trust established for the benefit of the children of Mr. Short whereby we pay certain premiums on life insurance policies on Mr. Short, to which the trust is the beneficiary. We paid premiums on behalf of Mr. Short of $46,143 in 2002. Mr. Short received taxable income of $46,143 in 2003 and 2004 in order to maintain the policy. We are entitled to the repayment of the premiums paid by us on these insurance policies upon maturity.

(5)	Dr. Fink resigned from his position with us effective November 30, 2004.

(6)	Amount consists of $284,381 accrued base compensation payable in 2005 and a 401(k) plan matching contribution applicable to 2004.

The following table contains information concerning the grant of stock options to the named executive officers during 2004. We do not have any plans pursuant to which stock appreciation rights, or SARs, may be granted.


*	All options have an exercise price equal to or greater than the market price of the common stock on the date of grant.

(1)	The options become exercisable in three equal annual installments beginning on March 23, 2005.

(2)	Illustrates value that might be realized upon exercise of options immediately prior to the expiration of their term, assuming specified compounded rates of appreciation on the common stock over the term of the options. Assumed rates of appreciation are not necessarily indicative of future stock performance.

(3)	Dr. Fink resigned from his position with us effective November 30, 2004.

The following table sets forth information related to options exercised during 2004 by the Named Executive Officers and the number and value of options held at December 31, 2004 by such individuals. We do not have any plan pursuant to which SARs may be granted.


(1)	The closing price of our common stock on the NASDAQ National Market on December 31, 2004 was $6.69.

(2)	Dr. Fink resigned from his position with us effective November 30, 2004.

Mr. Short has an employment agreement with us providing for an annual salary that is subject to annual increases during the term of the agreement, as determined by the Compensation Committee of our board of directors. In addition, Mr. Short is eligible to receive incentive compensation as determined by the Compensation Committee of the board of directors. The agreement provides that in the event Mr. Short’s employment is terminated by us without cause or Mr. Short terminates the employment for “cause” (as defined in the employment agreement), in addition to his compensation through the date of such termination, he is to receive an immediate cash payment equal to two times his annual base compensation, unless such termination occurs within 24 months after a change in control (as defined in the employment agreement), in which case Mr. Short shall receive an immediate cash payment equal to two and one-half times his annual base compensation.

Messrs. Quirk and Cox and Ms. Wolf have employment agreements with us providing for annual salaries that are subject to annual increases during the term of the agreement, as determined by our Chief Executive Officer and approved by the Compensation Committee of the board of directors. In addition, they are eligible to receive incentive compensation in accordance with short-term and/or long-term incentive compensation programs established by us from time to time. The employment agreements of each of Messrs. Quirk and Cox further provide that if we terminate such executive officer’s employment without cause, he will be entitled to continue to receive his base compensation and medical and life insurance benefits until 11 months after the effective date of such termination.

The following table sets forth the number of shares of common stock and Series B Preferred Stock, and the percentage of such classes, beneficially owned at March 24, 2005, by:


	•	each of the executive officers named in the summary compensation table in the section entitled “Management” in this prospectus;

	•	each director of our company;

	•	all executive officers and directors of our company as a group (15 persons); and

	•	all persons known by us to be the beneficial owner of more than 5% of our outstanding voting stock.

The address of all directors and executive officers in this table is c/o Opinion Research Corporation, 600 College Road East, Suite 4100, Princeton, New Jersey 08540. Each of the persons named in the table below as beneficially owning the shares set forth therein has sole voting power and sole investment power with respect to such shares, unless otherwise indicated.


	(1)	Includes options exercisable within 60 days of March 24, 2005 for each of the named executive officers and directors as follows: Mr. Short — 165,001; Mr. Cox — 71,800; Mr. Quirk — 6,667; Dr. Holden — 4,333; Ms. Wolf — 1,000; Professor Greyser — 90,000; Mr. Florio — 30,000; Mr. Geiger — 5,000; Mr. Gavin — 20,000; Mr. Ladin — 10,000; Mr. LeBlanc — 5,000.

	(2)	Does not include 49,896 shares of common stock held in trusts for the benefit of the children of Mr. Short. Mr. Short disclaims beneficial ownership of these shares.

	(3)	Includes 157,500 shares of common stock held by Mr. Short as co-trustee of our Retirement Plan, over which Mr. Short has sole voting power.

	(4)	Includes (a) 1,107,665 shares of common stock, 672,274 shares of common stock underlying an exercisable warrant and 9 shares of Series B Preferred Stock held by LLR Equity Partners, L.P., and (b) 108,393 shares of common stock, 68,226 shares of common stock underlying an exercisable warrant and 1 share of Series B Preferred Stock held by LLR Equity Partners Parallel, L.P. Mr. Lehr is a managing member of LLR Capital, L.L.C. which is the general partner of LLR Capital, L.P. which, in turn, is the general partner of both LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. Mr. Lehr disclaims beneficial ownership of the foregoing shares. Also includes 20,000 shares of common stock subject to options exercisable within 60 days of March 24, 2005 held by Mr. Lehr for the benefit of LLR Equity Partners, L.P. Also includes 2,638 shares purchased by Mr. Lehr through our Stock Purchase Plan for Non-employee Directors and Designated Employees and Consultants. As indicated under “Use of Proceeds” and “Certain Relationships and Related Party Transactions” in this prospectus, we intend to repurchase all of the shares of the Series B Preferred Stock and a substantial number of the shares of common stock held by the LLR Partnerships.

	(5)	The 98,000 shares of common stock beneficially owned by our executive officers and held pursuant to our Retirement Plan are included only once in the total.

	(6)	Includes two executive officers who are not named executive officers.

	(7)	Based on a Schedule 13D filed with the SEC, the above holdings include 1,107,665 shares of common stock and 672,274 shares of common stock underlying an exercisable warrant held by LLR Equity Partners, L.P. Also includes 20,000 shares of common stock subject to options exercisable within 60 days of March 24, 2005 held by Mr. Lehr for the benefit of LLR Equity Partners, L.P.


		LLR Equity Partners, L.P. is under common control with LLR Equity Partners Parallel, L.P.; see footnote 4 above. As indicated under “Use of Proceeds” and “Certain Relationships and Related Party Transactions” in this prospectus, we intend to repurchase all of the shares of the Series B Preferred Stock and a substantial number of the shares of common stock held by the LLR Partnerships.

	(8)	Includes 108,393 shares of common stock and 68,226 shares of common stock underlying an exercisable warrant. LLR Equity Partners Parallel, L.P. is under common control with LLR Equity Partners, L.P.; see footnote 4 above. As indicated under “Use of Proceeds” and “Certain Relationships and Related Party Transactions” in this prospectus, we intend to repurchase all of the shares of the Series B Preferred Stock and a substantial number of the shares of common stock held by the LLR Partnerships.

	(9)	Based solely on filings with the SEC on Schedule 13G.


(10)	Based solely on a filing with the SEC on Schedule 13D.

(11)	Includes 276,785 shares of common stock underlying exercisable warrants held by Allied Capital Corporation and 160,244 shares of common stock underlying exercisable warrants held by Allied Investment Corporation.

Over several years, we made loans to certain of our executive officers bearing an interest rate of 9.5%. Our current corporate policy prohibits the making of loans to all officers and directors. Mr. Short, our Chairman and Chief Executive Officer, has an outstanding loan with us, which has been grandfathered. Including accrued interest, the aggregate amount of indebtedness due from Mr. Short outstanding at March 24, 2005 was $155,539. Since January 1, 2004, the largest amount outstanding under Mr. Short’s loan was $155,539.

The Faculty Group, Inc., which is a consulting group owned by, among others, Harvard University faculty members, and of which Professor Greyser, one of our directors, is a principal, received $50,000 from us in consulting fees during 2004.

Pursuant to a Purchase Agreement between us and the LLR Partnerships (the “Purchase Agreement”), we have agreed to repurchase the LLR Interests (the “Transaction”). See “Use of Proceeds” in this prospectus. Subject to limitations set forth in the Purchase Agreement, we have also agreed to indemnify the LLR Partnerships in connection with the transactions contemplated by the Purchase Agreement and this offering as it relates to the Purchase Agreement. The Purchase Agreement, unless otherwise extended by the parties, expires on May 13, 2005, after which, if closing under the Purchase Agreement does not occur, the parties will have no obligations to complete the purchase of the LLR Interests under the Purchase Agreement. An earlier agreement with the LLR Partnership (the “Expired Agreement”), on substantially the same terms as the current agreement, expired on January 31, 2005. In the Purchase Agreement, we agreed to reimburse the LLR Partnerships for their legal fees and costs in connection with this transaction in an amount not to exceed $50,000, an increase of $15,000 from the Expired Agreement intended to cover the incremental costs associated with the Purchase Agreement. Also in the Purchase Agreement, we agreed to accelerate the vesting of options to acquire 5,000 shares of Common Stock granted in 2005 to each of Messrs. Lehr and Gavin for their service on our board of directors and exclude them from the LLR Interests being repurchased, all consistent with the treatment of Messrs. Lehr and Gavin’s options in the Expired Agreement. The closing of the transactions contemplated by the Purchase Agreement is contingent upon the closing of this offering or another offering of our equity securities. The LLR Partnerships have agreed in the Purchase Agreement not to exercise their anti-dilution warrants as long as the Purchase Agreement is effective. In addition, at the closing under the Purchase Agreement, the directors appointed by the LLR Partnerships to our board of directors, Seth J. Lehr and John J. Gavin, will submit to us their resignations as members of our board of directors.

We decided to offer to repurchase the LLR Interests because we believe that the capital structure that resulted from the original transactions with the LLR Partnerships under our agreements with the LLR Partnerships in September 2000 is an impediment to a successful public offering, unless the proceeds from such public offering are used to repurchase the LLR Interests, and that the complicated financial structure of the LLR Interests negatively affects investor interest in our common stock. We considered, but ultimately rejected, the possibility of raising capital through a private placement of our common stock and using the proceeds to repurchase the LLR Interests before initiating a public offering.

Our board of directors appointed two independent, disinterested directors, Messrs. Ladin and Geiger, to negotiate the repurchase of the LLR Interests. Throughout the process, the negotiating team appointed by the board of directors kept the full board of directors apprised of the progress in the negotiations.

During the negotiations, we took the position that any agreement with the LLR Partnerships would be conditioned upon obtaining a favorable fairness opinion from an independent investment banker satisfactory to our board of directors. At the board of directors meeting held on August 25, 2004, the board of directors considered alternatives for the engagement of an investment banker to provide a fairness opinion in connection with the proposed transaction with the LLR Partnerships. After discussion, the board of directors approved the retention of Janney Montgomery Scott LLC (“Janney”) to evaluate the proposed transaction with the LLR Partnerships and to provide, if warranted, a fairness opinion. A fairness opinion was delivered by Janney to the board of directors on October 3, 2004 and discussed at the board of directors meeting on October 5, 2004, at which time the repurchase of the LLR Interests was approved in principle by the board. At a board of directors meeting held on March 23, 2005, the board of directors approved the terms of the Purchase Agreement and discussed the benefits against the costs of obtaining an updated fairness opinion. The board of directors determined after analysis and discussion that (1) there has not been a material change in the terms of the proposed transaction with LLR, (2) our financial condition had improved and the market price of our Common Stock as traded on the NASDAQ had increased since the date of the fairness opinion obtained in connection with this transaction, and (3) based on discussions with its underwriters, the market conditions were such that any further delay in this offering would not be in our best interest. Therefore, the board of directors concluded that obtaining an updated fairness opinion under these circumstances was not warranted. Prior to reaching such conclusion and approving the terms of the Purchase Agreement, the board of directors conferred with Janney, which reaffirmed its consent to the inclusion of the fairness opinion as an exhibit to the Registration Statement of which this prospectus is a part. As a result of advice obtained from our underwriters, at a board of directors meeting held on April 22, 2005, the board determined to lower the amount raised in this offering to $30.0 million from the $45.0 million previously contemplated. In anticipation of that change, and because of the potential impact the lower offering amount, and the passage of time, could have on the fairness opinion, we asked Janney to update its September 30, 2004 opinion. Prior to the board of directors meeting held on April 22, 2005, Janney distributed to the board of directors drafts of an updated fairness opinion and related analysis. At the meeting of the board of directors, Janney affirmed that, taking into account the lower offering amount, the terms of the Purchase Agreement and the effects of the passage of time since the date of the original fairness opinion, in Janney’s opinion, the Aggregate Consideration (as defined below) was fair, from a financial point of view, to our stockholders, other than the LLR Partnerships. Messrs. Lehr and Gavin, the directors appointed by the LLR Partnerships as holders of our Class B Preferred Stock, did not participate in any of the board discussions and approvals relating to the transactions with the LLR Partnerships described herein.

We retained Janney to provide its opinion as to the fairness from a financial point of view of the consideration (“Aggregate Consideration”) to be offered to the LLR Partnerships by us for all of our securities owned by the LLR Partnerships, except for $2.0 million in common stock (the “Transaction”).

Janney delivered to our board of directors its written opinion that, as of April 22, 2005, the Aggregate Consideration offered to the LLR Partnerships by us is fair, from a financial point of view, to our stockholders, other than the LLR Partnerships. The full text of Janney’s opinions are attached as Exhibits 99.1 and 99.2 to the registration statement on Form S-1 filed with the Securities and Exchange Commission, of which this prospectus is a part. Janney’s opinion speaks only as of the date of the opinion. It does not address our underlying business decision to proceed with the Transaction or any other aspect of the Transaction and does not constitute a recommendation to any of our stockholders. Janney’s opinion notes that Janney was retained only by our company and, subject to applicable law, the engagement is not deemed to be on behalf of, and does not confer any rights upon, any of our stockholders or any other person. The availability of a defense based upon such limitation will be resolved by a court of competent jurisdiction. The resolution of the question of the availability of such a defense will have no effect on the rights and responsibilities of our board of directors under applicable state law, and the availability of such a state-law defense to Janney would have no effect on the rights and responsibilities of either Janney or our board of directors under the federal securities laws.

We encourage you to read the opinion in its entirety for a description of the analyses performed, assumptions made, matters considered and qualifications and limitations on the review undertaken by Janney in rendering its opinion. The description of the opinion set forth below is qualified in its entirety by reference to the opinion.



	•	reviewed the Purchase Agreement between us and the LLR Partnerships dated March 25, 2005 and the original documentation surrounding the securities owned by LLR Partnerships;



	•	reviewed our historical results of operations, including our annual reports on Form 10-K for the years ended December 31, 2001, 2002, 2003 and 2004 and certain other filings with the Securities and Exchange Commission made by us;


	•	reviewed other publicly available information concerning us and the trading market for our common stock;

	•	reviewed certain non-public information relating to us;

	•	conducted discussions with certain members of our management; and

	•	performed such other analyses, examinations and procedures, reviewed such other agreements and documents, and considered such other factors, as Janney deemed in its sole judgment, to be necessary, appropriate or relevant to render an opinion.

Janney assumed and relied upon, without independent verification, the accuracy and completeness of the financial and other information discussed with or reviewed by Janney in arriving at its opinion. With respect to non-public information provided to or discussed with Janney, Janney assumed, at our direction and without independent verification or investigation, that such information was reasonably prepared on a basis reflecting the best currently available information, estimates and judgments of our management. In arriving at its opinion, Janney did not conduct a physical inspection of our properties and facilities and did not make or obtain any evaluations or appraisals of our assets or liabilities (including, without limitation, any potential environmental liabilities) contingent or otherwise. Based on conversations with our management, Janney assumed that we are conducting an offering of shares of our common stock to the public and that a portion of the proceeds of the offering will be used to purchase the securities offered by LLR Partnerships. Janney also assumed that the Transaction will be consummated in accordance with the terms of the Purchase Agreement or changes to the Purchase Agreement as discussed with management and that all material governmental, regulatory or other consents and approvals necessary for the consummation of the Transaction will be obtained without any adverse effect to us or on the expected benefits of the Transaction.

In performing its analyses, Janney also made numerous assumptions with respect to industry performance, business, economic and market conditions and various other matters, many of which cannot be predicted and are beyond our control. The analyses performed by Janney are not necessarily indicative of

actual values or future results, which may be significantly more or less favorable than suggested by such analyses. Janney’s estimates of the values of companies did not purport to be appraisals or necessarily reflect the prices at which companies or their securities may actually be sold. Janney expressed no opinion as to the underlying valuation, future performance or long-term viability of our business. The opinion solely addresses the fairness from a financial point of view of the Aggregate Consideration to the holders of our common stock, other than the LLR Partnerships. The opinion does not address the relative merits of the Transaction as compared to other transactions or business strategies that might be available to us, nor does it address our underlying business decision to proceed with the Transaction or the public offering of our common stock. Although subsequent developments may affect its opinion, Janney does not have any obligation to update or revise the opinion. Accordingly, these analyses and estimates are inherently subject to substantial uncertainty. Janney prepared its analyses solely for purposes of rendering its opinion and provided such analyses to our board of directors on October 3, 2004 and provided updated analyses to our board of directors on April 22, 2005. In addition, the Janney opinion was among several factors taken into consideration by our board of directors in making its decision to approve the Transaction.

The following is a summary of the material analyses performed by Janney and presented to our board of directors on October 3, 2004 and April 22, 2005. The summary is not a complete description of all the analyses underlying Janney’s opinion. The preparation of a fairness opinion is a complex process involving subjective judgments as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, a fairness opinion is not readily susceptible to partial analysis or summary description. Janney believes that its analyses must be considered as a whole and that selecting portions of the factors and analyses considered without considering all factors and analyses, or attempting to ascribe relative weights to some or all such factors and analyses, could create an incomplete view of the evaluation process underlying its opinion.

Summary of Proposal. Janney reviewed the financial terms of the proposed Transaction. The LLR Partnerships will sell their positions (all the securities, rights and control provisions) in us, except for $2.0 million in common stock, in exchange for $18.0 million in cash.

The Janney opinion assumed that the number of shares the LLR Partnerships retain will be set by:


	•	dividing $2.0 million by the average closing price of our common stock for the 20 business days prior to the close of the Transaction, or

	•	using the price of the stock upon the close of a public offering if the proceeds of the offering are being used to execute the Transaction.

Sum of the Parts Valuation. Janney valued four separate components of the LLR Interests: the Series B Preferred Stock, common stock with anti-dilution warrants, warrants to purchase shares of the common stock with an anti-dilution provision, and the option to convert common stock to Series C stock.

Series B Preferred Stock. The maximum financial consideration for the Series B Preferred Stock is $100.00; Janney considered this amount immaterial to its financial analyses.

Common Stock. The LLR Partnerships own 1,176,458 shares which were purchased in the year 2000 as part of their original investment; in addition, the LLR Partnerships own 39,600 shares purchased in the open market.

Upon a share issuance below $8.50 per share, the LLR Partnerships are entitled to a warrant to purchase common shares at $0.01 per share. The number of shares subject to the warrant is derived from a formula based on new shares being issued and the price at which they are issued. Since the exercise price of the warrants is nominal, they were valued as equivalent to common stock.

We anticipate that the LLR Partnerships’ shares and the contingent warrant will be retired with a portion of the proceeds of this offering. Therefore, Janney valued the stock and the contingent warrant at the price per share at which we believe we can raise capital — a range of between $6.00 per share and $8.00 per share. The calculated value of common stock ranges from $8.34 million to $9.94 million, assuming an offering size of $30.0 million.

Warrants. Janney utilized the Black-Scholes Model to value the warrants the LLR Partnerships currently own using the same methodology and assumptions used in connection with our stock option valuation in our annual report on Form 10-K for the year ended December 31, 2003. The warrants also have anti-dilution features. Janney used the anti-dilution formulas associated with these warrants to adjust the number of warrants and the exercise price of the warrants. The calculated value of the warrants ranges from $1.86 million to $3.60 million, assuming an offering size of $30.0 million.

Cash Flow (from Series C conversion feature). On September 1, 2005, the LLR Partnerships may convert 1,176,458 shares of our common stock held by them into 588,229 shares of our Series C Preferred Stock. Each Series C preferred share is entitled to a dividend of $0.51 per quarter indefinitely, which dividend accrues if not paid in cash.

Janney valued this dividend at the value upon conversion, as if it were a perpetuity paid each quarter in cash with December 31, 2005 as the first payment, and then discounted the perpetuity back to April 22, 2005. The value of the cash flow from the dividend ranges from $7.15 million to $9.60 million.

Janney totaled the sum of the four components and arrived at a range of values between $17.36 million and $23.14 million, assuming an offering size of $30 million. Janney compared this range to the $18.0 million in cash plus the $2.0 million in common stock being offered to the LLR Partnerships by our stockholders in exchange for the securities currently owned by the LLR Partnerships. Janney also calculated the sum of the parts valuation assuming both a $20.0 million and a $40.0 million offering size. These analyses led to a range of values between $16.91 million and $22.93 million assuming an offering size of $20 million and between $17.73 million and $23.32 million assuming an offering size of $40.0 million.

There are other features of the LLR Partnerships’ securities that have value to stockholders and the LLR Partnerships. Janney believes these features enhance the value of the LLR Partnership’s securities in us; however, these other features cannot be precisely valued and were therefore not included in the sum of the parts analysis. These features include board seats, liquidation preferences and redemption rights.

Janney has acted as financial advisor to us in connection with the Transaction and will receive a fee for its services; the fee is not contingent upon the consummation of the transaction. We paid Janney $25,000 upon execution of the engagement letter, $125,000 at the time of delivering the September 30, 2004 written opinion, and an additional $50,000 for disclosing Janney’s name in this prospectus and for providing a written description of the analyses performed. In addition, we paid Janney $50,000 for delivering the April 22, 2005 updated opinion and analysis. We have agreed to indemnify Janney for certain liabilities arising out of rendering its opinion. In addition, in the ordinary course of Janney’s business as a broker-dealer, Janney may, from time to time, have a long or short position in, and buy or sell, our debt or equity securities for its own account or for the accounts of its customers.

We are authorized to issue up to 20,000,000 shares of common stock, $.01 par value per share, and 1,000,000 shares of preferred stock, $.01 par value per share. The following description summarizes information about our capital stock. You can obtain more information about our capital stock by reviewing our certificate of incorporation and by-laws, as well as the Delaware General Corporation Law.

The following summary description relating to our capital stock sets forth the material terms of the capital stock, but does not purport to be complete. A description of our capital stock is contained in our certificate of incorporation, as amended.

Holders of our common stock are entitled to one vote per share on all matters submitted to a vote of stockholders. Subject to any preferences that have been or may be granted to holders of our preferred stock, holders of the common stock are entitled to receive ratably any dividends that may be declared by

Our board of directors by resolution may issue up to 1,000,000 shares of preferred stock in one or more series and fix the number of shares constituting any series, the voting power (which may be multiple or fractional votes per share), designations, preferences and relative, participating, optional or other special rights and qualifications, limitations or restrictions thereof, including the dividend rates, terms of redemption (including sinking fund provisions), redemption price or prices, voting rights, conversion rights and liquidation preferences of the shares constituting any series, without any further vote or action by our stockholders. The issuance of preferred stock by our board of directors could adversely affect the rights of holders of our common stock to the extent that the preferred stock has preferences over our common stock with respect to dividends and in liquidation. The following series of preferred stock have been authorized:

On September 13, 1996, our board of directors adopted a Stockholder Rights Plan (the “Plan”), which provides for the distribution of one purchase right (a “Right”) for each share of our common stock outstanding as of October 3, 1996 (the “Record Date”). Each additional share of common stock issued prior to the Distribution Date (defined below) has a Right attached. Each Right entitles the registered holder, upon the occurrence of certain events described below, to purchase from us a unit consisting of one one-thousandth of a newly issued share (a “Unit”) of our Series A Junior Participating Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), at a purchase price of $25.00 per Unit (the “Purchase Price”), subject to adjustment. The description and terms of the Rights are set forth in a Rights Agreement (the “Rights Agreement”) between us and StockTrans, Inc. (the “Rights Agent”).

The Rights currently attach to all common stock certificates representing outstanding shares of common stock, and no separate Rights Certificates are distributed. The Rights will separate from the common stock and a “Distribution Date” will occur upon the earlier of:


	•	10 days following a public announcement that a person or group of affiliated or associated persons, other than an Exempted Person (as defined below) (an “Acquiring Person”) has acquired, or obtained the right to acquire, beneficial ownership of 20% or more of the outstanding shares of our common stock (the “Stock Acquisition Date”); or

	•	10 business days following the commencement of a tender offer or exchange offer that would result in a person or group beneficially owning 20% or more of the outstanding shares of our Common stock.


	•	the Rights will be evidenced by the common stock certificates and will be transferred with and only with the common stock certificates;

	•	new common stock certificates will contain a notation incorporating the Rights Agreement by reference; and

	•	the surrender for transfer of any certificates for common stock outstanding will also constitute the transfer of the Rights associated with the common stock represented by the certificate.

The Rights are not exercisable until the Distribution Date and will expire at the close of business on October 3, 2006 if they are not earlier redeemed by us, as described below. At no time will the Rights have any voting power.

As soon as practicable after the Distribution Date, Rights Certificates will be mailed to the holders of record of the common stock as of the close of business on the Distribution Date. Thereafter, the separate Rights Certificates alone will represent the Rights. Except as otherwise determined by our board of directors, only shares of common stock issued prior to the Distribution Date will be issued with the Rights.

In the event that an Acquiring Person, other than an Exempted Person (as defined below), becomes the beneficial owner of 20% or more of the then outstanding shares of common stock (unless the acquisition is made by a tender or exchange offer for all of our outstanding shares, at a price determined by a majority of our independent directors who are not representatives, nominees, affiliates or associates of an Acquiring Person to be fair and otherwise in the best interest of our company and our stockholders after receiving advice from one or more investment banking firms (a “Qualified Offer”)), each holder of a Right will thereafter have the right to receive, upon exercise, common stock (or, in certain circumstances, cash, property or other securities of our company), having a value equal to four times the Exercise Price of the Right. The Exercise Price is the Purchase Price times the number of shares of common stock associated with each Right (initially, one). Notwithstanding any of the foregoing, following the occurrence of any of the events set forth in this paragraph (which we refer to as the “Flip-In Events”), all Rights that are, or (under certain circumstances specified in the Rights Agreement) were, beneficially owned by any Acquiring Person will be null and void. However, Rights are not exercisable until such time as the Rights are no longer redeemable by us as set forth below.

Any person who, together with all of that person’s affiliates and associates, is the beneficial owner of common stock, options and/or warrants exercisable for shares of common stock representing 20% or more of the shares of common stock outstanding on September 13, 1996 (the “Rights Dividend Declaration Date”) will be an “Exempted Person.” In addition, each of LLR Equity Partners, L.P., a Delaware limited partnership, and LLR Equity Partners Parallel, L.P., a Delaware limited partnership, is an “Exempted Person.” Furthermore, any person who, together with all of that person’s affiliates and associates becomes the beneficial owner of common stock, options and/or warrants exercisable for shares of common stock representing 20% or more of the shares of common stock then outstanding as a result of a purchase by us or any of our subsidiaries of shares of common stock will also be an “Exempted Person.” However, any person, as a result of purchases by us or our subsidiaries, will no longer be deemed to be an Exempted Person and will be deemed to be an Acquiring Person if that person, together with all of that person’s affiliates and associates, becomes the beneficial owner, at any time after the Rights Dividend Declaration Date, of additional securities representing 1,000 or more shares of common stock, except if the additional shares are acquired:


	•	by the exercise of options or warrants to purchase common stock outstanding and beneficially owned by the person as of the date the person became the beneficial owner of 20% or more of the then outstanding shares of common stock or as a result of an adjustment to the number of shares of common stock for which the options or warrants are exercisable pursuant to their terms; or

	•	as a result of a stock split, stock dividend or similar event.

A purchaser, assignee or transferee of the shares of common stock (or options or warrants exercisable for common stock) of an Exempted Person will not thereby become an Exempted Person by the purchase, assignment or transfer.


	•	we engage in a merger or business combination transaction in which we are not the surviving corporation (other than a merger that follows a tender offer determined to be fair to our stockholders, as described above);


	•	we engage in a merger or business combination transaction in which we are the surviving corporation and the common stock is changed or exchanged; or

	•	50% or more of our assets or earning power is sold or transferred;

each holder of a Right (except Rights that have previously been voided as we have described above) will thereafter have the right to receive, upon exercise of the Right, common stock of the acquiring company having a value equal to four times the Exercise Price of the Right.

The Purchase Price and the number of Units of Series A Preferred Stock or other securities or property issuable upon exercise of the Rights are subject to adjustment from time to time to prevent dilution:


	•	in the event of a stock dividend on, or a subdivision, combination or reclassification of, the Series A Preferred Stock;

	•	if holders of the Series A Preferred Stock are granted certain rights or warrants to subscribe for Series A Preferred Stock or convertible securities at less than the current market price of the Series A Preferred Stock; or

	•	upon the distribution to holders of the Series A Preferred Stock of evidences of indebtedness or assets (excluding regular quarterly cash dividends) or of subscription rights or warrants (other than those referred to above).

With certain exceptions, no adjustments in the Purchase Price will be required until cumulative adjustments amount to at least 1% of the Purchase Price. No fractional Units will be issued. Instead, an adjustment in cash will be made based on the market price of the Series A Preferred Stock on the last trading date prior to the date of exercise.

We may redeem the Rights in whole, but not in part, at any time until 20 days following the Stock Acquisition Date, at a price of $0.001 per Right. Under certain circumstances, the decision to redeem will require the concurrence of 75% of the members of the board. Immediately upon any action of our board of directors ordering redemption of the Rights, the Rights will terminate. In that event, the Rights will only entitle the holders to receive the $0.001 redemption price.

Until a Right is exercised, the holder of the Right, as such, will not be entitled to vote or to receive dividends or have any other right as our stockholder. Our stockholders may, depending upon the circumstances, recognize taxable income in the event that the Rights become exercisable for common stock (or other consideration).

Other than those provisions relating to the principal economic terms of the Rights, any of the provisions of the Rights Agreement may be amended by our board of directors prior to the Distribution Date. After the Distribution Date, the provisions of the Rights Agreement may be amended by the board (in certain circumstances, with the concurrence of 75% of the members of the board) in order to cure any ambiguity, to make changes that do not adversely affect the interests of holders of the Rights (excluding the interest of any Acquiring Person), or to shorten or lengthen any time period under the Rights Agreement, but no amendment to adjust the time period governing redemption may be made at a time when the Rights are not redeemable.

The Rights have certain anti-takeover effects, and will cause substantial dilution to a person or group that attempts to acquire us in certain circumstances. Accordingly, the existence of the Rights may deter certain acquirors from making takeover proposals or tender offers. The Rights, however, are not intended to prevent a takeover, but rather are designed to enhance the ability of the board of directors to negotiate with a potential acquiror on behalf of all of our stockholders.

We intend to use the proceeds of this offering to repurchase the Series B Preferred Stock held by the LLR Partnerships. See “Use of Proceeds” and “Certain Relationships and Related Party Transactions” in

On September 1, 2000, we issued a total of ten shares of our Series B Preferred Stock to the LLR Partnerships. The holders of the Series B Preferred Stock are not entitled to receive any dividends other than any dividends which may be received under the dividend right created with the designation of the rights relating to our Series C Preferred Stock, described below. The holders of the Series B Preferred Stock are entitled, subject to the pari passu rights of holders of our Series C Preferred Stock (and any other series of Preferred Stock with pari passu rights upon liquidation approved by the holders of a majority of the Series B Preferred Stock), to be paid out of our assets legally available for distribution to stockholders a liquidation preference of $10.00 per share before any distribution of assets is made to holders of the common stock or any other class or series of our capital stock that ranks junior to the Series B Preferred Stock as to liquidation rights.

We are entitled to purchase all of the outstanding shares of Series B Preferred Stock at any time after the LLR Partnerships and any of their permitted transferees (as defined) collectively own less than 10% of our common stock purchased by the LLR Partnerships under a purchase agreement dated as of September 1, 2000 (the “LLR Purchase Agreement”) (including for this purpose, on an as-converted basis, any shares of Series C Preferred Stock). The per share purchase price payable upon exercise of the call option is the sum of the liquidation preference amount plus any accrued but unpaid dividends.

Subject to adjustment if the LLR Partnerships and their permitted transferees collectively own less than 75% of the common stock purchased pursuant to the LLR Purchase Agreement, the holders of the Series B Preferred will be entitled to nominate and elect two directors to our board of directors.

In addition to any other vote required by law, the affirmative vote or written consent of the holders of the Series B Preferred Stock owning a majority of the outstanding shares of Series B Preferred Stock is necessary for us to effect the following actions:


	•	any amendment, alteration, repeal, or waiver of any provision of our certificate of incorporation, as in effect from time to time, or our by-laws which adversely affects the rights, preferences or privileges of the Series B Preferred Stock or Series C Preferred Stock;

	•	any increase in the authorized number of members of our board of directors to more than 11 members;

	•	the creation of a new class or series of shares which have rights, preferences or privileges that are senior to, or are equivalent (pari passu) with, the rights, preferences or privileges of the Series B Preferred Stock or Series C Preferred Stock;

	•	any merger or consolidation with another company if it is proposed that the Series B Preferred Stock or Series C Preferred Stock will be exchanged for preferred shares of the other company; and

	•	the redemption or repurchase by us of our stock or options to purchase our stock (other than the exercise of our call option relating to the Series B Preferred Stock, the repurchase of stock or options from former employees and consultants of our company pursuant to repurchase agreements which have been approved by our board of directors and the purchase of common stock in an amount not to exceed issuances pursuant to our employee stock purchase plan, provided that these purchases shall not exceed 1,000,000 shares of our common stock in the aggregate or 300,000 shares of our common stock in any 12-month period ending September 1).

We intend to use the proceeds of this offering to repurchase shares of common stock held by the LLR Partnerships which may become exchangeable for shares of our Series C Preferred Stock. See “Use

On September 1, 2000, we authorized the issuance of up to 588,229 shares of our Series C Preferred Stock. All or any of the authorized shares of Series C Preferred Stock may be acquired by the LLR Partnerships at any time on or after September 1, 2005 (or earlier, upon the occurrence of certain events described below) by exchanging two shares of common stock for each share of Series C Preferred Stock being acquired. The following is a description of the Series C Preferred Stock.

Pursuant to the terms of the Purchase Agreement, the selling stockholders may exchange two shares of the common stock owned by them into one share of our Series C Preferred Stock upon the occurrence of the following events:


	•	upon a Liquidation (as defined below);

	•	30 days after written notice from one of the LLR Partnerships of an Event of Non-Compliance (as defined below); or

	•	any time on or after September 1, 2005.

“Liquidation” means any voluntary or involuntary liquidation, dissolution or winding up of the affairs of our company, other than any dissolution, liquidation or winding up in connection with any reincorporation of our company in another jurisdiction, or any Corporate Transaction (as defined). “Corporate Transaction” means:


	•	any consolidation or merger of our company with or into any other corporation or other entity or person, or any other corporate reorganization, in which our stockholders immediately prior to the consolidation, merger or reorganization own less than 50% of the voting power immediately after the consolidation, merger or reorganization;

	•	any transaction or series of related transactions in which more than 50% of the voting power is transferred to one or more affiliated persons; or

	•	a sale, lease, transfer or other disposition of all or substantially all of our assets.


	•	our failure to pay any required dividend to holders of our Series C Preferred Stock;

	•	our breach or failure to perform or observe any material covenant or agreement set forth in the Designation of Series C Preferred Stock;

	•	our or any of our material subsidiaries making of an assignment for the benefit of creditors, commencing any proceeding under any bankruptcy, insolvency or liquidation law of any jurisdiction, or being the subject of any such bankruptcy or insolvency petition commenced by a third party; or

	•	our default in the payment of the principal of any indebtedness with an aggregate principal amount of in excess of $5.0 million or in the performance of any agreement or covenant contained in any agreement or instrument with respect to any such indebtedness.

Holders of our Series C Preferred Stock will be entitled to receive dividends at an annual rate of $2.04 per share, as the dividend may be adjusted to account for events such as dividends and capital reorganizations. Dividends on our Series C Preferred Stock must be declared and set apart or paid on a pari passu basis with our Series B Preferred Stock and before dividends of any kind may be declared, and before distributions of any other kind may be made, upon the common stock or any other shares of our capital stock. The dividends will be cumulative.

In the event we declare a distribution payable in securities of other persons, evidences of indebtedness issued by us or other persons, assets (excluding cash dividends) or options or rights, then the holders of our Series C Preferred Stock are entitled to a proportionate share of any such distribution as though the holders of our Series C Preferred Stock were the holders of the number of shares of common stock into which their shares of Series C Preferred Stock are convertible as of the record date fixed for the determination of the holders of common stock entitled to receive the distribution.

In the event of any Liquidation, subject to the pari passu rights of our Series B Stock, each issued and outstanding share of Series C Preferred Stock will entitle the holder of record of that share to payment at the rate per share of $17.00 (the “Preference Amount”) (which amount will be adjusted upon the occurrence of events such as stock dividends and capital reorganizations) plus an amount equal to all accrued but unpaid dividends, without interest, on a pari passu basis with the Series B Preferred Stock and before any payment or distribution of our net assets shall be made to or set apart for the holders of record of the issued and outstanding common stock or any other class ranking junior to the Series C Preferred Stock.

If after the payment or provision for the payment of our debts and other liabilities, the net assets of our company are insufficient to pay in full the preferential amounts to which the holders of record of all the outstanding shares of our Series B Preferred Stock and our Series C Preferred Stock (and other holders of pari passu stock) are entitled, the entire net assets of our company are to be distributed ratably to the holders of all the outstanding shares of our Series B Preferred Stock and our Series C Preferred Stock (and other holders of any other pari passu stock) in proportion to the full amounts to which they are entitled, and the holders of the common stock and any other classes of securities ranking junior to our Series C Preferred Stock are in no event to be entitled to participate in the distribution of the net assets in respect of their stock.

We have a call option to purchase all of the outstanding shares of our Series C Preferred Stock (the “Series C Call Option”). At any time and from time to time we can exercise our Series C Call Option by sending written notice to the holders of outstanding shares of Series C Preferred Stock. We must send any call notice to the called holders at least 30 days prior to the date specified in the call notice as the exercise date. We may purchase the outstanding shares of Series C Preferred Stock at a per share amount equal to the greater of (a) fair market value, or (b) the Preference Amount, as adjusted pursuant to the terms set forth in the Designation of Series C Preferred Stock, multiplied by 25% per year, compounded annually from September 1, 2000, plus any accrued but unpaid dividends per share.

In the event we enter into an agreement to be sold, merged or consolidated into or with any other company (a “Sale”) or the closing of a Sale occurs within one year from the date the Series C Call Option is exercised, the called holders will be entitled to receive from us, within 15 days of the closing of the Sale, in addition to the call amount, an amount equal to the difference, if any, between the call amount and the amount the called holders would have received in the sale of our company if the called holders were the holders of the number of shares of common stock into which their shares of Series C Preferred Stock were convertible immediately prior to the closing of the Sale.

Subject to certain conditions described in this prospectus, each share of Series C Preferred Stock is convertible at any time and from time to time, at the option of the holder of record of the share, into fully paid and nonassessable shares of common stock upon surrender to us of the certificate or certificates representing the Series C Preferred Stock to be converted. The basis for each conversion shall be the “Series C Conversion Rate” in effect at the time of conversion, which means the number of shares of common stock issuable for each share of Series C Preferred Stock surrendered for conversion. As used in this prospectus, the term “Series C Conversion Rate” means an amount computed by dividing the sum of $17.00 (the “Conversion Amount”) (which amount will be adjusted upon the occurrence of events such as stock dividends and capital reorganizations) by the “Series C Conversion Price” (as defined below) to determine the number of shares of common stock into which one share of the Series C Preferred Stock is convertible at the Series C Conversion Price then in effect. As used in this prospectus, the term “Series C Conversion Price” means $8.50, as adjusted from time to time if we issue any securities by recapitalization

In addition to any other rights, each holder of shares of Series C Preferred Stock issued and outstanding will be entitled to notice of any stockholders’ meeting and to a number of votes at the meeting equal to the number of shares of common stock into which the holder’s shares of Series C Preferred Stock could be converted as of the record date for the meeting. The holders of the Series C Preferred Stock will vote together with the holders of the common stock as one class. Other than voting with respect to a merger or consolidation by us in which the Series C Preferred Stock will be exchanged for preferred shares of another company, the holders of Series C Preferred Stock will not be entitled to vote as a class with respect to a Corporate Transaction.

In addition to the two directors nominated and elected by the holders of the Series B Preferred Stock, if the Series C Preferred Stock were issued today, the holders of Series C Preferred Stock, as a class, would be entitled, by the affirmative vote of the holders of a majority of the shares of Series C Preferred Stock, to nominate and elect two additional directors to our board of directors (the “Series C Preferred Directors”). The right of the holders of the Series C Preferred Stock to elect directors, if the Series C Preferred Stock is issued, will be subject to adjustments if the LLR partnerships and their permitted transferees collectively own less than 75% of the common stock purchased pursuant to the LLR Purchase Agreement (including on an as-converted basis any shares of Series C Preferred Stock).

In addition to any other required vote or consent, the affirmative vote or written consent of the holders of Series C Preferred Stock owning a majority of the outstanding shares of Series C Preferred Stock shall be necessary to effect or validate the following actions:


	•	Any amendment, alteration, repeal, or waiver of any provision of our certificate of incorporation, as in effect from time to time, or our by-laws which adversely affects the rights, preferences or privileges of the Series C Preferred Stock;

	•	Any increase in the authorized number of members of our board of directors to more than 11 members;

	•	The creation of a new class or series of shares which have rights, preferences or privileges that are senior to, or are equivalent (pari passu) with the rights, preferences or privileges of the Series C Preferred Stock;


	•	Any merger or consolidation by us with another company if it is proposed that the Series C Preferred Stock will be exchanged for preferred shares of the other company;



	•	The redemption or repurchase of our stock or options to purchase our stock by us (other than the exercise of the Call Option pursuant to the terms set forth in the Designation of Series C Preferred Stock, the repurchase of stock or options from our former employees and consultants pursuant to repurchase agreements which have been approved by our board of directors and the purchase of common stock (the “Purchase Plan Related Purchases”) in an amount not to exceed issuances pursuant to our Employee Stock Purchase Plan, provided that our Purchase Plan Related Purchases shall not exceed 1,000,000 shares of common stock in the aggregate or 300,000 shares of common stock in any 12-month period ending August 31 without the approval of the holders of Series C Preferred Stock as provided above); and,


	•	Any declaration or payment or any dividends or distribution upon any of common stock or other equity securities except for dividends payable on the Series C Preferred Stock.

Certain provisions of the Delaware General Corporation Law and of our certificate of incorporation and by-laws, each as amended, all as summarized in the following paragraphs, may be deemed to have an

We are a Delaware corporation and are subject to the provisions of the General Corporation Law of the State of Delaware, including Section 203, an anti-takeover law. In general, this law prohibits a public Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years after the date of the transaction in which that person became an interested stockholder unless:


	•	prior to such date, the board of directors approves the business combination; or

	•	upon becoming an interested stockholder, the stockholder then owns at least 85% of the voting securities, as defined in Section 203; or

	•	subsequent to such date, the business combination is approved by both the board of directors and the stockholders.

“Business combination” is defined to include mergers, asset sales and other similar transactions with an “interested stockholder.” An “interested stockholder” is defined as a person who, together with affiliates and associates, owns (or, within the prior three years, did own) 15% or more of the corporation’s voting stock. Although Section 203 permits us to elect not to be governed by its provisions, to date we have not made this election.

Our by-laws provide for the board of directors to be divided into three classes of directors serving staggered three-year terms. As a result, approximately one-third of the board of directors will be elected each year. Under the Delaware General Corporation Law, in the case of a corporation having a classified board of directors, stockholders may remove a director only for cause. This provision, when coupled with the provision of the by-laws authorizing only the board of directors to fill a vacant directorship, will preclude a stockholder from removing incumbent directors without cause and simultaneously gaining control of the board of directors by filling the vacancies created by such removal with its own nominees.

The by-laws provide that special meetings of our stockholders may be called only by the board, our chief executive officer or our president. This provision will make it more difficult for stockholders to take action opposed by the board of directors.

Our certificate of incorporation provides that no action required or permitted to be taken at an annual or a special meeting of our stockholders may be taken without a meeting unless the action is authorized by the unanimous consent in writing of all stockholders.

Our by-laws provide that stockholders seeking to bring business before a meeting of stockholders, or to nominate candidates for election as directors at a meeting of stockholders, must provide timely notice thereof in writing. To be timely, a stockholders’ notice must be delivered to, or mailed and received at, our principal executive offices:


	•	in the case of an annual meeting that is called for a date that is within 30 days before or after the anniversary date of the immediately preceding annual meeting of stockholders, not less than 60 days nor more than 90 days prior to such anniversary date; and


	•	in the case of an annual meeting that is called for a date that is not within 30 days before or after the anniversary date of the immediately preceding annual meeting, or in the case of a special meeting of stockholders, not later than the close of business on the tenth day following the date on which notice of the date of the meeting was mailed or public disclosure of the date of the meeting was made, whichever occurs first.

The by-laws also specify certain requirements for a stockholders’ notice to be in proper written form. These provisions may preclude some stockholders from bringing matters before the stockholders at an annual or special meeting or from making nominations for directors at an annual or special meeting.

Our certificate of incorporation and by-laws provide that the vote of a majority of all directors then serving or the vote of holders of a majority of the outstanding stock entitled to vote is required to alter, amend or repeal the by-laws.

The transfer agent and registrar for our common stock is StockTrans, Inc., Ardmore, Pennsylvania.

The following is a general discussion of the material U.S. federal income and estate tax consequences to a non-U.S. holder of the ownership and disposition of our common stock. For the purpose of this discussion, a non-U.S. holder is any holder that for U.S. federal income tax purposes is not a U.S. person or a partnership. For purposes of this discussion, the term U.S. person means:


	•	an individual citizen or resident of the U.S.;

	•	a corporation or other entity taxable as a corporation or a partnership created or organized in the U.S. or under the laws of the U.S., any state or the District of Columbia;

	•	an estate whose income is subject to U.S. federal income tax regardless of its source; or

	•	a trust (x) whose administration is subject to the primary supervision of a court within the U.S. and which has one or more U.S. persons that have the authority to control all substantial decisions of the trust or (y) which has made a valid election to be treated as a U.S. person.

If a partnership holds common stock, the tax treatment of a partner will generally depend on the status of the partner and upon the activities of the partnership. Accordingly, partnerships which hold our common stock and partners in such partnerships should consult their tax advisors.

This discussion assumes that non-U.S. holders will hold our common stock issued pursuant to the offering as a capital asset (generally, property held for investment). This discussion does not address all aspects of U.S. federal income and estate taxation that may be relevant in light of a non-U.S. holder’s special tax status or special tax situation. U.S. expatriates or former long-term residents, life insurance companies, tax-exempt organizations, dealers in securities or currency, banks or other financial institutions, investors whose functional currency is other than the U.S. dollar, that have elected mark-to-market accounting, who acquired our common stock as compensation, or that hold our common stock as part of a hedge, straddle, constructive sale, conversion, or other risk reduction transaction, and special status corporations (such as “controlled foreign corporations,” “foreign investment companies,” “passive foreign investment companies,” “foreign personal holding companies,” and corporations that accumulate earnings to avoid U.S. income tax) are among those categories of potential investors that are subject to special rules not covered in this discussion. This discussion does not address any tax consequences arising under the laws of any state, local or non-U.S. taxing jurisdiction. Furthermore, the following discussion is based on current provisions of the Internal Revenue Code of 1986, as amended, and Treasury Regulations and administrative and judicial interpretations thereof, all as in effect on the date hereof, and all of which are subject to change, possibly with retroactive effect. Accordingly, each non-U.S. holder should consult its tax advisor regarding the U.S. federal, state, local and non-U.S. income and other tax consequences of acquiring, holding and disposing of shares of our common stock.

We do not anticipate paying any dividends on our common stock for the foreseeable future. However, if we do pay dividends on our common stock, those payments will constitute dividends for U.S. tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent those dividends exceed our current and accumulated earnings and profits, the dividends will constitute a return of capital and will first reduce a holder’s tax basis, but not below zero, and then will be treated as gain from the sale of stock.

Any dividend (out of earnings and profits) paid to a non-U.S. holder of common stock generally will be subject to U.S. withholding tax at a rate of 30% of the gross amount of the dividend or such lower rate as may be specified by an applicable tax treaty. In order to receive a reduced treaty rate, a non-U.S. holder must provide us with an Internal Revenue Service (“IRS”) Form W-8BEN (or successor form) or an appropriate substitute form certifying qualification for the reduced rate. The non-U.S. holder must periodically update the information on such forms. Such non-U.S. holder may also be required to

obtain and provide a U.S. taxpayer identification number and/or demonstrate residence in the applicable foreign jurisdiction by providing documentation issued by the government of such jurisdiction. Furthermore, Treasury Regulations require special procedures for payments through qualified intermediaries. A non-U.S. holder of common stock that is eligible for a reduced rate of withholding tax pursuant to a tax treaty may obtain a refund of any excess amounts currently withheld by filing an appropriate claim for a refund with the IRS. Dividends received by a non-U.S. holder that are effectively connected with a U.S. trade or business conducted by the non-U.S. holder are exempt from the 30% withholding tax. In order to obtain this exemption, a non-U.S. holder must provide us with an IRS Form W-8ECI (or successor form) or an appropriate substitute form properly certifying such exemption. In general, non-U.S. stockholders will not be considered to be engaged in a U.S. trade or business solely as the result of their ownership of any shares of our common stock. “Effectively connected” dividends, although not subject to withholding tax, are taxed at the same graduated rates applicable to U.S. persons, net of certain deductions and credits. If the non-U.S. holder is eligible for the benefits of a tax treaty between the United States and the holder’s country of residence, any effectively connected dividends or gain would generally be subject to U.S. federal income tax only if such amount is also attributable to a permanent establishment or fixed base maintained by the holder in the United States.

In addition to the graduated tax described above, dividends received by a corporate non-U.S. holder that are effectively connected with a U.S. trade or business of the corporate non-U.S. holder may also, under certain circumstances, be subject to a branch profits tax at a rate of 30% or such lower rate as specified by an applicable tax treaty.

You generally will not be subject to U.S. federal income tax on any gain recognized on the sale, exchange or other taxable disposition of our common stock unless:



	•	you are an individual present in the U.S. for 183 days or more in the year of the sale, exchange or other taxable disposition and certain other requirements are met;



	•	the income or gain is effectively connected with your conduct of a trade or business within the U.S. and, where a tax treaty applies, is attributable to a permanent establishment; or



	•	we are or have been, at any time within the shorter of the five-year period preceding such disposition or your holding period of our common stock, a “United States real property holding corporation” within the meaning of Section 897(c)(2) of the Code unless our common stock is regularly traded on an established securities market and you held no more than 5% of our outstanding common stock, directly or indirectly, at all times within the shorter of the five-year period preceding such disposition or your holding period for our common stock. We believe that we are not currently, and that we will not become, a United States real property holding corporation.

If you are an individual described in the first bullet point immediately above you will be subject to a flat 30% tax on the gain derived from the sale, which may be offset by U.S. source capital losses, even though you are not considered a resident of the U.S. If you are an individual described in the second bullet point you will be subject to tax on the net gain derived from the sale under regular graduated U.S. federal income tax rates. If you are a foreign corporation described in the second bullet point, you generally will be subject to tax on its net gain in the same manner as if you were a U.S. person as defined under the Code and, in addition, you may be subject to the branch profits tax equal to 30% of your effectively connected earnings and profits or at such lower rate as may be specified by an applicable income tax treaty.

Common stock owned or treated as owned by an individual who is a non-U.S. holder at the time of death will be included in the individual’s gross estate for U.S. federal estate tax purposes and may be

Generally, we must report annually to the IRS the amount of dividends paid, the name and address of the recipient, and the amount, if any, of tax withheld in the case of each non-U.S. holder. A similar report is sent to the holder. Tax treaties or other agreements may require the IRS to make its reports available to tax authorities in the recipient’s country of residence.

We must report annually to the IRS and to each non-U.S. holder the amount of dividends or other distributions we pay to you on your shares of our common stock and the amount of tax we withhold on these distributions regardless of whether withholding is required. The IRS may make copies of the information returns reporting those dividends and amounts withheld available to the tax authorities in the country in which you reside pursuant to the provisions of an applicable income tax treaty or exchange of information treaty. In addition, dividends paid to a non-U.S. holder generally will be subject to backup withholding unless applicable certification requirements are met.

Information reporting and backup withholding generally are not required with respect to the amount of any proceeds from the sale of your shares of our common stock outside the United States through a foreign office of a foreign broker that does not have certain specified connections to the United States. However, if you sell your shares of our common stock within the United States or through certain U.S.-related financial intermediaries, the broker will be required to report to the IRS the amount of proceeds paid to you and also backup withhold (currently at the rate of 28%) on such proceeds unless you provide appropriate certification (usually on an IRS Form W-8BEN) to the broker of your status as a non-U.S. person, unless you are a corporation or one of several types of entities and organizations that qualify for exemption.

Backup withholding is not an additional tax. Rather, the U.S. income tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained, provided that the required information is furnished to the IRS.

The preceding discussion of material U.S. federal income and estate tax consequences is general information only and is not tax advice. Accordingly, each investor should consult its own tax advisor as to the particular tax consequences of purchasing, holding and disposing of our common stock, including the applicability and effect of any state, local or non-U.S. tax laws and of any changes or proposed changes in applicable law.

We are offering our common stock described in this prospectus through a number of underwriters. Friedman, Billings, Ramsey & Co., Inc., or FBR, is acting as the representative of the underwriters. Subject to the terms and conditions contained in the underwriting agreement, we have agreed to sell to the underwriters, and each of the underwriters has severally agreed to purchase from us, on a firm commitment basis, the number of shares of common stock listed next to its name in the following table:

The underwriters are obligated to take and pay for all of our common stock offered if any of the shares of common stock are taken, other than the shares subject to the over-allotment option.

The underwriters propose initially to offer the shares to the public at the price specified on the cover page of this prospectus. The underwriters may allow selected dealers a concession of not more than $ per share. The underwriters may also allow, and any dealers may reallow, a concession of not more than $ per share to other dealers. If all the shares are not sold at the public offering price, the underwriters may change the public offering price and the other selling terms. Our shares of common stock are offered subject to a number of conditions, including:


	•	receipt and acceptance of our common stock by the underwriters; and

	•	the underwriters’ right to reject orders in whole or in part.

We have granted the underwriters an option, exercisable in one or more installments for 30 days after the date of this prospectus, to purchase up to 637,500 additional shares of common stock to cover over-allotments, if any, at the public offering price less the underwriting discount set forth on the cover page of this prospectus. To the extent that the underwriters exercise the option, each underwriter will be committed, subject to certain conditions, to purchase that number of additional shares of common stock that is proportionate to such underwriter’s initial commitment.

As described in the underwriting agreement, we have agreed to reimburse the underwriters for certain accountable out-of-pocket expenses, including their legal expenses, incurred in connection with this offering. The following table shows the amount per share and total underwriting discounts and commissions we will pay to the underwriters assuming both no exercise and full exercise of the underwriters’ option to purchase up to 637,500 additional shares to cover over-allotments.

We estimate that the total expenses of this offering to be paid by us, not including underwriting discounts and commissions, will be approximately $950,000.

We will indemnify the underwriters against various liabilities, including liabilities under the Securities Act of 1933. If we are unable to provide this indemnification, we will contribute to payments the underwriters may be required to make in respect of those liabilities. We have also agreed to reimburse the underwriters for the fees of filing with the National Association of Securities Dealers, Inc. and the reasonably and actually incurred cost of producing a blue-sky survey.

In connection with this offering, the underwriters may engage in activities that stabilize, maintain or otherwise affect the price of our common stock, including:


	•	stabilizing transactions;

	•	short sales;

	•	syndicate covering transactions;

	•	imposition of penalty bids; and

	•	purchases to cover positions created by short sales.

Stabilizing transactions consist of bids or purchases made for the purpose of preventing or retarding a decline in the market price of our common stock while this offering is in progress. Stabilizing transactions may include making short sales of our common stock, which involves the sale by an underwriter of a greater number of shares of common stock than it is required to purchase in this offering, and purchasing common stock from us or in the open market to cover positions created by short sales. Short sales may be “covered” shorts, which are short positions in an amount not greater than the underwriters’ over-allotment option referred to above, or may be “naked” shorts, which are short positions in excess of that amount.

The underwriters may close out any covered short position either by exercising their over-allotment option, in whole or in part, or by purchasing shares in the open market. In making this determination, the underwriters will consider, among other things, the price of shares available for purchase in the open market compared to the price at which the underwriters may purchase shares pursuant to the over-allotment option.

A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchased in this offering. To the extent that the underwriters create a naked short position, the underwriters will purchase shares in the open market to cover the position.

The underwriters also may impose a penalty bid on selling group members. This means that if the underwriters purchase shares in the open market in stabilizing transactions or to cover short sales, the underwriters can require the selling group members that sold those shares as part of this offering to repay the selling concession received by them or the cost of such purchase.

As a result of these activities, the price of our common stock may be higher than the price that otherwise might exist in the open market. If the underwriters commence these activities, they may discontinue them at any time. The underwriters may carry out these transactions on the Nasdaq National Market, in the over-the-counter market or otherwise.

The representative has advised us that the underwriters do not confirm sales to accounts over which they exercise discretionary authority.

FBR will be facilitating Internet distribution for this offering to certain of its Internet subscription customers. FBR intends to allocate a limited number of shares for sale to its online brokerage customers. An electronic prospectus is available on the Internet website maintained by FBR. Other than the prospectus in electronic format, the information on the FBR website is not part of this prospectus or the registration statement of which this prospectus forms a part, has not been approved and/or endorsed by us or FBR in its capacity as underwriter and should not be relied upon by investors.

Some of the underwriters or their affiliates may provide us with certain commercial banking, financial advisory, valuation and investment banking services in the future, for which they would receive customary compensation. We intend to seek the assistance of FBR with respect to the identification of appropriate candidates for consideration by our Nominating Committee to fill a vacancy on our board of directors. None of the underwriters have provided any such services to us in connection with our intended use of the proceeds of this offering or any of the transactions related thereto.

We, and John F. Short, Chairman of our board of directors and our Chief Executive Officer, Douglas L. Cox, our Executive Vice President and Chief Financial Officer, Frank J. Quirk, our President, and each of our directors have agreed not to offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, or otherwise transfer or dispose of, directly or indirectly, any shares of our common stock, or any securities convertible into or exercisable or exchangeable for any shares of our common stock or any right to acquire shares of our common stock, for a period of 90 days from the date of this prospectus. FBR may at any time and without notice release all or any portion of the common stock subject to the foregoing lock-up agreements. In considering a request to release any shares of common stock from these lock-up restrictions, FBR will likely consider a number of factors, including the impact that such a release would have on this offering and the market for our common stock and the equitable considerations underlying the request for release. No such release is contemplated at this time.

The validity of the common stock will be passed upon for us by Wolf, Block, Schorr and Solis-Cohen LLP, Philadelphia, Pennsylvania. Certain legal matters related to this offering will be passed upon for the underwriters by Gibson, Dunn & Crutcher LLP, Washington, D.C.

The consolidated financial statements and schedule of Opinion Research Corporation at December 31, 2003, and for the years ended December 31, 2003 and 2002, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

The consolidated financial statements and schedule of Opinion Research Corporation at December 31, 2004 and for the year then ended, appearing in this prospectus and registration statement have been audited by Grant Thornton LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

We have filed with the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, a registration statement on Form S-1 under the Securities Act of 1933 with respect to the shares of common stock offered in this prospectus. This prospectus does not contain all of the information set forth in the registration statement and the exhibits and schedules thereto. For further information with respect to us and our shares of common stock, we refer you to the registration statement and the exhibits and schedules filed as a part of the registration statement. Statements contained in this prospectus as to the contents of any contract or other document are not necessarily complete and, in each instance, reference is made to the copy of the contract or document filed as an exhibit to the registration statement. For additional information regarding the contents of any contract or document described or discussed in this prospectus, we refer you to the copy of the contract or document filed as an exhibit to the registration statement. The registration statement, including exhibits and schedules thereto, may be inspected and copied at the Securities and Exchange Commission’s Public Reference Room at 450 Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the operation of the Public Reference Room by calling the Securities and Exchange Commission at 1-800-SEC-0330. Copies of the registration statement may also be obtained at prescribed rates from the Public Reference Section of the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, we file annual, quarterly and current reports, proxy and information statements and other information with the

We have audited the accompanying consolidated balance sheet of Opinion Research Corporation and Subsidiaries as of December 31, 2004, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the year ended December 31, 2004. 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 audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides 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 Opinion Research Corporation and Subsidiaries as of December 31, 2004, and the consolidated results of their operations and their cash flows for the year ended December 31, 2004, in conformity with accounting principles generally accepted in the United States of America.

Our audit was conducted for the purpose of forming an opinion on the basic consolidated financial statements taken as a whole. The financial schedule (Schedule II-Valuation and Qualifying Accounts) for the year ended December 31, 2004, listed in Item 15 of the 2004 Annual Report on Form 10-K, is presented for purposes of additional analysis and is not a required part of the basic consolidated financial statements. This schedule has been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic consolidated financial statements taken as a whole.

We have audited the accompanying consolidated balance sheet of Opinion Research Corporation and Subsidiaries as of December 31, 2003, and the related consolidated statements of operations, stockholders’ equity, and cash flows for the years ended December 31, 2003 and 2002. Our audits also included the financial statement schedule for the years ended December 31, 2003 and 2002 listed in the Index at page F-1. These financial statements and schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Opinion Research Corporation and Subsidiaries at December 31, 2003, and the consolidated results of their operations and their cash flows for the years ended December 31, 2003 and 2002, in conformity with accounting principles generally accepted in the United States. Also, in our opinion, the related financial statement schedule for the years ended December 31, 2003 and 2002, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

As discussed in Notes 1 and 3 to the consolidated financial statements, the Company adopted Statement of Financial Accounting Standards No. 142, Goodwill and Other Intangible Assets, effective January 1, 2002.


	We were established in 1938 to apply the principles of general public opinion polling to marketing issues facing America’s largest companies. We evolved to provide social research, market research, information services, marketing services, and telemarketing. We perform public sector primary research and provide information technology, communications, and other consulting services, primarily to agencies of the United States federal government and state and local governments. We also assist our commercial clients in the evaluation, monitoring and optimization of their marketing and sales efforts, addressing issues such as customer loyalty and retention, market demand and forecasting, and corporate image and competitive positioning. The majority of our governmental projects are in the areas of health, education, and international aid. Our telemarketing services consist principally of outbound customer acquisition services.

	The consolidated financial statements include the accounts of our company and our wholly owned subsidiaries. All inter-company transactions are eliminated upon consolidation.


	Service revenue is recognized when earned, generally as work is performed in accordance with the provisions of Staff Accounting Bulletin No. 104. Services performed vary from contract to contract and are not uniformly performed over the term of the arrangement. In our market research and social research segments, revenues under fixed-price contracts are recognized on a proportional performance basis. Performance is based on the ratio of costs incurred to total estimated costs where the costs incurred represent a reasonable surrogate for output measures of contract performance, including survey design, data collection, survey analysis and presentation of deliverables to the client. Progress on a contract is matched against project costs and costs to complete on a periodic basis. Provision for estimated contract losses, if any, is made in the period such losses are determined. Customers are obligated to pay as services are performed, and in the event that a client cancels the contract, the client is responsible for payment for services performed through the date of cancellation.

	Revenues under cost-reimbursement contracts are recognized as costs are incurred. Applicable estimated profits are included in earnings in the proportion that incurred costs bear to total estimated costs. Incentives, award fees or penalties related to performance are also considered in estimating revenues and profit rates based on actual and anticipated awards. See “Item 1, Business — Government Contracts” for a discussion of the types of contracts we have with the U.S. federal government.

	Revenues under time-and-materials contracts are recognized as costs are incurred.

	In our teleservices segment, revenues are recognized at the time services are performed.

	Invoices to clients are generated in accordance with the terms of the applicable contract, which may not be directly related to the performance of services. Unbilled receivables are invoiced based upon the achievement of specific events as defined by each contract including deliverables, timetables and incurrence of certain costs. Unbilled receivables are classified as a current asset. Advanced billings to clients in excess of revenue earned are recorded as deferred revenues until the revenue recognition criteria are met. We grant credit primarily to large companies and government agencies and perform periodic credit evaluations of our clients’ financial condition. We do not generally require collateral. Credit losses relating to clients generally have been within management’s expectations. Reimbursements of out of pocket expenses are included in revenues with corresponding costs incurred by us included in cost of revenues.


	We consider as cash equivalents all highly liquid debt instruments with a maturity of three months or less when purchased.


	Property and equipment are stated at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the related assets (3-10 years). Leasehold improvements are amortized using the straight-line method over their estimated useful lives or the remaining life of the lease, whichever is shorter.

We record impairment losses on long-lived assets used in operations when events and circumstances indicate that the carrying amount of such assets may not be recoverable. Determination of recoverability of long-lived assets is based on an estimate of undiscounted future cash flows resulting from the use and eventual disposition of the assets. Measurement of an impairment loss for long-lived assets that management expects to hold and use is based on the fair value of the asset. Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.

All assets and liabilities of foreign subsidiaries are translated into U.S. dollars using the exchange rate in effect at the balance sheet date and revenues and expenses are translated using an average exchange rate during the period. The resulting translation adjustments are recorded as a component of other comprehensive income and are accumulated in stockholders’ equity. Because cumulative translation adjustments are considered a component of permanently invested unremitted earnings of subsidiaries outside of the United States, no taxes are provided on such amounts.


	As permitted by Statement of Financial Accounting Standards (“SFAS”) No. 123, “Accounting for Stock-Based Compensation,” (“Statement No. 123”) we have elected to follow Accounting Principles Board (“APB”) Opinion No. 25, “Accounting for Stock Issued to Employees” and related interpretations in accounting for our employee option plans.

	Under APB No. 25, no compensation expense is recognized at the time of the option grant if the exercise price of the employee stock option is fixed and equals or exceeds the fair market value of the underlying common stock on the date of grant and the number of shares to be issued pursuant to the exercise of such options are known and fixed at the grant date.


	If we had elected to recognize compensation expense based on the fair value of the options granted at grant date as prescribed by Statement No. 123, net income (loss) and related per share amounts would have been adjusted to the pro forma amounts indicated in the table below:


	The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions:


	The weighted average fair value of options granted during 2002, 2003, and 2004 was $3.32, $3.02, and $3.57 per share, respectively.

Deferred tax assets and liabilities are determined based on the temporary differences between financial statement and tax bases of assets and liabilities and are measured using the enacted tax rates and laws that are expected to be in effect when the temporary differences are expected to reverse. Recognition of deferred tax assets is limited to amounts considered by management to be more likely than not to be realized in future periods.


	In accordance with Statement of Position 98-1 (“SOP 98-1”), “Accounting for the Costs of Computer Software Developed or Obtained for Internal Use” issued by the American Institute of Certified Public Accountants, we have capitalized certain internal and external costs incurred to acquire or create internal use software. Capitalized costs are amortized over five years.


	Comprehensive income (loss) consists of two components, net income (loss) and other comprehensive income (loss). Other comprehensive income (loss) refers to revenue, expenses, gains and losses that,

under generally accepted accounting principles, are recorded as an element of stockholders’ equity but are excluded from net income (loss). Our other comprehensive income (loss) is comprised of foreign currency translation adjustments from those subsidiaries not using the U.S. dollar as their functional currency. Total accumulated other comprehensive income (loss) is displayed as a separate component of stockholders’ equity in the accompanying consolidated balance sheets.


	We adopted Statement No. 142 effective January 1, 2002. Under Statement No. 142, goodwill and intangible assets that have indefinite useful lives are no longer amortized. Statement No. 142 requires goodwill to be tested for impairment on an annual basis, or more frequently if certain indicators arise, using the guidance specifically provided.

	Furthermore, Statement No. 142 requires purchased intangible assets other than goodwill to be amortized over their useful lives unless these lives are determined to be indefinite. We use comparable company analyses and discounted cash flow models to determine the fair value of our reporting units and whether any impairment of goodwill exists. See Note 3 for additional information regarding goodwill and other intangibles.


	Basic and diluted earnings per share are calculated in accordance with Statement No. 128, “Earnings per Share.”

	Basic earnings per share excludes dilution and is computed by dividing income available to common shareholders by the weighted average common shares outstanding during the period. Diluted earnings per share takes into account the potential dilution that could occur if securities or other contracts to issue common stock were exercised and converted into common stock.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States 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 the reported amounts of revenues and expenses during the reporting period. Significant estimates include those related to revenue recognition, valuation allowances, and goodwill impairment. Actual results could differ from those estimates.


	Our carrying value of financial instruments approximates fair value because of the nature and characteristic of our financial instruments. We do not have any off-balance sheet financial instruments. We do not have derivative procedure in place to manage risks related to foreign currency fluctuations for our foreign operations or for interest rate changes.


	In the consolidated balance sheet as of December 31, 2003 certain amounts in unbilled services have been reclassified to deferred revenues and the consolidated statements of cash flows for the years ended December 31, 2002 and 2003 have been adjusted accordingly.


	In the consolidated statements of cash flows for the year ended December 31, 2002, certain amounts in other assets have been reclassified to payments of loan amendment fees in the cash flows from financing activities.


	Effective January 1, 2003, we adopted FASB Statement No. 146, “Accounting for Costs Associated with Exit or Disposal Activities,” (“Statement No. 146”), which requires liabilities for costs associated with exit or disposal activities to be recognized when the liabilities are incurred, rather than when an entity commits to an exit plan. Statement No. 146 also establishes that the liability should initially be measured and recorded at fair value. This rule changed the timing of liability and expense recognition related to exit or disposal activities, but not the ultimate amount of such expenses.

	In 2003, we reduced our workforce in the U.S. market research operating segment and, as a result, incurred one-time termination benefits of approximately $705,000 for the termination of certain employees. These termination benefits were recognized in accordance with Statement No. 146 and included in our results of operations for the year ended December 31, 2003. During 2004, we paid out all previously accrued termination benefits from 2003.

	In January 2003, the FASB issued Interpretation No. 46, “Consolidation of Variable Interest Entities, an Interpretation of Accounting Research Bulletin No. 51” (“Interpretation No. 46”). Interpretation No. 46 requires the consolidation of entities in which an enterprise absorbs a majority of the entity’s expected losses, receives a majority of the entity’s expected residual returns, or both, as a result of ownership, contractual or other financial interests in the entity. Currently, entities are generally consolidated by an enterprise when it has a controlling financial interest through ownership of a majority voting interest in the entity.

	In December 2003, the FASB issued Interpretation No. 46(R) (“Interpretation No. 46(R)”), which clarified and amended Interpretation No. 46. Interpretation No. 46(R) requires existing unconsolidated variable interest entities to be consolidated by their primary beneficiaries if the entities do not effectively disperse risk among the parties involved. Interpretation No. 46(R) also enhances the disclosure requirements related to variable interest entities. Interpretation No. 46 applied immediately to variable interest entities created after January 31, 2003 and, with respect to variable interest entities created before February 1, 2003, Interpretation No. 46(R) applied for the quarter ended March 31, 2004.

	During 2001, we formed the Joint Venture with Ratrix Analytics LLC for the purpose of developing new research-based products. We have a 44.8% ownership interest and 50% voting interest in the Joint Venture. In 2004, we contributed $0 in services and cash and, since inception, have contributed an aggregate of $1.7 million. All amounts funded to date have been expensed. We are not obligated for future funding of the Joint Venture.

	As the Joint Venture has a sufficient amount of equity to absorb the entity’s expected loss, the equity owners as a group are able to make decisions about the entity’s activities, and the equity owners have the obligation to absorb expected losses and the rights to receive the expected residual returns, we believe that the Joint Venture is not a variable interest entity under the principal criteria as set forth in Interpretations No. 46 and 46(R) and, accordingly, we are not required to apply the consolidation provision under Interpretations No. 46 and 46(R). The application of Interpretations No. 46 and 46(R) in 2003 and 2004 had no impact on our results of operations, financial position or cash flows.


	In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity” (“Statement No. 150”). Statement No. 150 requires that certain financial instruments with characteristics of both liabilities and equity, including mandatory redeemable financial instruments, be classified as a liability. Any amounts paid or to be paid to holders of these financial instruments in excess of the initial measurement amount shall be reflected in interest cost. Statement No. 150 is effective for financial instruments entered into or modified after May 31, 2003, and otherwise will be effective at the beginning of the first interim period beginning after June 15, 2003. We adopted Statement No. 150 on July 1, 2003. The adoption of this statement has had no impact on our results of operations, financial position or cash flows.

	In December 2004, the Financial Accounting Standards Board issued Statement No. 123(R), Share-Based Payment (“Statement No. 123(R)”). Statement No. 123(R) requires that the costs of employee share-based payments be measured at fair value on the awards’ grant date using an option pricing model and recognized in the financial statements over the requisite service period. Statement No. 123(R) does not change the accounting for stock ownership plans, which are subject to American Institute of Certified Public Accountants SOP 93-6, “Employer’s Accounting for Employee Stock Ownership Plans. Statement No. 123(R) supersedes Opinion 25, Accounting for Stock Issued to Employees and its related interpretations, and eliminates the alternative to use Opinion 25’s intrinsic value method of accounting, which we are currently using.

	Statement No. 123(R) allows for two alternative transition methods. The first method is the modified prospective application whereby compensation cost for the portion of awards for which the requisite service has not yet been rendered that are outstanding as of the adoption date will be recognized over the remaining service period. The compensation cost for that portion of awards will be based on the grant-date fair value of those awards as calculated for pro forma disclosures under Statement No. 123, as originally issued. All new awards and awards that are modified, repurchased, or cancelled after the adoption date will be accounted for under the provisions of Statement No. 123(R). The second method is the modified retrospective application, which requires that we restate prior period financial statements. The modified retrospective application may be applied either to all prior periods or only to prior interim periods in the year of adoption of Statement No. 123(R). We are currently determining which transition method we will adopt and are evaluating the impact Statement No. 123(R) will have on our financial position, results of operations, EPS and cash flows when Statement No. 123(R) is adopted.

	In December 2004, the FASB issued FSP 109-2, “Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provisions within the American Jobs Creation Act of 2004” (the “Act”). The Act was signed into law on October 22, 2004. The Act provides for a special one-time tax deduction of 85% of certain foreign earnings that are repatriated (as defined by the Act) in either an enterprise’s last tax year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. At December 31, 2004, unremitted earnings of foreign subsidiaries that could qualify for this special one-time tax deduction of 85% were approximately $384,000. Because at this time it is our intention to indefinitely reinvest these earnings, no U.S. taxes have been provided. If, upon further evaluation of this provision, we conclude that we will repatriate these unremitted foreign earnings, the tax expense recognized would be approximately $20,000.


	As discussed in Note 1 to the Consolidated Financial Statements, we adopted SFAS No. 142, “Goodwill and Other Intangible Assets” on January 1, 2002. Under Statement No. 142, goodwill and intangible assets that have indefinite useful lives are no longer amortized. Instead, Statement No. 142 requires such assets be reviewed for impairment annually, or more frequently if certain indicators arise, using the guidance specifically provided. At the date of adoption, we reclassified assembled workforce intangible assets with an unamortized balance of $865,000 and recorded as a cumulative effect of a change in accounting principle, goodwill impairment related to our Mexican subsidiary of $292,000, or $(0.05) per share. During 2002, we identified other intangible assets for which useful life can no longer be determined. As a result, we reclassified $480,000 from other intangible assets to goodwill in the fourth quarter of 2002. In the fourth quarter of 2002, we recorded a non-cash impairment charge of $5.9 million to reduce the carrying value of goodwill in our U.S. market research segment.

	In the fourth quarter of 2003, we recorded non-cash impairment charges to reduce the carrying values of goodwill in the amount of $10.0 million in teleservices, $6.0 million in U.S. market research and $317,000 in our Korean subsidiary.

	The significant assumptions in 2003 used in determining the market value of the teleservices business were as follows:


	•	0.3 times trailing twelve-month revenues for comparable publicly-traded companies;

	•	3.7 times trailing twelve-month earnings before interest, taxes, depreciation and amortization for comparable publicly-traded companies;

	•	0.5 times trailing twelve-month revenues for comparable sales transactions;

	•	multiples of earnings before interest, taxes, depreciation and amortization for comparable sales transactions were not included given the absence of profitable comparable companies; and

	•	for a five-year financial projection, a discount rate of 20.0%; an exit multiple of 2.5 times earnings before interest, taxes, depreciation and amortization; a compound growth rate for revenues of 6.4% and an improvement in operating income as a percentage of revenues from 13.3% to 15.4%.


	The significant assumptions used in determining the market value of the U.S. market research business were as follows:


	•	1.2 times trailing twelve-month revenues for comparable publicly-traded companies;

	•	9.6 times trailing twelve-month earnings before interest, taxes, depreciation and amortization for comparable publicly-traded companies;

	•	0.6 times trailing twelve-month revenues for comparable sales transactions;

	•	6.6 times trailing earnings before interest, taxes, depreciation and amortization for comparable sales transactions;

	•	for a five-year financial projection, a discount rate of 16.0%; an exit multiple of 6.0 times earnings before interest, taxes, depreciation and amortization; a compound growth rate for revenues of 7.5% and no improvement in operating income as a percentage of revenues; and

	•	in the overall evaluation, the publicly-traded comparable data was discounted 15.0% to reflect the netting of discounts for marketability and company size and a control premium.


	comparables and the relevant-sale transaction comparables were very different for these two segments at the time of comparison. Second, because the two segments had very different types of operating risks at the time, we used different weighted average costs of capital and different discount rates for lack of marketability in these analyses. One of the most significant differences in operating risks between these two segments was the nature and mix of the client contracts when viewed in the context of the then-current market conditions. Both of these factors led to the use of lower valuation metric assumptions for the teleservices segment at the time we performed the analyses.

	In October 2004, as part of our annual impairment test based on Statement No. 142, we performed our annual goodwill impairment test. Based upon the results of such test we determined that the estimated fair values of our business segments exceeded their book values as determined by a weighting of comparable company analyses and discounted cash flow models.

	Management cannot provide assurance that additional impairment charges will not be required in the future if the U.S. market research and teleservices businesses do not recover as projected.

	The changes in the carrying value of goodwill are as follows:


	Amortization expense for other intangibles for the years ended December 31, 2002, 2003, and 2004 was $986,000, $538,000 and $312,000 respectively. The estimated aggregate amortization expense for each of the five succeeding years is as follows:

The unbilled receivables at December 31, 2003 and 2004 included $802,000 and $1.1 million respectively, of retainage under terms of the contracts which can only be invoiced upon completion of federal government indirect cost audits. We do not anticipate the collection of any of the retainage recorded at December 31, 2004 during 2005, but such amounts are classified as current assets in accordance with industry standards. No single client constituted more than 10% of net billed receivables at December 31, 2003. One client in our social research business constituted 14% of net billed receivables for the year ended December 31, 2004.


	Depreciation expense for the years ended December 31, 2002, 2003, and 2004 was $3.5 million, $3.6 million and $3.7 million, respectively.


	For financial reporting purposes, income (loss) before income taxes and cumulative effect of accounting change consists of the following:


	The provision (benefit) for income taxes, excluding amounts related to cumulative effect of accounting change, consists of the following:


	The difference between tax expense and the amount computed by applying the statutory federal income tax rate (34%) to income before income taxes and cumulative effect of accounting change is as follows:


	Our deferred tax liabilities and assets consist of the following temporary differences:

At December 31, 2003 and 2004, we have net current deferred tax assets in the amount of $931,000 and $280,000, respectively, which are reported in the balance sheet in prepaid and other current assets. Income taxes paid in the U.S. in 2002, 2003, and 2004 are $1.8 million, $1.1 million, and $1.9 million, respectively. Income taxes paid in the U.K. in 2002, 2003, and 2004 are $417,000, $198,000, and $217,000, respectively.


	At December 31, 2003 and 2004 we recorded a net valuation allowance of $2.2 million and $2.7 million respectively against state deferred tax assets related to certain subsidiaries since the realization of these future state tax benefits is not deemed to be more likely than not.

	The American Jobs Creation Act of 2004 (the “Act”) was signed into law on October 22, 2004. The Act provides for a special one time tax deduction of 85 percent of certain foreign earnings that are repatriated (as defined by the Act) in either an enterprise’s last tax year that began before the enactment date, or the first tax year that begins during the one-year period beginning on the date of enactment. At December 31, 2004, unremitted earnings of foreign subsidiaries that could qualify for this special one time tax deduction of 85 percent were approximately $384,000. Since at this time it is our intention to indefinitely reinvest these earnings, no U.S. taxes have been provided. If, upon further evaluation of this provision, we conclude that we will repatriate these unremitted foreign earnings, the deferred tax expense recognized would be approximately $20,000.

	At December 31, 2004, the company had approximately $34 million of state net operating losses available to offset the future taxable income of certain subsidiaries. If not used, these net operating losses will expire in varying amounts beginning in 2005 through 2024.


	In February 2003, we completed an amendment to our then existing senior credit facility (the “Senior Facility”), which reduced the amount available under the revolving credit from $19.0 million to $16.5 million and amended certain future covenants to be less restrictive (the “February 2003 Amendment”). Additionally, the February 2003 Amendment provided for an increase in the interest rate by 50 basis points to LIBOR plus 375 basis points or the financial institution’s designated base rate plus 250 basis points. We incurred an amendment fee of $180,000 for the February 2003 Amendment.

	We were required to maintain certain financial covenants under the Senior Facility, such as minimum earnings, debt-to-earnings, interest coverage and other financial ratios. For the measuring period ended June 30, 2003, we were not in compliance with two of the existing covenants; such non-compliance was waived by the lenders in July 2003. In conjunction with the waiver, we also amended certain covenants for the measuring period ended September 30, 2003 to be less restrictive (the “July 2003 Amendment”). We were in compliance with all covenant requirements for the measuring period ended September 30, 2003. Total costs incurred for the July 2003 Amendment were $495,000 and were being amortized over the remaining term of the facility.


	During the third quarter of 2003, it came to our attention and our lenders that we had failed to make a payment under an excess cash flow provision of our Senior Facility in the amount of $1.7 million. We entered into a Forbearance Agreement with our lenders pursuant to which the lenders agreed to allow us to make such payment in four equal monthly installments beginning December 31, 2003, and we agreed to an increase of 2% in the interest rate applicable to our senior credit facility and a forbearance fee of $79,000. We also agreed to meet certain deadlines relating to the expected refinancing of our credit facilities which included the requirement to deliver a written commitment from a new senior credit facility lender no later than December 17, 2003. We were not able to deliver such written commitment on the specified date. As a result of the non-delivery of the written commitment, the senior lenders did not approve and we did not make an interest payment to our subordinated lenders in the amount of $474,000 which was originally due on December 1, 2003.

	On December 30, 2003, we completed another amendment to our Senior Facility (the “December 2003 Amendment”) in which Heller Financial Inc., a wholly owned subsidiary of General Electric Capital Corporation, purchased the remaining interests from other participating lenders and assumed the entire Senior Facility. The December 2003 Amendment provided for the increase in the amount available under the revolving credit from $16.5 million to $19.5 million and extended the maturity for both the revolving credit and the term notes to March 31, 2005. Additionally, the December 2003 Amendment provided for an increase in the interest rate to LIBOR plus 700 basis points or the financial institution’s designated base rate plus 500 basis points for the revolving credit and 9% for the term notes for which the outstanding balance as of December 31, 2003 was $13.5 million. The December 2003 Amendment also permitted the payment of interest in the amount of $474,000 due to our subordinated lenders and waived the existing defaults and required excess cash flow payments discussed in the previous paragraphs. We made such interest payment to our subordinated lenders upon completion of the December 2003 Amendment.

	In conjunction with the December 2003 Amendment, we incurred an amendment fee of $1.0 million which was recorded in other long-term assets in our consolidated balance sheet and, together with the previously unamortized loan fees of $520,000 was being amortized over the remaining term of the facility.

	In March 2004, we further amended a future financial covenant under our Senior Facility and subordinated debentures to be less restrictive. We incurred an amendment fee of $75,000.

	In May 2004, we entered into a secured revolving credit facility of $35.0 million with Citizens Bank of Pennsylvania and First Horizon Bank (the “Senior Revolving Facility”). The Senior Revolving Facility is for a three-year term and is secured by substantially all of our assets. The Senior Revolving Facility carries an interest rate at our discretion of either the financial institution’s designated base rate (5.25% at December 31, 2004) plus 100 basis points or LIBOR (3-month LIBOR was 2.56% at December 31, 2004) plus 300 basis points. As of December 31, 2004, we had approximately $12.7 million of additional credit available under the Senior Revolving Facility.

	In May 2004, we also issued $10.0 million of secured subordinated notes (the “Secured Subordinated Notes”) and $12.0 million of unsecured subordinated notes (the “Unsecured Subordinated Notes”) to Allied Capital Corporation (“Allied Capital”). We used the proceeds of the borrowings under the Senior Revolving Facility, the Secured Subordinated Notes and the Unsecured Subordinated Notes to repay all debt outstanding at May 4, 2004. At December 31, 2004, the Secured Subordinated Notes carried an interest rate of 10.0%, required principal payments of $500,000 per quarter, and were set to mature in November 2007. At December 31, 2004, the Unsecured Subordinated Notes carried a fixed


	interest rate of 15.5%; 13.0% payable quarterly in cash, and 2.5%, payable, in cash or deferred and included in the outstanding principal balance until maturity in May 2009. In exchange for consideration received in connection with this debt, we extended the term of existing warrants held by Allied Capital and Allied Investment Corporation (together, “Allied”) from May 2007 to the later of May 2009 or the third anniversary of the repayment date. These warrants were issued in 1999 to Allied and are for the purchase of 437,029 shares of our common stock at an exercise price of $5.422 per share. The extension of these warrants is valued at $616,000 and will be accreted through interest expense over the life of the Unsecured Subordinated Notes. Effective March 15, 2005, we used the proceeds from the Term Loan, together with proceeds from a drawdown of the Senior Revolving Facility, to pay off the outstanding balance under the Secured Subordinated Notes and the Unsecured Subordinated Notes.

	We are required to maintain certain financial covenants under our credit facilities. At December 31, 2004, we were in compliance with all of our financial covenants. We expect to be in compliance with all of our financial covenants throughout 2005.

	All debt outstanding as of May 4, 2004 was repaid with proceeds from the above borrowings. In conjunction with the new credit facilities, we incurred additional costs of approximately $1.4 million which are included in other long term assets in our consolidated financial statements and amortized over the remaining terms of the facilities, commencing in the second quarter of 2004. Due to the refinancing described herein, we also wrote off the unamortized loan fees of approximately $2.5 million as interest expense, which included payments of $420,000 made in 2004, related to the retired debt in the second quarter of 2004.

	Aggregate maturities of debt for the years ending December 31 are as follows:


	We paid interest of $4.0 million, $4.5 million and $5.0 million for the years ended December 31, 2002, 2003, and 2004, respectively. Interest expense for 2004 included the write-off of unamortized loan fees of approximately $2.5 million due to the refinancing of the credit facilities. See note 18 regarding our new secured term loan.


	Future minimum payments required under capital and operating leases that have non-cancelable lease terms in excess of one year are as follows:

At December 31, 2004, the current and long-term capital lease obligations of $194,000 and $328,000 were recorded in the balance sheet in other current and long-term liabilities, respectively. Rent expense under operating leases was $8.4 million, $8.7 million and $9.6 million for the years ended December 31, 2002, 2003 and 2004, respectively. Real estate taxes, insurance and maintenance expenses generally are obligations of our company and, accordingly, are not included as part of rental payments. It is expected that, in the normal course of business, leases that expire will be renewed or replaced by leases on similar properties.


	On July 19, 2001, guidance was issued in EITF Topic No. D-98, “Classification and Measurement of Redeemable Securities”, which requires securities with redemption features, including those that become exercisable only upon a change-in-control, be classified outside of permanent equity. As described in the paragraphs below, certain of our equity instruments purchased by LLR Equity Partners, L.P. and LLR Partners Parallel, L.P. (together, the “LLR Partnerships”) on September 1, 2000 contain such change-in-control redemption rights.

	Pursuant to the terms of a September 1, 2000 Purchase Agreement, we sold and the LLR Partnerships purchased in a private placement (1) 1,176,458 shares of the our Common Stock, (2) 10 shares of the Series B Preferred Stock, and (3) warrants to purchase 740,500 shares of our Common Stock at an exercise price of $12.00 per share, for aggregate gross proceeds of $10.0 million. The warrants are exercisable from the date of issuance and expire in 2010. If we sell shares of Common Stock in the future at a per share price below $8.50, the exercise price of the warrants would be proportionately reduced and certain contingent warrants issued to the LLR Partnerships at an exercise price of $.01 per share become exercisable.

	The holders of Series B Preferred Stock are entitled to nominate and elect two directors to our board of directors. The holders of the Series B Preferred Stock are not entitled to receive dividends. In the event of liquidation, each share of the Series B Preferred Stock is entitled to a liquidation preference of $10.00 per share. We may redeem the outstanding shares of Series B Preferred Stock at any time


	the LLR Partnership’s shareholdings fall below 10% of our outstanding common shares, at a per share amount equal to the greater of the fair market value or the liquidation preference.

	At any time after the fifth anniversary of the closing, the LLR Partnerships may exchange each share of Common Stock for one-half of a share of our Series C Preferred Stock. After conversion, the holders of Series C Preferred Stock are entitled to receive cumulative quarterly cash dividends at an annual rate of $2.04 per share. In the event of liquidation, each share of the Series C Preferred Stock is entitled to a liquidation preference of $17.00 per share plus all accrued and unpaid dividends. Each share of Series C Preferred Stock is convertible at all times into two shares of Common Stock. The holders of Series C Preferred Stock are entitled to vote on all matters before the common holders, as a single class with the Common Stock, on an as if converted basis. Additionally, holders of Series C Preferred Stock as a class, may also nominate and elect two additional directors to our board of directors, subject to the maintenance by the LLR Partnerships of certain specified ownership percentages.

	In the event of (i) the sale of substantially all of the assets of the Company, (ii) any consolidation or merger of the Company into another corporation or entity in which the stockholders of the Company immediately prior to such transaction hold less than 50% of the Company’s voting power immediately after such transaction, or (iii) any transactions in which in excess of 50% of the Company’s voting power is transferred to one or more affiliated persons, the holders of the Series B Preferred Stock and the Series C Preferred Stock may require us to redeem such securities at their liquidation preferences of $10.00 and $17.00 per share, respectively. Because such redemption features are not solely within the control of the Company, the Series B Preferred Stock and the 1,176,458 shares of Common Stock held by LLR (which may be exchanged into shares of Series C Preferred Stock), have been presented outside of stockholders’ equity in our consolidated balance sheets. The 1,176,458 shares of Common Stock held by the LLR Partnerships are carried at their aggregate fair value at issuance of $8.9 million, and no changes will be made to such carrying value until a change-in-control of the Company is probable. Finally, because the rights to exchange shares of Common Stock into shares of Series C Preferred Stock may not be transferred by the LLR Partnerships to any parties other than affiliates of the LLR Partnerships, these rights will terminate upon any resale or transfer of the 1,176,458 shares of Common Stock held by LLR to an unaffiliated entity. Accordingly, upon the occurrence of any such resale or transfer, we will reclassify a pro-rata portion of the carrying value of such Common Stock into stockholders’ equity.

	We may call, solely at our discretion, the outstanding shares of Series C Preferred Stock at any time at a per share amount equal to the greater of the fair market value or the liquidation preference multiplied by 25% per annum, compounded annually from September 1, 2000, plus any accrued but unpaid dividends per share.

We maintain a defined contribution pension and profit sharing plan covering substantially all domestic employees (“the ORC Plan”) except for ORC Macro and SHS which maintained separate profit sharing and 401(k) plans (the “ORC Macro Plans” and the “SHS Plans”). As of December 31, 2004, employees may contribute up to 50% of their annual salary but not to exceed the maximum allowable under the Internal Revenue Code. The respective board of directors may elect to match employees’ contributions or contribute to the profit sharing plan. The ORC Plan assets included 159,625 and 157,500 shares of our common stock as of December 31, 2003 and 2004, respectively. We contributed $421,000, $399,000, and $325,000 to the ORC Plan in 2002, 2003, and


	2004, respectively. Under the ORC Macro Plans, we contributed $1.9 million, $1.9 million, and $2.1 million in 2002, 2003 and 2004, respectively. Under the SHS Plans, we contributed $377,000, $446,000, and $460,000 in 2002, 2003 and 2004, respectively.


	We maintain the 1997 Stock Incentive Plan, which provides for the grant of up to 1,625,000 options to purchase common stock to our directors and key employees. The exercise price of options granted to employees under this plan is at least equal to the fair market value of the stock on the date of grant; stock options are exercisable for seven years. Options granted under this plan are vested equally over a three-year period.

	Under the 1997 Stock Incentive Plan as amended, each Non-employee Director is granted options to acquire the “formula number” of shares of common stock on January 2nd of each year. The option exercise price for these options is equal to the fair market value of the underlying shares on the date of the grant.

	These options become exercisable on the first anniversary of the date of grant provided the Non-employee Director is a member of the board of directors on that date. The options granted under this provision are non-qualified stock options.

	For 2002, 2003 and 2004, all outside directors were granted the “formula number” of 5,000 shares. In addition, each director who chaired a committee was granted options to purchase an additional 5,000 shares of our common stock.

	Non-employee Directors’ options terminate seven years from the date of grant or the first anniversary after the optionee ceases to serve as a member of the board of directors for any reason. Any options of a Non-employee Director that are not exercisable when he or she ceases to serve as a member of the board of directors will terminate as of the termination of the Non-employee Director’s service on the board of directors.


	The following table presents the dollar ranges of stock option exercise prices relating to outstanding and exercisable stock options at December 31, 2004:


	In January 2000, 90,000 non-plan options were issued, with an exercise price equal to the market value of the stock at the date of grant, to a senior executive and were outstanding as of December 31, 2004. All such non-plan options have a vesting period of three years and a life of seven years. All non-plan options are included in the previously presented option table.

	Options exercisable at December 31, 2002, 2003, and 2004 were 837,560, 780,273, and 559,656 respectively. Exercise prices for options outstanding as of December 31, 2004 for the plan ranged from $3.63 to $8.88 per share. The weighted average remaining term of the outstanding options is 3.6 years. As of December 31, 2004, there were 490,101 shares available for grant under the 1997 Stock Incentive Plan.


	We have 1,402,529 and 1,277,529 warrants issued and outstanding with a weighted average exercise price of $8.80 and $9.23 as of December 31, 2003 and 2004. These warrants are immediately exercisable.

	At December 31, 2004, we have reserved an aggregate of 3,611,448 shares of common stock for issuance upon the exercise or conversion of all outstanding securities and the purchase of common stock under various stock purchase plans (see Note 12).

In May 2001, our stockholders approved the adoption of the Opinion Research Corporation Employee Stock Purchase Plan (the “Qualified Plan”), the Opinion Research Corporation Stock Purchase Plan for Non-employee Directors and Designated Employees and Consultants (the “Non-Qualified Plan”), and the ORC Holdings, Ltd. Employee Share Ownership Plan (the “U.K. Plan”). We have reserved, under the Qualified Plan, Non-Qualified Plan and the U.K. Plan, 1,000,000, 400,000 and 200,000 shares, respectively, of our common stock for future issuance. These plans allow eligible employees, non-employee directors, and consultants who meet certain qualifications to purchase our common stock at 85% of the lower of the fair market value at the beginning or end of each offering period. The following table summarizes the number of shares issued under the various plans for the years ended December 31, 2003 and 2004, respectively:


	As of December 31, 2004, approximately 574,340, 264,365, and 169,431 shares remained available for future issuance under the Qualified Plan, Non-Qualified Plan, and the U.K. Plan, respectively.


	We have entered into an agreement with a trust established in the name of an officer of the Company. Under the agreement, we pay certain premiums on the life insurance policy on the officer, to which the trust is the beneficiary. We have been assigned certain rights to the assets of the trust as collateral for the premium paid on this life insurance policy. The amount paid by us for the premiums on this policy was $46,000 for years ended December 31, 2002 and 2003. The cumulative premiums paid prior to 2004, which totaled $370,000 are recorded in other assets in the accompanying consolidated balance sheets. In the event the policy is terminated, the officer has guaranteed the repayment of the amount due from his trust, and has pledged certain of his personal assets to us to collateralize such guarantee. The amount paid in 2004 of $46,000 was treated as compensation expense by us and as income to the officer.

	Over several years, we made loans to certain executive officers bearing an interest rate of 9.5%. The current corporate policy prohibits the making of loans to any officers or directors. We currently have an outstanding loan made to our Chief Executive Officer, which has been grandfathered. Including accrued interest, the aggregate amount of indebtedness outstanding at December 31, 2003 and 2004 was $156,000. This amount was recorded in other current assets in our consolidated financial statements.

We identify segments based on our internal reporting to management and our board of directors which reflects our geographic locations and industries in which we operate. We currently have four reportable segments: U.S. market research, U.K. market research, teleservices, and social research. We measure segment profits as operating profit, which is defined as income before interest and other non-operating expenses and income taxes. Information on segments and a reconciliation to the consolidated total, are as follows:


	International long-lived assets were $4.9 million in 2002 and 2003 and $5.8 million in 2004. In 2002, 2003 and 2004, revenues from one customer of the social research segment represented $18.7 million,


	$20.4 million and $24.1 million of our total revenues, respectively. Revenues from the U.S. federal government represented $82.9 million, $95.3 million and $108.8 million of our total revenues in 2002, 2003 and 2004, respectively. Revenues in the “Other” category were generated from our Asia and Mexico operations. As these segments are not significant, results are not presented separately.


	The following table sets forth the computation of basic and diluted net income (loss) per share:


	Options and warrants to purchase 94,328 and 127,867 shares of common stock have not been included in the computation of diluted net income (loss) per share for the years ended December 31, 2002 and 2003, respectively, as their effect would have been anti-dilutive.

On December 2, 2004, several persons who purport to be stockholders of our company filed a derivative complaint against us and our directors in the Chancery Court of the State of Delaware regarding our contemplated offering of common stock. We have proposed to use a portion of the proceeds of a public offering of our common stock to repurchase all of the interests of the LLR Partnerships in us, other than limited registration rights and shares of our common stock with a value of $2.0 million, which the LLR Partnerships shall retain. The interests of the LLR Partnerships in us that are being repurchased are referred to herein as the “LLR Interests.” The plaintiffs allege, among other things, that the contemplated offering is unfairly dilutive to their holdings of our common stock and that the purchase price we intend to pay for the LLR Interests constitutes a waste of corporate assets. The complaint further alleges that, in approving the offering and the repurchase of the LLR Interests, our directors did not act on our behalf or on behalf of our stockholders but, rather, breached their fiduciary duties of good faith and loyalty to us and our stockholders. Finally, the complaint alleges that Janney Montgomery Scott LLC, an independent valuation firm, materially overvalued the LLR Interests in its opinion to our board of directors that our repurchase of the LLR


	Interests is fair, from a financial point of view, to our stockholders other than the LLR Partnerships. The plaintiffs seek the following:


	•	a declaration that our directors have violated their fiduciary duties;

	•	to enjoin the offering and the proposed repurchase of the LLR Interests or, if these transactions are completed, to rescind the transactions, compel the payment of unspecified damages or compel the issuance of new shares to plaintiffs to compensate for their dilution;

	•	an accounting from the defendants, jointly and severally, to us, the plaintiffs and our other stockholders for all monetary damages suffered by us by reason of the alleged misconduct;

	•	the award of costs and disbursements of their actions, including reasonable attorneys’ and experts’ fees; and

	•	such other and further relief as the court may determine is just and proper.


	We believe this suit is without merit and intend to vigorously defend against it. We have moved to dismiss the plaintiffs’ complaint.


	In March 2005, we entered into a new secured term loan of $15.0 million with Citizens Bank of Pennsylvania and First Horizon Bank (the “Term Loan”). The Term Loan is for a five-year term and is secured by substantially all of our assets. The Term Loan carries an interest rate of LIBOR plus 350 basis points, requires principal payments of $750,000 per quarter and matures in 2010. The proceeds from the Term Loan and a drawdown from the Senior Revolving Facility were used to prepay the Secured Subordinated Notes and the Unsecured Subordinated Notes in the combined amount of $20.5 million. We wrote-off unamortized fees in the amount of $813,000 and incurred prepayment penalties in the amount of $360,000 in connection with this transaction in the first quarter of 2005.

	On March 25, 2005, we entered into an agreement to repurchase the LLR Interests. Consummation of the agreement is contingent upon completion of a proposed public offering of our common stock. This agreement is on substantially the same terms as an earlier agreement that expired on January 31, 2005. The new agreement is attached as Exhibit 10.37 to our annual report on Form 10-K filed with the Securities and Exchange Commission on March 31, 2005.

The following table sets forth expenses in connection with the issuance and distribution of the securities being registered, all of which are being borne by the registrant.

For information regarding provisions under which one of our directors or officers may be insured or indemnified in any manner against any liability which he may incur in his capacity as such, reference is made to Section 145 of the Delaware General Corporation Law, Article Eleven of our Restated Certificate of Incorporation and Article Seven of our Amended and Restated By-laws. Section 145 of the Delaware General Corporation Law provides in its entirety as follows:


	(a) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe the person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which the person reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that the person’s conduct was unlawful.

	(b) A corporation shall have power to indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that the person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if the person acted in good faith and in a manner the person reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was


	brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper.

	(c) To the extent that a present or former director or officer of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses (including attorneys’ fees) actually and reasonably incurred by such person in connection therewith.

	(d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the present or former director, officer, employee or agent is proper in the circumstances because the person has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made, with respect to a person who is a director or officer at the time of such determination, (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) by a committee of such directors designated by majority vote of such directors, even though less than a quorum, or (3) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (4) by the stockholders.

	(e) Expenses (including attorneys’ fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that such person is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys’ fees) incurred by former directors and officers or other employees and agents may be so paid upon such terms and conditions, if any, as the corporation deems appropriate.

	(f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in such person’s official capacity and as to action in another capacity while holding such office.

	(g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of such person’s status as such, whether or not the corporation would have the power to indemnify such person against such liability under this section.

	(h) For purposes of this section, references to “the corporation” shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as such person would have with respect to such constituent corporation if its separate existence had continued.

	(i) For purposes of this section, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to “serving at the request of the corporation” shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or


	involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner such person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the corporation” as referred to in this section.

	(j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person.

	(k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation’s obligation to advance expenses (including attorneys’ fees).

Our certificate of incorporation eliminates the liability of directors to us for monetary damages for breach of fiduciary duty as a director to the fullest extent permissible under Delaware law. Under Delaware law, such provision may not eliminate or limit director monetary liability for: (a) breaches of the director’s duty of loyalty to us or our stockholders; (b) acts or omissions not in good faith or involving intentional misconduct or knowing violations of law; (c) the payment of unlawful dividends or unlawful stock repurchases or redemptions; or (d) transactions in which the director received an improper personal benefit. Such limitation of liability provisions also may not limit a director’s liability for violation of, or otherwise relieve us or our directors from the necessity of complying with, federal or state securities laws, or affect the availability of non-monetary remedies such as injunctive relief or rescission.

Our by-laws provide that we shall indemnify our directors and officers and may indemnify our employees and other agents to the fullest extent permitted by law. We believe that indemnification under our by-laws covers at least negligence and gross negligence on the part of indemnified parties. Our by-laws also permit us to secure insurance on behalf of any officer, director, employee or other agent for any liability arising out of his or her actions in such capacity, regardless of whether we would have the power to indemnify him or her against such liability under the General Corporation Law of Delaware.

Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions or otherwise, the registrant has been informed that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is therefore unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act of 1933, as amended, and will be governed by the final adjudication of such issue.


	(1) For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or Rule 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time is was declared effective.

	(2) For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

Pursuant to the requirements of the Securities Act of 1933, Opinion Research Corporation has duly caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized, at Princeton, New Jersey on April 27, 2005.


	BY:	/s/ JOHN F. SHORT



	John F. Short
	Chairman of the Board and
	Chief Executive Officer

Pursuant to the requirements of the Securities Act of 1933, this registration statement has been signed by the following persons in the capacities and on the dates indicated.

II-8 EX-1.1 2 e02966a4exv1w1.txt FORM OF UNDERWRITING AGREEMENT EXHIBIT 1.1 Opinion Research Corporation [________] Shares Common Stock UNDERWRITING AGREEMENT [_____], 2005 Friedman, Billings, Ramsey & Co., Inc. as Representative of the several Underwriters c/o Friedman, Billings, Ramsey & Co., Inc. 1001 19th Street North Arlington, Virginia 22209 Ladies and Gentlemen: Opinion Research Corporation, a Delaware corporation (the "Company"), confirms its agreement with each of the Underwriters listed on Schedule I hereto (collectively, the "Underwriters"), for whom Friedman, Billings, Ramsey & Co., Inc. is acting as representative (in such capacity, the "Representative"), with respect to the sale by the Company of [_________] shares (the "Initial Shares") of Common Stock, par value $0.01 per share, of the Company ("Common Stock"), and the purchase by the Underwriters, acting severally and not jointly, of the respective number of shares of Common Stock set forth opposite the names of the Underwriters in Schedule I hereto. The Company also confirms the grant of the option described in Section 1(b) hereof to purchase all or any part of [______] additional shares of Common Stock to cover over-allotments (the "Option Shares"), if any, from the Company to the Underwriters, acting severally and not jointly. The Initial Shares of Common Stock to be purchased by the Underwriters and all or any part of the Option Shares of Common Stock subject to the option described in Section l(b) hereof are hereinafter called, collectively, the "Shares." The Company has prepared and filed with the Securities and Exchange Commission (the "Commission"), a registration statement on Form S-1 (No. 333-119875) and a related preliminary prospectus for the registration of the Shares under the Securities Act of 1933, as amended (the "Securities Act"), and the rules and regulations thereunder (the "Securities Act Regulations"). The Company has prepared and filed such amendments thereto, if any, and such amended preliminary prospectuses, if any, as may have been required to the date hereof, and will file such additional amendments thereto and such amended prospectuses as may hereafter be required. The registration statement has been declared effective under the Securities Act by the Commission. The registration statement as amended at the time it became effective (including all exhibits, financial schedules and information deemed (whether by incorporation by reference or otherwise) to be a part of the registration statement at the time it became effective pursuant to Rule 430A(b) of the Securities Act Regulations or otherwise) is hereinafter called the "Registration Statement," except that, if the Company files a post-effective amendment to such registration statement which becomes effective prior to the Closing Time (as defined below), "Registration Statement" shall refer to such registration statement as so amended. Any registration statement filed pursuant to Rule 462(b) of the Securities Act Regulations is hereinafter called the "Rule 462(b) Registration Statement," and after such filing the term "Registration Statement" shall include the 462(b) Registration Statement. Each prospectus included in the registration statement, or amendments thereof or supplements thereto, before it became effective under the Securities Act and any prospectus filed with the Commission by the Company with the consent of the Underwriters pursuant to Rule 424(a) of the Securities Act Regulations is hereinafter called the "Preliminary Prospectus." The term "Prospectus" means the prospectus in the form included in the Registration Statement at the time of effectiveness, or if Rule 430A of the Securities Act Regulations is relied upon, the term "Prospectus" shall also include the final prospectus, as first filed with the Commission pursuant to paragraph (1) or (4) of Rule 424(b) of the Securities Act Regulations, and any amendments thereof or supplements thereto. The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus. The Company understands that the Underwriters propose to make a public offering of the Shares as soon as the Underwriters deem advisable after the effective date of the Registration Statement and this Agreement has been executed and delivered. The Company hereby confirms that the Underwriters and dealers have been authorized to distribute or cause to be distributed each Preliminary Prospectus and are authorized to distribute the Prospectus (as from time to time amended or supplemented if the Company furnishes any amendments or supplements thereto to the Underwriters). The Company and the Underwriters agree as follows: 1. Sale and Purchase. (a) Initial Shares. Upon the basis of the warranties and representations and other terms and conditions herein set forth, at the purchase price per share of [________], the Company agrees to sell to the Underwriters the number of Initial Shares set forth in Schedule I opposite its name, and each Underwriter agrees, severally and not jointly, to purchase from the Company the number of Initial Shares set forth in Schedule I opposite such Underwriter's name, plus any additional number of Initial Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 8 hereof, subject in each case, to such adjustments among the Underwriters as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares. The Underwriters may from time to time increase or decrease the public offering price after the public offering to such extent as the Underwriters may determine. (b) Option Shares. In addition, upon the basis of the warranties and representations and other terms and conditions herein set forth, at the purchase price per share 2 set forth in paragraph (a), the Company hereby grants an option to purchase all or any part of the [_______] Option Shares to the Underwriters. The option hereby granted will expire 30 days after the date hereof and may be exercised in whole or in part from time to time only for the purpose of covering over-allotments which may be made in connection with the offering and distribution of the Initial Shares upon notice by the Representative to the Company setting forth the number of Option Shares as to which the several Underwriters are then exercising the option and the time and date of payment and delivery for such Option Shares. Any such time and date of delivery (a "Date of Delivery") shall be determined by the Representative, but shall not be later than ten full business days (or earlier, without the consent of the Company, than two full business days) after the exercise of said option, nor in any event prior to the Closing Time, as hereinafter defined. If the option is exercised as to all or any portion of the Option Shares, each of the Underwriters, acting severally and not jointly, will purchase the number of Option Shares which the Company has been advised by the Representative have been attributed to such Underwriter or, if the Company has not been so advised, that proportion of the total number of Option Shares then being purchased which the number of Initial Shares set forth in Schedule I opposite the name of such Underwriter bears to the total number of Initial Shares, plus any additional number of Option Shares which such Underwriter may become obligated to purchase pursuant to the provisions of Section 8 hereof, subject in each case to such adjustments among the Underwriters as the Representative in its sole discretion shall make to eliminate any sales or purchases of fractional shares. The Underwriters may from time to time increase or decrease the public offering price of the Option Shares after the public offering to such extent as the Underwriters may determine. 2. Payment and Delivery. (a) Initial Shares. The Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as the Representative may request upon at least forty-eight hours' prior notice to the Company shall be delivered by or on behalf of the Company to the Representative, including, at the option of the Representative, through the facilities of The Depository Trust Company ("DTC") for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified to the Representative by the Company upon at least forty-eight hours' prior notice. To the extent the Representative requests that the Initial Shares be delivered in certificated form and not in book entry through the facilities of DTC, the Company will cause the certificates representing the Initial Shares to be made available for checking and packaging at least twenty-four hours prior to the Closing Time (as defined below) with respect thereto at the office of the Representative, 1001 19th Street North, Arlington, Virginia 22209, or at the office of DTC or its designated custodian, as the case may be (the "Designated Office"). The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on the third (fourth, if pricing occurs after 4:30 p.m., New York City time) business day after the date hereof (unless another time and date shall be agreed to by the Representative and the Company). The time at which such payment and delivery are actually made is hereinafter sometimes called the "Closing Time." 3 (b) Option Shares. Any Option Shares to be purchased by each Underwriter hereunder, in definitive form, and in such authorized denominations and registered in such names as the Representative may request upon at least forty-eight hours' prior notice to the Company shall be delivered by or on behalf of the Company to the Representative, including, at the option of the Representative, through the facilities of DTC for the account of such Underwriter, against payment by or on behalf of such Underwriter of the purchase price therefor by wire transfer of Federal (same-day) funds to the account specified to the Representative by the Company upon at least forty-eight hours' prior notice. To the extent the Representative requests that the Option Shares be delivered in certificated form and not in book entry through the facilities of DTC, the Company will cause the certificates representing the Option Shares to be made available for checking and packaging at least twenty-four hours prior to the Date of Delivery with respect thereto at the Designated Office. The time and date of such delivery and payment shall be 9:30 a.m., New York City time, on the date specified by the Representative in the notice given by the Representative to the Company of the Underwriters' election to purchase such Option Shares or on such other time and date as the Company and the Representative may agree upon in writing. 3. Representations and Warranties of the Company. The Company represents and warrants to each Underwriter that: (a) The subsidiaries listed on Schedule II attached hereto are the only subsidiaries of the Company (each a "Subsidiary"). The Company and its Subsidiaries each have been duly incorporated or organized and are validly existing as corporations or limited liability companies in good standing under the laws of their respective jurisdictions of incorporation or organization with full power and authority to own, lease, license and operate their respective assets and properties and to conduct their respective business as described in the Registration Statement and Prospectus and, in the case of the Company, to execute and deliver this Agreement and to consummate the transactions described in this Agreement; (b) the Company and all of its Subsidiaries are duly qualified or licensed by each jurisdiction in which they conduct their respective businesses, and the Company and its Subsidiaries are duly qualified, and are in good standing, in each jurisdiction in which they own or lease real property or maintain an office and in which such qualification is necessary, except where the failure to be so qualified or licensed and in good standing, individually and in the aggregate, would not have a material adverse effect on the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole (a "Material Adverse Effect"); except as disclosed in the Prospectus, no Subsidiary is prohibited or restricted, directly or indirectly, from paying dividends to the Company, or from making any other distribution with respect to such Subsidiary's capital stock or from repaying to the Company or any other Subsidiary any amounts which may from time to time become due under any loans or advances to such Subsidiary from the Company or such other Subsidiary, or from transferring any such Subsidiary's property or assets to the Company or to any other Subsidiary; other than as 4 disclosed in the Prospectus, the Company does not control or own, directly or indirectly, any capital stock or other equity securities of any other corporation (other than the Subsidiaries) or any ownership interest in any partnership, joint venture or other association; (c) the Company and its Subsidiaries, and, to the Company's knowledge, each of the officers and directors of the Company and the Subsidiaries, in their capacity as such, are in compliance in all respects with all applicable laws, rules, regulations, orders, decrees and judgments, including, without limitation, those relating to fiduciary obligations of directors, transactions with affiliates, and the Sarbanes-Oxley Act of 2002, as amended, and except where the failure to be so in compliance could not reasonably be expected to have a Material Adverse Effect; (d) neither the Company nor its Subsidiaries is in breach or violation of or in default (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under), (i) under any term or provision of its respective certificate of incorporation or charter or by-laws, or (ii) in the performance or observance of any obligation, agreement, covenant or condition contained in any license, indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument to which the Company or its Subsidiaries is a party or by which any of them or their respective properties is bound, except, in the case of clause (ii) only, for such breaches or defaults, individually and in the aggregate, which would not have a Material Adverse Effect; and the execution, delivery and performance of this Agreement, and consummation of any of the transactions contemplated hereby and the application of the net proceeds from the offering and sale of the Shares to be sold by the Company in the manner set forth in the Prospectus under the caption "Use of Proceeds" will not give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with, or result in any breach or violation of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both would constitute a breach of, or default under), or require any consent or waiver under, (a) any provision of the certificate of incorporation or charter or by-laws of the Company or its Subsidiaries; (b) any provision of any franchise, permit, license, indenture, mortgage, deed of trust, loan or credit agreement or other agreement or instrument to which the Company or its Subsidiaries is a party or by which any of them or their respective properties may be bound or affected; or (c) any federal, state, local or foreign law, regulation or rule or any decree, judgment or order applicable to the Company or its Subsidiaries, or result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company or its Subsidiaries, except in the case of clauses (b) or (c) for such conflicts, breaches or defaults which have been validly waived or would not reasonably be expected to have a Material Adverse Effect or result in the creation or imposition of any material lien, charge, claim or encumbrance upon any property or asset of the Company or any of its Subsidiaries; (e) all necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Shares by the Company; this Agreement has been duly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the Company 5 enforceable in accordance with its terms, except as may be limited or affected by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and by general principles of equity, and except to the extent that the indemnification and contribution provisions of Section 9 hereof may be limited by federal or state securities laws and public policy considerations in respect thereof; (f) no approval, authorization, consent, license, permit, certificate or order of or filing by or with any federal, state or local governmental or regulatory commission, board, body, authority or agency is required in connection with the Company's execution, delivery and performance of this Agreement, its consummation of the transactions contemplated hereby, and its sale and delivery of the Shares, other than (A) such as have been obtained and are in full force and effect, or will have been obtained and will be in full force and effect at the Closing Time or the relevant Date of Delivery, as the case may be, under the Securities Act, (B) such approvals as have been obtained and are in full force and effect in connection with the approval of the quotation of the Shares on the Nasdaq National Market, (C) any necessary qualification under the securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters, and (D) where the failure to obtain any such approval, authorization, consent, license, permit, certificate or order could not reasonably be expected to affect adversely in any material respect the transactions contemplated by this Agreement or to have a Material Adverse Effect. (g) each of the Company and its Subsidiaries has all necessary licenses, authorizations, consents, permits, certificates and approvals and has made all necessary filings required under any federal, state or local law, regulation or rule, and has obtained all necessary licenses, authorizations, consents, permits, certificates and approvals from other persons, required in order to own, lease and license their respective assets and properties and conduct their respective businesses as described in the Prospectus, all of which are valid and in full force and effect, except to the extent that any failure to have any such licenses, authorizations, consents or approvals, to make any such filings or to obtain any such licenses, authorizations, consents, permits, certificates or approvals would not, individually or in the aggregate, have a Material Adverse Effect; neither the Company nor any of its Subsidiaries is required by any applicable law to obtain accreditation or certification from any governmental agency or authority in order to provide the products and services which it currently provides or which it proposes to provide as set forth in the Prospectus, except such accreditations or certifications as have been obtained by the Company and are in full force and effect and except to the extent that the failure to have such accreditations or certifications could not reasonably be expected to have a Material Adverse Effect; neither the Company nor any of its Subsidiaries has received any notice regarding a possible violation, default or revocation of, and, to the Company's knowledge, neither the Company nor any of its Subsidiaries is in violation of or in default under, any such license, authorization, consent, permit, certificate or approval or any federal, state, local or foreign law, regulation or rule or any decree, order or judgment applicable to the Company or its Subsidiaries the effect of which could be material and adverse to the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole; to the Company's knowledge, no event has occurred that allows, or after notice or lapse of time 6 would allow, revocation or termination of any such license, authorization, consent, permit, certificate or approval or results in any other material impairment of the rights of the Company or any Subsidiary thereunder; and no such license, authorization, consent, permit, certificate or approval contains a materially burdensome restriction that is not adequately disclosed in the Registration Statement and the Prospectus; (h) the Company has an authorized capitalization as set forth in the Prospectus under the caption "Capitalization;" all of the issued and outstanding shares of capital stock of the Company and its Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable and none of them was issued in violation of any preemptive or other similar right, and all of the outstanding shares of capital stock of the Subsidiaries are directly or indirectly owned of record and beneficially by the Company; all securities issued by the Company, its Subsidiaries or any trust established by the Company or its Subsidiaries, have been issued and sold by the Company, its Subsidiaries or any trust established by the Company or its Subsidiaries, as the case may be, in compliance with (x) all applicable federal and state securities laws, (y) the laws of the applicable jurisdiction of incorporation of the issuing entity and (z) to the extent applicable, the requirements of the Nasdaq National Market; except as disclosed in the Prospectus, there are no outstanding (i) securities or obligations of the Company or its Subsidiaries convertible into or exchangeable for any capital stock of the Company or the Subsidiaries, (ii) warrants, rights or options to subscribe for or purchase from the Company or any of its Subsidiaries any such capital stock or any such convertible or exchangeable securities or obligations, or (iii) obligations, commitments, plans or arrangements of the Company or the Subsidiaries to issue any shares of capital stock, any such convertible or exchangeable securities or obligations, or any such warrants, rights or options; there are no statutory preemptive or other similar rights to subscribe for or to purchase or acquire any shares of capital stock of the Company or any such rights pursuant to its certificate of incorporation or by-laws or any agreement or instrument to or by which the Company is a party or bound; (i) each of the Registration Statement and any Rule 462(b) Registration Statement has become effective under the Securities Act and no stop order preventing or suspending the effectiveness of the Registration Statement or any Rule 462(b) Registration Statement or the use of the Prospectus has been issued under the Securities Act and no proceedings for that purpose have been instituted or are pending or, to the knowledge of the Company, are threatened by the Commission, and any request on the part of the Commission for additional information has been complied with; any required filing of the Prospectus and any supplement thereto pursuant to Rule 424(b) of the Securities Act Regulations has been or will be made in the manner and within the time period required by such Rule 424(b); (j) the Preliminary Prospectus and the Registration Statement comply and the Prospectus and any further amendments or supplements thereto will, when they have become effective or are filed with the Commission, as the case may be, comply in all material respects with the requirements of the Securities Act, the Securities Act Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange Act") and the rules and regulations of the Commission promulgated thereunder; the Registration Statement did not, 7 and any amendment thereto will not, in each case as of the applicable effective date, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Preliminary Prospectus does not, and the Prospectus or any amendment or supplement thereto will not, as of the applicable filing date and at the Closing Time and on each Date of Delivery (if any), contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, that the Company makes no warranty or representation with respect to any statement contained in the Registration Statement or the Prospectus in reliance upon and in conformity with the information concerning the Underwriters and furnished in writing by or on behalf of the Underwriters through the Representative to the Company expressly for use in the Registration Statement or the Prospectus (that information being limited to that described in the last sentence of the first paragraph of Section 9(c) hereof); (k) all information furnished in writing to the Underwriters by the Company for use in the preparation of the documents to be filed with the National Association of Securities Dealers, Inc. or state securities or blue sky authorities is true and correct and does not contain an untrue statement of a material fact nor does it omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (l) the Preliminary Prospectus was and the Prospectus delivered to the Underwriters for use in connection with this offering will be identical to the versions of the Preliminary Prospectus and Prospectus created to be transmitted to the Commission for filing via the Electronic Data Gathering Analysis and Retrieval System ("EDGAR"), except to the extent permitted by Regulation S-T; (m) all legal or governmental proceedings, contracts, leases or documents of a character required to be filed as exhibits to the Registration Statement or to be summarized or described in the Prospectus have been so filed, summarized or described as required; the summaries and descriptions in the Registration Statement and the Prospectus of the contracts, leases and other legal documents therein described present fairly the information required to be shown; each agreement described in the Registration Statement and the Prospectus or listed in the exhibits to the Registration Statement or incorporated by reference is in full force and effect and is valid and enforceable by and against the Company or the Subsidiary party thereto in accordance with its terms, except as may be limited or affected by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and by general principles of equity; (n) there are no actions, suits, proceedings, inquiries or investigations pending or, to the knowledge of the Company, threatened against the Company or any of its Subsidiaries or any of their respective officers and directors or to which the properties, assets or rights of any such entity are subject, at law or in equity, before or by any federal, state, local or foreign 8 governmental or regulatory commission, board, body, authority, arbitral panel or agency which is required to be disclosed in the Registration Statement and the Prospectus that is not so disclosed; (o) the financial statements, including the notes thereto, included in the Registration Statement and the Prospectus present fairly, in all material respects, the consolidated financial position of the entities to which such financial statements relate (the "Covered Entities") as of the dates indicated and the consolidated results of operations and changes in financial position and cash flows of the Covered Entities for the periods specified; such financial statements and related notes have been prepared in conformity with generally accepted accounting principles applied on a consistent basis during the periods involved and in accordance with Regulation S-X promulgated by the Commission and all adjustments necessary for a fair presentation of the results for such periods have been made; the amounts in the Prospectus under the captions "Prospectus Summary - Summary Financial Data" and "Selected Financial Data" present fairly, in all material respects, the information shown therein and have been compiled on a basis consistent with the financial statements included in the Registration Statement and the Prospectus; (p) Ernst & Young LLP, whose reports on the consolidated financial statements of the Company and its Subsidiaries are filed with the Commission as part of the Registration Statement and Prospectus, were during the periods covered by their reports independent registered public accountants with respect to the Company as required by the Securities Act and the Securities Act Regulations; Grant Thornton LLP, which the Company engaged on August 12, 2004, is an independent registered public accounting firm with respect to the Company. (q) subsequent to the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as may be otherwise stated in the Registration Statement or Prospectus, there has not been (A) any material adverse change in the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise), present or prospective, of the Company and its Subsidiaries taken as a whole, whether or not arising in the ordinary course of business, (B) any transaction, which is material to the Company and its Subsidiaries taken as a whole, as to which negotiations have commenced or which has been entered into by the Company or any of its Subsidiaries, (C) any obligation, contingent or otherwise, directly or indirectly incurred by the Company or any of its Subsidiaries, which is material to the Company and its Subsidiaries taken as a whole, (D) any dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock, or any redemption, purchase or other acquisition by the Company (or agreement to do any of the foregoing) of any shares of its capital stock, (E) any issuance of any securities of the Company other than pursuant to the stock option plans and stock purchase plans described in the Prospectus or (F) any loss or interference with the Company or its Subsidiaries' assets, business or properties (whether owned or leased) from fire, explosion, earthquake, flood or other calamity, whether or not covered by insurance, or from any labor dispute or any court or legislative or other governmental action, order or decree which is material to the Company and its Subsidiaries taken as a whole; 9 (r) except as set forth in the Prospectus and except for Allied Capital Corporation and Allied Investment Corporation, there are no persons with registration or other similar rights to have any equity securities, including securities which are convertible into or exchangeable for equity securities, registered pursuant to the Registration Statement or otherwise registered by the Company under the Securities Act; no holder of securities of the Company has rights to the registration of any securities of the Company because of the filing of the Registration Statement, which rights have not been waived by the holder thereof as of the date hereof; (s) the Shares have been duly authorized and, when issued and duly delivered against payment therefor as contemplated by this Agreement, will be validly issued, fully paid and non-assessable, free and clear of any pledge, lien, encumbrance, security interest or other claim arising through the Company or the Subsidiaries, and the issuance and sale of the Shares by the Company is not subject to preemptive or other similar rights arising by operation of law, under the certificate of incorporation or by-laws of the Company, under any agreement to which the Company or any of its Subsidiaries is a party or otherwise; (t) the Company has not taken, and will not take, directly or indirectly, any action which is designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Shares; (u) neither the Company nor any of its officers, directors, stockholders or affiliates (i) is required to register as a "broker" or "dealer" in accordance with the provisions of the Exchange Act or the rules and regulations thereunder, or (ii) directly, or indirectly through one or more intermediaries, controls or has any other association with (within the meaning of Article I of the By-laws of the National Association of Securities Dealers, Inc. (the "NASD")) any member firm of the NASD, except as set forth in the Registration Statement or otherwise disclosed in writing to the Representative; (v) the Company has not relied upon the Representative or legal counsel for the Representative for any legal, tax or accounting advice in connection with the offering and sale of the Shares; (w) any certificate signed by any officer of the Company or any Subsidiary delivered to the Representative or to counsel for the Underwriters pursuant to or in connection with this Agreement shall be deemed a representation and warranty by the Company to each Underwriter as to the matters covered thereby; (x) the Common Stock conforms in all material respects to the description thereof contained in the Registration Statement and Prospectus; the form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements and with any applicable requirements of the certificate of incorporation and by-laws of the Company and of the Nasdaq National Market; the Company has filed an 10 additional listing notification with the Nasdaq National Market with respect to the Shares, and has received notification that the listing has been approved, subject to notice of issuance of the Shares; (y) the Company and its Subsidiaries have good and marketable title in fee simple to all real property, if any, and good title to all personal property owned by them, in each case free and clear of all liens, security interests, pledges, charges, encumbrances, mortgages and defects, except such as are disclosed in the Prospectus or such as do not materially and adversely affect the value of such property and do not interfere with the use made or proposed to be made of such property by the Company and the Subsidiaries; and any real property and buildings held under lease by the Company or the Subsidiaries are held under valid, existing and enforceable leases, free and clear of all liens, security interests, pledges, charges, encumbrances, mortgages and defects, with such exceptions as are disclosed in the Prospectus or are not material and do not interfere with the use made or proposed to be made of such property and buildings by the Company or the Subsidiaries; (z) the Company and the Subsidiaries own or possess adequate and enforceable license or other rights to use all material patents, trademarks, service marks, trade names, copyrights, software and design licenses, trade secrets, manufacturing processes, other intangible property rights (including applications for any of the foregoing) and know-how (collectively "Intangibles") necessary to entitle the Company and the Subsidiaries to conduct their business as described in the Prospectus, and neither the Company, nor any of the Subsidiaries, has received notice of infringement of or conflict with (and the Company knows of no such infringement of or conflict with) asserted rights of others with respect to any Intangibles; (aa) the books, records and accounts of the Company and its Subsidiaries accurately and fairly reflect, in all material respects and in reasonable detail, the transactions in and dispositions of the assets and the results of operations of the Company and the Subsidiaries; the Company and its Subsidiaries maintain a system of internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act; (bb) (i) the Company has established and maintains disclosure controls and procedures (as such term is defined in Rule 13a-15(e) under the Exchange Act), which (x) are designed to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to the Company's principal executive officer and its principal financial officer by others within those entities, particularly during the periods in which the periodic reports required under the Exchange Act are being prepared, (y) have been evaluated for effectiveness as of the end of the last fiscal period covered by the Registration Statement, and (z) are effective in all material respects to perform the functions for which they were established, and (ii) based on the evaluation of the Company's disclosure controls and procedures described above, the Company is not aware of (A) any significant deficiency or material weakness in the design or operation of its disclosure controls and procedures which is reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information, or (B) any fraud, whether or not material, that 11 involves management or other employees who have a significant role in the Company's internal control over financial reporting. Since the most recent evaluation of the Company's disclosure controls and procedures described above, there have been no significant changes in internal control over financial reporting or in other factors that could significantly affect internal control over financial reporting; (cc) each of the Company and the Subsidiaries has filed on a timely basis all necessary federal, state, local and foreign tax returns required to be filed through the date hereof, or has properly requested an extension thereof, and has paid all taxes shown as due thereon; no tax deficiency or proposed additional tax assessment has been asserted against any such entity, nor does any such entity know of any tax deficiency or assessment which is likely to be asserted against any such entity which if determined adversely to any such entity, could reasonably be expected to have a Material Adverse Effect; all tax liabilities are adequately provided for on the respective books of such entities; and there are no tax audits or investigations pending with respect to the Company or any of its Subsidiaries; (dd) each of the Company and its Subsidiaries maintains insurance (issued by insurers of nationally recognized financial responsibility) of the types and in the amounts generally deemed adequate for their respective businesses and consistent with insurance coverage maintained by similar companies in similar businesses, including, but not limited to, insurance covering real and personal property owned or leased by the Company or its Subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect; the Company and its Subsidiaries are in compliance with the terms of such insurance policies and instruments in all material respects; neither the Company nor any of its Subsidiaries has any reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business; neither the Company nor any of its Subsidiaries has, during the past three fiscal years, been denied any insurance coverage which it has sought or for which it has applied; (ee) neither the Company nor any of its Subsidiaries has violated, or received notice of any violation or asserted claim with respect to, any applicable environmental, health, safety or similar law, regulation, decision or order of any governmental agency or body or court, domestic or foreign, applicable to the business of the Company or its Subsidiaries, or any federal or state law relating to discrimination in the hiring, promotion or pay of employees, or any applicable federal or state wages and hours law, or any provisions of the Employee Retirement Income Security Act or the rules and regulations promulgated thereunder, or any state law precluding the denial of credit due to the neighborhood in which a property is situated, where any such violation could have a Material Adverse Effect; to the Company's knowledge, the Company and its Subsidiaries have received all permits, licenses or other approvals required of them under applicable environmental laws to conduct their respective business, and are in compliance with all terms and conditions thereof; to the Company's knowledge, no facts currently exist that will require the Company or the Subsidiaries to make future material capital expenditures to comply with environmental laws; 12 to the Company's knowledge, no property which is or has been owned, leased or occupied by the Company or any Subsidiary has been designated as a Superfund site pursuant to the Comprehensive Environmental Response, Compensation of Liability Act of 1980, as amended ("CERCLA") or otherwise designated as a contaminated site under applicable state or local law and neither the Company nor any of its Subsidiaries has been named as a "potentially responsible party" under the CERCLA; (ff) neither the Company nor any of its Subsidiaries, nor any officer, director, agent or employee purporting to act on behalf of the Company or its Subsidiaries has at any time, directly or indirectly, (i) made any contributions to any candidate for political office, or failed to disclose fully any such contributions, in violation of law, (ii) made any payment to any state, federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or allowed by applicable law (including the Foreign Corrupt Practices Act of 1977, as amended), (iii) engaged in any transactions, maintained any bank account or used any corporate funds except for transactions, bank accounts and funds which have been and are reflected in the normally maintained books and records of the Company and its Subsidiaries, (iv) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended, or (v) made any other unlawful payment; (gg) except as otherwise disclosed in the Prospectus, there are no material outstanding loans or advances or material guarantees of indebtedness by the Company or any of its Subsidiaries to or for the benefit of any of the officers or directors of the Company or any of its Subsidiaries or any of the members of the families of any of them; (hh) neither the Company, nor to the Company's knowledge, any employee or agent of the Company, has made any payment of funds of the Company or received or retained any funds in violation of any law, rule or regulation, including without limitation the "know your customer" and anti-money laundering laws of any jurisdiction; (ii) each of the individuals named in the Prospectus who is or is expected to be an independent director of the Company satisfies the requirements for independence under the Sarbanes-Oxley Act of 2002 and the rules of the NASD; (jj) in connection with this offering, the Company has not offered and will not offer its Common Stock or any other securities convertible into or exchangeable or exercisable for Common Stock, in a manner in violation of the Securities Act; and the Company has not distributed and will not distribute any Prospectus or other offering material in connection with the offer and sale of the Shares, except as specifically contemplated herein; (kk) the Company has not incurred any liability for any finder's fees or similar payments in connection with the transactions herein contemplated; 13 (ll) no relationship, direct or indirect, exists between or among the Company or any of its Subsidiaries on the one hand, and the directors, officers, stockholders, customers or suppliers of the Company or any of its Subsidiaries on the other hand, which is required by the Securities Act and the Securities Act Regulations to be described in the Registration Statement and the Prospectus and which is not so described; (mm) neither the Company nor any of its Subsidiaries is and, after giving effect to the offering and sale of the Shares and the application of the net proceeds therefrom as described in the Prospectus, will be an "investment company" or an entity "controlled" by an "investment company," as such terms are defined in the Investment Company Act of 1940, as amended (the "Investment Company Act"); (nn) there is no existing or, to the knowledge of the Company, threatened labor dispute with the employees of the Company or any of its Subsidiaries, nor is the Company aware of any existing or imminent labor disturbance by the employees of any of the Company's or any of its Subsidiaries' principal suppliers or contractors or any threatened or pending litigation between the Company or any of its Subsidiaries and any of its respective executive officers, in each case which are likely to have, individually or in the aggregate, a Material Adverse Effect; and (oo) for purposes of this Agreement, (A) "U.S. Government" includes any agency, department, division, subdivision or office of the federal government of the United States, including the officials, employees and agents thereof, (B) "Contract" includes any agreement, Prime Contract, subcontract, basic ordering agreement, letter contract, purchase order or delivery order of any kind, whether written or oral, including all amendments, modifications and options thereunder or relating thereto, (C) "Government Contract" means any Prime Contract or any subcontract with a prime contractor or higher-tier subcontractor under a Prime Contract, and (D) "Prime Contract" means any Contract entered into directly with the U.S. Government. (i) There are no Government Contracts under which the parties thereto are currently experiencing material cost, billing, schedule, technical or quality problems that could result in claims against the Company (or its successors in interest) or its Subsidiaries by the U.S. Government, a prime contractor or a higher-tier subcontractor that would have a Material Adverse Effect. (ii) All of the Company's Government Contracts that are material to the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole were, to the knowledge of the Company, legally awarded, are binding on the parties thereto (except as may be limited or affected by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, by federal government contracting laws and regulations and by general principles of equity), and are in full force and effect. To the Company's knowledge, such Government Contracts (or, where applicable, the Prime Contracts under which such Government Contracts were awarded) are not currently the subject of bid or award protest proceedings. 14 (iii) Except as could not reasonably be expected to have a Material Adverse Effect, the Company and its Subsidiaries have complied in all material respects with all statutory and regulatory requirements applicable to the Government Contracts to which the Company or a Subsidiary is a party, as set forth by such statutes and regulations and as interpreted by courts, Boards of Contract Appeals, and other relevant authorities. In this regard, the Company and its Subsidiaries have complied in all material respects with, but not limited to, the Federal Procurement and Administrative Services Act, the Federal Acquisition Regulation ("FAR") and agency supplements to the FAR, FAR cost principles and Cost Accounting Standards, where and as applicable to each of the Company's and its Subsidiaries' Government Contracts and each of the Company's and its Subsidiaries' quotations, bids and proposals for Government Contracts. Furthermore, the Company represents that there are no actual or alleged violations or breaches of any statute, regulation, representation, certification, disclosure obligation, or contract term with respect to any Government Contract of the Company or any of its Subsidiaries. (iv) Except as could not reasonably be expected to have a Material Adverse Effect, all facts set forth in or acknowledged by any representations or certifications made or submitted by or on behalf of the Company in connection with each of the Company's and its Subsidiaries' Government Contracts and each of the Company's and its Subsidiaries' quotations, bids, and proposals for Government Contracts, were current, accurate and complete in all respects as of the date of submission. (v) Except as could not reasonably be expected to have a Material Adverse Effect, none of the Company or any of its Subsidiaries have received any materially adverse or negative government past performance evaluations or ratings in connection with the Company's and its Subsidiaries' Government Contracts that could affect the evaluation of the Company's (or its successors') or its Subsidiaries' bids or proposals for future Government Contracts, and no facts currently exist that are reasonably likely to give rise to negative government performance evaluations in the future. (vi) Except as could not reasonably be expected to have a Material Adverse Effect, to the knowledge of the Company, no facts exist that could give rise to a claim under the False Claims Act, the Truth in Negotiations Act or any other request for a reduction in the price of any of the Company's Government Contracts. (vii) Except as could not reasonably be expected to have a Material Adverse Effect, (i) none of the Company or its Subsidiaries has received a show cause, cure, deficiency, default or similar notices relating to its outstanding Government Contracts, (ii) none of the Company's or its Subsidiaries' Government Contracts has been terminated for default, (iii) no facts exist that are reasonably likely to give rise to a termination for default of any of the Company's or its Subsidiaries' Government Contracts, and (iv) the Company has received no notice, written or otherwise, terminating any of the Company's or its Subsidiaries' Government Contracts for convenience or indicating an intent to terminate any of the Company's Government Contracts for convenience. Except as could not reasonably be expected to have a Material Adverse Effect, there are no material outstanding claims or disputes relating to the Company's or its Subsidiaries' Government Contracts and involving 15 either the U.S. Government, any prime contractor, any higher-tier subcontractor or any third party. To the knowledge of the Company, there exist no facts or allegations, past or present, being put forth by any person that could give rise to such a claim or dispute in the future. No negative determination of responsibility has ever been issued against the Company with respect to any quotation, bid or proposal for a Government Contract. The Company has not been and is not now suspended, debarred, or proposed for suspension or debarment from government contracting. To the knowledge of the Company, no facts exist which could cause or give rise to such suspension or debarment. (viii) To the knowledge of the Company, no audit, review, inspection, investigation, survey or examination of records by the U.S. Government has revealed any fact, occurrence or practice which could have a Material Adverse Effect. (ix) Except as could not reasonably be expected to have a Material Adverse Effect, neither the U.S. Government nor any prime contractor or higher-tier subcontractor under a Government Contract has questioned or disallowed any costs claimed by the Company or its Subsidiaries under the Company's or its Subsidiaries' outstanding Government Contracts. To the knowledge of the Company, there is no fact or occurrence presently existing that could reasonably be expected to be a basis for disallowing any such costs. (x) The Company has complied in all material respects with all applicable requirements under each of the Company's and its Subsidiaries' Government Contracts relating to the safeguarding of and access to classified information, and to the knowledge of the Company, no facts currently exist which are reasonable likely to give rise to the revocation of the Company's or its Subsidiaries' security clearances. 4. Certain Covenants. The Company hereby agrees with each Underwriter: (a) to furnish such information as may be required and otherwise to cooperate in qualifying the Shares for offering and sale under the securities or blue sky laws of such states as the Representative may designate and to maintain such qualifications in effect as long as required for the distribution of the Shares, provided that the Company shall not be required to qualify as a foreign corporation or to execute a general consent to the service of process under the laws of any such state (except service of process with respect to the offering and sale of the Shares); (b) to prepare the Prospectus in a form approved by the Underwriters and file such Prospectus with the Commission within the time period required by Rule 424(b) under the Securities Act or, if applicable, such earlier time as may be required by Rule 430A(a)(3) under the Securities Act, and to furnish promptly (and with respect to the initial delivery of such Prospectus, not later than 10:00 a.m. (New York City time) on the day following the execution and delivery of this Agreement) to the Underwriters as many copies of the Prospectus (or of the Prospectus as amended or supplemented if the Company shall have 16 made any amendments or supplements thereto after the effective date of the Registration Statement) as the Underwriters may reasonably request for the purposes contemplated by the Securities Act Regulations, which Prospectus and any amendments or supplements thereto furnished to the Underwriters will be identical to the version created to be transmitted to the Commission for filing via EDGAR, except to the extent permitted by Regulation S-T; (c) to advise the Representative promptly and (if requested by the Representative) to confirm such advice in writing, when the Registration Statement has become effective under the Securities Act Regulations; (d) if, at the time this Agreement is executed and delivered, it is necessary for a post-effective amendment to the Registration Statement to be declared effective before the offering of the Shares may commence, the Company will endeavor to cause such post-effective amendment to become effective as soon as possible and will advise the Representative promptly and, if requested by the Representative, will confirm such advice in writing, when such post-effective amendment has become effective; (e) to advise the Representative immediately, confirming such advice in writing, of (i) the receipt of any comments from, or any request by, the Commission for amendments or supplements to the Registration Statement or Prospectus or for additional information with respect thereto, or (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of any order preventing or suspending the use of any Preliminary Prospectus or the Prospectus, or of the suspension of the qualification of the Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes and, if the Commission or any other government agency or authority should issue any such order, to make every reasonable effort to obtain the lifting or removal of such order as soon as possible; to advise the Representative promptly, and to furnish the Representative with a copy for its review prior to filing, of any proposal to amend or supplement the Registration Statement or Prospectus and to file no such amendment or supplement to which the Representative shall reasonably object in writing; (f) to furnish to the Representative for a period of five years from the date of this Agreement such other information as the Representative may reasonably request; (g) to advise the Underwriters promptly of the happening of any event known to the Company within the time during which a Prospectus relating to the Shares is required to be delivered under the Securities Act Regulations which, in the judgment of the Company, would require the making of any change in the Prospectus then being used so that the Prospectus would not include an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, and, during such time, to prepare and furnish, at the Company's expense, to the Underwriters promptly such amendments or supplements to such Prospectus as may be necessary to reflect any such change and to furnish to the Underwriters a copy of such proposed amendment or supplement before filing any such amendment or supplement with the Commission and not to file any 17 such amendment or supplement to which the Representative shall reasonably object in writing; (h) to furnish promptly to the Representative and counsel for the Underwriters, without charge, a copy of the signed Registration Statement, as initially filed with the Commission, and of all amendments or supplements thereto (including all exhibits filed therewith or incorporated by reference therein) and such number of conformed copies of the foregoing as the Representative may reasonably request, and, so long as delivery of a prospectus by an Underwriter or dealer may be required by the Securities Act or the Securities Act Regulations, as many copies of any Preliminary Prospectus and the Prospectus and any amendments thereof or supplements thereto as the Representative reasonably requests; (i) to furnish to the Representative, not less than two business days before filing with the Commission subsequent to the effective date of the Prospectus and during the period referred to in paragraph (g) above, a copy of any document proposed to be filed with the Commission pursuant to Section 13, 14, or 15(d) of the Exchange Act; notwithstanding the foregoing, during such period Current Reports on Form 8-K of the Company shall be furnished to the Representative not less than 24 hours before filing with the Commission; (j) to apply the net proceeds of the sale of the Shares by the Company in accordance with its statements under the caption "Use of Proceeds" in the Prospectus; (k) to make generally available to its security holders and to deliver to the Representative as soon as practicable, but in any event not later than the end of the full fiscal quarter first occurring after the first anniversary of the effective date of the Registration Statement an earnings statement complying with the provisions of Section 11(a) of the Securities Act (including the provisions of Rule 158 of the Securities Act Regulations), covering a period of 12 months beginning after the effective date of the Registration Statement; (l) to use commercially reasonable efforts to effect and maintain the quotation of the Shares on the Nasdaq National Market and to file with the Nasdaq National Market all documents and notices required by the Nasdaq National Market of companies that have securities that are traded and quotations for which are reported by the Nasdaq National Market; (m) to engage and maintain, at its expense, a registrar and transfer agent for the Shares; (n) to refrain during a period of 90 days from the date of the Prospectus, without the prior written consent of the Representative, from (i) offering, pledging, selling, contracting to sell, selling any option or contract to purchase, purchasing any option or contract to sell, granting any option for the sale of, or otherwise disposing of or transferring, directly or indirectly, any equity security of the Company or any securities convertible into or 18 exercisable or exchangeable for equity securities of the Company, or filing any registration statement under the Securities Act with respect to any of the foregoing, or (ii) entering into any swap or any other agreement or any transaction that transfers, in whole or in part, directly or indirectly, the economic consequence of ownership of equity securities of the Company, whether any such swap or transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Shares to be sold hereunder, (B) any shares of Common Stock issued by the Company upon the exercise of an option outstanding on the date hereof and generally referred to in the Prospectus, or (C) any shares of Common Stock issued by the Company pursuant to the Company's existing stock purchase plans; (o) to not itself, and to use its best efforts to cause its officers, directors and affiliates not to, (i) take, directly or indirectly prior to termination of the underwriting syndicate contemplated by this Agreement, any action designed to stabilize or manipulate the price of any security of the Company, or which may cause or result in, or which might in the future reasonably be expected to cause or result in, the stabilization or manipulation of the price of any security of the Company, to facilitate the sale or resale of any of the Shares, (ii) sell, bid for, purchase or pay anyone any compensation for soliciting purchases of the Shares or (iii) pay or agree to pay to any person any compensation for soliciting any order to purchase any other securities of the Company; (p) to use its best efforts to cause John F. Short, Frank J. Quirk and Douglas L. Cox and each of the Company's directors to furnish to the Representative, prior to the first Date of Delivery, a letter or letters, substantially in the form of Exhibit A hereto, pursuant to which each such person shall agree not to, directly or indirectly, (i) offer for sale, sell, pledge or otherwise dispose of (or enter into any transaction or device which is designed to, or could be expected to, result in the disposition by any person at any time in the future of) any shares of Common Stock or securities convertible into or exchangeable for Common Stock or (ii) enter into any swap or other derivatives transaction that transfers to another, in whole or in part, any of the economic benefits or risks of ownership of such shares of Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise, in each case for a period of 90 days from the date of the Prospectus, without the prior written consent of the Representative on behalf of the Underwriters; (q) upon request of any Underwriter, to furnish, or cause to be furnished, to such Underwriter an electronic version of the Company's trademarks, OPINION RESEARCH CORPORATION service mark and corporate logo (collectively, the "Marks") for use on the website, if any, operated by such Underwriter; the Company hereby grants to each such Underwriter a nontransferable, non-assignable, non-exclusive, royalty free license to use the Marks solely for the purpose of facilitating the on-line offering of the Shares (the "License"); all use of the Marks shall inure to the benefit of the Company, and such Underwriter shall acquire no interests or rights of any kind in or to the Marks (except as explicitly stated in the License) or the goodwill associated therewith; 19 (r) that the provisions of the letter agreement dated September 16, 2004 between the Company and Friedman, Billings, Ramsey & Co., Inc. (the "Engagement Letter") shall survive the execution and delivery of this Agreement and the consummation of the transactions contemplated hereby; (s) if at any time during the 30-day period after the Registration Statement becomes effective, any rumor, publication or event relating to or affecting the Company shall occur as a result of which, in the reasonable opinion of the Representative, the market price of the Common Stock has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or amendment of the Prospectus) and after written notice from the Representative advising the Company to the effect set forth above, to forthwith prepare, consult with the Representative concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to the Representative, responding to or commenting on such rumor, publication or event; (t) that the Company will comply with all of the provisions of any undertakings in the Registration Statement; and (u) that, from and after the Closing Time, the Company shall have in place and maintain a system of internal control over financial reporting, as such term is defined in Rule 13a-15(f) under the Exchange Act. 5. Payment of Expenses. (a) The Company agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, whether or not the transactions contemplated hereunder are consummated or this Agreement is terminated, including expenses, fees and taxes in connection with (i) the preparation and filing of the Registration Statement, all exhibits thereto, each Preliminary Prospectus, the Prospectus, and any amendments or supplements thereto, and the printing and furnishing of copies of each thereof to the Underwriters and to dealers (including costs of mailing and shipment) as may be reasonably requested, (ii) the preparation, issuance and delivery of the certificates for the Shares to the Underwriters, including any stock or other transfer taxes or duties payable upon the sale and delivery of the Shares to the Underwriters, (iii) the printing of this Agreement and any dealer agreements and furnishing of copies of each to the Underwriters and to dealers (including costs of mailing and shipment), (iv) the registration or qualification of the Shares for offering and sale under state laws that the Company and the Representative have mutually agreed are appropriate and the determination of their eligibility for investment under state law as aforesaid (including the legal fees and filing fees and other disbursements of counsel for the Underwriters) and the preparation, printing and furnishing of copies of any blue sky surveys or legal investment surveys to the Underwriters and to dealers, (v) filing for review of the public offering of the Shares by the NASD (including the legal fees and filing fees and other disbursements of counsel for the Underwriters relating thereto), (vi) the fees and expenses of any transfer agent or registrar for the Shares and miscellaneous expenses referred to in the 20 Registration Statement, (vii) the fees and expenses incurred in connection with the listing of the Shares on the Nasdaq National Market, (viii) making road show presentations with respect to the offering of the Shares, (ix) preparing and distributing bound volumes of transaction documents for the Representative and its legal counsel and (x) the performance of the Company's other obligations hereunder. Upon the request of the Representative, the Company will provide funds in advance for filing fees. (b) The Company agrees to reimburse the Representative for their reasonable out-of-pocket expenses in connection with the performance of their activities under this Agreement, including, but not limited to, costs such as printing, facsimile, courier service, direct computer expenses, accommodations and travel, and fees and expenses of the Underwriters' outside legal counsel and any other advisors, accountants, appraisers, etc. (other than the fees and expenses of counsel with respect to state securities or blue sky laws and obtaining the filing for review of the public offering of the Shares by the NASD, all of which shall be reimbursed by the Company pursuant to the provisions of subsection (a) above). Notwithstanding any provision herein to the contrary, the Company's liability for all fees of counsel to the Underwriters under this Agreement shall be limited to (i) $100,000, if the offering of the Shares contemplated by this Agreement is consummated, or (ii) $200,000, if the offering of the Shares contemplated by this Agreement is not consummated. (c) If this Agreement shall be terminated by the Underwriters, or any of them, because of any failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason the Company shall be unable to perform its obligations under this Agreement, the Company will reimburse the Underwriters or such Underwriters as have so terminated this Agreement with respect to themselves, severally, for all out-of-pocket expenses (such as printing, facsimile, courier service, direct computer expenses, accommodations, travel and the fees and disbursements of Underwriters' counsel) and any other advisors, accountants, appraisers, etc. reasonably incurred by such Underwriters in connection with this Agreement or the transactions contemplated herein. If this Agreement shall be terminated by the Underwriters, or any of them, other than pursuant to Section 7 or because of any reason other than failure or refusal on the part of the Company to comply with the terms or to fulfill any of the conditions of this Agreement, the Company shall not be liable for payment of any of the fees or expenses of counsel to the Underwriters. 6. Conditions of the Underwriters' Obligations. The obligations of the Underwriters hereunder to purchase Shares at the Closing Time or on the Date of Delivery, as applicable, are several and not joint, and are subject to the accuracy of the representations and warranties on the part of the Company on the date hereof and at the Closing Time and on each Date of Delivery, as applicable, the performance by the Company of its respective obligations hereunder in all material respects and to the satisfaction of the following further conditions at the Closing Time or on the Date of Delivery, as applicable: 21 (a) The Company shall furnish to the Underwriters at the Closing Time and on each Date of Delivery an opinion of Wolf, Block, Schorr and Solis-Cohen LLP, counsel for the Company and its Subsidiaries, or, with respect to those portions of the opinions based upon the laws of any jurisdiction other than the United States, Pennsylvania or Delaware, counsel licensed in such jurisdiction, addressed to the Underwriters and dated the Closing Time and each Date of Delivery and in form and substance reasonably satisfactory to the Representative and Gibson, Dunn & Crutcher LLP, counsel for the Underwriters, stating that: (i) the Company and the Subsidiaries listed on Schedule III ("Material Subsidiaries") each have been duly incorporated or organized and are validly existing as corporations or limited liability companies in good standing under the laws of their respective jurisdictions of incorporation or organization with full corporate or limited liability company power and authority to own, lease, license and operate their respective assets and properties and to conduct their respective business as described in the Registration Statement and Prospectus and, in the case of the Company, to execute and deliver this Agreement and to consummate the transactions described in this Agreement; (ii) the Company and all of its Material Subsidiaries are duly qualified or licensed by each jurisdiction in which they conduct their respective businesses, and the Company and its Material Subsidiaries are duly qualified, and are in good standing, in each jurisdiction in which they own or lease real property or maintain an office and in which such qualification is necessary, except where the failure to be so qualified or licensed and in good standing, individually and in the aggregate, would not have a Material Adverse Effect; except as provided in the law of the jurisdiction of incorporation or formation of such entity or pursuant to agreements of which such counsel has no knowledge or as disclosed in the Prospectus, the Material Subsidiaries are not prohibited or restricted, directly or indirectly, from paying dividends to the Company, or from making any other distribution with respect to such Material Subsidiaries' capital stock or from repaying to the Company any amounts which may from time to time become due under any loans or advances to such Material Subsidiaries from the Company, or from transferring such Material Subsidiaries' property or assets to the Company, except, in each case, as may be affected or limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally and by general principles of equity; (iii) to the best of such counsel's knowledge, neither the Company nor any of its Material Subsidiaries is in breach or violation of, or in default under (nor has any event occurred which with notice, lapse of time, or both would constitute a breach of, or default under), its respective certificates of incorporation or charter or by-laws, any indenture, mortgage, deed of trust, loan or credit agreement or any other agreement or instrument to which the Company or any of its Material Subsidiaries is a party or by which any of them or their respective properties may be bound or affected or under any law, regulation or rule or any decree, judgment or order applicable to the Company or its Material Subsidiaries, except such breaches or defaults which would not be reasonably likely to have a Material Adverse Effect; 22 (iv) the execution, delivery and performance of this Agreement by the Company and the consummation by the Company of the transactions contemplated by this Agreement do not and will not (A) give rise to a right to terminate or accelerate the due date of any payment due under, or conflict with, or result in any breach or violation of, or constitute a default under (nor constitute any event which with notice, lapse of time, or both would constitute a breach of or default under), or require any consent or waiver, except for such consents or waivers which have been obtained and are in full force and effect, under, (i) any provisions of the certificate of incorporation, charter or by-laws of the Company or the Material Subsidiaries, (ii) to such counsel's knowledge, any provision of any material contract, franchise, permit, license, indenture, mortgage, deed of trust, loan, credit or other agreement or instrument to which the Company or the Material Subsidiaries is a party or by which any of them or their respective properties or assets may be bound or affected, (iii) any law or regulation binding upon or applicable to the Company or the Material Subsidiaries or any of their respective properties or assets normally applicable to transactions of the type contemplated by this Agreement, or (iv) to such counsel's knowledge, any decree, judgment or order known to such counsel to be applicable to the Company or the Material Subsidiaries; or (B) to the best of such counsel's knowledge, result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or assets of the Company or its Material Subsidiaries, except in the case of clauses (ii), (iii) and (iv) for such conflicts, breaches or defaults which have been validly waived or would not reasonably be expected to have a Material Adverse Effect or result in the creation or imposition of any material lien, charge, claim or encumbrance upon any property or asset of the Company or any of its Material Subsidiaries; (v) all necessary corporate action has been duly and validly taken by the Company to authorize the execution, delivery and performance of this Agreement and the issuance and sale of the Shares by the Company; this Agreement has been duly and validly authorized, executed and delivered by the Company and is a legal, valid and binding agreement of the Company, enforceable against it in accordance with its terms, except as may be affected or limited by bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors' rights generally, and by general principles of equity, and except that enforceability of the indemnification and contribution provisions set forth in Section 9 of this Agreement may be limited by the federal or state securities laws of the United States or public policy underlying such laws; (vi) to such counsel's knowledge, no approval, authorization, consent, license, permit, certificate or order of or filing by or with any federal or state governmental or regulatory commission, board, body, authority or agency is required to be obtained or made by the Company in connection with the execution, delivery and performance of this Agreement, the consummation by the Company of the transaction contemplated hereby, and the sale and delivery of the Shares by the Company as contemplated hereby, other than such as have been obtained or made and are in full force and effect under the Securities Act and the Securities Act Regulations and such approvals as have been obtained and are in full force and effect in connection with the approval of the quotation of the Shares on the Nasdaq 23 National Market, and except that such counsel need express no opinion as to any necessary qualification under the state securities or blue sky laws of the various jurisdictions in which the Shares are being offered by the Underwriters or any approval of the underwriting terms and arrangements by the National Association of Securities Dealers, Inc.; (vii) [intentionally omitted] (viii) the Company has authorized preferred stock and common stock as set forth in the Prospectus under the caption "Capitalization"; to such counsel's knowledge, all of the issued and outstanding shares of capital stock of the Company and its Material Subsidiaries have been duly and validly authorized and issued and are fully paid and non-assessable and none of them was issued in violation of any preemptive or other similar right, and all of the issued and outstanding shares of capital stock of the Material Subsidiaries are directly or indirectly owned of record and beneficially by the Company; except as disclosed in the Prospectus, to such counsel's knowledge, there are no outstanding (i) securities or obligations of the Company or its Material Subsidiaries convertible into or exchangeable for any capital stock of the Company or any of its Material Subsidiaries, (ii) warrants, rights or options to subscribe for or purchase from the Company or any of its Material Subsidiaries any such capital stock or any securities or obligations convertible into or exchangeable for such capital stock, or (iii) obligations, commitments, plans or arrangements of the Company or any of its Material Subsidiaries to issue any shares of capital stock, any such convertible or exchangeable securities or obligation, or any such warrants, rights or options; there are no statutory preemptive or other similar rights to subscribe for or to purchase or acquire any shares of capital stock of the Company or any such rights pursuant to the Company's certificate of incorporation or by-laws or any agreement or instrument known to such counsel to or by which the Company or any of its Material Subsidiaries is a party or bound or, to such counsel's knowledge, otherwise; (ix) the Shares have been duly authorized, and when the Shares have been issued and duly delivered against payment therefor as contemplated by this Agreement, the Shares will be validly issued, fully paid and non-assessable, and the Underwriters will acquire good and marketable title to the Shares, free and clear of any pledge, lien, encumbrance, security interest, or other claim arising through the Company or otherwise; (x) the issuance and sale of the Shares by the Company is not subject to preemptive or other similar rights arising by operation of law, under the certificate of incorporation, charter or bylaws of the Company, or, to such counsel's knowledge, under any agreement to which the Company or any of its Material Subsidiaries is a party; (xi) to the best of such counsel's knowledge and except for Allied Capital Corporation and Allied Investment Corporation, there are no persons with registration or other similar rights to have any equity securities, including securities which are convertible into or exchangeable for equity securities, registered by the Company pursuant to the Registration Statement or otherwise registered by the Company under the Securities Act; 24 (xii) the Shares conform in all material respects to the description thereof contained in the Registration Statement and Prospectus; the form of certificate used to evidence the Common Stock complies in all material respects with all applicable statutory requirements and with any applicable requirements of the certificate of incorporation and by-laws of the Company and of the Nasdaq National Market; (xiii) the capital stock of the Company conforms as to legal matters in all material respects to the description thereof set forth in the Prospectus under the caption "Description of Capital Stock;" (xiv) the Registration Statement, including the Prospectus and such amendments to such Registration Statement as may be required prior to the date of this Agreement, has become effective under the Securities Act, and no stop order preventing or suspending the effectiveness of the Registration Statement or the use of the Prospectus has been issued and, to the best of such counsel's knowledge, no proceedings with respect thereto have been commenced or threatened; any required filing of the Prospectus and any supplement thereto pursuant to Rule 424(b) under the Securities Act has been made in the manner and within the time period required by such Rule 424(b); (xv) the Registration Statement, all Preliminary Prospectuses and the Prospectus and each amendment or supplement thereto (except as to the financial statements and other financial data contained therein, as to which such counsel need express no opinion) complied as to form in all material respects with the requirements of the Securities Act and the Securities Act Regulations; (xvi) the statements under the captions "Capitalization," "Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources," "Our Business - Government Contracts," "Management - Management Compensation," "Description of Capital Stock," and "Material United States Income and Estate Tax Considerations to Non-United States Holders," in the Registration Statement and the Prospectus, insofar as such statements constitute a summary of the documents or legal matters referred to therein, constitute fair summaries thereof in all material respects and accurately present the information called for with respect to such documents or matters; (xvii) to the best of such counsel's knowledge, there are no actions, suits or proceedings, inquiries, or investigations pending or threatened against the Company or any of its Material Subsidiaries or any of their respective officers and directors or to which the properties, assets or rights of any such entity are subject, at law or in equity, before or by any federal, state, local or foreign governmental or regulatory commission, board, body, authority, arbitral panel or agency which are required to be described in the Prospectus but are not so described; (xviii) to the best of such counsel's knowledge, there are no contracts, leases or documents of a character which are required to be filed as exhibits to the Registration Statement or required to be described or summarized in the Prospectus which have not been 25 so filed, summarized or described, and all such summaries and descriptions fairly and accurately set forth the material provisions of such contracts and documents required to be shown; (xix) none of the Company or any of its Material Subsidiaries is, or, if operated solely in the manner described in the Prospectus, will be, (i) an "investment company" or an "affiliated person" of, or "promoter" or "principal underwriter" for, an "investment company," as such terms are defined in the Investment Company Act, or (ii) a "broker" within the meaning of Section 3(a)(4) of the Exchange Act or a "dealer" within the meaning of Section 3(a)(5) of the Exchange Act or required to be registered pursuant to Section 15(a) of the Exchange Act; and (xx) the Shares have been duly authorized for listing on the Nasdaq National Market, subject to notice of issuance. In addition, such counsel shall state that they have participated in conferences with officers and other representatives of the Company, independent public accountants of the Company and representatives of the Representative, at which the contents of the Registration Statement and Prospectus and related matters were discussed and, although such counsel is not passing upon and does not assume responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or Prospectus (except as and to the extent stated in subparagraphs (viii), (xii), (xiii), (xvi) and (xvii) above), on the basis of the foregoing, no facts have come to the attention of such counsel that lead them to believe that the Registration Statement at the time it became effective, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, or that any Preliminary Prospectus or the Prospectus, as amended or supplemented, as of their respective effective or issue date, and as of the date of such counsel's opinion, contained or contains an untrue statement of a material fact or omitted or omits to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (it being understood that, in each case, such counsel need express no view with respect to the financial statements and other financial data included in the Registration Statement, Preliminary Prospectus or Prospectus). (b) The Representative shall have received from Ernst & Young LLP and Grant Thornton LLP letters dated, respectively, as of the date of this Agreement, the Closing Time and each Date of Delivery, as the case may be, addressed to the Representative, in form and substance satisfactory to the Representative, relating to the financial statements, including any pro forma financial statements, of the Company and its Subsidiaries, and such other matters customarily covered by comfort letters issued in connection with registered public offerings. In the event that the letters referred to above set forth any changes in indebtedness, decreases in total assets or retained earnings or increases in borrowings, it shall be a 26 further condition to the obligations of the Underwriters that (A) such letters shall be accompanied by a written explanation of the Company as to the significance thereof, unless the Representative deems such explanation unnecessary, and (B) such changes, decreases or increases do not, in the reasonable judgment of the Representative, make it impractical or inadvisable to proceed with the purchase and delivery of the Shares as contemplated by the Registration Statement. (c) The Representative shall have received at the Closing Time and on each Date of Delivery the favorable opinion of Gibson, Dunn & Crutcher LLP, dated the Closing Time or such Date of Delivery, addressed to the Representative and in form and substance satisfactory to the Representative. (d) No amendment or supplement to the Registration Statement or Prospectus shall have been filed to which the Underwriters shall have reasonably objected in writing. (e) Notification that the Registration Statement has become effective shall have been received by the Representative and the Prospectus shall have been timely filed with the Commission in accordance with Section 4(b) of this Agreement. (f) Prior to the Closing Time and each Date of Delivery (i) no stop order suspending the effectiveness of the Registration Statement or any order preventing or suspending the use of any Preliminary Prospectus or Prospectus has been issued, and no proceedings for such purpose shall have been initiated or threatened, by the Commission, and no suspension of the qualification of the Shares for offering or sale in any jurisdiction, or of the initiation or threatening of any proceedings for any of such purposes, has occurred; (ii) the Registration Statement and the Prospectus shall not contain an untrue statement of material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and (iii) any requests for additional information on the part of the Commission (to be included in the Registration Statement or the Prospectus or otherwise) shall have been complied with to the satisfaction of the Commission and the Representative. (g) Between the time of execution of this Agreement and the Closing Time or the relevant Date of Delivery (i) no material and unfavorable change in the assets, business, operations, earnings, prospects, properties or condition (financial or otherwise) of the Company and its Subsidiaries taken as a whole shall occur or become known (whether or not arising in the ordinary course of business), and (ii) no transaction which is material and unfavorable to the Company shall have been entered into by the Company or any of its Subsidiaries. (h) The Shares shall have been duly authorized for listing on the Nasdaq National Market upon official notice of issuance. (i) The NASD shall not have raised any objection with respect to the fairness and reasonableness of the underwriting terms and arrangements. 27 (j) The Representative shall have received lock-up agreements from each director and executive officer of the Company listed on Schedule IV attached hereto, in the form of Exhibit A attached hereto, and such letter agreements shall be in full force and effect. (k) The Company will, at the Closing Time and on each Date of Delivery, deliver to the Underwriters a certificate of its Chairman of the Board and Chief Executive Officer, its President and Chief Operating Officer, and its Vice President and Chief Financial Officer, to the effect that the signers of such certificate have carefully examined the Registration Statement, the Prospectus and this Agreement and (i) the representations and warranties of the Company set forth in this Agreement are true and correct on and as of such date with the same effect as if made on such date, (ii) the Company has performed all covenants and agreements and satisfied all conditions contained in this Agreement required to be performed or satisfied by it at or prior to such date and (iii) the conditions set forth in paragraphs (f), (g) and (h) have been satisfied, in each case as of such date. (l) The Company shall have furnished to the Underwriters such other documents and certificates as to the accuracy and completeness of any statement in the Registration Statement and the Prospectus, the representations, warranties and statement of the Company contained herein, and the performance by the Company of its covenants contained herein, and the fulfillment of any conditions contained herein, as of the Closing Time or any Date of Delivery as the Underwriters may reasonably request. (m) The Company shall have performed such of its respective obligations under this Agreement as are to be performed by the terms hereof and thereof at or before the Closing Time or the relevant Date of Delivery. 7. Termination. The obligations of the several Underwriters hereunder shall be subject to termination in the absolute discretion of the Representative, at any time prior to the Closing Time or any Date of Delivery, (i) if any of the conditions specified in Section 6 shall not have been fulfilled when and as required by this Agreement to be fulfilled, or (ii) if there has been since the respective dates as of which information is given in the Registration Statement, in the judgment of the Representative, any material adverse change, or any development involving a prospective material adverse change, in or affecting the assets, business, operations, earnings, prospects, properties, condition (financial or otherwise) or management of the Company or any Subsidiary, whether or not arising in the ordinary course of business, or (iii) if there has occurred any outbreak or escalation of hostilities or other national or international calamity or crisis or change in economic, political or other conditions the effect of which is material and adverse to the financial markets of the United States so as to make it, in the judgment of the Representative, impracticable to market the Shares or enforce contracts for the sale of the Shares, or (iv) if trading in any securities of the Company has been suspended by the Commission or by Nasdaq, or if trading generally on the New York Stock Exchange or in the Nasdaq National Market has been suspended or limited (including an automatic halt in trading pursuant to market-decline triggers other than those in which solely program trading is temporarily halted), or 28 limitations on prices for trading (other than limitations on hours or numbers of days of trading) have been fixed, or maximum ranges for prices for securities have been required, by such exchange or the NASD or Nasdaq or by order of the Commission or any other governmental authority, or (v) if there has been any downgrade in the rating of any of the Company's debt securities or preferred stock by any "nationally recognized statistical rating organization" (as defined for purposes of Rule 436(g) under the Securities Act); or (vi) if any federal or state statute, regulation, rule or order of any court or other governmental authority has been enacted, published, decreed or otherwise promulgated which in the reasonable opinion of the Representative materially adversely affects or will materially adversely affect the business or operations of the Company, or (vii) if any action has been taken by any federal, state or local government or agency in respect of its monetary or fiscal affairs which in the reasonable opinion of the Representative has a Material Adverse Effect on the securities markets in the United States, or (viii) if any domestic or international event or act or occurrence has materially disrupted, or in the reasonable opinion of the Representative will in the future materially disrupt, the securities markets, or (ix) if a banking moratorium has been declared by any state or federal authority. If the Representative elects to terminate this Agreement as provided in this Section 7, the Company and the Underwriters shall be notified promptly by telephone, promptly confirmed by facsimile. If the sale to the Underwriters of the Shares, as contemplated by this Agreement, is not carried out by the Underwriters for any reason permitted under this Agreement or if such sale is not carried out because the Company shall be unable to comply in all material respects with any of the terms of this Agreement, the Company shall not be under any obligation or liability under this Agreement (except to the extent provided in Sections 5 and 9 hereof) and the Underwriters shall be under no obligation or liability to the Company under this Agreement (except to the extent provided in Section 9 hereof) or to one another hereunder. 8. Increase in Underwriters' Commitments. If any Underwriter shall default at the Closing Time or on a Date of Delivery in its obligation to take up and pay for the Shares to be purchased by it under this Agreement on such date the Representative shall have the right, within 48 hours after such default, to make arrangements for one or more of the non-defaulting Underwriters, or any other underwriters, to purchase all, but not less than all, of the Shares which such Underwriter shall have agreed but failed to take up and pay for (the "Defaulted Shares"). Absent the completion of such arrangements within such 48 hour period, (i) if the total number of Defaulted Shares does not exceed 10% of the total number of Shares to be purchased on such date, each non-defaulting Underwriter shall take up and pay for (in addition to the number of Shares which it is otherwise obligated to purchase on such date pursuant to this Agreement) the portion of the total number of Shares agreed to be purchased by the defaulting Underwriter on such date in the proportion that its underwriting obligations hereunder bears to the underwriting obligations of all non-defaulting Underwriters; and (ii) if the total number of Defaulted Shares exceeds 10% of such total, the Representative may terminate this Agreement by notice to the Company, without liability to any non-defaulting Underwriter. 29 Without relieving any defaulting Underwriter from its obligations hereunder, the Company agrees with the non-defaulting Underwriters that the Company will not sell any Shares hereunder on such date unless all of the Shares to be purchased on such date are purchased on such date by the Underwriters (or by substituted Underwriters selected by the Representative with the approval of the Company or selected by the Company with the approval of the Representative). If a new Underwriter or Underwriters are substituted for a defaulting Underwriter in accordance with the foregoing provision, the Company or the non-defaulting Underwriters shall have the right to postpone the Closing Time or the relevant Date of Delivery for a period not exceeding five business days in order that any necessary changes in the Registration Statement and Prospectus and other documents may be effected. The term Underwriter as used in this Agreement shall refer to and include any Underwriter substituted under this Section 8 with the like effect as if such substituted Underwriter had originally been named in this Agreement. 9. Indemnity and Contribution by the Company and the Underwriters. (a) The Company agrees to indemnify, defend and hold harmless each Underwriter and any person who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, expense, liability, damage or claim (or action in respect thereof) (including the reasonable cost of investigation) which, jointly or severally, any such Underwriter or controlling person may incur under the Securities Act, the Exchange Act or otherwise, insofar as such loss, expense, liability, damage or claim (or action in respect thereof) arises out of or is based upon (i) any breach of any representation, warranty or covenant of the Company contained herein, (ii) any failure on the part of the Company to comply with any applicable law, rule or regulation relating to the offering of securities being made pursuant to the Prospectus, (iii) any application or other document, or any amendment or supplement thereto, executed by the Company or based upon written information furnished by or on behalf of the Company filed in any jurisdiction (domestic or foreign) in order to qualify the Shares under the securities or blue sky laws thereof or filed with the Commission or any securities association or securities exchange (each an "Application") or (iv) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment thereof by the Company), a Prospectus (the term Prospectus for the purpose of this Section 9 being deemed to include any Preliminary Prospectus, the Prospectus and the Prospectus as amended or supplemented by the Company), any Application or any audio or visual materials prepared, approved or used by the Company in connection with the marketing of the Shares, including without limitation, slides, videos, films and tape recordings, or arises out of or is based upon any omission or alleged omission to state a material fact required to be stated in either such Registration Statement or Prospectus or such other materials or necessary to make the statements made therein, in the light of the circumstances under which they were made, not misleading, and 30 will promptly reimburse any Underwriter for all reasonable expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation for or defense arising from any threatened or pending claim, except insofar as any such loss, expense, liability, damage or claim (or action in respect thereof) arises out of or is based upon any untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in and made in reliance upon and in conformity with information furnished in writing by the Underwriters through the Representative to the Company expressly for use in such Registration Statement or such Prospectus. (b) If any action is brought against an Underwriter or controlling person in respect of which indemnity may be sought against the Company pursuant to subsection (a) above, such Underwriter shall promptly notify the Company in writing of the institution of such action, and the Company shall assume the defense of such action, including the employment of counsel and payment of expenses, provided, however, that any failure or delay to so notify the Company will not relieve the Company of any obligation hereunder, except to the extent that its ability to defend is actually impaired by such failure or delay. Such Underwriter or controlling person shall have the right to employ its or their own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of such Underwriter or such controlling person unless the employment of such counsel shall have been authorized in writing by the Company in connection with the defense of such action, or the Company shall not have employed counsel to have charge of the defense of such action within a reasonable time or such indemnified party or parties shall have reasonably concluded (based on the advice of counsel) that there may be defenses available to it or them which are different from or additional to those available to the Company (in which case the Company shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by the Company and paid as incurred (it being understood, however, that the Company shall not be liable for the expenses of more than one separate firm of attorneys for the Underwriters or controlling persons in any one action or series of related actions in the same jurisdiction (other than local counsel in any such jurisdiction) representing the indemnified parties who are parties to such action). Anything in this paragraph to the contrary notwithstanding, the Company shall not be liable for any settlement of any such claim or action effected without its written consent. (c) Each Underwriter agrees, severally and not jointly, to indemnify, defend and hold harmless the Company, the Company's directors, the Company's officers that signed the Registration Statement, and any person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any loss, expense, liability, damage or claim (or action in respect thereof) (including the reasonable cost of investigation) which, jointly or severally, the Company or any such person may incur under the Securities Act, the Exchange Act or otherwise, but only insofar as such loss, expense, liability, damage or claim (or action in respect thereof) arises out of or is based upon any untrue statement or alleged untrue statement of a material fact contained in and made in reliance upon and in conformity with information furnished in writing by such Underwriter through the Representative to the Company expressly for use in the Registration Statement (or in the Registration Statement as amended by any post-effective amendment 31 thereof by the Company), a Prospectus or any Application, or arises out of or is based upon any omission or alleged omission to state a material fact in connection with such information required to be stated either in such Registration Statement, Prospectus or Application or necessary to make such information, in the light of the circumstances under which made, not misleading, and will promptly reimburse the Company for all reasonable expenses (including reasonable counsel fees and expenses) as they are incurred in connection with the investigation of, preparation for or defense arising from any threatened or pending claim. The statements set forth in the table under paragraph one, and in paragraphs three, eight, nine, ten, eleven, twelve, thirteen, fourteen and fifteen under the caption "Underwriting" in the Preliminary Prospectus and the Prospectus (to the extent such statements relate to the Underwriters) constitute the only information furnished by or on behalf of any Underwriter through the Representative to the Company for purposes of Section 3(j) and this Section 9. If any action is brought against the Company, or any such person in respect of which indemnity may be sought against any Underwriter pursuant to the foregoing paragraph, the Company or such person shall promptly notify the Representative in writing of the institution of such action and the Representative, on behalf of the Underwriters, shall assume the defense of such action, including the employment of counsel and payment of expenses. The Company or such person shall have the right to employ its own counsel in any such case, but the fees and expenses of such counsel shall be at the expense of the Company or such person unless the employment of such counsel shall have been authorized in writing by the Representative in connection with the defense of such action or the Representative shall not have employed counsel to have charge of the defense of such action within a reasonable time or such indemnified party or parties shall have reasonably concluded (based on the advice of counsel) that there may be defenses available to it or them which are different from or additional to those available to the Underwriters (in which case the Representative shall not have the right to direct the defense of such action on behalf of the indemnified party or parties), in any of which events such fees and expenses shall be borne by such Underwriter and paid as incurred (it being understood, however, that the Underwriters shall not be liable for the expenses of more than one separate firm of attorneys in any one action or series of related actions in the same jurisdiction (other than local counsel in any such jurisdiction) representing the indemnified parties who are parties to such action). Anything in this paragraph to the contrary notwithstanding, no Underwriter shall be liable for any settlement of any such claim or action effected without the written consent of the Representative. (d) If the indemnification provided for in this Section 9 is unavailable to or insufficient to hold harmless an indemnified party under subsections (a), (b) or (c) of this Section 9 in respect of any losses, expenses, liabilities, damages or claims (or actions in respect thereof) referred to therein, then each applicable indemnifying party, in lieu of indemnifying such indemnified party, shall contribute to the amount paid or payable by such indemnified party as a result of such losses, expenses, liabilities, damages or claims (or actions in respect thereof) (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Underwriters from the offering of the Shares or (ii) if (but only if) the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in 32 clause (i) above but also the relative fault of the Company and of the Underwriters in connection with the statements or omissions which resulted in such losses, expenses, liabilities, damages or claims (or actions in respect thereof), as well as any other relevant equitable considerations. The relative benefits received by the Company and the Underwriters shall be deemed to be in the same proportion as the total proceeds from the offering (net of underwriting discounts and commissions but before deducting expenses) received by the Company bear to the underwriting discounts and commissions received by the Underwriters. The relative fault of the Company and of the Underwriters shall be determined by reference to, among other things, whether the untrue statement or alleged untrue statement of a material fact or omission or alleged omission relates to information supplied by the Company or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages and liabilities (or actions in respect thereof) referred to above shall be deemed to include any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any claim or action. (e) The Company and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 9 were determined by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in subsection (d)(i) and, if applicable (ii), above. Notwithstanding the provisions of this Section 9, no Underwriter shall be required to contribute any amount in excess of the underwriting discounts and commissions applicable to the Shares purchased by such Underwriter. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 9 are several in proportion to their respective underwriting commitments and not joint. 10. Survival. The indemnity and contribution agreements contained in Section 9 and the covenants, warranties and representations of the Company contained in this Agreement, including the covenants, warranties and representations of the Company in Sections 3, 4 and 5, and the provisions of Section 7 of this Agreement shall remain in full force and effect regardless of any investigation made by or on behalf of any Underwriter, or any person who controls any Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, or by or on behalf of the Company, its directors and officers or any person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, and shall survive any termination or cancellation of this Agreement or the sale and delivery of the Shares. The Company and each Underwriter agree promptly to notify the others of the commencement of any litigation or proceeding against it and, in the case of the Company, against any of the Company's officers and directors, in connection with the sale and delivery of the Shares, or in connection with the Registration Statement or Prospectus. 33 11. Notices. Except as otherwise herein provided, all statements, requests, notices and agreements shall be in writing or by telegram and, if to the Underwriters, shall be sufficient in all respects if delivered to Friedman, Billings, Ramsey & Co., Inc., 1001 19th Street North, Arlington, Virginia 22209, Attention: Syndicate Department; if to the Company, shall be sufficient in all respects if delivered to the Company at the offices of the Company at 600 College Road East, Suite 4100, Princeton, New Jersey 08540 with a copy to David Gitlin, Esq., Wolf, Block, Schorr and Solis-Cohen LLP, 1650 Arch Street, 22nd Floor, Philadelphia, PA 19103. 12. Governing Law; Headings. THIS AGREEMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF VIRGINIA, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES. The section headings in this Agreement have been inserted as a matter of convenience of reference and are not a part of this Agreement. 13. Parties at Interest. The Agreement herein set forth has been and is made solely for the benefit of the Underwriters, the Company and the controlling persons, directors and officers referred to in Sections 9 and 10 hereof, and their respective successors, assigns, executors and administrators. No other person, partnership, association or corporation (including a purchaser, as such purchaser, from any of the Underwriters) shall acquire or have any right under or by virtue of this Agreement. 14. Counterparts and Facsimile Signatures. This Agreement may be signed by the parties in counterparts which together shall constitute one and the same agreement among the parties. A facsimile signature shall constitute an original signature for all purposes. [The remainder of this page is intentionally left blank.] 34 If the foregoing correctly sets forth the understanding among the Company and the Underwriters, please so indicate in the space provided below for the purpose, whereupon this Agreement shall constitute a binding agreement among the Company and the Underwriters. Very truly yours, Opinion Research Corporation By: ----------------------------- By: Title: Accepted and agreed to as of the date first above written: FRIEDMAN, BILLINGS, RAMSEY & CO., INC. By: ------------------------------- Title: For itself and as Representative of the other Underwriters named on Schedule I hereto. 35 Schedule I

Schedule II Active Subsidiaries of the Company Macro International Inc. ORC Holdings, Ltd. ORC International Holdings, Ltd. O.R.C. International, Ltd. ORC Korea, Ltd. ORC ProTel, LLC Opinion Research Corporation, S.A. de C.V. ORC Telecommunications Ltd. ORC TeleService Corporation Social & Health Services, Ltd. Schedule III Material Subsidiaries Macro International Inc. O.R.C. International, Ltd. ORC ProTel, LLC ORC TeleService Corporation Social & Health Services, Ltd. Schedule IV Persons/Entities Delivering Lock-Ups John F. Short Frank J. Quirk Douglas L. Cox Dale J. Florio John J. Gavin Brian J. Geiger Stephen A. Greyser, D.B.A. Steven F. Ladin Robert D. LeBlanc Seth J. Lehr Exhibit A Form of Lock-up Agreement [___________], 2005 Friedman, Billings, Ramsey & Co., Inc. as Representative of the several Underwriters c/o Friedman, Billings, Ramsey & Co., Inc. 1001 19th Street North Arlington, Virginia 22209 Ladies and Gentlemen: The undersigned understands and agrees as follows: 1. Friedman, Billings, Ramsey & Co., Inc. ("FBR") proposes to enter into an Underwriting Agreement (the "Underwriting Agreement") with Opinion Research Corporation, a Delaware corporation (the "Company"), providing for the public offering (the "Public Offering") by the several Underwriters, including FBR (the "Underwriters"), of [_______] shares of the Common Stock, $0.01 par value, of the Company (the "Common Stock") to be issued by the Company, and in connection therewith, the Company has filed a registration statement, File No. [333-________] (as amended, the "Registration Statement") with the Securities and Exchange Commission. 2. After consultation, the Company and FBR, acting as representative of the Underwriters for the Public Offering, have agreed that sales by certain officers and the directors of the Company within the 90-day period after the date of effectiveness of the Registration Statement could have an adverse effect on the market price for the Common Stock and that the public to whom the Common Stock is being offered should be protected for a reasonable time from the impact of such sales. 3. It is in the best interest of the Company and its officers, directors and stockholders to have a successful public offering and stable and orderly public market thereafter. To induce the Underwriters that may participate in the Public Offering to continue their efforts in connection with the Public Offering, the undersigned hereby agrees that, without the prior written consent of FBR on behalf of the Underwriters, he or she will not, during the period commencing on the effective date of the Registration Statement and ending 90 days after the date of the final prospectus relating to the Public Offering, (1) offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any equity securities of the Company that he, she or it may own or acquire or any securities convertible into or exercisable or exchangeable for equity securities of the Company or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of equity securities of the Company, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Common Stock or other securities, in cash or otherwise. The undersigned acknowledges that FBR is relying on the agreements of the undersigned set forth herein in making its decision to enter into the Underwriting Agreement and to continue its efforts in connection with the Public Offering. This Agreement shall be governed by and construed in accordance with the laws of the Commonwealth of Virginia without regard to principles of conflict of laws. Whether or not the Public Offering actually occurs depends on a number of factors, including market conditions. Any Public Offering will only be made pursuant to the Underwriting Agreement, the terms of which are subject to negotiation among the Company and the Underwriters. Very truly yours, ------------------------- (Name) ------------------------- ------------------------- (Address) EX-23.1 3 e02966a4exv23w1.htm CONSENT OF GRANT THORNTON LLP exv23w1


Delaware	8732	22-3118960
(State or Other Jurisdiction of Incorporation or Organization)	Primary Standard Industrial Classification Code Number	(I.R.S. Employer Identification Number)


	Per Share	Total

Public offering price	$	$
Underwriters’ discounts and commissions⁽¹⁾	$	$
Proceeds, before expenses, to us	$	$



Repurchase of LLR Interests


								Effect on
				Repurchase		Book
		No. of Shares		Value		Value		Capital			NIAC⁽²⁾

Shares of common stock⁽¹⁾			932,772	$	6,585,370	$	6,844,681	$	(6,884,681	)		—
	Gain (loss) on repurchase of common stock				259,311				—			—
Shares of Series B Preferred Stock			10		100		100		(100	)		—
Warrants			740,500		2,620,000		1,100,000		(2,620,000	)		—
Rights to exchange shares of common stock into Series C Preferred Stock, Anti-dilution warrants and other rights					8,535,219		—		—		$	(8,535,219	)


		High		Low

2005
	Second Quarter (through April 26)	$	7.90	$	6.90
	First Quarter		7.66		6.35
2004
	Fourth Quarter	$	6.75	$	5.75
	Third Quarter		7.09		5.71
	Second Quarter		8.55		6.00
	First Quarter		6.70		5.71
2003
	Fourth Quarter	$	6.59	$	5.19
	Third Quarter		6.64		5.97
	Second Quarter		6.70		3.89
	First Quarter		6.00		3.55



			At December 31, 2004

			Actual			As Adjusted⁽¹⁾


			(in thousands)
Cash and cash equivalents			$	467		$	467
Total debt (including capital leases)				42,808			33,553
Redeemable Equity⁽²⁾:
	Preferred Stock:
		Series B — 10 shares designated, issued and outstanding, liquidation value of $10 per share		—			—
		Series C — 588,229 shares designated, none issued or outstanding		—			—
	Common stock — 1,176,458 shares issued and outstanding			8,900			—
Stockholders’ Equity:
	Preferred Stock, $.01 par value, 1,000,000 shares authorized:
		Series A — 10,000 shares designated, none issued or outstanding		—			—
	Common Stock, $.01 par value, 20,000,000 shares authorized, 5,245,815 shares issued and 5,196,993 outstanding in 2004			52			97
	Additional paid-in capital			21,426			48,071
	Retained earnings (deficit)⁽³⁾			422			(8,113	)
	Treasury Stock, at cost, 48,822 shares			(261	)		(261	)
	Accumulated other comprehensive income			704			704

Total stockholders’ equity			$	22,343		$	40,498


David Gitlin, Esq. Wolf, Block, Schorr and Solis-Cohen LLP 1650 Arch Street, 22nd Floor Philadelphia, PA 19103 (215) 977-2284 Fax: (215) 405-3884		Howard B. Adler, Esq. Gibson, Dunn & Crutcher LLP 1050 Connecticut Avenue, N.W. Washington, D.C. 20036-5306 (202) 955-8500 Fax: (202) 467-0539


(1)	Please see “Underwriting” beginning on page 80 for a discussion of underwriters’ compensation.


	Page

Prospectus Summary		1
Risk Factors		8
Special Note Regarding Forward-Looking Statements		16
Use of Proceeds		17
Price Range of Common Stock		19
Dividend Policy		19
Capitalization		20
Selected Financial Information		21
Management’s Discussion and Analysis of Financial Condition and Results of Operations		25
Changes in Registrant’s Certifying Accountants		39
Our Business		40
Management		54
Principal Stockholders		61
Certain Relationships and Related Party Transactions		63
Description of Capital Stock		67
Material United States Income and Estate Tax Consequences to Non-United States Stockholders		77
Underwriting		80
Legal Matters		82
Experts		82
Where You Can Find Additional Information		82
Index to Consolidated Financial Statements		F-1
FORM OF UNDERWRITING AGREEMENT
CONSENT OF GRANT THORNTON LLP
CONSENT OF ERNST & YOUNG LLP
CONSENT OF JANNEY MONTGOMERY SCOTT LLC
FAIRNESS OPINION OF JANNEY MONTGOMERY SCOTT LLC


	•	our experience and reputation with agencies of the U.S. federal government, our ranking as the 16th largest market research company in the world based on 2003 market research revenues, and our access to senior executives, which we believe make us a leader in both social research and commercial market research;

	•	our diversified client base: we have more than 450 active contracts and task orders with various U.S. federal and state government agencies and more than 1,000 engagements with commercial clients in over 13 different industries;

	•	our long-standing client relationships and the recurring nature of our revenues: we derived approximately 82.8% of our revenues in 2004 from multi-year contracts and/or from clients for whom we have done work in each year in the three-year period ended December 31, 2004;


	•	our diverse service offerings enable us to respond to a broad range of requests for proposals, attract additional business from our existing clients, win bids and engagements from new


	•	to further expand our strong presence in the research industry by capitalizing on our long-term client relationships and our reputation with our government and commercial clients in order to expand existing client relationships and attract new clients;

	•	to continue our successful integration of research and technology by collecting and delivering useful real-time data to our clients;

	•	to take advantage of substantial opportunities for us to acquire companies in the highly fragmented research industry; and

	•	to strengthen our balance sheet by reducing our debt and significantly increasing the amount of our equity.


	•	a number of factors beyond our control, such as declining government expenditures and weak economic conditions, could decrease the demand of our existing clients for our services and impair our ability to attract new clients;

	•	our clients generally may terminate the services we provide to them at any time, and the loss of one or more of our large clients, or a significant reduction in business from those clients, could hurt our business;

	•	we have incurred losses in recent years and may incur them again;

	•	our current credit agreements contain customary financial and operating covenants which could adversely affect our business by limiting our operational and financial flexibility;

	•	our business is substantially dependent upon contracts with the U.S. federal government, and we face a number of risks inherent in doing business with the U.S. federal government; and

	•	as a government contractor, our operations are affected by shifts in government spending priorities.



(1)	4,887,500 shares if the underwriters exercise their over-allotment option in full.



(2)	11,296,846 shares if the underwriters exercise their over-allotment option in full.


(3)	Based on the number of shares outstanding at March 24, 2005. This does not include the following shares:


	•	836,979 shares issuable upon exercise of outstanding options, with a weighted average exercise price of $6.67 per share;

	•	537,029 shares issuable upon exercise of outstanding warrants, with an exercise price of $5.42 per share;

	•	740,500 shares issuable to LLR Equity Partners, L.P. and LLR Equity Partners Parallel, L.P. upon exercise of warrants, with an exercise price of $12.00 per share, which we intend to repurchase following the completion of this offering;

	•	an aggregate of 440,104 shares available for future awards under our 1997 Stock Incentive Plan; and

	•	1,008,136 shares available for future issuance under our stock purchase plans for our directors, employees and consultants.


(1)	We acquired C/ J Research, Inc. in August 2000 and Social and Health Services, Ltd. in October 2000; accordingly, the consolidated statement of operations includes only 4-month operating results of C/J Research, Inc. and 2-month operating results of Social and Health Services, Ltd.


(2)	We recorded a non-cash impairment charge of $5.9 million in 2002 to reduce the carrying value of goodwill in our U.S. market research segment and $16.3 million in 2003 to reduce the carrying value of goodwill in our teleservices segment by $10.0 million, our U.S. market research segment by $6.0 million and our Korean market research subsidiary by $317,000.


(3)	As a result of the amendment of our credit facility in the third quarter of 2002, we experienced a $77,000 expense associated with the write-off of unamortized loan fees. In the second quarter of 2004 we refinanced our debt and recognized an expense of $2.5 million for the write-off of unamortized loan fees.


(4)	On January 1, 2002, we recorded a goodwill impairment charge in our Mexican subsidiary of $292,000 as a cumulative effect of a change in accounting principle upon adoption of FASB Statement of Financial Accounting Standards No. 142, “Goodwill and Other Intangible Assets.”


(5)	Amounts include capital leases.


	*General economic and industry-specific factors beyond our control may adversely affect our business by causing demand for our services to decline.*


FRIEDMAN BILLINGS RAMSEY	OPPENHEIMER & CO.


	*Our business could suffer if we were to lose the business of SAMHSA, USAID or one or more of our other large clients.*


	*We have incurred losses in recent years and may not be profitable in the future. These losses may adversely affect our business and the market price of our stock.*


	*Covenants in our loan agreements could adversely affect our business by limiting our operational and financial flexibility.*


	*We may enter into acquisitions that may be difficult to integrate, disrupt our business, dilute stockholder value or divert management attention.*


	*Fluctuations in our quarterly and annual operating results may cause unanticipated decreases in available cash and may cause the value of our stock to decline.*


	*Our operating results may suffer if there are additional significant goodwill write-offs.*


	*If we lose key management or are unable to attract and retain the personnel required for our business, our operating results could suffer.*


	*Our clients’ spending priorities may change in a manner which could negatively affect our revenues.*


	*Our contracts with the U.S. federal government grant the government rights that are typically not found in commercial contracts and that could adversely affect our revenues and income.*


	*The U.S. federal government has the right to terminate its contracts with us at any time and such terminations could adversely affect our revenues and income.*


	We may not receive the full amount authorized under contracts that we have entered into and our backlog may be lower than we have projected, both of which could reduce our future revenues.


	*Our competitors could challenge successfully the award of a government contract to us, causing us to lose the contract, which could reduce our future revenues.*


	*Our government contracts are subject to audits and cost adjustments by the U.S. federal government, which could hurt our operating results.*


	*We may not accurately estimate the expenses, time and resources necessary to satisfy our contractual obligations, which could hurt our operating results.*


	*If our employees engage in misconduct or other improper activities, we could be subject to various penalties and liabilities.*


	*Our competitors could obtain, and use to our detriment, confidential information about us through a request under the Freedom of Information Act.*


	*Our international operations subject us to social, political and economic risks of doing business in foreign countries.*


	*Several of our purported stockholders have filed a lawsuit against us, which could result in significant legal costs and divert management attention from the operation of our business.*


	*The marketing research industry is vulnerable to general economic conditions, which may cause our revenues to decline.*


	*Our industry is competitive, and larger, better financed competitors may be more successful in obtaining clients than we are.*