<PAGE> 1
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SCHEDULE 14A
(RULE 14A-101)
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>
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE COMMISSION
ONLY (AS PERMITTED BY RULE 14a-6(e)(2))
[X] 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)
XXXXXXXXXXXXXXXX
(NAME OF PERSON(S) FILING PROXY STATEMENT, IF OTHER THAN THE REGISTRANT)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) 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
April 1, 1999
Dear Fellow Shareholder:
You are cordially invited to attend the 1999 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 28,
1999 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,
/s/ Gale S. Fitzgerald
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 28, 1999
Computer Task Group, Incorporated will hold its Annual Meeting of
Shareholders at its corporate headquarters located at 800 Delaware Avenue,
Buffalo, New York on Wednesday, April 28, 1999, at 10:00 a.m. for the following
purposes:
1. To elect three Class I directors to hold office until the 2001
annual meeting of shareholders and until their successors are elected and
qualified.
2. To consider and act upon any other matters that may be brought
before the meeting or any adjournment thereof.
We have fixed the close of business on March 17, 1999 as the record date
for determination of shareholders entitled to notice of and vote at the meeting
or any adjournment.
Buffalo, New York
April 1, 1999
By Order of the Board of Directors,
/s/ James R. Boldt
James R. Boldt
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 1, 1999, 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 28, 1999, and
any adjournment or postponement of the meeting. The mailing address of the
Company's executive office is 800 Delaware Avenue, Buffalo, New York 14209.
The Board has fixed the close of business on March 17, 1999 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 20,876,063 shares of
common stock, par value $.01 per share.
Each outstanding share of common stock 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 that are present at the meeting, or
represented by a proxy, will be counted for quorum purposes regardless of
whether or not a broker with discretionary authority exercises 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 may 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.
ELECTION OF DIRECTORS
At the annual meeting of shareholders, in accordance with the Company's
Certificate of Incorporation and By-laws, three persons are to be elected to the
Board as Class I directors to hold office until the 2001 annual meeting of
shareholders and until their successors are elected and qualified.
The 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, Randolph A. Marks and R.
Keith Elliott. Pursuant to the Company's Bylaws, each class of directors must
have at least three 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 2000 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 is 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 their 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 Ms. Fitzgerald, 48, has been Chairman and Chief Executive
Officer of the Company since October, 1994. She joined the
Company in May, 1991, as Senior Vice President responsible
for the Company's Northeastern United States and Canadian
operations and was promoted to President and 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. She is
currently on the Boards of Directors of Kaleida Health, an
integrated health care provider, the University of Buffalo
School of Management, the Business Council of New York and
the Information Technology Association of America. Ms.
Fitzgerald has been a Director of CTG since 1993.
Randolph A. Marks Mr. Marks, 63, is co-founder of the Company and currently an
independent business consultant. From 1985 to September
1990, he served as Chairman of the Board of American Brass
Company. Mr. Marks was engaged by the Company as a
consultant from March, 1984, until his 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. Mr. Marks has been a Director of CTG
since 1966.
R. Keith Elliott Mr. Elliott, 57, has been chief executive officer of
Hercules Incorporated, a chemical specialties manufacturer
since August 1996 and chairman and chief executive officer
since January 1997. From July 1995 until 1997, Mr. Elliott
was president of Hercules and was its executive vice
president and chief financial officer from August 1991. Mr.
Elliott is also a director of PECO Energy Company, a
provider of retail electric and natural gas service, and
Wilmington Trust Company, a full service retail and
commercial bank specializing in asset protection and trust
management. Mr. Elliott has been a Director of CTG since
1998. The Board elected Mr. Elliott to serve as a Director
of CTG on April 29, 1998, when Paul W. Joy retired as a
Director prior to the expiration of his term.
Richard L. Crandall Mr. Crandall, 55, has been Managing Director of Arbor
Partners LLC, a venture capital firm since 1997. Prior to
that, he served as Chairman of Comshare, Inc., a computer
software and services company from 1994 until 1997. From
1966 until 1994, Mr. Crandall served as Chief Executive
Officer of Comshare. Mr. Crandall is also a director of
Diebold, Inc., a manufacturer of automated self-service
transactions systems, security products and software, Giga
Information Group, Inc., a provider of research and advisory
services to the computer and telecommunications industries,
Steeplechase Software, Inc., a manufacturer of PC-based
factory control systems, Tacit Knowledge Systems, Inc., a
software developer, and Edwards Brothers, Inc., a producer
of short and medium run books and journals. Mr. Crandall has
been a Director of CTG since 1993.
George B. Beitzel Mr. Beitzel, 70, has been an independent business consultant
since his retirement from International Business Machines
Corporation in 1987 where he served as Senior Vice
President. Mr. Beitzel joined IBM in 1955 as a sales
representative and was a member of IBM's 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, Staff Leasing, Inc., a
professional employer organization, and Bitstream, Inc., a
developer of computer software for the creation and printing
of electronic documents. Mr. Beitzel has been a Director of
CTG since 1994.
Barbara Z. Shattuck Ms. Shattuck, 48, is the managing director of Shattuck
Hammond, a division of PriceWaterhouseCoopers Securities, an
investment banking firm specializing in the healthcare
industry. From 1993 to 1998 Ms. Shattuck was president and
founding principal of Shattuck Hammond Partners, Inc., a
financial and investment advisor to the healthcare industry.
From 1982 to 1993, she was a founding partner and principal
of Cain Brothers, Shattuck & Company, Inc., a financial and
investment advisor. She is also on the Board of Directors of
Tufts Associated Health Plans. Ms. Shattuck has been a
Director of CTG since 1995.
</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 17, 1999, the following person was a beneficial owner of more
than five percent of the Company's common stock. The following table shows the
nature and amount of their beneficial ownership.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE PERCENT
TITLE OF CLASS OF BENEFICIAL OWNER OF OWNERSHIP(1) OF CLASS
-------------- ------------------- ----------------- --------
<S> <C> <C> <C>
Common Stock....................... Thomas R. Beecher, Trustee 4,384,445 21%
CTG Stock Employee
Compensation Trust
200 Theater Place
Buffalo, NY 14202
</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. Except as otherwise indicated, each holder has sole
voting and investment power with respect to the shares indicated.
Security Ownership By Management
As of March 17, 1999, 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
NAME OF INDIVIDUAL OF BENEFICIAL PERCENT
OF NUMBER IN GROUP OWNERSHIP(1) OF CLASS
------------------ ----------------- --------
<S> <C> <C>
Gale S. Fitzgerald.......................................... 480,674(2) 2.30%
Randolph A. Marks........................................... 241,754(3)(4) 1.16%
George B. Beitzel........................................... 123,841(5) *
R. Keith Elliott............................................ 22,250(6) *
Richard L. Crandall......................................... 104,667(7) *
Barbara Z. Shattuck......................................... 91,834(8) *
James R. Boldt.............................................. 62,950(9) *
John F. Moore............................................... 8,071(10) *
Jonathan R. Asher........................................... 20,546(11) *
Nico Molenaar............................................... 61,500(12) *
All directors and executive officers as a group (12
persons).................................................. 1,322,135(13) 6.33%
</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 Securities
and Exchange Commission. 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 260,000 shares that are or
will become exercisable within sixty (60) days and 12,900 shares owned by
members of Ms. Fitzgerald's immediate family.
(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 $300,000 in the aggregate). The purchase price for the shares
will be 90 percent of the market price of such shares on the Friday
immediately preceding the date of death.
(4) Amount indicated includes options to purchase 70,000 shares which are or
will become exercisable within sixty (60) days. Mr. Marks has voting and
investment power over 20,000 of these shares that are owned by a family
charitable foundation of which he is a trustee.
3
<PAGE> 7
(5) Amount indicated includes options to purchase 72,000 shares which are or
will become exercisable within sixty (60) days, 18,841 shares held by Mr.
Beitzel in his own name and 13,000 shares held by Mr. Beitzel's wife. The
remaining shares are held by two trusts of which Mr. Beitzel and his wife
are trustees.
(6) Amount indicated represents 1,000 shares held by Mr. Elliott in his own
name and options to purchase 21,250 shares which are or will become
exercisable within sixty (60) days.
(7) Amount indicated includes options to purchase 78,000 shares that are or
will become exercisable within sixty (60) days and 10,000 shares which are
held by Mr. Crandall as custodian for his son.
(8) Amount indicated includes options to purchase 76,000 shares that are or
will become exercisable within sixty (60) days and 5,500 shares owned by
Ms. Shattuck's husband.
(9) Amount indicated includes options to purchase 45,450 shares which are or
will become exercisable within sixty (60) days and 200 shares of which are
held by Mr. Boldt as custodian for members of his immediate family.
(10) Amount indicated includes options to purchase 8,000 shares that are or will
become exercisable within sixty (60) days.
(11) Amount indicated includes options to purchase 19,250 shares that are or
will become exercisable within sixty (60) days.
(12) Amount indicated includes options to purchase 61,500 shares that are or
will become exercisable within sixty (60) days.
(13) Amount indicated includes options to purchase 798,900 shares that 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, 1998, the Board of Directors held
a total of four regularly scheduled meetings and one special meeting. 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 Governance Committees
which met four, three and two times, respectively, in 1998. The committees are
comprised of the following Directors: Audit -- George B. Beitzel, Richard L.
Crandall and Randolph A. Marks; Compensation -- Barbara Z. Shattuck, George B.
Beitzel and R. Keith Elliott; and Governance -- Richard L. Crandall, Randolph A.
Marks and Barbara Z. Shattuck. 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
Governance Committee is responsible for the establishment of governance policies
concerning the Board of Directors as well as for reviewing and approving the
compensation of directors (subject to ratification by the Board of Directors).
The Board of Directors does not have a Nominating Committee. Nominations for
directors are made by the Governance Committee in consultation with the Chairman
and Chief Executive Officer.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
directors, executive officers and persons who own more than 10% of the Company's
common stock, to file with the Securities and Exchange Commission and the New
York Stock Exchange reports of ownership and changes in ownership of common
stock and other equity securities of the Company. Officers, directors and
greater than 10% shareholders are required by SEC regulation to furnish the
Company with copies of all Section 16(a) forms they file.
The Company believes that, except for one late report of one transaction
filed by CTG Director, Randolph A. Marks, 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 1998. This belief is based
solely on the Company's review of copies of the reports furnished to it and
written representations that no other reports were required.
Director Compensation
Each nonemployee director receives 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. The 30,000 share
grant that would otherwise have been made in April of 1999 was made on December
14, 1998 in order to permit the Company to take advantage of the more favorable
accounting treatment available to the Company for options granted at that time.
Effective as of the April 28, 1999 annual meeting, the annual retainer will be
$15,000. Directors do not receive fees for attending board or committee
meetings. Directors who are not employees are entitled to be reimbursed for
expenses incurred while serving as directors. Directors who are employees of the
Company do not receive additional compensation for their services as directors.
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<PAGE> 9
Executive Compensation and Other Information
The following table shows the annual and long-term compensation paid to the
Chairman and Chief Executive Officer and to the four highest compensated
executive officers for services rendered in 1998, 1997, and 1996.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------- -------
OTHER RESTRICTED
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SAR'S PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) (1) ($) (#) ($) ($) (5)
--------- ---- ------ ----- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald(2) 1998 $380,000 $350,092 $54,757 $ 0 60,000(6) $0 $ 4,800
Chairman of the Board and 1997 $360,000 $495,000 $85,500 $60,188 84,000 $0 $ 3,200
Chief Executive Officer 1996 $345,000 $255,000 $45,000 $43,625 96,000 $0 $ 3,200
Jonathan R. Asher(3) 1998 $185,000 $ 63,269 $18,620 $ 0 20,000 $0 $ 4,800
Vice President, 1997 $165,000 $132,306 $29,731 $ 0 36,000 $0 $ 2,532
Managed Services, NA
James R. Boldt(4) 1998 $175,000 $114,661 $21,725 $ 0 25,000(6) $0 $ 4,761
Vice President and 1997 $155,000 $120,000 $27,500 $ 0 51,000 $0 $ 2,375
Chief Financial Officer 1996 $133,846 $ 89,000 $16,713 $ 0 50,000 $0 $ 1,720
Nico Molenaar 1998 $134,248 $ 99,770 $ 0 $ 0 10,000 $0 $ 9,730
Vice President, 1997 $129,734 $ 37,805 $ 0 $ 0 21,500 $0 $ 9,350
Managed Services, Europe 1996 $125,758 $155,185 $ 0 $ 0 30,000 $0 $10,303
John F. Moore 1998 $132,098 $ 35,673 $ 0 $ 0 12,000 $0 $ 2,644
Vice President,
Strategic Staffing Services
</TABLE>
- ---------------
(1) Other annual compensation consists of deferred compensation contributed by
the Company under the CTG Non-Qualified Key Employee Deferred Compensation
Plan.
(2) Ms. Fitzgerald did not defer any of her 1998 salary or bonus under the
Non-Qualified Key Employee Deferred Compensation Plan.
(3) Mr. Asher joined the Company on December 16, 1996, as a Vice President. On
that date, Mr. Asher received options to purchase 10,000 shares of CTG
stock. Mr. Asher deferred a total of $10,602 of his 1998 salary and bonus
under the Non-Qualified Key Employee Deferred Compensation Plan.
(4) Mr. Boldt joined the Company on February 12, 1996 as Vice President and
Chief Financial Officer. Mr. Boldt deferred a total of $13,750 of his 1998
salary and bonus under the Non-Qualified Key Employee Deferred Compensation
Plan.
(5) Consists of Company contributions under retirement plans.
(6) Includes options granted in 1999 for services rendered in 1998 in the
amounts of 30,000 and 10,000 shares for each of Ms. Fitzgerald and Mr. Boldt
respectively.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee (Committee) of the Board of Directors is
composed of Barbara Z. Shattuck (Chairman), George B. Beitzel and R. Keith
Elliott, all of who are "non-employee directors" within the meaning of Rule
16b-3 under the Securities Exchange Act of 1934. The Committee is responsible
for overseeing the administration of the Company's employee stock and benefit
plans, establishing policies relating to the compensation of employees and
setting the terms and conditions of employment for senior executive officers.
This Committee report describes the various components of the Company's
executive officer compensation program and the basis on which 1998 compensation
was paid to such executive officers, including the executive officers named in
the compensation table set forth above.
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<PAGE> 10
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 that 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 substantial 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 1998, 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 1998
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) earnings per share, and (v) individual objectives. The
Committee, in awarding 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 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 1998 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 the expected contribution
toward 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. The awards are also intended to reward
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 1998. Other than termination due to special circumstances, restricted
stock awards are subject to required service for four years from the date of the
grant until the restrictions lapse. During the 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
7
<PAGE> 11
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 1998 -- The Committee granted stock options
during 1998 to various executive officers named in the following table (see
Options/SAR Grants in 1998). Recipients of the stock options receive the right
to purchase shares of common stock of the Company in the future at a price equal
to or greater than the fair market value determined on the date of grant. The
Committee determines the dates and terms upon which options may be exercised, as
well as whether the options will be incentive stock options or nonqualified
stock options. In determining whether to grant an individual stock options, 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 the executive.
Deferred Compensation -- The fourth component of executive compensation
during 1998 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 1998 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 1998,
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 (1) annual base compensation
established by the Committee, (2) cash incentive compensation measured by
Company financial performance and Ms. Fitzgerald's attainment of specific
strategic and organizational objectives, together with an assessment by the
Committee and the Board of Directors of her effectiveness as CEO, (3) long-term
stock-based incentive compensation, and (4) a contribution under the CTG
Non-Qualified Key Employee Deferred Compensation Plan.
Ms. Fitzgerald's 1998 compensation consisted of (1) base compensation of
$380,000 per year, (2) cash incentive compensation consisting of $350,092 based
upon her attainment of specific financial, strategic, and organizational
objectives, together with an assessment by the Committee and Board of Directors
of her effectiveness as CEO, (3) long-term stock-based incentive compensation
consisting of a stock option grants of 30,000 shares at $21.9375 awarded on
December 14, 1998, and 30,000 shares at $26.0625 awarded on February 5, 1999,
and (4) a contribution of $54,757 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>
R. Keith Elliott Barbara Z. Shattuck George B. Beitzel
Chairman
</TABLE>
8
<PAGE> 12
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, and a
Peer Group, assuming a base index of $100 at the end of 1993. The cumulative
total return for each annual period within the five years presented is measured
by dividing (1) the sum of (A) the cumulative amount of dividends for the
period, assuming dividend reinvestment, and (B) the difference between the
Company's share price at the end and the beginning of the period by (2) the
share price at the beginning of the period. The calculations exclude trading
commissions and taxes.
<TABLE>
<CAPTION>
COMPUTER TASK GROUP, INC. S&P 500 INDEX PEER GROUP
------------------------- ------------- ----------
<S> <C> <C> <C>
'Dec 93' 100.00 100.00 100.00
'Dec 94' 128.25 101.32 135.46
'Dec 95' 287.94 139.40 143.96
'Dec 96' 630.97 171.40 274.77
'Dec 97' 1042.31 228.59 531.03
'Dec 98' 796.28 293.91 831.00
</TABLE>
The Peer Group comprises the following companies which are in the business
of providing information technology (IT) services: Alternative Resources
Corporation; American Management Systems, Incorporated; Analysts International
Corporation; Ciber, Inc.; Computer Horizons Corp.; Compuware Corporation; Keane,
Inc.; and Technology Solutions Company.
9
<PAGE> 13
Option/SAR Grants, Exercises and Holdings
The following tables set forth certain information concerning stock options
granted and exercised during 1998, and unexercised options held as of the end of
1998, by the named executives:
OPTIONS/SAR GRANTS IN 1998
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
NUMBER OF PERCENT VALUE AT ASSUMED ANNUAL
SECURITIES OF TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS APPRECIATION FOR
OPTIONS/SARS GRANTED TO EXERCISE OR OPTION TERM (1)
GRANTED EMPLOYEES BASE PRICE EXPIRATION -----------------------
NAME IN 1998 IN 1998 PER SHARE DATE 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald 25,442 4.65% $21.9375 12/14/13 $602,186 $1,773,330
4,558 0.83% $21.9375 12/14/08 $ 62,884 $ 159,360
26,164 4.78% $26.0625 2/5/14 $735,720 $2,166,563
3,836 0.70% $26.0625 2/5/09 $ 62,874 $ 159,360
Jonathan R. Asher 15,442 2.82% $21.9375 12/14/13 $365,496 $1,076,321
4,558 0.83% $21.9375 12/14/08 $ 62,884 $ 159,360
James R. Boldt 11,250 2.06% $21.9375 12/14/13 $266,276 $ 784,135
3,750 0.69% $21.9375 12/14/08 $ 51,736 $ 131,110
6,820 1.25% $26.0625 2/5/14 $191,775 $ 564,744
3,180 0.58% $26.0625 (2) $ 50,747 $ 127,909
Nico Molenaar(3) 10,000 1.83% $27.6413 12/14/03 $ 3,571 $ 76,893
John F. Moore 9,000 1.65% $21.9375 12/14/13 $213,021 $ 627,308
3,000 0.55% $21.9375 12/14/08 $ 41,389 $ 104,888
</TABLE>
- ---------------
(1) 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.
(2) Options expire on February 5, 2008 and 2009.
(3) Represents shares granted to Mr. Molenaar in accordance with the laws of The
Netherlands.
AGGREGATE OPTION/SAR EXERCISES IN 1998 AND 1998 YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTIONS/SARS OPTIONS/SARS
ACQUIRED AT FISCAL YEAR END AT FISCAL YEAR END
ON VALUE ---------------------------- ----------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- -------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald 62,000 $2,223,556 183,500 188,500 $3,423,250 $2,258,125
Jonathan R. Asher 0 $ 0 14,000 52,000 $ 59,766 $ 219,297
James R. Boldt 2,300 $ 39,675 22,950 78,250 $ 233,538 $ 679,375
Nico Molenaar 0 $ 0 61,500 0 $ 662,500 $ 0
John F. Moore 2,000 $ 39,375 4,250 30,750 $ 9,297 $ 122,016
</TABLE>
Long-Term Incentive Plan Awards
No awards were made to the named executives during 1998 under the Company's
1991 Restricted Stock Plan.
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
10
<PAGE> 14
participants. As a result of this action, the Company reduced its annual
Supplemental Plan expense from approximately $1.1 million in 1994 to
approximately $0.7 million in 1998. 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 that 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 15 years or the life of
the participant, whichever is longer. A change of control will occur if (1) 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; (2) during any period of 24 consecutive months,
individuals who at the beginning of the 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 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 (3) 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
$816,000.
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.
Ms. Fitzgerald and 20 former employees are presently covered by the
Supplemental Plan. She also participates 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.
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 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
11
<PAGE> 15
agrees not to terminate Ms. Fitzgerald's employment with the Company unless the
Company gives her 12 months prior notice of the termination, or pays to her an
amount equal to 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.
The agreement provides 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 12 month period following the date
of separation, the Company will pay her up to an additional six months of total
compensation calculated on the basis of the last compensation plan in effect
between the Company and Ms. Fitzgerald.
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 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 calendar years preceding the change
of control, multiplied by 2.99.
A change of control is defined to mean (1) 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, (2)
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, (3) approval by
the holders of the common stock of any plan or proposal for the liquidation or
dissolution of the Company; or (4) 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.
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 (1) elect to defer a percentage of their annual cash
compensation and (2) 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 (1) those key employees who will be eligible
to participate and (2) 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) occurs, the participant or his or her estate will 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 1998, the Company attained defined operating income
objectives sufficient to cause the Compensation Committee on February 5, 1999,
to authorize an award of seven and one-half percent (7.5%) of each eligible
participant's 1998 base and incentive
12
<PAGE> 16
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 three-year liability insurance policy,
with a policy period effective April 1, 1998, was issued by The Chubb Group of
Insurance Companies at an annual premium of approximately $77,000.
Certain Relationships and Related Transactions
During 1998 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 for Mr. Marks with a face value of $300,000.
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 will 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
brokers, custodians, nominees or fiduciaries for their expenses in so doing. In
addition, Corporate Investor Communications, Inc. may be retained by the Company
to assist in the solicitation for which it will be paid an estimated fee of
$3,500 plus reasonable out of pocket expenses.
Change in Independent Accountants from Prior Periods
On July 7, 1998, the Company engaged Deloitte & Touche LLP ("Deloitte") as
the principal accountants to audit the Company's financial statements for the
fiscal year ending December 31, 1998, and dismissed KPMG LLP ("KPMG") after the
completion of the term of a three year engagement. During the two most recent
fiscal years and any subsequent interim periods prior to their engagement, the
Company did not consult with Deloitte on any matter.
KPMG had been the independent accounting firm auditing the financial
statements of the Company since October 16, 1995. KPMG's report on the financial
statements of the Company as of December 31, 1997, 1996 and 1995 and for the
years then ended, contained no adverse opinion or disclaimer of opinion and was
not qualified or modified as to uncertainty, audit scope or accounting
principles.
The decision to change accountants was recommended by the Audit Committee
and approved by the Board of Directors of the Company. During the Company's two
most recent fiscal years and any subsequent interim period preceding the
dismissal, there were no disagreements between the Company and KPMG on any
matter of accounting principles or practices, financial statement disclosure or
auditing scope or procedure which, if not resolved to the satisfaction of KPMG
would have caused KPMG to make reference to the subject matter of the
disagreement in connection with its report. Also, during the aforementioned
period, there occurred no "reportable event" within the meaning of Item
304(a)(1)(v) of Regulation S-K of the SEC.
A representative of Deloitte will be present at the annual meeting of
shareholders of the Company. The representative will be given the opportunity to
make a statement if the representative desires to do so, and will be
13
<PAGE> 17
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 April 2000 annual meeting of
shareholders must be received at the Company's principal executive offices not
later than December 2, 1999. A shareholder who wishes to present a proposal for
consideration at the April 2000 annual meeting without inclusion of such
proposal in the Company's proxy materials must give written notice of the
proposal to the Secretary of the Company not later than sixty days in advance of
the date of such meeting.
OTHER BUSINESS
As of the date of this Proxy Statement, the Board of Directors of the
Company knows of no other business that will be presented for consideration at
the 1999 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 on those matters in accordance with
the judgment of the holders of the proxies.
April 1, 1999
By Order of the Board of Directors
14
<PAGE> 18
sku# 0554-PS-99
<PAGE> 19
DETACH HERE
CTG06A
Please mark
[ X ] votes as in
this example.
<TABLE>
<S> <C>
1. Election of Class I Directors 2. Said proxies are given discretionary
Nominees: Gale S. Fitzgerald, Randolph authority to vote and act upon such other
A. Marks, and R. Keith Elliott. matters as may come before the meeting or
any adjournment thereof.
FOR WITHHELD MARK HERE IF YOU
ALL [ ] [ ] FROM ALL PLAN TO ATTEND THE MEETING [ ]
NOMINEES NOMINEES
MARK HERE FOR ADDRESS
CHANGE AND NOTE AT LEFT [ ]
[ ] ______________________________________ Please date and sign exactly as name appears
For all nominees except as noted above 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 reply envelope is
enclosed for your convenience.
</TABLE>
Signature:__________________Date:______ Signature:____________________Date:_____
<PAGE> 20
CTG06B
DETACH HERE
PROXY
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, as
specified on the reverse side of this card, and, if applicable, hereby directs
the trustee of the Company's 401(K) Profit Sharing Retirement Plan (the
''Plan'') to vote the shares allocated to the account of the undersigned or
otherwise which the undersigned is entitled to vote pursuant to the Plan, as
specified on the reverse side of this card, 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 28, 1999 at 10:00 a.m. or
at any adjournment thereof.
This proxy when property executed will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this proxy will
be voted FOR Proposal 1 and in accordance with the judgment of the proxies on
any other matters that may properly come before the meeting.
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| SEE REVERSE | | SEE REVERSE |
| SIDE | MARK, SIGN AND DATE ON REVERSE SIDE | SIDE |
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