<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 12, 1996
REGISTRATION NO. 333- -
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
CIBER, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
DELAWARE 7379 38-2046833
(State or other jurisdiction (Primary Standard Industrial (I.R.S. Employer
of incorporation or Classification Code Number) Identification
organization) Number)
</TABLE>
5251 DTC PARKWAY, SUITE 1400
ENGLEWOOD, COLORADO 80111
(303) 220-0100
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive office)
BOBBY G. STEVENSON, CHIEF EXECUTIVE OFFICER
5251 DTC PARKWAY, SUITE 1400
ENGLEWOOD, COLORADO 80111
(303) 220-0100
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
COPIES TO:
J. JUSTYN SIRKIN, ESQ. MARK A. BERTELSEN, ESQ.
N. ANTHONY JEFFRIES, ESQ. ANN YVONNE WALKER, ESQ.
DAVIS, GRAHAM & STUBBS LLP ROBERT M. TARKOFF, ESQ.
370 SEVENTEENTH STREET, SUITE 4700 WILSON SONSINI GOODRICH & ROSATI
DENVER, COLORADO 80202 PROFESSIONAL CORPORATION
(303) 892-9400 650 PAGE MILL ROAD
PALO ALTO, CALIFORNIA 94304-1050
(415) 493-9300
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
------------------------
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. / /
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
If delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS OF AMOUNT TO OFFERING PRICE AGGREGATE AMOUNT OF
SECURITIES TO BE REGISTERED BE REGISTERED(1) PER SHARE(2) OFFERING PRICE(2) REGISTRATION FEE
<S> <C> <C> <C> <C>
Common Stock, par value $.01 per share........... 2,300,000 shares $35.6875 $82,081,250 $24,873
</TABLE>
(1) Includes up to 300,000 shares that the Underwriters have the option to
purchase from the Company and one of the Selling Stockholders to cover
over-allotments, if any.
(2) The price is estimated solely for the purpose of calculating the
registration fee pursuant to Rule 457(c) promulgated under the Securities
Act of 1933, as amended, and represents the average of the high and low
prices of a share of Common Stock on December 6, 1996 as reported on the
Nasdaq National Market.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED DECEMBER 12, 1996
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES
EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
<PAGE>
PROSPECTUS
2,000,000 SHARES
[LOGO]
COMMON STOCK
------------------
Of the 2,000,000 shares of Common Stock, par value $.01 per share (the
"Common Stock") of CIBER, Inc., a Delaware corporation ("CIBER" or the
"Company"), offered hereby (the "Offering"), 700,000 shares are being sold by
the Company and 1,300,000 shares are being sold by certain stockholders of the
Company (the "Selling Stockholders"). See "Principal and Selling Stockholders."
The Company will not receive any proceeds from the sale of the shares of Common
Stock being sold by the Selling Stockholders.
The Common Stock is traded on the Nasdaq National Market under the symbol
"CIBR." On December 11, 1996, the last reported sale price of the Common Stock
was $36.00 per share. See "Price Range of Common Stock."
------------------------
SEE "RISK FACTORS" COMMENCING ON PAGE 7 OF THIS PROSPECTUS FOR INFORMATION
THAT SHOULD BE CONSIDERED BY PROSPECTIVE INVESTORS.
---------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
<TABLE>
<CAPTION>
PROCEEDS TO
PRICE TO UNDERWRITING PROCEEDS TO SELLING
PUBLIC DISCOUNT(1) COMPANY(2) STOCKHOLDERS(2)
<S> <C> <C> <C> <C>
Per Share.................. $ $ $ $
Total(3)................... $ $ $ $
</TABLE>
(1) The Company and the Selling Stockholders have agreed to indemnify the
several Underwriters against certain liabilities, including liabilities
under the Securities Act of 1933, as amended. See "Underwriting."
(2) Before deducting expenses of the Offering payable by the Company and the
Selling Stockholders estimated at $ - and $ - , respectively.
(3) The Company and one of the Selling Stockholders, on an equal basis, have
granted the several Underwriters an option to purchase up to an additional
300,000 shares of Common Stock, on the same terms as set forth above, solely
to cover over-allotments, if any. If such option is exercised in full, the
total Price to Public, Underwriting Discount, Proceeds to Company and
Proceeds to Selling Stockholders will be $ , $ , $
and $ , respectively. See "Underwriting."
------------------------
The shares of Common Stock are offered by the several Underwriters, subject
to prior sale, when, as and if issued to and accepted by them, subject to
approval of certain legal matters by counsel for the Underwriters and certain
other conditions. The Underwriters reserve the right to withdraw, cancel or
modify such offer and to reject orders in whole or in part. It is expected that
delivery of the shares of Common Stock will be made in New York, New York, on or
about , 1996.
------------------------
MERRILL LYNCH & CO.
HANIFEN, IMHOFF INC.
J.P. MORGAN SECURITIES INC.
---------------
The date of this Prospectus is , 1996
<PAGE>
[PHOTO INSERT]
[The page is divided into three sections. The first section consists of a
graphical depiction of the earth surrounded by various words relating to the
Company's business such as "solutions," "data," "people," "integration" and
similar words. The middle section contains the statement "CIBER, Inc. is a
nationwide provider of information technology consulting, including application
software staff supplementation, management consulting solutions to business
problems, package software implementation, system life-cycle project
responsibility, millenium date change conversion services and networking
procurement and engineering services." The bottom section consists of five logos
representing the various business divisions of CIBER.
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK AT
A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH
STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON
STOCK ON THE NASDAQ NATIONAL MARKET IN ACCORDANCE WITH RULE 10B-6A UNDER THE
SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. SEE "UNDERWRITING."
CIBER-REGISTERED TRADEMARK- AND BIT-REGISTERED TRADEMARK- ARE REGISTERED
SERVICE MARKS OF THE COMPANY. SERVICE MARKS AND TRADEMARKS OF OTHER COMPANIES
ARE ALSO USED IN THIS PROSPECTUS.
2
<PAGE>
PROSPECTUS SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS APPEARING ELSEWHERE IN THIS PROSPECTUS OR
INCORPORATED BY REFERENCE HEREIN. ALL REFERENCES TO A PARTICULAR "FISCAL YEAR"
SHALL REFER TO THE 12 MONTHS ENDED JUNE 30 OF THE YEAR REFERENCED. ALL
CONSOLIDATED FINANCIAL INFORMATION CONTAINED HEREIN HAS BEEN RESTATED TO GIVE
RETROACTIVE EFFECT TO THE SEPTEMBER 1996 MERGER OF SPECTRUM TECHNOLOGY GROUP,
INC. WITH THE COMPANY, WHICH BUSINESS COMBINATION WAS ACCOUNTED FOR AS A POOLING
OF INTERESTS. FOR RECENT BUSINESS COMBINATIONS AND OTHER DEVELOPMENTS, SEE
"RECENT DEVELOPMENTS." AS USED IN THIS PROSPECTUS, THE TERM "ACQUISITION" REFERS
TO BUSINESS COMBINATIONS ACCOUNTED FOR AS A PURCHASE AND THE TERM "MERGER"
REFERS TO BUSINESS COMBINATIONS ACCOUNTED FOR AS A POOLING OF INTERESTS. EXCEPT
WHERE OTHERWISE INDICATED, THE INFORMATION CONTAINED IN THIS PROSPECTUS ASSUMES
THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED. ALL REFERENCES TO
THE "COMPANY" REFER TO CIBER, INC. AND ITS SUBSIDIARIES UNLESS OTHERWISE
INDICATED. INVESTORS SHOULD CAREFULLY CONSIDER THE INFORMATION SET FORTH UNDER
THE HEADING "RISK FACTORS."
THE COMPANY
The Company is a nationwide provider of information technology consulting,
including application software staff supplementation, management consulting
solutions to business problems, package software implementation, system
life-cycle project responsibility, millennium date change conversion services
and networking procurement and engineering services.
The Company's revenues are generated from two services groups, the CIBER
Information Services ("CIS") group and the Strategic Technology Services ("STS")
group. The CIS group provides application software development and maintenance
services and, through the CIBR2000 division, millenium date change solutions.
The STS group provides services through the Company's wholly-owned subsidiaries,
Spectrum Technology Group, Inc. ("Spectrum"), Business Information Technology,
Inc. ("BIT") and CIBER Network Services, Inc. ("CNSI"). Spectrum provides
management consulting solutions to business problems, specifically in the areas
of data warehousing, data modeling and enterprise architecture, as well as
project management and system integration services. BIT specializes in the
implementation and integration of human resource and financial software
application products, primarily for client/server networks. A substantial
portion of BIT's revenues is derived from assisting clients implementing
PeopleSoft software. CNSI serves clients in the areas of local-area and
wide-area networking, including design, procurement, installation, testing and
maintenance.
The Company's strategy is to expand its business by continuing to build
long-term relationships with major clients based on high-quality information
technology services tailored to meet client needs and strategies, as well as by
continuing to evaluate the acquisition of complementary businesses. The
Company's traditional time and material application software programming
services are evolving to include a comprehensive array of management consulting,
system design, development, integration, implementation and project management
services.
The Company markets its services through a direct sales force that targets
large corporations relying on outside firms to satisfy information technology
requirements. The primary focus of the sales and marketing effort is to
cultivate long-term client relationships that result in the ongoing utilization
of the Company's services throughout an enterprise.
The Company currently services its clients through a nationwide network of
39 offices in 21 states, plus two foreign offices. The Company currently employs
approximately 2,800 employees, approximately 2,400 of whom are billable
consultants trained in operating systems, standard and state-of-the-art
programming languages, application software design techniques, process
re-engineering and management resource planning, local-area and wide-area
networking and certain widely-used software packages. These services are
generally provided on-site to large clients with substantial information
technology requirements.
3
<PAGE>
The Company began operations in 1974 to assist companies in need of computer
programming support. In the mid-1980s, the Company initiated a growth strategy
that included expanding its range of computer-related services, developing a
professional sales force and selectively acquiring established companies. Since
fiscal 1992, the Company's revenues have increased from $58.7 million to $172.2
million in fiscal 1996, a compound annual growth rate of 31%. Additionally, pro
forma net income increased from $1.1 million in fiscal 1992 to $8.8 million in
fiscal 1996, a compound annual growth rate of 67%.
The Company's principal executive office is located at 5251 DTC Parkway,
Suite 1400, Englewood, Colorado 80111 and its telephone number at such address
is (303) 220-0100.
THE OFFERING
<TABLE>
<S> <C>
Common Stock Offered:
By the Company(1).......................... 700,000 Shares
By the Selling Stockholders(1)............. 1,300,000 Shares
Total Common Stock Offered(1)................ 2,000,000 Shares
Common Stock Outstanding after the 19,375,016 Shares
Offering(2)................................
Use of Proceeds to the Company............... To fund expansion of the Company, including
the potential acquisition of businesses, and
for general corporate purposes. See "Use of
Proceeds."
Nasdaq National Market Symbol................ "CIBR"
</TABLE>
- ------------------------
(1) Assumes the Underwriters' over-allotment option to purchase up to 300,000
shares of Common Stock from the Company and one of the Selling Stockholders,
on an equal basis, is not exercised. See "Underwriting."
(2) Based on 18,675,016 shares of Common Stock outstanding at December 2, 1996.
Excludes 2,510,365 shares of Common Stock issuable pursuant to outstanding
stock options, 1,486,700 of which are currently exercisable.
RECENT DEVELOPMENTS
Subsequent to September 30, 1996, the Company has completed the three
following business combinations:
TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG"). On November 26, 1996, TMG merged
with a subsidiary of the Company. The business combination will be accounted for
as a pooling of interests. The Company issued 242,176 shares of its Common Stock
and granted options to purchase 163,003 shares of Common Stock (at an aggregate
exercise price of $547,000), in exchange for all of the outstanding common stock
and the cancellation of stock options of TMG. TMG, located in Seattle,
Washington, provides consulting services similar to the Company's CIS division.
The merger with TMG provides the Company with its first office in the northwest
United States.
TECHNICAL SUPPORT GROUP ("TSG"). On November 27, 1996, TSG merged with a
subsidiary of the Company. This business combination will be accounted for as a
pooling of interests. The Company issued 370,373 shares of Common Stock and
assumed all of TSG's liabilities in exchange for all of the assets of TSG. TSG,
located in Chicago, Illinois, provides consulting services similar to the
Company's CIS division. The merger with TSG provides the Company with its first
CIS division office in the Chicago, Illinois metropolitan area.
4
<PAGE>
CIBER NETWORK SERVICES, INC. ("CNSI"). On December 2, 1996, the Company
acquired CNSI for consideration of approximately $3.7 million, consisting of
68,631 shares of Common Stock and approximately $1.2 million in cash. In
addition, the Company assumed net liabilities of approximately $800,000,
resulting in a total purchase price of approximately $4.5 million. Furthermore,
contingent consideration of up to an additional $2.6 million will be paid to the
sellers if CNSI achieves certain performance objectives in each of the 12 month
periods ending October 31, 1997, 1998 and 1999. The acquisition will be
accounted for as a purchase. CNSI was purchased primarily from affiliates of the
Company. CNSI, which has offices in Edison, New Jersey, Denver, Colorado, and
San Francisco, California, provides local-area and wide-area networking
solutions, including design, procurement, installation, testing and maintenance.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Certain Relationships and Related Transactions." See also Note
9 of Notes to Consolidated Financial Statements.
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
The following table sets forth summary consolidated financial data of the
Company that is derived from the Consolidated Financial Statements of the
Company. The data should be read in conjunction with the Consolidated Financial
Statements and related Notes thereto and "Management's Discussion and Analysis
of Financial Condition and Results of Operations" included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------------------------------- --------------------
1992(1) 1993(1) 1994(1) 1995(1) 1996(1) 1995(1) 1996
--------- --------- --------- ---------- ---------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues............................... $ 58,662 $ 70,461 $ 87,933 $ 130,458 $ 172,151 $ 38,258 $ 49,489
Operating income....................... 2,187 2,720 3,889 7,901 13,827 3,167 4,288
Net income............................. 1,112 1,518 2,348 4,465 9,293 1,921 1,634
Pro forma net income(2)................ 1,131 1,466 2,344 4,586 8,760 1,871 2,603
Pro forma income per common and common
equivalent share(2).................. $ 0.08 $ 0.11 $ 0.16 $ 0.27 $ 0.48 $ 0.11 $ 0.14
Weighted average common and common
equivalent shares.................... 13,458 13,574 14,378 16,893 18,305 17,200 19,069
OTHER DATA:
Operating income as a percentage of
revenues............................. 3.7% 3.9% 4.4% 6.1% 8.0% 8.3% 8.7%
Total consultants at end of period..... 631 826 1,191 1,502 1,897 1,579 2,020
</TABLE>
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
-------------------------
ACTUAL AS ADJUSTED(3)
--------- --------------
(IN THOUSANDS)
<S> <C> <C>
BALANCE SHEET DATA:
Working capital...................................................................... $ 40,230 $ 63,707
Total assets......................................................................... 76,909 100,386
Long-term liabilities................................................................ 200 200
Stockholders' equity................................................................. 61,477 84,954
</TABLE>
- ------------------------
(1) Restated to reflect the merger of Spectrum with the Company that was
accounted for as a pooling of interests.
(2) Pro forma net income reflects the exclusion of the one-time income tax
effects related to changes in the tax status of certain merged companies and
imputes tax expense for S corporation operations that were not subject to
income taxes.
(3) Adjusted to reflect the sale of 700,000 shares of Common Stock offered by
the Company at an estimated offering price of $36.00 per share and the
application of the estimated net proceeds therefrom. See "Use of Proceeds"
and "Capitalization."
6
<PAGE>
RISK FACTORS
AN INVESTMENT IN THE COMMON STOCK OFFERED HEREBY INVOLVES A HIGH DEGREE OF
RISK. IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS, THE
FOLLOWING RISK FACTORS SHOULD BE CAREFULLY CONSIDERED IN EVALUATING THE COMPANY
BEFORE PURCHASING SHARES OF COMMON STOCK OFFERED HEREBY.
GROWTH THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION
As an integral part of its business strategy, the Company intends to
continue to expand by acquiring application software consulting businesses in
attractive markets or with desirable client relationships, as well as businesses
with complementary information technology consulting and system integration
activities. The Company continuously evaluates potential business combinations
and aggressively pursues attractive transactions. From June 1994 through
December 1996, the Company completed twelve business combinations. See "Summary
- -- Recent Developments." The success of this strategy depends not only upon the
Company's ability to identify and acquire businesses on a cost-effective basis,
but also upon its ability to integrate acquired operations into its organization
effectively, to retain and motivate key personnel and to retain clients of
acquired businesses. Business combinations involve numerous risks, including the
ability to manage geographically remote offices, the diversion of management's
attention from other business concerns and the risks of entering markets in
which the Company has limited or no direct experience. In addition, acquisitions
may involve the expenditure of significant funds and the incurrence of
significant charges associated with the amortization of goodwill or other
intangible assets or future write-downs of the recorded values of assets
acquired. There can be no assurance that any business combination will result in
long-term benefits to the Company or that management will be able to manage
effectively the resulting business. Additionally, the Company experiences
competition for acquisitions. See "Business -- Recent Developments and --
Business Combinations."
The Company may open new offices in attractive markets with its own
personnel. Many of the Company's branch offices were originally start-up
operations. Not all branch offices, whether start-up or acquired, have been
successful; however, no office has been closed since June 1994. There can be no
assurance that the Company will be able to start-up, identify, acquire, or
integrate what will ultimately be successful branch operations. See "Business --
Offices."
ABILITY TO ATTRACT AND RETAIN QUALIFIED CONSULTANTS
The Company's future success will depend in part on its ability to hire and
provide adequately trained consultants who can fulfill the increasingly
sophisticated needs of its clients. The Company's on-going personnel needs arise
from: (i) increased demand for the Company's services, (ii) turnover, which is
generally high in the industry and (iii) client requests for consultants trained
in the newest software technologies. Few of the Company's employees are bound by
non-compete agreements. Competition for consultants in the information
technology services industry is significant and the Company has had and expects
to continue to have difficulty in attracting and retaining an optimal level of
qualified consultants. In particular, competition is intense for the limited
number of qualified project managers and professionals with specialized skills,
such as a working knowledge of certain sophisticated software. There can be no
assurance that the Company will be successful in attracting and retaining the
personnel it requires to continue to grow. See "Business -- Consultant
Recruitment."
DEPENDENCE ON SIGNIFICANT RELATIONSHIPS; ABSENCE OF LONG-TERM CONTRACTS
The Company's five largest clients accounted for 28% of the Company's total
revenues for the fiscal year ended June 30, 1996. AT&T Corp. ("AT&T"), the
Company's largest client, accounted for approximately 12% of the Company's total
revenues in fiscal 1996. The typical client contract term is one to three years
and there can be no assurance that a client will renew its contract when it
terminates. In addition, the Company's contracts are generally cancelable by the
client at any time and clients may unilaterally reduce
7
<PAGE>
their use of the Company's services under such contracts without penalty. The
termination or significant reduction of its business relationship with any of
its significant clients would have a material adverse effect on the Company. See
"Business -- Client Agreements."
Additionally, the Company has a significant relationship with PeopleSoft,
both as a client and as an implementation partner. In fiscal 1996, the Company
derived 15% of its total revenues from clients who purchased implementation
services for their PeopleSoft software and 1% of its total revenues from
PeopleSoft as a client. In the event PeopleSoft products become obsolete or
non-competitive or if the Company should lose its "implementation partner"
status with PeopleSoft, the Company would suffer a material adverse effect. See
"Business -- Clients."
MANAGEMENT OF A LARGE AND RAPIDLY CHANGING BUSINESS
The Company's rapid growth could place a substantial strain on its
operational, administrative and financial resources. The Company's ability to
manage its staff and facilities growth effectively will require it to continue
to improve its operational, financial, and other internal systems, and to train,
motivate and manage its consultants. If the Company's management is unable to
manage growth effectively or its consultants are unable to achieve anticipated
performance levels, or if the integration of new businesses results in a
material diversion of management's attention to the day-to-day operations of the
business, the Company's results of operations would be materially adversely
affected. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business -- Business Combinations."
PROJECT RISKS
The Company has provided and intends to continue to provide increased
project services to its clients. Projects are distinguishable from the Company's
time and material contracts by the level of responsibility assumed by the
Company and the potentially longer and more costly sales cycle of a project.
These factors may cause fluctuations in quarterly results. In a typical project,
the Company independently develops a program or maintains a system, whereas with
time and material contracts, the Company's clients generally maintain
responsibility for the overall task. The failure of a project or the failure of
the Company to provide project services in a satisfactory manner could have a
material adverse effect on the Company. Further, because the Company may
undertake projects on a fixed price basis and guarantee performance based upon
defined operating specifications, cost overruns, unsatisfactory performance or
unanticipated difficulties in completing such projects could have a material
adverse effect on the Company's results of operations. See "Business --
Clients."
PRICING AND MARGIN PRESSURE
Many of the Company's larger clients purchase information technology
services primarily from a limited number of pre-approved vendors. In order to
remain on its clients' vendor lists and to develop new client relationships, the
Company must satisfy client requirements at competitive rates. Although the
Company continually attempts to lower its costs, there are other software
services organizations and temporary placement agencies that provide the same or
similar services at equal or lower costs. Furthermore, as competition
intensifies between information technology services providers, there may be
increased demand for qualified consultants resulting in upward market pressure
on consultant compensation. Additionally, certain of the Company's clients
require that their vendors reduce rates after services have commenced. There can
be no assurance that the Company will be able to compete effectively on pricing
or other requirements and, as a result, the Company could lose clients or be
unable to maintain historic gross margin levels or to operate profitably. With
respect to the Company's implementation services for software packages, the
manufacturers of such software may have training requirements that inhibit the
Company from competing effectively with other packaged software implementation
providers. In addition, as the Company expands its service offerings to include
a greater number of fixed price
8
<PAGE>
projects, the Company may experience a decrease in margins as a result of
unanticipated cost overruns resulting from the inability to meet various project
requirements. See "Business -- Competition."
COMPETITION
The Company operates in a highly competitive and rapidly changing industry
and competes with a variety of companies for positions on the vendor lists of
particular clients. Most of these competing companies, many of which are
significantly larger and have greater financial, technical and marketing
resources, provide the same services as those offered by, and some offer a wider
variety of services than, the Company. Many large accounting and management
consulting firms offer services that overlap with a significant portion of the
Company's services, and the Company competes with the internal information
technology staffs of its clients and potential clients. Also, computer hardware
and software companies are increasingly becoming involved in systems integration
projects. Recently, temporary placement agencies, such as CoreStaff, Olsten and
Interim, have begun expanding their businesses to provide computer-related
services. There can be no assurance that the Company will be able to continue to
compete successfully with its existing competitors or will be able to compete
successfully with new competitors. Additionally, over the past several years
there has been an influx of foreign nationals who provide skilled computer
programming services at lower pay scales than other domestic programmers. Some
of these foreign nationals are being hired as consultants directly by the
Company's clients and potential clients, as well as by certain of the Company's
competitors. Moreover, in an attempt to decrease costs, some of the Company's
clients and potential clients are outsourcing their business to competitors in
foreign countries, including Ireland, India and the former Soviet Union. An
increase in the use of skilled foreign national labor at lower rates or foreign
software service firms by the Company's competitors or clients could have a
material adverse effect on the Company. See "Business -- Competition."
DEPENDENCE UPON KEY MANAGEMENT PERSONNEL
The success of the Company continues to be highly dependent upon the efforts
of key management personnel of the Company, particularly its executive officers.
The loss of the services of any one of its executive officers could have a
material adverse effect on the Company. The Company maintains life insurance on
each of these individuals. The amount of insurance, however, may not be
sufficient to offset the Company's loss if the services of any of its executive
officers were unavailable.
INTELLECTUAL PROPERTY RIGHTS
The Company's success is dependent in part upon its proprietary software
development methodology and other intellectual property rights. The Company
relies upon a combination of trade secret, nondisclosure and other contractual
arrangements, technical measures and trademark laws to protect its proprietary
rights. The Company does not hold any patents or copyrights, but does hold four
registered trademarks. The Company generally enters into confidentiality
agreements with its employees, consultants, clients and potential clients that
limit access to and distribution of its proprietary information, although there
can be no assurance that any such agreement will be enforceable. There can be no
assurance that the steps taken by the Company in this regard will be adequate to
deter misappropriation of its proprietary information or that the Company will
be able to detect unauthorized use and take appropriate steps to enforce its
intellectual property rights. The Company's business includes the development of
custom software applications in connection with specific client engagements.
Ownership of such software is generally assigned to the client. In addition, the
Company also develops object-oriented software components that can be reused in
software application development and certain foundation and application software
products, or software "tools," most of which remain the property of the Company.
Although the Company believes that its services and products do not infringe on
the intellectual property rights of others, there can be no assurance that such
a claim will not be asserted against the Company in the future.
9
<PAGE>
BENEFITS OF THE OFFERING TO MANAGEMENT
The completion of the Offering made by this Prospectus will benefit certain
members of the Company's management directly through the sale of an aggregate of
1,144,077 shares (representing approximately 16% of the shares beneficially
owned by all executive officers and directors as a group) at a large gain, as
follows: Bobby G. Stevenson, Chief Executive Officer, 973,077 shares and John B.
Maitland, Jr., Vice President, 171,000 shares. Based on an estimated public
offering price of $36.00 per share, the shares being sold by management have an
aggregate market value of approximately $41.2 million.
CONTROL BY CURRENT STOCKHOLDERS AND RELATED PARTY TRANSACTIONS
Upon completion of the Offering, Bobby G. Stevenson, the Company's Chairman
and Chief Executive Officer will own beneficially 5,704,311 shares of Common
Stock, representing 29% of the outstanding Common Stock (5,554,311 shares, or
28%, if the Underwriters' over-allotment option is exercised in full). As a
result, Mr. Stevenson is able to exercise significant influence on the election
of the Company's Board of Directors and thereby direct the policies of the
Company. See "Principal and Selling Stockholders." In addition, certain officers
of the Company owned, directly or indirectly, a majority (85%) of the capital
stock of CNSI. CNSI was purchased by the Company on December 2, 1996 for
consideration of approximately $3.7 million, consisting of 68,631 shares of
Common Stock and approximately $1.2 million in cash. In addition, the Company
assumed approximately $800,000 in net liabilities, resulting in a total purchase
price of approximately $4.5 million. At closing, the Company repaid
approximately $898,000 that was owed by CNSI to Mr. Stevenson and his family.
Collectively, the officers received, directly or indirectly, 54,498 shares of
Common Stock, approximately $1.2 million in cash and the repayment of debt of
approximately $898,000. See "Summary -- Recent Developments," "Certain
Relationships and Related Transactions" and Note 9 of Notes to Consolidated
Financial Statements.
CERTAIN ANTI-TAKEOVER EFFECTS
The Company's Amended and Restated Certificate of Incorporation (the
"Certificate of Incorporation") and Bylaws and the Delaware General Corporation
Law include provisions that may be deemed to have anti-takeover effects and may
delay, defer or prevent a takeover that stockholders might consider in their
best interests. These provisions include the ability of the Board of Directors,
without stockholder approval, to have the Company issue up to 5,000,000 shares
of preferred stock in one or more series with such rights, obligations and
preferences as the Board of Directors may provide, a provision under which only
certain officers and the Board of Directors may call meetings of stockholders
and certain advance notice procedures for nominating candidates for election to
the Board of Directors. Directors of the Company are divided into three classes
and are elected to serve staggered three-year terms. Directors can be removed
from office only for cause.
PRICE VOLATILITY
The market price of the Common Stock could be subject to significant
fluctuations in response to variations in quarterly operating results, changes
in earnings estimates by securities analysts and other factors. In addition, the
securities markets have experienced significant price and volume fluctuations
from time to time in recent years that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Common Stock.
See "Price Range of Common Stock."
SHARES ELIGIBLE FOR FUTURE SALE
Sales of a substantial number of shares of Common Stock after this Offering,
or the perception that such sales could occur, could adversely affect the market
price of the Common Stock and could impair the Company's ability to raise
capital through the sale of its equity securities. Upon completion of this
10
<PAGE>
Offering, the Company will have approximately 19.4 million shares outstanding
(approximately 19.5 million shares if the Underwriters' over-allotment option is
exercised in full). Of these shares, the 2,000,000 shares offered hereby
(2,300,000 shares if the Underwriters' over-allotment option is exercised in
full), together with approximately 9.9 million shares currently traded in the
public market and not subject to contractual restrictions, are freely tradeable
without restriction. The remaining 7.5 million shares are subject to securities
law or contractual restrictions on sale (the "Restricted Shares"). A number of
such Restricted Shares were issued in recent mergers consummated after September
30, 1996. An aggregate of 427,578 Restricted Shares held by affiliates of the
combined companies in such mergers will become available for sale in the public
market without significant restrictions upon public release by the Company of
certain results of operations financial information for the quarter ending
December 31, 1996, which release is expected to occur on or about January 15,
1997. Beginning 90 days after the date of this Prospectus, approximately 5.9
million Restricted Shares will become eligible for sale in the public market
(subject to certain volume limitations imposed by Rule 144 of the Securities Act
of 1933, as amended (the "Securities Act")) upon the expiration of lock-up
agreements entered into by all executive officers and directors of the Company
in connection with this Offering.
In addition, the Company has agreed that, under certain circumstances
(including expiration of the 90-day lock-up period), it will register for resale
under the Securities Act up to a total of approximately 547,567 shares of Common
Stock previously issued in conjunction with certain acquisitions. Exercise of
such registration rights could involve a substantial expense to the Company and
may be a hindrance to future equity financings by the Company.
NO CASH DIVIDENDS
The Company anticipates that, for the foreseeable future, all earnings, if
any, will be retained for the operation and expansion of its business and that
it will not pay cash dividends. See "Dividend Policy."
------------------------
CERTAIN STATEMENTS CONTAINED IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS," SUCH AS STATEMENTS CONCERNING
RECENT OR FUTURE ACQUISITIONS, CIBR2000, CONTINUED ACCEPTANCE AND GROWTH OF
PEOPLESOFT SOFTWARE AND DEPENDENCE ON SIGNIFICANT CLIENTS, CERTAIN STATEMENTS
CONTAINED IN "BUSINESS," SUCH AS STATEMENTS CONCERNING THE COMPANY'S BUSINESS
STRATEGY AND INDUSTRY BACKGROUND, AND OTHER STATEMENTS CONTAINED HEREIN
REGARDING MATTERS THAT ARE NOT HISTORICAL FACTS OR STATEMENTS OF CURRENT STATUS
ARE FORWARD-LOOKING STATEMENTS (AS SUCH TERM IS DEFINED IN THE SECURITIES ACT);
AND BECAUSE SUCH STATEMENTS INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, ACTUAL
RESULTS MAY DIFFER MATERIALLY FROM THOSE EXPRESSED OR IMPLIED BY SUCH
FORWARD-LOOKING STATEMENTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED ABOVE.
11
<PAGE>
PRICE RANGE OF COMMON STOCK
The Common Stock is quoted and traded on the Nasdaq National Market under
the symbol "CIBR." The table below sets forth the high and low intra-day prices
per share of the Common Stock on the Nasdaq National Market for the periods
indicated.
<TABLE>
<CAPTION>
HIGH LOW
-------- --------
<S> <C> <C>
1995
First Quarter..................................... $ 4 9/16 $ 4 1/16
Second Quarter.................................... 5 9/16 4
Third Quarter..................................... 8 3/8 4 9/16
Fourth Quarter.................................... 9 6 1/4
1996
First Quarter..................................... 12 1/2 8 3/8
Second Quarter.................................... 17 1/8 9
Third Quarter..................................... 16 7/8 9 5/8
Fourth Quarter.................................... 25 14 7/8
1997
First Quarter..................................... 39 13 1/4
Second Quarter (through December 11, 1996)........ 41 3/4 31 1/2
</TABLE>
The last reported sale price of the Common Stock on the Nasdaq National
Market on December 11, 1996 was $36.00 per share. As of November 30, 1996, the
Company estimates that it had approximately 8,500 beneficial stockholders.
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common
Stock. The Company currently intends to retain future earnings for use in the
operation and expansion of its business and therefore does not anticipate paying
cash dividends in the foreseeable future.
12
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company after deducting the estimated underwriting
discount and estimated offering expenses from the sale of the Common Stock being
offered by the Company are estimated to be $23.5 million ($28.6 million if the
Underwriters' over-allotment option is exercised in full), assuming an offering
price of $36.00 per share. The Company anticipates that the net proceeds of this
Offering will be used primarily for the following purposes: (i) to fund the
expansion of the Company, including the potential acquisition of complementary
businesses that may, depending on acquisition opportunities, utilize all
proceeds, and (ii) to the extent any proceeds remain, for general corporate
purposes. See "Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Liquidity and Capital Resources." The Company does not
currently have any agreements, arrangements or understandings with respect to
the acquisition of any material business. Pending such uses, the Company intends
to invest the net proceeds from this offering in investment grade, short-term,
interest-bearing securities.
The Company will not receive any of the proceeds from the sale of Common
Stock by the Selling Stockholders.
CAPITALIZATION
The table below sets forth the capitalization of the Company as of September
30, 1996 and as adjusted to give effect to the sale of 700,000 shares of Common
Stock offered by the Company at an estimated offering price of $36.00 per share,
net of the estimated underwriting discount and estimated offering expenses, and
the application of the estimated net proceeds therefrom. See "Use of Proceeds."
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS, EXCEPT
SHARE DATA)
<S> <C> <C>
Long-term acquisition costs payable........................................... $ 200 $ 200
Stockholders' equity:
Preferred Stock ($.01 par value per share) 5,000,000 shares authorized; no
shares outstanding........................................................ -- --
Common Stock ($.01 par value per share) 40,000,000 shares authorized;
17,935,000 shares issued and outstanding; 18,635,000 shares issued and
outstanding as adjusted(1)................................................ 179 186
Additional paid-in capital.................................................. 41,102 64,572
Retained earnings........................................................... 20,196 20,196
--------- -----------
Total stockholders' equity................................................ 61,477 84,954
--------- -----------
Total capitalization.................................................... $ 61,677 $ 85,154
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(1) Excludes 2,272,024 shares of Common Stock issuable pursuant to outstanding
stock options at September 30, 1996, 1,340,559 of which were exercisable.
See "Management."
13
<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
The following selected Statement of Operations Data for the fiscal years
ended June 30, 1994, 1995 and 1996 and the selected Balance Sheet Data as of
June 30, 1995 and 1996 has been taken or derived from the audited Consolidated
Financial Statements of the Company, included elsewhere herein. The selected
Statement of Operations Data for the fiscal years ended June 30, 1992 and 1993
and for the three months ended September 30, 1995 and 1996 and the selected
Balance Sheet Data as of June 30, 1992, 1993 and 1994 and as of September 30,
1996 were derived from the unaudited consolidated financial statements of the
Company. In the opinion of management, these unaudited financial statements have
been prepared on the same basis as the audited Consolidated Financial
Statements. All periods presented reflect the merger of Spectrum with the
Company, which business combination has been accounted for as a pooling of
interests. The selected financial data should be read in conjunction with the
Consolidated Financial Statements, including the related Notes thereto, included
elsewhere herein. See also "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business -- Business Combinations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
-------------------------------------------------------------- -----------------------
1992(1) 1993(1) 1994(1) 1995(1) 1996(1) 1995(1) 1996
---------- ---------- ---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AND OTHER DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................ $ 58,662 $ 70,461 $ 87,933 $ 130,458 $ 172,151 $ 38,258 $ 49,489
Salaries, wages and other direct
costs................................. 39,453 48,131 60,200 89,334 118,458 26,000 33,431
Selling, general and administrative
expenses.............................. 16,447 18,961 23,154 30,771 37,188 8,654 10,656
Amortization of intangible assets....... 575 649 690 1,377 1,777 437 517
Merger costs............................ -- -- -- 1,075 901 -- 597
---------- ---------- ---------- ---------- ---------- ---------- ----------
Operating income........................ 2,187 2,720 3,889 7,901 13,827 3,167 4,288
Interest (expense)/income, net.......... (291) (341) (190) (228) 454 (88) 212
---------- ---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes.............. 1,896 2,379 3,699 7,673 14,281 3,079 4,500
Income tax expense...................... 784 861 1,351 3,208 4,988 1,158 2,866
---------- ---------- ---------- ---------- ---------- ---------- ----------
Net income.............................. 1,112 1,518 2,348 4,465 9,293 1,921 1,634
Pro forma tax adjustment(2)............. 19 (52) (4) 121 (533) (50) 969
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pro forma net income(2)................. $ 1,131 $ 1,466 $ 2,344 $ 4,586 $ 8,760 $ 1,871 $ 2,603
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Pro forma income per common and common
equivalent share(2)................... $ 0.08 $ 0.11 $ 0.16 $ 0.27 $ 0.48 $ 0.11 $ 0.14
---------- ---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ---------- ----------
Weighted average common and common
equivalent shares..................... 13,458 13,574 14,378 16,893 18,305 17,200 19,069
OTHER DATA:
Operating income as a percentage of
revenues.............................. 3.7% 3.9% 4.4% 6.1% 8.0% 8.3% 8.7%
Total consultants at end of period...... 631 826 1,191 1,502 1,897 1,579 2,020
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------------------- SEPTEMBER 30,
1992(1) 1993(1) 1994(1) 1995(1) 1996(1) 1996
---------- ---------- ---------- ---------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital.............................. $ 5,090 $ 6,512 $ 9,126 $ 11,009 $ 41,670 $ 40,230
Total assets................................. 15,202 18,213 33,589 44,430 69,722 76,909
Long-term debt, net of current portion....... 2,528 3,000 -- -- -- --
Long-term acquisition costs payable.......... -- -- 400 300 200 200
Stockholders' equity......................... 5,134 6,748 20,528 25,802 58,107 61,477
</TABLE>
- --------------------------
(1) Restated to reflect the merger of Spectrum with the Company that was
accounted for as a pooling of interests.
(2) The pro forma adjustment to income tax expense reflects the exclusion of the
one-time income tax effects related to changes in the tax status of certain
merged companies and imputes tax expense for S corporation operations that
were not subject to income taxes.
14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL
CONDITION SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED
FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS PROSPECTUS.
WITH THE EXCEPTION OF HISTORICAL MATTERS AND STATEMENTS OF CURRENT STATUS,
CERTAIN MATTERS DISCUSSED BELOW ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE
SUBSTANTIAL RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY FROM TARGETS OR PROJECTED RESULTS. FACTORS THAT COULD CAUSE ACTUAL
RESULTS TO DIFFER MATERIALLY INCLUDE, AMONG OTHERS, THOSE FACTORS DESCRIBED IN
"RISK FACTORS." MANY OF THESE FACTORS ARE BEYOND THE COMPANY'S ABILITY TO
PREDICT OR CONTROL. PROSPECTIVE INVESTORS ARE CAUTIONED NOT TO PUT UNDUE
RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH STATEMENTS HAVE BEEN MADE AS OF
THE DATE OF THIS PROSPECTUS, AND PROSPECTIVE INVESTORS SHOULD NOT INFER THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
THAT WOULD WARRANT ANY MODIFICATION OF ANY FORWARD-LOOKING STATEMENT MADE
HEREIN. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE PUBLICLY THESE
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
OVERVIEW
The Company's revenues are generated from two services groups, the CIBER
Information Services group ("CIS") and the Strategic Technology Services group
("STS"). CIS revenues in fiscal 1996 accounted for approximately 75% of the
Company's total revenues, while STS revenues accounted for the remainder. CIS
revenues are derived from the application software development and maintenance
services that are provided from the branch offices of the CIS division and the
Company's work in millennium date change solutions under its "CIBR2000"
division. STS revenues are derived from services provided by Spectrum, BIT and
CNSI. Spectrum provides management consulting level solutions to business
problems, specifically in the areas of data warehousing, modeling and enterprise
architecture. Spectrum also has responsibility for the Company's Microsoft-based
technology consulting now known as Spectrum NT. BIT provides package software
implementation services, primarily for customers of PeopleSoft. CNSI provides a
wide range of local-area and wide-area network solutions, from design and
procurement to installation and maintenance, with services including Internet
and intranet connectivity.
The Company's operating income as a percentage of revenues increased to 8.0%
in fiscal 1996 from 3.7% in fiscal 1992. Excluding merger costs related to
pooling of interests business combinations, fiscal 1996 and 1995 operating
income as a percentage of revenues were 8.6% and 6.9%, respectively. This
improvement in operating margins was due to a substantial reduction in selling,
general and administrative expenses as a percentage of revenues, partially
offset by increased pricing pressures and increases in direct costs.
BUSINESS COMBINATIONS
Over the past several years, the Company has grown significantly through
mergers and acquisitions, as well as through internal growth. Growth from
internal operations (measured in terms of number of employees) has averaged
approximately 22% per year since fiscal 1992 and was 23% in fiscal 1996. The
Company's acquisitions involve the capitalization of intangible assets, which
intangible assets are generally amortized over two to 15 years for financial
reporting purposes and 15 years for tax purposes, provided that the acquisition
is not a tax-free reorganization. In the event of a tax-free reorganization, the
Company may not be able to amortize goodwill for income tax purposes. In
addition, the Company's consolidated financial statements include the results of
operations of each acquired business since the date of acquisition. Mergers
result in a one-time charge in the period in which the transaction is completed
for costs associated with the business combination. In addition, selling,
general and administrative expenses may vary as a percentage of revenues
depending on the fluctuations in the selling, general and administrative
expenses of merged companies, if any, during any given period. The Company's
consolidated financial statements are restated for all periods prior to the
merger to include the results of operations, financial position and cash flows
of the merged company.
15
<PAGE>
Since its initial public offering in March 1994 and through September 30,
1996, the Company has completed the following acquisitions: C.P.U., Inc.
("CPU"), June 1994; Interface Systems, Inc. ("ISI"), January 1995; the Minnesota
Branch of Broadway & Seymour, Inc. (the "Minnesota Branch"), September 1995;
OASYS, Inc. (the "Columbus Branch"), March 1996; and the Business Systems
Developments division of DataFocus ("Spectrum NT"), July 1996. In addition,
during the same period the Company completed the following mergers: Spencer &
Spencer Systems, Inc. ("SSSI"), May 1995; Business Information Technology, Inc.,
June 1995; Practical Business Solutions, Inc. ("PBSI"), May 1996; and Spectrum
Technology Group, Inc., September 1996. Since September 30, 1996, the Company
has completed the three following business combinations:
TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG"). On November 26, 1996, TMG merged
with a subsidiary of the Company. The business combination will be accounted for
as a pooling of interests. The Company issued 242,176 shares of its Common Stock
and granted options to purchase 163,003 shares of Common Stock (at an aggregate
exercise price of approximately $547,000), in exchange for all of the
outstanding common stock and the cancellation of stock options of TMG.
TECHNICAL SUPPORT GROUP, INC. ("TSG"). On November 27, 1996, TSG merged
with a subsidiary of the Company. This business combination will be accounted
for as a pooling of interests. The Company issued 370,373 shares of Common Stock
and assumed TSG's liabilities in exchange for all of the assets of TSG.
CIBER NETWORK SERVICES, INC. ("CNSI"). On December 2, 1996, the Company
acquired CNSI for which it paid consideration of approximately $3.7 million,
consisting of 68,631 shares of Common Stock and approximately $1.2 million in
cash. In addition, the Company assumed approximately $800,000 in net
liabilities, resulting in a total purchase price of approximately $4.5 million.
Approximately $898,000 of liabilities assumed were notes payable by CNSI to
Bobby G. Stevenson and members of his family. This debt was paid in its entirety
at closing. Additionally, contingent consideration of up to an additional $2.6
million will be paid to the sellers if CNSI achieves certain performance
objectives in each of the 12-month periods ending October 31, 1997, 1998 and
1999. The contingent consideration, if earned, will be payable at the sellers'
option in Common Stock, at the then prevailing market price for Common Stock, or
in cash. This acquisition will be accounted for as a purchase. The Company will
record goodwill of approximately $4.5 million, which will be amortized over 15
years. Any contingent consideration paid will be accounted for as additional
goodwill. For income tax purposes this acquisition was a non-taxable
transaction. See "Summary -- Recent Developments," "Business -- Business
Combinations," "Certain Relationships and Related Transactions" and Note 9 of
Notes to Consolidated Financial Statements. The accompanying consolidated
financial information has not been restated to reflect the TMG and the TSG
poolings of interests in November 1996 and also does not reflect the purchase of
CNSI in December 1996.
The following unaudited pro forma information has been prepared assuming
that the TMG and TSG mergers had taken place at the beginning of the respective
periods presented. The pro forma information does not include merger costs of
approximately $550,000 that will be recorded in the three months ending December
31, 1996 as a result of the TMG and TSG mergers. The pro forma information does
not reflect the acquisition of CNSI. Results for the three months ended
September 30, 1996 are not necessarily indicative of results for the year ending
June 30, 1997.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, 1996 SEPTEMBER 30, 1996
------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenues................................................................. $ 187,653 $ 54,030
Pro forma net income..................................................... 9,300 2,727
Pro forma income per common share........................................ .49 .14
</TABLE>
Had the acquisition of CNSI occurred at the beginning of the respective
periods presented, revenues would have been increased by approximately $19.2
million and $5.3 million for the year ended June 30, 1996 and for the three
months ended September 30, 1996, respectively. The effects on pro forma net
income and pro forma income per common share would not have been material.
16
<PAGE>
RESULTS OF OPERATIONS
The following tables set forth, for the periods indicated, certain items
from the Company's consolidated statements of operations, included elsewhere
herein, expressed as a percentage of revenues and percentage change in the
dollar amount of such items compared to the prior year:
<TABLE>
<CAPTION>
PERCENTAGE INCREASE (DECREASE)
---------------------------------
PERCENTAGE OF REVENUES THREE
---------------------------------------------------- MONTHS
THREE MONTHS TO
ENDED THREE
YEAR ENDED JUNE 30, SEPTEMBER 30, YEAR TO YEAR MONTHS
------------------------------ ------------------- --------------------- ---------
1994 1995 1996 1995 1996 1994:1995 1995:1996 1995:1996
-------- -------- -------- -------- -------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues............................ 100.0% 100.0% 100.0% 100.0% 100.0% 48.4% 32.0% 29.4%
Salaries, wages and other direct
costs............................. 68.5 68.4 68.8 68.0 67.6 48.4 32.6 28.6
Selling, general and administrative
expenses.......................... 26.3 23.6 21.6 22.6 21.5 32.9 20.9 23.1
Amortization of intangible assets... .8 1.1 1.1 1.1 1.0 99.6 29.0 18.3
Merger costs........................ -- .8 .5 -- 1.2 -- -- --
-------- -------- -------- -------- --------
Operating income.................... 4.4 6.1 8.0 8.3 8.7 103.2 75.0 35.4
Interest (expense)/income, net...... (.2) (.2) .3 (.3) .4 20.0 -- --
-------- -------- -------- -------- --------
Income before income taxes.......... 4.2 5.9 8.3 8.0 9.1 107.4 86.1 46.2
Income tax expense.................. 1.5 2.5 2.9 3.0 5.8 137.5 55.5 147.5
-------- -------- -------- -------- --------
Net income.......................... 2.7% 3.4% 5.4% 5.0% 3.3% 90.2 108.1 (14.9)
-------- -------- -------- -------- --------
Pro forma net income................ 2.7% 3.5% 5.1% 4.9% 5.3% 95.6 91.0 39.1
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
THREE MONTHS ENDED SEPTEMBER 30, 1996 AS COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1995
The Company's total revenues for the three months ended September 30, 1996
increased 29.4% to $49.5 million from $38.3 million for the three months ended
September 30, 1995. For the three months ended September 30, 1996, CIS revenues
increased 27.7% to $36.4 million from $28.5 million for the three months ended
September 30, 1995 and STS revenues increased 34.2% to $13.1 million from $9.8
million for the three months ended September 30, 1995. CIS revenues accounted
for 73.5% and 74.4% of total revenues for the three months ended September 30,
1996 and 1995, respectively. The increase in the Company's CIS revenues was
derived primarily from increases in hours billed and, to a lesser extent, an
increase in average billing rates. The increase in hours billed was due
primarily to internal growth in branch offices and the inclusion of operations
of the Minnesota Branch and the Columbus Branch for the three months ended
September 30, 1996 versus only one month for the Minnesota Branch for the three
months ended September 30, 1995. These acquired branches accounted for
approximately $1.4 million of additional revenues for the three months ended
September 30, 1996 as compared to 1995. STS revenues have increased primarily
due to increased volume of customers implementing PeopleSoft software, increased
national management consulting level sales, increased project responsibilities
for existing clients and the acquisition of Spectrum NT in July 1996.
Salaries, wages and other direct costs, consisting primarily of consultant
wages, payroll taxes, benefits and related costs, increased 28.6% to $33.4
million (67.6% of revenues) for the three months ended September 30, 1996 from
$26.0 million (68.0% of revenues) for the three months ended September 30, 1995.
Selling, general and administrative expenses increased 23.1% to $10.7
million (21.5% of revenues) for the three months ended September 30, 1996 from
$8.7 million (22.6% of revenues) for the three months ended September 30, 1995.
This decrease as a percentage of revenues was due primarily to the Company's
ability to spread fixed costs over greater revenues.
Amortization of intangible assets, consisting primarily of goodwill, client
lists and non-compete agreements, increased 18.3% to $517,000 for the three
months ended September 30, 1996 from $437,000 for the three months ended
September 30, 1995. This increase was primarily due to the Company's
acquisitions during the first quarter of fiscal 1997 and during fiscal 1996.
17
<PAGE>
Net interest income was $212,000 for the three months ended September 30,
1996 as compared to net interest expense of $88,000 for the three months ended
September 30, 1995. As a result of the Company's sale of Common Stock in
November 1995, the Company reduced its borrowings under its bank line of credit
and significantly increased its investment in interest earning cash equivalent
instruments.
The Company's effective tax rates were 63.7% and 37.6% for the three months
ended September 30, 1996 and 1995, respectively. The increase was primarily due
to a one-time charge of $1.2 million to income tax expense related to Spectrum's
termination of its S corporation status upon its merger with the Company and, to
a lesser extent, nondeductible merger costs, which were partially offset by
Spectrum's nontaxable S corporation income. As a result of these one-time,
merger-related tax effects and merger costs of $597,000, net income decreased to
$1.6 million for the three months ended September 30, 1996 from $1.9 million in
the corresponding period in the prior year.
The Company's pro forma net income increased 39.1% to $2.6 million (5.3% of
revenues) for the three months ended September 30, 1996 from $1.9 million (4.9%
of revenues) for the three months ended September 30, 1995. The pro forma
adjustment to income tax expense reflects the exclusion of the one-time income
tax effects related to changes in the tax status of certain merged companies and
imputes tax expense for S corporation operations that were not subject to income
taxes.
FISCAL YEAR ENDED JUNE 30, 1996 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1995
The Company's total revenues for fiscal 1996 increased 32.0% to $172.2
million from $130.5 million for fiscal 1995. In fiscal 1996, CIS revenues
increased 28.0% to $128.5 million from $100.4 million in fiscal 1995 and STS
revenues increased 45.2% to $43.7 million from $30.1 million in fiscal 1995. CIS
revenues represented 74.6% and 76.9% of total revenues in fiscal 1996 and fiscal
1995, respectively. The increase in the Company's CIS revenues was derived
primarily from increases in hours billed and, to a lesser extent, an increase in
average billing rates. The increase in hours billed was due primarily to
internal growth in branch offices, the inclusion of operations of ISI for 12
months in fiscal 1996 as compared to six months in fiscal 1995, and the
inclusion of operations of the Minnesota Branch for 10 months and the Columbus
Branch for four months in fiscal 1996. These acquisitions accounted for
approximately $6.0 million of additional revenues in fiscal 1996 as compared to
fiscal 1995. STS revenues have increased primarily due to increased volume of
customers implementing PeopleSoft software, increased national sales and
increased project responsibilities for existing clients.
Salaries, wages and other direct costs increased 32.6% to $118.5 million
(68.8% of revenues) in fiscal 1996 from $89.3 million (68.4% of revenues) in
fiscal 1995.
Selling, general and administrative expenses increased 20.9% to $37.2
million (21.6% of revenues) in fiscal 1996 from $30.8 million (23.6% of
revenues) in fiscal 1995. The decrease as a percentage of revenues was due
primarily to greater economies of scale at the administrative level of the
Company in fiscal 1996.
Amortization of intangible assets increased 29.0% to $1.8 million in fiscal
1996 from $1.4 million in fiscal 1995. This increase was due primarily to the
Company's acquisitions of each of ISI in January 1995, the Minnesota Branch in
September 1995 and the Columbus Branch in March 1996.
Merger costs of $901,000 in fiscal 1996 relate to PBSI's merger with the
Company. Merger costs of $1.1 million in fiscal 1995 relate to the mergers of
SSSI and BIT.
Net interest income was $454,000 (0.3% of revenues) in fiscal 1996 as
compared to net interest expense of $228,000 (0.2% of revenues) in fiscal 1995.
As a result of the Company's November 1995 public sale of Common Stock, the
Company reduced its borrowings under its bank line of credit and significantly
increased its investment in interest earning cash equivalent instruments.
The effective tax rates for fiscal 1996 and fiscal 1995 were 34.9% and
41.8%, respectively. The decrease was primarily attributable to a $818,000 tax
benefit resulting from Spectrum's conversion to an S corporation in fiscal 1996
and, to a lesser extent, decreased nondeductible merger costs in fiscal 1996.
Additionally, in fiscal 1996, the Company recognized $2.6 million as a direct
addition to additional paid-in
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<PAGE>
capital and a deduction to income taxes payable from the tax benefits resulting
from the exercise of stock options. Of this amount, $1.6 million reduced income
taxes payable at June 30, 1996 and $1.0 million is included in deferred tax
assets, which will be used to reduce income taxes payable for the year ending
June 30, 1997. In fiscal 1995, the Company recognized $422,000 as a direct
addition to additional paid-in capital for the tax benefit resulting from the
exercise of stock options, which tax benefit correspondingly reduced income
taxes payable.
The Company's net income increased 108.1% to $9.3 million (5.4% of revenues)
in fiscal 1996 from $4.5 million (3.4% of revenues) in fiscal 1995. Prior to
their merger with the Company, Spectrum, PBSI and SSSI were not tax-paying
entities. The pro forma adjustment to income tax expense reflects the inclusion
of income tax expense as if Spectrum, PBSI and SSSI had been tax-paying entities
in each period prior to their merger with the Company. The pro forma adjustment
to income tax expense for the year ended June 30, 1996 reflects the exclusion of
an income tax benefit of $818,000 resulting from Spectrum's conversion to an S
corporation in fiscal 1996. The pro forma adjustment to income tax expense in
fiscal 1996 and 1995 also results in the exclusion of one-time income tax
expenses of $475,000 and $284,000, respectively, resulting from the termination
of the S corporation status of PBSI and SSSI. The pro forma adjustment to income
tax expense decreased pro forma net income to $8.8 million (5.1% of revenues) in
fiscal 1996 while increasing pro forma net income to $4.6 million (3.5% of
revenues) in fiscal 1995. See Notes 1(j) and 7 of Notes to Consolidated
Financial Statements.
FISCAL YEAR ENDED JUNE 30, 1995 AS COMPARED TO FISCAL YEAR ENDED JUNE 30, 1994
The Company's total revenues for fiscal 1995 increased 48.4% to $130.5
million from $87.9 million for fiscal 1994. In fiscal 1995, CIS revenues
increased 48.9% to $100.4 million from $67.4 million in fiscal 1994 and STS
revenues increased 46.5% to $30.1 million from $20.5 million in fiscal 1994. CIS
revenues represented 76.9% and 76.6% of total revenues in fiscal 1995 and fiscal
1994, respectively. The increase in the Company's CIS revenues was derived
primarily from increases in hours billed as average billing rates remained
relatively constant in fiscal 1995. The increase in hours billed was a function
of internal growth in branch offices, the inclusion of operations of CPU for 12
months in fiscal 1995 as compared to one month in fiscal 1994 and the inclusion
of operations of ISI for the last six months of fiscal 1995. These two
acquisitions accounted for approximately $12.8 million of additional revenues in
fiscal 1995 as compared to fiscal 1994.
Salaries, wages and other direct costs increased 48.4% to $89.3 million
(68.4% of revenues) in fiscal 1995 from $60.2 million (68.5% of revenues) in
fiscal 1994.
Selling, general and administrative expenses increased 32.9% to $30.8
million (23.6% of revenues) in fiscal 1995 from $23.2 million (26.3% of
revenues) in fiscal 1994. The decrease as a percentage of revenues was due
primarily to greater efficiencies and economies of scale of the Company's
operations in fiscal 1995.
Amortization of intangible assets increased 99.6% to $1.4 million in fiscal
1995 from $690,000 in fiscal 1994. This increase was due primarily to the
Company's acquisition of CPU in June 1994 and the acquisition of ISI in January
1995.
Merger costs of $1.1 million in fiscal 1995 consist primarily of
professional fees, brokers' fees and severance payments related to the mergers
of SSSI and BIT into the Company. No merger costs were incurred in fiscal 1994.
Net interest expense increased 20.0% to $228,000 (0.2% of revenues) in
fiscal 1995 from $190,000 (0.2% of revenues) in fiscal 1994 due to overall
increased indebtedness, which indebtedness was used primarily to fund
acquisitions.
The effective tax rates for fiscal 1995 and fiscal 1994 were 41.8% and
36.5%, respectively. The increase was primarily attributable to nondeductible
merger costs and the conversion of SSSI to a taxable entity. In fiscal 1995, the
Company recognized $422,000 as a direct addition to additional paid-in capital
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<PAGE>
and a deduction to income taxes payable from the tax benefits resulting from the
exercise of stock options, which correspondingly reduced income taxes payable.
No such benefit was obtained in fiscal 1994.
The Company's net income increased 90.2% to $4.5 million (3.4% of revenues)
in fiscal 1995 from $2.3 million (2.7% of revenues) in fiscal 1994. Prior to
their merger with the Company, PBSI and SSSI were not tax paying entities. The
pro forma adjustment to income tax expense reflects the inclusion of income tax
expense as if PBSI and SSSI had been tax paying entities in each period prior to
their merger with CIBER. The pro forma adjustment to income tax expense in
fiscal 1995 reflects the exclusion of $284,000, representing the one-time income
tax expense that resulted from termination of the S corporation status of SSSI.
The pro forma adjustment to income tax expense increased pro forma net income to
$4.6 million (3.5% of revenues) in fiscal 1995 as compared to $2.3 million (2.7%
of revenues) in fiscal 1994. See Notes 1(j) and 7 of Notes to Consolidated
Financial Statements.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1996, the Company had $40.2 million of working capital, of
which $19.4 million was cash and cash equivalents. The Company has used
operating cash flow, its revolving line of credit and the net proceeds from
sales of Common Stock to finance working capital needs and acquisitions. The
Company believes that its operating cash flow and the availability of credit
under its bank revolving line of credit will be sufficient to finance working
capital needs through at least fiscal 1997.
Net cash provided by operating activities was $5.0 million, $2.2 million,
$636,000 and $2.2 million for the three months ended September 30, 1996 and in
fiscal 1996, 1995 and 1994, respectively. Net income excluding noncash charges
(primarily depreciation, amortization and deferred income taxes) provided cash
of $3.4 million, $10.6 million, $6.6 million and $3.4 million for the three
months ended September 30, 1996 and in fiscal 1996, 1995 and 1994, respectively.
This was partially offset by changes in operating assets and liabilities that
provided cash of $1.6 million during the three months ended September 30, 1996
while using cash of $8.4 million, $6.0 million and $1.2 million in fiscal 1996,
1995 and 1994, respectively. Changes in operating assets and liabilities have
used significant amounts of cash in fiscal 1996 and 1995 primarily because the
Company's accounts receivable increased 32.9% and 45.8%, respectively, as a
result of the Company's 32.0% and 48.4% increase in revenues in fiscal 1996 and
1995, respectively.
Net cash used in investing activities during the three months ended
September 30, 1996 and in fiscal 1996, 1995 and 1994 was $5.4 million, $3.4
million, $5.0 million and $10.1 million, respectively. The Company used $5.0
million of cash during the three months ended September 30, 1996 for the
acquisition of Spectrum NT. Fiscal 1996 investing activities used $1.7 million
for the acquisitions of the Minnesota Branch and the Columbus Branch and used
$1.7 million for purchases of property and equipment, primarily computer-related
office equipment and furniture. The fiscal 1995 and 1994 cash used in investing
activities related principally to the acquisitions of ISI and CPU, respectively.
Net cash provided by financing activities during the three months ended
September 30, 1996 and in fiscal 1996, 1995 and 1994 was $2.8 million, $15.9
million, $4.7 million and $8.3 million, respectively. During the three months
ended September 30, 1996 and in fiscal 1996 and 1994, the Company obtained net
cash proceeds from the sale of Common Stock of $572,000, $20.3 million and $11.0
million, respectively. During the three months ended September 30, 1996, the
Company recognized $1.1 million as a direct increase to additional paid-in
capital from the tax benefits resulting from the exercise of stock options.
This, together with $1.0 million of current tax benefits resulting from the
exercise of stock options which were accounted for as deferred tax assets at
June 30, 1996, reduced the Company's income taxes payable and provided cash of
$2.2 million during the three months ended September 30, 1996. In fiscal 1996
and 1994, the Company used $5.8 million and $2.3 million, respectively, to
reduce its borrowings under bank lines of credit, while in fiscal 1995 the
Company borrowed $4.1 million on the line of credit.
The Company currently has available a $15 million revolving line of credit
with UMB Bank Colorado. The line of credit expires on April 1, 1997 and is
collateralized by substantially all assets of the Company. Borrowings under the
line of credit bear interest at the bank's prime rate (currently 8.25%). The
highest
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amount outstanding under the line of credit in fiscal 1996 was $7.0 million and,
at September 30, 1996, there were no amounts outstanding. The credit agreement
requires that the Company maintain certain tangible net worth and debt service
coverage ratios and imposes limits on the incurrence of additional indebtedness.
Subsequent to September 30, 1996, the Company has used approximately $6.0
million in cash in connection with the TSG, TMG and CNSI business combinations
as consideration and for the payment of certain assumed liabilities. See "--
Business Combinations."
ASSET MANAGEMENT
The Company's accounts receivable have increased 32.9% and 45.8% as a result
of the Company's 32.0% and 48.4% increase in revenues in fiscal 1996 and 1995,
respectively. Clients are generally billed weekly, bi-weekly or monthly for
services. Due to the quality and large size of the Company's clients, bad debt
expenses have averaged less than 0.1% of revenues for the last several years.
During the last three fiscal years, approximately 85% of the Company's
receivables have been collected within 60 days of invoice. Delays in collection
of accounts receivable generally relate to missing time sheets, delayed receipt
of purchase order numbers and payables procedures of the Company's clients. The
Company believes substantially all accounts receivable on its September 30, 1996
balance sheet will be collected, although there can be no assurance that
substantially all accounts receivable will be collected.
SEASONALITY AND QUARTERLY RESULTS
The Company experiences a moderate amount of seasonality. Typically,
operating income as a percentage of revenues is lowest in the last quarter of
each calendar year (the Company's second fiscal quarter), because more holidays
and vacations are taken at that time of year resulting in fewer hours billed in
that period.
The following table sets forth certain statements of operations data for
each of the Company's last nine quarters and, in management's opinion, contains
all adjustments, consisting only of normal recurring adjustments necessary for a
fair presentation thereof. See Note 13 of Notes to Consolidated Financial
Statements for additional quarterly financial information.
<TABLE>
<CAPTION>
FISCAL 1997
FISCAL 1995 -- THREE MONTHS ENDED THREE MONTHS
-------------------------------------- FISCAL 1996 -- THREE MONTHS ENDED ENDED
JUNE ---------------------------------------- -------------
SEPT. 30 DEC. 31 MAR. 31 30(1) SEPT. 30 DEC. 31 MAR. 31 JUNE 30(1) SEPT. 30(1)
-------- -------- -------- -------- -------- -------- -------- ---------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues...................... $28,895 $ 30,371 $34,332 $36,860 $38,258 $ 39,509 $44,626 $ 49,758 $ 49,489
Operating income, excluding
merger costs................ 1,832 1,592 2,487 3,065 3,167 2,921 3,776 4,864 4,885
Operating income as a
percentage of revenues,
excluding merger costs...... 6.3% 5.2% 7.2% 8.3% 8.3% 7.4% 8.5% 9.8% 9.9%
</TABLE>
- ----------------------------------
(1) Operating income for these periods in fiscal 1995, 1996 and 1997 exclude
merger costs of $1,075,000, $901,000 and $597,000, respectively, relating to
business combinations accounted for as poolings of interests.
RECENT ACCOUNTING PRONOUNCEMENTS
During the year ended June 30, 1997, the Company will be required to adopt
Statement of Financial Accounting Standards No. 123 "Accounting for Stock-Based
Compensation" ("SFAS 123"). SFAS 123 establishes financial accounting and
reporting standards for stock-based compensation plans, as well as for
transactions in which an entity issues its equity instruments to acquire goods
or services from non-employees. SFAS 123 permits stock compensation cost to be
measured using either the intrinsic value-based method or the fair value method.
When adopted, the Company intends to continue to use the intrinsic value-based
method and will provide the expanded disclosures required by SFAS 123 in the
notes to financial statements.
21
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BUSINESS
WITH THE EXCEPTION OF HISTORICAL MATTERS, CERTAIN MATTERS DISCUSSED BELOW
ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES THAT COULD
CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM TARGETS OR PROJECTED RESULTS.
FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY INCLUDE, AMONG
OTHERS, DEPENDENCE ON SIGNIFICANT CLIENTS, CONTINUED ACCEPTANCE AND GROWTH OF
PEOPLESOFT SOFTWARE, THE COMPANY'S ABILITY TO ATTRACT AND RETAIN QUALIFIED
CONSULTANTS, PROJECT RISKS, THE COMPANY'S ABILITY TO EFFECTIVELY MANAGE AND
INTEGRATE BUSINESS COMBINATIONS, AND COMPETITION, AS WELL AS OTHER FACTORS
DESCRIBED HEREIN AND IN "RISK FACTORS." MANY OF THESE FACTORS ARE BEYOND THE
COMPANY'S ABILITY TO PREDICT OR CONTROL. PROSPECTIVE INVESTORS ARE CAUTIONED NOT
TO PUT UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS, WHICH HAVE BEEN MADE AS OF
THE DATE OF THIS PROSPECTUS, AND PROSPECTIVE INVESTORS SHOULD NOT INFER THAT
THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF
THAT WOULD WARRANT ANY MODIFICATION OF ANY FORWARD-LOOKING STATEMENT MADE
HEREIN. THE COMPANY DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE PUBLICLY THESE
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
GENERAL
The Company is a nationwide provider of information technology consulting,
including application software staff supplementation, management consulting
solutions to business problems, package software implementation, system
life-cycle project responsibility, millennium date change conversion services
and networking procurement and engineering services.
The Company's revenues are generated from two services groups, the CIBER
Information Services ("CIS") group and the Strategic Technology Services ("STS")
group. The CIS group provides application software development and maintenance
services and, through the CIBR2000 division, millenium date change solutions.
The STS group provides services through Spectrum, BIT and CNSI. Spectrum
provides management consulting solutions to business problems, specifically in
the areas of data warehousing, data modeling and enterprise architecture, as
well as project management and system integration services. BIT specializes in
the implementation and integration of human resource and financial software
application products, primarily for client/server networks. A substantial
portion of BIT's revenues is derived from assisting clients implementing
PeopleSoft software. CNSI serves clients in the areas of local-area and wide-
area networking, including design, procurement, installation, testing and
maintenance.
The Company's strategy is to expand its business by continuing to build
long-term relationships with major clients based on high-quality information
technology services tailored to meet client needs and strategies, as well as by
continuing to evaluate the acquisition of complementary businesses. The
Company's traditional time and material application software programming
services are evolving to include a comprehensive array of management consulting,
system design, development, integration, implementation and project management
services.
The Company markets its services through a direct sales force that targets
large corporations relying on outside firms to satisfy information technology
requirements. The primary focus of the sales and marketing effort is to
cultivate long-term client relationships that result in the ongoing utilization
of the Company's services throughout an enterprise.
The Company currently services its clients through a nationwide network of
39 offices in 21 states, plus two foreign offices. The Company currently employs
approximately 2,800 employees, approximately 2,400 of whom are billable
consultants trained in operating systems, standard and state-of-the-art
programming languages, application software design techniques, process
re-engineering and management resource planning, local-area and wide-area
networking and certain widely-used software packages. These services are
generally provided on-site to large clients with substantial information
technology requirements.
The Company began operations in 1974 to assist companies in need of computer
programming support. In the mid-1980s, the Company initiated a growth strategy
that included expanding its range of
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<PAGE>
computer-related services, developing a professional sales force and selectively
acquiring established complementary companies. Since fiscal 1992, the Company's
revenues have increased from $58.7 million to $172.2 million in fiscal 1996, a
compound annual growth rate of 31%. Over the same period, pro forma net income
increased from $1.1 million in fiscal 1992 to $8.8 million in fiscal 1996, a
compound annual growth rate of 67%.
RECENT DEVELOPMENTS
Subsequent to September 30, 1996, the Company has completed the three
following business combinations:
TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG"). On November 26, 1996, TMG merged
with a subsidiary of the Company. The business combination will be accounted for
as a pooling of interests. The Company issued 242,176 shares of its Common Stock
and granted options to purchase 163,003 shares of Common Stock (at an aggregate
exercise price of $547,000), in exchange for all of the outstanding common stock
and the cancellation of stock options of TMG. TMG, located in Seattle,
Washington, provides consulting services similar to the Company's CIS division.
The merger with TMG provides the Company with its first office in the northwest
United States.
TECHNICAL SUPPORT GROUP ("TSG"). On November 27, 1996, TSG merged with a
subsidiary of the Company. This business combination will be accounted for as a
pooling of interests. The Company issued 370,373 shares of Common Stock and
assumed all of TSG's liabilities in exchange for all of the assets of TSG. TSG,
located in Chicago, Illinois, provides consulting services similar to the
Company's CIS division. The merger with TSG provides the Company with its first
office in the Chicago, Illinois metropolitan area.
CIBER NETWORK SERVICES, INC. ("CNSI"). On December 2, 1996, the Company
acquired CNSI for consideration of approximately $3.7 million, consisting of
68,631 shares of Common Stock and approximately $1.2 million in cash. In
addition, the Company assumed net liabilities of approximately $800,000,
resulting in a total purchase price of approximately $4.5 million. Furthermore,
contingent consideration of up to an additional $2.6 million will be paid to the
sellers if CNSI achieves certain performance objectives in each of the 12 month
periods ending October 31, 1997, 1998 and 1999. If the contingent consideration
is earned, it will be payable, at the sellers' option, in Common Stock (at the
then prevailing market price for Common Stock) or in cash. The acquisition will
be accounted for as a purchase. CNSI was purchased primarily from affiliates of
the Company. CNSI, which has offices in Edison, New Jersey, Denver, Colorado,
and San Francisco, California, provides local-area and wide-area networking
solutions, including design, procurement, installation, testing and maintenance.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operation," "Certain Relationships and Related Transactions" and Note 9 of Notes
to Consolidated Financial Statements.
INDUSTRY BACKGROUND
Computer software is generally categorized as system software or application
software. System software is the software that controls the internal operations
of the hardware (E.G., the input, storage and output of the computer).
Application software performs the specific tasks required by the computer user,
(E.G., an accounts receivable, inventory control or mortgage payment history
program). Regardless of the purpose, computer programs designed to perform tasks
otherwise done manually are referred to as application software. Application
software has become essential to manage most business information for major
companies.
The major technological development in information services in recent years
has been the transition from host-based application software that operated on
mainframes and minicomputers, typically supplied by a single vendor, to
distributed and open computing environments utilizing client/server
architectures. The host-based application software offered centralized data
processing to a small group of users and
23
<PAGE>
helped automate tasks such as financial reporting. In the 1980s, the ease-of-use
and low cost of personal computers, combined with the increased availability of
powerful application software, led to rapid growth in the number of computer
users throughout organizations. Computing environments became increasingly
varied and included personal computers and workstations from different vendors,
as well as traditional minicomputers and mainframes. This decentralized
computing environment requires businesses to seek methods of improving
information processing across varying computer hardware and software
configurations.
In recent years, corporations have relied increasingly on information
technology consulting firms to develop, support and strengthen their management
information systems ("MIS") departments. The reliance of businesses on
information technology consulting firms is due, in part, to rapid technological
change, resulting in information systems that are more complex and that require
specialized technical expertise, as well as a desire by clients to maintain
smaller computer systems staffs. Corporations' MIS departments frequently lack
adequate technical and management capabilities to address the size and
complexity of their application software and its interaction with both the
system software and the other application software being utilized on the same
system. These needs lead corporations to outsource these functions to
information technology consulting firms. Additionally, clients often have
difficulty in attracting and retaining technical and management personnel with
experience in relevant technologies.
The Company believes that a number of factors have caused the demand for
information technology services to grow, including businesses' motivation to
improve productivity, accelerating technological change and the need for
integrated systems. Due to the advantages of flexible staffing, the rapidly
changing nature of programming skill sets and the desire to avoid potential
employee termination costs, the practice of outsourcing to information
technology consulting firms is likely to increase. The information technology
services industry has grown significantly and totaled $19.8 billion in 1995.
This market is forecasted to exceed $37.3 billion in revenues by the year 2000
as reported by The Updata Group, an independent market research firm.
BUSINESS STRATEGY
The Company's strategy is to expand its business by continuing to build
long-term relationships with major clients based on high-quality information
technology services tailored to meet client needs. The Company's traditional
time and material application software programming services have been expanded
to include a comprehensive array of management consulting software system
design, development, integration, implementation and project management
services. The Company's strategy includes the following key elements:
- BUILD STRONG CLIENT RELATIONSHIPS. The Company is committed to providing
quality custom software application and development services that meet the
demands of large companies with substantial data processing operations.
Management believes the Company's emphasis on building long-term relationships
with major clients has been a primary reason for the Company's success. Most of
the Company's largest clients have been significant clients for many years. For
example, the Company's largest and second largest clients, accounting for
approximately 12% and 6%, respectively, of fiscal 1996 revenues, have been
clients for over 17 and 10 years, respectively. The Company focuses significant
resources on continuous qualification as an approved vendor on its clients'
vendor lists and, over the past five years, has regularly qualified as such a
vendor for more than two dozen Fortune 500 companies.
- GROW THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION. The Company
intends to expand by acquiring companies that broaden the Company's array of
consulting services, that have strategic client relationships or that are
located in attractive geographic locations. The Company also intends to expand
the operations of existing offices primarily by providing incremental
information technology services to existing clients. The Company may also start
new branches in attractive markets with its own personnel.
24
<PAGE>
- EXPAND INTEGRATION AND IMPLEMENTATION SERVICES. The Company's concentrated
effort on providing time and material programming services has expanded to
include management level strategic systems solutions, as well as the
implementation of clients' long-term information technology strategies, from
design and development of their information systems, through testing and
implementation, to migration from mainframe to client/server architectures, as
well as package software project implementation. As a result of these efforts,
the Company is taking greater responsibility for projects and providing greater
value-added services to its clients. This expansion of focus, combined with the
Company's stringent controls and high quality processes, methodologies, tools
and templates, will help position the Company as a full-service provider for its
existing and new clients' information technology and application needs.
- FOCUS ON QUALITY SERVICE. The Company seeks to be a leader in providing
quality services and processes to its clients. The Company's corporate and CIS
operations have received ISO 9002 certification, an international standard for
consistency in operating procedures. The Company believes that it is currently
the sole provider of computer-related services with ISO 9002 certification on a
national basis. Many of the Company's clients are expected to require this
certification in the next several years. ISO 9002 certification has enhanced the
Company's ability (i) to achieve preferred supplier status from larger
companies, (ii) to satisfy current and prospective clients who insist on a
documented quality assurance system and (iii) to improve its operations by
facilitating cost controls and other efficiencies on a continuing basis. The CIS
and CIBR2000 divisions have also qualified for ISO 9001 certification, which
certification relates to project development activities. The CIS division has
also achieved Ford Motor Company "Q-1" status.
SERVICES
CIS GROUP
CIBER INFORMATION SERVICES. The CIS division supports the life cycle of
computer systems, from strategy and design to development and implementation
and, finally, to maintenance and support. The Company's technical staff performs
a wide variety of tasks to identify, analyze and solve clients' data processing
and computing problems. Generally, these services are provided on-site to
clients whose personnel do not have the requisite technical skills or to clients
with specific projects requiring additional staffing that do not justify
permanent personnel increases. The scope of the work performed by the Company
ranges from specific, minor tasks of short duration to large, complex tasks that
require a large number of consultants for a year or longer. Examples of larger
tasks include developing new systems and maintaining mature mainframe systems
that cannot be quickly replaced. Typically, the Company's professional staff
augments and becomes part of the clients' software development team on a
specific application or project. A key element of the CIS strategy is to
maintain offices in those geographic locations where the Company has significant
client relationships. Currently, the CIS division operates out of 28 offices in
20 states.
CIBR2000. In April 1996, the CIBR2000 division was launched to provide
millennium date conversion services to assist clients in remedying customized
computer programs that can only calculate time correctly up to December 31,
1999. CIBR2000 reviews and analyzes clients' existing programs, develops
solutions alternatives for the year 2000 date change, and implements conversion
solutions to correct this problem. CIBR2000 solutions include impact assessment,
solution plan development, corrections implementation and validation/testing.
Each CIBR2000 project follows a common methodology that is governed by the
Company's Quality Process which is certified to the ISO 9001 international
standard. Currently, the Company is performing millenium work at its CIBR2000
software facility, as well as at client sites.
STS GROUP
SPECTRUM TECHNOLOGY GROUP, INC. Spectrum focuses its services on executive
management level, strategic systems solutions to business problems, including
data modeling, data warehousing and enterprise
25
<PAGE>
architecture. Spectrum also develops systems on a project basis and is
responsible for the Company's Microsoft technology-based consulting group known
as Spectrum NT. Spectrum assists clients in aligning their technology platforms
with their strategic business objectives. As the marketplace continues to
evolve, the Company intends to assist clients in customizing their technology
platforms, which the Company believes will help grow its integrated application
solutions business.
BUSINESS INFORMATION TECHNOLOGY, INC. BIT assists clients in implementing
package application software on client/server systems. Clients seeking these
services are generally businesses that are migrating from the mainframe to, or
that are developing or implementing, client/server architectures. Approximately
15% of the Company's fiscal 1996 revenues were generated from clients
implementing PeopleSoft software. The Company believes that, as package software
companies such as PeopleSoft continue to enhance the functionality and
performance of their products and such products become more widely used, package
software implementation services will present an increasing opportunity for the
Company.
CIBER NETWORK SERVICES, INC. CNSI provides cross-platform, multi-vendor
computer systems integration, complete network solutions and other related
services to clients with networking needs. CNSI operates from offices in Edison,
New Jersey, Denver, Colorado, and San Francisco, California. Networking services
provided by CNSI include strategic planning, network design and configuration,
technical support services, resources (hardware and software), project
management, installation, and network administration and support. See "Certain
Relationships and Related Transactions."
BUSINESS COMBINATIONS
The Company has expanded its geographic breadth, diversified its technical
expertise, expanded its client base and believes it has achieved other
competitive advantages through business combinations. Following each CIS
division merger or acquisition, the Company seeks to add value to the operations
acquired by implementing the Company's automated office information systems and
ISO 9002 processes, and by providing national recruiting support to its new
offices. Given the highly fragmented nature of the information technology
services industry, the Company intends to pursue business combinations as part
of its growth and operating strategy. The success of this strategy depends not
only upon the Company's ability to identify and acquire businesses on a
cost-effective basis, but also upon its ability to integrate acquired operations
into its organization effectively, to retain and motivate personnel and to
retain clients of acquired firms.
Acquired branches have accounted for approximately 50% of the Company's
employee growth over the past five years. In reviewing potential business
combinations, the Company focuses on the target company's geographic area,
client base, reputation in specific software services, acquisition availability,
cost, anticipated financial performance, sales, management and recruiting
personnel and potential client demand, among other factors.
26
<PAGE>
Since the Company's initial public offering in March 1994, the Company has
completed the following business combinations:
<TABLE>
<CAPTION>
APPROXIMATE TOTAL CONSULTANTS AT
DATE NAME MAIN OFFICE CONSIDERATION ACQUISITION
- ------------------ ---------------------------------- -------------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
December 1996 CIBER Network Services, Inc. Edison, New Jersey $ 4.5 million(1) 50
November 1996 Technical Support Group, Inc. Chicago, Illinois $ 13.5 million(2) 70
November 1996 Technology Management Group, Inc. Seattle, Washington $ 13.7 million(3) 108
September 1996 Spectrum Technology Group, Inc. Somerville, New Jersey $ 16.6 million(4) 110
July 1996 DataFocus, Inc.(5) Fairfax, Virginia $ 5.0 million 45
May 1996 Practical Business Solutions, Inc. Boston, Massachusetts $ 12.9 million(6) 125
March 1996 OASYS, Inc. Columbus, Ohio $ 0.8 million 18
September 1995 Broadway & Seymour, Inc.(7) Rochester, Minnesota $ 1.0 million 45
June 1995 Business Information Concord, California $ 10.3 million(8) 125
Technology, Inc.
May 1995 Spencer & Spencer Systems, Inc. St. Louis, Missouri $ 5.3 million(9) 141
January 1995 Interface Systems, Inc. Holmdel, New Jersey $ 3.4 million(10) 48
June 1994 C.P.U., Inc. Rochester, New York $ 12.4 million(11) 190
</TABLE>
- ------------------------
(1) The total estimated consideration was paid by the issuance of 68,631 shares
of Common Stock, the payment of approximately $1.2 million in cash and the
assumption of approximately $800,000 of net liabilities. If the acquired
business achieves certain levels of revenue or net income, the Company will
be required to pay additional consideration of up to $2.6 million in cash or
Common Stock. See "Summary -- Recent Developments," "Certain Relationships
and Related Transactions" and Note 9 of Notes to Consolidated Financial
Statements.
(2) The consideration was paid by the issuance of 370,373 shares of Common
Stock. See "Summary -- Recent Developments."
(3) The consideration was paid by the issuance of 242,176 shares of Common Stock
and options to purchase 163,003 shares of Common Stock at various exercise
prices (totaling $547,000). See "Summary -- Recent Developments."
(4) Total consideration was paid by the issuance of 853,116 shares of Common
Stock.
(5) The Company acquired only the Business Systems Development division of this
Company.
(6) The consideration was paid by the issuance of 959,035 shares of Common Stock
and options to purchase 72,185 shares of Common Stock at an exercise price
of $.01 per share.
(7) The Company acquired only one branch office of this company.
(8) The consideration was paid by the issuance of 1,400,512 shares of Common
Stock.
(9) The consideration was paid by issuance of 624,284 shares of Common Stock and
an option to purchase 134,268 shares of Common Stock at an exercise price of
$0.005 per share.
(10) In addition, if the operations acquired achieve certain levels of income,
the Company will be required to pay additional consideration in the form of
Common Stock through December 31, 1997.
(11) The purchase price includes balance sheet net assets acquired of
approximately $2.3 million.
27
<PAGE>
The business combinations with SSSI, BIT, PBSI and Spectrum have each been
accounted for as a pooling of interests and TMG and TSG will each be accounted
for as a pooling of interests, while the other business combinations are or will
be accounted for as purchases. See "Management's Discussion and Analysis of
Financial Condition and Results of Operations" for additional information.
CLIENTS
The Company focuses its client marketing efforts on large companies with
substantial needs for supplemental programmer staffing, package software
implementation and systems integration services and other computer-related
professional services. Such clients afford the Company opportunities to develop
long-term relationships based on the high-quality, consistent services the
Company has provided for more than 22 years. Although most consultant
assignments are from three to 12 months, many of the Company's client
relationships have continued for more than 10 years.
The ability to serve large clients in diverse industries demonstrates the
Company's adaptability to a wide variety of client environments. Whether clients
are in the services or manufacturing sector, the Company recruits and provides
consultants having skills matching the requirements of each client's project.
The Company routinely satisfies the diverse information technology needs of
clients in a wide variety of industries.
Since approximately 1990, larger clients have started to limit the number of
information technology vendors they use. In order to achieve the reduction in
the number of vendors used, companies often review and screen both existing and
potential vendors and generate select lists of approved vendors. The factors
considered for placement of a company on a vendor list include geographic and
technical breadth of operations, quality assurance programs, reliability and
cost effectiveness. The Company focuses significant resources on continuous
qualification as an approved vendor on its clients' vendor lists and, over the
past five years, has regularly qualified as such a vendor for more than two
dozen Fortune 500 companies.
Certain customers account for a significant portion of the Company's
revenues. One of the Company's clients, AT&T, accounted for 12% of total
revenues for the year ended June 30, 1996. In addition, the Company's five
largest clients represented 28%, 24% and 27% of the Company's total revenues for
the years ended June 30, 1996, 1995 and 1994, respectively.
The following table lists each of the Company's clients that management
believes accounted for at least $1 million in revenues in fiscal 1996 and the
number of years as a client (including periods served by an acquired or merged
company). These clients represented, in the aggregate, approximately 55% of the
Company's revenues in fiscal 1996.
<TABLE>
<CAPTION>
YEARS AS
CLIENT CLIENT
- ----------------------------------------------------------------- -------------
<S> <C>
American Express Company......................................... 20
AT&T............................................................. 17
Bell South....................................................... 2
Blue Cross/Blue Shield........................................... 5
EDS.............................................................. 5
Fidelity Investments, Inc........................................ 6
Ford Motor Corporation........................................... 22
GTE Corporation.................................................. 8
Harris Corporation............................................... 4
IBM.............................................................. 10
Eastman Kodak.................................................... 10
Kroger Co........................................................ 9
Lam Research Corporation......................................... 2
Lucent Technologies.............................................. 1
<CAPTION>
YEARS AS
CLIENT CLIENT
- ----------------------------------------------------------------- -------------
<S> <C>
MCI Telecommunications Corporation............................... 12
MEMC Electronics................................................. 13
Mellon Bank, N.A................................................. 15
Monsanto Corp.................................................... 13
National Grocers................................................. 1
The Oshawa Group................................................. 3
PeopleSoft....................................................... 5
Publix Supermarkets.............................................. 4
Sprint Corporation............................................... 5
State of Georgia................................................. 10
US West Communications, Inc...................................... 11
University of Texas.............................................. 1
Wakefern......................................................... 2
Xerox Corporation................................................ 11
</TABLE>
28
<PAGE>
The Company normally offers professional services through agreements that
specify that services are rendered on a best efforts basis, that the Company
makes no express or implied warranties and that the client must continue to pay
all charges incurred prior to the termination of the agreement. Because services
are typically rendered on an as required basis, the Company does not consider
the backlog of unfinished assignments significant in understanding its business.
The typical client contract term is one to three years and there can be no
assurance that a client will renew its contract when it terminates. The
Company's contracts are generally cancelable by the client at any time and
clients may unilaterally reduce their use of the Company's services under such
contracts without penalty. The termination or significant reduction of the
Company's business relationship with any of its significant clients could have a
material adverse effect on the Company's operating results.
Through BIT, the Company has a significant relationship with PeopleSoft,
both as a client and as an implementation partner. In fiscal 1996, 15% of the
Company's total revenues was derived from clients who purchased implementation
services for their PeopleSoft software and 1% of the Company's revenues was
derived from PeopleSoft as a client. In the event PeopleSoft products become
obsolete or non-competitive, or if BIT should lose its "implementation partner"
status with PeopleSoft, the Company would suffer a material adverse effect.
The Company generally prices its services to clients on a time and materials
basis and maintains price ranges that reflect the technical skills and
experience levels of the Company's consultants. The Company has provided and
intends to continue to provide increased project services to its clients.
Projects are distinguishable from the Company's core business of time and
material consulting by the level of responsibility assumed by the Company. In a
typical project, the Company independently develops a program or maintains a
system, whereas, for time and materials contracts, the Company's clients
generally maintain responsibility for the overall task. The failure of a project
or the failure of the Company to provide project services in a satisfactory
manner could have a material adverse effect on the Company. Further, because the
Company may undertake projects on a fixed price basis and guarantee performance
based upon defined operating specifications, cost overruns, unsatisfactory
performance or unanticipated difficulties in such projects could have a material
adverse effect on the Company's results of operations. See "Risk Factors --
Dependence on Significant Relationship; Absence of Long-Term Contracts."
SALES FORCE
The Company maintains an experienced sales force of approximately 110
employees who market the Company's services to senior business executives, chief
information officers, information systems managers, other users of programming
services and purchasing/buying groups. The purchasing departments of the
Company's largest CIS division clients commonly select a limited list of
preferred vendors. Once on the vendor list, the Company's sales representatives
are eligible to work directly with managers of projects or application systems
seeking consultant assistance. New client contacts are generated through a
variety of methods, including client referrals, personal sales calls, direct
mailings to targeted clients and telemarketing.
OFFICES
The Company's CIS division office network is integral to its business
strategy. Through the office network, the Company can (i) offer a broad range of
consulting services on a local basis, (ii) respond to changing market demands
for information technology services through a variety of contacts in many
industries and geographic areas and (iii) maintain a quality professional staff
because of its nationwide reputation and its training programs. Additionally,
the offices can market their services as being provided by a company with a
national presence and a long history in the information technology services
business.
The Company believes its operating procedures and financial controls are two
of its primary strengths. Business plans, generally at the office level, are
prepared annually and include monthly projections for the
29
<PAGE>
ensuing fiscal year. Results are tracked monthly to compare actual performance
to projected results. The Company has centralized accounting and cash management
functions to help ensure integrity of data and control of information flow.
Operating data is available on a weekly basis. The Company believes that these
practices enhance results from acquired businesses as well.
The Company established its office network through the internal start-up and
staffing of offices in new geographic locations and through the acquisition of
information technology services companies, their professional staffs and client
relationships. The Company's network of offices currently consists of 39 offices
in 21 states and two foreign offices. The number of consultants working out of
any office ranges from as few as five to over 150. The average is approximately
55 consultants per office.
The following is a list of the locations where the Company currently has
offices:
<TABLE>
<CAPTION>
LOCATION
- --------------------------------------------------------------------------------
<S> <C>
DOMESTIC
Arizona Phoenix
California Concord
San Francisco*
Colorado Denver (three offices)*
Florida Melbourne
Orlando
Tampa
Georgia Atlanta
Illinois Chicago*
Oakbrook Terrace
Indiana Indianapolis
Kansas Overland Park (Kansas City)
Massachusetts Woburn (Boston)
Michigan Dearborn (Detroit)
Minnesota Rochester
Missouri St. Louis
New Jersey Edison (two offices)*
Iselin
Somerville
West Orange
<CAPTION>
LOCATION
- --------------------------------------------------------------------------------
<S> <C>
New York Buffalo
Rochester
North Carolina Charlotte
Ohio Cincinnati
Cleveland
Columbus
Pennsylvania Philadelphia (two offices)
Pittsburgh
Rhode Island Providence
Texas Dallas (two offices)
Houston
Virginia Fairfax
Reston
Washington Seattle*
INTERNATIONAL
Canada Toronto
Argentina Buenos Aires
</TABLE>
- ------------------------
*Includes offices that were acquired as a result of the TMG, TSG and CNSI
business combinations.
CONSULTANT RECRUITMENT
The Company's future success will depend in part on its ability to hire
adequately trained personnel who address the increasingly sophisticated needs of
its clients. The Company's on-going consultant needs arise from (i) increasing
demand for the Company's services, (ii) turnover, which is generally high in the
industry, and (iii) the clients' requests for programmers trained in the newest
software technologies. Few of the Company's employees are bound by non-compete
agreements. Competition for personnel in the information technology services
industry is significant and the Company has had, and expects to continue to
have, difficulty in attracting and retaining an optimal level of qualified
personnel. In particular, competition for the limited number of qualified
project managers and professionals with certain specialized skills, such as a
working knowledge of certain sophisticated software, is intense. Because of
this, the recruitment of the Company's skilled consultant group is a critical
element in the Company's success. The Company devotes significant resources to
meeting its personnel requirements. The Company currently has approximately 90
full-time recruiters in its offices and 17 in its National Recruiting Group. The
National
30
<PAGE>
Recruiting Group maintains a national, proprietary database of relocatable and
harder to find consultants (due to unique or specialized skill sets), augments
local recruiting, advertises nationally for new consultants, travels to branches
to train new recruiters and performs related tasks.
The Company invests heavily in a number of programs designed to retain its
trained personnel. The Company sponsors a tuition reimbursement program
available to all employees and, in addition, maintains a library of technical
training courses available for home study. The Company makes available an
employee stock purchase plan, incentive stock options and a matching provision
as part of its 401(k) savings plan to all employees.
It is often difficult to match the availability of consultants with client
requirements. Pre-marketing and lead times from clients help, but consultant
availability remains a significant factor in determining whether the Company or
a competitor will obtain the available business. The Company believes that
careful coordination of its recruiting and sales activities gives it an
advantage over many of its smaller competitors. See "Risk Factors -- Ability to
Attract and Retain Qualified Consultants."
COMPETITION
The information technology services industry is extremely competitive. A
number of companies compete with the Company in selected markets with
substantially similar services. In most of the markets in which the Company
competes, the Company believes that there are participants that have
significantly greater financial, technical and marketing resources than the
Company. The Company believes, however, that no one competitor dominates any of
its markets.
There are few very large competitors with annual revenues over $100 million.
There are, however, according to The Updata Group, an independent consulting
firm, over 3,000 software service firms with yearly revenues over $1 million
competing for market share. Most of these firms participate in just one
geographic area. The Company's competition, therefore, varies significantly from
office to office. Often, local competitors are the Company's primary
competition. At certain offices, particularly those with major clients, national
competitors are the Company's significant competition. Each office must adapt to
the circumstances under which it operates.
In particular, the Company believes that its CIS division competes most
directly with the following national companies: Keane, Inc., Analysts
International Corporation and Computer Task Group, Inc. For project management
services, Electronic Data Systems Corporation, Andersen Consulting, Computer
Sciences Corporation and Cambridge Technology Partners, Inc. and others are
competitors. Many of these companies are national and international in scope and
have greater resources than the Company. BIT and Spectrum often compete with
"Big Six" accounting firms, as well as larger systems consulting firms. The
Company also competes with the internal data processing staffs of its clients,
which clients can add to their employee base as an alternative to using a
consulting firm. Additionally, many large accounting and management consulting
firms offer services that overlap with a significant portion of the Company's
services. Also, computer hardware and software companies are increasingly
becoming involved in systems integration projects. Recently, temporary placement
agencies, such as Corestaff, Olsten and Interim, have begun expanding their
businesses to provide computer-related services to their customers.
Additionally, over the past several years there has been an influx of foreign
nationals who provide skilled computer programming services at lower pay scales
than other domestic programmers. Some of these foreign nationals are being hired
as consultants directly by the Company's clients and potential clients, as well
as by certain of the Company's competitors. Moreover, in an attempt to decrease
costs, some of the Company's clients and potential clients are outsourcing their
business to competitors in foreign countries, including Ireland, India and the
former Soviet Union. An increase in the use of skilled foreign national labor at
lower rates or foreign software service firms by the Company's competitors or
clients could have a material adverse effect on the Company.
31
<PAGE>
In order to remain on its clients' vendor lists and to develop new client
relationships, the Company must satisfy client requirements at competitive
rates. Although the Company continually attempts to lower its costs, there are
other software services organizations and temporary placement agencies that
provide the same or similar services as the Company at similar or lower costs.
Additionally, certain of the Company's clients require that their vendors reduce
rates after services have commenced. There can be no assurance that the Company
will be able to compete effectively on pricing or other requirements and, as a
result, the Company could lose clients or be unable to maintain historic gross
margin levels or to operate profitably. With respect to the Company's
implementation services for software packages, the manufacturers of such
software may have training requirements that inhibit the Company from competing
effectively with other packaged software implementation providers.
EMPLOYEES
As of December 2, 1996, the Company had approximately 2,800 full-time
employees, including approximately 400 personnel in administrative positions and
approximately 2,400 billable consultants. Administrative personnel are
principally branch managers, sales representatives, recruiters and
administrative assistants located throughout the Company's offices. None of the
Company's employees are subject to a collective bargaining arrangement. The
Company has entered into employment agreements with its executive officers. The
Company believes its relations with its employees are good.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
32
<PAGE>
MANAGEMENT
The following table sets forth the Company's directors and executive
officers, their ages and their positions and offices currently held with the
Company.
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
- ----------------------- --- --------------------------------------------------------------------
<S> <C> <C>
Bobby G. Stevenson 54 Chairman, Chief Executive Officer and Secretary
Mac J. Slingerlend 49 President/Chief Operating Officer, Treasurer and Director
William E. Storrison 37 President/CIBER Information Services Division
John B. Maitland 53 Vice President; President of Business Information Technology, Inc.
Richard A. Montoni 45 Executive Vice President/Chief Financial Officer and Director
James A. Rutherford 50 Director
James C. Spira 53 Director
Roy L. Burger 41 Director
</TABLE>
BOBBY G. STEVENSON. Mr. Stevenson is Chairman of the Board of Directors,
Chief Executive Officer, Secretary and one of the original three founders of the
Company. Mr. Stevenson was Vice President in charge of recruiting and management
of the technical staff from 1974 until November 1977 when he became Chief
Executive Officer. He has been responsible for all operations of the Company
since 1977.
MAC J. SLINGERLEND. Mr. Slingerlend joined the Company in January 1989 as
Executive Vice President/ Chief Financial Officer, became Treasurer and a
director in 1994 and President and Chief Operating Officer in 1996. Prior to
joining the Company, Mr. Slingerlend spent 15 years in the banking industry,
primarily as a commercial lender, and five years in corporate financial
positions in the cable television and hospitality industries.
WILLIAM E. STORRISON. Mr. Storrison has been President of the Company's
CIBER Information Services Division since 1996. Mr. Storrison was Senior Vice
President/Operations of the Company from 1994 to 1996 and, from 1992 until 1994,
served as the Company's Vice President/Eastern Operations. Mr. Storrison has
been with the Company since 1987 and was previously Branch Manager and Regional
Vice President of several of the Company's eastern branch offices.
JOHN B. MAITLAND. Mr. Maitland joined the Company in 1995 as Vice President
and as President of BIT when BIT merged with the Company. Mr. Maitland is
responsible for the strategic initiatives, organizational development, business
growth and overall profitability of BIT. From 1969 to 1981, Mr. Maitland held
several positions in management and consulting, lastly as Consulting Manager and
Director of Consulting at Integral Systems, Inc., a human resource management
systems and financial software producer and consulting firm. In 1981, Mr.
Maitland co-founded BIT and became its Executive Vice President and Chief
Operating Officer. In 1987, he was promoted to President and Chief Executive
Officer of BIT.
RICHARD A. MONTONI. Mr. Montoni has been the Company's Executive Vice
President/Chief Financial Officer and a director since October 1996. Prior to
joining the Company, Mr. Montoni was a partner with KPMG Peat Marwick LLP, where
he worked for over 20 years with companies in the high technology,
manufacturing, merchandising and distribution industries. Mr. Montoni is a
member of the American
Institute of Certified Public Accountants and the Colorado Society of Certified
Public Accountants.
JAMES A. RUTHERFORD. Mr. Rutherford has been a director of the Company
since February 1994. He is a managing director of Wingset Investments Ltd., a
private venture capital company located in New Albany, Ohio. Prior to forming
Wingset in 1995, Mr. Rutherford was one of the founders of Goal Systems
International Inc., serving in various executive positions and as a director
from its incorporation in 1977
33
<PAGE>
until its sale in 1992. Mr. Rutherford is also a director of Symix Systems,
Inc., Columbus, Ohio, as well as several private corporations.
JAMES C. SPIRA. Mr. Spira has been a director of the Company since
September 1994. Since 1995, he has been managing partner with Chicago, Illinois
based Diamond Technology Partners, Inc., a management consulting firm providing
program management services to design and deploy technology-enabled business
strategies. From 1991 to 1995, Mr. Spira was Group Vice President of The
Tranzonic Companies, a Cleveland-based holding company. From 1974 through 1991,
Mr. Spira was founder, President and Chief Executive Officer of Cleveland
Consulting Associates, an operations and systems management consulting firm
doing business with large multi-national companies.
ROY L. BURGER. Mr. Burger has been a director of the Company since November
1995. Mr. Burger has approximately 20 years experience in the equipment leasing
and finance industry and has arranged the financing of more than $1.5 billion of
equipment. Mr. Burger currently serves as Chairman and Chief Executive Officer
of Boulder Capital Group, a company founded by him in 1986 that specializes in
equipment leasing.
34
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information with respect to Mr.
Stevenson, the Company's Chief Executive Officer, and the Company's four most
highly paid executive officers with annual compensation in excess of $100,000
(collectively, the "Named Executive Officers") for services rendered for the
fiscal years ended June 30, 1996, 1995 and 1994. See "Employment Agreements."
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
-------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
---------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION FISCAL YEAR SALARY BONUS OPTIONS COMPENSATION(1)
- -------------------------------------------- ------------- ---------- ---------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
Bobby G. Stevenson(2) 1996 $ 315,000 $ 34,134 -- $ 5,041
Chairman, Chief Executive Officer 1995 300,000 93,000 -- 5,987
and Secretary 1994 300,000 275,696 100,000 4,760
Mac J. Slingerlend(2) 1996 $ 230,000 $ 82,654 20,000 $ 13,240
President/Chief Operating Officer 1995 200,000 73,500 -- 7,470
and Treasurer 1994 200,000 95,892 -- 6,200
John B. Maitland, Jr. 1996 $ 225,000 $ 53,004 50,000 $ 6,075
President/Chief Operating Officer 1995 -- -- -- --
Business Information Technology, Inc. 1994 -- -- -- --
William E. Storrison(2) 1996 $ 150,000 $ 41,780 20,000 $ 12,249
President/CIBER Information 1995 125,000 90,000 30,000 5,255
Services 1994 125,000 76,395 83,312 4,701
Prasong Suvarnasorn(2) 1996 $ 97,731 $ 20,000 20,000 $ 4,757
Senior Vice President/ 1995 95,288 6,000 12,000 3,330
Operations/CIBR2000 1994 73,923 10,000 38,750 2,926
</TABLE>
- ------------------------
(1) Consists of amounts contributed by the Company under the Company's 401(k)
Savings Plan and life insurance premiums paid by the Company. Savings Plan
contributions were $4,781, $5,237 and $4,615 for Mr. Stevenson; $5,538,
$5,470 and $4,268 for Mr. Slingerlend; $4,723, $5,080 and $4,701 for Mr.
Storrison; and $3,117, $2,672 and $2,268 for Mr. Suvarnasorn, for the years
ended June 30, 1996, 1995 and 1994, respectively. Savings Plan contributions
for Mr. Maitland were $6,075 in fiscal 1996. The remaining amounts represent
life insurance premiums.
(2) In January 1994, the Company entered into employment agreements with Messrs.
Stevenson and Slingerlend. For the remainder of fiscal 1994, these executive
officers were paid salaries pursuant to such employment agreements at the
following annual rates, plus the following fiscal-year bonuses: Bobby G.
Stevenson, salary $300,000 plus a bonus based on a formula related to the
Company's net income; and Mac J. Slingerlend, salary $200,000 plus a bonus
based on a formula related to the Company's net income. The Company entered
into an employment agreement with Mr. Storrison on July 1, 1992, which
agreement provided for a salary of $125,000 plus a bonus tied to the future
performance of the CIS group of the Company. Pursuant to employment
agreements effective July 1, 1995, the base salaries of Messrs. Stevenson,
Slingerlend and Storrison were changed to $330,000, $300,000 and $200,000,
respectively, for fiscal 1997.
35
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information regarding options granted
to the Named Executive Officers during the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF
PERCENT OF STOCK
NUMBER OF TOTAL PRICE APPRECIATION
SECURITIES OPTIONS FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(1) ($)
OPTIONS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED FISCAL YEAR ($/SHARE) DATE 5% 10%
- --------------------------- ----------- ----------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Bobby G. Stevenson -- -- -- -- -- --
Mac J. Slingerlend(2) 20,000 4% $ 8.88 7/2005 111,629 282,889
John B. Maitland, Jr.(3) 50,000 11% $ 8.88 7/2005 279,072 707,223
William E. Storrison(2) 20,000 4% $ 8.88 7/2005 111,629 282,889
Prasong Suvarnasorn(2) 20,000 4% $ 8.88 7/2005 111,629 282,889
</TABLE>
- ------------------------
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if any,
on stock option exercises will depend on future performance of the Common
Stock. No assurance can be made that the amounts reflected in these columns
will be achieved.
(2) Options were granted on July 1, 1995. The options vest and are exercisable
in equal installments over three years commencing July 1, 1996.
(3) Options were granted July 1, 1995. The options vest and are exercisable in
equal installments over five years commencing July 1, 1996.
OPTION EXERCISE IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding options
held by the Named Executive Officers during the fiscal year ended June 30, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES VALUE OPTIONS AT FISCAL YEAR AT FISCAL YEAR END
ACQUIRED ON REALIZED END EXERCISABLE/UNEXERCISABLE
NAME EXERCISE ($) EXERCISABLE/UNEXERCISABLE ($)
- ------------------------ ----------- ----------- ------------------------ --------------------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson -- -- 40,000/60,000 704,000/1,056,000
Mac J. Slingerlend 40,000 483,645 450,000/20,000 9,690,968/262,500
John B. Maitland, Jr. -- -- -- /50,000 -- /656,250
William E. Storrison 35,000 358,564 174,998/40,000 3,643,079/615,000
Prasong Suvarnasorn 14,000 172,029 70,000/28,000 1,457,940/403,500
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with each of its executive officers.
Except in the case of John Maitland, whose employment agreement was entered into
in conjunction with the merger with BIT, each employment agreement has a term of
one year and is annually renewable. In the case of Mr. Maitland, the initial
term is through June 30, 1998 and is annually renewable for one-year terms
thereafter, however, employment is not guaranteed for such three-year period
ending June 1998. Each employment agreement provides that an officer's
compensation will include a base salary and a bonus. See footnote 2 to the
Summary Compensation Table above. In the event that any officer's employment is
terminated upon a change of control of the Company, upon death or disability of
the officer or without cause, such officer will be entitled to a severance
payment. In the event of termination upon a change of control of the Company or
other than for cause by the Company, the severance payment due the Chief
Executive Officer is equal to three times his base salary, with such amounts
payable in equal installments over a period of 36 months following termination.
In the event of death of the Chief Executive Officer, the
36
<PAGE>
severance payment is equal to one-half of such officer's base salary, with such
amount payable in equal installments over a period of 24 months. The severance
payment for each other officer (other than Mr. Maitland) in the event of
termination upon a change in control of the Company, other than for cause by the
Company or in the event of death of such officer, is equal to one-half of such
officer's base salary, with such amounts payable in equal installments over a
period of 24 months following termination (other than Messrs. Storrison and
Suvarnasorn whose severance payments in the event of death will be paid over a
period of 12 months). With respect to Mr. Maitland, in the event of termination
upon a change of control of the Company or upon termination other than for
cause, Mr. Maitland is entitled to receive one-half of his base salary for an
additional 24 months; PROVIDED, HOWEVER, that, in the event of termination for
such reasons prior to June 30, 1997, Mr. Maitland shall be paid at the rate of
100% of his base salary for the period ended June 30, 1997, with any of the
remaining payments to be at the rate of one-half of base salary. The severance
payment in the event of the death of Mr. Maitland is equal to one-half of his
base salary. In addition, in the event of termination upon a change of control
of the Company, other than for cause by the Company, voluntary termination or
termination for disability, Mr. Maitland would be entitled to a lump sum payment
of between $25,000 and $50,000 if such termination occurred before June 30,
1998. In the event of termination of an executive officer upon a change of
control of the Company, other than for cause by the Company or in the event of
disability, the Company will pay such officer's medical, life and disability
premiums for the first 12 months following termination.
Effective November 1, 1996, the Company employed Richard A. Montoni as its
Executive Vice President and Chief Financial Officer. The initial term of
employment terminates on June 30, 1998 and will be automatically renewable for
one year periods thereafter. Mr. Montoni's base salary and bonus for fiscal 1997
is $325,000. Mr. Montoni was also paid a $25,000 signing bonus. For fiscal 1998,
Mr. Montoni will be paid a base salary of $250,000 and will be entitled to an
annual bonus of one percent (1%) of the increase in the Company's net income
from the prior year's net income. In the event of a termination upon a change of
control of the Company, Mr. Montoni will receive a severance payment equal to
his base salary for an additional two years plus an amount equal to his bonus
for the two years preceding the termination. In the event of a termination other
than for cause, Mr. Montoni will receive a severance payment of his base salary
for an additional year. In addition, Mr. Montoni was granted under the Company's
Employee Equity Incentive Plan incentive stock options to purchase 29,410 shares
of Common Stock at $34.00 per share (the "ISO Options") and non-incentive stock
options to purchase 20,590 shares of Common Stock at $34.00 per share (the "NSO
Options"). The ISO Options vest over ten years and the NSO Options vest over
three years.
LONG-TERM DEFERRED COMPENSATION PLAN
The Company has agreed to make certain post-employment payments to Mr.
Slingerlend or his designated beneficiary except in the event of a termination
for cause. The payments will be made for 15 years after Mr. Slingerlend's
termination of employment with the Company and will range from $40,000 to
$100,000 annually, based on Mr. Slingerlend's age at the time of termination of
employment. The benefits are also subject to certain vesting provisions.
The Company has agreed to make certain post-employment payments to Mr.
Montoni or his designated beneficiary except in the event of a termination for
cause. The payments will be made for 15 years after Mr. Montoni's termination of
employment with the Company and will range from $30,000 to $75,000 annually,
based on the date of termination of employment. The benefits are also subject to
certain vesting provisions.
1989 STOCK OPTION PLAN
The Company adopted a non-qualified stock option plan in 1989 (the "1989
Plan") to provide long-term incentives to certain of its employees, consultants
and directors. Thirteen individuals were granted options under the 1989 Plan. At
September 30, 1996, there were 1,147,730 options outstanding under the
37
<PAGE>
1989 Plan, all of which are exercisable. The exercise prices of the options
range from $.47 to $1.29 per share, with a weighted average of approximately
$.64 per share. Options totaling 403,990 shares were exercised in fiscal 1996.
No options were granted subsequent to July 1, 1993. The 1989 Plan was
discontinued in calendar 1993. Options under the 1989 Plan remain outstanding
pursuant to their terms and expire at various times through 2013.
EMPLOYEES' EQUITY INCENTIVE PLAN
In January 1994, the Company adopted an Employees' Equity Incentive Plan
(the "Employees' Plan"). The purpose of the Employees' Plan is to provide
long-term incentives to the Company's officers, employees and consultants. The
Employees' Plan initially reserved 1,000,000 shares of Common Stock for issuance
thereunder, which share amount was increased to 2,000,000 in October 1996. Under
the Employees' Plan, the Company may grant to officers, employees and
consultants awards of restricted stock, stock options and performance bonuses or
any combination thereof. The Employees' Plan terminates after January 2004.
Incentive stock options ("ISOs") may not be granted at an exercise price of less
than the fair market value of the Common Stock on the date of grant. The
exercise price of non-qualified stock options granted under the Employees' Plan
may be granted at less than the fair market value of the Common Stock on the
date of grant. The exercise price of ISOs granted to holders of more than 10% of
the aggregate amount of outstanding Common Stock must be at least 110% of the
fair market value of the Common Stock on the date of grant and the term of these
options cannot exceed five years. As of September 30, 1996, options to purchase
1,081,294 shares of Common Stock were outstanding under the Employees' Plan at
an average exercise price of $12.47 per share. Options for 42,000 shares were
exercised in fiscal 1996, while options for 1,000 shares were forfeited.
EMPLOYEE STOCK PURCHASE PLAN
Under the Employee Stock Purchase Plan (the "Stock Purchase Plan"), which
was approved by the Company's stockholders in October 1994, employees who have
been employed by the Company for at least six months can elect to purchase,
through payroll deductions, shares of Common Stock at 85% of the fair market
value on the first or last date of an offering period. Presently, 1,000,000
shares of Common Stock are reserved for issuance under the Stock Purchase Plan.
The Stock Purchase Plan provides for one offering during each three-month
period, commencing January 1, 1995. Employees are permitted to deduct at least
1% but not more than 5% of their compensation, or such other rates as determined
from time to time by the Board of Directors. Notwithstanding the foregoing, no
employee is permitted to subscribe for shares under the Stock Purchase Plan if,
after the purchase of the shares, the employee would own 5% or more of the total
voting power or value of all classes of stock of the Company or if the purchase
would permit the employee to buy, pursuant to the Stock Purchase Plan, more than
$6,250 worth of stock for any three-month offering period.
As of September 30, 1996, 651 employees were participating in the Stock
Purchase Plan. Employees purchased 90,268 shares at a weighted average price per
share of $8.84 during fiscal 1996.
38
<PAGE>
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth information regarding beneficial ownership of
the Company's Common Stock as of December 2, 1996, and as adjusted to reflect
the sale of the Common Stock offered hereby, for (i) each director and each
Named Executive Officer, (ii) all directors and executive officers of the
Company as a group, (iii) each person known by the Company to own beneficially
more than 5% of the outstanding shares of Common Stock and (iv) the Selling
Stockholders. Other than Messrs. Stevenson and Maitland, no Selling Stockholder
is an employee or officer of the Company. All information is taken from or based
upon ownership filings made by such persons with the Commission or upon
information provided by such persons to the Company. All beneficial ownership is
sole and direct unless otherwise indicated. Beneficial ownership is determined
in accordance with the rules of the Commission and generally reflect voting or
investment power with respect to securities. In accordance with Commission
rules, shares of Common Stock which may be acquired upon exercise of stock
options which are currently exercisable or which become exercisable within 60
days of December 2, 1996 are deemed beneficially owned by the optionee and each
beneficial owner's percentage ownership is determined by assuming that options
that are held by such person (but not those held by any other person) and which
are exercisable within 60 days of December 2, 1996 have been exercised.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES TO BE
OWNED PRIOR TO BENEFICIALLY OWNED
THE OFFERING NUMBER OF AFTER OFFERING(1)
DIRECTORS, OFFICERS AND ----------------------- SHARES -----------------------
FIVE PERCENT STOCKHOLDERS NUMBER PERCENT BEING OFFERED NUMBER PERCENT
- -------------------------------------------------------- --------- ------------ ------------- --------- ------------
<S> <C> <C> <C> <C> <C>
Bobby G. Stevenson(2)................................... 6,717,388 35.9% 973,077 5,744,311 29.6%
Mac J. Slingerlend(3)................................... 494,092 2.6 -- 494,092 2.5
John B. Maitland, Jr.(4)................................ 346,192 1.9 171,000 175,192 *
William E. Storrison(5)................................. 184,034 * -- 184,034 *
Prasong Suvarnasorn(6).................................. 95,123 * -- 95,123 *
James A. Rutherford(7).................................. 22,156 * -- 22,156 *
James C. Spira(7)....................................... 12,156 * -- 12,156 *
Roy L. Burger(8)........................................ 5,156 * -- 5,156 *
Richard A. Montoni...................................... -- -- -- -- --
All directors and executive officers as a group (9
persons)(9)........................................... 7,876,297 40.5 1,144,077 6,732,220 33.4
<CAPTION>
OTHER SELLING STOCKHOLDERS
- --------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Paul Piper.............................................. 74,192 * 74,192 -- --
BIT Class B Stockholder Liquidating Trust............... 140,052 * 81,731 58,321 *
</TABLE>
- --------------------------
* less than 1%
(1) Gives effect to the sale in this Offering of a total of 700,000 shares of
Common Stock by the Company and 1,300,000 shares by the Selling
Stockholders. Assumes the Underwriters' over-allotment is not exercised. The
address of Mr. Stevenson is c/o CIBER, Inc., 5251 DTC Parkway, Suite 1400,
Englewood, CO 80111.
(2) Represents shares held by Bobby G. Stevenson Revocable Trust, of which Mr.
Stevenson is the settlor, trustee and beneficiary and options to purchase
40,000 shares of Common Stock that are fully vested. Excludes 31,000 shares
of Common Stock held in the Irrevocable First Stevenson Charitable Remainder
Unitrust, of which shares Mr. Stevenson disclaims beneficial ownership. The
number of shares being offered excludes 150,000 shares to be sold by Mr.
Stevenson pursuant to the Underwriters' over-allotment option. If the
Underwriters' over-allotment option is exercised in full, Mr. Stevenson will
beneficially own 5,594,311 shares of Common Stock, representing 28.8% of the
outstanding Common Stock.
(3) Includes options to purchase 451,666 shares of Common Stock that are fully
vested and 29,166 shares that are owned by members of his family.
(4) Includes 345,962 shares currently held by the John B. Maitland, Jr. Trust,
of which Mr. Maitland is the settlor, trustee and beneficiary.
(5) Includes options to purchase 181,664 shares of Common Stock that are fully
vested.
(6) Includes options to purchase 78,666 of Common Stock that are fully vested
and 10,416 shares that are owned by members of his family.
(7) Includes options to purchase 12,000 shares of Common Stock that are fully
vested.
(8) Includes options to purchase 5,000 shares of Common Stock that are fully
vested.
(9) Includes options to purchase 780,996 shares of Common Stock that are fully
vested.
39
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Bobby G. Stevenson, the Company's largest stockholder, Chief Executive
Officer and Chairman, Mac J. Slingerlend, the Company's President and Chief
Operating Officer, and Prasong Suvarnasorn, an officer of the Company, directly
and through their children, owned 85% of CIBER Network Services, Inc. ("CNSI"),
which commenced operations in July 1992. CNSI is engaged in the computer network
integration business, which business includes the procurement of computer
hardware and the installation of local and wide area computer networks and
related services.
On December 2, 1996, the Company acquired CNSI for consideration of
approximately $3.7 million, consisting of 68,631 shares of Common Stock and
approximately $1.2 million in cash. In addition, the Company assumed net
liabilities of approximately $800,000, resulting in a total purchase price of
approximately $4.5 million. Approximately $898,000 was paid by the Company at
closing to Bobby G. Stevenson and members of his family for a debt owed to them
by CNSI.
Mr. Stevenson owned 10% of CNSI and received $375,000 in cash upon the sale
and he and members of his family were repaid approximately $898,000 for an
outstanding obligation owed to them by CNSI. Mr. Slingerlend and members of his
family owned, collectively, 60% of CNSI and received 39,166 shares of Common
Stock and $784,024 in cash upon the sale. Mr. Suvarnasorn and his family owned,
collectively, 15% of CNSI and received 15,332 shares of Common Stock and $48.00
in cash upon the sale. Additionally, contingent consideration of up to an
additional $2.6 million will be paid to the sellers if CNSI achieves certain
performance objectives in each of the 12 month periods ending October 31, 1997,
1998 and 1999. If the contingent consideration is earned, it will be payable, at
the sellers' option, in Common Stock (at the then prevailing market price for
Common Stock) or in cash. The contingent consideration, if earned, will be paid
to the sellers in accordance with their historical percentage ownership interest
in CNSI.
In order to increase the likelihood that the contingent consideration would
be earned, the Company agreed to establish a management compensation plan for
the five CNSI managers (who were also stockholders of CNSI), pursuant to which
such managers could earn additional compensation in an amount equal to the
contingent consideration for meeting or exceeding the revenue and earnings'
thresholds that trigger payment of the contingent consideration.
The acquisition was approved by a majority of the disinterested board
members of the Company, with Mr. Stevenson and Mr. Slingerlend abstaining, after
full disclosure by Mr. Stevenson, Mr. Slingerlend and Mr. Suvarnasorn of their
respective interests in CNSI and the interests of their families. In determining
the purchase price of the transaction, the board relied, in part, on independent
valuations.
The Company was a guarantor on a $3.0 million inventory purchase line of
credit with AT&T Capital Corporation to CNSI. The highest amount outstanding
under the line of credit was $1.9 million during the year ended June 30, 1995,
and $2.0 million during the year ended June 30, 1996. In connection with the
acquisition, the Company assumed CNSI's liability under this line of credit
which had an outstanding balance of approximately $1.1 million at December 2,
1996. Messrs. Stevenson and Slingerlend guaranteed this line of credit and
indemnified the Company against losses that could have been incurred as a result
of its guaranty. These personal guaranties were released at the closing of the
purchase of CNSI. In addition, CNSI had a $2.5 million bank line of credit with
UMB Bank Colorado. This line of credit was secured by Mr. Stevenson's pledge of
250,000 shares of Common Stock. These shares were released by the bank upon the
sale of CNSI to the Company and were returned to Mr. Stevenson.
During the years ended June 30, 1994, 1995 and 1996, the Company purchased
from CNSI several local area networks and various computer equipment and
software for approximately $160,000, $268,000 and $923,000, respectively. In
January 1994, the Company and CNSI entered into a month-to-month management
services agreement, which provided that the Company would supply accounting and
other administrative services to CNSI at a monthly cost of $2,500. See Notes 9
and 12 of Notes to Consolidated Financial Statements.
40
<PAGE>
UNDERWRITING
Subject to the terms and conditions set forth in an underwriting agreement
(the "Underwriting Agreement") among the Company, the Selling Stockholders and
Merrill Lynch, Pierce, Fenner & Smith Incorporated, Hanifen, Imhoff Inc., and
J.P. Morgan Securities Inc. (the "Underwriters"), the Company and the Selling
Stockholders have agreed to sell to each of the Underwriters, and each of the
Underwriters has severally agreed to purchase from the Company and the Selling
Stockholders, the number of shares of Common Stock set forth opposite its name
below. The Underwriting Agreement provides that the obligations of the
Underwriters are subject to certain conditions precedent and that the
Underwriters will be obligated to purchase all of the shares of Common Stock
offered hereby if any of such shares are purchased.
<TABLE>
<CAPTION>
NUMBER OF
UNDERWRITER SHARES
- --------------------------------------------------------------------------------- ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...........................................................
Hanifen, Imhoff Inc..............................................................
J.P. Morgan Securities Inc.......................................................
----------
Total.................................................................. 2,000,000
----------
----------
</TABLE>
The Underwriters have advised the Company that they propose initially to
offer the shares of Common Stock to the public at the public offering price set
forth on the cover page of this Prospectus, and to certain dealers at such price
less a concession not in excess of $ - per share. The Underwriters may allow,
and such dealers may reallow, a discount not in excess of $ - per share to
certain other dealers. After the Offering, the public offering price, concession
and discount may be changed.
The Company and Mr. Stevenson have, on an equal basis, granted the
Underwriters an option exercisable for 30 days after the date of this Prospectus
to purchase up to an aggregate of 300,000 additional shares of Common Stock at
the public offering price set forth on the cover page of this Prospectus, less
the underwriting discount. The Underwriters may exercise this option only to
cover over-allotments, if any, made on the sale of the shares of Common Stock
offered hereby. If the Underwriters exercise this option, each of the
Underwriters will have a firm commitment, subject to certain conditions, to
purchase approximately the same percentage thereof which the number of shares of
Common Stock to be purchased by it shown in the foregoing table is of the
2,000,000 shares initially offered hereby.
The Company and certain officers of the Company have agreed not to offer,
sell, contract to sell or otherwise dispose of, directly or indirectly, or file
or cause to be filed a registration statement under the Securities Act with
respect to, any shares of Common Stock, securities convertible into,
exchangeable for or repayable with such shares or rights or warrants to acquire
such shares, for a period of 90 days after the date of this Prospectus without
the prior written consent of Merrill Lynch, Pierce, Fenner & Smith Incorporated,
except that the Company may, without such consent, grant options pursuant to its
benefit plans or issue shares of Common Stock upon exercise of options currently
outstanding, or issue, or file registration statements with respect to, up to a
specified number of shares of Common Stock in connection with acquisitions under
certain circumstances.
In connection with the Offering, certain Underwriters (and selling group
members, if any) may engage in passive market making transactions in the Common
Stock on the Nasdaq National Market in accordance with Rule 10b-6A under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Rule 10b-6A
permits, upon satisfaction of certain conditions, underwriters and selling group
members participating in a distribution that are also market makers in the
security being distributed to engage in limited market making transactions
during the period when Rule 10b-6 under the Exchange Act would otherwise
prohibit such activity, Rule 10b-6A prohibits underwriters and selling group
members engaged in the passive market making, generally, from entering a bid or
effecting a purchase at a price that exceeds
41
<PAGE>
the highest bid for those securities displayed on the Nasdaq National Market by
a market maker that is not participating in the distribution. Under Rule 10b-6A,
each underwriter or selling group member engaged in passive market making is
subject to a daily net purchase limitation equal to 30% of such entity's average
daily trading volume during the two full consecutive calendar months immediately
preceding the date of the filing of the registration statement under the
Securities Act, pertaining to the security to be distributed.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the Underwriters may be required to
make in respect thereof.
LEGAL MATTERS
The validity of the Common Stock offered hereby will be passed upon for the
Company by Davis, Graham & Stubbs LLP, Denver, Colorado. Certain legal matters
will be passed upon for the Underwriters by Wilson Sonsini Goodrich & Rosati,
Professional Corporation, Palo Alto, California.
EXPERTS
The consolidated balance sheets of CIBER, Inc. and subsidiaries as of June
30, 1996 and 1995, the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended June 30, 1996, have been included and incorporated by reference
herein and in the Registration Statement in reliance upon the report of KPMG
Peat Marwick LLP, independent certified public accountants, appearing elsewhere
and incorporated by reference herein, and upon the authority of said firm as
experts in auditing and accounting.
AVAILABLE INFORMATION
The Company is subject to the reporting requirements of the Exchange Act,
and, in accordance therewith, files annual and quarterly reports, proxy
statements and other information with the Securities Exchange Commission (the
"Commission").
The Company has filed with the Commission in Washington, D.C. a Registration
Statement on Form S-3 under the Securities Act with respect to the shares of
Common Stock offered by this Prospectus. This Prospectus, which forms part of
the Registration Statement, does not contain all the information set forth in
the Registration Statement, certain portions of which are omitted as permitted
by the rules and regulations of the Commission. For further information with
respect to the Company and the shares offered by this Prospectus, reference is
made to the Registration Statement, including the exhibits and schedules filed
therewith. Statements contained in this Prospectus regarding the contents of any
document referred to herein or therein are not necessarily complete, and in each
instance reference is made to the copy of such document filed as an exhibit to
the Registration Statement or such other document, each such statement being
qualified in all respects by such reference. The Company has filed an 8-K
concurrently with the Registration Statement, of which the Prospectus is a part,
that restates the Company's financial statements to reflect the merger of
Spectrum into the Company, which merger was accounted for as a pooling of
interests.
The Registration Statement, including exhibits and schedules thereto, and
other information may be inspected and copies of such materials may be obtained
from the Public Reference Section of the Commission at Room 1024, Judiciary
Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 and at the following
regional offices of the Commission: Citicorp Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511; and Room 1400, 7 World Trade Center,
13th Floor, New York, New York 10048, upon payment of the charges prescribed
therefor by the Commission, or may be examined without charge at the office of
the Commission. The Commission also maintains a Web site at http://www.sec.gov
contain the Registration Statement and reports, proxy statements and other
information concerning the Company. The Registration Statement and reports,
proxy statements and other information concerning the Company may also be
inspected and copied at the offices of the Nasdaq National Market.
42
<PAGE>
INCORPORATION OF CERTAIN INFORMATION BY REFERENCE
The following documents filed by the Company with the Commission are
incorporated by reference in this Prospectus:
(1) Annual Report on Form 10-K for the year ended June 30, 1996, filed with
the Commission on September 27, 1996.
(2) Quarterly Report on Form 10-Q for the quarter ended September 30, 1996,
filed with the Commission on November 8, 1996.
(3) Current Report on Form 8-K, filed with the Commission on December 12,
1996.
(4) Definitive Proxy Statement for the 1996 Annual Meeting of Stockholders,
filed with the Commission on September 27, 1996.
(5) The description of the Company's Capital Stock contained in the
Registration Statement on Form 8-A (File No. 0-23488) filed with the
Commission on February 25, 1994.
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Exchange Act subsequent to the date hereof and prior to the
termination of the offering of the Common Stock offered hereby shall be deemed
to be incorporated by reference in this Prospectus and to be a part hereof from
the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any statement so modified or superseded shall not be
deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
The Company will provide without charge to each person to whom a copy of
this Prospectus is delivered, upon the oral or written request of such person, a
copy of any or all of the documents incorporated herein by reference (other than
exhibits, unless such exhibits are specifically incorporated by reference in
such documents). Requests for such copies should be directed to the Secretary,
CIBER, Inc., 5251 DTC Parkway, Suite 1400, Englewood, CO 80111, (303) 220-0100.
The information in this Prospectus is qualified in its entirety by the more
detailed information and Consolidated Financial Statements and Notes thereto
appearing in this Prospectus or incorporated by reference herein.
43
<PAGE>
CIBER, INC. AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Consolidated Financial Statements of CIBER, Inc. and subsidiaries:
Independent Auditors' Report.............................................. F-2
Consolidated Balance Sheets -- June 30, 1995 and 1996, and (unaudited)
September 30, 1996...................................................... F-3
Consolidated Statements of Operations -- Years Ended June 30, 1994, 1995
and 1996, and (unaudited) three months ended September 30, 1995 and
1996.................................................................... F-4
Consolidated Statements of Stockholders' Equity -- Years Ended June 30,
1994, 1995 and 1996, and (unaudited) three months ended September 30,
1996.................................................................... F-5
Consolidated Statements of Cash Flows -- Years Ended June 30, 1994, 1995
and 1996, and (unaudited) three months ended September 30, 1995 and
1996.................................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
CIBER, Inc.:
We have audited the accompanying consolidated balance sheets of CIBER, Inc.
and subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of operations, stockholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1996. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of CIBER, Inc.
and subsidiaries as of June 30, 1996 and 1995, and the results of their
operations and their cash flows for each of the years in the three-year period
ended June 30, 1996 in conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Denver, Colorado
August 6, 1996, except as to
the first and second paragraphs
of Note 2, which are as of
October 28, 1996.
F-2
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS
<TABLE>
<CAPTION>
JUNE 30,
-------------------- SEPTEMBER 30,
1995(1) 1996(1) 1996
--------- --------- -------------
(UNAUDITED)
<S> <C> <C> <C>
Current assets:
Cash and cash equivalents.................................... $ 2,335 $ 17,071 $ 19,401
Accounts receivable.......................................... 26,305 34,969 34,732
Prepaid expenses and other assets............................ 697 628 1,134
Income taxes................................................. -- -- 195
Deferred income taxes........................................ -- 417 --
--------- --------- -------------
Total current assets....................................... 29,337 53,085 55,462
--------- --------- -------------
Property and equipment, at cost................................ 3,250 4,992 5,624
Less accumulated depreciation and amortization................. (1,735) (2,508) (2,712)
--------- --------- -------------
Net property and equipment................................... 1,515 2,484 2,912
--------- --------- -------------
Intangible assets, net......................................... 12,693 12,775 17,148
Deferred income taxes.......................................... 440 458 530
Other assets................................................... 445 920 857
--------- --------- -------------
Total assets............................................... $ 44,430 $ 69,722 $ 76,909
--------- --------- -------------
--------- --------- -------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Bank revolving lines of credit............................... $ 5,800 $ -- $ --
Notes payable................................................ 110 -- --
Trade payables............................................... 1,606 1,521 1,829
Accrued compensation......................................... 6,598 6,670 9,588
Accrued expenses and other liabilities....................... 1,537 2,584 2,161
Income taxes payable......................................... 792 640 --
Deferred income taxes........................................ 1,885 -- 1,654
--------- --------- -------------
Total current liabilities.................................. 18,328 11,415 15,232
Long-term acquisition costs payable............................ 300 200 200
--------- --------- -------------
Total liabilities.......................................... 18,628 11,615 15,432
--------- --------- -------------
Stockholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued............................... -- -- --
Common stock, $0.01 par value, 40,000,000 shares authorized,
15,182,000, 17,790,000, and 17,935,000 shares issued and
outstanding................................................ 152 178 179
Additional paid-in capital................................... 13,515 37,237 41,102
Retained earnings............................................ 12,135 20,692 20,196
--------- --------- -------------
Total stockholders' equity................................. 25,802 58,107 61,477
--------- --------- -------------
Commitments and contingencies
Total liabilities and stockholders' equity................. $ 44,430 $ 69,722 $ 76,909
--------- --------- -------------
--------- --------- -------------
</TABLE>
- --------------------------
(1) Restated for Spectrum pooling of interests -- See Note 2.
See accompanying notes to consolidated financial statements.
F-3
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------- --------------------
1994(1) 1995(1) 1996(1) 1995(1) 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues..................................... $ 87,933 $ 130,458 $ 172,151 $ 38,258 $ 49,489
Salaries, wages and other direct costs....... 60,200 89,334 118,458 26,000 33,431
Selling, general and administrative
expenses................................... 23,154 30,771 37,188 8,654 10,656
Amortization of intangible assets............ 690 1,377 1,777 437 517
Merger costs................................. -- 1,075 901 -- 597
--------- --------- --------- --------- ---------
Operating income........................... 3,889 7,901 13,827 3,167 4,288
Interest income.............................. 103 61 664 16 212
Interest expense............................. (293) (289) (210) (104) --
--------- --------- --------- --------- ---------
Income before income taxes................. 3,699 7,673 14,281 3,079 4,500
Income tax expense........................... 1,351 3,208 4,988 1,158 2,866
--------- --------- --------- --------- ---------
Net income................................. $ 2,348 $ 4,465 $ 9,293 $ 1,921 $ 1,634
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma information (unaudited) (Note
1(j)):
Historical net income...................... $ 2,348 $ 4,465 $ 9,293 $ 1,921 $ 1,634
Pro forma adjustment to income tax
expense.................................. (4) 121 (533) (50) 969
--------- --------- --------- --------- ---------
Pro forma net income....................... $ 2,344 $ 4,586 $ 8,760 $ 1,871 $ 2,603
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Pro forma income per common and common
equivalent share......................... $ 0.16 $ 0.27 $ 0.48 $ 0.11 $ 0.14
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common and common equivalent
shares..................................... 14,378 16,893 18,305 17,200 19,069
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
- ------------------------
(1) Restated for Spectrum pooling of interests -- See Note 2.
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1994, 1995 AND 1996
AND THREE MONTHS ENDED SEPTEMBER 30, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------------------ PAID-IN RETAINED STOCKHOLDERS'
SHARES AMOUNT CAPITAL EARNINGS EQUITY
----------- ----------- ----------- ----------- -------------
<S> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1993(1)............................... 11,586 $ 116 $ 423 $ 6,209 $ 6,748
Stock or stock option redemption.......................... -- -- (2) (33) (35)
Issuance of common stock for options exercised............ 400 4 369 -- 373
Common stock issued in initial public offering, net of
offering costs of $1,200................................ 2,950 30 10,557 -- 10,587
Issuance of common stock in connection with acquisition... 120 1 499 -- 500
Compensation expense related to stock options............. -- -- 7 -- 7
Net income................................................ -- -- -- 2,348 2,348
----------- ----- ----------- ----------- -------------
BALANCES AT JUNE 30, 1994(1).............................. 15,056 151 11,853 8,524 20,528
Issuance of common stock for options exercised of merged
company................................................. -- -- 85 -- 85
Stock redemption of merged company........................ -- -- (35) -- (35)
Issuance of common stock for options exercised............ 86 1 59 -- 60
Sale of common stock under employee stock purchase plan... 16 -- 72 -- 72
Tax benefit from exercise of stock options................ -- -- 422 -- 422
Termination of S corporation tax status of merged
company................................................. -- -- 854 (854) --
Reversal of deferred compensation liability............... -- -- 86 -- 86
Issuance of common stock in connection with acquisition... 24 -- 100 -- 100
Compensation expense related to stock options............. -- -- 19 -- 19
Net income................................................ -- -- -- 4,465 4,465
----------- ----- ----------- ----------- -------------
BALANCES AT JUNE 30, 1995(1).............................. 15,182 152 13,515 12,135 25,802
Issuance of common stock for options exercised............ 582 6 444 -- 450
Sale of common stock under employee stock purchase plan... 90 1 797 -- 798
Common stock issued in public offering, net of offering
costs of $1,532......................................... 1,912 19 18,971 -- 18,990
Sale of common stock...................................... -- -- 12 -- 12
Tax benefit from exercise of stock options................ -- -- 2,643 -- 2,643
Termination of S corporation tax status of merged
company................................................. -- -- 736 (736) --
Issuance of common stock in connection with acquisition... 24 -- 100 -- 100
Compensation expense related to stock options............. -- -- 19 -- 19
Net income................................................ -- -- -- 9,293 9,293
----------- ----- ----------- ----------- -------------
BALANCES AT JUNE 30, 1996(1).............................. 17,790 178 37,237 20,692 58,107
Issuance of common stock for options exercised............ 121 1 213 -- 214
Sale of common stock under employee stock purchase plan... 24 -- 328 -- 328
Sale of common stock...................................... -- -- 30 -- 30
Tax benefit from exercise of stock options................ -- -- 1,141 -- 1,141
Compensation expense related to stock and stock options... -- -- 23 -- 23
Termination of S corporation tax status of merged
company................................................. -- -- 2,130 (2,130) --
Net income................................................ -- -- -- 1,634 1,634
----------- ----- ----------- ----------- -------------
BALANCES AT SEPTEMBER 30, 1996 (UNAUDITED)................ 17,935 $ 179 $ 41,102 $ 20,196 $ 61,477
----------- ----- ----------- ----------- -------------
----------- ----- ----------- ----------- -------------
</TABLE>
- ------------------------------
(1) Restated for Spectrum pooling of interests -- See Note 2.
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEARS ENDED JUNE 30, SEPTEMBER 30,
------------------------------- --------------------
1994(1) 1995(1) 1996(1) 1995(1) 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income..................................................... $ 2,348 $ 4,465 $ 9,293 $ 1,921 $ 1,634
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization................................ 1,050 1,922 2,567 581 809
Deferred income taxes........................................ (9) 240 (1,277) 84 956
Compensation expense related to stock and stock options...... 7 19 19 4 23
Changes in operating assets and liabilities, net of the
effect of acquisitions:
Accounts receivable.......................................... (3,054) (8,268) (8,664) (1,732) 237
Intangible assets............................................ -- -- (127) (127) (140)
Other current and long-term assets........................... (133) (298) (405) (606) (443)
Trade payables............................................... 670 519 (85) 14 308
Accrued compensation......................................... 1,740 1,153 47 2,035 2,873
Income taxes................................................. 277 215 (152) 265 (835)
Other liabilities............................................ (663) 669 983 (402) (423)
--------- --------- --------- --------- ---------
Net cash provided by operating activities................ 2,233 636 2,199 2,037 4,999
--------- --------- --------- --------- ---------
INVESTING ACTIVITIES:
Acquisitions................................................... (9,920) (5,213) (1,725) (956) (4,980)
Purchases of property and equipment............................ (481) (917) (1,678) (239) (445)
(Purchases) sales of short-term investments.................... (1,024) 1,140 -- -- --
Advances to affiliates......................................... (9,083) -- -- -- --
Payments from affiliates....................................... 10,402 -- -- -- --
--------- --------- --------- --------- ---------
Net cash used in investing activities.................... (10,106) (4,990) (3,403) (1,195) (5,425)
--------- --------- --------- --------- ---------
FINANCING ACTIVITIES:
Net borrowings (payments) on bank lines of credit.............. (2,280) 4,131 (5,800) (700) --
Proceeds from sales of common stock, net....................... 10,960 217 20,250 147 572
Current tax benefit from exercise of stock options............. -- 422 1,600 379 2,184
Payments on notes payable...................................... (65) (55) (110) (110) --
Redemption of stock or stock option............................ (35) (35) -- -- --
Payments on notes payable-related party........................ (304) -- -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used in) financing activities...... 8,276 4,680 15,940 (284) 2,756
--------- --------- --------- --------- ---------
Net increase in cash and cash equivalents................ 403 326 14,736 558 2,330
Cash and cash equivalents, beginning of period................. 1,606 2,009 2,335 2,335 17,071
--------- --------- --------- --------- ---------
Cash and cash equivalents, end of period....................... $ 2,009 $ 2,335 $ 17,071 $ 2,893 $ 19,401
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Supplemental cash flow information:
Cash paid for interest......................................... $ 200 $ 291 $ 213 $ 100 $ --
Cash paid for income taxes..................................... 957 1,946 4,738 445 366
Supplemental noncash investing and financing activities:
Increase in liabilities to acquire assets in acquisitions...... 2,093 225 -- -- --
Decrease in current liabilities due to reversal of deferred
compensation liability....................................... -- 86 -- -- --
Issuance of common stock in connection with acquisition........ 500 100 100 -- --
</TABLE>
- ------------------------------
(1) Restated for Spectrum pooling of interests -- See Note 2.
See accompanying notes to consolidated financial statements.
F-6
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1994, 1995 AND 1996
(INFORMATION AS OF SEPTEMBER 30, 1996 AND FOR THE THREE MONTH PERIODS
ENDED SEPTEMBER 30, 1995 AND 1996 IS UNAUDITED)
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(A) NATURE OF OPERATIONS
CIBER, Inc. ("CIBER" or the "Company") is a nationwide provider of
information technology consulting, including application software staff
supplementation, management consulting solutions to business problems, package
software implementation, system life-cycle project responsibility, millennium
date change conversion services, and networking procurement and engineering
services. As of September 30, 1996, CIBER has approximately 2,000 consultants
operating out of over 30 offices in over 20 states, plus one office in each of
two foreign countries.
The Company's core business is application software staff supplementation
and is provided by the CIBER Information Services ("CIS") division. The Company
provides strategic technology services through its wholly-owned subsidiaries:
Spectrum Technology Group, Inc. ("Spectrum") and Business Information
Technology, Inc. ("BIT"). Spectrum provides management consulting solutions to
business problems, specifically in the areas of data warehousing, data modeling
and enterprise architecture, as well as project management and system
integration services. BIT specializes in the implementation and integration of
human resource and financial software application products, primarily for
client/server networks. A substantial portion of BIT's revenues is derived from
assisting clients implementing PeopleSoft, Inc. ("PeopleSoft") software.
(B) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. All significant intercompany balances and
transactions have been eliminated.
(C) CASH EQUIVALENTS
The Company considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. Cash
equivalents consist of money market funds.
(D) PROPERTY AND EQUIPMENT
Property and equipment, which consists primarily of office equipment and
furniture, is stated at cost. Repair and maintenance costs are charged to
expense. Depreciation is computed using the straight-line and accelerated
methods over the estimated useful lives, ranging primarily from five to seven
years. Depreciation expense was $360,000, $545,000 and $790,000 for the years
ended June 30, 1994, 1995 and 1996, respectively.
(E) INTANGIBLE ASSETS
Intangible assets consist of client lists, goodwill, noncompete agreements
and software license costs. Client lists are amortized over the estimated useful
lives ranging from two to eight years. Goodwill is amortized over 12 to 15
years. Noncompete agreements and software license costs are amortized over the
terms of the contracts, which range from two to eight years. Amortization is
recorded using the straight-line method.
F-7
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Intangible assets will be reviewed for impairment when events indicate the
carrying amount of intangible assets may not be recoverable. Events that may
indicate a need to assess recoverability include significant changes in business
conditions, continuing losses or a forecasted inability to achieve at least
break-even operating results over a long period. Management does not believe
current events or circumstances provide evidence that intangible assets have
been impaired. Impairments would be considered to exist when the estimated
non-discounted future cash flows expected to result from the use of the
intangible asset are less than the carrying amount of the asset. Impairment, if
any, will be measured based on forecasted future discounted operating cash
flows.
(F) REVENUE RECOGNITION
The Company recognizes revenue on contracts as services are rendered.
Revenues include reimbursable expenses directly incurred in providing services
to clients. Reimbursable expenses totaled $2,368,000, $3,896,000 and $4,610,000
for the years ended June 30, 1994, 1995 and 1996, respectively.
(G) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. A tax benefit or expense is
recognized for the net change in the deferred tax asset or liability during the
period. The effect on deferred tax assets and liabilities due to a change in tax
rates is recognized in income tax expense in the period that includes the
enactment date.
During the quarter ended December 31, 1995, Spectrum elected S corporation
status for federal income tax purposes, effective for its tax year ended
December 31, 1995. As an S corporation, Spectrum was generally not subject to
income taxes. As a result of the change in Spectrum's tax status, income tax
expense for the quarter ended December 31, 1995 includes a tax benefit of
$818,000, resulting from the elimination of Spectrum's net deferred tax
liability. Thereafter, no provision for income taxes is included in the
consolidated financial statements for the operations of Spectrum prior to its
merger with CIBER. Upon Spectrum's merger with CIBER, Spectrum's S corporation
status was terminated and the Company has recorded a one-time income tax expense
of $1,202,000 to record the net deferred tax liability of Spectrum at the merger
date.
Prior to their merger with the Company, Practical Business Solutions, Inc.
("PBSI"), and Spencer & Spencer Systems, Inc. ("SSSI") each had elected S
corporation status for U.S. federal income tax purposes, and therefore were
generally not subject to income taxes. Accordingly, no provision for income
taxes is included in the consolidated financial statements for the operations of
these companies prior to their merger with CIBER. The related net deferred tax
liability at the merger date has been recorded as income tax expense. See note
1(j).
(H) STOCK SPLIT
The Company's Board of Directors authorized a two-for-one stock split
effected in the form of a 100% stock dividend payable on June 14, 1996, to
stockholders of record on May 31, 1996. As a result of the stock split, an
additional 8,468,000 common shares were issued. Stockholders' equity has been
restated to give retroactive recognition to the stock split for all periods
presented by reclassifying from additional paid-in capital to common stock the
par value of the additional shares arising from the split. In addition, all
F-8
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
references in the consolidated financial statements to number of common shares,
per share amounts and stock option data have been restated.
(I) STOCK-BASED COMPENSATION
CIBER uses the intrinsic value-based method for measuring stock-based
compensation cost, which measures compensation cost as the excess, if any, of
the quoted market price of CIBER common stock at the grant date over the amount
the employee must pay for the stock. CIBER generally grants stock options at
fair market value at the date of grant.
(J) PRO FORMA NET INCOME
To properly reflect the Company's pro forma net income, the net income of
Spectrum, PBSI and SSSI, which was not subject to income taxes because of their
S corporation status, has been tax effected and included in the pro forma
adjustment to income tax expense in the accompanying consolidated statements of
operations. This adjustment was computed as if the merged companies had been
taxable entities subject to federal and state income taxes for all periods prior
to their merger with CIBER at the marginal rates applicable in such periods.
The pro forma adjustment to income tax expense for the year ended June 30,
1996 has also been effected to exclude an income tax benefit of $818,000,
representing the tax benefit resulting from Spectrum's conversion to an S
corporation. In addition, the pro forma adjustment to income tax expense for the
years ended June 30, 1995 and 1996 and for the three months ended September 30,
1996 has been effected to exclude income tax expense of $284,000, $475,000 and
$1,202,000, respectively, representing the one-time tax expense resulting from
the termination of the S corporation status of SSSI, PBSI and Spectrum.
(K) PRO FORMA INCOME PER COMMON AND COMMON EQUIVALENT SHARE
Pro forma income per common and common equivalent share is computed on the
basis of weighted average number of shares outstanding during the period and
common equivalent shares. Common equivalent shares of 1,906,000, 1,806,000 and
1,561,000 in fiscal 1994, 1995 and 1996, respectively, and 1,964,000 and
1,244,000 for the three months ending September 30, 1995 and 1996, respectively,
consist of stock options, determined using the treasury stock method. Pursuant
to a Securities and Exchange Commission Staff Accounting Bulletin, common and
common equivalent shares issued during the twelve-month period prior to the
Company's initial public offering in March 1994 at prices less than the initial
public offering price have been included in the calculation as if they were
outstanding for all periods prior to the initial public offering (using the
treasury stock method and the initial public offering price). In addition, the
shares and the options issued in connection with business combinations accounted
for as a pooling of interests have been treated as if they had been issued and
outstanding for all periods prior to the merger.
(L) ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
F-9
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(M) FAIR VALUE OF FINANCIAL INSTRUMENTS
Unless otherwise stated herein, the fair value of the Company's financial
instruments approximate their carrying amounts due to the relatively short
periods to maturity of the instruments and/or variable interest rates of the
instruments, which approximate current market rates.
(N) UNAUDITED INTERIM CONSOLIDATED FINANCIAL STATEMENTS AND NOTES
The consolidated financial statements as of September 30, 1996 and for the
three months ended September 30, 1995 and 1996 are unaudited but, in the opinion
of management, include all adjustments, consisting only of normal recurring
adjustments, which are necessary for a fair presentation of the consolidated
financial condition, results of operations and cash flows. Information in the
notes to consolidated financial statements that relate to the interim unaudited
consolidated financial statements is also unaudited. The operating results for
the three months ended September 30, 1996 are not necessarily indicative of the
results that may be expected for the year ending June 30, 1997.
(2) POOLINGS OF INTERESTS
On September 3, 1996, Spectrum merged with CIBER in a business combination
accounted for as a pooling of interests. CIBER issued 853,116 shares of common
stock in exchange for all of the outstanding common stock of Spectrum.
Accordingly, the Company's consolidated financial statements have been restated
for all periods prior to the merger to include the results of operations,
financial position and cash flows of Spectrum with those of the Company.
Revenues, net income (loss) and pro forma net income of the separate
companies and of the two companies combined were (in thousands):
<TABLE>
<CAPTION>
CIBER
(AS
PREVIOUSLY
REPORTED) SPECTRUM COMBINED
------------- ----------- ----------
<S> <C> <C> <C>
Three months ended September 30, 1996:
Revenues.............................................. $ 45,292 $ 4,197 $ 49,489
Net income (loss)..................................... 2,169 (535) 1,634
Pro forma net income.................................. 2,169 434 2,603
Year ended June 30, 1996:
Revenues.............................................. $ 156,873 $ 15,278 $ 172,151
Net income............................................ 8,142 1,151 9,293
Pro forma net income.................................. 8,531 229 8,760
Year ended June 30, 1995:
Revenues.............................................. $ 120,151 $ 10,307 $ 130,458
Net income............................................ 4,175 290 4,465
Pro forma net income.................................. 4,296 290 4,586
Year ended June 30, 1994:
Revenues.............................................. $ 79,810 $ 8,123 $ 87,933
Net income............................................ 2,262 86 2,348
Pro forma net income.................................. 2,258 86 2,344
</TABLE>
In May 1996, PBSI merged with CIBER in a business combination accounted for
as a pooling of interests. In connection with the merger of PBSI with CIBER, the
Company incurred merger costs of $901,000, which were expensed in the quarter
ended June 30, 1996. In fiscal 1995, SSSI and BIT merged with CIBER in business
combinations each accounted for as a pooling of interests. In connection with
the
F-10
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
mergers of SSSI and BIT, the Company incurred merger costs of $1,075,000, which
were expensed in the quarter ended June 30, 1995. The Company's consolidated
financial statements include the accounts and operations of SSSI, BIT and PBSI
for all periods prior to the respective merger.
(3) ACQUISITIONS
From July 1, 1993 through September 30, 1996, CIBER made the acquisitions
set forth below. Each of these acquisitions has been accounted for under the
purchase method of accounting for business combinations and, accordingly, the
accompanying consolidated financial statements include the results of operations
of each acquired business since the date of acquisition. Pro forma results of
operations have not been presented because the effects were not material to
revenues or net income.
BUSINESS SYSTEMS DEVELOPMENT DIVISION -- In July 1996, the Company acquired
certain assets, liabilities and all of the business operations of the Business
Systems Development division of DataFocus, Inc., Fairfax, Virginia, a subsidiary
of KTI, Inc. The aggregate purchase price was $4,980,000, of which $4,751,000
has been allocated to goodwill and $229,000 has been allocated to other net
assets. This division provides Microsoft technology-based computer software
consulting services.
OASYS, INC. -- In March 1996, the Company acquired certain assets and all of
the business operations of Oasys, Inc., located near Columbus, Ohio. The
consideration paid for this acquisition was $769,000 in cash. The excess of the
purchase price over the estimated fair value of net assets acquired amounted to
$740,000, which has been accounted for as goodwill. In addition, if the
operations acquired achieve certain levels of revenue, the Company would be
required to pay, through December 31, 1998, additional cash consideration to the
former owners. The Company would record such additional consideration paid, if
any, as additional goodwill.
MINNESOTA BRANCH -- In September 1995, the Company acquired certain assets
and liabilities and all of the business operations of the Rochester, Minnesota
branch office of Broadway & Seymour, Inc. The consideration paid for this
acquisition was $956,000 in cash and the assumption of $16,000 of net
liabilities. The excess of the purchase price over the estimated fair value of
net assets acquired amounted to $972,000, which has been accounted for as
goodwill.
INTERFACE SYSTEMS, INC. ("ISI") -- In January 1995, the Company acquired
certain assets and all of the business operations of ISI, located in Holmdel,
New Jersey. The consideration for the acquisition was $3,350,000. In addition,
if the operations acquired achieve certain levels of income, the Company will be
required to pay annually, through December 31, 1997, additional consideration in
the form of shares of common stock to the former owners. The Company would
record such additional consideration paid, if any, as additional goodwill. The
aggregate purchase price was allocated, based upon fair values, to: client lists
$1,771,000, goodwill $1,500,000, noncompete agreements $60,000 and other assets
$19,000.
C.P.U., INC. ("CPU") -- In June 1994, the Company acquired certain assets
and all of the business operations of CPU, located in Rochester, New York. The
total consideration for this acquisition was $12,359,000, of which $9,859,000
was paid in cash at closing, $1,500,000 was paid in fiscal 1995, $500,000 was
paid through the issuance of common stock of the Company, and $500,000 of common
stock issuable in equal installments over five years. The first two of these
stock issuances had been made as of June 30, 1996. The aggregate purchase price
was allocated, based upon fair values, to: client lists $5,000,000, goodwill
$4,500,000, noncompete agreements $600,000, accounts receivable $2,163,000 and
other net assets $96,000.
F-11
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(4) INTANGIBLE ASSETS
Intangible assets consist of the following at June 30, 1995 and 1996 (in
thousands):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Goodwill................................................................ $ 5,975 $ 7,687
Client lists............................................................ 6,872 6,872
Noncompete agreements................................................... 2,725 2,845
Software license costs.................................................. 310 337
--------- ---------
15,882 17,741
Less accumulated amortization........................................... (3,189) (4,966)
--------- ---------
$ 12,693 $ 12,775
--------- ---------
--------- ---------
</TABLE>
(5) BANK REVOLVING LINES OF CREDIT
The Company has a revolving line of credit agreement with a bank providing
for outstanding borrowings of up to 80% of eligible accounts receivable with a
maximum borrowing of $15,000,000. Outstanding borrowings bear interest at the
bank's prime rate (8.25% at June 30, 1996). Borrowings under the agreement are
collateralized by substantially all the assets of the Company. The credit
agreement requires a commitment fee of 0.225% per annum on any unused portion.
The terms and conditions of the credit agreement include several covenants,
including those whereby the Company agrees to the maintenance of a certain
tangible net worth and debt service coverage ratios and imposes limits on the
incurrence of additional indebtedness. Amounts advanced under the line of credit
can be used to consummate an acquisition and may be required by the bank to be
converted into a five-year term note payable in equal amounts of interest and
principal; in such event, the line of credit would be reduced by the amount of
the term note.
At June 30, 1996, Spectrum had a $650,000, unsecured, revolving line of
credit with a bank. Outstanding borrowings bear interest at the bank's prime
rate. No borrowings were outstanding at June 30, 1996.
(6) LEASES
The Company has several noncancelable operating leases for office space.
Rental expense for operating leases totaled $1,456,000, $1,804,000 and
$1,835,000 for the years ended June 30, 1994, 1995 and 1996, respectively.
Future minimum lease payments as of June 30, 1996 are (in thousands):
<TABLE>
<CAPTION>
Year ending June 30:
<S> <C>
1997.............................................................. $ 1,580
1998.............................................................. 1,414
1999.............................................................. 1,216
2000.............................................................. 585
2001.............................................................. 90
---------
Total minimum lease payments.................................... $ 4,885
---------
---------
</TABLE>
F-12
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(7) INCOME TAXES
Income tax expense (benefit) for the years ended June 30, 1994, 1995 and
1996 consists of the following (in thousands):
<TABLE>
<CAPTION>
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
Current:
Federal........................................................................... $ 1,230 $ 2,555 $ 5,246
State and local................................................................... 95 354 909
Foreign........................................................................... 35 59 110
--------- --------- ---------
1,360 2,968 6,265
--------- --------- ---------
Deferred:
Federal........................................................................... (15) 198 (1,083)
State and local................................................................... 6 42 (194)
--------- --------- ---------
(9) 240 (1,277)
--------- --------- ---------
Income tax expense.............................................................. $ 1,351 $ 3,208 $ 4,988
--------- --------- ---------
--------- --------- ---------
</TABLE>
Actual income tax expense for the years ended June 30, 1994, 1995 and 1996
differed from the amounts computed by applying the expected U.S. federal income
tax rate to income before income taxes as a result of the following (in
thousands):
<TABLE>
<CAPTION>
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Computed expected tax expense at 34.0%........................................ $ 1,258 $ 2,609 $ 4,856
Increase (decrease) in income taxes resulting from:
State and local income taxes, net of federal income tax benefit............. 67 257 556
Nondeductible merger costs.................................................. -- 236 38
Termination of S corporation status of merged companies..................... -- 284 475
Conversion of merged company to an S corporation............................ -- -- (818)
S corporation income of merged companies.................................... (4) (96) (161)
Other....................................................................... 30 (82) 42
----------- ----------- -----------
Income tax expense........................................................ $ 1,351 $ 3,208 $ 4,988
----------- ----------- -----------
----------- ----------- -----------
Effective tax rate.......................................................... 36.5% 41.8% 34.9%
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
For the year ended June 30, 1996, the Company recognized $2,643,000 as a
direct increase to additional paid-in capital for the tax benefit resulting from
the exercise of stock options. Of this amount, $1,600,000 reduced income taxes
payable at June 30, 1996 and $1,043,000 is included in deferred tax assets,
which will be used to reduce income taxes payable for the year ending June 30,
1997.
F-13
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The components of the net deferred tax asset or liability at June 30, 1995
and 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
1995 1996
--------- ---------
<S> <C> <C>
Deferred tax assets:
Intangible assets, due to differences in amortization periods.................... $ 176 $ 458
Accounts payable................................................................. 234 186
Accrued expenses, due to accruals not currently tax deductible................... 1,005 443
Net operating loss carryforwards of BIT.......................................... 264 --
Future tax benefit of stock options exercised.................................... -- 1,043
Other............................................................................ 4 --
--------- ---------
1,683 2,130
--------- ---------
Deferred tax liabilities:
Accounts receivable.............................................................. (3,128) (1,255)
--------- ---------
Net deferred tax asset (liability)............................................. $ (1,445) $ 875
--------- ---------
--------- ---------
Balance sheet classification of net deferred tax asset (liability):
Deferred tax asset-current....................................................... $ -- $ 417
Deferred tax asset-long term..................................................... 440 458
Deferred tax liability-current................................................... (1,885) --
--------- ---------
Net deferred tax asset (liability)............................................. $ (1,445) $ 875
--------- ---------
--------- ---------
</TABLE>
Deferred taxes related to accounts payable and accounts receivable are
primarily related to Spectrum and BIT utilizing the cash basis of accounting for
income tax purposes, prior to their merger with CIBER.
(8) STOCKHOLDERS' EQUITY
On October 29, 1996, the Company's stockholders' approved: (i) an increase
in the number of authorized shares of common stock from 20,000,000 to
40,000,000, (ii) an increase in the number of shares of common stock reserved
for issuance pursuant to the Company's Employee Stock Purchase Plan from 500,000
to 1,000,000, and (iii) an increase in the number of shares of common stock
reserved for issuance pursuant to the Company's Equity Incentive Plan (the
"Employees' Plan") from 1,000,000 to 2,000,000.
(A) EMPLOYEE STOCK PURCHASE PLAN
In January 1995, the Company established a stock purchase plan that allows
eligible employees to purchase, through payroll deductions, shares of the
Company's common stock at 85% of the fair market value at specified dates. The
Company has reserved 1,000,000 shares of common stock for issuance under the
Employee Stock Purchase Plan. During the years ended June 30, 1995 and 1996,
employees purchased 16,880 and 90,268 shares of common stock, respectively.
(B) STOCK OPTION PLANS
1989 PLAN -- The Company established a stock option plan in 1989 that was
discontinued during fiscal 1994. The options are 100% vested as of July 1, 1995
and are subject to certain restrictions. The options expire 20 years after the
date of grant through 2013.
F-14
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
EMPLOYEES' PLAN -- The Company established in 1994 a stock option plan for
employees and has reserved 2,000,000 shares of the Company's authorized but
unissued common stock for granting of options. Under this plan, the plan
administrators may grant restricted stock, stock options, performance bonuses or
any combination thereof to officers, employees and consultants. The number of
awards granted annually is determined by the compensation committee of the Board
of Directors. Options become exercisable as determined at the date of grant by
the Board of Directors and expire within 10 years from the date of grant. No
portion of the option vests before six months after the date of grant.
DIRECTORS' PLAN -- The Company also established in 1994 a stock option plan
for non-employee directors, and has reserved 100,000 shares of the Company's
authorized but unissued common stock for granting of options thereto. Under this
plan, stock options are non-discretionary and granted annually at the fair
market value of the Company's common stock on the date of grant. The number of
options granted annually is fixed by the plan. Options become exercisable as
determined at the date of grant by the Board of Directors and expire 10 years
from the date of grant.
SSSI OPTION AGREEMENT -- In May 1995, the Company established a stock option
plan for Mr. David T. Pieroni as part of the SSSI merger. The Company granted an
option to purchase 134,268 shares of common stock at $.005 per share. This
option was exercised during the year ended June 30, 1996.
At June 30, 1996, there were 2,329,322 common shares reserved for stock
options (excluding the increase in authorized shares approved by stockholders on
October 29, 1996) and options for 1,360,322 common shares were exercisable under
the Company's stock option plans.
F-15
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
The following summarizes activity under the Company's 1989, Employees' and
Directors' stock option plans:
<TABLE>
<CAPTION>
PER SHARE OPTION
SHARES UNDER OPTION PRICE
------------------- ---------------------
<S> <C> <C>
1989 PLAN
Outstanding at June 30, 1993..................... 1,904,560 $ 0.46 - 1.06
Granted.......................................... 290,626 1.29
Redeemed......................................... (34,874) 0.77
Exercised........................................ (400,000) 0.46 - 1.29
----------
Outstanding at June 30, 1994..................... 1,760,312 0.46 - 1.29
Exercised........................................ (85,000) 0.46 - 1.29
----------
Outstanding at June 30, 1995..................... 1,675,312 0.46 - 1.29
Exercised........................................ (403,990) 0.46 - 1.29
----------
Outstanding at June 30, 1996..................... 1,271,322 0.46 - 1.29
----------
----------
EMPLOYEES' PLAN
Outstanding at June 30, 1993..................... -- --
Granted.......................................... 200,000 $ 4.17 - 4.40
----------
Outstanding at June 30, 1994..................... 200,000 4.17 - 4.40
Granted.......................................... 120,000 4.38
Canceled......................................... (18,000) 4.38
----------
Outstanding at June 30, 1995..................... 302,000 4.17 - 4.40
Granted (a)...................................... 473,894 0.01 - 19.88
Exercised........................................ (42,000) 4.17 - 4.38
Canceled......................................... (1,000) 16.38
----------
Outstanding at June 30, 1996..................... 732,894 0.01 - 19.88
----------
----------
DIRECTORS' PLAN
Outstanding at June 30, 1993..................... -- --
Granted.......................................... 10,000 $ 4.00
----------
Outstanding at June 30, 1994..................... 10,000 4.00
Granted.......................................... 12,000 4.44 - 6.31
----------
Outstanding at June 30, 1995..................... 22,000 4.00 - 6.31
Granted.......................................... 14,000 10.75 - 11.63
----------
Outstanding at June 30, 1996..................... 36,000 4.00 - 11.63
----------
----------
</TABLE>
- ------------------------
(a) Includes options for 72,185 shares, at $.01 per share, granted in connection
with PBSI's merger with CIBER, which options replaced existing PBSI stock
options.
(9) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CIBER Network Services, Inc. ("CNSI") on
December 2, 1996 (see note 12), the Company was a guarantor on an inventory
purchase line of credit with AT&T Capital Corporation to CNSI. CNSI was majority
owned by certain officers of the Company. Effective October 25, 1996, the
maximum borrowings available under this line of credit was increased from
$2,000,000 to $3,000,000. As of June 30, 1996 and September 30, 1996, the
outstanding amount under the line of credit was $1,774,000 and $1,239,000,
respectively. The highest amount outstanding under the line of credit was
$1,896,000 during the year ended June 30, 1995 and $2,000,000 during the year
ended June 30, 1996. Certain officers of the Company had also guaranteed this
line of credit and had indemnified the Company against losses that
F-16
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
might be incurred as a result of its guaranty. As a result of the acquisition of
CNSI by CIBER, the officers of CIBER have been released from the guarantees and
indemnifications related to this line of credit.
During the years ended June 30, 1994, 1995 and 1996, CIBER purchased from
CNSI several local area networks and various computer equipment and software for
approximately $160,000, $268,000 and $923,000, respectively. In January 1994,
the Company and CNSI entered into a month-to-month management services
agreement, which provided that the Company supply accounting and other
administrative services to CNSI at a monthly cost of $2,500.
(10) 401(K) SAVINGS PLAN
The Company has two savings plans under Section 401(k) of the Internal
Revenue Code. Company contributions are determined based on the employee's
completed years of service, the employee's contribution and the Company's
matching contribution percentage. Company contributions were $418,000, $615,000
and $932,000 for the years ended June 30, 1994, 1995 and 1996, respectively.
Prior to its merger with CIBER, Spectrum had a non-contributory profit
sharing plan. Contributions were made at the discretion of Spectrum's Board of
Directors. Spectrum contributions to the plan were $38,000, $71,000 and $156,000
for the years ended June 30, 1994, 1995 and 1996, respectively.
(11) BUSINESS AND CREDIT CONCENTRATIONS
The Company's clients are located principally throughout the United States.
Its revenue and accounts receivable are generally derived from large companies
in several industries. One of the Company's clients accounted for 10% and 12% of
total revenues for the year ended June 30, 1995 and 1996, respectively. In
addition, the Company's five largest clients accounted for, in the aggregate,
27%, 24% and 28% of the Company's total revenues for the years ended June 30,
1994, 1995 and 1996, respectively. The Company has a policy to regularly monitor
the creditworthiness of its clients and generally does not require collateral.
Historically the Company has not had the need to provide for material
uncollectible amounts. Through BIT, the Company has a concentration of revenues
related to clients purchasing software from PeopleSoft, Inc. ("PeopleSoft").
Approximately 10%, 13% and 15% of the Company's total revenues for the years
ended June 30, 1994, 1995 and 1996, respectively, were generated from over 100
clients implementing PeopleSoft software.
The Company also has concentrations of credit risk in cash and cash
equivalents, which are maintained at recognized financial institutions. The
Company performs ongoing financial evaluations of these institutions.
(12) SUBSEQUENT EVENTS (UNAUDITED)
Subsequent to September 30, 1996, the Company completed the following three
business combinations:
THE TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG") -- On November 26, 1996, TMG
merged with CIBER in a business combination that will be accounted for as a
pooling of interests. The Company issued 242,176 shares of its common stock and
granted options for 163,003 shares of the Company's common stock (at an
aggregate exercise price of $546,986) in exchange for all of the outstanding
shares of common stock and the cancellation of options of TMG. The CIBER stock
options replaced existing TMG stock options. TMG, located in Seattle,
Washington, provides consulting services similar to CIBER.
F-17
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
TECHNICAL SUPPORT GROUP ("TSG") -- On November 27, 1996, TSG merged with
CIBER in a business combination that will be accounted for as a pooling of
interests. The Company issued 370,373 shares of its common stock and assumed all
of TSG's liabilities in exchange for all of the assets of TSG. TSG, located in
Chicago, Illinois, provides consulting services similar to CIBER.
The Company's historical consolidated financial statements presented herein
have not been restated to reflect the mergers of TMG and TSG, because generally
accepted accounting principles prohibit giving effect to a consummated business
combination, accounted for by the pooling of interests method, in financial
statements that do not include the date of consummation of the business
combination. Accordingly, the Company's consolidated financial statements issued
in the future will be restated to include the results of operations, financial
position, and cash flows of TMG and TSG for all periods prior to their
respective merger.
On December 2, 1996, the Company acquired CNSI, which was majority owned by
certain officers of the Company (see note 9), for consideration of approximately
$3.7 million consisting of 68,631 shares of its common stock and approximately
$1.2 million in cash. In addition, the Company assumed net liabilities of
approximately $800,000, resulting in a total purchase price of approximately
$4.5 million. The contingent consideration, if earned, will be payable at the
sellers' option in the Company's common stock, at the then prevailing market
price, or in cash. This acquisition will be accounted for as a purchase. The
Company will record goodwill of approximately $4.5 million, which will be
amortized over 15 years. Any contingent consideration paid will be accounted for
as additional goodwill. For income tax purposes, this acquisition was a
non-taxable transaction. CNSI, which has offices in Edison, NJ, Denver, CO, and
San Francisco, CA, provides local and wide-area networking solutions, including
design, procurement, installation, testing and maintenance. The results of
operations of CNSI after the acquisition date will be included in the Company's
consolidated statement of operations.
The following unaudited pro forma information has been prepared assuming
that the TMG and TSG mergers had taken place at the beginning of the respective
periods. The pro forma information does not include the effects of merger costs
of approximately $550,000 to be recorded in the quarter ended December 31, 1996
as a result of the TMG and TSG mergers. Results for the three months ended
September 30, 1996 are not necessarily indicative of results for the year ending
June 30, 1997.
<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED ENDED
JUNE 30, 1996 SEPTEMBER 30, 1996
------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C>
Revenues................................................................... $ 187,653 $ 54,030
Pro forma net income....................................................... 9,300 2,727
Pro forma income per common share.......................................... .49 .14
</TABLE>
Had the acquisition of CNSI occurred at the beginning of the respective
periods, revenues would have been increased by approximately $19.2 million and
$5.3 million, for the year ended June 30, 1996 and for the three months ended
September 30, 1996, respectively. The effects on pro forma net income and pro
forma income per common share would not have been material.
(13) QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain statements of operations data for
each of the quarters indicated below and, in the opinion of management, contains
all adjustments, consisting only of normal recurring adjustments, necessary for
a fair presentation thereof. All information has been restated for the effect of
the merger with Spectrum in September 1996, which was accounted for as a pooling
of interests, but has
F-18
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
not been restated to reflect the poolings of interests with TMG and TSG (see
note 12). The fourth quarters of fiscal 1995 and 1996 include merger costs of
$1,075,000 and $901,000, respectively, related to poolings of interests. See
note 2. The second and fourth quarters of fiscal 1996 and the fourth quarter of
fiscal 1995 include income tax expense/benefit related to changes in the tax
status of certain merged companies. See note 7.
<TABLE>
<CAPTION>
FIRST
QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER TOTAL
------------ -------------- ------------- -------------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1996
Revenues............................ $ 38,258 $ 39,509 $ 44,626 $ 49,758 $ 172,151
Operating income.................... 3,167 2,921 3,776 3,963 13,827
Net income.......................... 1,921 2,724 2,581 2,067 9,293
Pro forma net income................ 1,871 1,835 2,457 2,597 8,760
Pro forma income per common and
common equivalent share........... $ 0.11 $ 0.10 $ 0.13 $ 0.14 $ 0.48
YEAR ENDED JUNE 30, 1995
Revenues............................ $ 28,895 $ 30,371 $ 34,332 $ 36,860 $ 130,458
Operating income.................... 1,832 1,592 2,487 1,990 7,901
Net income.......................... 1,114 1,072 1,482 797 4,465
Pro forma net income................ 1,120 967 1,437 1,062 4,586
Pro forma income per common and
common equivalent share........... $ 0.07 $ 0.06 $ 0.08 $ 0.06 $ 0.27
</TABLE>
F-19
<PAGE>
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED OR
INCORPORATED BY REFERENCE IN THIS PROSPECTUS IN CONNECTION WITH THE OFFERING
COVERED BY THIS PROSPECTUS. IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY THE
COMPANY, THE SELLING STOCKHOLDERS OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY THE COMMON
STOCK IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO
MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THERE HAS NOT BEEN ANY CHANGE IN THE FACTS SET FORTH IN THIS PROSPECTUS OR IN
THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF.
--------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary........................................................ 3
Risk Factors.............................................................. 7
Price Range of Common Stock............................................... 12
Dividend Policy........................................................... 12
Use of Proceeds........................................................... 13
Capitalization............................................................ 13
Selected Consolidated Financial Data...................................... 14
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 15
Business.................................................................. 22
Management................................................................ 33
Executive Compensation.................................................... 35
Principal and Selling Stockholders........................................ 39
Certain Relationships and Related Transactions............................ 40
Underwriting.............................................................. 41
Legal Matters............................................................. 42
Experts................................................................... 42
Available Information..................................................... 42
Incorporation of Certain Information by Reference......................... 43
Index to Consolidated Financial Statements................................ F-1
</TABLE>
2,000,000 SHARES
[LOGO]
COMMON STOCK
-------------------
PROSPECTUS
-------------------
MERRILL LYNCH & CO.
HANIFEN, IMHOFF INC.
J.P. MORGAN SECURITIES INC.
, 1996
- -------------------------------------------
-------------------------------------------
- -------------------------------------------
-------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by either the Company or the
Selling Stockholders in connection with the sale of Common Stock being
registered (all amounts are estimated except the SEC Registration Fee and the
NASD Filing Fee).
<TABLE>
<S> <C>
SEC Registration Fee.............................................. $ 24,873
NASD Filing Fee................................................... 8,708
Nasdaq Additional Listing Fee..................................... 17,500
Blue Sky Qualification Fees and Expenses (including legal fees)... 15,000
Printing Expenses................................................. 150,000
Legal Fees and Expenses........................................... 125,000
Auditors' Fees and Expenses....................................... 40,000
Transfer Agent and Registrar Fees................................. 5,000
Miscellaneous Expenses............................................ 13,919
---------
Total......................................................... $ 400,000
---------
---------
</TABLE>
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's Bylaws and Amended and Restated Certificate of Incorporation
(the "Certificate of Incorporation") provide that the Company shall, to the
fullest extent permitted by the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all directors and officers of
the Company. Section 145 of the Delaware General Corporation Law provides in
part that a corporation shall have the power to indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding (other than an action by or in the right of
the corporation) by reason of the fact that such person is or was a director,
officer, employee or agent of the corporation or is or was serving at the
request of the corporation as a director, officer, employee or agent of another
corporation or other enterprise, against expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement actually and reasonably incurred
by him in connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the corporation, and with respect to any criminal action or
proceeding, had no reasonable cause to believe his conduct was unlawful. Similar
indemnity is authorized for such persons against expenses (including attorneys'
fees) actually and reasonably incurred in defense or settlement of any
threatened, pending or completed action or suit by or in the right of the
corporation, if such person acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the corporation, and
provided further that (unless a court of competent jurisdiction otherwise
provides) such person shall not have been adjudged liable to the corporation.
Any such indemnification may be made only as authorized in each specific case
upon a determination by the stockholders or disinterested directors that
indemnification is proper because the indemnitee has met the applicable standard
of conduct. The indemnitee is presumed to be entitled to indemnification and the
Company has the burden of proof to overcome that presumption. Where an officer
or a director is successful on the merits or otherwise in the defense of any
action referred to above, the corporation must indemnify him against the
expenses which such officer or director actually or reasonably incurred.
Additionally, the Certificate of Incorporation and Bylaws provide for
mandatory indemnification of directors to the fullest extent permitted by
Delaware law. This provision does not eliminate the liability of a director (i)
for a breach of the director's duty of loyalty to the Company or its
stockholders; (ii) for acts or omissions by the director not in good faith or
which involve intentional misconduct or a knowing violation
II-1
<PAGE>
of law; (iii) for liability arising under Section 174 of the Delaware General
Corporation Law (relating to the declaration of dividends and purchase or
redemption of shares in violation of the Delaware General Corporation Law); or
(iv) for any transaction from which the director derived an improper personal
benefit.
Section 6 of the Underwriting Agreement (filed as Exhibit 1.1 hereto)
provides that the Underwriters will indemnify and hold harmless the Company,
each director, officer or controlling person of the Company and the Selling
Stockholders from and against any liability caused by any statement or omission
in the Registration Statement or Prospectus based on certain information
furnished to the Company by the Underwriters for use in the preparation thereof.
The Company has a directors' and officers' insurance policy with a $5
million coverage limit per occurrence and in the aggregate per year.
ITEM 16. EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- ---------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Purchase Agreement between the Company and the Underwriters
1.2 Form of Agreement among Underwriters and Selected Dealer Agreement
4.1 Form of Common Stock Certificate(1)
5.1 Form of Opinion of Davis, Graham & Stubbs LLP as to the legality of issuance of the Company's
Common Stock
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Davis, Graham & Stubbs LLP (see Exhibit 5.1)
24 Power of Attorney (included on Page II-4)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
(1) Incorporated by reference to Amendment No. 1 to the Registration Statement
on Form S-1 (File No. 33-74774), as filed with the Commission on March 9,
1994.
ITEM 17. UNDERTAKINGS.
The undersigned registrant hereby undertakes to provide to the Underwriters
at the closing specified in the Underwriting Agreement certificates in such
denominations and registered in such names as required by the Underwriters to
permit prompt delivery to each purchaser.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
registrant pursuant to the Company's Bylaws, Certificate of Incorporation or the
Underwriting Agreement, the registrant has been advised that in the opinion of
the Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
The undersigned registrant hereby undertakes:
(1) That, for purposes of determining any liability under the Securities Act
of 1933, each filing of the registrant's annual report pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Act of 1934) that is
incorporated by reference in the registration statement shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
(2) That for purposes of determining any liability under the Securities Act
of 1933, the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to
Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed
to be part of this registration statement as of the time it was declared
effective.
(3) That for the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering thereof.
(3) To deliver or cause to be delivered with the prospectus, to each person
to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule
14c-3 under the Exchange Act; and, where interim financial information
required to be presented by Article 3 of Regulation S-X is not set forth
in the prospectus, to deliver, or cause to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such
interim financial information.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Englewood, State of Colorado, on December 12, 1996.
CIBER, Inc.
By: /s/ BOBBY G. STEVENSON
------------------------------------------
Bobby G. Stevenson,
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears
herein constitutes and appoints Bobby G. Stevenson and Mac J. Slingerlend, and
each of them, as his true and lawful attorneys-in-fact and agents, with full
power of substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign any and all amendments to this
Registration Statement (including post-effective amendments), including a
registration statement filed pursuant to Rule 462(b) under the Securities Act of
1933, as amended, and to file the same, with all exhibits thereto, and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or any of them, or their or his
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLE DATE
- ------------------------------ -------------------------- -------------------
Chairman, Chief Executive
/s/ BOBBY G. STEVENSON Officer and Secretary
- ------------------------------ (Principal Executive December 12, 1996
Bobby G. Stevenson Officer)
/s/ MAC J. SLINGERLEND President/Chief Operating
- ------------------------------ Officer, Treasurer and December 12, 1996
Mac J. Slingerlend Director
Executive Vice
/s/ RICHARD A. MONTONI President/Chief
- ------------------------------ Financial Officer and December 12, 1996
Richard A. Montoni Director (Principal
Financial Officer)
Vice President/Chief
/s/ CHRISTOPHER L. LOFFREDO Accounting Officer
- ------------------------------ (Principal Accounting December 12, 1996
Christopher L. Loffredo Officer)
- ------------------------------ Director December , 1996
James A. Rutherford
- ------------------------------ Director December , 1996
James C. Spira
/s/ ROY L. BURGER
- ------------------------------ Director December 12, 1996
Roy L. Burger
II-4
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBIT
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
1.1 Form of Purchase Agreement between the Company and the Underwriters
1.2 Form of Agreement among Underwriters and Selected Dealer Agreement
4.1 Form of Common Stock Certificate(1)
5.1 Form of Opinion of Davis, Graham & Stubbs LLP as to the legality of issuance of the Company's Common
Stock
23.1 Consent of KPMG Peat Marwick LLP
23.2 Consent of Davis, Graham & Stubbs LLP (see Exhibit 5.1)
24 Power of Attorney (included on Page II-4)
27.1 Financial Data Schedule
</TABLE>
- ------------------------
(1) Incorporated by reference to Amendment No. 1 to the Registration Statement
on Form S-1 (File No. 33-74774), as filed with the Commission on March 9,
1994.
<PAGE>
Draft of October 10, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
CIBER, Inc.
(a Delaware corporation)
2,000,000 Shares of Common Stock
PURCHASE AGREEMENT
Dated: October __, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
----
SECTION 1. Representations and Warranties................................. 2
(a) Representations and Warranties by the Company.................... 2
(i) Compliance with Registration Requirements................ 3
(ii) Incorporated Documents................................... 3
(iii) Independent Accountants.................................. 4
(iv) Financial Statements..................................... 4
(v) No Material Adverse Change in Business................... 4
(vi) Good Standing of the Company............................. 4
(vii) Good Standing of Subsidiaries............................ 4
(viii) Capitalization........................................... 5
(ix) Authorization of Agreement............................... 5
(x) Authorization and Description of Securities.............. 5
(xi) Absence of Defaults and Conflicts........................ 5
(xii) Absence of Inter-Relationships........................... 6
(xiii) Absence of Proceedings; Statutes; Accuracy of Exhibits... 6
(xiv) Possession of Intellectual Property...................... 6
(xv) Absence of Further Requirements.......................... 7
(xvi) Possession of Licenses and Permits....................... 7
(xvii) Title to Property........................................ 7
(xviii) Compliance with Cuba Act................................. 7
(xix) Investment Company Act................................... 7
(xx) Registration Rights...................................... 8
(xxi) Insurance................................................ 8
(xxii) Accounting Controls...................................... 8
(xxiii) Taxes.................................................... 8
(xxiv) Stabilization............................................ 8
(xxv) Prospectus Distribution.................................. 9
(xxvi) Brokers and Finders Fees................................. 9
(b) Representations and Warranties by the Selling Stockholders....... 9
(i) Accurate Disclosure...................................... 9
(ii) Authorization of Agreements.............................. 9
(iii) Good and Marketable Title; Fully Paid Securities......... 10
(iv) Due Execution of Power of Attorney and Custody Agreement. 10
(v) Absence of Manipulation.................................. 10
(vi) Absence of Further Requirements.......................... 10
(vii) Certificates Suitable for Transfer....................... 11
(viii) No Association with NASD................................. 11
-i-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
(c) Officer's Certificates........................................... 11
SECTION 2. Sale and Delivery to Underwriters, Closing..................... 11
(a) Initial Securities............................................... 11
(b) Option Securities................................................ 11
(c) Payment.......................................................... 12
(d) Demonstrations; Registration..................................... 12
SECTION 3. Covenants of the Company....................................... 13
(a) Compliance with Securities Regulations and Commission Requests... 13
(b) Filing of Amendments............................................. 13
(c) Delivery of Registration Statements.............................. 13
(d) Delivery of Prospectuses......................................... 14
(e) Continued Compliance with Securities Laws........................ 14
(f) Blue Sky Qualifications.......................................... 14
(g) Rule 158......................................................... 14
(h) Listing.......................................................... 14
(i) Restriction on Sale of Securities................................ 15
(j) Reporting Requirements........................................... 15
SECTION 4. Payment of Expenses............................................ 15
(a) Expenses......................................................... 15
(b) Expenses of the Selling Stockholders............................. 16
(c) Termination of Agreement......................................... 16
SECTION 5. Conditions of Underwriters' Obligations........................ 16
(a) Effectiveness of Registration Statement.......................... 16
(b) Opinions of Counsel for Company.................................. 16
(c) Opinion of Counsel for the Selling Stockholders.................. 17
(d) Opinion of Counsel for Underwriters.............................. 17
(e) Officers' Certificate............................................ 17
(f) Certificate of Selling Stockholders.............................. 17
(g) Accountant's Comfort Letter...................................... 18
(h) Bring-down Comfort Letter........................................ 18
(i) Approval of Listing.............................................. 18
-ii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
(j) No Objection..................................................... 18
(k) Lock-up Agreements............................................... 18
(l) Conditions to Purchase of Option Securities...................... 18
(i) Officers' Certificate...................................... 18
(ii) Certificate of Selling Stockholders........................ 18
(iii) Opinion of Counsel for Company............................. 18
(iv) Opinion of Counsel for the Selling Stockholders............ 19
(v) Opinion of Counsel for Underwriters........................ 19
(vi) Bring-down Comfort Letter.................................. 19
(m) Additional Documents............................................. 19
(n) Termination of Agreement......................................... 19
SECTION 6. Indemnification................................................ 19
(a) Indemnification of Underwriters.................................. 19
(b) Indemnification of Company, Directors and Officers............... 21
(c) Actions against Parties; Notification............................ 21
(d) Settlement without Consent if Failure to Reimburse............... 21
(e) Prior Indemnification Agreements................................. 22
(f) Selling Stockholder Indemnification.............................. 22
SECTION 7. Contribution................................................... 22
SECTION 8. Representations, Warranties and Agreements to Survive Delivery. 24
SECTION 9. Termination of Agreement....................................... 24
(a) Termination; General............................................. 24
(b) Liabilities..................................................... 24
Section 10. Default by One or More of the Underwriters.................... 24
Section 11. Default by one or more of the Selling Stockholders or the
Company....................................................... 25
Section 12. Notices....................................................... 26
Section 13. Parties....................................................... 26
-iii-
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
PAGE
----
SECTION 14. Governing Law and Time........................................ 26
SECTION 15. Effect of Headings............................................ 26
-iv-
<PAGE>
CIBER, Inc.
(a Delaware corporation)
2,000,000 Shares of Common Stock
(Par Value $.01 Per Share)
PURCHASE AGREEMENT
October __, 1996
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
HANIFEN, IMHOFF INC.
J.P. MORGAN SECURITIES INC.
as Representatives of the several underwriters
c/o Merrill Lynch & Co.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
CIBER, Inc., a Delaware corporation (the "Company") and the persons listed
in Schedule B hereto (the "Selling Stockholders") confirm their respective
agreements with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other Underwriters named in
Schedule A hereto (collectively, the "Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 1O
hereof), for whom Merrill Lynch, Hanifen, Imhoff Inc., and J.P. Morgan
Securities Inc. are acting as representatives (in such capacity, the
"Representatives"), with respect to (i) the issue and sale by the Company and
the sale by the Selling Stockholders, acting severally and not jointly, and the
purchase by the Underwriters, acting severally and not jointly, of the
respective numbers of shares of Common Stock, par value $.01 per share, of the
Company ("Common Stock") set forth in Schedules A and B hereto and (ii) the
grant by the Company and certain Selling Stockholders to the Underwriters of the
option described in Section 2(b) hereof to purchase all or any part of 300,000
additional shares of Common Stock to cover over-allotments, if any. The
aforesaid 2,000,000 shares of Common Stock (the "Initial Securities") to be
purchased by the Underwriters and all or any part of the 300,000 shares of
Common Stock subject to the option described in Section 2(b) hereof (the "Option
Securities") are hereinafter called, collectively, the "Securities".
<PAGE>
The Company and the Selling Stockholders understand that the Underwriters
propose to make a public offering of the Securities as soon as the
Representatives deem advisable after this Agreement has been executed and
delivered.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333 - ) covering the
registration of the Securities under the Securities Act of 1933, as amended
(the "1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will
prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the " 1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations. The information included in such prospectus that was
omitted from such registration statement at the time it became effective but
that is deemed to be part of such registration statement at the time it became
effective pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information." Each prospectus used before such registration statement became
effective, and any prospectus that omitted the Rule 430A Information, that was
used after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus. "Such registration
statement, including the exhibits thereto and schedules, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1993 Act, at the time it became effective and including the Rule 430A
Information is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final prospectus including the documents incorporated by
reference therein pursuant to Item 12 of Form S-3 under the 1933 Act in the form
first furnished to the Underwriters for use in connection with the offering of
the Securities is herein called the "Prospectus." For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the Prospectus or any amendment or supplement to any of the
foregoing shall be deemed to include the copy filed with the Commission pursuant
to its Electronic Data Gathering, Analysis and Retrieval System ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus or the Prospectus (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus or the
Prospectus, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectus shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which
is incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectus, as the case may be.
SECTION 1. REPRESENTATIONS AND WARRANTIES.
(a) REPRESENTATIONS AND WARRANTIES BY THE COMPANY. The Company
and the Primary Selling Stockholder named in Schedule B hereto (hereinafter the
"Primary Selling Stockholder")
-2-
<PAGE>
jointly and severally represent and warrant to each Underwriter as of the date
hereof, as of the Closing Time referred to in Section 2(c) hereof, and as of
each Date of Delivery (if any) referred to in Section 2(b) hereof, and agrees
with each Underwriter, as follows.
(i) COMPLIANCE WITH REGISTRATION REQUIREMENTS. The
Company meets the requirements for use of Form S-3 under the 1933 Act and no
stop order preventing or suspending the use of any preliminary prospectus has
been issued by the Commission, and each preliminary prospectus filed as part
of the Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act, and did not contain an
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
PROVIDED THAT this representation and warranty shall not apply to any
statements or omissions made in reliance upon and in conformity with
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through the Representatives expressly for use therein.
Each of the Registration Statement any Rule 462(b) Registration
Statement has become effective under the 1933 Act, and no stop order suspending
the effectiveness of the Registration Statement has been issued and, to the
knowledge of the Company and of the Primary Selling Stockholder, no proceeding
for that purpose has been instituted or, threatened by the Commission; and the
Registration Statement and Prospectus (as amended or supplemented if the Company
shall have furnished any amendments or supplements thereto) comply, or will
comply, as the case may be, in all material respects with the 1933 Act and do
not and will not, as of the applicable effective date as to the Registration
Statement and any amendment thereto and as of the date of the Prospectus and any
amendment or supplement thereto, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary to
make the statements therein not misleading, and the Prospectus, as amended or
supplemented at the Closing Date, if applicable, will not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading; except that the foregoing representations and warranties
shall not apply to statements or omissions in the Registration Statement or the
Prospectus made in reliance upon and in conformity with information relating to
any Underwriter furnished to the Company in writing by such Underwriter through
the Representatives expressly for use therein.
(ii) INCORPORATED DOCUMENTS. There are no contracts or
other documents which are required by the 1933 Act to be filed as exhibits to
the Registration Statement which have not been so filed; each contract to which
the Company is a party and to which reference is made in the Prospectus or which
is filed as an exhibit to the Registration Statement has been duly and validly
executed by the Company and is in full force and effect in all material respects
in accordance with its respective terms, and none of such contracts have been
assigned by the Company; the Company and the Primary Selling Stockholder know of
no present situation or condition or fact which would prevent compliance in all
material respects with the terms of any of such contracts, as amended to date.
-3-
<PAGE>
(iii) INDEPENDENT ACCOUNTANTS. To the knowledge of the
Company, KPMG Peat Marwick LLP, which has certified the financial statements
filed with the Commission as part of the Registration Statement, are independent
public accountants as required by the 1933 Act.
(iv) FINANCIAL STATEMENTS. The financial statements and
the related notes thereto included or incorporated by reference in the
Registration Statement, any preliminary prospectus and the Prospectus, present
fairly the consolidated financial position of the Company and its consolidated
subsidiaries as of the dates indicated and the results of their operations, and
changes in their consolidated cash flows for the periods specified; and said
financial statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis and present fairly the
information required to be stated therein; [and the pro forma financial
information,] and the related notes thereto, included in the Registration
Statement and the Prospectus, has been prepared in accordance with the
applicable requirements of the 1933 Act and is based upon good faith estimates
and assumptions believed by the Company and the Primary Selling Stockholder to
be reasonable.
(v) NO MATERIAL ADVERSE CHANGE IN BUSINESS. Since the
respective dates as of which information is given in the Registration Statement
and the Prospectus, there has not been any material adverse change, or any
development of which the Company is aware that would reasonably be expected to
involve a prospective material adverse change in or affect the business,
management, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, otherwise than as set forth or contemplated in
the Prospectus; except as set forth or contemplated in the Prospectus neither
the Company nor any of its subsidiaries has entered into any transaction or
agreement (whether or not in the ordinary course of business) material to the
Company and its subsidiaries taken as a whole.
(vi) GOOD STANDING OF THE COMPANY. The Company has been
duly incorporated and is validly existing as a corporation in good standing
under the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as described
in the Prospectus and has been duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in which it
owns or leases properties, or conducts any business so as to require such
qualification, except where the failure so to qualify or to be in good standing
would not have a material adverse effect on the Company and its subsidiaries,
taken as a whole.
(vii) GOOD STANDING OF SUBSIDIARIES. Each of the Company's
subsidiaries has been duly incorporated and is validly existing as a corporation
under the laws of its jurisdiction of incorporation, with power and authority to
own its properties and conduct its business as described in the Prospectus, and
has been duly qualified as a foreign corporation for the transaction of business
and is in good standing under the laws of each jurisdiction in which it owns or
leases properties, or conducts any business, so as to require such
qualification, other than where the failure to be so qualified or in good
standing would not have a material adverse effect on the Company and its
subsidiaries taken as a whole; and all the outstanding shares of capital stock
of each subsidiary of the Company have been duly authorized and validly issued,
are fully-paid and non-assessable, and (except, in the case of foreign
subsidiaries, for directors' qualifying shares) are owned by the Company,
directly or indirectly, free and clear of all liens, encumbrances, security
interests and claims.
-4-
<PAGE>
(viii) CAPITALIZATION. The authorized capital stock of the
Company conforms as to legal matters to the description thereof incorporated by
reference to _______________in the Prospectus, and all of the outstanding shares
of capital stock of the Company have been duly authorized and validly issued,
are fully-paid and non-assessable and are not subject to any preemptive or
similar rights to acquire equity securities of the Company; and, except as
described in or expressly contemplated by the Prospectus, there are no
outstanding rights (including, without limitation, preemptive rights), warrants
or options to acquire, or instruments convertible into or exchangeable for, any
shares of capital stock or other equity interest in the Company or any of its
subsidiaries, or any contract, commitment, agreement, understanding or
arrangement of any kind relating to the issuance of any capital stock of the
Company or any such subsidiary, any such convertible or exchangeable securities
or any such rights, warrants or options.
(ix) AUTHORIZATION OF AGREEMENT. This Agreement has been
duly authorized, executed and delivered by the Company and constitutes the valid
and binding agreement of the Company, except as rights to indemnity and
contribution hereunder may be limited by federal and state securities laws and
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to the general principles of equity.
(x) AUTHORIZATION AND DESCRIPTION OF SECURITIES. The
Securities to be issued and sold by the Company and the Securities to be sold
by the Selling Stockholders hereunder have been duly authorized, and, when
delivered to and paid for by the Underwriters in accordance with the terms of
this Agreement, will have been duly issued and will be fully paid and
non-assessable and will conform to the description thereof incorporated by
reference to ________________ in the Prospectus; and the issuance of the
Securities is not subject to any preemptive or similar right to acquire
equity securities of the Company.
(xi) ABSENCE OF DEFAULTS AND CONFLICTS. Neither the
Company nor any of its subsidiaries is, or with the giving of notice or lapse of
time or both would be, in violation of or in default under, its Certificate of
Incorporation or By-Laws or any indenture, mortgage, deed of trust, loan
agreement or other agreement or instrument to which the Company or any of its
subsidiaries is a party or by which it or any of them or any of their respective
properties is bound, except for violations and defaults which individually and
in the aggregate are not material to the Company and its subsidiaries taken as a
whole; except for registration rights which have either been fulfilled hereby or
properly waived, the issue and sale of the Securities and the performance by the
Company of its obligations under this Agreement and the consummation of the
transactions contemplated herein will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, any indenture,
mortgage, deed of trust, loan agreement or other material agreement or
instrument to which the Company or any of its subsidiaries is a party or by
which the Company or any of its subsidiaries is bound or to which any of the
property or assets of the Company or any of its subsidiaries is subject except
for conflicts or breaches which individually or in the aggregate are not
material to the Company and its subsidiaries taken as a whole, nor will any such
action result in any violation of the provisions of the Certificate of
Incorporation or the By-Laws of the Company, nor will any such action result in
any violation of the provisions of any applicable law or statute or any order,
rule or regulation of any court or governmental agency or body having
jurisdiction over the Company, its subsidiaries or any of their respective
properties
-5-
<PAGE>
except for violations which individually or in the aggregate are not material to
the Company and its subsidiaries taken as a whole; and no consent, approval,
authorization, order, registration or qualification of or with any such court or
governmental agency or body is required for the issue and sale of the Securities
or the consummation by the Company of the transactions contemplated by this
Agreement, except such consents, approvals, authorizations, registrations or
qualifications as have been obtained under the 1933 Act, the 1934 Act, and the
rules and regulations of the Commission thereunder (collectively, the "Exchange
Act"), the National Association of Securities Dealers, Inc. ("NASD") and the
Nasdaq National Market, and as may be required under state securities or Blue
Sky Laws in connection with the purchase and distribution of the Securities by
the Underwriters.
(xii) ABSENCE OF INTER-RELATIONSHIPS. No relationship,
direct or indirect, exists between or among the Company or any or its
subsidiaries on the one hand, and the directors, officers, stockholders,
customers or suppliers of the Company or any of its subsidiaries on the other
hand, which is required by the 1933 Act to be described in the Registration
Statement and the Prospectus which is not so described.
(xiii) ABSENCE OF PROCEEDINGS STATUTES; ACCURACY OF
EXHIBITS. Other than as set forth or contemplated in the Prospectus, there are
no legal or governmental proceedings pending or, to the knowledge of the Company
or of the Primary Selling Stockholder, threatened to which the Company or any of
its subsidiaries is or may be a party or to which any property of the Company or
any of its subsidiaries is or may be the subject which, if determined adversely
to the Company, could individually or in the aggregate reasonably be expected to
have a material adverse effect on the general affairs, business, prospects,
management, financial condition or results of operations of the Company and its
subsidiaries, taken as a whole, and, to the Company's and the Primary Selling
Stockholder's knowledge, no such proceedings are threatened or contemplated by
governmental authorities or threatened by others; and there are no contracts or
other documents of a character required to be filed as an exhibit to the
Registration Statement or required to be described in the Registration Statement
or the Prospectus which are not filed or described as required.
(xiv) POSSESSION OF INTELLECTUAL PROPERTY. The Company
and its subsidiaries owns, licenses, or possesses adequate rights to use all
material patents, patent applications, trademarks, service marks, trade names,
trademark registrations, service mark registrations, copyrights, licenses,
inventions, trade secrets and other unpatented and/or unpatentable proprietary
or confidential information, systems or procedures and similar rights necessary
for the conduct of its business as currently conducted (collectively the
"Intellectual Property"); and except as described in the Registration Statement
or the Prospectus, neither the Company nor any of its subsidiaries has received
any notice or is otherwise aware of any infringement of or conflict with
asserted rights of others with respect to any Intellectual Property or of any
facts or circumstances which would render any Intellectual Property invalid or
inadequate to protect the interest of the Company or any of its subsidiaries
therein, and which infringement or conflict (if the subject of any unfavorable
decision, ruling or finding) or invalidity or inadequacy, singly or in the
aggregate, would result in a material adverse effect and, except as disclosed in
the Prospectus, the Intellectual Property of the Company and its subsidiaries
referred to in the Prospectus do not, to the best knowledge of the Company or
any of its subsidiaries, infringe or conflict with any right or patent of any
third party, or any discovery, invention, product or process which is the
-6-
<PAGE>
subject of a patent application filed by any third party, known to the Company
or any of its Subsidiaries which could result in a material adverse effect on
the Company's business, financial condition, or results of operation.
(xv) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
authorization, approval, consent, license, order, registration, qualification or
decree of, any court or governmental authority or agency is necessary or
required for the performance by the Company of its obligations hereunder, in
connection with the offering, issuance or sale of the Securities hereunder or
the consummation of the transactions contemplated by this Agreement, except such
as have been already obtained or as may be required under the 1933 Act or the
1933 Act Regulations, state securities laws or the rules and regulations of the
NASD.
(xvi) POSSESSION OF LICENSES AND PERMITS. The Company and
its subsidiaries possess such permits, licenses, approvals, consents and other
authorizations (collectively, "Governmental Licenses") issued by the appropriate
federal, state, local or foreign regulatory agencies or bodies necessary to
conduct the business now operated by them; the Company and its subsidiaries are
in compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the aggregate,
have a material adverse effect on the Company's business or results of
operations; all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect would not have a
material adverse effect on the Company; and neither the Company nor any of its
subsidiaries has received any notice of proceedings relating to the revocation
or modification of any such Governmental Licenses which, singly or in the
aggregate, if the subject of an unfavorable decision, ruling or finding, would
result in a Material Adverse Effect on the Company's business, financial
condition, or results of operations.
(xvii) TITLE TO PROPERTY. The Company and its subsidiaries
have good and marketable title to all real property and good and marketable
title to all personal property owned by them and used in their business, in each
case, free and clear of all liens, encumbrances and defects of any kind except
such as (a) are described in the Prospectus or (b) do not, singly or in the
aggregate, materially affect the value of such property and do not interfere
with the use made and proposed to be made of such property by the Company or any
of its subsidiaries; and any real property and buildings held under lease by the
Company and its subsidiaries are held by them under valid, existing and
enforceable leases with such exceptions as are not material and do not interfere
with the use made of such property and buildings by the Company or its
subsidiaries.
(xviii) COMPLIANCE WITH CUBA ACT. The Company has complied
with, and is and will be in compliance with, the provisions of that certain
Florida act relating to disclosure of doing business with Cuba, codified as
Section 517.075 of the Florida statutes, and the rules and regulations
thereunder (collectively, the "Cuba Act") or is exempt therefrom.
(xix) INVESTMENT COMPANY ACT. The Company is not, and
upon the issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectus will
not be, an "investment company" or an entity "controlled" by an
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"investment company" as such terms are defined in the Investment Company Act of
1940, as amended (the "1940 Act").
(xx) REGISTRATION RIGHTS. Other than registration
rights which have either been fulfilled hereby or properly waived, no person has
the right to require the Company to register any securities for offering and
sale under the 1933 Act by reason of the filing of the Registration Statement
with the Commission or the issue and sale of the Securities.
(xxi) INSURANCE. The Company maintains insurance of the
types and in the amounts that the Company deems adequate for its business and
consistent with insurance maintained by similar companies in similar businesses,
including, but not limited to, general liability insurance, and insurance
covering all real and personal property owned or leased by the Company against
theft, damage, destruction, acts of vandalism and all other risks customarily
insured against, all of which insurance is in full force and effect.
(xxii) ACCOUNTING CONTROLS. The Company maintains a
system of internal accounting controls sufficient to provide reasonable
assurances that (i) transactions are executed in accordance with management's
general or specific authorization; (ii) transactions are recorded as necessary
to permit preparation of financial statements in conformity with generally
accepted accounting principles and to maintain accountability for assets; (iii)
access to assets is permitted only in accordance with management's general or
specific authorization; and (iv) the recorded accountability for assets is
compared with existing assets at reasonable intervals and appropriate action is
taken with respect to any differences.
(xxiii) TAXES. The Company has filed all federal, state,
local and foreign income, withholding and franchise tax returns and taxes
which have been required to be filed and has paid all taxes indicated by said
returns and all assessments received by it to the extent that such taxes and
assessments have become due and payable; the Company (i) has paid all
federal, state, local and foreign taxes and assessments which are due from
the Company, including but not limited to withholding taxes and amounts
payable under Chapters 21 through 24 of the Internal Revenue Code of 1986, as
amended (the "Code"), and has furnished all information returns that the
Company is required to furnish pursuant to the Code, (ii) has established
adequate reserves for such taxes which are not due and payable, and, (iii) to
its knowledge, does not have any tax deficiency or claim outstanding,
proposed or assessed against it; the Company has not granted any extension of
any statute of limitations to any federal, state, local or foreign tax
authority for any period, nor has the Company requested any extension of the
time for filing any federal, state, local or foreign tax return or form.
(xxiv) STABILIZATION. Other than the over-allotment option
granted to the Underwriters herein, neither the Company nor the Primary Selling
Stockholder will take, directly or indirectly, any action (and neither the
Company nor the Primary Selling Stockholder knows of any action by its
directors, officers or stockholders or by others) designed to or which has
constituted or which might reasonably be expected to cause or result in, under
the Exchange Act or otherwise, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Securities in
violation of the Exchange Act.
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(xxv) PROSPECTUS DISTRIBUTION. The Company has not
distributed and will not distribute any prospectus or other offering material in
connection with the offering and sale of the Securities other than any
preliminary prospectus or the Prospectus or other materials permitted by the
1933 Act to be distributed by the Company.
(xxvi) BROKERS AND FINDERS FEES. the Company has not
incurred any liability for any finder's or broker's fee or agent's commission in
connection with the execution and delivery of this Agreement or the consummation
of the offering of the Securities contemplated hereby other than as described in
this Agreement.
(b) REPRESENTATIONS AND WARRANTIES BY THE SELLING
STOCKHOLDERS. Each Selling Stockholder severally and not jointly represents and
warrants to each Underwriter as of the date hereof, as of the Closing Time, and,
if the Selling Stockholder is selling Option Securities on a Date of Delivery,
as of each such Date of Delivery, and agrees with each Underwriter, as follows:
(i) ACCURATE DISCLOSURE. Such Selling Stockholder has
no actual knowledge that any of the representations and warranties of the
Company contained in Section 1 (a) hereof are not true and correct; such Selling
Stockholder has reviewed and is familiar with the Registration Statement and the
Prospectus and such Selling Stockholder has no actual knowledge that the
Prospectus contains any statement of a material fact that is untrue or omits to
state a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading; such
Selling Stockholder is not prompted to sell the Securities to be sold by such
Selling Stockholder hereunder by any information concerning the Company or any
subsidiary of the Company which is not set forth in the Prospectus.
(ii) AUTHORIZATION OF AGREEMENTS. This Agreement has
been duly authorized, executed and delivered by or on behalf of such Selling
Stockholder and constitutes a valid and binding obligation upon such Selling
Stockholder except as rights to indemnity and contribution hereunder may be
limited by federal and state securities laws and except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or similar laws
affecting the rights of creditors generally and subject to the general
principals of equity. The execution and delivery by such Selling Stockholder
of, and the performance by such Selling Stockholder of its obligations under,
this Agreement, the Custody Agreement signed by such Selling Stockholder and
[American Securities Transfer, Inc.], as Custodian, relating to the deposit of
the Securities to be sold by such Selling Stockholder and the Power of Attorney
appointing certain individuals as such Selling Stockholder's attorneys-in-fact
(the "Attorneys-in-Fact") to the extent set forth therein, relating to the
transactions contemplated hereby and by the Registration Statement (the "Custody
Agreement and Power of Attorney") and the Lock-up Agreement signed by such
Selling Stockholder relating to resale restrictions on the Company's stock owned
or held by such Selling Stockholder (the "Lock-up Agreement") will not
contravene any provision of applicable law, or any material agreement or other
material instrument binding upon such Selling Stockholder or any judgment, order
or decree of any governmental body, agency or court having jurisdiction over
such Selling Stockholder, and no consent, approval, authorization or order of or
qualification with any governmental body or agency is required for the
performance by such Selling Stockholder of its obligations under this Agreement
or the Custody Agreement and Power of Attorney or Lock-up
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Agreement of such Selling Stockholder, except such as may be required by the
securities or Blue Sky laws of the various states in connection with the offer
and sale of the Securities. [Such Selling Stockholder, if other than a natural
person, has been duly organized and is validly existing and in good standing
under the laws of the jurisdiction of its organization as the type of entity
that it purports to be; and] such Selling Stockholder has full right, power and
authority to enter into and perform its obligations under this Agreement and the
Custody Agreement and Power of Attorney, and to sell, assign, transfer and
deliver the Securities to be sold by such Selling Stockholder under this
Agreement.
(iii) GOOD AND MARKETABLE TITLE; FULLY PAID SECURITIES. Such
Selling Stockholder has, and on the Closing Date will have, good and marketable
title to the Securities to be sold by such Selling Stockholder and the legal
right and power, and all authorization and approval required by law or contract,
to enter into this Agreement, the Custody Agreement and Power of Attorney and
the Lock-up Agreement and to sell, transfer and deliver the Securities to be
sold by such Selling Stockholder, and such sale, transfer and delivery is not
subject to any right of first refusal or other contractual restriction. The
Securities to be sold by such Selling Stockholder pursuant to this Agreement
have been or will be prior to the Closing Date, fully paid.
(iv) DUE EXECUTION OF POWER OF ATTORNEY AND CUSTODY
AGREEMENT. The Custody Agreement and Power of Attorney and the Lock-up
Agreement have been duly authorized, executed and delivered by such Selling
Stockholder and are valid and binding agreements of such Selling Stockholder
except as rights to indemnity and contribution hereunder may be limited by
federal and state securities laws and except as such enforceability may be
limited by bankruptcy, insolvency, reorganization or similar laws affecting the
rights of creditors generally and subject to the general principals of equity.
Assuming the Underwriters purchase the Securities to be sold by each Selling
Stockholder for value, in good faith and without notice of adverse claim with
the meaning of the Uniform Commercial Code, of the certificates delivery for the
Securities to be sold by such Selling Stockholder pursuant to this Agreement
will pass good and marketable title to such Securities free and clear of any
security interests, claims, liens, equities and other encumbrances.
(v) ABSENCE OF MANIPULATION. Such Selling Stockholder has
not taken, and will not take, directly or indirectly, any action which is
designed to or which has constituted or which might reasonably be expected to
cause or result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities.
(vi) ABSENCE OF FURTHER REQUIREMENTS. No filing with, or
consent, approval, authorization, order, registration, qualification or decree
of, any court or governmental authority or agency, domestic or foreign, is
necessary or required for the performance by each Selling Stockholder of its
obligations hereunder or in the Power of Attorney and Custody Agreement, or in
connection with the sale and delivery of the Securities hereunder by such
Selling Stockholder or the consummation of the transactions contemplated by this
Agreement by such Selling Stockholder, except such as may have previously been
made or obtained or as may be required under the 1933 Act or the 1933 Act
Regulations, state securities laws or the rules and regulations of the NASD.
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(vii) CERTIFICATES SUITABLE FOR TRANSFER. Certificates in
negotiable form for all Securities to be sold by such Selling Stockholder
under this Agreement, together with a stock power or powers duly endorsed in
blank by such Selling Stockholder, have been placed in custody with the
Custodian for the purpose of effecting delivery hereunder; [provided, however,
that with respect to stock options to be exercised by certain of the Selling
Stockholders on the date hereof for Common Stock which Common Stock shall be
sold by such Selling Stockholders hereunder, no certificates or stock powers
have been delivered to the Custodian, however, all actions have been taken by
each such Selling Stockholder to effect the exercise of such stock options and
the delivery of the Selling Stockholder Securities hereunder.
(viii) NO ASSOCIATION WITH NASD. Neither such Selling
Stockholder nor any of his, her or its affiliates directly, or indirectly
through one or more intermediaries, controls, or is controlled by, or is
under common control with, or has any other association with (within the
meaning of Article I, Section 1(m) of the By-laws of the National Association
of Securities Dealers, Inc.), any member firm of the National Association of
Securities Dealers, Inc. except as disclosed in writing to Merrill Lynch.
(c) OFFICER'S CERTIFICATES. Any certificate signed by any officer
of the Company or any subsidiary delivered to the Representatives or to
counsel for the Underwriters shall be deemed a representation and warranty by
the Company to each Underwriter as to the matters covered thereby; and any
certificate signed by or on behalf of the Selling Stockholders as such and
delivered to the Representatives or to counsel for the Underwriters pursuant
to the terms of this Agreement shall be deemed a representation and warranty
by such Selling Stockholder to the Underwriters as to the matters covered
thereby.
SECTION 2. SALE AND DELIVERY TO UNDERWRITERS, CLOSING.
(a) INITIAL SECURITIES. On the basis of the representations and
warranties herein contained and subject to the terms and conditions herein
set forth, the Company and the Selling Stockholders, severally and not
jointly, agree to sell to each Underwriter, severally and not jointly, and
each Underwriter, severally and not jointly, agrees to purchase from the
Company and each Selling Stockholder, at the price per share set forth in
Schedule C, that proportion of the number of Initial Securities set forth in
Schedule B opposite the name of the Company or such Selling Stockholder, as
the case may be, which the number of Initial Securities set forth in Schedule
A opposite the name of such Underwriter, plus any additional number of
Initial Securities which such Underwriter may become obligated to purchase
pursuant to the provisions of Section 10 hereof bears to the total number of
Initial Securities, subject, in each case, to such adjustments among the
Underwriters as the Representatives in their sole discretion shall make to
eliminate any sales or purchases of fractional securities.
(b) OPTION SECURITIES. In addition, on the basis of the
representations and warranties herein contained and subject to the terms and
conditions herein set forth, the Company and the Selling Stockholders acting
severally and not jointly hereby grant an option to the Underwriters,
severally and not jointly, to purchase up to an additional 300,000 Securities
of Common Stock at the price per share set forth in Schedule C. The option
hereby granted will expire 30 days after the date hereof and may be
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exercised in whole or in part from time to time only for the purpose of
covering over-allotments which may be made in connection with the offering
and distribution of the Initial Securities upon notice by the Representatives
to the Company and the Selling Stockholders setting forth the number of
Option Securities as to which the several Underwriters are then exercising
the option and the time and date of payment and delivery for such Option
Securities. Any such time and date of delivery (a "Date of Delivery") shall
be determined by the Representatives, but shall not be later than five full
business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to
all or any portion of the Option Securities, each of the Underwriters, acting
severally and not jointly, will purchase that proportion of the total number
of Option Securities then being purchased which the number of Initial
Securities set forth in Schedule A opposite the name of such Underwriter
bears to the total number of Initial Securities, subject in each case to such
adjustments as the Representatives in their discretion shall make to
eliminate any sales or purchases of fractional shares.
(c) PAYMENT. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Davis, Graham & Stubbs, L.L.C., 370 17th Street, Suite 4700, Denver, Colorado
80202, or at such other place as shall be agreed upon by the Representatives
and the Company and the Selling Stockholders, at 9:00 A.M. (Eastern time) on
the third (fourth, if the pricing occurs after 4:30 P.M. (Eastern time on any
given day) business day after the date hereof (unless postponed in accordance
with the provisions of Section 10), or such other time not later than ten
business days after such date as shall be agreed upon by the Representatives
and the Company and the Selling Stockholders (such time and date of payment
and delivery being herein called "Closing Time").
In addition, in the event that any or all of the Option Securities
are purchased by the Underwriters, payment of the purchase price for, and
delivery of certificates for, such Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by
the Representatives and the Company [and the Selling Stockholders,] on each
Date of Delivery as specified in the notice from the Representatives to the
Company and the Selling Stockholders.
Payment shall be made to the Company and the Selling Stockholders by
wire transfer or certified or official bank check or checks in federal
[(same-day)] funds payable to the order of the Company and to the Custodian
pursuant to each Selling Stockholder's Power of Attorney and Custody
Agreement, as the case may be, against delivery to the Representatives for
the respective accounts of the Underwriters of certificates for the
Securities to be purchased by them. It is understood that each Underwriter
has authorized the Representatives, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for, the Initial
Securities and the Option Securities, if any, which it has agreed to
purchase. Merrill Lynch, individually and not as representative of the
Underwriters, may (but shall not be obligated to) make payment of the
purchase price for the Initial Securities or the Option Securities, if any,
to be purchased by any Underwriter whose funds have not been received by the
Closing Time or the relevant Date of Delivery, as the case may be, but such
payment shall not relieve such Underwriter from its obligations hereunder.
(d) DENOMINATIONS; REGISTRATION. Certificates for the Initial
Securities and the Option Securities, if any, shall be in such denominations
and registered in such names as the
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Representatives may request in writing at least one full business day before the
Closing Time or the relevant Date of Delivery, as the case may be. The
certificates for the Initial Securities and the Option Securities, if any, will
be made available for examination and packaging by the Representatives in The
City of New York not later than 1O:00 A.M. (Eastern time) on the business day
prior to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. COVENANTS OF THE COMPANY. The Company covenants with
each Underwriter as follows:
(a) COMPLIANCE WITH SECURITIES REGULATIONS AND COMMISSION
REQUESTS. The Company, subject to Section 3(b), will comply with the
requirements of Rule 430A and will notify the Representatives immediately, and
confirm the notice in writing, (i) when any post-effective amendment to the
Registration Statement, shall become effective, or any supplement to the
Prospectus or any amended Prospectus shall have been filed, (ii) of the receipt
of any comments from the Commission, (iii) of any request by the Commission for
any amendment to the Registration Statement or any amendment or supplement to
the Prospectus or for additional information, and (iv) of the issuance by the
Commission of any stop order suspending the effectiveness of the Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus, or of the suspension of the qualification of the Securities for
offering or sale in any jurisdiction, or of the initiation or threatening of any
proceedings for any of such purposes. The Company will promptly effect the
filings necessary pursuant to Rule 424(b) and will take such steps as it deems
necessary to ascertain promptly whether the form of prospectus transmitted for
filing under Rule 424(b) was received for filing by the Commission and, in the
event that it was not, it will promptly file such prospectus. The Company will
make every reasonable effort to prevent the issuance of any stop order and, if
any stop order is issued, to obtain the lifting thereof at the earliest possible
moment.
(b) FILING OF AMENDMENTS. The Company will give the
Representatives notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)) or any
amendment, supplement or revision to either the prospectus included in the
Registration Statement at the time it became effective or to the Prospectus,
will furnish the Representatives with copies of any such documents a reasonable
amount of time prior to such proposed filing or use, as the case may be, and
will not file or use any such document to which the Representatives or counsel
for the Underwriters shall object.
(c) DELIVERY OF REGISTRATION STATEMENTS. The Company has
furnished or will deliver to the Representatives and counsel for the
Underwriters, without charge, three signed copies of the Registration Statement
as originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein) and signed copies of all
consents and certificates of experts, and will also deliver to the
Representatives, without charge, a conformed copy of the Registration Statement
as originally filed and of each amendment thereto (without exhibits) for each of
the Underwriters.
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(d) DELIVERY OF PROSPECTUSES. The Company has delivered to each
Underwriter, without charge, as many copies of each preliminary prospectus as
such Underwriter reasonably requested, and the Company hereby consents to the
use of such copies for purposes permitted by the 1933 Act. The Company will
furnish to each Underwriter, without charge, during the period when the
Prospectus is required to be delivered under the 1933 Act or the 1934 Act, such
number of copies of the Prospectus (as amended or supplemented) as such
Underwriter may reasonably request.
(e) CONTINUED COMPLIANCE WITH SECURITIES LAWS. The Company will
comply with the 1933 Act and the 1933 Act Regulations so as to permit the
completion of the distribution of the Securities as contemplated in this
Agreement and in the Prospectus. If at any time when a prospectus is required
by the 1933 Act to be delivered in connection with sales of the Securities, any
event shall occur or condition shall exist as a result of which it is necessary,
in the opinion of counsel for the Underwriters or for the Company, to amend the
Registration Statement or amend or supplement the Prospectus in order that the
Prospectus will not include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of such
counsel, at any such time to amend the Registration Statement or amend or
supplement the Prospectus in order to comply with the requirements of the 1933
Act or the 1933 Act Regulations, the Company will promptly prepare and file with
the Commission, subject to Section 3(b), such amendment or supplement as may be
necessary to correct such statement or omission or to make the Registration
Statement or the Prospectus comply with such requirements, and the Company will
furnish to the Underwriters such number of copies of such amendment or
supplement as the Underwriters may reasonably request.
(f) BLUE SKY QUALIFICATIONS. The Company will use its best
efforts, in cooperation with the Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and other
jurisdictions (domestic or foreign) as the Representatives may designate and to
maintain such qualifications in effect for a period of not less than one year
from the later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; provided, however, that the Company shall not be
obligated to file any general consent to service of process or to qualify as a
foreign corporation or as a dealer in securities in any jurisdiction in which it
is not so qualified or to subject itself to taxation in respect of doing
business in any jurisdiction in which it is not otherwise so subject. In each
jurisdiction in which the Securities have been so qualified, the Company will
file such statements and reports as may be required by the laws of such
jurisdiction to continue such qualification in effect for a period of not less
than one year from the effective date of the Registration Statement and any Rule
462(b) Registration Statement.
(g) RULE 158. The Company will timely file such reports
pursuant to the 1934 Act as are necessary in order to make generally available
to its securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last paragraph of
Section II (a) of the 1933 Act.
(h) LISTING. The Company will use its best efforts to effect
and maintain the quotation of the Securities on the Nasdaq National Market and
will file with the Nasdaq National Market
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all documents and notices required by the Nasdaq National Market of companies
that have securities that are traded in the over-the-counter market and
quotations for which are reported by the Nasdaq National Market.
(i) RESTRICTION ON SALE OF SECURITIES. During a period 90 days
from the date of the Prospectus, the Company will not, without the prior written
consent of Merrill Lynch, (i) directly or indirectly, offer, pledge, sell,
contract to sell, sell any option or contract to purchase, purchase any option
or contract to sell, grant any option, right or warrant to purchase or otherwise
transfer or dispose of any share of Common Stock or any securities convertible
into or exercisable or exchangeable for Common Stock or file any registration
statement under the 1933 Act with respect to any of the foregoing or (ii) enter
into any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership of the
Common Stock, whether any such swap or transaction described in clause (i) or
(ii) above is to be settled by delivery of Common Stock or such other
securities, in cash or otherwise. The foregoing sentence shall not apply to (A)
the Securities to be sold hereunder, (B) any shares of Common Stock issued by
the Company upon the exercise of an option or warrant or the conversion of a
security outstanding on the date hereof and referred to in the Prospectus or (C)
any shares of Common Stock issued or options to purchase Common Stock granted
pursuant to existing employee benefit plans of the Company referred to in the
Prospectus.
(j) REPORTING REQUIREMENTS. The Company, during the period when
the Prospectus is required to be delivered under the 1933 Act or the 1934 Act,
will file all documents required to be filed with the Commission pursuant to the
1934 Act within the time periods required by the 1934 Act and the rules and
regulations of the Commission thereunder.
SECTION 4. PAYMENT OF EXPENSES.
(a) EXPENSES. The Company and the Selling Stockholders
will pay or cause to be paid all expenses incident to the
performance of its obligations under this Agreement, including
(i) the preparation, printing and filing of the Registration
Statement (including financial statements and exhibits) as
originally filed and of each amendment thereto, (ii) the
preparation, printing and delivery to the Underwriters of this
Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering,
purchase, sale, issuance or delivery of the Securities, (iii) the
preparation, issuance and delivery of the certificates for the
Securities to the Underwriters, including any stock or other
transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters,
(iv) the fees and disbursements of the Company's counsel,
accountants and other advisors and counsel for the Selling
Stockholders, (v) the qualification of the Securities under
securities laws in accordance with the provisions of Section 3(f)
hereof, including filing fees and the reasonable and accountable
fees and disbursements of counsel for the Underwriters in
connection therewith and in connection with the preparation of
the Blue Sky Survey and any supplement thereto, (vi) the printing
and delivery to the Underwriters of copies of each preliminary
prospectus, and of the Prospectus and any amendments or
supplements thereto, (vii) the preparation, printing and delivery
to the Underwriters of copies of the Blue Sky Survey and any
supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Securities, (ix) the filing fees
incident to the review by the National Association of Securities
Dealers, Inc. (the "NASD") of the terms of the sale of the
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Securities, and (x) the fees and expenses incurred in connection with the
inclusion of the Securities in the Nasdaq National Market. The foregoing shall
not affect any agreements between the Company and the Selling Stockholders with
respect to payment of expenses.
(b) EXPENSES OF THE SELLING STOCKHOLDERS. The Selling
Stockholders, jointly and severally, will pay all expenses incident to the
performance of their respective obligations under, and the consummation of the
transactions contemplated by this Agreement, including (i) any stamp duties,
capital duties and stock transfer taxes, if any, payable upon the sale of the
Securities to the Underwriters, and their transfer between the Underwriters
pursuant to an agreement between such Underwriters, and (ii) the fees and
disbursements of their respective counsel and accountants, other than counsel to
the Selling Stockholders who is also counsel to the Company.
(c) TERMINATION OF AGREEMENT. If this Agreement is terminated
by the Representatives in accordance with the provisions of Section 5, Section
9(a)(i) or Section II hereof, the Company and the Selling Stockholders shall
reimburse the Underwriters for all of their out-of-pocket expenses, including
the reasonable fees and disbursements of counsel for the Underwriters.
SECTION 5. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The
obligations of the several Underwriters hereunder are subject to the accuracy
of the representations and warranties of the Company and the Selling
Stockholders contained in Section 1 hereof or in certificates of any officer
of the Company or any Subsidiary or on behalf of any Selling Stockholder
delivered pursuant to the provisions hereof, to the performance by the
Company of its covenants and other obligations hereunder, and to the
following further conditions:
(a) EFFECTIVENESS OF REGISTRATION STATEMENT. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of the
Registration Statement shall have been issued under the 1933 Act or proceedings
therefor pending or threatened by the Commission, and any request on the part of
the Commission for additional information shall have been complied with to the
reasonable satisfaction of counsel to the Underwriters. A prospectus containing
the Rule 430A Information shall have been filed with the Commission in
accordance with Rule 424(b) (or a post-effective amendment providing such
information shall have been filed and declared effective in accordance with the
requirements of Rule 430A).
(b) OPINIONS OF COUNSEL FOR COMPANY. At Closing Time the
Representatives shall have received a written opinion, dated as of Closing Time,
of Davis, Graham & Stubbs, L.L.C., counsel for the Company, in form and
substance satisfactory to counsel for the Underwriters. In giving such opinion
such counsel may rely, as to all matters governed by the laws ofjurisdictions
other than the law of the State of Colorado, the federal law of the United
States and the General Corporation Law of the State of Delaware, upon the
opinions of counsel satisfactory to the Representatives. Such counsel may also
state that, insofar as such opinion involves factual matters, they have relied,
to the extent they deem proper, upon certificates of officers of the Company and
its Subsidiaries and certificates of public officials.
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(c) OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS. At
Closing Time the Representatives shall have received the favorable opinion,
dated as of Closing Time, of Davis, Graham & Stubbs, counsel for the Selling
Stockholders, in form and substance satisfactory to counsel for the
Underwriters, together with signed or reproduced copies of such letter for
each of the other Underwriters to the effect set forth in Exhibit D hereto
and to such further effect as counsel to the Underwriters may reasonably
request. In giving such opinion such counsel may rely, as to all matters
governed by the laws of jurisdictions other than the law of the State of
Colorado, the federal law of the United States and the General Corporation
Law of the State of Delaware, upon the opinions of counsel satisfactory to
the Representatives. Such counsel may also state that, insofar as such
opinion involves factual matters, they have relied, to the extent they deem
proper, upon certificates of officers of the Company and its Subsidiaries and
certificates of public officials.
(d) OPINION OF COUNSEL FOR UNDERWRITERS. At Closing Time the
Representatives shall have received the favorable opinion, dated as of
Closing Time, of Wilson, Sonsini, Goodrich & Rosati, Professional
Corporation, counsel for the Underwriters, together with signed or reproduced
copies of such letter for each of the other Underwriters with respect to the
matters set forth in (i), (v), (vi) (solely as to preemptive or other similar
rights arising by operation of law or under the charter or by-laws of the
Company), (viii) to (x), inclusive, (xiv) (solely as to the information in
the Prospectus under __________________________) and the penultimate
paragraph of Exhibit A hereto. In giving such opinion such counsel may rely,
as to all matters governed by the laws of jurisdictions other than the law of
the State of California, the federal law of the United States and the General
Corporation Law of the State of Delaware, upon the opinions of counsel
satisfactory to the Representatives. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and its
Subsidiaries and certificates of public officials.
(e) OFFICERS' CERTIFICATE. At Closing Time there shall not
have been, since the date hereof or since the respective dates as of which
information is given in the Prospectus, any material adverse change in the
condition, financial or otherwise, or in the earnings, business affairs or
business prospects of the Company and its Subsidiaries considered as one
enterprise, whether or not arising in the ordinary course of business, and
the Representatives shall have received a certificate of the Chief Executive
Officer or a Vice President of the Company and of the chief financial or
chief accounting officer of the Company, dated as of Closing Time, to the
effect that (i) there has been no such material adverse change, (ii) the
representations and warranties in Section l(a) hereof are true and correct
with the same force and effect as though expressly made at and as of Closing
Time, (iii) the Company has complied with all agreements and satisfied all
conditions on its part to be performed or satisfied at or prior to Closing
Time, and (iv) no stop order suspending the effectiveness of the Registration
Statement has been issued and no proceedings for that purpose have been
instituted or are pending or are contemplated by the Commission.
(f) CERTIFICATE OF SELLING STOCKHOLDERS. At Closing Time, the
Representatives shall have received a certificate of an Attorney-in-Fact on
behalf of each Selling Stockholder, dated as of Closing Time, to the effect that
(i) the representations and warranties of each Selling Stockholder contained in
Section 1 (b) hereof are true and correct in all respects with the same force
and effect as
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through expressly made at and as of Closing Time and (ii) each Selling
Stockholder has complied in all material respects with all agreements and all
conditions on its part to be performed under this Agreement at or prior to
Closing Time.
(g) ACCOUNTANT'S COMFORT LETTER. At the time of the execution
of this Agreement, the Representatives shall have received from KPMG Peat
Marwick LLP a letter dated such date, in form and substance satisfactory to the
Representatives, together with signed or reproduced copies of such letter for
each of the other Underwriters containing statements and information of the type
ordinarily included in accountants' "comfort letters" to underwriters with
respect to the financial statements and certain financial information contained
in the Registration Statement and the Prospectus.
(h) BRING-DOWN COMFORT LETTER. At Closing Time the
Representatives shall have received from KPMG Peat Marwick LLP a letter,
dated as of Closing Time, to the effect that they reaffirm the statements
made in the letter furnished pursuant to subsection (g) of this Section,
except that the specified date referred to shall be a date not more than
three business days prior to Closing Time.
(i) APPROVAL OF LISTING. At the Closing Time the Securities
shall have been approved for inclusions in the Nasdaq National Market,
subject only to official notice of issuance.
(j) NO OBJECTION. The NASD shall not have raised any objection
with respect to the fairness and reasonableness of the underwriting terms and
arrangements.
(k) LOCK-UP AGREEMENTS. At the date of this Agreement, the
Representatives shall have received an agreement substantially in the form of
Exhibit E hereto signed by the persons listed on Schedule D hereto.
(1) CONDITIONS TO PURCHASE OF OPTION SECURITIES. In the event
that the Underwriters exercise their option provided in Section 2(b) hereof to
purchase all or any portion of the Option Securities, the representations and
warranties of the Company and the Selling Stockholders contained herein and the
statements in any certificates furnished by the Company, any Subsidiary of the
Company and the Selling Stockholders hereunder shall be true and correct as of
each Date of Delivery and, at the relevant Date of Delivery, the Representatives
shall have received:
(i) OFFICERS' CERTIFICATE. A certificate, dated
such Date of Delivery, of the Chief Executive Officer or a Vice President of
the Company and of the chief financial or chief accounting officer of the
Company confirming that the certificate delivered at the Closing Time
pursuant to Section 5(e) hereof remains true and correct as of such Date of
Delivery.
(ii) CERTIFICATE OF SELLING STOCKHOLDERS. A
certificate, dated such Date of Delivery, of an Attorney-in-Fact on behalf of
each Selling Stockholder confirming that the certificate delivered at Closing
Time pursuant to Section 5(f) remains true and correct as of such Date of
Delivery.
(iii) OPINION OF COUNSEL FOR COMPANY. The
favorable legal opinion of Davis, Graham & Stubbs, L.L.C., counsel for the
Company, in form and substance satisfactory to counsel for
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the Underwriters, dated such Date of Delivery, relating to the Option Securities
to be purchased on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(b) hereof.
(iv) OPINION OF COUNSEL FOR THE SELLING STOCKHOLDERS.
The favorable opinion of Davis, Graham & Stubbs, L.L.C., counsel for the Selling
Stockholders in form and substance satisfactory to counsel for the Underwriters,
dated such Date of Delivery, relating to the Option Securities to be purchased
on such Date of Delivery and otherwise to the same effect as the opinion
required by Section 5(c).
(v) OPINION OF COUNSEL FOR UNDERWRITERS. The
favorable opinion of Wilson, Sonsini, Goodrich & Rosati, P.C., counsel for the
Underwriters, dated such Date of Delivery, relating to the Option Securities to
be purchased on such Date of Delivery and otherwise to the same effect as the
opinion required by Section 5(d) hereof.
(vi) BRING-DOWN COMFORT LETTER. A letter from
KPMG Peat Marwick LLP, in form and substance satisfactory to the
Representatives and dated such Date of Delivery, substantially in the same
form and substance as the letter furnished to the Representatives pursuant to
Section 5(g) hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days prior to
such Date of Delivery.
(m) ADDITIONAL DOCUMENTS. At Closing Time and at each Date of
Delivery counsel for the Underwriters shall have been furnished with such
documents and opinions as they may require for the purpose of enabling them
to pass upon the issuance and sale of the Securities as herein contemplated,
or in order to evidence the accuracy of any of the representations or
warranties, or the fulfillment of any of the conditions, herein contained;
and all proceedings taken by the Company and the Selling Stockholders in
connection with the issuance and sale of the Securities as herein
contemplated shall be satisfactory in form and substance to the
Representatives and counsel for the Underwriters.
(n) TERMINATION OF AGREEMENT. If any condition specified in
this Section shall not have been fulfilled when and as required to be
fulfilled, this Agreement, or, in the case of any condition to the purchase
of Option Securities, on a Date of Delivery which is after the Closing Time,
the obligations of the several Underwriters to purchase the relevant Option
Securities, may be terminated by the Representatives by notice to the Company
at any time at or prior to Closing Time or such Date of Delivery, as the case
may be, and such termination shall be without liability of any party to any
other party except as provided in Section 4 and except that Sections 1, 6, 7
and 8 shall survive any such termination and remain in full force and effect.
SECTION 6. INDEMNIFICATION.
(a) INDEMNIFICATION OF UNDERWRITERS. The Company and the
Primary Selling Stockholder, jointly and severally, agree to indemnify and
hold harmless each Underwriter and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act to the extent and in the manner set forth in clauses (i), (ii),
(iii) and (iv) below:
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(i) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Registration
Statement (or any amendment thereto), including the Rule 43OA Information, or
in any preliminary prospectus, or the omission or alleged omission therefrom of
a material fact required to be stated therein or necessary to make the
statements therein not misleading or arising out of any untrue statement or
alleged untrue statement of a material fact contained in the Prospectus (or any
amendment or supplement thereto), or the omission or alleged omission therefrom
of a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in this Agreement;
(iii) against any and all loss, liability, claim, damage
and expense whatsoever, as incurred, to the extent of the aggregate amount paid
in settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim whatsoever
based upon any such untrue statement or omission, or any such alleged untrue
statement or omission; provided that (subject to Section 6(d) below) any such
settlement is effected with the written consent of the Company and the Primary
Selling Stockholder; and
(iv) against any and all expense whatsoever, as
incurred (including the fees and disbursements of counsel chosen by Merrill
Lynch), reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under (i), (ii) or (iii) above;
PROVIDED, HOWEVER, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
Underwriter through Merrill Lynch expressly for use in the Registration
Statement (or any amendment thereto) including the 430A Information or the
Prospectus (or any amendment or supplement thereto). In addition, each Selling
Stockholder, severally and not jointly (in the proportion that the number of
Securities being sold by such Selling Stockholder bears to the total number of
Securities), agrees to indemnify and hold harmless each Underwriter, its
directors, officers and employees, and each person, if any, who controls any
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act from and against any and all loss, liability, claim, damage and
expense whatsoever, as incurred (including, without limitation, the legal fees
and other expenses incurred in connection with any suit, action or proceeding or
any claim asserted) arising out of or caused by any untrue statement or alleged
untrue statement of a material fact with respect to information pertaining to
such Selling Stockholder furnished by or on behalf of such Selling Stockholder
expressly for use in any preliminary prospectus or prospectuses, including the
Prospectus (or any amendment or supplement thereto) or the Registration
Statement (or any amendment thereto), provided that the liability of each
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Selling Stockholder under the indemnity agreement contained in the provisions of
this Section 6 shall be limited to an amount equal to the product of the
proceeds per share to the Selling Stockholders as set forth on the cover page of
the Prospectus times the number of Securities set forth in Schedule B opposite
such Selling Stockholder's name.
(b) INDEMNIFICATION OF COMPANY, DIRECTORS AND OFFICERS. Each
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act and each Selling Stockholder against any
and all loss, liability, claim, damage and expense described in the indemnity
contained in subsection (a) of this Section, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto), including the
Rule 430A Information or any preliminary prospectus or the Prospectus (or any
amendment or supplement thereto) in reliance upon and in conformity with written
information fumished to the Company by such Underwriter through Merrill Lynch
expressly for use in the Registration Statement (or any amendment thereto) or
such preliminary prospectus or the Prospectus (or any amendment or supplement
thereto).
(c) ACTIONS AGAINST PARTIES; NOTIFICATION. Each indemnified
party shall give notice as promptly as reasonably practicable to each
indemnifying party of any action commenced against it in respect of which
indemnity may be sought hereunder, but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified
pursuant to Section 6(a) above, counsel to the indemnified parties shall be
selected by Merrill Lynch, and, in the case of parties indemnified pursuant to
Section 6(b) above, counsel to the indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the
defense of any such action; provided, however, that counsel to the indemnifying
party shall not (except with the consent of the indemnified party) also be
counsel to the indemnified party. In no event shall the indemnifying parties be
liable for fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which Indemnification or contribution could be sought
under this Section 6 or Section 7 hereof (whether or not the indemnified parties
are actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes an unconditional release of each indemnified party from all
liability arising out of such litigation, investigation, proceeding or claim and
(ii) does not include a statement as to or an admission of fault, culpability or
a failure to act by or on behalf of any indemnified party.
(d) SETTLEMENT WITHOUT CONSENT IF FAILURE TO REIMBURSE. If at
any time an indemnified party shall have requested an indemnifying party to
reimburse the indemnified party for fees and expenses of counsel, such
indemnifying party agrees that it shall be liable for any settlement
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contemplated by Section 6(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 45 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) PRIOR INDEMNIFICATION AGREEMENTS. The provisions of this
Section shall not affect any agreement among the Company and the Selling
Stockholders with respect to indemnification.
(f) SELLING STOCKHOLDER INDEMNIFICATION. Notwithstanding
anything herein contained, (i) the liability of Bob G. Stevenson, as the Primary
Selling Stockholder, under the representations and warranties contained in
Section 1(a) hereof and under the indemnity agreements contained in the
provisions of this Section 6 shall not exceed an amount equal to the initial
public offering price of the Securities sold by Bob G. Stevenson to the
Underwriters, and (ii) the liability of each Selling Stockholder under the
representations and warranties contained in Section 1(b) hereof and under the
indemnity agreements contained in the provisions of this Section 6 shall not
exceed an amount equal to the initial public offering price of the Securities
sold by each such Selling Stockholder to the Underwriters; provided, further,
that with respect to indemnification arising out of or based upon any breach of
any representation contained in Section 1(a) hereof, the Underwriters agree to
exhaust their remedies against the Company before proceeding (only as to the
enforcement of remedies available to them and not as to the initiation of any
action) against the Primary Selling Stockholder.
SECTION 7. CONTRIBUTION. If the indemnification provided for in
Section 6 hereof is for any reason unavailable to or insufficient to hold
harmless an indemnified party in respect of any losses, liabilities, claims,
damages or expenses referred to therein, then each indemnifying party shall
contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Selling Stockholders on the one hand and the
Underwriters on the other hand from the offering of the Securities pursuant
to this Agreement or (ii) if the allocation provided by clause (i) is not
permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause (i) above but also the
relative fault of the Company and the Selling Stockholders on the one hand
and of the Underwriters on the other hand in connection with the statements
or omissions, or in connection with any failure of the nature referred to in
Section 6(a)(ii)(A) hereof, which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations.
The relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand in
connection with the offering of the Securities pursuant to this Agreement shall
be deemed to be in the same respective proportions as the total net proceeds
from the offering of the Securities pursuant to this Agreement (before deducting
expenses) received by the Company and the Selling Stockholders and the total
underwriting discount received by the Underwriters, in each case as set forth on
the cover of the Prospectus.
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The relative fault of the Company and the Selling Stockholders
on the one hand and the Underwriters on the other hand shall be determined by
reference to, among other things, whether any such untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact relates to information supplied by the Company and the Selling Stockholders
or by the Underwriters and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree
that it would not be just and equitable if contribution pursuant to this Section
7 were determined by pro rata allocation (even if the Underwriters were treated
as one entity for such purpose) or by any other method of allocation which does
not take account of the equitable considerations referred to above in this
Section 7. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
7 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, (i) no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price at which the Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such Underwriter has otherwise been required to pay by reason of
any such untrue or alleged untrue statement or omission or alleged omission, and
(ii) no Selling Stockholder shall be required to contribute any amount in excess
of the amount by which the net proceeds from the sale of Securities (before
deducting expenses) received by such Selling Stockholder exceeds the amount of
any damages that such Selling Stockholder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission.
No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the 1933 Act) shall be entitled to contribution
from any person who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls
an Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such Underwriter, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The Underwriters'
respective obligations to contribute pursuant to this Section 7 are several in
proportion to the number of Initial Securities set forth opposite their
respective names in Schedule A hereto and not joint.
The provisions of this Section shall not affect any agreement
among the Company and the Selling Stockholders with respect to contribution.
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SECTION 8. REPRESENTATIONS, WARRANTIES AND AGREEMENTS TO SURVIVE
DELIVERY. All representations, warranties and agreements contained in this
Agreement or in certificates of officers of the Company or the Selling
Stockholders submitted pursuant hereto, shall remain operative and in full
force and effect, regardless of any investigation made by or on behalf of any
Underwriter or controlling person, or by or on behalf of the Company or the
Selling Stockholders, and shall survive delivery of the Securities to the
Underwriters.
SECTION 9. TERMINATION OF AGREEMENT.
(a) TERMINATION; GENERAL. The Representatives may
terminate this Agreement, by notice to the Company and the Selling
Stockholders, at any time at or prior to Closing Time (i) if there has been,
since the time of execution of this Agreement or since the respective dates
as of which information is given in the Prospectus, any material adverse
change in the condition, financial or otherwise, or in the earnings, business
affairs or business prospects of the Company and its Subsidiaries considered
as one enterprise, whether or not arising in the ordinary course of business,
or (ii) if there has occurred any material adverse change in the financial
markets in the United States or the international financial markets, any
outbreak of hostilities or escalation thereof or other calamity or crisis or
any change or development involving a prospective change in national or
international political, financial or economic conditions, in each case the
effect of which is such as to make it, in the judgment of the
Representatives, impracticable to market the Securities or to enforce
contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or limited by the Commission or
the Nasdaq National Market, or if trading generally on the American Stock
Exchange or the New York Stock Exchange or in the Nasdaq National Market has
been suspended or limited, or minimum or maximum prices for trading have been
fixed, or maximum ranges for prices have been required, by any of said
exchanges or by such system or by order of the Commission, the National
Association of Securities Dealers, Inc. or any other governmental authority,
or (iv) if a banking moratorium has been declared by either Federal or New
York authorities.
(b) LIABILITIES. If this Agreement is terminated pursuant to
this Section, such termination shall be without liability of any party to any
other party except as provided in Section 4 hereof, and provided further that
Sections 1, 6 and 7 shall survive such termination and remain in full force and
effect.
SECTION 1O. DEFAULT BY ONE OR MORE OF THE UNDERWRITERS. If one or
more of the Underwriters shall fail at Closing Time or a Date of Delivery to
purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the Representatives shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting Underwriters, or any other underwriters, to purchase all, but not
less than all, of the Defaulted Securities in such amounts as may be agreed upon
and upon the terms herein set forth; if, however, the Representatives shall not
have completed such arrangements within such 24-hour period, then:
(a) if the number of Defaulted Securities does not exceed 10% of
the number of Securities to be purchased on such date, each of the
non-defaulting Underwriters shall be obligated,
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severally and not jointly, to purchase the full amount thereof in the
proportions that their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the
number of Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the Underwriters to purchase and of the Company to sell the Option
Securities to be purchased and sold on such Date of Delivery shall terminate
without liability on the part of any non-defaulting Underwriter.
No action taken pursuant to this Section shall relieve any
defaulting Underwriter from liability in respect of its default.
In the event of any such default which does not result in a
termination of this Agreement or, in the case of a Date of Delivery which is
after the Closing Time, which does not result in a termination of the obligation
of the Underwriters to purchase and the Company to sell the relevant Option
Securities, as the case may be, either the Representatives or the Company and
any Selling Stockholder shall have the right to postpone Closing Time or the
relevant Date of Delivery, as the case may be, for a period not exceeding seven
days in order to effect any required changes in the Registration Statement or
Prospectus or in any other documents or arrangements. As used herein, the term
"Underwriter" includes any person substituted for an Underwriter under this
Section 10.
SECTION 11. DEFAULT BY ONE OR MORE OF THE SELLING STOCKHOLDERS OR THE
COMPANY. If the Selling Stockholders shall fail at Closing Time to sell and
deliver the number of Securities which such Selling Stockholder are obligated to
sell hereunder, and the remaining Selling Stockholders do not exercise the right
hereby granted to increase, pro rata or otherwise, the number of Securities to
be sold by them hereunder to the total number to be sold by all Selling
Stockholders as set forth in Schedule B hereto, then the Underwriters may, at
option of the Representatives, by notice from the Representatives to the Company
and the non-defaulting Selling Stockholders, either (a) terminate this Agreement
without any liability on the fault of any non-defaulting party except that the
provisions of Sections 1, 4, 6 and 7 shall remain in full force and effect or
(b) elect to purchase the Securities which the non-defaulting Selling
Stockholders have agreed to sell hereunder. No action taken pursuant to this
Section 11 shall relieve any Selling Stockholder so defaulting from liability,
if any, in respect of such default.
In the event of a default by any Selling Stockholder as referred to in
this Section 11, each of the Representatives, the Company and the
non-defaulting Selling Stockholders shall have the right to postpone Closing
Time for a period not exceeding seven days in order to effect any required
change in the Registration Statement or Prospectus or in any other documents or
arrangements.
If the Company shall fail at Closing Time or at the Date of
Delivery to sell the number of Securities that it is obligated to sell
hereunder, then this Agreement shall terminate without any liability on the
part of any nondefaulting party; provided, however, that the provisions of
Sections 4, 5 and 7 shall remain in full force and effect. No action taken
pursuant to this Section shall relieve the Company from liability, if any, in
respect of such default.
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SECTION 12. NOTICES. All notices and other communications
hereunder shall be in writing and shall be deemed to have been duly given if
mailed or transmitted by any standard form of telecommunication. Notices to
the Underwriters shall be directed to the Representatives at Merrill Lynch &
Co., 101 California Street, Suite 1320, San Francisco, California 94111,
attention of Steven F. Strandberg; notices to the Company shall be directed
to it at CIBER, Inc. 5251 DTC Parkway, Suite 1400, Englewood, Colorado 80111;
and notices to the Selling Stockholders shall be directed to them at c/o
CIBER, Inc. 5251 DTC Parkway, Suite 1400, Englewood, Colorado 80111,
attention of Bob G. Stevenson and Mac J. Slingerlend, Attorneys-in-fact for
the Selling Stockholders.
SECTION 13. PARTIES. This Agreement shall each inure to the benefit
of and be binding upon the Underwriters, the Company and the Selling
Stockholders and their respective successors. Nothing expressed or mentioned in
this Agreement is intended or shall be construed to give any person, firm or
corporation, other than the Underwriters, the Company and the Selling
Stockholders and their respective successors and the controlling persons and
officers and directors referred to in Sections 6 and 7 and their heirs and legal
representatives, any legal or equitable right, remedy or claim under or in
respect of this Agreement or any provision herein contained. This Agreement and
all conditions and provisions hereof are intended to be for the sole and
exclusive benefit of the Underwriters, the Company and the Selling Stockholders
and their respective successors, and said controlling persons and officers and
directors and their heirs and legal representatives, and for the benefit of no
other person, firm or corporation. No purchaser of Securities from any
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 14. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW
YORK. EXCEPT AS OTHERWISE SET FORTH HEREIN, SPECIFIED TIMES OF DAY REFER TO
NEW YORK CITY TIME.
SECTION 15. EFFECT OF HEADINGS. The Article and Section headings
herein and the Table of Contents are for convenience only and shall not affect
the construction hereof.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-26-
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company and the Attorney-in-Fact for
the Selling Stockholders, a counterpart hereof, whereupon this instrument,
along with all counterparts, will become a binding agreement among the
Underwriters, the Company and the Selling Stockholders in accordance with its
terms.
Very truly yours,
CIBER, Inc.
By:
-------------------------------------
Bob G. Stevenson, President
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO. By:
Merrill Lynch, Pierce, Fenner & ------------------------------------
Smith Incorporated As Attorney-in-Fact acting on behalf
HANIFEN, IMHOFF INC. of the Selling Stockholders named in
J.P. MORGAN SECURITIES INC. Schedule B hereto
By: MERRILL LYNCH, PIERCE, FENNER &
SMITH INCORPORATED
By:
-------------------------------
Authorized Signatory
For themselves and as Representatives of the other
Underwriters named in Schedule A hereto.
-27-
<PAGE>
SCHEDULE A
2,000,000 Shares
CIBER, Inc.
Common Stock
<TABLE>
<CAPTION>
NAME OF UNDERWRITER NUMBER OF INITIAL SECURITIES
- ------------------------------------------------- ----------------------------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith Incorporated...................
Hanifen, Imhoff Inc..................................................
J.P. Morgan Securities Inc...........................................
----------
Total................................................................ 2,000,000
----------
----------
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
<TABLE>
<CAPTION>
MAXIMUM NUMBER
NUMBER OF INITIAL OF OPTION SECURITIES
SECURITIES TO BE SOLD TO BE SOLD
--------------------- --------------------
<S> <C> <C>
CIBER, Inc.. . . . . . . . . . . . . . . . . . . 700,000
Bob G. Stevenson(1). . . . . . . . . . . . . . . 1,000,000
John B. Maitland, Jr.. . . . . . . . . . . . . . 151,000
Paul Piper . . . . . . . . . . . . . . . . . . . 74,000
BIT Class B Stockholder Liquidating Trust. . . . 75,000
--------- -------
Total. . . . . . . . . . . . . . . . . . . . . . 2,000,000 300,000
--------- -------
--------- -------
- ---------------
</TABLE>
(1)For purposes of this Agreement, Mr. Stevenson is the "Primary Selling
Stockholder."
Sch B-1
<PAGE>
SCHEDULE C
CIBER, Inc.
__________ Shares of Common Stock
(Par Value $.Ol Per Share)
1. The public offering price per share for the Securities shall be
$________________.
2. The purchase price per share for the Securities to be paid by the
several Underwriters shall be $_______________________, being an amount
equal to the public offering price set forth above less $________________ per
share; provided that the purchase price per share for any Option Securities
purchased upon the exercise of the over allotment option described in Section
2(b) shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial Securities
but not payable on the Option Securities.
<PAGE>
SCHEDULE D
LIST OF PERSONS AND ENTITIES SUBJECT TO LOCK-UP
<PAGE>
EXHIBIT A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State of
Delaware.
(ii) The Company has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectus and to enter into and perform its obligations
under the Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation
to transact business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not result in a material adverse effect on the
Company's business, results of operations, or financial condition.
(iv) The authorized, issued and outstanding capital stock
of the Company is as set forth in the Prospectus in the column entitled
"Actual" under the caption "Capitalization" (except for subsequent issuances,
if any, pursuant to the Purchase Agreement or pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectus or
pursuant to the exercise of convertible securities or options referred to in
the Prospectus); the shares of issued and outstanding capital stock of the
Company, including the Securities to be purchased by the Underwriters from
the Selling Stockholders, have been duly authorized and validly issued and
are fully paid and non-assessable; and none of the outstanding shares of
capital stock of the Company was issued in violation of the preemptive or
other similar rights of any securityholder of the Company.
(v) The Securities to be purchased by the Underwriters
from the Company have been duly authorized for issuance and sale to the
Underwriters pursuant to the Purchase Agreement and the Securities to be sold
by the Selling Stockholders are, and the Securities to be sold by the
Company, when issued and delivered by the Company pursuant to the Purchase
Agreement against payment of the consideration set forth in the Purchase
Agreement, will be validly issued and fully paid and non-assessable and no
holder of the Securities is or will be subject to personal liability by
reason of being such a holder.
(vi) The issuance and sale of the Securities by the Company
and the sale of the Securities by the Selling Stockholders is not subject to
preemptive or other similar rights of any securityholder of the Company.
(vii) Each "significant subsidiary" of the Company (as such
term is defined in Rule 405 of the 1933 Act) has been duly incorporated and is
validly existing as a corporation in good standing under the laws of the
jurisdiction of its incorporation, has corporate power and authority to own,
lease
A-1
<PAGE>
and operate its properties and to conduct its business as described in the
Prospectus and is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify
or to be in good standing would not result in a Material Adverse Effect;
except as otherwise disclosed in the Registration Statement, all of the
issued and outstanding capital stock of each Significant Subsidiary has been
duly authorized and validly issued, is fully paid and non-assessable and, to
the best of our knowledge and information, is owned by the Company, directly
or through subsidiaries, free and clear of any security interest, mortgage,
pledge, lien, encumbrance, claim or equity; none of the outstanding shares of
capital stock of any Significant Subsidiary was issued in violation of the
preemptive or similar rights of any securityholder of such Significant
Subsidiary.
(viii) The Purchase Agreement has been duly authorized,
executed and delivered by the Company.
(ix) The Registration Statement, including any Rule 462(b)
Registration Statement, has been declared effective under the 1933 Act; any
required filing of the Prospectus pursuant to Rule 424(b) has been made in
the manner and within the time period required by Rule 424(b); and, to the
best of our knowledge, no stop order suspending the effectiveness of the
Registration Statement has been issued under the 1933 Act and no proceedings
for that purpose have been instituted or are pending or threatened by the
Commission.
(x) The Registration Statement, including any Rule 462(b)
Registration Statement, the Rule 430A Information and the Rule 434
Information, as applicable, the Prospectus and each amendment or supplement
to the Registration Statement and Prospectus as of their respective effective
or issue dates (other than the financial statements and supporting schedules
included therein or omitted therefrom, as to which we need express no
opinion) complied as to form in all material respects with the requirements
of the 1933 Act and the 1933 Act Regulations.
(xi) If Rule 434 has been relied upon, the Prospectus was
not "materially different," as such term is used in Rule 434, from the
Prospectus included in the Registration Statement at the time it became
effective.
(xii) The form of certificate used to evidence the Common
Stock complies in all material respects with all applicable statutory
requirements, with any applicable requirements of the charter and by-laws of
the Company and the requirements of the Nasdaq National Market.
(xiii) To the best of our knowledge, there is no pending or
threatened action, suit, proceeding, inquiry or investigation, to which the
Company or any Significant Subsidiary is a party, or to which the property of
the Company or any Significant Subsidiary is subject, before or brought by any
court or governmental agency or body, domestic or foreign, which might
reasonably be expected to result in a Material Adverse Effect, or which might
reasonably be expected to materially and adversely affect the properties or
assets thereof or the consummation of the transactions contemplated in the
Purchase Agreement or the performance by the Company of its obligations
thereunder.
A-2
<PAGE>
(xiv) The information in the Prospectus under
"Management--Limitation of Liability and Indemnification Matters,"
"Management--Employee and Director Plans," "Certain Transactions,"
"Description of Capital Stock" and "Securities Eligible for Future Sale" and
in the Registration Statement under Items 14 and 15, to the extent that it
constitutes matters of law, summaries of legal matters, the Company's charter
and bylaws or legal proceedings, or legal conclusions, has been reviewed by
us and is correct in all material respects.
(xv) To the best of our knowledge, there are no statutes or
regulations that are required to be described in the Prospectus that are not
described as required.
(xvi) All descriptions in the Registration Statement of
contracts and other documents to which the Company or its Significant
Subsidiaries are a party are accurate in all material respects; to the best
of our knowledge, there are no franchises, contracts, indentures, mortgages,
loan agreements, notes, leases or other instruments required to be described
or referred to in the Registration Statement or to be filed as exhibits
thereto other than those described or referred to therein or filed or
incorporated by reference as exhibits thereto, and the descriptions thereof
or references thereto are correct in all material respects.
(xvii) Neither the Company nor any Significant Subsidiary is
in violation of its charter or by-laws and, to the best of our knowledge, no
default by the Company or any Significant Subsidiary exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument that is described or referred to
in the Registration Statement or the Prospectus or filed or incorporated by
reference as an exhibit to the Registration Statement.
(xviii) No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency, domestic or foreign (other than (i) under
the 1933 Act and the 1933 Act Regulations, which have been obtained, or (ii)
as may be required under the securities or blue sky laws of the various
states or the rules and regulations of the NASD, as to which we express no
opinion) is necessary or required in connection with the due authorization,
execution and delivery of the Purchase Agreement or for the offering,
issuance or sale of the Securities.
(xix) The execution, delivery and performance of the Purchase
Agreement and the consummation of the transactions contemplated in the Purchase
Agreement and in the Registration Statement (including the issuance and sale of
the Securities and the use of the proceeds from the sale of the Securities as
described in the Prospectus under the caption "Use Of Proceeds") and compliance
by the Company with its obligations under the Purchase Agreement do not and will
not, whether with or without the giving of notice or lapse of time or both,
conflict with or constitute a breach of, or default or Repayment Event (as
defined in Section 1(a)(x) of the Purchase Agreement) under or result in the
creation or imposition of any lien, charge or encumbrance upon any property or
assets of the Company or any Significant Subsidiary pursuant to any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease or any
other agreement or instrument, known to us, to which the Company or any
Significant Subsidiary is a party or by which it or any of them may be bound, or
to which any of the
A-3
<PAGE>
property or assets of the Company or any Significant Subsidiary is subject
(except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company or any Significant Subsidiary, or any applicable law, statute, rule,
regulation, judgment, order, writ or decree, known to us, of any government,
government instrumentality or court, domestic or foreign, having jurisdiction
over the Company or any Significant Subsidiary or any of their respective
properties, assets or operations.
(xx) To the best of our knowledge, there is no owner of
any securities of the Company who has any rights, not effectively satisfied
or waived, to require registration of any shares of capital stock of the
Company in connection with the filing of the Registration Statement.
(xxi) The Company is not an "investment company" or an
entity "controlled" by an "investment company," as such terms are defined in
the 1940 Act.
(xxii) [The Rights under the Company's Stockholder Rights
Plan to which holders of the Securities will be entitled have been duly
authorized and validly issued]
Nothing has come to our attention that would lead us to
believe that the Registration Statement or any amendment thereto, including the
Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time such
Registration Statement or any such amendment became effective, contained an
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein not misleading
or that the Prospectus or any amendment or supplement thereto (except for
financial statements and schedules and other financial data included therein or
omitted therefrom, as to which we need make no statement), at the time the
Prospectus was issued, at the time any such amended or supplemented prospectus
was issued or at the Closing Time, included or includes an untrue statement of a
material fact or omitted or omits to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading.
In rendering such opinion, such counsel may rely as
to matters of fact (but not as to legal conclusions), to the extent they deem
proper, on certificates of responsible officers of the Company and public
officials. Such opinion shall not state that it is to be governed or
qualified by, or that it is otherwise subject to, any treatise, written
policy or other document relating to legal opinions, including, without
limitation, the Legal Opinion Accord of the ABA Section of Business
Law (1991).
A-4
<PAGE>
EXHIBIT D
Form of Opinion of Counsel for the Selling Stockholders
to be Delivered Pursuant to Section 5(c)
(i) No filing with, or consent, approval, authorization,
order, registration, qualification or decree of, any court or governmental
authority or agency, domestic or foreign, (other than (i) the issuance of the
order of the Commission declaring the Registration Statement effective and
(ii) such authorizations, approvals or consents as may be necessary under
state securities laws or the rules and regulations of the NASD, as to which
we need express no opinion) is necessary or required to be obtained by the
Selling Stockholders for the performance by each Selling Stockholder of its
obligations under the Purchase Agreement or in the Power of Attorney and
Custody Agreement, or in connection with the offer, sale or delivery of the
Securities.
(ii) Each Power of Attorney and Custody Agreement has been
duly executed and delivered by the respective Selling Stockholders named
therein and constitutes the valid and binding agreement of such Selling
Stockholder in accordance with its terms.
(iii) The Purchase Agreement has been duly authorized,
executed and delivered by or on behalf of each Selling Stockholder.
(iv) The sale of the Securities by the Selling Stockholders
is not subject to preemptive or similar rights of any security holder of the
Company.
(v) Each Attorney-in-Fact has been duly authorized by the
Selling Stockholders to deliver the Securities on behalf of the Selling
Stockholders in accordance with the terms of the Purchase Agreement.
(vi) The execution, delivery and performance of the
Purchase Agreement and the Power of Attorney and Custody Agreement and the
sale and delivery of the Securities and the consummation of the transactions
contemplated in the Purchase Agreement and in the Registration Statement and
compliance by the Selling Stockholders with its obligations under the
Purchase Agreement have been duly authorized by all necessary action on the
part of the Selling Stockholders and do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event under or result in the
creation or imposition of any tax, lien, charge or encumbrance upon the
Securities or any property or assets of the Selling Stockholders pursuant to,
any contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, license, lease or other instrument or agreement to which any Selling
Stockholder is a party or by which they may be bound, or to which any of the
property or assets of the Selling Stockholders may be subject nor will such
action result in any violation of the provisions of the charter or by-laws of
the Selling Stockholders, if applicable, or any law, administrative
regulation, judgement or order of any governmental agency or body or any
administrative or court decree having jurisdiction over such Selling
Stockholder or any of its properties.
D-1
<PAGE>
(viii) Each Selling Stockholder is, and immediately prior to
Closing Time will be, the sole registered owner of the Securities to be sold
by such Selling Stockholder; upon consummation of the sale of the Securities
pursuant to the Purchase Agreement, each of the Underwriters will be the
registered owner of the Securities purchased by it from such Selling
Stockholder and, assuming the Underwriters purchased the Securities for value
in good faith and without notice of any adverse claim, the Underwriters will
have acquired all rights of such Selling Stockholder in the Securities free
and clear of any security interest, mortgage, pledge, lien, encumbrance,
claim or equity, and the owner of the Securities, if other than such Selling
Stockholder, is precluded from asserting against the Underwriters the
ineffectiveness of any unauthorized endorsement; and such Selling Stockholder
has the full right, power and authority (A) to enter into the Purchase
Agreement and the Power of Attorney and Custody Agreement and (B) to sell,
transfer and delivery the Securities to be sold by such Selling Stockholder
under the Purchase Agreement.
D-2
<PAGE>
EXHIBIT E
CIBER, INC.
LOCK-UP CONTRACT
October __, 1996
Merrill Lynch & Co.
Hanifen, Imhoff, Inc.
J.P. Morgan Securities, Inc.
c/o Robert M. Tarkoff
Wilson, Sonsini, Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Dear Sirs:
The undersigned understands that Merrill Lynch & Co. ("Merrill
Lynch"), as Representative of the several Underwriters, proposes to enter into
an Purchase Agreement (the "Purchase Agreement") with CIBER, Inc., a Delaware
corporation (the "Company"), providing for the public offering (the "Public
Offering") by the several Underwriters, including Merrill Lynch (the
"Underwriters"), of shares of Common Stock, $.Ol par value, of the Company (the
"Common Stock").
In order to induce you and the other Underwriters that may
participate in the Public Offering subject to the terms of the Purchase
Agreement, to continue their efforts in connection with the Public Offering,
the undersigned hereby agrees that, without the prior written consent of
Merrill Lynch on behalf of the Underwriters, it will not, during the period
commencing on the date hereof and ending [120] days after the date of the
final prospectus relating to the Public Offering (the "Prospectus"): (1)
offer, pledge, sell, contract to sell, sell any option or contract to
purchase, purchase any option or contract to sell, grant any option, right or
warrant to purchase, or otherwise transfer or dispose of, directly or
indirectly, any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for shares of Common Stock (collectively, the
"Securities") (whether such shares or any securities are now owned or
hereafter acquired), or (2) enter into any swap or other arrangement that
transfers to another, in whole or in part, any of the economic consequences
of ownership of the Securities, whether or not any such transaction described
in clause (1) or (2) above is to be settled by delivery of the Securities or
such other securities, in cash or otherwise. The foregoing sentence shall
not apply to the sale of any Securities by the undersigned to the
Underwriters pursuant to the Purchase Agreement. In addition, the
undersigned agrees that, without the prior written consent of Merrill Lynch
on behalf of the Underwriters, it will not, during the period commencing on
the date hereof and ending [120] days after the date of the Prospectus, make
any demand for or exercise any right with respect to, the registration of any
shares of Common Stock or any security convertible into or exercisable or
exchangeable for Common Stock.
E-1
<PAGE>
Whether or not a Public Offering actually occurs depends on a number of
conditions, including market conditions. The Public Offering will be made only
pursuant to an Purchase Agreement, the terms of which will be subject to
agreement among the Company, any selling Stockholders and you as Representative
of the Underwriters.
Very truly yours,
-------------------------------------------
(Name)
-------------------------------------------
(Address)
Accepted as of the date set forth above:
By:
-------------------------------------
E-2
<PAGE>
REVISED OCTOBER 29, 1990
MASTER AGREEMENT AMONG UNDERWRITERS
April 15, 1985
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED)
Merrill Lynch World Headquarters
North Tower
World Financial Center
New York, N.Y. 10281-1305
Dear Sirs:
We understand that from time to time you may act as Representative or as
one of the Representatives of the several underwriters of offerings of
securities of various issuers. This Agreement shall apply to any offering of
securities in which we elect to act as an underwriter after receipt of an
invitation from you which shall identify the issuer, contain information
regarding certain terms of the securities to be offered and specify the amount
of our proposed participation and the names of the other Representatives, if
any, and that our participation as an underwriter in the offering shall be
subject to the provisions of this Agreement. Your invitation will include
instructions for our acceptance of such invitation. At or prior to the time of
an offering, you will advise us, to the extent applicable, as to the expected
offering date, the expected closing date, the initial offering price, the
interest or dividend rate (or the method by which such rate is to be
determined), the conversion price, the underwriting discount, the management
fee, the selling concession and the reallowance, except that if the offering
price of the securities is to be determined as contemplated by Rule 430A under
the Securities Act of 1933 (such procedure being hereinafter referred to as
"430A Pricing"), you shall so advise us and shall specify the maximum
underwriting discount, management fee and selling concession. Such information
may be conveyed by you in one or more communications (such communications
received by us with respect to the offering are hereinafter collectively
referred to as the "Invitation"). If the Purchase Agreement (as hereinafter
defined) provides for the granting of an option to purchase additional
securities to cover over-allotments or otherwise (an "over-allotment option"),
you will notify us, in the Invitation, of such option and of our maximum
obligation upon exercise of such option.
This Agreement, as amended or supplemented by the Invitation, shall become
effective with respect to our participation in an offering of securities if you
receive our oral or written acceptance and you do not receive a written
communication revoking our acceptance prior to the time and date specified in
the Invitation (our unrevoked acceptance after expiration of such time and date
being hereinafter referred to as our "Acceptance"). Our Acceptance will
constitute our confirmation that, except as otherwise stated in such Acceptance,
each statement included in the Master Underwriters' Questionnaire set forth as
Exhibit A hereto (or otherwise furnished to us) is correct. The issuer of the
securities in any offering of securities made pursuant to this Agreement is
hereinafter referred to as the "Issuer". If the Purchase Agreement does not
provide for an over-allotment option, the securities to be purchased are
hereinafter referred to as the "Securities"; if the Purchase Agreement provides
for an over-allotment option, the securities the Underwriters (as hereinafter
defined) are initially obligated to purchase pursuant to the Purchase Agreement
are hereinafter called the "Initial Securities" and any additional securities
which may be purchased upon exercise of the over-allotment option are
hereinafter called the "Option Securities", with the Initial Securities and all
or any part of the Option Securities being hereinafter collectively referred to
as the "Securities". Any underwriters of Securities under this Agreement,
including the Representatives (as hereinafter defined), are hereinafter
collectively referred to as the "Underwriters". All references herein to "you"
or to the "Representatives" shall mean Merrill Lynch, Pierce, Fenner & Smith
Incorporated and the other firms, if any, which are named as Representatives in
the Invitation. The Securities to be offered may, but need not, be registered
for a delayed or continuous offering pursuant to Rule 415 under the Securities
Act of 1933 (the "1933 Act").
The following provisions of this Agreement shall apply separately to each
individual offering of Securities. This Agreement may be supplemented or
amended by you by written notice to us and, except for supplements or
amendments set forth in an Invitation relating to a particular offering of
Securities,
<PAGE>
any such supplement or amendment to this Agreement shall be effective with
respect to any offering of Securities to which this Agreement applies after this
Agreement is so amended or supplemented.
Section 1. PURCHASE AGREEMENT; AUTHORITY OF REPRESENTATIVES. We authorize
you to execute and deliver a purchase agreement and any amendment or supplement
thereto and any associated Terms Agreement or other similar agreement
(collectively, the "Purchase Agreement") on our behalf with the Issuer and/or
any selling securityholder with respect to the Securities in such form as you
determine. We will be bound by all terms of the Purchase Agreement as executed.
We understand that changes may be made in those who are to be Underwriters, and
in the amount of Securities to be purchased by them, but the amount of
Securities to be purchased by us in accordance with the terms of this Agreement,
including the maximum amount of Option Securities, if any, which we may become
obligated to purchase by reason of the exercise of any over-allotment option
provided in the Purchase Agreement, shall not be changed without our consent
except as provided in the Purchase Agreement.
As Representatives of the Underwriters, you are authorized to take such
action as you deem necessary or advisable to carry out this Agreement, the
Purchase Agreement, and the purchase and sale of the Securities, and to agree to
any waiver or modification of any provision of the Purchase Agreement. To the
extent applicable, you are also authorized to determine (i) the amount of Option
Securities, if any, to be purchased by the Underwriters pursuant to any over-
allotment option and (ii) with respect to offerings using 430A Pricing, the
initial offering price and the price at which the Securities are to be purchased
in accordance with the Purchase Agreement. It is understood and agreed that
Merrill Lynch, Pierce, Fenner & Smith Incorporated may act on behalf of all
Representatives.
It is understood that, if so specified in the Invitation, arrangements may
be made for the sale of Securities by the Issuer pursuant to delayed delivery
contracts (hereinafter referred to as "Delayed Delivery Contracts"). References
herein to delayed delivery and Delayed Delivery Contracts apply only to
offerings to which delayed delivery is applicable. The term "underwriting
obligation", as used in this Agreement with respect to any Underwriter, shall
refer to the amount of Securities, including any Option Securities (plus such
additional Securities as may be required by the Purchase Agreement in the event
of a default by one or more of the Underwriters) which such Underwriter is
obligated to purchase pursuant to the provisions of the Purchase Agreement,
without regard to any reduction in such obligation as a result of Delayed
Delivery Contracts which may be entered into by the Issuer.
If the Securities consist in whole or in part of debt obligations maturing
serially, the serial Securities being purchased by each Underwriter pursuant to
the Purchase Agreement will consist, subject to adjustment as provided in the
Purchase Agreement, of serial Securities of each maturity in a principal amount
which bears the same Proportion to the aggregate principal amount of the serial
Securities of such maturity to be purchased by all the Underwriters as the
respective principal amount of serial Securities set forth opposite such
Underwriter's name in the Purchase Agreement bears to the aggregate principal
amount of the serial Securities to be purchased by all the Underwriters.
Section 2. REGISTRATION STATEMENT AND PROSPECTUS; OFFERING CIRCULAR. In
the case of an Invitation regarding an offer of Securities registered under
the 1933 Act (a "Registered Offering"), you will furnish to us, to the extent
made available to you by the Issuer, copies of any registration statement or
registration statements relating to the Securities which may be filed with
the Securities and Exchange Commission (the "Commission") pursuant to the
1933 Act and of each amendment thereto (excluding exhibits but including any
documents incorporated by reference therein). Such registration statement(s)
as amended, and the prospectus(es) relating to the sale of Securities by the
Issuer constituting a part thereof, including all documents incorporated
therein by reference, as from time to time amended or supplemented by the
filing of documents pursuant to the Securities Exchange Act of 1934 (the
"1934 Act"), the 1933 Act or otherwise, are referred to herein as the
"Registration Statement" and the "Prospectus", respectively; provided
however, that a supplement to the Prospectus filed with the Commission
pursuant to Rule 424 under the 1933 Act with respect to an offering of
Securities (a "Prospectus Supplement") shall be deemed to have supplemented
the Prospectus only with respect to the offering of Securities to which it
relates.
With respect to Securities for which no Registration Statement is filed
with the Commission, you will furnish to us, to the extent made available to you
by the Issuer, copies of any private placement
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memorandum, offering circular or other offering materials to be used in
connection with the offering of the Securities and of each amendment thereto
(the "Offering Circular").
Section 3. OFFERING. The sale of the securities to the public shall
commence as soon as you deem advisable. We will not sell any Securities until
they are released by you for that purpose. When notified by you that the
Securities are released for sale, we will offer in conformity with the terms of
the offering set forth in the Prospectus or Offering Circular, such of the
Securities to be purchased by us as are not reserved for our account for sale to
Selected Dealers and others pursuant to Section 5. After the initial offering,
the offering price and the concession and discount therefrom may be changed by
you by notice to the Underwriters, and we agree to be bound by any such
change.
If, in accordance with the terms of offering set forth in the Prospectus or
Offering Circular, the offering of the Securities is not at a fixed price but at
varying prices set by individual Underwriters based on market prices or at
negotiated prices, the provisions above relating to your right to change the
offering price and concession and discount to dealers shall not apply, and other
references in this Section and elsewhere in this Agreement to the offering price
or Selected Dealers' concession shall be deemed to mean the prices and
concessions determined by you from time to time in your discretion.
Unless otherwise permitted in the Invitation, we will not sell any
Securities to any account over which we have discretionary authority. We will
also comply with any other restrictions which may be set forth in the
Invitation.
The initial public advertisement, if any, with respect to the Securities
shall appear on such date, and shall include the names of such of the
Underwriters, as you may determine.
Section 4. DELAYED DELIVERY ARRANGEMENTS. We authorize you to act on our
behalf in making all arrangements for the solicitation of offers to purchase
Securities from the Issuer pursuant to Delayed Delivery Contracts, and we agree
that all such arrangements will be made only through you (directly or through
Underwriters or Selected Dealers). You may allow to Selected Dealers in respect
to such Securities a commission equal to the concession allowed to Selected
Dealers pursuant to Section 5.
The obligations of the Underwriters shall be reduced in the aggregate by
the principal amount of Securities covered by Delayed Delivery Contracts made by
the Issuer, the obligation of each Underwriter to be reduced by the principal
amount of such Securities, if any, allocated by you to such Underwriter. Your
determination of the allocation of Securities covered by Delayed Delivery
Contracts among the several Underwriters shall be final and conclusive, and we
agree to be bound by any notice delivered by you to the Issuer setting forth the
amount of the reduction in our obligation as a result of Delayed Delivery
Contracts.
Upon receiving payment from the Issuer of the fee for arranging Delayed
Delivery Contracts, you will credit our account with the portion of such fee
applicable to the Securities covered by Delayed Delivery Contracts allocated to
us. You will charge our account with any commission allocated to Selected
Dealers in respect of Securities covered by Delayed Delivery Contracts allocated
to us.
Section 5. OFFERING TO SELECTED DEALERS AND OTHERS; MANAGEMENT OF OFFERING.
We authorize you, for our account, to reserve for sale and sell to dealers
("Selected Dealers"), among whom any of the Underwriters may be included, such
amount of Securities to be purchased by us as you shall determine. Reservations
for sales to Selected Dealers for our account need not be in proportion to our
underwriting obligation, but sales of Securities reserved for our account for
sale to Selected Dealers shall be made as nearly as practicable in the ratio
which the amount of Securities reserved for our account bears to the aggregate
amount of Securities reserved for the account of all Underwriters, as calculated
from day to day. Sales to Selected Dealers may be made under the Merrill Lynch,
Pierce, Fenner & Smith Incorporated Standard Dealer Agreement, or otherwise.
The price to Selected Dealers initially shall be the offering price less a
concession not in excess of the Selected Dealers concession set forth in the
Invitation. Selected Dealers shall be actually engaged in the investment
banking or securities business and shall be either (i) members in good standing
of the National Association of Securities Dealers, Inc. (the "NASD") or (ii)
dealers with their principal place of business located outside the United
States, its territories and its possessions and not registered under the 1934
Act who agree to make no sales within the United States, its territories or its
possessions or to persons who are nationals thereof or residents therein
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or (iii) banks that are not eligible for membership in the NASD. Each Selected
Dealer shall agree to comply with the provisions of Section 24 of Article III
of the Rules of Fair Practice of the NASD, and each foreign Selected Dealer or
bank who is not a member of the NASD also shall agree to comply with the NASD's
interpretation with respect to free-riding and withholding, to comply, as though
it were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that Section applies to a non-member foreign dealer or
bank.
With your consent, the Underwriters may allow, and Selected Dealers may
reallow, a discount on sales to any dealer who meets the above NASD requirements
in an amount not in excess of the amount set forth in the Invitation. Upon your
request, we will advise you of the identity of any dealer to whom we allow such
a discount and any Underwriter or Selected Dealer from whom we receive such a
discount.
We also authorize you, for our account, to reserve for sale and to sell
Securities to be purchased by us at the offering price to others, including
institutions and retail purchasers. Except for such sales which are designated
by a purchaser to be for the account of a particular Underwriter, such
reservations and sales shall be made as nearly as practicable in proportion to
our underwriting obligation, unless you agree to a smaller proportion at our
request.
At or before the time the Securities are released for sale, you shall
notify us of the amount of Securities which have not been reserved for our
account for sale to Selected Dealers and others and which is to be retained by
us for direct sale.
We will from time to time, upon your request, report to you the amount of
Securities retained by us for direct sale which remains unsold and, upon your
request, deliver to you for our account, or sell to you for the account of one
or more of the Underwriters, such amount of unsold Securities as you may
designate at the offering price less an amount determined by you not in excess
of the concession to Selected Dealers. You may also repurchase Securities from
other Underwriters and Selected Dealers, for the account of one or more of the
Underwriters, at prices determined by you not in excess of the offering price
less the concession to Selected Dealers.
You may from time to time deliver to any Underwriter, for carrying purposes
or for sale by such Underwriter, any of the Securities then reserved for sale
to, but not purchased and paid for by, Selected Dealers or others as above
provided, but to the extent that Securities are so delivered for sale by such
Underwriter, the amount of Securities then reserved for the account of such
Underwriter shall be correspondingly reduced. Securities delivered for carrying
purposes only shall be redelivered to you upon demand.
The Underwriters and Selected Dealers may, with your consent, purchase
Securities from and sell Securities to each other at the offering price less a
concession not in excess of the concession to Selected Dealers.
Section 6. REPURCHASE OF SECURITIES NOT EFFECTIVELY PLACED. In recognition
of the importance of distributing the Securities to bona fide investors, we
agree to repurchase on demand any Securities sold by us, except through you,
which are purchased by you in the open market or otherwise during a period
terminating as provided in Section 16, at a price equal to the cost of such
purchase, including accrued interest, amortization of original issue discount or
dividends, commissions and transfer and other taxes, if any, on redelivery. The
certificates delivered to us need not be identical certificates delivered to you
in respect of the Securities purchased. In lieu of requiring repurchase, you
may, in your discretion, sell such Securities for our account at such prices,
upon such terms and to such persons, including any of the other Underwriters, as
you may determine, charging the amount of any loss and expense, or crediting the
amount of any net profit, resulting from such sale, to our account, or you may
charge our account with an amount determined by you not in excess of the
concession to Selected Dealers.
Section 7. STABILIZATION AND OVER-ALLOTMENT. In order to facilitate the
sale of the Securities, we authorize you, in your discretion, to purchase and
sell Securities or any other securities of the Issuer or any guarantor of the
Securities specified in the Invitation in the open market or otherwise, for long
or
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short account, at such prices as you may determine, and, in arranging for sales
to Selected Dealers or others, to over-allot. You may liquidate any long
position or cover any short position incurred pursuant to this Section at such
prices as you may determine. You shall make such purchases and sales (including
over-allotments) for the accounts of the Underwriters as nearly as practicable
in proportion to their respective underwriting obligations. It is understood
that, in connection with any particular offering of Securities to which this
Agreement applies, you may have made purchases of securities of the Issuer or
securities of any guarantor of the Securities for stabilizing purposes prior to
the time when we become an Underwriter, and we agree that any such securities so
purchased shall be treated as having been purchased for the respective accounts
of the Underwriters pursuant to the foregoing authorization. At the close of
business on any day our net commitment, either for long or short account,
resulting from such purchases or sales (including over-allotments) shall not
exceed 20% (or such other amount as may be specified in the Invitation) of our
underwriting obligation, except that such percentage may be increased with the
approval of a majority in interest of the Underwriters. We will take up at cost
on demand any Securities or other securities of the Issuer or any securities of
any guarantor of the Securities so sold or over-allotted for our account,
including accrued interest, amortization of original issue discount or
dividends, and we will pay to you on demand the amount of any losses or expenses
incurred for our account pursuant to this Section. In the event of default by
any Underwriter in respect of its obligations under this Section, each non-
defaulting Underwriter shall assume its share of the obligations of such
defaulting Underwriter in the proportion that its underwriting obligation bears
to the underwriting obligations of all non-defaulting Underwriters without
relieving such defaulting Underwriter of its liability hereunder.
If you effect any stabilizing purchase pursuant to this Section, you shall
promptly notify us of the date and time of the first stabilizing purchase and
the date and time when stabilizing was terminated. You shall prepare and
maintain such records as are required to be maintained by you as manager
pursuant to Rule 17a-2 under the 1934 Act.
Section 8. OPEN MARKET TRANSACTIONS. We represent and agree in connection
with the offering of Securities we have complied and will comply with the
provisions of Rule lOb-6 under the 1934 Act with regard to trading in the
Securities. For purposes of the foregoing sentence, we agree that, in addition
to the Securities, other securities of the Issuer or securities of any guarantor
of the Securities or the right or option to purchase or otherwise acquire any
securities of the Issuer or any securities of any guarantor of the Securities
specified in the Invitation shall be considered securities of the same class and
series as the Securities.
Section 9. PAYMENT AND DELIVERY. At or before such time, on such dates and
at such places as you may specify in the Invitation, we will deliver to you a
certified or official bank check in such funds as are specified in the
Invitation, payable to the order of Merrill Lynch, Pierce, Fenner & Smith
Incorporated (unless otherwise specified in the Invitation) in an amount equal
to, as you direct, either (i) the offering price or prices plus accrued
interest, amortization of original issue discount or dividends, if any, set
forth in the Prospectus or Offering Circular less the concession to Selected
Dealers in respect of the amount of Securities to be purchased by us in
accordance with the terms of this Agreement, or (ii) the amount set forth in the
Invitation with respect to the Securities to be purchased by us. We authorize
you to make payment for our account of the purchase price for the Securities to
be purchased by us against delivery to you of such Securities (which may be in
temporary form), and the difference between such purchase price of the
Securities and the amount of our funds delivered to you therefor shall be
credited to our account.
Delivery to us of Securities retained by us for direct sale shall be made
by you as soon as practicable after your receipt of the Securities. Upon
termination of the provisions of this Agreement as provided in Section 16, you
shall deliver to us any Securities reserved for our account for sale to Selected
Dealers and others which remain unsold at that time.
You are authorized to make appropriate arrangements for payment for and/or
delivery through the facilities of The Depository Trust Company or any such
other depository or similar facility, the Securities to be purchased by us, or
if we are not a member, settlement may be made through a correspondent that is
a member pursuant to our timely instructions to you.
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Upon receiving payment for Securities sold for our account to Selected
Dealers and others, you shall remit to us an amount equal to the amount paid by
us to you in respect of such Securities and credit or charge our account with
the difference, if any, between such amount and the price at which such
Securities were sold.
In the event that the Purchase Agreement for an offering provides for the
payment of a commission or other compensation to the Underwriters, we authorize
you to receive such commission or other compensation for our account.
Section 10. MANAGEMENT COMPENSATION. As compensation for your services in
the management of the offering, we will pay you an amount equal to the
management fee specified in the Invitation in respect of the Securities to be
purchased by us pursuant to the Purchase Agreement, and we authorize you to
charge our account with such amount. If there is more than one Representative,
such compensation shall be divided among the Representatives in such proportions
as they may determine.
Section 11. AUTHORITY TO BORROW. We authorize you to advance your own
funds for our account, charging current interest rates, or to arrange loans for
our account or the account of the Underwriters, as you may deem necessary or
advisable for the purchase, carrying, sale and distribution of the Securities.
You may execute and deliver any notes or other instruments required in
connection therewith and man hold or pledge as security therefor all or any part
of the Securities which we or such Underwriters have agreed to purchase. The
obligations of the Underwriters under loans arranged on their behalf shall be
several in proportion to their respective participations in such loans, and not
joint. Any lender is authorized to accept your instructions as to the
disposition of the proceeds of any such loans. You shall credit each
Underwriter with the proceeds of any loans made for its account.
Section 12. LEGAL QUALIFICATIONS. You shall inform us, upon request, of
the states and other jurisdictions of the United States in which it is believed
that the Securities are qualified for sale under, or are exempt from the
requirements of, their respective securities laws, but you assume no
responsibility with respect to our right to sell Securities in any jurisdiction.
You are authorized to file with the Department of State of the State of New York
a Further State Notice with respect to the Securities, if necessary.
If we propose to offer Securities outside the United States, its
territories or its possessions, we will take, at our own expense, such action,
if any, as may be necessary to comply with the laws of each foreign jurisdiction
in which we propose to offer Securities.
Section 13. MEMBERSHIP IN NATIONAL ASSOCIATION OF SECURITIES DEALERS,
FOREIGN UNDERWRITERS AND BANKS. We understand that you are a member in good
standing of the NASD. We confirm that we are actually engaged in the investment
banking or securities business and are either (i) a member in good standing of
the NASD or (ii) a dealer with its principal place of business located outside
the United States, its territories and its possessions and not registered under
the 1934 Act who hereby agrees to make no sales within the United States, its
territories or its possessions or to persons who are nationals thereof or
residents therein (except that we may participate in sales to Selected Dealers
and others under Section 5 of this Agreement) or (iii) a bank not eligible for
membership in the NASD. We hereby agree to comply with Section 24 of Article
III of the Rules of Fair Practice of the NASD, and if we are a foreign dealer or
bank and not a member of the NASD we also hereby agree to comply with the NASD's
interpretation with respect to free-riding and withholding, to comply, as though
we were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice, and to comply with Section 25 of
Article III thereof as that Section applies to a non-member foreign dealer or
bank.
Section 14. DISTRIBUTION OF PROSPECTUSES; OFFERING CIRCULARS. We are
familiar with Securities Act of 1933 Release No. 4968 and Rule 15c2-8 under the
1934 Act, relating to the distribution of preliminary and final prospectuses,
and we confirm that we will comply therewith, to the extent applicable, in
connection with any sale of Securities. You shall cause to be made available to
us, to the extent made available to you by the Issuer, such number of copies of
the Prospectus as we may reasonably request for purposes contemplated by the
1933 Act, the 1934 Act and the rules and regulations thereunder.
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Our Acceptance of an Invitation relating to an offering made pursuant to
an Offering Circular shall constitute our agreement that, if requested by
you, we will furnish a copy of any amendment to a preliminary or final
Offering Circular to each person to whom we shall have furnished a previous
preliminary or final Offering Circular. Our Acceptance shall constitute our
confirmation that we have delivered and our agreement that we will deliver
all preliminary and final Offering Circulars required for compliance with the
applicable federal and state laws and the applicable rules and regulations of
any regulatory body promulgated thereunder governing the use and distribution
of offering circulars by underwriters and any additional instructions
contained in the Invitation and, to the extent consistent with such laws,
rules and regulations, our Acceptance shall constitute our confirmation that
we have delivered and our agreement that we will deliver all preliminary and
final Offering Circulars which would be required if the provisions of Rule
15c2-8 (or any successor provision) under the 1934 Act applied to such
offering.
Section 15. NET CAPITAL. The incurrence by us of our obligations
hereunder and under the Purchase Agreement in connection with the offering of
the Securities will not place us in violation of the net capital requirements of
Rule 15c3-1 under the 1934 Act, or, if we are a financial institution subject to
regulation by the Board of Governors of the Federal Reserve System, the
Comptroller of the Currency or the Federal Deposit Insurance Corporation, will
not place us in violation of the capital requirements of such regulator or any
other regulator to which we are subject.
Section 16. TERMINATION. With respect to each offering of Securities
pursuant to this Agreement, all limitations in this Agreement on the price at
which the Securities may be sold, the period of time referred to in Section 6,
the authority granted by the first sentence of Section 7, and the restrictions
contained in Section 8 shall terminate at the close of business on the 45th day
after the commencement of the offering of such Securities. You may terminate
any or all of such provisions at any time prior thereto by notice to the
Underwriters. All other provisions of this Agreement shall remain operative and
in full force and effect with respect to such offering.
Section 17. EXPENSES AND SETTLEMENT. You may charge our account with any
transfer taxes on sales of Securities made for our account and with our
proportionate share (based upon our underwriting obligation) of all other
expenses incurred by you under this Agreement or otherwise in connection with
the purchase, carrying, sale or distribution of the Securities. With respect to
each offering of Securities pursuant to this Agreement, the respective accounts
of the Underwriters shall be settled as promptly as practicable after the
termination of all the provisions of this Agreement as provided in Section 16,
but you may reserve such amounts as you may deem advisable for additional
expenses. Your determination of the amount to be paid to or by us shall be
conclusive. You may at any time make partial distributions of credit balances
or call for payment of debit balances. Any of our funds in your hands may be
held with your general funds without accountability for interest.
Notwithstanding any settlement, we will remain liable for any taxes on transfers
for our account and for our proportionate share (based upon our underwriting
obligation) of all expenses and liabilities which may be incurred by or for the
accounts of the Underwriters with respect to each offering of Securities
pursuant to this Agreement.
Section 18. INDEMNIFICATION. With respect to each offering of Securities
pursuant to this Agreement, we will indemnify and hold harmless each other
Underwriter and each person, if any, who controls each other Underwriter within
the meaning of Section 15 of the 1933 Act, to the extent that and on the terms
upon which we agree to indemnify and hold harmless the Issuer and other
specified persons as set forth in the Purchase Agreement.
Section 19. CLAIMS AGAINST UNDERWRITERS. With respect to each offering of
Securities pursuant to this Agreement, if at any time any person other than an
Underwriter assets a claim (including any commenced or threatened investigation
or proceeding by any governmental agency or body) against one or more of the
Underwriters or against you as Representatives of the Underwriters arising out
of an alleged untrue statement or omission in the Registration Statement (or any
amendment thereto) or in any preliminary prospectus or the Prospectus or any
amendment or supplement thereto, or in any preliminary or final Offering
Circular, or relating to any transaction contemplated by this Agreement, we
authorize
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you to make such investigation, to retain such counsel for the Underwriters and
to take such action in the defense of such claim as you may deem necessary or
advisable. You may settle such claim with the approval of a majority in
interest of the Underwriters. We will pay our proportionate share (based upon
our underwriting obligation) of all expenses incurred by you (including the fees
and expenses of counsel for the Underwriters) as incurred, in investigating and
defending against such claim and our proportionate share of the aggregate
liability incurred by all Underwriters in respect to such claim (after deducting
any contribution or indemnification obtained pursuant to the Purchase Agreement,
or otherwise, from persons other than Underwriters), whether such liability is
the result of a judgment against one or more of the Underwriters or the result
of any such settlement. Any Underwriter may retain separate counsel at its own
expense. A claim against or liability incurred by a person who controls an
Underwriter shall be deemed to have been made against or incurred by such
Underwriter. In the event of default by any Underwriter in respect of its
obligations under this Section, the non-defaulting Underwriters shall be
obligated to pay the full amount thereof in the proportions that their
respective underwriting obligations bear to the underwriting obligations of all
non-defaulting Underwriters without relieving such defaulting Underwriter of its
liability hereunder.
Section 20. DEFAULT BY UNDERWRITERS. Default by any Underwriter in
respect of its obligations hereunder or under the Purchase Agreement shall not
release us from any of our obligations or in any way affect the liability of
such defaulting Underwriter to the other Underwriters for damages resulting from
such default. If one or more Underwriters default under the Purchase Agreement,
if provided in such Purchase Agreement you may (but shall not be obligated to)
arrange for the purchase by others, which may include yourselves or other non-
defaulting Underwriters, of all or a portion of the Securities not taken up by
the defaulting Underwriters.
In the event that such arrangements are made, the respective underwriting
obligations of the nondefaulting Underwriters and the amounts of the Securities
to be purchased by others, if any, shall be taken as the basis for all rights
and obligations hereunder; but this shall not in any way affect the liability of
any defaulting Underwriter to the other Underwriters for damages resulting from
its default, nor shall any such default relieve any other Underwriter of any of
its obligations hereunder or under the Purchase Agreement except as herein or
therein provided. In addition, in the event of default by one or more
Underwriters in respect of their obligations under the Purchase Agreement to
purchase the Securities agreed to be purchased by them thereunder and, to the
extent that arrangements shall not have been made by you for any person to
assume the obligations of such defaulting Underwriter or Underwriters, we agree,
if provided in the Purchase Agreement, to assume our proportionate share, based
upon our underwriting obligation, of the obligations of each such defaulting
Underwriter (subject to the limitations contained in the Purchase Agreement)
without relieving such defaulting Underwriter of its liability therefor.
In the event of default by one or more Underwriters in respect of their
obligations under this Agreement to take up and pay for any securities
purchased, or to deliver any securities sold or overalloted, by you for the
respective accounts of the Underwriters, or to bear their proportion of
expenses or liabilities pursuant to this Agreement, and to the extent that
arrangements shall not have been made by you for any persons to assume the
obligations of such defaulting Underwriter or Underwriters, we agree to
assume our proportionate share, based upon our respective underwriting
obligation, of the obligations of each defaulting Underwriter without
relieving any such defaulting Underwriter of its liability therefor.
Section 21. LEGAL RESPONSIBILITY. As Representatives of the Underwriters,
you shall have no liability to us, except for your lack of good faith and for
obligations assumed by you in this Agreement and except that we do not waive any
rights that we may have under the 1933 Act or the 1934 Act or the rules and
regulations thereunder. No obligations not expressly assumed by you in this
Agreement shall be implied herefrom.
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Nothing herein contained shall constitute the Underwriters an association,
or partners, with you, or with each other, or, except as otherwise provided
herein or in the Purchase Agreement, render any Underwriter liable for the
obligations of any other Underwriter; and the rights, obligations and
liabilities of the Underwriters are; several in accordance with their respective
underwriting obligations, and not joint.
If the Underwriters are deemed to constitute a partnership for federal
income tax purposes, we elect to be excluded from the application of Subchapter
K, Chapter 1, Subtitle A, of the Internal Revenue Code of 1954, as amended, and
agree not to take any position inconsistent with such election, and you, as
Representatives, are authorized, in your discretion, to execute on behalf of the
Underwriters such evidence of such election as may be required by the Internal
Revenue Service.
Unless we have promptly notified you in writing otherwise, our name as it
should appear in the Prospectus or Offering Circular and our address are set
forth on the signature pages hereof.
Section 22. NOTICES. Any notice from you shall be deemed to have been
duly given if mailed or transmitted to us at our address appearing below.
Section 23. GOVERNING LAW. This Agreement shall be governed by the laws
of the State of New York applicable to agreements made and to be performed in
said State.
Please confirm this Agreement and deliver a copy to us.
Very truly yours,
Name of Firm:
By:..........................................
Authorized Officer or Partner
Address:
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Confirmed as of the date
first above written.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Fred F. Hessinger
. . . . . . . . . . . . . . . . . . .
Name: Fred F. Hessinger
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EXHIBIT A
MASTER UNDERWRITERS' QUESTIONNAIRE
In connection with each offering of Securities pursuant to the Merrill
Lynch, Pierce, Fenner & Smith Incorporated Master Agreement Among Underwriters,
dated April 15, 1985 as revised (the "Agreement"), each Underwriter confirms the
following information, except as indicated in such Underwriter's Acceptance or
other written communication furnished to Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Defined terms used herein have the same meaning as defined terms
in the Master Agreement Among Underwriters.
(a) Neither such Underwriter nor any of its directors, officers or
partners have any material (as defined in Regulation C under the 1933 Act)
relationship with Issuer, its parent (if any), any other seller of the
Securities or any guarantor of the Securities.
(b) Except as described or to be described in the Agreement, the
Merrill Lynch, Pierce, Fenner & Smith Incorporated Standard Dealer Agreement,
the Purchase Agreement or the Invitation, such Underwriter does not know: (i) of
any discounts or commissions to be allowed or paid to dealers, including all
cash, securities, contracts, or other consideration to be received by any dealer
in connection with the sale of the Securities, or of any other discounts or
commissions to be allowed or paid to the Underwriters or of any other items that
would be deemed by the NASD to constitute underwriting compensation for purposes
of the NASD's Rules of Fair Practice, (ii) of any intention to over-allot, or
(iii) that the price of any security may be stabilized to facilitate the
offering of the Securities.
(c) No report or memorandum has been prepared for external use (i.e.,
outside such Underwriter's organization) by such Underwriter in connection with
the proposed offering of Securities and, in the case of a Registered Offering,
where the Registration Statement is on Form S-1, such Underwriter has not
prepared or had prepared for it any engineering, management or similar report or
memorandum relating to the broad aspects of the business, operations or products
of the Issuer, its parent (if any) or any guarantor of the Securities within the
past twelve months (except for reports solely comprised of recommendations to
buy, sell or hold the securities of the Issuer, its parent (if any) or any
guarantor of the Securities, unless such recommendations have changed within the
past six months). If any such report or memorandum has been prepared, furnish
to Merrill Lynch, Pierce, Fenner & Smith Incorporated three copies thereof,
together with a statement as to the actual or proposed use, identifying each
class of persons who have received or will receive the report or memorandum, the
number of copies distributed to each class and the period of distribution.
(d) If the Securities are debt securities to be issued under an
indenture to be qualified under the Trust Indenture Act of 1939, neither such
Underwriter nor any of its directors, officers or partners is an "affiliate",
as that term is defined under the Trust Indenture Act of 1939, of the Trustee
for the Securities as specified in the Invitation, or of its parent (if any);
neither the Trustee nor its parent (if any) nor any of their directors or
executive officers is a director, officer, partner, employee, appointee or
representative of such Underwriters as those terms are defined in the Trust
Indenture Act of 1939 or in the relevant instructions to Form T-1; neither
such Underwriter nor any of its directors, partners or executive officers,
separately or as a group, owns beneficially 1% or more of its shares of any
class of voting securities of the Trustee or of its parent (if any); and if such
Underwriter is a corporation, it does not have outstanding nor has it assumed or
guaranteed any securities issued otherwise than in its present corporate name,
and neither the Trustee nor its parent (if any) is a holder of any such
securities.
(e) If the Issuer is a public utility, such Underwriter is not a
"holding company" or a "subsidiary company" or an "affiliate" of a "holding
company" or of a "public utility company", each as defined in the Public Utility
Holding Company Act of 1935.
(f) Neither such Underwriter nor any "group" (as that term is defined
in Section 13(d)(3) of the 1934 Act) of which it is a member and is the
beneficial owner (determined in accordance with Rule 13d-3 under the 1934 Act)
of more than 5% of any class of voting securities of the Issuer, its parent (if
any), any other seller of the Securities or any guarantor of the Securities
nor does it have any knowledge that more than 5% of any class of voting
securities of the Issuer is held or to be held subject to any voting trust or
other similar agreement.
<PAGE>
REVISED OCTOBER 29, 1990
[LOGO]
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED
MERRILL LYNCH WORLD HEADQUARTERS
NORTH TOWER
WORLD FINANCIAL CENTER
NEW YORK, N.Y. 10281-1305
STANDARD DEALER AGREEMENT
Dear Sirs:
In connection with public offerings of securities underwritten by us, or by
a group of underwriters (the "Underwriters") represented by us, you may be
offered the opportunity to purchase a portion of such securities, as principal,
at a discount from the offering price representing a selling concession or
reallowance granted as consideration for services rendered by you in the sale of
such securities. We request that you agree to the following terms and
provisions, and make the following representations, which, together with any
additional terms and provisions set forth in any wire or letter sent to you in
connection with a particular offering, will govern all such purchases of
securities and the reoffering thereof by you.
YOUR SUBSCRIPTION TO, OR PURCHASE OF, SUCH SECURITIES WILL CONSTITUTE YOUR
REAFFIRMATION OF THIS AGREEMENT.
1. When we are acting as representative (the "Representative") of the
Underwriters in offering securities to you, it should be understood that all
offers are made subject to prior sale of the subject securities, when, as and if
such securities are delivered to and accepted by the Underwriters and subject to
the approval of legal matters by their counsel. In such cases, any order from
you for securities will be strictly subject to confirmation and we reserve the
right in our uncontrolled discretion to reject any order in whole or in part.
Upon release by us, you may reoffer such securities at the offering price fixed
by us. With our consent, you may allow a discount, not in excess of the
reallowance fixed by us, in selling such securities to other dealers, provided
that in doing so you comply with the Rules of Fair Practice of the National
Association of Securities Dealers, Inc. (the "NASD"). Upon our request, you
will advise us of the identity of any dealer to whom you allow such a discount
and any Underwriter or dealer from whom you receive such a discount. After the
securities are released for sale to the public, we may vary the offering price
and other selling terms.
2. You represent that you are a dealer actually engaged in the investment
banking or securities business and that you are either (i) a member in good
standing of the NASD or (ii) a dealer with its principal place of business
located outside the United States, its territories or possessions and not
registered under the Securities Exchange Act of 1934 (a "non-member foreign
dealer") or (iii) a bank not eligible for membership in the NASD. If you are a
non-member foreign dealer, you agree to make no sales of securities within the
United States, its territories or its possessions or to persons who are
nationals thereof or residents therein. Non-member foreign dealers and banks
agree, in making any sales, to comply with the NASD's interpretation with
respect to free-riding and withholding. In accepting a selling concession where
we are acting as Representative of the Underwriters, in accepting a reallowance
from us whether or not we are acting as such Representative, and in allowing a
discount to any other person, you agree to comply with the provisions of Section
24 of Article III of the Rules of Fair Practice of the NASD, and, in addition,
if you are a non-member foreign dealer or bank, you agree to comply, as though
you were a member of the NASD, with the provisions of Sections 8 and 36 of
Article III of such Rules of Fair Practice and to comply with Section 25 of
Article III thereof as that Section applies to a non-member foreign dealer or
bank. You represent that you are fully familiar with the above provisions of
the Rules of Fair Practice of the NASD.
3. If the securities have been registered under the Securities Act of
1933 (the "1933 Act"), in offering and selling such securities, you are not
authorized to give any information or make any
<PAGE>
representation not contained in the prospectus relating thereto. You confirm
that you are familiar with the rules and policies of the Securities and
Exchange Commission relating to the distribution of preliminary and final
prospectuses, and you agree that you will comply therewith in any offering
covered by this Agreement. If we are acting as Representative of the
Underwriters, we will make available to you, to the extent made available to us
by the issuer of the securities, such number of copies of the prospectus or
offering documents, for securities not registered under the 1933 Act, as you may
reasonably request.
4. If we are acting as Representative of the Underwriters of
securities of an issuer that is not required to file reports under the
Securities Exchange Act of 1934 (the "1934 Act"), you agree that you will not
sell any of the securities to any account over which you have discretionary
authority.
5. Payment for securities purchased by you is to be made at our
office, One Liberty Plaza, 165 Broadway, New York, N.Y. 10006 (or at such other
place as we may advise), at the offering price less the concession allowed to
you, on such date as we may advise, by certified or official bank check in New
York Clearing House funds (or such other funds as we may advise), payable to our
order, against delivery of the securities to be purchased by you. We shall have
authority to make appropriate arrangements for payment for and/or delivery
through the facility of The Depository Trust Company or any such other
depository or similar facility for the securities.
6. In the event that, prior to the completion of the
distribution of securities covered by this Agreement, we purchase in the open
market or otherwise any securities delivered to you, if we are acting as
Representative of the Underwriters, you agree to repay to us for the accounts of
the Underwriters the amount of the concession allowed to you plus brokerage
commissions and any transfer taxes paid in connection with such purchase.
7. At any time prior to the completion of the distribution of
securities covered by this Agreement you will, upon our request as
Representative of the Underwriters, report to us the amount of securities
purchased by you which then remains unsold and will, upon our request, sell to
us for the account of one or more of the Underwriters such amount of such unsold
securities as we may designate, at the offering price less an amount to be
determined by us not in excess of the concession allowed to you.
8. If we are acting as Representative of the Underwriters, upon
application to us, we will inform you of the states and other jurisdictions of
the United States in which it is believed that the securities being offered are
qualified for sale under, or are exempt from the requirements of, their
respective securities laws, but we assume no responsibility with respect to your
right to sell securities in any jurisdiction. We shall have authority to file
with the Department of State of the State of New York a Further State Notice
with respect to the securities, if necessary.
9. You agree that in connection with any offering of securities
covered by this Agreement you will comply with the applicable provisions of the
1933 Act and the 1934 Act and the applicable rules and regulations of the
Securities and Exchange Commission thereunder, the applicable rules and
regulations of the NASD, and the applicable rules of any securities exchange
having jurisdiction over the offering.
10. We shall have full authority to take such action as we may
deem advisable in respect of all matters pertaining to any offering covered by
this Agreement. We shall be under no liability to you except for our lack of
good faith and for obligations assumed by us in this Agreement, except that you
do not waive any rights that you may have under the 1933 Act or the rules and
regulations thereunder.
11. Any notice from us shall be deemed to have been duly given if
mailed or transmitted by any standard form of written telecommunications to you
at the above address or at such other address as you shall specify to us in
writing.
12. With respect to any offering of securities covered by this
Agreement, the price restrictions contained in Paragraph 1 hereof and the
provisions of Paragraphs 6 and 7 hereof shall terminate as to such offering at
the close of business on the 45th day after the securities are released for sale
or, as to any or all such provisions, at such earlier time as we may advise.
All other provisions of this Agreement shall remain operative and in full force
and effect with respect to such offering.
2
<PAGE>
13. This Agreement shall be governed by the laws of the State of
New York.
Please confirm your agreement hereto by signing the enclosed duplicate copy
hereof in the place provided below and returning such signed duplicate copy to
us at World Headquarters, North Tower, World Financial Center, New York, N.Y.
10281-1305, ATTENTION: Corporate Syndicate. Upon receipt thereof, this
instrument and such signed duplicate copy will evidence the agreement between
us.
Very truly yours,
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Fred F. Hessinger
. . . . . . . . . . . . . . . . . .
Name: Fred F. Hessinger
Confirmed and accepted as of the
day of , 19
..........................................
NAME OF DEALER
..........................................
AUTHORIZED OFFICER OR PARTNER
(if not Officer or Partner, attach copy of
Instrument of Authorization)
3
<PAGE>
EXHIBIT 5.1
[LETTERHEAD OF DAVIS, GRAHAM & STUBBS LLP APPEARS HERE]
December 12, 1996
CIBER, Inc.
5251 DTC Parkway
Suite 1400
Englewood, CO 80111
Re: Sale of up to 2,300,000 shares of
common stock pursuant to a Registration Statement
on Form S-3.
Ladies and Gentlemen:
We are providing this opinion in connection with the registration by
CIBER, Inc. (the "Company") of up to 2,300,000 shares of its common stock,
$.01 par value (the "Shares"), described in the Registration Statement on
Form S-3 of the Company, as filed with the Securities and Exchange Commission
on December 12, 1995. In such connection, we have examined certain corporate
records and proceedings of the Company, including actions taken by the
Company in respect of the authorization and issuance of the Shares, and such
other matters as we deemed appropriate.
Based on the foregoing, we are of the opinion that the Shares have been
duly authorized and, when sold as contemplated in the Registration Statement,
will be legally issued, fully paid and non-assessable.
We hereby consent to the reference to this firm under the heading "Legal
Matters" in the Registration Statement, and in the Prospectus constituting a
part thereof, as the counsel who will pass upon the validity of the Shares.
Very truly yours,
/s/ Davis, Graham & Stubbs LLP
DAVIS, GRAHAM & STUBBS LLP
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CIBER, Inc.:
We consent to the incorporation by reference herein of our report dated
August 6, 1996, except as to the second paragraph of Note 12, which is as of
September 3, 1996, relating to the consolidated balance sheets of CIBER, Inc.
and subsidiaries as of June 30, 1996 and 1995, and the related consolidated
statements of operations, shareholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1996, which report appears in the
June 30, 1996 annual report on Form 10-K of CIBER, Inc. and which report is no
longer appropriate since restated consolidated financial statements giving
effect to a business combination accounted for as a pooling of interests have
been included herein and in the Form 8-K of CIBER, Inc. to be filed on December
12, 1996. We also consent to the inclusion and incorporation by reference herein
of our report dated August 6, 1996, except as to the first and second paragraphs
of Note 2, which are as of October 28, 1996 with respect to the consolidated
balance sheets of CIBER, Inc. and subsidiaries as of June 30, 1996 and 1995, and
the related consolidated statements of operations, stockholders' equity, and
cash flows for each of the years in the three-year period ended June 30, 1996,
which report appears herein and in the Form 8-K of CIBER, Inc. to be filed on
December 12, 1996 and to the reference to our firm under the heading "Experts"
in the prospectus.
KPMG Peat Marwick LLP
Denver, Colorado
December 10, 1996
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
SEPTEMBER 30, 1996 CONSOLIDATED FINANCIAL STATEMENTS OF THE COMPANY. PREVIOUSLY
REPORTED FINANCIAL INFORMATION HAS BEEN RESTATED FOR A POOLING OF INTERESTS
BUSINESS COMBINATION IN SEPTEMBER 1996 AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> YEAR 3-MOS
<FISCAL-YEAR-END> JUN-30-1996 JUN-30-1997
<PERIOD-START> JUL-01-1995 JUL-01-1996
<PERIOD-END> JUN-30-1996 SEP-30-1996
<CASH> 17,071 19,401
<SECURITIES> 0 0
<RECEIVABLES> 34,969 34,732
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 53,085 55,462
<PP&E> 4,992 5,624
<DEPRECIATION> 2,508 2,712
<TOTAL-ASSETS> 69,722 76,909
<CURRENT-LIABILITIES> 11,415 15,232
<BONDS> 0 0
0 0
0 0
<COMMON> 178 179
<OTHER-SE> 57,929 61,298
<TOTAL-LIABILITY-AND-EQUITY> 69,722 76,909
<SALES> 0 0
<TOTAL-REVENUES> 172,151 49,489
<CGS> 0 0
<TOTAL-COSTS> 118,458 33,431
<OTHER-EXPENSES> 39,866 11,770
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 210 0
<INCOME-PRETAX> 14,281 4,500
<INCOME-TAX> 4,988 2,866
<INCOME-CONTINUING> 9,293 1,634
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 9,293 1,634
<EPS-PRIMARY> .48<F1> .14<F1>
<EPS-DILUTED> 0 0
<FN>
<F1>EPS is calculated based on proforma net income of $8,760 for the year ended
June 30, 1996 and $2,603 for the three months ended September 30, 1996.
</FN>
</TABLE>
