<PAGE> 1
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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>
[ ] 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)
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
March 29, 2000
Dear Fellow Shareholder:
You are cordially invited to attend the 2000 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 26,
2000 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 26, 2000
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 26, 2000, at 10:00 a.m. for the following
purposes:
1. To elect two Class II directors to hold office until the 2002
annual meeting of shareholders and until their successors are elected and
qualified, and two Class III directors to hold office until the 2003 annual
meeting of shareholders and until their successors are elected and
qualified.
2. To consider and act upon a proposal to approve and ratify the
adoption by the Board of Directors of the Computer Task Group, Incorporated
Equity Award Plan, and to authorize for issuance 2,000,000 shares of the
Company's Common Stock to be used for awards thereunder.
3. To consider and act upon any other matters that may be brought
before the meeting or any adjournment thereof.
We have selected the close of business on March 15, 2000 as the record date
for determination of shareholders entitled to notice of and vote at the meeting
or any adjournment.
Buffalo, New York
March 29, 2000
By Order of the Board of Directors,
/s/ Peter P. Radetich
--------------------------------------
Peter P. Radetich
Secretary
<PAGE> 4
COMPUTER TASK GROUP,
INCORPORATED
PROXY STATEMENT
This Proxy Statement and the accompanying form of proxy are being mailed on
or about March 29, 2000, 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 26, 2000, 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 selected the close of business on March 15, 2000 as the
record date for the determination of shareholders entitled to vote at the annual
meeting. On that date, the Company had outstanding and entitled to vote
20,875,056 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 Company's 1986 annual meeting of shareholders, the shareholders
approved an amendment to the Company's Certificate of Incorporation and By-laws
to provide in part that, without the further approval of the shareholders, the
Board must be divided into three classes, as nearly equal in number as possible,
if otherwise permitted by law. New York State has recently amended its Business
Corporation Law to permit classes of directors consisting of less than three
directors. At the 2000 annual meeting of shareholders, the Board will
accordingly be reclassified into three classes with each class consisting of two
directors. The Board currently has two classes of directors: Class I consisting
of Gale S. Fitzgerald, Randolph A. Marks and R. Keith Elliott, and Class II
consisting of George B. Beitzel, Richard L. Crandall and Barbara Z. Shattuck.
Therefore, as required by the Company's Certificate of Incorporation and
By-laws, Randolph A. Marks and R. Keith Elliott, two of the three directors who
were elected at the 1999 annual meeting of shareholders and who are currently
designated as Class I directors will continue to be designated as Class I
directors and will continue to serve until the expiration of their terms at the
annual meeting of shareholders in 2001. Two persons are to be elected to the
Board in each of Classes II and III and shall respectively hold office until the
2002 and 2003 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 II directors -- George B. Beitzel and Richard L. Crandall, and
as Class III directors -- Gale S. Fitzgerald and Barbara Z. Shattuck.
1
<PAGE> 5
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE
NOMINEES FOR CLASS II AND CLASS III 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.
<TABLE>
<S> <C>
Gale S. Fitzgerald Ms. Fitzgerald, 49, 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, University of Buffalo
School of Management, the Business Council of New York,
Diebold, Inc., a manufacturer of automated self-service
transactions systems, security products and software, and
the Information Technology Association of America. Ms.
Fitzgerald has been a Director of CTG since 1993.
George B. Beitzel Mr. Beitzel, 71, has been a director of various corporate
boards since his retirement from International Business
Machines Corporation in 1987. He served at IBM for 32 years,
the last 14 as a member of IBM's board of directors and
corporate office. He is currently a director of Bankers
Trust Company (a subsidiary of Deutsche Bank), Staff
Leasing, Inc., a professional employer organization,
Bitstream, Inc., a developer of computer software for the
creation and printing of electronic documents and Actuate
Corporation, a provider of web-based business information
software. Mr. Beitzel is Chairman Emeritus of Amherst
College and the Colonial Williamsburg Foundation. He is a
graduate of the Harvard Business School and served twelve
years on the board of directors of the Associates at Harvard
Business School. Mr. Beitzel has been a Director of CTG
since 1994.
Richard L. Crandall Mr. Crandall, 56, 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, SolidSpeed, Inc., an internet
infrastructure provider, and Tacit Knowledge Systems, Inc.,
a software developer. Mr. Crandall has been a Director of
CTG since 1993.
</TABLE>
2
<PAGE> 6
<TABLE>
<S> <C>
R. Keith Elliott Mr. Elliott, 58, has been chairman of the board of directors
of Hercules Incorporated, a chemical specialties
manufacturer since 1996 and was chief executive officer from
July 1996 until July 1999. Mr. Elliott will retire from
Hercules effective April 1, 2000. From October 1995 until
July 1996, Mr. Elliott was president and chief operating
officer of Hercules and prior to that was its executive vice
president and chief financial officer. 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.
Randolph A. Marks Mr. Marks, 64, 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 1984, until his retirement from the Company
in 1985. Prior to 1984, Mr. Marks served as Chairman of the
Board and Chief Executive Officer of the Company commencing
in 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 on the advisory board of HSBC Bank
USA, Western New York Region, the boards of directors of
Columbus McKinnon Corporation, a manufacturer of material
handling products and Delaware North Companies,
Incorporated, a privately held provider of foodservice
operations, hospitality and recreational services and sports
and leisure facilities management, and on the board of
trustees of the Albright-Knox Art Gallery. Mr. Marks has
been a Director of CTG since 1966.
Barbara Z. Shattuck Ms. Shattuck, 49, 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>
3
<PAGE> 7
SECURITY OWNERSHIP OF THE COMPANY'S COMMON SHARES
BY CERTAIN BENEFICIAL OWNERS AND BY MANAGEMENT
Security Ownership of Certain Beneficial Owners
As of March 15, 2000, the following persons were beneficial owners 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 4,723,707 22.6%
CTG Stock Employee
Compensation Trust
200 Theater Place
Buffalo, NY 14202
Common Stock......................... Wanger Asset Management, LP 1,279,500 6.1%
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
</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 15, 2000 the directors and nominees for director individually,
the executive officers named in the compensation table, 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
OR NUMBER IN GROUP OWNERSHIP(1) OF CLASS
------------------ ----------------- --------
<S> <C> <C>
Gale S. Fitzgerald.......................................... 540,674(2) 2.6%
Randolph A. Marks........................................... 269,930(3)(4) 1.3%
George B. Beitzel........................................... 135,841(5) *
R. Keith Elliott............................................ 33,500(6) *
Richard L. Crandall......................................... 114,667(7) *
Barbara Z. Shattuck......................................... 103,834(8) *
James R. Boldt.............................................. 94,450(9) *
Gary M. Gershon............................................. 3,750(10) *
Jonathan R. Asher........................................... 37,659(11) *
Nico Molenaar............................................... 61,500(12) *
All directors and executive officers as a group (13
persons).................................................. 1,562,008(13) 7.5%
</TABLE>
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* 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 320,000 shares that are or
will become exercisable within sixty (60) days and 12,900 shares owned by
members of Ms. Fitzgerald's immediate family.
4
<PAGE> 8
(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 him as may be purchased with the proceeds of the
insurance on the life of Mr. Marks 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 169,930 shares held by Mr. Marks in his own name
and options to purchase 80,000 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.
(5) Amount indicated includes options to purchase 84,000 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 includes options to purchase 32,500 shares which are or
will become exercisable within sixty (60) days.
(7) Amount indicated includes options to purchase 90,000 shares that are or
will become exercisable within sixty (60) days and 5,000 shares which are
held by Mr. Crandall as custodian for his son.
(8) Amount indicated includes options to purchase 88,000 shares that are or
will become exercisable within sixty (60) days and 5,500 shares owned by
the estate of Ms. Shattuck's husband.
(9) Amount indicated includes options to purchase 76,950 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 3,750 shares that are or will
become exercisable within sixty (60) days.
(11) Amount indicated includes options to purchase 35,750 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 988,650 shares that are or
will become exercisable within sixty (60) days.
5
<PAGE> 9
INFORMATION ABOUT MANAGEMENT
The Board of Directors
During the fiscal year ended December 31, 1999, the Board of Directors held
a total of five 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, Governance and Compensation Committees
which met four, three and one times, respectively, in 1999. During 1999, the
committees were 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 Trusts. 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 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 1999. 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 $15,000 annual retainer and the grant
on every third year of a non-qualified stock option for 30,000 shares of common
stock subject to vesting at the rate of 10,000 shares per year. Directors do not
receive fees for attending board or committee meetings but are entitled to be
reimbursed for expenses incurred while serving as directors. Directors who are
employees of the Company do not receive additional compensation for their
services as directors.
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<PAGE> 10
Executive Compensation and Other Information
The following table shows the annual and long-term compensation paid to the
Chairman and Chief Executive Officer and to the four other most highly
compensated executive officers for services rendered in 1999, 1998, and 1997.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
-------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
---------------------------------- --------------------- -------
OTHER RESTRICTED
NAME AND ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
PRINCIPAL SALARY BONUS COMPENSATION AWARD(S) SAR'S PAYOUTS COMPENSATION
POSITION YEAR ($) ($) ($) (1) ($) (#) ($) ($) (4)
--------- ---- ------ ----- ------------ ---------- -------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald(2).......... 1999 $380,000 $ 0 $19,000 $ 0 0 $0 $4,800
Chairman of the Board and 1998 $380,000 $350,092 $54,757 $ 0 60,000(5) $0 $4,800
Chief Executive Officer 1997 $360,000 $495,000 $85,500 $60,188 84,000 $0 $3,200
Jonathan R. Asher(2)........... 1999 $215,000 $ 0 $10,750 $ 0 0 $0 $4,800
Vice President,.............. 1998 $185,000 $ 63,269 $18,620 $ 0 20,000 $0 $4,800
Managed Services, NA....... 1997 $165,000 $132,306 $29,731 $ 0 36,000 $0 $2,532
Gary M. Gershon(2)(3).......... 1999 $215,000 $ 0 $10,750 $ 0 15,000 $0 $2,857
Vice President,
Marketing and Services
James R. Boldt(2).............. 1999 $195,000 $ 0 $ 9,750 $ 0 0 $0 $4,800
Vice President and........... 1998 $175,000 $114,661 $21,725 $ 0 25,000(5) $0 $4,761
Chief Financial Officer.... 1997 $155,000 $120,000 $27,500 $ 0 51,000 $0 $2,375
Nico Molenaar.................. 1999 $140,882 $ 48,682 $ 0 $ 0 0 $0 $6,438
Vice President,.............. 1998 $134,248 $ 99,770 $ 0 $ 0 10,000 $0 $9,730
Managed Services, Europe... 1997 $129,734 $ 37,805 $ 0 $ 0 21,500 $0 $9,350
</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 and Messrs. Asher, Boldt and Gershon did not defer any of
their 1999 salary or bonus under the Non-Qualified Key Employee Deferred
Compensation Plan.
(3) Mr. Gershon joined the company in January 1999 as Vice President, Marketing
and Services.
(4) Consists of Company contributions under retirement plans.
(5) 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 1999 compensation
was paid to such executive officers, including the executive officers named in
the compensation table 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 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;
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<PAGE> 11
- 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 1999, 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 regularly engages compensation consultants, participates in and reviews
various industry salary surveys in order to assess its compensation program for
executive management.
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) revenue, (ii) controllable profit, (iii) specific
assigned objectives, and (iv) earnings per share. 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 1999 consisted of grants of stock options under
the Company's 1991 Stock Option 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. 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 1999 -- The Committee granted stock options
during 1999 to one executive officer named in the following table (see
Options/SAR Grants in 1999). The recipient of the 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. The Committee
determines the dates and terms upon which option 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.
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<PAGE> 12
Deferred Compensation -- The fourth component of executive compensation
during 1999 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. 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 1999 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 during 1999, 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
available for the position of CEO, as applicable, consists 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 1999 compensation consisted of (1) base compensation of
$380,000 per year, and (2) a contribution of $19,000 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 the exception to the $1 million limit for "performance
based compensation." 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>
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, and a
Peer Group, assuming a base index of $100 at the end of 1994. The cumulative
total return for each annual period within the five years presented is measured
by dividing (1) the sum of (A) the cumulative amount of dividends for the
period, assuming dividend reinvestment, and (B) the difference between the
Company's share price at the end and the beginning of the period by (2) the
share price at the beginning of the period. The calculations exclude trading
commissions and taxes.
<TABLE>
<CAPTION>
COMPUTER TASK GROUP, INC. S&P 500 INDEX PEER GROUP
------------------------- ------------- ----------
<S> <C> <C> <C>
Dec 94 100.00 100.00 100.00
Dec 95 224.47 137.58 106.27
Dec 96 491.85 169.17 202.84
Dec 97 812.53 225.60 392.01
Dec 98 620.74 290.08 613.45
Dec 99 339.97 351.12 579.16
</TABLE>
The Peer Group comprises the following companies which are in the business
of providing software and information technology (IT) services: Alternative
Resources Corporation; American Management Systems, Incorporated; Analysts
International Corporation; Ciber, Inc.; Computer Horizons Corp.; Compuware
Corporation; Keane, Inc.; and Technology Solutions Company.
10
<PAGE> 14
Option/SAR Grants, Exercises and Holdings
The following tables set forth certain information concerning stock options
granted and exercised during 1999, and unexercised options held as of the end of
1999, by the named executives:
OPTIONS/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF PERCENT OF ANNUAL
SECURITIES TOTAL RATES OF STOCK PRICE
UNDERLYING OPTIONS/SARS EXERCISE OR APPRECIATION FOR
OPTIONS/SARS GRANTED TO BASE OPTION TERM (1)
GRANTED IN EMPLOYEES PRICE PER EXPIRATION ---------------------
NAME 1999 1999 SHARE DATE 5% ($) 10% ($)
---- ------------ ------------ ----------- ---------- ------ -------
<S> <C> <C> <C> <C> <C> <C>
Gale S. Fitzgerald 0 0% -- -- $ 0 $ 0
Jonathan R. Asher 0 0% -- -- $ 0 $ 0
James R. Boldt 0 0% -- -- $ 0 $ 0
Gary M. Gershon 14,476 15.61% $27.625 1/4/2009 $251,945 $637,337
524 0.56% $27.625 1/4/2014 $ 15,618 $ 45,992
Nico Molenaar 0 0% -- -- $ 0 $ 0
</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.
AGGREGATE OPTION/SAR EXERCISES IN 1999 AND 1999 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 10,000 $154,375 273,500 118,500 $1,790,875 $139,500
Jonathan R. Asher 0 $ 0 30,500 35,500 $ 0 $ 0
James R. Boldt 0 $ 0 51,950 59,250 $ 122,013 $ 67,188
Gary M. Gershon 0 $ 0 0 15,000 $ 0 $ 0
Nico Molenaar 0 $ 0 61,500 0 $ 166,875 $ 0
</TABLE>
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 reduced its annual
Supplemental Plan expense from approximately $1.1 million in 1994 to
approximately $0.7 million in 1999. 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.
11
<PAGE> 15
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 during the period prior to normal retirement
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 $769,000.
On November 1, 1996, the Compensation Committee 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. At normal retirement age, Ms. Fitzgerald will receive $30,000
per year under the Supplemental Plan.
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 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 severance 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
12
<PAGE> 16
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 approved the creation of a
Non-Qualified Key Employee Deferred Compensation Plan. The Deferred Compensation
Plan is intended as a successor plan to the Supplemental Plan. Participants in
the Deferred Compensation Plan are 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 1999, the Company attained defined operating income
objectives sufficient to cause the Compensation Committee on February 4, 2000,
to authorize an award of 5% of each eligible participant's 1999 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 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.
13
<PAGE> 17
Certain Relationships and Related Transactions
During 1999 Mr. Marks received an annual sum of $90,000 and the same
medical benefits as those provided to other officers of the Company under the
terms of the Supplemental Plan. The Company also paid the premiums on a life
insurance policy for Mr. Marks with a face value of $300,000.
APPROVAL AND RATIFICATION OF THE COMPUTER TASK GROUP,
INCORPORATED EQUITY AWARD PLAN
At the annual meeting, shareholders are being asked to consider and take
action upon a proposal to approve and ratify the adoption by the Board of
Directors of the Computer Task Group, Incorporated Equity Award Plan ("Plan").
The full text of the Plan is set forth in Appendix A hereto and shareholders are
urged to refer to it for a complete description of the Plan. The following
summary is qualified in its entirety by reference to the full text of the Plan.
The purpose of the Plan is to promote the success of the Company and the
interests of its stockholders by attracting, motivating, retaining and rewarding
key employees, including officers and non-employee directors, with awards and
incentives for high levels of individual performance and improved financial
performance of the Company. The Plan will be administered by and all awards will
be authorized by the Compensation Committee (the "Committee") of the Board of
Directors. The Committee will have authority to grant awards and to determine
the prices and amounts at which securities will be offered or awarded as well as
the terms and conditions, including vesting or performance criteria, of such
awards. The Committee will also have the authority to construe and interpret the
Plan and any agreements defining the rights and obligations of the Company and
Plan participants and to amend and rescind rules and regulations relating to the
administration of the Plan. The Committee has the authority to, subject to the
limitations set forth in the Plan, waive conditions of or limitations on awards
to eligible persons that the Committee has previously imposed, without the
consent of the individual, and make other changes that do not materially and
adversely affect in any manner the rights and benefits granted to an individual.
The maximum number of shares of Common Stock that may be delivered pursuant
to awards under the Plan will not exceed 2,000,000 shares. The maximum number of
shares subject to stock options and stock appreciation rights that may be
granted to an individual in any calendar year is limited to 225,000 shares and
the maximum individual limit on the number of shares in the aggregate subject to
all awards that may be granted to an individual in any calendar year will be
500,000 shares. The maximum number of shares that may be granted in the
aggregate to all non-employee directors under the Plan for stock options and
stock appreciation rights may not exceed 750,000. All limitations for awards
will be subject to adjustment as described below. Each award and all executory
rights or obligations under an award agreement will expire on such date as
determined by the Committee, but in the case of incentive stock options not
later than ten years after the date of the award. The Plan will have a term of
ten years. Awards may be made to "eligible persons" who are defined in the Plan
to include any officer or key employee of the Company and its subsidiaries, as
well as non-employee directors and any individual consultants or advisors who
render services to the Company. As of March 15, 2000, the closing price of the
Common Stock as reported by the New York Stock Exchange - Composite Transactions
Listing was $12 11/16 per share.
Stock Options. The Committee has the authority to grant either incentive
stock options or non-qualified stock options at such prices as determined by the
Committee, but in the case of incentive stock options at a price not less than
the fair market value of such shares on the date of grant. The fair market value
of the shares will generally be the closing price of the Company's Common Stock
as reported on the composite tape of the New York Stock Exchange. The purchase
price of any shares purchased on the exercise of an option will be paid in full
at the time of each purchase in one or a combination of the following methods:
(a) in cash; (b) by certified or cashier's check; (c) if authorized by the
Committee, by a promissory note; (d) by notice and third party payment in such
manner as may be authorized by the Committee; or (e) by delivery of shares of
Common Stock of the Company already owned by the option holder, but the
Committee may in its absolute discretion limit the option holder's ability to
exercise an award by delivering such shares. Shares of Common Stock used to pay
the exercise price of an option will be valued at fair market value on the date
of exercise. In addition, the Committee may
14
<PAGE> 18
provide that an option can be exercised and payment made by delivering a
properly executed exercise notice together with irrevocable instructions to a
broker to promptly deliver to the Company the amount of sale proceeds necessary
to pay the exercise price.
The Committee has the authority to, for the benefit of any option holder,
adjust the vesting schedule, the number of shares subject to, the restrictions
upon or the term of an option by cancellation of an outstanding award and the
subsequent regranting of an option, by amendment, by substitution of an
outstanding award, by waiver or by other legally valid means. In no event shall
the foregoing result in, without the prior approval of the Company's
shareholders, the repricing of options through cancellation or regrant or
otherwise lowering of the exercise price of an outstanding option.
If an option holder's employment by the Company terminates for any reason
other than retirement, total disability, death or "for cause" (all of which are
defined in the Plan), the option holder will have, unless otherwise provided in
an award agreement, three months after such date to exercise any option to the
extent it has become exercisable on the date of termination. If an option
holder's employment terminates as a result of total disability or death, the
option holder or his or her personal representative or beneficiary will have
until twelve months after such date in which to exercise the option but only to
the extent the option will have become exercisable by the date of termination.
If an option holder's employment terminates a result of retirement, the option
holder will have, unless otherwise provided in an award agreement, until twelve
months after the date of retirement to exercise any non-qualified option (three
months in the case of an incentive stock option) but only to the extent the
option was will have become exercisable by the date of retirement. The Committee
does have the discretion, in the event of or in anticipation of a termination of
employment for any reason other than "for cause", to increase the portion of an
option holder's award available to the option holder, or extend the
exercisability period upon such terms as the Committee determines.
Stock Appreciation Rights. The Committee may grant stock appreciation
rights ("SAR") to eligible persons under the Plan either concurrently with the
grant of another award or in respect of an outstanding award, or independently
of any other award. Any SAR granted in connection with an incentive stock option
will contain such terms as may be required to comply with the provisions of
Section 422 of the Internal Revenue Code. Unless otherwise determined by the
Committee, a SAR related to another award will be exercisable at such time or
times, and to the extent, that the related award will be exercisable. A SAR
granted independently of any other award will be exercisable pursuant to the
terms of the award agreement but in no event earlier than six months after the
award date, except in the case of death or total disability. Unless the
Committee provides otherwise, upon the exercise of a SAR and the attendant
surrender of an exercisable portion of any related award, the SAR holder will be
entitled to receive payment of an amount determined by multiplying (a) the
difference obtained by subtracting the exercise price per share of Common Stock
under the related award (if applicable) or the initial share value specified in
the award from the fair market value of a share of Common Stock on the date of
exercise of the SAR, by (b) the number of shares with respect to which the SAR
has been exercised.
Restricted Stock Awards. The Committee may grant one or more restricted
stock awards to any eligible person. Such award will specify the number of
shares of Common Stock to be issued to the individual, the date of such
issuance, the consideration for such shares, the extent to which and the time at
which the individual will be entitled to dividends, voting rights in respect to
the shares prior to vesting, and the restrictions (which may be based on
performance criteria, passage of time or other factors or any combination
thereof) imposed on such shares and the conditions of release or lapse of such
restrictions. Such restrictions will not lapse earlier than six months after the
award date, except as otherwise provided for by the Committee. Restricted shares
may not generally by sold, assigned, transferred, pledged or otherwise disposed
of or encumbered, either voluntarily or involuntarily, until the restrictions on
such shares have lapsed and the shares have become vested. Unless otherwise
provided in an award agreement, an individual receiving restricted stock will be
entitled to cash dividend and voting rights for all shares issued even though
they are not vested, but such rights will terminate immediately as to any
restricted shares which cease to be eligible for vesting.
Performance Share Awards and Stock Bonuses. The Committee may grant
performance share awards to eligible persons based upon such factors as the
Committee deems relevant. An award will specify the maximum number of shares of
Common Stock, if any, subject to the performance award, the consideration to be
paid for
15
<PAGE> 19
any such shares, the duration of the award and the conditions upon which
delivery of any shares or cash to the individual will be based. The amount of
cash or shares that may be deliverable pursuant to an award will be based upon
the degree of attainment over a specified period of not more than ten years as
may be established by the Committee of such measures of the performance of the
Company or the individual as determined by the Committee. The eligible class of
persons for this type of award is limited to executive officers of the Company.
The Committee may also grant a stock bonus to any eligible person to reward
exceptional or special services, contributions or achievements in the manner and
on such terms and conditions as determined by the Committee.
Cash Bonus Awards. The Committee may establish a program of annual
incentive awards that are payable in cash to eligible persons based upon the
extent to which performance goals are met during the performance period. The
performance goals may depend upon the performance of the Company on a
consolidated, subsidiary division basis with reference to revenues, net
earnings, cash flow, return on equity or on assets or net investment, cost
containment or the achievement of strategic goals. In no event may awards
payable to any eligible person exceed $1 million in any year.
Adjustments/Acceleration/Change of Control. In the event that there is a
reclassification, recapitalization, stock split, reorganization, merger,
consolidation, spin-off or any similar or extraordinary corporate transaction,
the Committee will, to the extent it deems appropriate and equitable,
proportionately adjust (a) any or all of the number and type of shares of Common
Stock that may be made the subject of an award, (b) the number, amount and type
of shares of Common Stock subject to any or all outstanding awards, (c) the
grant, purchase or exercise price of any or all outstanding awards, (d) the
securities, cash or other property deliverable upon the exercise of any
outstanding award, or (e) the performance standards appropriate to any
outstanding award. The Committee may also make provision for a cash payment or
for the substitution or exchange of any or all outstanding awards or the cash,
securities or property deliverable to the holder of an outstanding award based
upon the distribution or consideration payable to the holders of the Common
Stock of the Company.
Unless the Committee determines otherwise, upon the occurrence of a "change
in control event", each option and SAR will become immediate exercisable,
restricted stock will immediately vest free of restrictions and the full amount
of each performance share award will become payable to the individual. The
Committee may override the limitations on acceleration by express provision in a
written award agreement and may accord any eligible person a right to refuse any
acceleration. A "change in control event" is defined in the Plan to include the
following: (a) approval by the Company's stockholders of the dissolution or
liquidation of the Company, (b) approval by the Company's stockholders of an
agreement to merge or consolidate or otherwise reorganize, with or into one or
more entities as a result of which less than 50% of the outstanding voting
securities of the surviving entity immediately after the reorganization are or
will be owned by stockholders of the Company immediately before such
reorganization, (c) approval by the Company's stockholders of the sale of
substantially all of the Company's business and/or assets to a person that is
not a subsidiary or affiliate of the Company, (d) any person, other than the
Company or any of its subsidiaries or any person holding Common Stock of the
Company for any Company benefit plan, directly or indirectly, becomes the
beneficial owner of more than 20% of the combined voting power of the Company's
outstanding securities entitled to vote generally in the election of directors,
or (e) during any period not longer than two consecutive years, individuals who
at the beginning of such period constitute the Board cease to continue to be at
least a majority of the Board, unless the election or nomination for election by
stockholders was approved by at least three-fourths of the board members then
still in office who were board members at the beginning of the period.
Tax Consequences
The following information relates only to certain federal tax consequences
in connection with awards made under the Plan. State tax treatment is subject to
individual state tax laws and is not described below.
Stock Options. The grant of an incentive stock option ("ISO") will not
result in taxable income to the option holder and the exercise of an ISO will
not result in taxable income to such an individual provided that he or she was
an employee of the Company during the period beginning on the date of grant and
ending on the date three months prior to the date of exercise of the option. If
the option holder does not sell or otherwise dispose of the stock within two
years from the date of the grant of the ISO or within one year after the
transfer of the
16
<PAGE> 20
underlying stock to him or her, then, upon disposition of such shares, any
amount realized in excess of the exercise price will be taxed to the individual
as capital gain, and the Company will not be entitled to any deduction for tax
purposes. If the foregoing holding periods are not met, the option holder will
generally realize ordinary income and a corresponding deduction will be allowed
to the Company, at the time of the disposition of the shares, in an amount equal
to the lesser of (a) the excess of the fair market value of the shares on the
date of exercise over the exercise price, or (b) the excess, if any, of the
amount realized upon disposition of the shares over the exercise price. The
excess of the fair market value of the shares at the time of the exercise of an
ISO over the exercise price is an adjustment that is generally included in the
calculation of an individual's alternative minimum taxable income for the year
in which the ISO is exercised. The exercise of an ISO through the exchange of
previously acquired stock will generally be treated as a non-taxable, like-kind
exchange as to the number of shares surrendered and the identical number of
shares received under the option. The value of the shares received upon such an
exchange that are in excess of the number given up will be taxed to the
individual at the time of exercise as ordinary income.
The grant of a non-qualified stock option ("NQSO") will not result in
taxable income to an option holder. Instead, the individual will realize
ordinary income at the time of exercise in an amount equal to the excess of the
fair market value of the shares acquired over the exercise price for those
shares, and the Company will be entitled to a corresponding deduction. Gains or
losses realized by the option holder upon disposition of such shares will be
treated as capital gains and losses, with the basis in such shares equal to the
fair market value of the shares at the time of exercise. The exercise of an NQSO
through the delivery of previously acquired stock will generally be treated in
the same manner as such an exercise would be treated in connection with the
exercise of an ISO.
Stock Appreciation Rights. The grant of a stock appreciation right ("SAR")
will not result in taxable income to an individual. Upon exercise of a SAR, the
amount of cash or the fair market value of shares received will be taxable to
the individual as ordinary income, and a corresponding deduction will be allowed
to the Company. Gains or losses realized by an individual upon disposition of
the shares received upon exercise, will be treated as capital gains and losses,
with the basis in such shares equal to the fair market value of the shares at
the time of exercise.
Restricted Stock. An individual who has been granted a restricted stock
award will not realize taxable income at the time of grant, and the Company will
not be entitled to a deduction at that time, assuming that the restrictions
constitute a substantial risk of forfeiture for federal income tax purposes.
Upon the vesting of shares subject to an award, the holder will realize ordinary
income in an amount equal to the then fair market value of the shares, and the
Company will be entitled to a corresponding deduction. Gains or losses realized
by the individual upon disposition of such shares will be treated as capital
gains and losses, with the basis in such shares equal to the fair market value
of the shares at the time of vesting. Dividends paid to the recipient will also
be compensation income and deductible by the Company. A recipient who has been
granted an award of restricted stock that is not subject to a substantial risk
of forfeiture will realize ordinary income in an amount equal to the fair market
value of the shares at that time and the Company will be entitled to a tax
deduction.
If an individual is granted restricted shares that are subject to a
substantial risk of forfeiture, recognition of taxable income may be accelerated
to the date of grant if he or she makes an election under Internal Revenue Code
Section 83(b). Such an election must be filed with the IRS not later than 30
days after the date of grant. If such an election is properly filed, the Company
will be entitled to a deduction at the time of grant in an amount equal to the
fair market value of the shares (determined without regard to forfeiture
restrictions) and there will be no further tax consequences when the
restrictions lapse. Gains or losses realized by the recipient of the restricted
shares upon disposition of such shares will be treated as capital gains or
losses with the basis in such shares equal to the fair market value of such
shares at the time of grant.
Performance Share Awards. An individual who has been granted performance
shares will not realize taxable income at the time of grant and the Company will
not be entitled to a tax deduction at that time. The individual will have
compensation income at the time the shares are distributed to him or her equal
to the then fair market value of the distributed shares and the Company will
have a corresponding tax deduction.
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The foregoing is merely a summary and does not purport to be a complete
description of the federal income tax aspects of awards under the Plan.
Individuals who receive awards under the Plan should consult with their personal
tax advisors to determine the applicability of the tax rules to the awards
granted to them.
The proposed Plan was authorized and adopted at the February 4, 2000
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 entitled to vote at the meeting is required
for adoption of the Plan.
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 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 Peat Marwick 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 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 2001 annual meeting of
shareholders must be received at the Company's principal executive offices not
later than December 1, 2000. A shareholder who wishes to present a proposal for
consideration at the April 2001 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.
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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 2000 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.
March 29, 2000
By Order of the Board of Directors
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Appendix A
COMPUTER TASK GROUP, INCORPORATED
2000 EQUITY AWARD PLAN
1. The Plan
1.1 Purpose. The purpose of this Plan is to promote the success of the
Company and the interests of its stockholders by attracting, motivating,
retaining and rewarding key employees, including officers, whether or not
directors, of the Company with awards and incentives for high levels of
individual performance and improved financial performance of the Company and to
attract, motivate and retain experienced and knowledgeable independent
directors. "CORPORATION" means Computer Task Group, Incorporated and "COMPANY"
means the Corporation and its Subsidiaries, collectively. These terms and other
capitalized terms are defined in Section 1.2.
1.2 Definitions.
"Award" means an award of any Option, Stock Appreciation Right,
Restricted Stock, Stock Bonus, performance share award, dividend equivalent
or deferred payment right or other right or security that would constitute
a "derivative security" under Rule 16a-1(c) of the Exchange Act, or any
combination thereof, whether alternative or cumulative, authorized by and
granted under this Plan.
"Award Agreement" means any writing setting forth the terms of an
Award that has been authorized by the Committee.
"Award Date" means the date upon which the Committee took the action
granting an Award or such later date as the Committee designates as the
Award Date at the time of the Award.
"Award Period" means the period beginning on an Award Date and ending
on the expiration date of such Award.
"Beneficiary" means the person, persons, trust or trusts designated by
a Participant or, in the absence of a designation, entitled by will or the
laws of descent and distribution, to receive the benefits specified in the
Award Agreement and under this Plan if the Participant dies, and means the
Participant's executor or administrator if no other Beneficiary is
designated and able to act under the circumstances.
"Board" means the Board of Directors of the Corporation.
"Change in Control Event" means any of the following:
(a) Approval by the stockholders of the Corporation of the
dissolution or liquidation of the Corporation;
(b) Approval by the stockholders of the Corporation of an agreement
to merge or consolidate, or otherwise reorganize, with or into one or
more entities that are not Subsidiaries or other affiliates, as a result
of which less than 50% of the outstanding voting securities of the
surviving or resulting entity immediately after the reorganization are,
or will be, owned, directly or indirectly, by stockholders of the
Corporation immediately before such reorganization (assuming for
purposes of such determination that there is no change in the record
ownership of the Corporation's securities from the record date for such
approval until such reorganization and that such record owners hold no
securities of the other parties to such reorganization), but including
in such determination any securities of the other parties to such
reorganization held by affiliates of the Corporation);
(c) Approval by the stockholders of the Corporation of the sale of
substantially all of the Corporation's business and/or assets to a
person or entity that is not a Subsidiary or other affiliate; or;
(d) Any "PERSON" (as such term is used in Sections 13(d) and 14(d)
of the Exchange Act but excluding any person described in and satisfying
the conditions of Rule 13d-1(b)(1) thereunder), other than the
Corporation, any subsidiary of the Corporation, any employee benefit
plan of the Corporation
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or of any of its subsidiaries or any Person holding common shares of the
Corporation for or pursuant to the terms of any such employee benefit
plan, becomes the beneficial owner (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Corporation
representing more than 20% of the combined voting power of the
Corporation's then outstanding securities entitled to then vote
generally in the election of directors of the Corporation; or
(e) During any period not longer than two consecutive years,
individuals who at the beginning of such period constituted the Board
cease to constitute at least a majority thereof, unless the election, or
the nomination for election by the Corporation's stockholders, of each
new Board member was approved by a vote of at least three-fourths of the
Board members then still in office who were Board members at the
beginning of such period (including for these purposes, new members
whose election or nomination was so approved).
"Code" means the Internal Revenue Code of 1986, as amended from time
to time.
"Commission" means the Securities and Exchange Commission.
"Committee" means the Board or a committee appointed by the Board to
administer this Plan, which committee will be comprised only of two or more
directors or such greater number of directors as may be required under
applicable law, each of whom, in respect of any decision at a time when the
Participant affected by the decision may be subject to Section 162(m) of
the Code, will be Disinterested.
"Common Stock" means the Common Stock of the Corporation and such
other securities or property as may become the subject of Awards, or become
subject to Awards, pursuant to an adjustment made under Section 6.2 of this
Plan.
"Company" means, collectively, the Corporation and its Subsidiaries.
"Corporation" means Computer Task Group, Incorporated, a New York
corporation, and its successors.
"Disinterested" means a disinterested director or an "outside
director" within the meaning of any mandatory legal or regulatory
requirements, including Section 162(m) of the Code.
"Eligible Employee" means an officer (whether or not a director) or
key employee of the Company.
"Eligible Person" means an Eligible Employee, or any Other Eligible
Person, as determined by the Committee.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Fair Market Value" on any date means (a) if the stock is listed or
admitted to trade on a national securities exchange, the closing price of
the stock on the Composite Tape, as published in The Wall Street Journal,
of the principal national securities exchange on which the stock is so
listed or admitted to trade, on such date, or, if there is no trading of
the stock on such date, then the closing price of the stock as quoted on
such Composite Tape on the next preceding date on which there was trading
in such shares; (b) if the stock is not listed or admitted to trade on a
national securities exchange, the last price for the stock on such date, as
furnished by the National Association of Securities Dealers, Inc. ("NASD")
through the NASDAQ National Market Reporting System or a similar
organization if the NASD is no longer reporting such information; (c) if
the stock is not listed or admitted to trade on a national securities
exchange and is not reported on the National Market Reporting System, the
mean between the bid and asked price for the stock on such date, as
furnished by the NASD or a similar organization; or (d) if the stock is not
listed or admitted to trade on a national securities exchange, is not
reported on the National Market Reporting System and if bid and asked
prices for the stock are not furnished by the NASD or a similar
organization, the value as established by the Committee at such time for
purposes of this Plan.
"Incentive Stock Option" means an Option that is designated and
intended as an incentive stock option within the meaning of Section 422 of
the Code, the award of which contains such provisions (including but
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not limited to the receipt of stockholder approval of this Plan, if the
award is made prior to such approval) and is made under such circumstances
and to such persons as may be necessary to comply with that section.
"Nonqualified Stock Option" means an Option that is designated as a
Nonqualified Stock Option and will include any Option intended as an
Incentive Stock Option that fails to meet the applicable legal requirements
thereof. Any Option granted hereunder that is not designated as an
incentive stock option will be deemed to be designated a nonqualified stock
option under this Plan and not an incentive stock option under the Code.
"Non-Employee Director" means a member of the Board of Directors of
the Corporation who is not an employee of the Company.
"Non-Employee Director Participant" means a Non-Employee Director who
holds an outstanding Award under the provisions of this Plan.
"Option" means an option to purchase Common Stock granted under this
Plan. The Committee will designate any Option granted to an Eligible Person
as a Nonqualified Stock Option or an Incentive Stock Option.
"Other Eligible Person" means any Non-Employee Director or any
individual consultant or advisor who or (to the extent provided in the next
sentence) agent who renders or has rendered bona fide services (other than
services in connection with the offering or sale of securities of the
Company in a capital raising transaction) to the Company, and who is
selected to participate in this Plan by the Committee. A non-employee agent
providing bona fide services to the Company (other than as an eligible
advisor or consultant) may also be selected as an Other Eligible Person if
such agent's participation in this Plan would not adversely affect (a) the
Corporation's eligibility to use Form S-8 to register under the Securities
Act of 1933, as amended, the offering of shares issuable under this Plan by
the Company or (b) the Corporation's compliance with any other applicable
laws.
"Participant" means an Eligible Person who has been granted an Award
under this Plan.
"Performance Share Award" means an Award of a right to receive shares
of Common Stock under Section 5.1, or to receive shares of Common Stock or
other compensation (including cash) under Section 5.2, the issuance or
payment of which is contingent upon, among other conditions, the attainment
of performance objectives specified by the Committee.
"Personal Representative" means the person or persons who, upon the
disability or incompetence of a Participant, has acquired on behalf of the
Participant, by legal proceeding or otherwise, the power to exercise the
rights or receive benefits under this Plan by virtue of having become the
legal representative of the Participant.
"Plan" means this Equity Award Plan, as amended from time to time.
"QDRO" means a qualified domestic relations order.
"Restricted Shares" or "Restricted Stock" means shares of Common Stock
awarded to a Participant under this Plan, subject to payment of such
consideration, if any, and such conditions on vesting (which may include,
among others, the passage of time, specified performance objectives or
other factors) and such transfer and other restrictions as are established
in or pursuant to this Plan and the related Award Agreement, for so long as
such shares remain unvested under the terms of the applicable Award
Agreement.
"Retirement" means retirement with the consent of the Company or, from
active service as an employee or officer of the Company on or after
attaining age 55 with ten or more years of service or age 65.
"Rule 16b-3" means Rule 16b-3 as promulgated by the Commission
pursuant to the Exchange Act, as amended from time to time, but subject to
any applicable transition rules.
"Section 16 Person" means a person subject to Section 16(a) of the
Exchange Act.
"Securities Act" means the Securities Act of 1933, as amended from
time to time.
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"Stock Appreciation Right" means a right authorized under this Plan to
receive a number of shares of Common Stock or an amount of cash, or a
combination of shares and cash, the aggregate amount or value of which is
determined by reference to a change in the Fair Market Value of the Common
Stock.
"Stock Bonus" means an Award of shares of Common Stock granted under
this Plan for no consideration other than past services and without
restriction other than such transfer or other restrictions as the Committee
may deem advisable to assure compliance with law.
"Subsidiary" means any corporation or other entity a majority of whose
outstanding voting stock or voting power is beneficially owned directly or
indirectly by the corporation.
"Total Disability" means a disability where Participant is unable to
effectively engage in the material activities required for Participant's
position with the Company by reason of any medically determinable physical
or mental impairment that can be expected to result in death or that has
lasted or can be expected to last for a period of 90 consecutive days or
for shorter periods aggregating 180 days in any consecutive 12 month
period.
1.3 Administration and Authorization; Power and Procedure.
1.3.1 Committee. This Plan will be administered by and all Awards to
Eligible Persons will be authorized by the Committee. Action of the
Committee with respect to the administration of this Plan will be taken
pursuant to a majority vote or by written consent of its members.
1.3.2 Plan Awards; Interpretation; Powers of Committee. Subject to the
express provisions of this Plan, the Committee will have the authority to:
(a) determine the particular Eligible Person who will receive
Awards;
(b) grant Awards to Eligible Persons, determine the price at which
securities will be offered or awarded and the amount of securities to be
offered or awarded to any of such persons, and determine the other
specific terms and conditions of such Awards consistent with the express
limits of this Plan, and establish the installments (if any) in which
such Awards will become exercisable or will vest, or determine that no
delayed exercisability or vesting is required, and establish the events
of termination or reversion of such Awards;
(c) approve the forms of Award Agreements (which need not be
identical either as to type of Award or among Participants);
(d) construe and interpret this Plan and any agreements defining
the rights and obligations of the Company and Participants under this
Plan, further define the terms used in this Plan, and prescribe, amend
and rescind rules and regulations relating to the administration of this
Plan;
(e) cancel, modify, or waive the Corporation's rights with respect
to, or modify, discontinue, suspend, or terminate any or all outstanding
Awards held by Eligible Persons, subject to any required consent under
Section 6.6 and provided, however, that in no event shall the foregoing
result in, without the prior approval of the Corporation's shareholders,
the repricing of options through cancellation or regrant or otherwise
lowering of the exercise price of an outstanding Award;
(f) accelerate or extend the exercisability or extend the term of
any or all such outstanding Awards within the maximum ten-year term of
Awards under Section 1.7; and
(g) make all other determinations and take such other action as
contemplated by this Plan or as may be necessary or advisable for the
administration of this Plan and the effectuation of its purposes.
1.3.3 Binding Determinations. Any action taken by, or inaction of, the
Corporation, any Subsidiary, the Board or the Committee relating or
pursuant to this Plan will be within the absolute discretion of that entity
or body and will be conclusive and binding upon all persons. No member of
the Board or Committee, or officer of the Corporation or any Subsidiary,
will be liable for any such action or inaction of the entity or body, of
another person or, except in circumstances involving bad faith, of himself
or herself. Subject only to
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compliance with the express provisions hereof, the Board and Committee may
act in their absolute discretion in matters within their authority related
to this Plan.
1.3.4 Reliance on Experts. In making any determination or in taking or
not taking any action under this Plan, the Committee or the Board, as the
case may be, may obtain and may rely upon the advice of experts, including
professional advisors to the Corporation. No director, officer or agent of
the Company will be liable for any such action or determination taken or
made or omitted in good faith.
1.3.5 Delegation. The Committee may delegate ministerial,
non-discretionary functions to individuals who are officers or employees of
the Company.
1.3.6 Cancellation and Recission of Awards.
(a) Unless the Award Agreement specifies otherwise, the Committee
may cancel, rescind, suspend, withhold or otherwise limit or restrict
any unexpired, unexercised, unpaid or deferred Awards at any time if the
Participant is not in compliance with all applicable provisions of the
Award Agreement and the Plan, or if the Participant engages in any
"Detrimental Activity." For purposes of this Section 1.3.6 "Detrimental
Activity" shall include: (1) the rendering of services for any
organization or engaging directly or indirectly in any business which is
or becomes competitive with the Company, or which organization or
business, or the rendering of services to such organization or business,
is or becomes otherwise prejudicial to or in conflict with the interests
of the Company; (2) the disclosure to anyone outside the Company, or the
use in other than the Company's business, without prior written
authorization from the Company, of any confidential information or
material, as defined in any Company agreement regarding confidential
information and intellectual property, relating to the business of the
Company, acquired by the Participant either during or after employment
with the Company; (3) the failure or refusal to disclose promptly and to
assign to the Company, pursuant to any Company agreement regarding
confidential information and intellectual property, all right, title and
interest in any invention or idea, patentable or not, made or conceived
by the Participant during employment by the Company, relating in any
manner to the actual or anticipated business, research or development
work of the Company or the failure or refusal to do anything reasonably
necessary to enable the Company to secure a patent where appropriate in
the United States and in other countries; (4) activity that results in
termination of the Participant's employment for cause; (5) a violation
of any rules, policies, procedures or guidelines of the Company; (6) any
attempt directly or indirectly to induce any employee of the Company to
be employed or perform services elsewhere or any attempt directly or
indirectly to solicit the trade or business of any current or
prospective customer, supplier or partner of the Company; (7) the
Participant being convicted of, or entering a guilty plea with respect
to, a crime, whether or not connected with the Company; or (8) any other
conduct or act determined to be injurious, detrimental or prejudicial to
any substantial interest of the Company.
(b) Upon exercise, payment or delivery pursuant to an Award, the
Participant shall certify in a manner acceptable to the Company that he
or she is in compliance with the terms and conditions of the Plan. If a
Participant fails to comply with the provisions of paragraphs (a)(1)-(8)
of this Section 1.3.6 prior to, or during the 12 months after, any
exercise, payment or delivery pursuant to an Award, the Committee may
rescind the exercise, payment or delivery within 2 years thereafter. In
the event of any such rescission, the Participant shall pay to the
Company the amount of any gain realized or payment received as a result
of the rescinded exercise, payment or delivery, in the manner and on the
terms and conditions that the Committee may require, and the Company
shall may set-off against the amount of any such gain any amount owed to
the Participant by the Company.
1.4 Participation. Awards may be granted by the Committee only to those
persons that the Committee determines to be Eligible Persons. An Eligible Person
who has been granted an Award may, if otherwise eligible, be granted additional
Awards if the Committee so determines.
1.5 Shares Available for Awards; Share Limits.
1.5.1 Shares Available. Subject to the provisions of Section 6.2, the
capital stock that may be delivered under this Plan will be shares of the
Corporation's authorized but unissued Common Stock and
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any shares of its Common Stock held as treasury shares. The shares may be
delivered for any lawful consideration.
1.5.2 Share Limits. The maximum number of shares of Common Stock that
may be delivered pursuant to Awards granted to Eligible Persons under this
Plan will not exceed 2,000,000 shares (the "Share Limit"). The maximum
number of shares subject to those options and Stock Appreciation Rights
that are granted during any calendar year to any individual will be limited
to 225,000 and the maximum individual limit on the number of shares in the
aggregate subject to all Awards that during any calendar year are granted
under this Plan will be 500,000. The maximum number of shares that may be
granted as options shall not exceed 2,000,000. The maximum number of shares
subject to those options and Stock Appreciation Rights that may be granted
to Non-Employee Directors will not exceed 750,000 shares. Each of the
foregoing numerical limits will be subject to adjustment as contemplated by
this Section 1.5.2 and by Section 6.2.
1.5.3 Share Reservation; Replenishment and Reissue of Unvested
Awards. No Award may be granted under this Plan unless, on the date of
grant, the sum of (a) the maximum number of shares issuable at any time
pursuant to such Award, plus (b) the number of shares that have previously
been issued pursuant to Awards granted under this Plan, other than
reacquired shares available for reissue consistent with any applicable
legal limitations, plus (c) the maximum number of shares that may be issued
at any time after such date of grant pursuant to Awards that are
outstanding on such date, does not exceed the Share Limit. Shares that are
subject to or underlie Awards that expire or for any reason are cancelled
or terminated, are forfeited, fail to vest, or for any other reason are not
paid or delivered under this Plan, as well as reacquired shares, will
again, except to the extent prohibited by law, be available for subsequent
Awards under the Plan. Except as limited by law, if an Award is or may be
settled only in cash, such Award need not be counted against any of the
limits under this Section 1.5.3.
1.6 Grant of Awards. Subject to the express provisions of this Plan, the
Committee will determine the number of shares of Common Stock subject to each
Award, the price (if any) to be paid for the shares or the Award and, in the
case of performance share awards, in addition to matters addressed in Section
1.3.2, the specific objectives, goals and performance criteria (such as an
increase in sales, market value, earnings or book value over a base period, the
years of service before vesting, the relevant job classification or level of
responsibility or other factors) that further define the terms of the
performance share award. Each Award will be evidenced by an Award Agreement
signed by the Corporation and, if required by the Committee, by the Participant.
Notwithstanding the foregoing, in the event an Award is made to a Non-Employee
Director under this Plan, the terms and conditions of said Award as contemplated
by this paragraph 1.6 shall be made by the Board of Directors of the
Corporation.
1.7 Award Period. Each Award and all executory rights or obligations under
the related Award Agreement will expire on such date (if any) as determined by
the Committee, but in the case of Incentive Stock Options not later than ten
(10) years after the Award Date.
1.8 Limitations on Exercise and Vesting of Awards.
1.8.1 Provisions for Exercise. Subject to the provisions of Section
6.2.2, the Committee shall establish the installments (if any) in which
Awards will become exercisable or will vest, or determine that no delayed
exercisability or vesting is required. Notwithstanding the foregoing, an
Award shall be immediately exercisable or vest upon the death, Total
Disability or Retirement of a Participant.
1.8.2 Procedure. Any exercisable Award will be deemed to be exercised
when the Corporation receives written notice of such exercise from the
Participant, together with any required payment made in accordance with
Section 2.2.2.
1.8.3 Fractional Shares/Minimum Issue. Fractional share interests will
be disregarded, but may be accumulated. The Committee, however, may
determine in the case of Eligible Persons that cash, other securities, or
other property will be paid or transferred in lieu of any fractional share
interests. No fewer than 100 shares may be purchased on exercise of any
Award at one time unless the number purchased is the total number at the
time available for purchase under the Award.
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1.9 No Transferability; Limited Exception to Transfer Restrictions.
1.9.1 Limit on Exercise and Transfer. Unless otherwise expressly provided
in (or pursuant to) this Section 1.9, by applicable law and by the Award
Agreement, as the same may be amended, (a) all Awards are non-transferable and
will not be subject in any manner to sale, transfer, anticipation, alienation,
assignment, pledge, encumbrance or charge; Awards will be exercised only by the
Participant; and (b) amounts payable or shares issuable pursuant to an Award
will be delivered only to (or for the account of) the Participant.
1.9.2 Exceptions. The Committee may permit Awards to be exercised by and
paid only to certain persons or entities related to the Participant pursuant to
such conditions and procedures as the Committee may establish. Any permitted
transfer will be subject to the condition that the Committee receive evidence
satisfactory to it that the transfer is being made for estate and/or tax
planning purposes and without consideration (other than nominal consideration).
ISOs and Restricted Stock Awards, however, will be subject to any and all
additional transfer restrictions under the Code.
1.9.3 Further Exceptions to Limits on Transfer. The exercise and transfer
restrictions in Section 1.9.1 will not apply to:
(a) transfers to the Corporation,
(b) the designation of a beneficiary to receive benefits if the
Participant dies or, if the Participant has died, transfers to or
exercise by the Participant's beneficiary, or, in the absence of a
validly designated beneficiary, transfers by will or the laws of descent
and distribution,
(c) transfers pursuant to a QDRO order if approved or ratified by
the Committee,
(d) if the Participant has suffered a disability, permitted
transfers or exercises on behalf of the Participant by the Participant's
legal representative, or
(e) the authorization by the Committee of "cashless exercise"
procedures with third parties who provide financing for the purpose of
(or who otherwise facilitate) the exercise of Awards consistent with
applicable laws and the express authorization of the Committee.
2. Options
2.1 Grants. One or more Options may be granted under this Section to any
Eligible Person. Each Option granted will be designated in the applicable Award
Agreement, by the Committee as either an Incentive Stock Option, subject to
Section 2.3, or a Non-Qualified Stock Option.
2.2 Option Price.
2.2.1 Pricing Limits. The purchase price per share of the Common Stock
covered by each Option will be determined by the Committee at the time of
the Award, but in the case of Incentive Stock Options will not be less than
100% (110% in the case of a Participant described in Section 2.4) of the
Fair Market Value of the Common Stock on the date of grant and in all cases
will not be less than the par value thereof.
2.2.2 Payment Provisions. The purchase price of any shares purchased
on exercise of an Option granted under this Section will be paid in full at
the time of each purchase in one or a combination of the following methods:
(a) in cash or by electronic funds transfer; (b) by certified or cashier's
check payable to the order of the Corporation; (c) if authorized by the
Committee or specified in the applicable Award Agreement, by a promissory
note of the Participant, provided that an amount equal to not less than the
par value of the shares is paid in cash; (d) by notice and third party
payment in such manner as may be authorized by the Committee; or (e) by the
delivery of shares of Common Stock of the Corporation already owned by the
Participant, but the Committee may in its absolute discretion limit the
Participant's ability to exercise an Award by delivering such shares, and
any shares delivered that were initially acquired upon exercise of a stock
option must have been owned by the Participant at least six months as of
the date of delivery. Shares of Common Stock used to satisfy the exercise
price of an Option will be valued at their Fair Market Value on the date of
exercise. In addition to the payment methods described above, the Committee
may provide that the Option can be exercised and payment made by delivering
a properly executed exercise
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notice together with irrevocable instructions to a broker to promptly
deliver to the Corporation the amount of sale proceeds necessary to pay the
exercise price and, unless otherwise prohibited by the Committee or
applicable law, any applicable tax withholding under Section 6.5. The
Corporation will not be obligated to deliver certificates for the shares
unless and until it receives full payment of the exercise price therefor
and any related withholding obligations have been satisfied.
2.3 Limitations on Grant and Terms of Incentive Stock Options.
2.3.1 $100,000 Limit. To the extent that the aggregate "Fair Market
Value" of stock with respect to which incentive stock options first become
exercisable by a Participant in any calendar year exceeds $100,000, taking
into account both Common Stock subject to Incentive Stock Options under
this Plan and stock subject to incentive stock options under all other
plans of the Company or any parent corporation, such options will be
treated as Nonqualified Stock Options. For this purpose, the "Fair Market
Value" of the stock subject to options will be determined as of the date
the options were awarded. In reducing the number of options treated as
incentive stock options to meet the $100,000 limit, the most recently
granted options will be reduced first. To the extent a reduction of
simultaneously granted options is necessary to meet the $100,000 limit, the
Committee may, in the manner and to the extent permitted by law, designate
which shares of Common Stock are to be treated as shares acquired pursuant
to the exercise of an Incentive Stock Option.
2.3.2 Option Period. Each Option and all rights thereunder will expire
no later than 10 years after the Award Date.
2.3.3 Other Code Limits. Incentive Stock Options may only be granted
to Eligible Employees of the Corporation or a Subsidiary that satisfies the
other eligibility requirements of the Code. There will be imposed in any
Award Agreement relating to Incentive Stock Options such other terms and
conditions as from time to time are required in order that the Option be an
"incentive stock option" as that term is defined in Section 422 of the
Code.
2.4 Limits on 10% Holders. No Incentive Stock Option may be granted to any
person who, at the time the Option is granted, owns (or is deemed to own under
Section 424(d) of the Code) shares of outstanding Common Stock possessing more
than 10% of the total combined voting power of all classes of stock of the
Corporation, unless the exercise price of such Option is at least 110% of the
Fair Market Value of the stock subject to the Option and such Option by its
terms is not exercisable after the expiration of five years from the date such
Option is granted.
2.5 Option Cancellation and Regrant/Waiver of Restrictions. Subject to
Section 1.3 and Section 6.6 and the specific limitations on Awards contained in
this Plan, the Committee from time to time may authorize, generally or in
specific cases only, for the benefit of any Eligible Person any adjustment in
the vesting schedule, the number of shares subject to, the restrictions upon or
the term of, an Award granted under this Section by cancellation of an
outstanding Award and a subsequent regranting of an Award, by amendment, by
substitution of an outstanding Award, by waiver or by other legally valid means.
Such amendment or other action may result in a greater or lesser number of
shares subject to the Award, or provide for a longer or shorter vesting or
exercise period. In no event shall the foregoing result in, without the prior
approval of the Corporation's shareholders, the repricing of options through
cancellation or regrant or otherwise lowering of the exercise price of an
outstanding Award.
2.6 Effects of Termination of Employment; Termination of Subsidiary Status;
Discretionary Provisions.
2.6.1 Options - Resignation or Dismissal. If the Participant's
employment by (or other service specified in the Award Agreement to) the
Company terminates for any reason (the date of such termination being
referred to as the "Severance Date") other than Retirement, Total
Disability or death, or "For Cause" (as determined in the discretion of the
Committee), the Participant will have, unless otherwise provided in the
Award Agreement and subject to earlier termination pursuant to or as
contemplated by Section 1.3, 1.7 or 6.2, three months after the Severance
Date to exercise any Option to the extent it has become exercisable on the
Severance Date. In other cases, the Option, to the extent not exercisable
on the Severance Date, will terminate.
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2.6.2 Options - Death or Disability. If the Participant's employment
by (or specified service to) the Company terminates as a result of Total
Disability or death, the Participant, Participant's Personal Representative
or the Participant's Beneficiary, as the case may be, will have, unless
otherwise provided in the Award Agreement and subject to earlier
termination pursuant to or as contemplated by Section 1.7 or 6.2, until 12
months after the Severance Date to exercise any Option to the extent it
will have become exercisable by the Severance Date. Any Option to the
extent not exercisable on the Severance Date will terminate.
2.6.3 Options - Retirement. If the Participant's employment by (or
specified service to) the Company terminates as a result of Retirement, the
Participant, Participant's Personal Representative or the Participant's
Beneficiary, as the case may be, will have, unless otherwise provided in
the Award Agreement and subject to earlier termination pursuant to or as
contemplated by Section 1.7 or 6.2, until 12 months after the Severance
Date to exercise any Nonqualified Stock Option (three months after the
Severance Date in the case of an Incentive Stock Option) to the extent it
will have become exercisable by the Severance Date. The Option, to the
extent not exercisable on the Severance Date, will terminate.
2.6.4 Certain SARS. Any SAR granted concurrently or in tandem with an
Option will have the same post-termination provisions and exercisability
periods as the Option to which it relates, unless the Committee otherwise
provides.
2.6.5 Other Awards. The Committee will establish in respect of each
other Award granted hereunder the Participant's rights and benefits (if
any) if the Participant's employment is terminated and in so doing may make
distinctions based upon the cause of termination and the nature of the
Award.
2.6.6 Committee Discretion. Notwithstanding the foregoing provisions
of this Section 2.6, in the event of, or in anticipation of, a termination
of employment with the Company for any reason, other than discharge for
cause, the Committee may increase the portion of the Participant's Award
available to the Participant, or Participant's Beneficiary or Personal
Representative, as the case may be, or, subject to the provisions of
Section 1.6, extend the exercisability period upon such terms as the
Committee determines and expressly sets forth in or by amendment to the
Award Agreement.
2.7 Options and Rights in Substitution for Stock Options Granted by Other
Corporations. Options and Stock Appreciation Rights may be granted to Eligible
Persons under this Plan in substitution for employee stock options granted by
other entities to persons who are or who will become Eligible Persons in respect
of the Company, in connection with a distribution, merger or reorganization by
or with the granting entity or an affiliated entity, or the acquisition by the
Company, directly or indirectly, of all or a substantial part of the stock or
assets of the employing entity.
3. Stock Appreciation Rights (including Limited Stock Appreciation Rights)
3.1 Grants. The Committee may grant to any Eligible Person Stock
Appreciation Rights either concurrently with the grant of another Award or in
respect of an outstanding Award, in whole or in part, or independently of any
other Award. Any Stock Appreciation Right granted in connection with an
Incentive Stock Option will contain such terms as may be required to comply with
the provisions of Section 422 of the Code and the regulations promulgated
thereunder, unless the holder otherwise agrees.
3.2 Exercise of Stock Appreciation Rights.
3.2.1 Exercisability. Unless the Award Agreement or the Committee
otherwise provides, a Stock Appreciation Right related to another Award
will be exercisable at such time or times, and to the extent, that the
related Award will be exercisable.
3.2.2 Effect on Available Shares. To the extent that a Stock
Appreciation Right is exercised, only the actual number of delivered shares
of Common Stock will be charged against the maximum amount of Common Stock
that may be delivered pursuant to Awards under this Plan. The number of
shares subject to the Stock Appreciation Right and the related Option of
the Participant will, however, be reduced by the
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number of underlying shares as to which the exercise related, unless the
Award Agreement otherwise provides.
3.2.3 Stand-Alone SARS. A Stock Appreciation Right granted
independently of any other Award will be exercisable pursuant to the terms
of the Award Agreement but in no event earlier than six months after the
Award Date, except in the case of death or Total Disability.
3.2.4 Proportionate Reduction. If an SAR extends to less than all the
shares covered by the related Award and if a portion of the related Award
is thereafter exercised, the number of shares subject to the unexercised
SAR shall be reduced only if and to the extent that the remaining number of
shares covered by such related Award is less than the remaining number of
shares subject to such SAR.
3.3 Payment.
3.3.1 Amount. Unless the Committee otherwise provides, upon exercise
of a Stock Appreciation Right and the attendant surrender of an exercisable
portion of any related Award, the Participant will be entitled to receive
subject to Section 6.5 payment of an amount determined by multiplying
(a) the difference obtained by subtracting the exercise price per
share of Common Stock under the related Award (if applicable) or the
initial share value specified in the Award from the Fair Market Value of
a share of Common Stock on the date of exercise of the Stock
Appreciation Right, by
(b) the number of shares with respect to which the Stock
Appreciation Right has been exercised.
3.3.2 Form of Payment. The Committee, in its sole discretion, will
determine the form in which payment will be made of the amount determined
under Section 3.3.1 above, either solely in cash, solely in shares of
Common Stock (valued at Fair Market Value on the date of exercise of the
Stock Appreciation Right), or partly in such shares and partly in cash, but
the Committee will have determined that such exercise and payment are
consistent with applicable law. If the Committee permits the Participant to
elect to receive cash or shares (or a combination thereof) on such
exercise, any such election will be subject to such conditions as the
Committee may impose.
3.4 Limited Stock Appreciation Rights. The Committee may grant to any
Eligible Person Stock Appreciation Rights exercisable only upon or in respect of
a change in control or any other specified event ("LIMITED SARS") and such
Limited SARs may relate to or operate in tandem or combination with or
substitution for Options, other SARs or other Awards (or any combination
thereof), and may be payable in cash or shares based on the spread between the
base price of the SAR and a price based upon or equal to the Fair Market Value
of the Shares during a specified period or at a specified time within a
specified period before, after or including the date of such event.
4. Restricted Stock Awards
4.1 Grants. The Committee may grant one or more Restricted Stock Awards to
any Eligible Person. Each Restricted Stock Award Agreement will specify the
number of shares of Common Stock to be issued to the Participant, the date of
such issuance, the consideration for such shares (but not less than the minimum
lawful consideration under applicable state law) that must be paid by the
Participant, the extent (if any) to which and the time (if ever) at which the
Participant will be entitled to dividends, voting and other rights in respect of
the shares prior to vesting, and the restrictions (which may be based on
performance criteria, passage of time or other factors or any combination
thereof) imposed on such shares and the conditions of release or lapse of such
restrictions. Such restrictions will not lapse earlier than six months after the
Award Date, except to the extent the Committee may otherwise provide. Stock
certificates evidencing shares of Restricted Stock pending the lapse of the
restrictions ("Restricted Shares") will bear a legend making appropriate
reference to the restrictions imposed hereunder and will be held by the
Corporation or by a third party designated by the Committee until the
restrictions on such shares have lapsed and the shares have vested in accordance
with the provisions of the Award and Section 1.7. Upon issuance of the
Restricted Stock Award, the Participant may be required to provide such further
assurance and documents as the Committee may require to enforce the
restrictions.
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4.2 Restrictions.
4.2.1 Pre-Vesting Restraints. Except as provided in Sections 4.1 and
1.9, restricted shares comprising any Restricted Stock Award may not be
sold, assigned, transferred, pledged or otherwise disposed of or
encumbered, either voluntarily or involuntarily, until the restrictions on
such shares have lapsed and the shares have become vested.
4.2.2 Dividend and Voting Rights. Unless otherwise provided in the
applicable Award Agreement, a Participant receiving a Restricted Stock
Award will be entitled to cash dividend and voting rights for all shares
issued even though they are not vested, but such rights will terminate
immediately as to any Restricted Shares which cease to be eligible for
vesting.
4.2.3 Cash Payments. If the Participant has been paid or received cash
(including any dividends) in connection with the Restricted Stock Award,
the Award Agreement will specify whether and to what extent such cash will
be returned (with or without an earnings factor) as to any restricted
shares that cease to be eligible for vesting.
4.3 Return to the Corporation. Unless the Committee otherwise expressly
provides, Restricted Shares that remain subject to restrictions at the time of
termination of employment or are subject to other conditions to vesting that
have not been satisfied by the time specified in the applicable Award Agreement
will not vest and will be returned to the Corporation in such manner and on such
terms as the Committee provides.
5. Performance Share Awards and Stock Bonuses
5.1 Grants of Performance Share Awards. The Committee may grant Performance
Share Awards to Eligible Persons based upon such factors as the Committee deems
relevant in light of the specific type and terms of the award. An Award
Agreement will specify the maximum number of shares of Common Stock (if any)
subject to the Performance Share Award, the consideration (but not less than the
minimum lawful consideration) to be paid for any such shares as may be issuable
to the Participant, the duration of the Award and the conditions upon which
delivery of any shares or cash to the Participant will be based. The amount of
cash or shares or other property that may be deliverable pursuant to such Award
will be based upon the degree of attainment over a specified period of not more
than 10 years (a "Performance Cycle") as may be established by the Committee of
such measure(s) of the performance of the Company (or any part thereof) or the
Participant as may be established by the Committee. The Committee may provide
for full or partial credit, prior to completion of such performance cycle or the
attainment of the performance achievement specified in the Award, in the event
of the Participant's death, Retirement, or Total Disability, a Change in Control
Event or in such other circumstances as the Committee (consistent with Section
6.10.3(b), if applicable) may determine.
5.2 Special Performance-Based Share Awards. Without limiting the generality
of the foregoing, and in addition to Performance Share Awards granted under
other provisions of this Section 5, other performance-based awards within the
meaning of Section 162(m) of the Code ("Performance-Based Awards"), whether in
the form of restricted stock, performance stock, phantom stock or other rights,
the vesting of which depends on the performance of the Company on a
consolidated, segment, subsidiary or division basis with reference to revenues,
net earnings (before or after taxes or before or after taxes, interest,
depreciation, and/or amortization), cash flow, return on equity or on assets or
on net investment, or cost containment or reduction, or any combination thereof
(the business criteria) relative to preestablished performance goals, may be
granted under this Plan. The applicable business criteria and the specific
performance goals must be approved by the Committee in advance of applicable
deadlines under the Code and while the performance relating to such goals
remains substantially uncertain. The applicable performance measurement period
may be not less than one nor more than 10 years. Performance targets may be
adjusted to mitigate the unbudgeted impact of material, unusual or nonrecurring
gains and losses, accounting changes or other extraordinary events not foreseen
at the time the targets were set. Other types of performance and non-performance
awards may also be granted under the other provisions of this Plan.
5.2.1 Eligible Class. The eligible class of persons for Awards under
this Section is executive officers of the Corporation.
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5.2.2 Maximum Award. In no event will grants in any calendar year to a
Participant under this Section 5.2 relate to shares with a value in excess
of $1 million or a cash amount of more than $1 million.
5.2.3 Committee Certification. Before any Performance-Based Award
under this Section 5.2 is paid, the Committee must certify that the
material terms of the Performance-Based Award were satisfied.
5.2.4 Terms and Conditions of Awards. The Committee will have
discretion to determine the restrictions or other limitations of the
individual Awards under this Section 5.2 (including the authority to reduce
Awards, payouts or vesting or to pay no Awards, in its sole discretion, if
the Committee preserves such authority at the time of grant by language to
this effect in its authorizing resolutions or otherwise).
5.2.5 Stock Payout Features. In lieu of cash payment of an Award, the
Committee may require or allow a portion of the Award to be paid in the
form of stock, Restricted Shares or an Option.
5.3 Grants of Stock Bonuses. The Committee may grant a Stock Bonus to any
Eligible Person to reward exceptional or special services, contributions or
achievements in the manner and on such terms and conditions (including any
restrictions on such shares) as determined from time to time by the Committee.
The number of shares so awarded will be determined by the Committee. The Award
may be granted independently or in lieu of a cash bonus.
5.4 Deferred Payments. The Committee may authorize for the benefit of any
Eligible Person the deferral of any payment of cash or shares that may become
due or of cash otherwise payable under this Plan, and provide for accredited
benefits thereon based upon such deferment, at the election or at the request of
such Participant, subject to the other terms of this Plan. Such deferral will be
subject to such further conditions, restrictions or requirements as the
Committee may impose, subject to any then vested rights of Participants.
5.5 Cash Bonus Awards.
5.5.1 Performance Goals. The Committee may establish a program of
annual incentive awards that are payable in cash to Eligible Persons based
upon the extent to which performance goals are met during the performance
period. The performance goals may depend upon the performance of the
Company on a consolidated, subsidiary division basis with reference to
revenues, net earnings (before or after interest, taxes, depreciation, or
amortization), cash flow, return on equity or on assets or net investment,
cost containment or reduction, or achievement of strategic goals (or any
combination of such factors). In addition, the award may depend upon the
Eligible Employee's individual performance.
5.5.2 Maximum Annual Amount. In no event may awards payable for any
year to any Eligible Employee exceed $1 million.
5.5.3 Payment in Restricted Stock. In lieu of cash payment of the
awards, the Committee may require or allow a portion of the award to be
paid in the form of a Restricted Stock Award.
6. Other Provisions
6.1 Rights of Eligible Persons, Participants and Beneficiaries.
6.1.1 Employment Status. Status as an Eligible Person will not be
construed as a commitment that any Award will be made under this Plan to an
Eligible Person or to Eligible Persons generally.
6.1.2 No Employment Contract. Nothing contained in this Plan (or in
any other documents related to this Plan or to any Award) will confer upon
any Eligible Person or other Participant any right to continue in the
employ or other service of the Company or constitute any contract or
agreement of employment or other service, nor will interfere in any way
with the right of the Company to otherwise change such person's
compensation or other benefits or to terminate the employment of such
person, with or without cause, but nothing contained in this Plan or any
related document will adversely affect any independent contractual right of
such person without the Participant's consent.
6.1.3 Plan Not Funded. Awards payable under this Plan will be payable
in shares or from the general assets of the Corporation, and (except as
provided in Section 1.4.3) no special or separate reserve, fund or
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deposit will be made to assure payment of such Awards. No Participant,
Beneficiary or other person will have any right, title or interest in any
fund or in any specific asset (including shares of Common Stock, except as
expressly otherwise provided) of the Company by reason of any Award
hereunder. Neither the provisions of this Plan (or of any related
documents), nor the creation or adoption of this Plan, nor any action taken
pursuant to the provisions of this Plan will create, or be construed to
create, a trust of any kind or a fiduciary relationship between the Company
and any Participant, Beneficiary or other person. To the extent that a
Participant, Beneficiary or other person acquires a right to receive
payment pursuant to any Award hereunder, such right will be no greater than
the right of any unsecured general creditor of the Company.
6.2 Adjustments; Acceleration.
6.2.1 Adjustments. The following provisions will apply if any
extraordinary dividend or other extraordinary distribution occurs in
respect of the Common Stock (whether in the form of cash, Common Stock,
other securities, or other property), or any reclassification,
recapitalization, stock split (including a stock split in the form of a
stock dividend), reverse stock split, reorganization, merger, combination,
consolidation, split-up, spin-off, combination, repurchase, or exchange of
Common Stock or other securities of the Corporation, or any similar,
unusual or extraordinary corporate transaction (or event in respect of the
Common Stock) or a sale of substantially all the assets of the Corporation
as an entirety occurs. The Committee will, in such manner and to such
extent (if any) as it deems appropriate and equitable
(a) proportionately adjust any or all of (i) the number and type of
shares of Common Stock (or other securities) that thereafter may be made
the subject of Awards (including the specific maximums and numbers of
shares set forth elsewhere in this Plan), (ii) the number, amount and
type of shares of Common Stock (or other securities or property) subject
to any or all outstanding Awards,(iii) the grant, purchase, or exercise
price of any or all outstanding Awards, (iv) the securities, cash or
other property deliverable upon exercise of any outstanding Awards, or
(v) the performance standards appropriate to any outstanding Awards, or
(b) in the case of an extraordinary dividend or other distribution,
recapitalization, reclassification, merger, reorganization,
consolidation, combination, sale of assets, split up, exchange, or spin
off, make provision for a cash payment or for the substitution or
exchange of any or all outstanding Awards or the cash, securities or
property deliverable to the holder of any or all outstanding Awards
based upon the distribution or consideration payable to holders of the
Common Stock of the Corporation upon or in respect of such event. In
each case, with respect to Awards of Incentive Stock Options, no such
adjustment will be made that would cause the Plan to violate Section
424(a) of the Code or any successor provisions without the written
consent of holders materially adversely affected thereby. In any of such
events, the Committee may take such action sufficiently prior to such
event if necessary to permit the Participant to realize the benefits
intended to be conveyed with respect to the underlying shares in the
same manner as is available to stockholders generally.
6.2.2 Acceleration of Awards Upon Change in Control. Unless prior to a
Change in Control Event the Committee determines that, upon its occurrence,
benefits under Awards will not accelerate or determines that only certain
or limited benefits under Awards will be accelerated and the extent to
which they will be accelerated, and/or establishes a different time in
respect of such Event for such acceleration, then upon the occurrence of a
Change in Control Event
(a) each Option and Stock Appreciation Right will become
immediately exercisable,
(b) Restricted Stock will immediately vest free of restrictions,
and
(c) the full amount of each Performance Share Award will become
payable to the Participant. The Committee may override the limitations
on acceleration in this Section 6.2.2 by express provision in the Award
Agreement and may accord any Eligible Person a right to refuse any
acceleration, whether pursuant to the Award Agreement or otherwise, in
such circumstances as the Committee may approve. Any acceleration of
Awards will comply with applicable legal requirements.
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6.2.3 Possible Early Termination of Accelerated Awards. If any Option
or other right to acquire Common Stock under this Plan (other than under
Section 8) has been fully accelerated as permitted by Section 6.2.2 but is
not exercised prior to (a) a dissolution of the Corporation, or (b) an
event described in Section 6.2.1 that the Corporation does not survive, or
(c) the consummation of an event described in Section 6.1 that results in a
Change of Control approved by the Board, such Option or right will
terminate, subject to any provision that has been expressly made by the
Committee for the survival, substitution, exchange or other settlement of
such Option or right.
6.2.4 Golden Parachute Limitations. Unless otherwise specified in an
Award Agreement, no Award may be accelerated under this Plan to an extent
or in a manner that would not be fully deductible by the Company for
federal income tax purposes because of Section 280G of the Code, nor will
any payment hereunder be accelerated if any portion of such accelerated
payment would not be deductible by the Company because of Section 280G of
the Code. If a holder would be entitled to benefits or payments hereunder
and under any other plan or program that would constitute "parachute
payments" as defined in Section 280G of the Code, then the holder may by
written notice to the Company designate the order in which such parachute
payments will be reduced or modified so that the Company is not denied
federal income tax deductions for any "parachute payments" because of
Section 280G of the Code.
6.3 Effect of Termination of Employment. The Committee will establish in
respect of each Award granted to an Eligible Person the effect of a termination
of employment on the rights and benefits thereunder and in so doing may make
distinctions based upon the cause of termination.
6.4 Compliance with Laws. This Plan, the granting and vesting of Awards
under this Plan and the offer, issuance and delivery of shares of Common Stock
and/or the payment of money under this Plan or under Awards granted hereunder
are subject to compliance with all applicable federal and state laws, rules and
regulations (including but not limited to state and federal securities law,
federal margin requirements) and to such approvals by any listing, regulatory or
governmental authority as may, in the opinion of counsel for the Corporation, be
necessary or advisable in connection therewith. Any securities delivered under
this Plan will be subject to such restrictions, and to any restrictions the
Committee may require to preserve a pooling of interests under generally
accepted accounting principles, and the person acquiring such securities will,
if requested by the Corporation, provide such assurances and representations to
the Corporation as the Corporation may deem necessary or desirable to assure
compliance with all applicable legal requirements.
6.5 Tax Withholding.
6.5.1 Mandatory Tax Withholding Offset. Subject only to Section 6.4,
the number of shares or the payment of cash issuable or payable in respect
of an Award, will be reduced by the amount necessary to satisfy the minimum
applicable tax withholding requirements imposed on the Company or any
subsidiary in respect of such Award or event. The participant will have no
discretion as to whether such shares or amount will or will not be withheld
and offset by the Company. Such withholding offset will be mandatory and
nondiscretionary.
6.5.2 Tax Loans. If so provided in the Award Agreement, the Company
may, to the extent permitted by law, authorize a loan to an Eligible Person
in the amount of any taxes that the Company may be required to withhold
with respect to shares of Common Stock received (or disposed of, as the
case may be) pursuant to a transaction described in Section 6.5.1. Such a
loan will be for a term, at a rate of interest and pursuant to such other
terms and conditions as the Company, under applicable law may establish.
6.6 Plan Amendment, Termination and Suspension.
6.6.1 Board Authorization. The Board may, at any time, terminate or,
from time to time, amend, modify or suspend this Plan, in whole or in part.
No Awards may be granted during any suspension of this Plan or after
termination of this Plan, but the Committee will retain jurisdiction as to
Awards then outstanding in accordance with the terms of this Plan.
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6.6.2 Stockholder Approval. To the extent then required under Sections
422 and 424 of the Code, Section 505 of the New York Business Corporation
Law, or any other applicable law, or deemed necessary or advisable by the
Board, any amendment to this Plan shall be subject to shareholder approval.
6.6.3 Amendments to Awards. Without limiting any other express
authority of the Committee under but subject to the express limits of this
Plan, the Committee by agreement or resolution may waive conditions of or
limitations on Awards to Eligible Persons that the Committee in the prior
exercise of its discretion has imposed, without the consent of a
Participant, and may make other changes to the terms and conditions of
Awards that do not affect in any manner materially adverse to the
Participant, the Participant's rights and benefits under an Award. In no
event shall the foregoing result in, without the prior approval of the
Corporation's shareholders, the repricing of options through the
cancellation or regrant or otherwise lowering of the exercise price of an
outstanding Award.
6.6.4 Limitations on Amendments to Plan and Awards. No amendment,
suspension or termination of this Plan or change of or affecting any
outstanding Award will, without written consent of the Participant, affect
in any manner materially adverse to the Participant any rights or benefits
of the Participant or obligations of the Corporation under any Award
granted under this Plan prior to the effective date of such change. Changes
contemplated by Section 6.2 will not be deemed to constitute changes or
amendments for purposes of this Section 6.6.
6.7 Privileges of Stock Ownership. Except as otherwise expressly authorized
by the Committee or this Plan, a Participant will not be entitled to any
privilege of stock ownership as to any shares of Common Stock not actually
delivered to and held of record by the Participant. No adjustment will be made
for dividends or other rights as a stockholder for which a record date is prior
to such date of delivery.
6.8 Effective Date of the Plan. This Plan will be effective as of the date
it is approved by the Board, subject to stockholder approval of the shareholders
of the Corporation.
6.9 Term of the Plan. No Award will be granted under this Plan after more
than ten years after the effective date of this Plan (the "Termination Date").
Unless otherwise expressly provided in this Plan or in an applicable Award
Agreement, any Award granted prior to the termination date may extend beyond
such date, and all authority of the Committee with respect to Awards hereunder,
including the authority to amend an Award, will continue during any suspension
of this Plan and in respect of Awards outstanding on the termination date.
6.10 Governing Law/Construction/Severability.
6.10.1 Choice of Law. This Plan, the Awards, all documents evidencing
Awards and all other related documents will be governed by, and construed
in accordance with the laws of the state of New York.
6.10.2 Severability. If a court of competent jurisdiction holds any
provision invalid and unenforceable, the remaining provisions of this Plan
will continue in effect.
6.10.3 Plan Construction.
(a) Rule 16b-3. It is the intent of the Corporation that the Awards
hereunder satisfy and be interpreted in a manner that, in the case of
Participants who are or may be subject to Section 16 of the Exchange
Act, satisfies the applicable requirements of Rule 16b-3 so that such
persons (unless they otherwise agree) will be entitled to the benefits
of Rule 16b-3 or other exemptive rules under Section 16 of the Exchange
Act in respect of those transactions and will not be subjected to
avoidable liability thereunder. If any provision of this Plan or of any
Award would otherwise frustrate or conflict with the intent expressed
above, that provision to the extent possible will be interpreted as to
avoid such conflict. If the conflict remains irreconcilable, the
Committee may disregard the provision if it concludes that to do so
furthers the interest of the Corporation and is consistent with the
purposes of this Plan as to such persons in the circumstances.
(b) Section 162(m). It is the further intent of the Company that
Options or SARs with an exercise or base price not less than Fair Market
Value on the date of grant and performance awards under Section 5.2 of
this Plan that are granted to or held by a person subject to Section
162(m) of the Code
A-15
<PAGE> 38
will qualify as performance-based compensation under Section 162(m) of
the Code, and this Plan will be interpreted consistent with such intent.
6.11 Captions. Captions and headings are given to the sections and
subsections of this Plan solely as a convenience to facilitate reference. Such
headings will not be deemed in any way material or relevant to the construction
or interpretation of this Plan or any provision thereof.
6.12 Effect of Change of Subsidiary Status. For purposes of this Plan and
any award hereunder, if an entity ceases to be a subsidiary a termination of
employment and service will be deemed to have occurred with respect to each
eligible person in respect of such subsidiary who does not continue as an
eligible person in respect of another entity within the company.
6.13 Non-Exclusivity of Plan. Nothing in this Plan will limit or be deemed
to limit the authority of the Board or the Committee to grant awards or
authorize any other compensation, with or without reference to the Common Stock,
under any other plan or authority.
A-16
<PAGE> 39
sku# 0554-PS-00
<PAGE> 40
PROXY
COMPUTER TASK GROUP, INCORPORATED
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Randolph A. Marks and R. Keith Elliott 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 26,
2000 at 10:00 a.m. or at any adjournment thereof.
THE 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 AND 2 AND IN ACCORDANCE WITH THE JUDGEMENT OF THE
PROXIES ON ANY OTHER MATTERS THAT MAY PROPERLY COME BEFORE THE MEETING.
- ------------- -------------
SEE REVERSE MARK, SIGN AND DATE ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ------------- -------------
<PAGE> 41
<TABLE>
<CAPTION>
<S> <C>
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
1. Election of Directors
CLASS II NOMINEES: (01) George B. Beitzel and
(02) Richard L. Crandall 2. To approve and ratify the adoption by FOR AGAINST ABSTAIN
the Board of Directors of the [ ] [ ] [ ]
CLASS III NOMINEES: (03) Gale S. Fitzgerald and Computer Task Group, Incorporated
(04) Barbara Z. Shattuck Equity Award Plan, and to authorize
for issuance 2,000,000 shares of the
FOR WITHHELD Company's Common Stock to be
ALL [ ] [ ] FROM ALL used for awards thereunder.
NOMINEES NOMINEES
3. Said proxies are given discretionary authority to vote and act
upon such other matters as may come before the meeting or any
[ ] ______________________________________ adjournment thereof.
For all nominees except as noted above
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
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 reply envelope is enclosed for your convenience.
Signature:______________________ Date:____________________ Signature: ______________________ Date: _____________________
</TABLE>
