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SCHEDULE 14A
(RULE 14a)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[X] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
COMPUTER TASK GROUP, INCORPORATED
(NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies: .......
(2) Aggregate number of securities to which transaction applies: ..........
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined): ............
(4) Proposed maximum aggregate value of transaction: ......................
(5) Total fee paid: .......................................................
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: ...............................................
(2) Form, Schedule or Registration Statement No.: .........................
(3) Filing Party: .........................................................
(4) Date Filed: ...........................................................
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<PAGE> 2
Company Logo
COMPUTER TASK GROUP,
INCORPORATED
Dear Fellow Shareholder:
April 4, 1997
You are cordially invited to attend the 1997 Annual Meeting of Shareholders
of Computer Task Group, Incorporated which will be held at our corporate
headquarters, 800 Delaware Avenue, Buffalo, New York on Wednesday, April 30,
1997 at 10:00 a.m.
Your Proxy card is enclosed. Please indicate your voting instructions and
sign, date and mail the Proxy promptly in the return envelope.
Sincerely,
G. S. Fitzgerald Signature
Gale S. Fitzgerald
Chairman of the Board and
Chief Executive Officer
<PAGE> 3
Company Logo
COMPUTER TASK GROUP,
INCORPORATED
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 30, 1997
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Computer
Task Group, Incorporated will be held at our corporate headquarters, 800
Delaware Avenue, Buffalo, New York on Wednesday, April 30, 1997, at 10:00 a.m.
for the following purposes:
1. To elect three Class I directors to hold office until the 1999
annual meeting of shareholders and until their successors are elected and
qualified.
2. To consider and take action upon an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
the Company's Common Stock from 25,000,000 to 150,000,000 shares.
3. To consider and take action upon an amendment to the Company's
Certificate of Incorporation to remove the authorization for 2,300,000
shares of a series of preferred stock designated as Series B Preferred
Stock.
4. To take action upon and transact any other business properly
brought before said meeting or any adjournment or adjournments thereof.
In accordance with the provisions of the By-laws, the record of
shareholders entitled to notice of and to vote at the meeting and any
adjournment thereof has been taken at the close of business on March 19, 1997.
Dated: Buffalo, New York
April 4, 1997
By Order of the Board of Directors,
J. G. Makowski Signature
Joseph G. Makowski
Secretary
<PAGE> 4
COMPUTER TASK GROUP,
INCORPORATED
PROXY STATEMENT
This Proxy Statement and the accompanying form of proxy are being mailed on
or about April 4, 1997, in connection with the solicitation by the Board of
Directors (Board) of Computer Task Group, Incorporated (Company or CTG) of
proxies to be voted at the annual meeting of shareholders on April 30, 1997, and
all adjournments thereof. The mailing address of the Company's principal
executive office is 800 Delaware Avenue, Buffalo, New York 14209.
Each share is entitled to one vote. Shares cannot be voted at the meeting
unless the shareholder is present or represented by proxy. If a properly
executed proxy in the accompanying form is returned, the shares represented
thereby will be voted at the meeting in accordance with the instructions
contained in the proxy, unless the proxy is revoked prior to its exercise. Under
the New York Business Corporation Law (BCL) and the Company's By-laws, the
presence, in person or by proxy, of one-third of the outstanding Common Stock is
necessary to constitute a quorum of the shareholders to take action at the
annual meeting. The shares which are present, or represented by a proxy, will be
counted for quorum purposes regardless of whether or not a broker with
discretionary authority fails to exercise its discretionary voting authority
with respect to any particular matter. Once a quorum is established, under the
BCL and the Company's By-laws, the directors standing for election must be
elected by a plurality of the votes cast. For voting purposes, all votes cast
"for," "against," "abstain," or "withhold authority" will be counted in
accordance with such instructions as to each item. Broker non-votes will not be
counted for any item.
The close of business on March 19, 1997 has been fixed by the Board as the
record date for the determination of shareholders entitled to vote at the
meeting. On that date, the Company had outstanding and entitled to vote
shares of Common Stock, par value $.01 per share (Common Stock).
ELECTION OF DIRECTORS
At the annual meeting of shareholders, in accordance with the Company's
Certificate of Incorporation and By-laws, three (3) persons are to be elected to
the Board as Class I directors to hold office until the 1999 annual meeting of
shareholders and until their successors are elected and qualified.
It is intended that shares represented by properly executed proxies will be
voted, in the absence of contrary instructions, in favor of the election of the
following nominees as Class I directors -- Gale S. Fitzgerald, Paul W. Joy and
Randolph A. Marks. Pursuant to the Company's Bylaws, each of the classes of
directors is required to have at least three (3) directors or such lesser number
as may be permitted by law and be as nearly equal in number as possible. The
current Class II directors of the Company whose terms of office extend until the
1998 annual meeting of shareholders and until their successors are elected and
qualified are George B. Beitzel, Richard L. Crandall and Barbara Z. Shattuck.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEES FOR CLASS I DIRECTORS
All nominees have consented to serve as directors, if elected. However, if
at the time of the meeting any nominee should be unable to stand for election,
the persons who are designated as nominees intend to vote, in their discretion,
for such other persons, if any, as may be designated by the Board.
The following information about the Company's directors relating to their
principal occupations or employment, name and principal business of the
corporation or other organization in which such occupation or employment is
carried on, and other affiliations has been furnished to the Company by the
respective directors.
1
<PAGE> 5
<TABLE>
<S> <C>
Gale S. Fitzgerald Chairman and Chief Executive Officer of the Company since October
(Class I) 1994. Ms. Fitzgerald joined the Company in May 1991 as Senior
Age 46 Vice President responsible for the Company's Northeastern United
Director since July States and Canadian operations and was promoted to President and
1993 Chief Operating Officer on July 1, 1993. Prior to joining the
Company, Ms. Fitzgerald was Vice President, Professional Services
at International Business Machines Corporation, where she had
worked for 18 years in various management positions.
Paul W. Joy Mr. Joy is an independent business consultant. From 1985 to
(Class I) August 1990, Mr. Joy served as Vice Chairman of the Board of
Age 73 American Brass Company.
Director since April
1982
Randolph A. Marks Co-founder of the Company and currently an independent business
(Class I) consultant. From 1985 to September 1990, Mr. Marks served as
Age 61 Chairman of the Board of American Brass Company. Mr. Marks was
Director since March engaged by the Company as a consultant from March 1984 until his
1966 retirement from the Company in December 1985. Prior to March
1984, Mr. Marks served as Chairman of the Board and Chief
Executive Officer of the Company commencing in June 1979, and
prior thereto as Chairman of the Board and President of the
Company from the time of its organization in 1966. Mr. Marks is a
director of Marine Midland Bank, Western New York Region and
Columbus McKinnon Corporation, a manufacturer of material
handling products.
Richard L. Crandall Chairman of the board of directors of Comshare, Inc., a computer
(Class II) software and services company. Mr. Crandall served as the
Age 53 President and Chief Executive Officer of Comshare from 1969 to
Director since July 1994. Mr. Crandall is also a director of Diebold, Inc., a
1993 manufacturer of automated self-service transactions systems,
security products and software.
George B. Beitzel Mr. Beitzel has been an independent business consultant since his
(Class II) retirement from International Business Machines Corporation in
Age 68 1987 where he served as Senior Vice President. Mr. Beitzel joined
Director since January IBM in 1955 as a sales representative and was a member of IBM's
1994 board of directors from 1972 until 1985. He is a director of
Bankers Trust New York Corporation and its subsidiary, Bankers
Trust Company, Phillips Petroleum Company, Phillips Gas Company,
Caliber System, Inc., a transportation and freight company, Rohm
and Haas Company, a manufacturer of plastic materials, Xillix
Technologies Corp., a manufacturer and distributor of computer
imaging systems for the medical profession, The Colonial
Williamsburg Foundation, a colonial restoration museum and hotel
complex, TIG Holdings, Inc., a property and casualty insurance
holding company, and Bitstream, Inc., a developer of computer
software for the creation and printing of electronic documents.
Barbara Z. Shattuck Ms. Shattuck is the president and founding principal of Shattuck
(Class II) Hammond Partners, Inc., a financial and investment advisor to the
Age 46 healthcare industry. Ms. Shattuck was also a founding partner and
Director since October principal of Cain Brothers, Shattuck & Company, Inc. a financial
1995 and investment advisor.
</TABLE>
2
<PAGE> 6
SECURITY OWNERSHIP OF THE COMPANY'S COMMON SHARES
BY CERTAIN BENEFICIAL OWNERS AND BY MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of March 19, 1997, the following persons were known by the Company to be
the beneficial owners of more than five percent of its Common Stock. The
following table shows the nature and amount of their beneficial ownership.
<TABLE>
<CAPTION>
AMOUNT AND
NAME AND ADDRESS NATURE OF PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
- - ------------------------- ---------------------------------- --------------- ----------
<S> <C> <C> <C>
Common Stock............. Thomas R. Beecher, Trustee 1,820,882 %
CTG Stock Employee
Compensation Trust
200 Theater Place
Buffalo, NY 14202
Common Stock............. Essex Investment Management 923,710(2) %
Company
125 High Street
Boston, MA 02110
</TABLE>
- - ---------------
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings made with the Securities
and Exchange Commission (SEC). Except as otherwise indicated, each holder
has sole voting and investment power with respect to the shares indicated.
(2) Essex Investment Management Company, a registered investment advisor, is the
beneficial owner of 923,710 shares of the Company's Common Stock, 636,980
shares of which it has the sole power to vote or to direct the vote. Essex
has the sole power to dispose of or to direct the disposition of all 923,710
shares.
Security Ownership by Management
As of March 19, 1997, the directors and nominees for director individually,
the named executive officers, and all directors and executive officers of the
Company as a group, respectively, owned beneficially the following amounts of
the Company's Common Stock.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF INDIVIDUAL BENEFICIAL PERCENT
OR NUMBER IN GROUP OWNERSHIP(1) OF CLASS
- - -------------------------------------------------------------- --------------- ----------
<S> <C> <C>
Gale S. Fitzgerald............................................ 188,406(2) %
-------
Randolph A. Marks............................................. 114,965(3)(4) *
Paul W. Joy................................................... 85,467(5) *
Richard L. Crandall........................................... 43,668(6) *
George B. Beitzel............................................. 56,067(7) *
Barbara Z. Shattuck........................................... 33,767(8) *
Richard A. Ballou............................................. 39,583(9) *
James R. Boldt................................................ 11,350(10) *
Michael E. Grich.............................................. 5,988(11) *
Nico H. Molenaar.............................................. 15,000(12) *
All directors and executive officers as a group (16 656,744(13) 3.18%
persons)....................................................
</TABLE>
- - ---------------
* Less than 1 percent of outstanding shares.
(1) The beneficial ownership information presented is based upon information
furnished by each person or contained in filings made with the SEC. Except
as otherwise indicated, each holder has sole voting and investment power
with respect to the shares indicated.
(2) Amount indicated includes options to purchase 122,500 shares which are or
will become exercisable within sixty (60) days and 6,250 shares owned by
members of Ms. Fitzgerald's immediate family.
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<PAGE> 7
(3) Under an agreement entered into in February 1981, upon the death of Mr.
Marks, the Company will have the option to purchase up to as many shares of
Common Stock owned by the decedent as may be purchased with the proceeds of
the insurance on the life of the decedent maintained by the Company
(currently $ in the aggregate). The purchase price for such shares
will be 90 percent of the market price of such shares on the Friday
immediately preceding the date of death.
(4) Amount indicated represents 84,965 shares held by Mr. Marks in his own name
and options to purchase 20,000 shares which are or will become exercisable
within sixty (60) days. A family charitable foundation of which Mr. Marks
is a trustee and shares voting and investment power with respect to said
shares is the beneficial owner of 10,000 shares.
(5) Amount indicated represents 20,467 shares held by Mr. Joy in his own name
and options to purchase 20,000 shares which are or will become exercisable
within sixty (60) days. The remaining shares are held by a family
charitable foundation of which Mr. Joy is a trustee and shares voting and
investment power with respect to said shares.
(6) Amount indicated includes options to purchase 22,000 shares which are or
will become exercisable within sixty (60) days, 5,000 shares which are held
by Mr. Crandall as custodian for his son and one share held by Comshare,
Inc. of which Mr. Crandall is the Chairman of the Board of Directors.
(7) Amount indicated includes options to purchase 22,000 shares which are or
will become exercisable within sixty (60) days and 24,067 shares held by
Mr. Beitzel in his own name. The remaining shares are held by two trusts of
which Mr. Beitzel and his wife are trustees.
(8) Amount indicated includes 6,600 shares which are owned by the spouse of Ms.
Shattuck, 6,167 shares which are owned by Ms. Shattuck and options to
purchase 21,000 shares which are or will become exercisable within sixty
(60) days.
(9) Amount indicated includes options to purchase 33,475 shares which are or
will become exercisable within sixty (60) days.
(10) Amount indicated includes options to purchase 6,250 shares which are or
will become exercisable within sixty (60) days and 100 shares of which are
held by Mr. Boldt as custodian for members of his immediate family.
(11) Amount indicated includes options to purchase 5,988 shares which are or
will become exercisable within sixty (60) days.
(12) Amount indicated includes options to purchase 15,000 shares which are or
will become exercisable within sixty (60) days.
(13) Amount indicated includes options to purchase 328,413 shares which are or
will become exercisable within sixty (60) days.
4
<PAGE> 8
INFORMATION ABOUT MANAGEMENT
The Board of Directors
During the fiscal year ended December 31, 1996, the Board of Directors held
a total of four (4) regularly scheduled meetings. Each of the directors attended
all of the meetings of the Board and of those committees of the Board on which
they served.
The Board of Directors has Audit, Compensation and Directors Affairs
Committees which met four (4), three (3) and two (2) times, respectively, in
1996. In 1996 the original composition of the Audit Committee was Messrs.
Crandall, Joy, Marks and Ms. Shattuck. Mr. Joy resigned as a member of the Audit
Committee on April 24, 1996. In 1996 the original composition of the
Compensation Committee consisted of Messrs. Beitzel, Joy and Marks. Mr. Marks
resigned as a member of the Compensation Committee on February 2, 1996 and was
replaced by Ms. Shattuck. In 1996 the original composition of the Directors
Affairs Committee was Messrs. Beitzel, Joy, Crandall and Marks. Mr. Joy resigned
as a member of the Directors Affairs Committee on April 24, 1996. The Audit
Committee reviews the annual financial statements and scope of the audit with
the Company's independent accountants and is available to discuss with them and
the Company's Chief Financial Officer and internal auditor any other
audit-related matters which may arise during the year. They also review the
internal audit function. The Compensation Committee reviews and approves the
compensation of senior management and is responsible for the administration of
the Company's stock plans, Non-qualified Key Employee Deferred Compensation
Plan, and Stock Employee Compensation Trust. The Directors Affairs Committee is
responsible for the establishment of governance policies concerning the Board of
Directors of the Company. The Directors Affairs Committee is also responsible
for reviewing and approving the compensation of directors subject to
ratification by the Board of Directors. In 1996 the Board of Directors
reappointed Paul W. Joy, lead director for communications with the Chairman and
Chief Executive Officer which require input from the outside directors. Mr. Joy
does not receive any additional remuneration in connection with his service as
lead director. The Board of Directors does not have a Nominating Committee.
Nominations for directors are made by the Directors Affairs Committee in
consultation with the Chairman and Chief Executive Officer.
Section 16(a) Beneficial Ownership Reporting Compliance
The Company believes that all Section 16(a) filing requirements applicable
to its officers, directors and beneficial owners of more than 10% of its
outstanding Common Stock were complied with for 1996. Such belief is based
solely on its review of copies of such reports furnished to the Company and
written representations that no other reports were required.
Director Compensation
From January 1, 1996 to April 24, 1996, the cash compensation of the
outside directors of the Company who were not officers consisted of a $3,333.00
retainer and a $1,000 fee for attendance at each Board of Directors meeting for
said period. The Company also purchased 667 shares of its Common Stock for each
outside director as part of his or her other annual compensation. Additionally,
the Chairperson of a committee received $800 for attendance at each committee
meeting and committee members received $500 for attendance at committee
meetings. Directors who are not officers were also entitled to be reimbursed for
expenses incurred while serving as directors. Directors who are officers of the
Company do not receive additional compensation for their services as directors.
On April 24, 1996 following approval by a vote of the holders of a majority
of the outstanding shares of the Company's Common Stock, the compensation of
non-officer directors was changed to a $10,000 annual retainer and the grant on
every third year of a non-qualified stock option for 30,000 shares of Common
Stock subject to vesting at the rate of 10,000 shares per year beginning in
1996. Accordingly, for the period from April 24, 1996 to May 1997, each
non-officer director received a $10,000 retainer and an option to purchase
30,000 shares of Common Stock. Directors no longer receive fees for attending
board or committee meetings or cash to be used for the purchase of shares of the
Company Common Stock. Directors who are not officers
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<PAGE> 9
continue to be entitled to be reimbursed for expenses incurred while serving as
directors. Directors who are officers of the Company do not receive additional
compensation for their services as directors.
Executive Compensation and Other Information
The following table shows the annual and long-term compensation paid to the
Chairman and Chief Executive Officer and the four (4) highest compensated
executive officers for services rendered in 1996, 1995 and 1994:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------------------- PAYOUTS
OTHER RESTRICTED -------
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SAR'S PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) (1) ($) (#) ($) ($) (6)
- - -------------------------------- -------- -------- ------------ ---------- ------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald 1996 $345,000 $255,000 $ 45,000 $ 43,625(7) 48,000 $ 0 $ 4,750
Chairman of the Board 1995 $300,000 $153,123 $ 2,832 $ 0 95,000 $ 0 $ 2,310
and Chief Executive 1994 $281,250 $100,000 $ 0 $ 0 42,000 $ 0 $ 2,310
Officer
Nico H. Molenaar(2) 1996 $125,758 $155,185 $ 0 $ 0 15,000 $ 0 $ 10,303
Vice President, Managing
Director of CTG Europe
James R. Boldt(3) 1996 $133,846 $ 89,000 $ 16,713 $ 0 25,000 $ 0 $ 1,720
Vice President and Chief
Financial Officer
Michael E. Grich(4) 1996 $120,000 $ 97,623 $ 16,322 $ 0 25,000 $ 0 $ 2,563
Vice President 1995 $120,000 $ 17,987 $ 862 $ 0 0 $ 0 $ 2,724
Richard A. Ballou(5) 1996 $150,000 $ 27,000 $ 13,275 $ 0 11,000 $ 0 $ 2,375
Vice President 1995 $135,000 $ 41,139 $ 1,108 $ 0 32,000 $ 0 $ 2,310
1994 $132,000 $ 28,050 $ 0 $ 0 4,300 $ 0 $ 2,310
</TABLE>
- - ---------------
(1) Other annual compensation for Ms. Fitzgerald and for Messrs. Boldt, Grich
and Ballou consists of deferred compensation contributed by the Company
under the CTG Non-Qualified Key Employee Deferred Compensation Plan. Ms.
Fitzgerald did not defer any of her 1996 salary or bonus under the
Non-Qualified Key Employee Deferred Compensation Plan.
(2) Mr. Molenaar was promoted to Vice President as of January 1, 1996. Mr.
Molenaar did not defer any of his 1996 salary or bonus under the
Non-Qualified Key Employee Deferred Compensation Plan.
(3) Mr. Boldt joined the Company on February 12, 1996 as Vice President and
Chief Financial Officer. Mr. Boldt deferred a total of $11,650 of his 1996
salary and bonus under the Non-Qualified Key Employee Deferred Compensation
Plan.
(4) Mr. Grich was promoted to Vice President in February, 1995. Mr. Grich
received $27,623 of his 1996 bonus and deferred $70,000 of such bonus under
the Non-Qualified Key Employee Deferred Compensation Plan.
(5) Mr. Ballou deferred $7,494 of his 1996 salary and none of his bonus under
the Non-Qualified Key Employee Deferred Compensation Plan.
(6) Consists of Company matching contributions under the 401(k) Retirement Plan
and Trust for Ms. Fitzgerald and Messrs. Boldt, Grich and Ballou and a
contribution to a retirement plan for Mr. Molenaar.
(7) Ms. Fitzgerald received an award of 1,000 shares of restricted common stock
with a value of $43.625 per share which will vest on January 31, 2001. The
shares are eligible to receive dividends in the same manner as all common
stock of the Company.
6
<PAGE> 10
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (Committee) of the Board of Directors is
composed of George B. Beitzel (Chairman), Paul W. Joy and Barbara Z. Shattuck,
all of whom are "non-employee directors" within the meaning of Rule 16b-3 under
the Securities Exchange Act of 1934, as amended. Randolph A. Marks, a member of
the Board, served on the Committee until February 2, 1996 when he was replaced
by Ms. Shattuck. The Committee is responsible for overseeing the administration
of the Company's employee stock and benefit plans and establishing policies
relating to the compensation of employees. This Committee report describes the
various components of the Company's executive officer compensation program and
the bases on which 1996 compensation was paid to such executive officers
including the executive officers named in the compensation tables set forth
above.
Compensation Policy -- The Committee's compensation policies are designed
to maintain a direct relationship among executive pay, financial performance of
the Company and the creation of shareholder value. Such policies seek to:
- Provide compensation opportunities which enable the Company to attract
and retain qualified executives;
- Provide compensation that is directly related to the performance of both
the Company and the individual;
- Integrate the compensation programs with the Company's annual and
long-term financial and operating objectives; and
- Align the interests of executive officers with the long-term interests of
the Company's stockholders through stock-based award opportunities that
can result in ownership of the Company's Common Stock.
The Company's executive compensation program attempts to achieve the
foregoing objectives by integrating annual base salary with annual cash and
stock-based incentives based on both Company and individual performance.
Measurement of Company performance is based on operating and financial
objectives set at the beginning of each year. As a result, executive
compensation tends to be higher in years in which the performance goals are
achieved or exceeded. In addition, as an executive's level of responsibility
increases, a greater portion of his or her annual compensation is based on
performance incentives. Accordingly, there will be greater variability in an
executive's total compensation from year to year based on both the individual's
and the Company's actual performance.
Components of Executive Compensation -- The compensation paid to the
Company's executive officers during 1996, as reflected in the tables set forth
in this Proxy Statement, consisted of annual base salary, annual cash incentive
compensation, long-term stock-based incentive compensation and deferred
compensation.
Annual Base Salary -- With respect to determining the base salary of
executive officers, the Committee takes into consideration a variety of factors
including the executive's level of responsibility, individual performance and
the salaries of similar positions in the Company and in comparable companies
both within and outside our industry who compete for executive talent. The
Company participates in and reviews various industry salary surveys and in 1996
retained the services of an independent consultant to assess comparable external
salaries.
Annual Cash Incentive Compensation -- Each executive officer's total annual
compensation consists in part of annual cash incentive compensation. Awards of
cash incentive compensation are based on the attainment of one or more specified
targeted levels of (i) gross profit, (ii) operating income, (iii) specific
assigned objectives, (iv) net income, and (v) individual objectives. The
Committee, in awarding such discretionary cash incentive compensation, considers
the recipient's individual contribution toward Company operating profitability,
cost containment, leadership, teamwork and the successful implementation of
business strategy. The objective of this form of annual compensation is to
provide an incentive to certain executives to
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<PAGE> 11
achieve operating and financial objectives that the Committee believes are
primary determinants of shareholder value over time.
Long-Term Stock-Based Incentive Compensation -- The third component of
executive compensation during 1996 consisted of grants of stock options under
the Company's 1991 Stock Option Plan and restricted stock under the Company's
1991 Restricted Stock Plan. In making grants of stock options, the Committee
considered an executive's contribution toward past and future Company
performance. Any value that might be received from an option grant depends upon
increases in the price of the Company's Common Stock. Accordingly, the amount of
compensation to be received by an executive is directly aligned with increases
in shareholder value. Grants of stock options are made to key employees of the
Company who, in the opinion of the Committee, have had and are expected to
continue to have a significant impact on the long-term performance of the
Company. Such awards are also intended to reward such individuals who remain
with the Company and to further align their interests with those of the
Company's shareholders. In making grants of restricted stock, the Committee
considered the executive's contribution to the success of the Company in 1996.
Other than due to special circumstances, restricted stock awards are subject to
required service for four years from the date of the grant until such
restrictions lapse. During such restriction period, the executive has the right
to vote and receive dividends paid on such shares. The final value of the shares
received by the executive is based on the change in shareholder value. The
Committee strongly believes that stock ownership by management and stock-based
performance compensation are beneficial in aligning management's and
shareholders' interests in the enhancement of shareholder value.
Stock Options Granted During 1996 -- The Committee granted stock options
during 1996 to various executive officers named in the following table (see
Options/SAR Grants in 1996). For all stock option grants during 1996, recipients
of such stock options received the right to purchase shares of Common Stock of
the Company in the future at a price equal to their fair market value determined
on the date of grant. Options granted as incentive stock options under the
Internal Revenue Code of 1986, as amended, generally become exercisable in
installments of 25 percent of the shares covered by each grant commencing on the
first annual anniversary date of the date of grant and on each annual
anniversary date thereafter. Such options may be exercised at any time for a
period of six (6) years after they first become exercisable. Options granted as
nonqualified stock options generally become exercisable in installments of 20
percent of the shares covered by each grant, commencing on the first annual
anniversary date of the date of grant and on each annual anniversary date
thereafter. After they become exercisable, these options may be exercised at any
time for a period not to exceed fifteen (15) years from the date of grant. The
Committee considers an executive's contribution toward Company performance,
expected future contribution and the number of options and shares of Common
Stock presently held by an executive.
Deferred Compensation -- The fourth component of executive compensation
during 1996 consisted of the Company's contribution under the CTG Non-Qualified
Key Employee Deferred Compensation Plan for those executives chosen to
participate in the Plan. Beginning June 1, 1995, executives chosen to
participate in the Plan were eligible to elect to defer a percentage of their
annual cash compensation. In addition, executives are also eligible to receive a
Company contribution under the Plan in an amount equal to a specified percentage
of the sum of the executive's 1996 base salary and bonus compensation. The
Company's contribution percentage and criteria used to determine performance
targets are based on the recommendations of the Chairman and CEO, subject to the
approval of the Committee. The contribution is made in cash or CTG Common Stock,
as determined by the Committee.
Chief Executive Officer Compensation -- The Committee, in setting the
compensation for the position of Chief Executive Officer (CEO) during 1996,
sought to provide a compensation package which depended in part upon the
attainment of both annual and long-term objectives, thereby linking the annual
compensation of the CEO to individual performance and the Company's performance.
Compensation for the position of CEO consisted of (i) annual base compensation
established by the Committee, (ii) cash incentive compensation tied to Company
financial performance, (iii) discretionary cash incentive compensation tied to
Company financial performance, (iv) discretionary cash incentive compensation
based upon an assessment by the Committee and the Board of Directors of Ms.
Fitzgerald's effectiveness as CEO as measured by specific
8
<PAGE> 12
strategic and organizational objectives, (iv) long-term stock-based incentive
compensation, and (v) a contribution under the CTG Non-Qualified Key Employee
Deferred Compensation Plan.
Ms. Fitzgerald's 1996 compensation consisted of (i) base compensation of
$345,000 per year, (ii) cash incentive compensation consisting of $85,000 based
upon her attainment of specific financial objectives, (iii) discretionary cash
incentive compensation consisting of $42,500 based upon her attainment of
specific financial objectives, (iv) discretionary cash incentive compensation
consisting of $127,500 based upon an assessment by the Committee and Board of
Directors of Ms. Fitzgerald's effectiveness as CEO as measured by specific
strategic and organizational objectives, (iv) long-term stock-based incentive
compensation consisting of an incentive stock option grant of 48,000 shares at
$18.00 awarded on February 2, 1996, (v) restricted stock with a value of $43,625
which will vest on January 31, 2001, and (vi) a contribution of $45,000 under
the CTG Non-Qualified Key Employee Deferred Compensation Plan.
Section 162(m) of the Internal Revenue Code -- Section 162(m) of the Code,
adopted as part of the Omnibus Budget and Reconciliation Act of 1993, generally
limits to $1 million the deduction that can be claimed by any publicly held
corporation for compensation paid to any "covered employee" in any taxable year
beginning after December 31, 1993. The term "covered employee" is defined as the
Chief Executive Officer and the four other highest paid executive officers of
the corporation. The Committee has determined that the 1991 Option Plan meets
the requirements for deductibility. The Committee will, however, continue to
study whether it is desirable to cause compensation arrangements in the future
to qualify as deductible compensation. To the extent that the Committee's
compensation objectives can be achieved in a manner which maximizes the
deductibility of compensation paid by the Company, it will seek to do so.
SUBMITTED BY THE COMPENSATION COMMITTEE
<TABLE>
<S> <C> <C>
George B. Beitzel Paul W. Joy Barbara Z. Shattuck
Chairman
</TABLE>
The Compensation Committee Report on Executive Compensation and the Stock
Performance Graph shall not be deemed incorporated by reference by any general
statement incorporating by reference this proxy statement into any filing under
the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the
extent the Company specifically incorporates this information by reference, and
shall not otherwise be deemed filed under such Acts.
9
<PAGE> 13
COMPANY PERFORMANCE GRAPH
The following graph shows a five-year comparison of cumulative total
shareholder returns for the Company's Common Stock, the S&P 500 Index, the S&P
Computer Software & Services Index and a new Peer Group, assuming a base index
of $100 at the end of 1991. The cumulative total return for each annual period
within the five years presented is measured by dividing (i) the sum of (A) the
cumulative amount of dividends for the period, assuming dividend reinvestment,
and (B) the difference between the Company's share price at the end and the
beginning of the period by (ii) the share price at the beginning of the period.
The calculations exclude trading commissions and taxes.
<TABLE>
<CAPTION>
Measurement Period Computer Task S&P Computer
(Fiscal Year Covered) Group, Inc. Software Peer Group S&P 500
<S> <C> <C> <C> <C>
1991 100.00 100.00 100.00 100.00
1992 100.60 118.30 114.00 107.60
1993 85.20 150.90 115.00 118.40
1994 109.30 178.40 155.80 120.00
1995 245.40 250.70 154.50 165.00
1996 537.70 373.00 295.10 202.90
</TABLE>
- - ---------------
The new Peer Group comprises the following companies which are in the
business of providing information technology (IT) services: American Management
Systems, Incorporated; Analysts International Corporation; Ciber, Inc.; Computer
Horizons Corp.; Compuware Corporation; Keane, Inc.; Alternative Resources
Corporation; and Technology Solutions Company. The S&P Computer Software &
Services Index comprises the following companies: Autodesk, Inc., Computer
Associates International, Inc., Computer Sciences Corporation, Microsoft
Corporation, Novell, Inc., Oracle Corporation, and Unisys Corporation.
The Company elected to adopt the new Peer Group as a replacement for the
S&P Computer Software & Services Index because it comprises companies that
provide IT services more closely aligned to those provided by the Company and
would, therefore, provide a more accurate indication of shareholder return for
the Company's Common Stock when compared to such similar firms.
10
<PAGE> 14
Option/SAR Grants, Exercises and Holdings
The following tables set forth certain information concerning stock options
granted and exercised during 1996, and unexercised options held as of the end of
1996, by the named executives:
OPTIONS/SAR GRANTS IN 1996
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
- - ----------------------------------------------------------------------------------------
NUMBER OF
SECURITIES PERCENT POTENTIAL REALIZABLE
UNDERLYING OF TOTAL VALUE AT ASSUMED ANNUAL
OPTIONS/SARS OPTIONS/SARS RATES OF STOCK PRICE
GRANTED GRANTED TO EXERCISE OR APPRECIATION FOR
IN 1996 EMPLOYEES BASE PRICE EXPIRATION OPTION TERM (2)
(#) (1) IN 1996 ($ PER SHARE) DATE 5% 10%
------------ ------------ ------------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald 12,000 3.52% $18.00 2/2/03 $ 87,934 $204,923
12,000 3.52% $18.00 2/2/04 $103,130 $247,015
12,000 3.52% $18.00 2/2/05 $119,087 $293,317
12,000 3.52% $18.00 2/2/06 $135,841 $344,248
Nico H. Molenaar 5,000 1.47% $19.50 1/2/01 $ 29,937 $ 59,525
10,000 2.93% $18.00 2/2/01 $ 49,731 $109,892
James R. Boldt 6,250 1.83% $18.875 2/12/03 $ 48,025 $111,919
6,250 1.83% $18.875 2/12/04 $ 56,325 $134,908
6,250 1.83% $18.875 2/12/05 $ 65,040 $160,195
6,250 1.83% $18.875 2/12/06 $ 74,190 $188,012
Michael E. Grich 2,500 0.73% $18.00 2/2/03 $ 18,320 $ 42,692
2,500 0.73% $18.00 2/2/04 $ 21,485 $ 51,461
2,500 0.73% $18.00 2/2/05 $ 24,810 $ 61,108
2,500 0.73% $18.00 2/2/06 $ 28,300 $ 71,718
3,750 1.10% $17.625 2/22/03 $ 26,907 $ 62,704
3,750 1.10% $17.625 2/22/04 $ 31,557 $ 75,584
3,750 1.10% $17.625 2/22/05 $ 36,439 $ 89,752
3,750 1.10% $17.625 2/22/06 $ 41,566 $105,336
Richard A. Ballou 2,750 0.81% $18.00 2/2/03 $ 20,151 $ 46,961
2,750 0.81% $18.00 2/2/04 $ 23,634 $ 56,608
2,750 0.81% $18.00 2/2/05 $ 27,291 $ 67,218
2,750 0.81% $18.00 2/2/06 $ 31,130 $ 78,890
</TABLE>
- - ---------------
(1) The above listed options are incentive stock options which become
exercisable in annual installments of 25 percent on each of the first four
anniversary dates from the date of grant. To the extent such options cannot
qualify as incentive stock options, they will be treated as nonqualified
stock options which become exercisable in annual installments of 20 percent
on each of the first five anniversary dates from the date of grant. The
options granted to Mr. Molenaar vest at the time of grant pursuant to the
law of The Netherlands.
(2) The dollar amounts under these columns use the five (5%) percent and ten
(10%) percent rates of stock price appreciation prescribed by the SEC. This
presentation is not intended to forecast future appreciation of the
Company's stock.
AGGREGATE OPTION/SAR EXERCISES IN 1996 AND 1996 YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
VALUE OF
NUMBER OF UNEXERCISED
SHARES UNEXERCISED IN-THE-MONEY
ACQUIRED OPTIONS/SARS AT OPTIONS/SAR AT
ON VALUE 1996 YEAR END 1996 YEAR END
EXERCISE REALIZED --------------------------- ---------------------------
# $ EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
-------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald........ 15,750 $349,063 76,000 180,500 $2,610,000 $ 5,590,188
Nico H. Molenaar.......... 0 $ 0 15,000 0 $ 369,375 $ 0
James R. Boldt............ 0 $ 0 0 25,000 $ 0 $ 606,250
Michael E. Grich.......... 0 $ 0 2,375 25,125 $ 82,734 $ 638,203
Richard A. Ballou......... 5,250 $130,813 21,900 38,900 $ 718,425 $ 1,159,144
</TABLE>
11
<PAGE> 15
Long-Term Incentive Plan Awards
No awards were made to the named executives during 1996 under the Company's
1991 Restricted Stock Plan other than Ms. Fitzgerald.
Executive Supplemental Benefit Plan
The Company maintains an Executive Supplemental Benefit Plan (Supplemental
Plan) which provides certain executives with deferred compensation benefits. The
Supplemental Plan was amended as of December 1, 1994 so as to freeze current
benefits, provide no additional benefit accruals for participants and to admit
no new participants. As a result of this action, the Company in 1996 reduced its
annual Supplemental Plan expense from approximately $1.1 million in 1994 to
approximately $.7 million. Generally, the Supplemental Plan provides for
retirement benefits of up to 50% of a participating employee's base compensation
at termination or as of December 1, 1994, which ever is earlier, and
pre-retirement death benefits calculated using the same formula that is used to
calculate normal and early retirement benefits. Benefits are based on service
credits earned each year of employment prior to and subsequent to admission to
the Supplemental Plan through December 1, 1994. Current employee participants
are also entitled to long-term disability benefits based upon 50% of the
disabled participant's base compensation at the time of disability. Retirement
benefits and pre-retirement death benefits are paid during the 180 months
following retirement or death, respectively, while disability benefits are paid
until normal retirement age. Normal retirement is age 60. For any participant
who is a member of a successor plan, the normal retirement age is increased to
65.
On November 30, 1994, the Supplemental Plan was also amended to provide
that in the event of a change of control, participants employed at such time
shall be entitled to receive a lump sum benefit equivalent to the present value
of 50% of their base compensation as of the date of the change of control. This
amount will be calculated for a period of no less than fifteen (15) years or the
life of the participant, whichever is longer. A change of control will occur if
(i) any person (other than the Company, any trustee or other fiduciary holding
securities under an employee benefit plan of the Company, or any company owned,
directly or indirectly, by the stockholders of the Company in substantially the
same proportions as the ownership of stock of the Company) is or becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 30% or more of combined voting power of the Company's then
outstanding voting securities; (ii) during any period of twenty-four (24)
consecutive months, individuals who at the beginning of such period constitute
the Board and any new director whose election by the Board, or whose nomination
for election by the Company's stockholders, was approved by a vote of at least
two-thirds 2/3 of the directors (other than in connection with the contested
election), before the beginning of the period cease, for any reason, to
constitute at least a majority thereof; or (iii) the stockholders of the Company
approve a plan of complete liquidation of the Company or the sale or disposition
by the Company of all or substantially all of the Company's assets unless the
acquirer of the assets or its directors shall meet the conditions for a merger
or consolidation described in the Supplemental Plan. Upon a change of control,
on the basis of present base compensation, all executive officers as a group
would receive a maximum of $726,000.
On November 1, 1996, the Compensation Committee of the Board, which is
responsible for the administration of the Supplemental Plan, determined as a
policy matter that no early retirement benefits would be available in the
future. On January 31, 1997, the Board of Directors amended the Supplemental
Plan to delete reference to the right of any plan participant to request an
early retirement benefit in the future. The Board further amended the
Supplemental Plan to allow the Company the right at any time to pay any vested
plan participant the present value, as calculated by the Company, of the benefit
due at normal retirement age.
Two current employees and nineteen (19) former employees are presently
covered by the Supplemental Plan. The two current employees also participate in
the CTG Non-Qualified Key Employee Deferred Compensation Plan which is a
successor plan. At normal retirement age, Ms. Fitzgerald will receive $30,000
per year. All executive officers as a group will receive total annual retirement
benefits of $51,300 at age 65.
The Company has purchased, and is the beneficiary of, insurance on the
lives of certain participants in the Supplemental Plan. Under the insurance
program, if the assumptions made as to mortality experience, policy
12
<PAGE> 16
dividend and other factors are realized, the proceeds of the policies will
reimburse the Company for all costs of the Supplemental Plan, including
benefits, insurance premiums and a factor for the use of the Company's money.
Non-Competition and Employment Agreements
On July 1, 1993 the Company entered into a non-competition agreement with
Ms. Fitzgerald upon her appointment as President and Chief Operating Officer.
This Agreement remained in place following her appointment as Chairman and Chief
Executive Officer in October, 1994. Under the terms of the agreement, Ms.
Fitzgerald, following the termination of her employment relationship with the
Company, is to refrain for a defined period from undertaking any activities in
competition with the business activities of the Company, including the
solicitation or recruitment of Company employees, or the use or disclosure of
confidential information concerning the Company's business and operations. Under
the terms of the agreement, the Company agrees not to terminate Ms. Fitzgerald's
employment with the Company unless the Company gives her twelve (12) months
prior notice of such termination, or pays to her an amount equal to twelve (12)
months total compensation to be paid to her under the terms of any then existing
compensation plan in effect between the Company and her. Pursuant to the terms
of the agreement, the Company agreed that in the event Ms. Fitzgerald has not
secured an employment or a contractual position of six months or more in an
executive management capacity, at the expiration of the twelve (12) month period
following the date of separation, the Company will pay her up to an additional
six (6) months of total compensation calculated on the basis of the last
compensation plan in effect between the Company and Ms. Fitzgerald.
The Company, through its Netherlands based subsidiary, Computer Task Group
Europe, B.V. (CTG Europe), entered into an agreement with Mr. Molenaar effective
January 1, 1996. The agreement sets forth the duties of Mr. Molenaar as
Co-Managing Director for the Company's European operations and provides for a
base salary (see compensation table), eligibility for an annual incentive bonus
based upon the attainment of annual operating profits by CTG Europe and
participation in employee benefit plans generally made available by CTG Europe.
The agreement also provides for a payment equal to one times Mr. Molenaar's last
earned annual gross salary in the event his employment is terminated at the
request of the Company for a reason other than with cause. In addition, the
agreement places post-employment restrictions on Mr. Molenaar with respect to
customer and employee relationships and nondisclosure of confidential
information. Finally, the agreement has a term for an indefinite period of time
but may be terminated by either party upon three months prior written notice and
will terminate in any event without notice at the end of the month in which Mr.
Molenaar reaches age 65.
Severance Compensation Agreement
On October 31, 1994, the Company entered into a severance compensation
agreement with Ms. Fitzgerald. Generally, the separation agreement provides that
in the event Ms. Fitzgerald is employed by the Company at the time of a change
of control, and is subsequently terminated within two (2) years following change
of control, she will be entitled to receive a lump sum severance payment equal
to her average annual compensation for the five (5) calendar years preceding the
change of control, multiplied by 2.99.
A change of control is defined to mean (i) approval by the holders of the
Common Stock of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
the Common Stock are converted into cash, securities or other properties, other
than a merger of the Company in which the holders of the Common Stock
immediately prior to the merger own in excess of 66 2/3% of the outstanding
voting securities of the surviving corporation immediately after the merger,
(ii) approval by the holders of the Common Stock of any sale, lease, exchange or
other transfer in one transaction or a series of related transactions of all or
substantially all of the assets of the Company other than a transfer of the
Company's assets to a majority-owned subsidiary of the Company, (iii) approval
by the holders of the Common Stock of any plan or proposal for the liquidation
or dissolution of the Company; or (iv) any person (other than the Company, or
any entity owned or controlled by the Company), becomes a beneficial owner of
securities of the Company representing 30% or more of the combined voting power
of the Company's outstanding voting securities.
13
<PAGE> 17
Non-Qualified Key Employee Deferred Compensation Plan
On February 2, 1995 the Compensation Committee of the Board of Directors
approved the creation of a Non-Qualified Key Employee Deferred Compensation Plan
(Deferred Plan). The Deferred Plan is intended as a successor plan to the
Supplemental Plan. Effective June 1, 1995, participants in the Deferred Plan
were eligible to (i) elect to defer a percentage of their annual cash
compensation and (ii) receive a Company contribution of a percentage of their
base compensation and annual bonus if the Company attains annual defined
performance objectives.
The Chairman and Chief Executive Officer, subject to the approval of the
Compensation Committee, recommends (i) those key employees who will be eligible
to participate and (ii) the percentage of a participant's base and bonus
compensation which will be contributed each year to the Deferred Plan if the
Company attains annual defined performance objectives. All amounts credited to
the participant are invested, as determined by the Compensation Committee, and
the participant is credited with actual earnings of the investments. Company
contributions, including investment earnings, may be cash or the stock of the
Company.
Prior to December 31, 2002, participants are granted pro rata vesting in
Company contributions at the rate of 12.5% per year. If a participant terminates
employment due to death, disability, retirement at age 65, or in the event a
change of control (as defined in the CTG Executive Supplemental Benefit Plan
previously recited) shall occur, the participant or his or her estate shall be
entitled to receive the benefits accrued for the participant as of the date of
such event. Company contributions will be forfeited, even if vested, in the
event a participant violates a non-competition agreement or separates from
service prior to December 31, 2002. Participants are 100% vested in their own
contributions. All amounts in the Deferred Plan, including elective deferrals,
are held as general assets of the Company and are subject to the claims of
creditors of the Company. In 1996 the Company attained defined operating income
objectives sufficient to cause the Compensation Committee on January 31, 1996 to
authorize an award of seven and one-half percent (7 1/2%) of each eligible
participant's 1996 base and incentive compensation as deferred compensation,
subject to the aforementioned pro-rata vesting requirement and forfeiture
provisions.
Directors' and Officers' Liability Insurance
The Company indemnifies its directors and officers to the extent permitted
by law in connection with civil and criminal proceedings against them by reason
of their service as a director or officer. As permitted by Section 726 of the
New York Business Corporation Law, the Company has purchased directors' and
officers' liability insurance to provide indemnification for the Company and all
its directors and officers. The current liability insurance policy, with a
policy period effective April 1, 1997, was issued by The Chubb Group of
Insurance Companies at an annual premium of approximately $110,000.
Indebtedness of Management
At the annual meeting of shareholders held on April 29, 1992, the
shareholders approved the Computer Task Group, Incorporated Management Stock
Purchase Plan (the Plan). The purpose of the Plan is to promote the long-term
growth and profitability of the Company by significantly increasing ownership of
the Company's Common Stock by key employees who are expected to make significant
contributions to the successful conduct of the business and affairs of the
Company. By significantly increasing their share ownership, the Company expects
that it will enhance its ability to attract and retain such individuals and that
they will further identify their interests with those of the Company's
shareholders. The Plan is administered by the Compensation Committee who has the
exclusive right to determine which key employees are eligible to participate in
the Plan, as well as the amount to be loaned to such employees for purposes of
acquiring shares under the Plan.
Under the Plan, eligible participants may purchase shares of the Company's
Common Stock either directly from the Company or on the open market in brokers'
transactions. The Company may, at the request of a Plan participant and subject
to the approval of the Compensation Committee, lend an amount not to exceed the
base compensation paid to such participant in the calendar year immediately
preceding the year in
14
<PAGE> 18
which such purchase occurs. Amounts loaned to Plan participants may be used only
for purposes of acquiring shares under the Plan. Each loan is evidenced by a
promissory note for the amount borrowed and bears interest at a market rate. All
amounts payable with respect to each note are secured by each participant's
pledge of Common Stock acquired with the loan proceeds.
During 1993 Ms. Fitzgerald borrowed $97,500 and during 1995 Mr. Louis Boyle
borrowed $115,000 to purchase shares under the Plan. The loans are for a term of
three (3) years with principal to be paid in full at the end of the term, with
interest at four (4%) percent per year. During 1996, the largest aggregate
amount of such indebtedness for both Ms. Fitzgerald and Mr. Boyle was $60,500
and $73,875, respectively. During 1996, Ms. Fitzgerald and Mr. Boyle repaid
$60,500 and $19,975 on their loans. As of March 19, 1997, Ms. Fitzgerald owed $0
and Mr. Boyle owed $53,900 under the Plan.
Compensation Committee Interlocks and Insider Participation
Mr. Marks, who was a member of the Compensation Committee until February 2,
1996, served as Chairman of the Company's Board of Directors from the time of
its organization in 1966 until March 1984. He was President of the Company from
1966 until June 1979 when he became Chief Executive Officer, a position he held
until March 1984. Mr. Marks was engaged by the Company as a consultant from
March 1984 until December 1985. During 1996 Mr. Marks received an annual sum of
$90,000 payable monthly under the terms of the Supplemental Plan. Under the
terms of a noncompetition agreement that covered the period from March 1984
through October 1995, Mr. Marks also received the same medical benefits as those
provided to other officers of the Company. The Company also paid the premiums on
a life insurance policy with a face value of $300,000.
2. PROPOSAL TO AMEND THE COMPUTER TASK GROUP, INCORPORATED CERTIFICATE OF
INCORPORATION TO INCREASE THE AUTHORIZED NUMBER OF SHARES OF COMMON STOCK.
The Company has not increased its authorized shares of Common Stock since
1986. The proposed amendment to Article 4 of the Certificate of Incorporation
would increase the number of authorized shares of Common Stock from 25,000,000
to 150,000,000 shares. As of March 19, 1997, approximately shares of
Common Stock were outstanding, and shares of Common Stock were
reserved for issuance through the Company's stock based employee plans, leaving
shares authorized and unreserved for issuance. The Board believes that
it is desirable to have the additional authorized shares of Common Stock
available for stock splits, dividends, acquisitions, possible future financing,
employee benefit plans, and other general corporate purposes. At present the
number of authorized but unissued shares available are insufficient in the
opinion of Company management and its financial advisors to engage in the
aforementioned activities should the Company desire to do so. Such shares would
be issuable at the Board's discretion without further shareholder action, except
as may be required by law, regulation or the rules of the New York Stock
Exchange.
Although the Board has no present intention of doing so, shares of
authorized and unissued Common Stock could be used in one or more transactions
which could make it more difficult and, therefore, less likely to result in a
takeover of the Company. Any such issuance of additional Common Stock would have
the effect of diluting the stock ownership of persons seeking control of the
Company. The Board believes that the possibility for such dilution could have a
deterrent effect particularly on persons seeking to acquire control of the
Company without purchasing 100% of the Company's outstanding shares. Pursuant to
the Certificate of Incorporation, shareholders are not entitled to preemptive or
other rights to subscribe for shares of Common Stock that may be issued in the
future. This means that current shareholders do not have a prior right to
purchase new shares of Common Stock in order to keep their proportionate
ownership interest.
The Board also could, although it has no present intention of doing so,
authorize the issuance of shares of Common Stock to a holder who might thereby
obtain sufficient voting power to assure that any proposal to alter, amend or
repeal any of the provisions of the Company's By-laws or Certificate of
Incorporation would not receive the 66 2/3% shareholder vote that would be
required. Further, such a holder might also have
15
<PAGE> 19
sufficient voting power to assure that any proposal to effect certain business
combinations or amend the Certificate of Incorporation would not receive the
shareholder approval required under New York law. Accordingly, the power to
issue additional shares of Common Stock would enable the Board of Directors to
make it more difficult to replace incumbent directors and to accomplish business
combinations opposed by the incumbent Board of Directors.
The proposed amendment to the Company's Certificate of Incorporation was
authorized at the January 31, 1997 meeting of the Board of Directors, subject to
the approval and ratification by the shareholders at the annual meeting. The
proposed amendment to the Certificate of Incorporation is reflected in Article 4
of the Certificate, as more fully set forth in Appendix A. The favorable vote of
the holders of a majority of all outstanding shares of Common Stock entitled to
vote at the meeting is required for adoption of the amendment to the Certificate
of Incorporation.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL
3. PROPOSAL TO AMEND THE CERTIFICATE OF INCORPORATION TO REMOVE THE
AUTHORIZATION FOR 2,300,000 SHARES OF PREFERRED STOCK DESIGNATED AS SERIES B
PREFERRED STOCK
The Certificate of Incorporation authorizes the issuance of 2,500,000
shares of preferred stock, par value $.01 per share (Preferred Stock), and
permits the Board to authorize by resolution the issuance of one or more series
of Preferred Stock and designate the terms thereof including, without
limitation, the dividend rate, redemption price, liquidation value, sinking fund
provisions, convertibility and voting powers of any such series. Pursuant to
this authorization,on May 30, 1989, the Board designated a series of Preferred
Stock as Series B Preferred Stock, and approved an amendment to the Certificate
of Incorporation which authorized the issuance of 2,300,000 shares of Series B
Preferred Stock, of which 1,448,276 were issued and sold to International
Business Machines Corporation (IBM). On February 25, 1994, pursuant to the terms
of the Series B Preferred Stock, IBM converted all of the 1,448,276 shares held
by it into Common Stock. The terms of the Series B Preferred Stock were
specifically negotiated with IBM in connection with the transaction in which the
shares of Series B Preferred Stock was sold to IBM. No other shares of Series B
Preferred Stock were ever issued by the Company and, due to the unique
negotiated terms of the Series B Preferred Stock, it is unsuitable for issuance
in connection with any other transaction.
The New York Business Corporation Law (BCL) provides that a New York
corporation, such as the Company, may provide in its Certificate of
Incorporation that a class of preferred stock, such as the Preferred Stock, may
be authorized for which the relative rights, preferences or limitations of any
series of the preferred stock may be set by the board of directors. However,
once the certificate of incorporation of a New York corporation has been amended
to provide for the relative rights, preferences or limitations of a series of
such preferred stock, the series of preferred stock may not be removed from
authorization without the approval of the shareholders of the corporation for
such removal.
Since the Series B Preferred Stock has no practical use for the Company,
the Board has proposed that the Certificate of Incorporation be amended to
remove its authorization. The removal of the authorization for the 2,300,000
shares of Series B Preferred Stock will have the effect of restoring an equal
number of shares of Preferred Stock to the amount from which the Board may
authorize one or more new series of Preferred Stock by designating their
relative rights, preferences or limitations and amending the Certificate of
Incorporation accordingly.
The Board believes that restoring the 2,300,000 shares of Preferred Stock
to a status in which they will be available for authorizing one or more new
series of Preferred Stock is desirable for possible future financings,
acquisitions and other general corporate purposes. By enabling the Board to
determine the terms of one or more new series of Preferred Stock (in addition to
the 200,000 shares of Preferred Stock as to which the Board still has the
effective ability to authorize a new series) at the time of any such issuance,
the shareholders will enable the Board to provide for specific terms appropriate
to a specific issuance without the expense and delay of holding a special
meeting of shareholders.
16
<PAGE> 20
Although the Board has no present intention to do so, it should be noted
that the Company could issue shares of a new series of Preferred Stock having
features which would work to frustrate or discourage potential business
combinations. By fixing the liquidation premium, redemption price, preferences
or voting rights of a series, the Board could dilute the percentage of stock
owned by an acquiring shareholder or increase the cost of acquiring a sufficient
amount of stock generally entitled to vote at meetings of shareholders necessary
to obtain control of the Company. Also, such shares could be issued to a holder
or holders who would thereby have sufficient voting power to assure that any
proposal to effect certain business combinations, to adopt or amend By-laws or
to amend certain provisions of the Certificate of Incorporation would not
receive the shareholder vote required by law or by the Certificate of
Incorporation. Accordingly, the power to issue shares of Preferred Stock could
enable the Board to make it more difficult to replace incumbent directors and to
accomplish business combinations opposed by the incumbent Board.
The 1994 financial statements together with the report of Price Waterhouse
updated February 10, 1995, and the 1995 and 1996 financial statements together
with the report thereon of KPMG Peat Marwick LLP dated January 31, 1997, and the
Selected Financial Data, and the Management's Discussion and Analysis of Results
of Operations and Financial Condition appearing in the accompanying 1996 Annual
Report to Shareholders of the Company are hereby incorporated by reference in
this Proxy Statement.
The proposed amendment to the Certificate of Incorporation would be
reflected in Article 4 of the Company's Certificate of Incorporation, as
detailed in Appendix A.
The proposed amendment was authorized at the January 31, 1997 meeting of
the Board of Directors, subject to the approval and ratification by the
shareholders at the annual meeting. The favorable vote of the holders of a
majority of all outstanding shares of Common Stock entitled to vote at the
meeting is required for approval of the proposed amendment of the Certificate of
Incorporation to remove the authorization for the Series B Preferred Stock.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL
OTHER INFORMATION
Proxy Solicitation
A shareholder giving a proxy may revoke it at any time before it is
exercised. The cost of soliciting proxies in the accompanying form is to be
borne by the Company. In addition to solicitations by mail, employees of the
Company (who will not be specifically compensated for such services) may solicit
proxies in person or by telephone. Arrangements will be made with brokers,
custodians, nominees and fiduciaries to forward proxies and proxy soliciting
material to the beneficial owners of the Company's shares, and the Company may
reimburse such brokers, custodians, nominees or fiduciaries for their expenses
in so doing. In addition, Corporate Investor Communications, Inc. has been
retained by the Company to assist in the solicitation for which it will be paid
a fee of approximately $3,000 plus reasonable out of pocket expenses.
Relationship with Independent Accountants
KPMG Peat Marwick LLP, which has been the independent accounting firm
auditing the financial statements of the Company since October 16, 1995, has
been selected by the Board of Directors as the independent auditors of the
Company. A representative of KPMG will be present at the annual meeting of
shareholders of the Company. The representative will be given the opportunity to
make a statement if he desires to do so, and will be available to respond to
appropriate questions. No member of that firm has any past or present interest,
financial or otherwise, direct or indirect, in the Company or any of its
subsidiaries. Matters involving auditing and related functions are considered
and acted upon by the Audit Committee.
SHAREHOLDER PROPOSALS
Proposals of shareholders which are intended to be included in the
Company's Proxy Statement relating to its 1998 annual meeting of shareholders
must be received at the Company's principal executive offices not later than
December 5, 1997.
17
<PAGE> 21
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other business which will be presented for consideration at
the 1997 annual meeting of shareholders. However, if any other matters properly
come before the meeting or any adjournment thereof, it is intended that the
shares represented by proxies will be voted with respect thereto in accordance
with the judgment of the holders of the proxies.
April 1, 1997
By Order of the board of Directors
18
<PAGE> 22
APPENDIX A
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
COMPUTER TASK GROUP, INCORPORATED
------------------------------------------------------------
Under Section 805 of the Business Corporation Law
------------------------------------------------------------
The undersigned, Gale S. Fitzgerald and Joseph G. Makowski, being,
respectively, the Chairman of the Board and the Secretary of Computer Task
Group, Incorporated, do hereby certify as follows:
1. The name of the Corporation is COMPUTER TASK GROUP, INCORPORATED. The
name under which the Corporation was formed is Marks-Baer, Inc.
2. The Certificate of Incorporation was filed by the Department of State of
the State of New York on March 11, 1966.
3. The Certificate of Incorporation is hereby amended as follows:
a. Article 4 of the Certificate of Incorporation which, among other
things, sets forth that the Corporation shall have the authority to issue
27,500,000 shares of all classes of stock consisting of 25,000,000 shares
of Common Stock, par value $.01 per share, and 2,500,000 shares of
Preferred Stock, par value $.01 per share, is hereby amended to increase
the aggregate number of shares of all classes of stock which the
Corporation shall be authorized to issue to 152,500,000 shares, consisting
of 150,000,000 shares of Common Stock, par value $.01 per share, and
2,500,000 shares of Preferred Stock, par value $.01 per share. In order to
effect such amendment, the first sentence of Article 4 is hereby amended to
read in its entirety as follows:
4. The total number of shares of all classes of stock which the Corporation
shall have the authority to issue is 152,500,000 consisting of (1) 150,000,000
shares of Common Stock, par value $.01 per share ("Common Stock"), and (2)
2,500,000 shares of Preferred Stock, $.01 par value per share ("Preferred
Stock").
b. Section (d) of Article 4 of the Certificate of Incorporation, which
designates a series of Preferred Stock of the Corporation as Series B
Preferred Stock and which sets the relative rights, preferences and
limitations of such Series B Preferred Stock, is hereby amended to
eliminate the designation of and authorization for such Series B Preferred
Stock. Immediately prior to this amendment, there were 2,300,000 shares of
Series B Preferred Stock, par value $.01 authorized, of which none were
issued. In order to effect such amendment, Section (d) of Article 4 of the
Certificate of Incorporation is deleted and eliminated in its entirety.
5. The foregoing amendment of the Certificate of Incorporation was
authorized by the affirmative vote of the Board of Directors of the Corporation
followed by the affirmative vote of the holders of a majority of all outstanding
shares of the Corporation entitled to vote thereon at a meeting of the
shareholders duly called and held on the 30th day of April, 1997.
IN WITNESS WHEREOF, the undersigned have signed this Certificate and
affirmed that the statements made herein are true under the penalties of perjury
the day of April, 1997.
<TABLE>
<S> <C>
- - --------------------------------------------- ---------------------------------------------
Gale S. Fitzgerald Joseph G. Makowski
Chairman of the Board Secretary
</TABLE>
A-1
<PAGE> 23
APPENDIX TO PROXY STATEMENT
PROXY CARD
COMPUTER TASK GROUP, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints George B. Beitzel, Richard L. Crandall
and Barbara Z. Shattuck and each of them, as proxy or proxies, with power of
substitution to vote all of the shares of Common Stock of Computer Task Group,
Incorporated (the "Company") which the undersigned may be entitled to vote at
the Annual Meeting of Shareholders of the Company to be held at the Company's
Headquarters, 800 Delaware Avenue, Buffalo, New York on Wednesday, April 30,
1997 at 10:00 a.m. or at any adjournment thereof.
This proxy when properly executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposals 1, 2 and 3 and in accordance with the judgment of the
proxies on any other matters that may properly come before the meeting.
(MARK, SIGN AND DATE ON REVERSE SIDE)
(REVERSE SIDE)
PLEASE MARK VOTES AS
IN THIS EXAMPLE
1. Election of Class I Directors
Nominees: Gale S. Fitzgerald, Paul W. Joy and Randolph A. Marks
[ ] For all Nominees
[ ] Withheld From All Nominees
[ ] For All Nominees Except as noted: _______
2. Proposal to amend the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 25,000,000 to 150,000,000
shares.
[ ] For
[ ] Against
[ ] Abstain
3. Proposal to amend the Company's Certificate of Incorporation to remove the
authorization for 2,300,000 shares of a series of preferred stock designated as
Series B Preferred Stock.
[ ] For
[ ] Against
[ ] Abstain
4. Said proxies are given discretionary authority to vote and act upon such
other matters as may come before the meeting or any adjournment thereof.
Please date and sign exactly as name appears hereon. Each joint tenant must
sign. When signing as attorney, executor, trustee, etc. give full title. If
signer is a corporation, sign in full corporate name by authorized officer. If a
partnership, sign in partnership name by an authorized person.
Please sign, date and return this proxy today. No postage is required. A
business envelope is enclosed for your convenience.
Signature: ______________ Date: ________ Signature: ______________ Date: ______
