<PAGE>
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): December 12, 1996
(September 3, 1996)
CIBER, INC.
- -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
Delaware 0-23488 38-2046833
- -------------------------------------------------------------------------------
(State or Other Jurisdiction (Commission (I.R.S. Employer
of Incorporation) File Number) Identification No.)
5251 DTC Parkway, Suite 1400, Englewood, Colorado 80111
- -------------------------------------------------------------------------------
(Address of principal executive offices, zip code)
Registrant's telephone number, including area code: (303) 220-0100
- -------------------------------------------------------------------------------
Former Name or Former Address if Changed Since Last Report
<PAGE>
ITEM 5. OTHER EVENTS
On September 3, 1996, Spectrum Technology Group, Inc. ("Spectrum")
merged with the Company in a business combination accounted for as a pooling
of interests. The Company issued 853,116 shares of common stock $.01 par
value ("Common Stock") in exchange for all of the outstanding common stock of
Spectrum. Accordingly, the Company's consolidated financial statements, which
are included herein, 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.
In addition, since September 30, 1996, the Company has completed the
three following business combinations:
On November 26, 1996, Technology Management Group, Inc. ("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.
On November 27, 1996, Technical Support Group, Inc. ("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.
On December 2, 1996, the Company acquired CIBER Network Services, Inc.
("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.
The consolidated financial statements included herein have not been
restated to reflect the TMG and the TSG poolings of interests in November
1996 and also do not reflect the purchase of CNSI in December 1996.
Finally, in October 1996, Richard A. Montoni joined the Company as its
new Executive Vice President/Chief Financial Officer and as a director. Mr.
Montoni was formerly a partner with KPMG Peat Marwick LLP. The Employment
Agreement between the Company and Mr. Montoni and the CIBER, Inc. Salary
Continuation Retirement Plan for Mr. Montoni are attached as exhibits
hereto.
-2-
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, FINANCIAL INFORMATION AND EXHIBITS
(a) Financial statements of businesses acquired.
Not applicable.
(b) Financial information.
CIBER, Inc. and subsidiaries consolidated
financial statements.
(c) Exhibits
Exhibit No. Exhibit
----------- -------
10.1 Employment Agreement between the
Company and Richard A. Montoni
10.2 CIBER, Inc. Salary Continuation
Retirement Plan for Richard A. Montoni
23.1 Consent of KPMG Peat Marwick LLP
-3-
<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.
/s/ KPMG Peat Marwick LLP
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>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
CIBER, INC.
Date: December 12, 1996 By: /s/ Richard A. Montoni
----------------------------
Richard A. Montoni
Executive Vice President/
Chief Financial Officer
-4-
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
10.1 Employment Agreement between the Company and
Richard A. Montoni
10.2 CIBER, Inc. Salary Continuation Retirement Plan for
Richard A. Montoni
23.1 Consent of KPMG Peat Marwick LLP
<PAGE>
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT ("Agreement") is made and entered into as of
November 1, 1996, by and between CIBER, INC., a Delaware corporation
("Corporation"), and RICHARD A. MONTONI ("Officer").
RECITAL
Corporation desires to employ Officer as its Executive Vice President and
Chief Financial Officer, and Officer is willing to accept such employment by
Corporation, on the terms and subject to the conditions set forth in this
Agreement.
AGREEMENT
THE PARTIES AGREE AS FOLLOWS:
1. DUTIES. Officer agrees to be employed by and to serve Corporation
as its Executive Vice President and Chief Financial Officer, and Corporation
agrees to employ and retain Officer in such capacity. Officer shall devote
all of his business time, energy and skill to the affairs of Corporation.
Officer shall have powers and duties commensurate with his position as
Executive Vice President and Chief Financial Officer of Corporation. Officer
shall comply with the general management policies of Corporation as announced
from time to time. Officer's principal place of business with respect to his
services to Corporation shall be within twenty (20) miles of the central
business district of Denver, Colorado, although Officer shall be required at
various times to travel as part of his duties.
2. TERM OF EMPLOYMENT.
2.1 BASIC TERM. The initial term of employment of Officer by
Corporation shall be from the date of this Agreement through June 30, 1998,
unless terminated earlier pursuant to this Agreement. This Agreement shall
renew automatically for a period of one year on July 1, 1998 and on each
subsequent anniversary date thereof, subject to the termination provisions
hereof.
3. SALARY, BENEFITS AND BONUS COMPENSATION.
3.1 BASE SALARY. Corporation agrees to pay to Officer initially a
"Base Salary" of $250,000.00 per annum payable in twenty-six (26) equal
biweekly installments. In the absence of and until any salary determination
by the Board, Officer's Base Salary for a particular fiscal year shall be
identical to Officer's Base Salary in effect on June 30th of the immediately
preceding fiscal year. In no event shall Officer's Base Salary be less than
$250,000.00 per annum.
3.2 TRANSITION PAYMENT. Corporation agrees to pay Officer $25,000
upon Officer's execution of this Agreement.
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3.3 BONUSES. Officer shall be eligible to receive the bonuses
described below. All such bonuses shall be determined and shall be payable
within seventy-five (75) days after the end of the fiscal year to which such
bonus relates.
3.3.1 1997 BONUS. Officer shall receive a bonus of $75,000
upon completion of the fiscal year ending June 30, 1997.
3.3.2 1998 AND SUBSEQUENT YEARS BONUS. Beginning with the
fiscal year ending June 30, 1998, Officer shall be eligible to receive a
bonus pursuant to this Section 3.3.2 for each full fiscal year of Corporation
completed during the term of Officer's employment. Initially, the actual
amount of such bonus shall be one percent (1%) of the increase in
Corporation's "Net Income" for the fiscal year to which such bonus relates
over Corporation's Net Income for the prior fiscal year. The term "Net
Income" shall mean Corporation's after-tax net income as reported on its
annual financial statements, without giving effect to the bonus or any
similar bonuses provided for in employment agreements between Corporation and
other executive officers of Corporation. Such bonus shall be subject to
modification for each fiscal year or portion thereof after fiscal year 1998
as determined in the sole discretion of the Board of Directors.
3.4 ADDITIONAL BENEFITS. During the term of his employment,
Officer shall be entitled to the following fringe benefits:
3.4.1 OFFICER BENEFITS. Officer shall be eligible to
participate in such of Corporation's benefit and compensation plans as may be
generally available to executive officers of Corporation, including, without
limitation, profit sharing, employee stock purchase plans, medical, dental,
health and annual physical examination plans, life and disability insurance
plans, financial planning and retirement programs, according to their terms.
All such benefit plans may be amended or discontinued in the sole discretion
of Corporation.
3.4.2 BUSINESS EXPENSES. Corporation shall reimburse Officer
for all reasonable and necessary expenses incurred in carrying out his duties
under this Agreement, including travel and entertainment expenses. Officer
shall present monthly to Corporation an itemized account of such expenses in
such form as may be required by Corporation.
3.4.3 CLUBS. Corporation shall pay all initiation fees and
dues charged by Glenmoor Country Club and for such additional organizations,
if any, as shall be approved by the Chief Executive Officer or the Chairman
of the Compensation Committee of Corporation.
3.4.4 VACATION. Officer shall be entitled to vacation time
generally available to executive officers of Corporation during which
vacation time his compensation shall be paid in full.
3.4.5 LIFE INSURANCE. Upon Officer passing any required
physical examination, Corporation shall at its expense procure and keep in
effect an unrated insurance policy or policies on the life of Officer in an
amount of not less than $1,000,000, payable to such beneficiaries as Officer
may from time to time designate. To the extent the
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Corporation maintains "key man" life insurance on the life of Officer of at
least $1,000,000, the Corporation may utilize such insurance to discharge the
obligation set forth in the preceding sentence. Such policies shall be owned
by Corporation. Officer shall cooperate in the obtaining of all such
insurance policies as Corporation may desire to apply for and own for its own
purposes. This insurance is in addition to any group life coverage which may
be provided to Officer by Corporation.
3.4.6 DEFERRED COMPENSATION. Officer shall be entitled to
participate in a deferred compensation plan pursuant to and subject to the
terms and conditions set forth in Exhibit A attached hereto.
3.5 OPTION TO ACQUIRE COMMON STOCK. Officer shall be granted an
option, pursuant to and subject to the terms and conditions of Corporation's
Non-qualified Stock Option Plan and Equity Incentive Plan (the "Equity
Incentive Plan") and the option agreement attached hereto as Exhibit B (the
"Option Agreement") to purchase 50,000 shares of Corporation's Common Stock
at an exercise price equal to the fair market value of the common stock on
the date of this Agreement, such options to be incentive stock options to the
extent permissible under Section 422 of the Internal Revenue Code. Any
further options shall be granted at the sole discretion of the Corporation's
Board of Directors.
4. TERMINATION OF EMPLOYMENT.
4.1 TERMINATION FOR CAUSE. Termination for Cause (as defined
below) of Officer's employment may be effected by Corporation at any time
without liability except as specifically set forth in this Subsection. The
termination shall be effected by written notification to Officer and shall be
effective as of the time set forth in such notice. At the effective time of
a Termination for Cause, Officer immediately shall be paid all accrued Base
Salary and any reasonable and necessary business expenses incurred by Officer
in connection with his duties hereunder, all to the date of termination. In
addition, Officer shall be entitled to benefits under any benefit plans of
Corporation in which Officer is a participant to the full extent of Officer's
rights under such plans.
4.2 TERMINATION OTHER THAN FOR CAUSE. Corporation may effect a
Termination Other Than for Cause (as defined below) of Officer's employment
at any time upon giving written notice to Officer of such termination and
without liability except as specifically set forth in this Subsection. The
termination shall be effective as of the time set forth in such notice. At
the effective time of any Termination Other Than for Cause, Officer shall
immediately be paid all accrued Base Salary, unpaid bonus compensation and
any reasonable and necessary business expenses incurred by Officer in
connection with his duties hereunder, all to the effective time of
termination. Unpaid bonus compensation for the purposes of this Section 4
shall be pro rated based on the number of full calendar months of Officer's
employment during the fiscal year in which termination occurs. In addition,
Officer shall be paid, in biweekly or monthly installments, at Corporation's
option, 100% of his Base Salary for an additional 12 months. Officer shall
also be entitled to benefits under any benefit plans of Corporation in which
Officer is a participant to the full extent of Officer's rights under such
plans, and Corporation shall pay Officer's medical, life and disability
insurance premiums under Corporation's plans (or shall pay Officer a sum in
cash, not to exceed $1,000.00 per month, to pay private plan premiums for
coverage substantially the same as Corporation's) for the first 12 months
following termination.
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4.3 TERMINATION BY REASON OF DISABILITY. If Officer, in the
reasonable judgment of the Board of Directors of Corporation, has failed to
perform his duties under this Agreement on account of illness or physical or
mental incapacity, and such illness or incapacity continues for a period of
more than six (6) months, then the question of whether Officer's illness or
incapacity is reasonably likely to continue shall be submitted to
Corporation's or, if disability insurance is maintained by Officer, Officer's
disability insurance carrier for determination. In the event such insurance
carrier determines that Officer is subject to such an illness or incapacity,
Corporation shall have the right to terminate Officer's employment
("Termination for Disability") by written notification to Officer and payment
to Officer of all accrued Base Salary, unpaid bonus compensation (prorated as
provided in Section 4.2) and any reasonable and necessary business expenses
incurred by Officer in connection with his duties hereunder, all to the date
of termination. Officer shall also be entitled to benefits under any benefit
plans in which Officer is a participant, including disability benefits which
may be provided pursuant to Section 3.4.1, to the full extent of Officer's
rights under such plans. In addition, Corporation shall pay Officer's
medical, life and disability insurance premiums under Corporation's plans (or
shall pay Officer a sum in cash, not to exceed $1,000.00 per month, to pay
private plan premiums for coverage substantially the same as Corporation's)
for the first 12 months following termination.
4.4 DEATH. In the event of Officer's death during the term of
employment, Officer's employment shall be deemed to have terminated as of the
last day of the month during which his death occurs, and Corporation shall
pay promptly to his estate (a) all accrued Base Salary, unpaid bonus
compensation (as defined in Section 4.2) and any reasonable and necessary
business expenses incurred by Officer in connection with his duties
hereunder, all to the date of termination, and proceeds from insurance
policies as provided in Section 3.4.5 and (b) 50% of Officer's Base Salary
payable in twenty-four (24) equal monthly installments to begin on the
effective day of termination. Officer's estate shall also be entitled to
benefits under any benefit plans of Corporation in which Officer is a
participant to the full extent of Officer's rights under such plans.
4.5 VOLUNTARY TERMINATION. In the event of a Voluntary Termination
(as defined below) by Officer, Corporation shall immediately pay all accrued
Base Salary and any reasonable and necessary business expenses incurred by
Officer in connection with his duties hereunder, all to the date of
termination.
4.6 TERMINATION UPON A CHANGE IN CONTROL. In the event of a
Termination Upon a Change in Control (as defined below), Officer shall
immediately be paid all accrued Base Salary, unpaid bonus compensation (as
defined in Section 4.2) and any reasonable and necessary business expenses
incurred by Officer in connection with his duties hereunder, all to the date
of termination. In addition, Officer shall be paid, in biweekly or monthly
payments, at Corporation's option, 100% of his Base Salary for an additional
24 months plus an amount equal to the bonus received by Officer for the two
years preceding the year in which termination occurs. Officer shall also be
entitled to benefits under any benefit plans of Corporation in which Officer
is a participant to the full extent of Officer's rights under such plans, and
Corporation shall pay Officer's medical, life and disability insurance
premiums under Corporation's plans (or shall pay Officer a sum in cash, not
to exceed $1,000.00 per month, to pay private plan premiums for coverage
substantially the same as Corporation's) for the first 24 months following
termination. Notwithstanding the foregoing, solely in the event of a
Termination Upon a Change in Control, the aggregate amount of severance
compensation paid to the Officer under this
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Agreement or otherwise shall not include any amount that the Corporation is
prohibited from deducting for federal income tax purposes by virtue of
Section 280G of the Internal Revenue Code or any successor provision.
4.7 OTHER BENEFITS. Nothing in this Article 4 shall be deemed to
limit or restrict any right or benefit of Officer under Corporation's
Certificate of Incorporation, Bylaws or other documents or agreements of the
Corporation applicable to Officer.
5. PROTECTION OF CORPORATION'S BUSINESS.
5.1 NO COMPETITION. Officer shall not, for eighteen (18) months
following the termination of his employment, work as an employee or
independent contractor or become an investor or lender of any business,
corporation, partnership or other entity engaged in a Competing Business. A
"Competing Business" is a business which Corporation has engaged in, or has
actively investigated engaging in, at any time during the twenty-four (24)
months prior to the termination of Officer's employment in which Officer had
responsibility to manage, direct or supervise.
5.2 NO SOLICITATION OF CLIENTS. Officer shall not, for eighteen
(18) months following the termination of his employment (unless Corporation
grants him written authorization): (a) call upon, cause to be called upon,
solicit or assist in the solicitation of, any client or potential client of
Corporation for the purpose of selling, renting or supplying any product or
service competitive with the products or services of Corporation; or (b)
provide any product or services to any client or potential client of
Corporation which is competitive with the products or services of
Corporation. Any individual, governmental authority, corporation, partnership
or other entity to whom Corporation has provided services or products at any
time prior to or during Officer's employment or to whom Corporation has made
one or more sales or sales calls during the eighteen (18) month period
preceding the date of termination of Officer's employment shall be deemed a
client or potential client.
5.3 NO HIRE OF OTHER EMPLOYEES OR CONTRACTORS. Officer shall not,
for a period of eighteen (18) months following the termination of his
employment, employ, engage or seek to employ or engage any individual or
entity, on behalf of Officer or any entity (including a client of
Corporation), who was or is employed or engaged by Corporation.
6. CONFIDENTIALITY.
6.1 CONFIDENTIAL INFORMATION AND MATERIALS. All of the
Confidential Information and Materials, as defined herein, are and shall
continue to be the exclusive confidential property and trade secrets of
Corporation. Confidential Information and Materials have been or will be
disclosed to Officer solely by virtue of his employment with Corporation and
solely for the purpose of assisting him in performing his duties for
Corporation. "Confidential Information and Materials" refers to all
information belonging to or used by Corporation or Corporation's clients
relating to internal operations, procedures and policies, finances, income,
profits, business strategies, pricing, billing information, compensation and
other personnel information, client contacts, sales lists, employee lists,
technology, software source codes, programs, costs, marketing plans,
developmental plans, computer programs, computer systems, inventions,
developments, personnel manuals, computer program manuals, programs and
system
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designs, and trade secrets of every kind and character, whether or not they
constitute a trade secret under applicable law and whether developed by
Officer during or after business hours.
6.2 NON-DISCLOSURE AND NON-USE. Officer may use Confidential
Information and Material while an employee of Corporation and in the course
of that employment to the extent deemed necessary by Corporation for the
performance of Officer's responsibilities. Such permission expires upon
termination of his employment with Corporation or on notice from Corporation.
Officer shall not, either during or after his employment with Corporation,
disclose any Confidential Information or Materials to any person, firm,
corporation, association or other entity for any reason or purpose unless
expressly permitted by Corporation in writing. Officer shall not use, in any
manner other than to further Corporation's business, any Confidential
Information or Materials of Corporation. Upon termination of his employment,
Officer shall immediately return all Confidential Information or Materials or
other property of Corporation or its clients or potential clients in his
possession or control.
7. DEFINITIONS.
7.1 DEFINITIONS. For purposes of this Agreement, the following
terms shall have the following meanings:
7.1.1 "Termination for Cause" shall mean termination by
Corporation of Officer's employment by Corporation by reason of Officer's
willful dishonesty towards, fraud upon or deliberate injury or attempted
injury to Corporation, by reason of Officer's material breach of this
Agreement, or by reason of other material good cause.
7.1.2 "Termination Other Than for Cause" shall mean termination
by Corporation of Officer's employment by Corporation other than a
Termination for Cause, Termination Upon Change in Control, Termination for
Disability, or for any or no reason.
7.1.3 "Termination Upon a Change in Control" shall mean a
termination (whether voluntary or involuntary) of Officer's employment with
Corporation or any successor thereto within ninety (90) days from the date on
which either of the following occurs: (a) any "person" or "group" (within
the meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange Act of
1934 (the "1934 Act")), other than Bobby G. Stevenson or a trustee or other
fiduciary holding securities under an employee benefit plan of Corporation,
is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the 1934
Act), directly or indirectly, of more than twenty percent (20%) of the then
outstanding voting stock of Corporation; or (b) at any time during any period
of three consecutive years (not including any period prior to the Effective
Date), individuals who at the beginning of such period constitute the Board
(and any new director whose election by the Board or whose nomination for
election by Corporation's stockholders was approved by a vote of at least
two-thirds of the directors then still in office who either were directors at
the beginning of such period or whose election or nomination for election was
previously so approved) cease for any reason to constitute a majority
thereof; or (c) the stockholders of Corporation approve a merger or
consolidation of Corporation with any other corporation, other than a merger
or consolidation which would result in the voting securities of Corporation
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 80% of the combined voting power of the voting
securities of Corporation or such surviving entity
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outstanding immediately after such merger or consolidation, or the
stockholders approve a plan of complete liquidation of Corporation or an
agreement for the sale or disposition by Corporation of all or substantially
all of Corporation's assets.
7.1.4 "Voluntary Termination" shall mean termination by Officer
of Officer's employment with Corporation, but shall not include (i)
constructive termination by Corporation by reason of material breach of this
Agreement by Corporation; (ii) Termination Upon a Change in Control; and
(iii) termination by reason of Officer's death or disability as described in
Subsections 4.3 and 4.4. Voluntary Termination shall include a termination
by Corporation after its receipt of a notice of an otherwise Voluntary
Termination from Officer.
8. REMEDIES.
8.1 LIQUIDATED DAMAGES.
8.1.1 If Officer violates Subsection 5.1, Officer shall pay to
Corporation the sum of $100,000.00 as liquidated damages to compensate
Corporation for its lost investment of money for recruitment, training, cost
of replacement, lost revenues and other damages due to the likely disruption
of the operation of Corporation's business.
8.1.2 If Officer violates Subsection 5.2, Officer shall pay to
Corporation as liquidated damages the greater of Corporation's gross billings
to the client to which products or services are supplied in violation of
Subsection 5.2 during the year immediately prior to the first improper
solicitation or $12,500.00, to compensate Corporation for its lost revenue,
client development expenses and other damages.
8.1.3 If Officer violates Subsection 5.3, Officer shall pay to
Corporation as liquidated damages, in compensation for its recruitment and
training costs, lost revenues and other damages, the following sums for each
employee or independent contractor hired or engaged in violation of
Subsection 5.3:
EMPLOYEE OR INDEPENDENT CONTRACTOR AMOUNT
---------------------------------- --------
Vice-President or other officer $100,000
Other Manager or Recruiter $ 50,000
Marketer or other sales personnel $ 50,000
Programmers or other billable personnel $ 12,500
Other office staff $ 5,000
8.1.4 Officer and Corporation have carefully considered the
issue of liquidated damages and after negotiation agree that they are a
reasonable compromise after attempting to estimate what the actual damages
would be and assessing the risk of collection.
8.1.5 Officer authorizes Corporation to disclose the terms of
Sections 5, 6 and 8 of this Agreement to any subsequent employer or client of
Officer.
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8.2 EQUITABLE REMEDIES. The service rendered by Officer to
Corporation and the information disclosed to Officer during his employment
are of a unique and special character, and any breach of Sections 5 or 6
hereof will cause Corporation irreparable injury and damage which will be
extremely difficult to quantify. Although the parties have agreed on
liquidated damages for some of the potential breaches by Officer, they agree
that because of the risk of collection and intangibles which are impossible
to measure, Corporation will be entitled to, in addition to all other
remedies available to it, injunctive relief to prevent a breach and to secure
the enforcement of all provisions of Sections 5 and 6. Officer represents
his experience and knowledge will enable him to earn an adequate living in a
non-competitive business and that the injunctive relief will not prevent him
from providing for himself and his family. Injunctive relief may be granted
immediately upon the commencement of any such action without notice to
Officer, WHICH NOTICE OFFICER SPECIFICALLY WAIVES.
8.3 COSTS. If litigation is brought to enforce or interpret any
provision contained herein, the court shall award reasonable attorneys' fees
and disbursements to the prevailing party as determined by the court.
8.4 SEVERABILITY. THE PARTIES HAVE CAREFULLY CONSIDERED ALL OF
SECTIONS 5, 6 AND 8 AND AGREE THAT THEY REPRESENT A PROPER BALANCING OF THEIR
INTERESTS AND WILL NOT PREVENT OFFICER FROM EARNING A LIVING AFTER
TERMINATION OF HIS EMPLOYMENT. It is the express intent of the parties
hereto that the obligations of, and restrictions on, the parties as provided
in Sections 5 and 6 shall be enforced and given effect to the fullest extent
legally permissible. If, in any judicial proceeding, a court shall refuse to
enforce one or more of the covenants or agreements contained in this
Agreement because the duration thereof is too long, the scope thereof is too
broad or some other reason, for the purpose of such proceeding, the court may
reduce such duration or scope to the extent necessary to permit the
enforcement of such obligations and restrictions.
9. MISCELLANEOUS.
9.1 PAYMENT OBLIGATIONS. Corporation's obligation to pay Officer
the compensation provided herein is subject to the condition precedent that
Officer perform his obligations; provided, however, Officer shall have no
obligation whatsoever to mitigate damages hereunder in the event of a
Termination Other Than for Cause.
9.2 DIRECTORS' AND OFFICERS' INSURANCE. Corporation shall use its
best efforts to obtain coverage for Officer under any insurance policy now in
force or hereafter obtained during the term of this Agreement insuring
officers and directors of Corporation for liability incurred by reason of the
fact that Officer is or was a director or officer of Corporation or, while
serving as a director or officer of Corporation, he is or was serving at the
request of Corporation as a director, officer, partner or trustee of, or in
any similar managerial or fiduciary position of, or as an employee or agent
of, another corporation, partnership, joint venture, trust, association, or
other entity.
9.3 WAIVER. The waiver of the breach of any provision of this
Agreement shall not operate or be construed as a waiver of any subsequent
breach of the same or other provision hereof.
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9.4 ENTIRE AGREEMENT; MODIFICATIONS. This Agreement represents the
entire understanding between the parties with respect to the subject matter
hereof, and this Agreement supersedes any and all prior understandings,
agreements, plans and negotiations, whether written or oral, with respect to
the subject matter hereof, including, without limitation, any understandings,
agreements or obligations respecting any past or future compensation,
bonuses, reimbursements or other payments to Officer from Corporation. All
modifications to this Agreement must be in writing and signed by the party
against whom enforcement of such modification is sought.
9.5 NOTICES. All notices and other communications under this
Agreement shall be in writing and shall be given by hand delivery, or
first-class mail, certified or registered with return receipt requested, or
by commercial overnight courier or by fax and shall be deemed to have been
duly given upon hand delivery, three (3) days after mailing, the first
business day following delivery to a commercial overnight courier or upon
receipt of a fax, addressed as follows:
If to Corporation:
CIBER, INC.
5251 DTC Parkway, #1400
Englewood, Colorado 80111
Attention: Bobby G. Stevenson
With a copy to:
John McCabe, Esq.
Davis, Graham & Stubbs LLP
370 Seventeenth Street
Post Office Box 185
Denver, Colorado 80201-0185
If to Officer:
Richard A. Montoni
5251 DTC Parkway, #1400
Englewood, Colorado 80111
Any party may change such party's address for notices by notice given
pursuant to this Section 9.5.
9.6 HEADINGS. The Section headings herein are intended for
reference and shall not by themselves determine the construction or
interpretation of this Agreement.
9.7 GOVERNING LAW; CONSENT TO JURISDICTION. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Colorado without application of its conflict of laws rules. Officer hereby
submits to the exclusive jurisdiction and venue of the District Court of the
State of Colorado for the City and County of Denver or the United States
District Court for the District of Colorado for purposes of any legal action.
Officer
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agrees that service upon Officer in any such action may be made by
first-class mail, certified or registered, in the manner provided for
delivery of notices in Section 9.5.
9.8 SEVERABILITY. Should a court or other body of competent
jurisdiction determine that any provision of this Agreement is excessive in
scope or otherwise invalid or unenforceable, such provision shall be adjusted
rather than voided, if possible, so that it is enforceable to the maximum
extent possible, and all other provisions of the Agreement shall be deemed
valid and enforceable to the extent possible.
9.9 SURVIVAL OF CORPORATION'S OBLIGATIONS. Corporation's
obligations hereunder shall not be terminated by reason of any liquidation,
dissolution, bankruptcy, cessation of business or similar event relating to
Corporation. This Agreement shall not be terminated by any merger or
consolidation or other reorganization of Corporation. In the event any such
merger, consolidation or reorganization shall be accomplished by transfer of
stock or by transfer of assets or otherwise, the provisions of this Agreement
shall be binding upon and inure to the benefit of the surviving or resulting
corporation or person. This Agreement shall be binding upon and inure to the
benefit of the executors, administrators, heirs, successors and assigns of
the parties; provided, however, that except as provided in this Subsection,
this Agreement shall not be assignable either by Corporation or by Officer.
9.10 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall constitute one and the same
Agreement.
9.11 WITHHOLDINGS. All compensation and benefits to Officer
hereunder shall be reduced by all federal, state, local and other
withholdings and similar taxes and payments required by applicable law.
Corporation may withhold amounts due it from Officer from amounts due under
this Agreement to Officer.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
OFFICER CIBER, INC., a Delaware corporation
By:
- -------------------------------- ------------------------------------
Richard A. Montoni Mac J. Slingerlend, President
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CIBER, INC.
SALARY CONTINUATION RETIREMENT PLAN FOR
RICHARD A. MONTONI
THIS PLAN is adopted by CIBER, INC., a Delaware corporation (the
"Company"), as of the Effective Date, for the purpose of providing certain
salary continuation retirement benefits to RICHARD A. MONTONI (the
"Participant").
1. DEFINITIONS. The following definitions apply to terms used in this Plan:
1.1. "ANNUAL BENEFIT AMOUNT" means an amount determined from the
following table based on the date of termination of the Participant's
employment with the Company:
Date of termination
of Participant's employment Annual Benefit Amount
--------------------------- ----------------------
Prior to November 1, 1999 $0
On or after November 1, 1999
and prior to November 1, 2000 $30,000
On or after November 1, 2000
and prior to November 1, 2001 $40,000
On or after November 1, 2001
and prior to November 1, 2002 $50,000
On or after November 1, 2002
and prior to November 1, 2003 $60,000
On or after November 1, 2003
and prior to November 1, 2004 $65,000
On or after November 1, 2004
and prior to November 1, 2005 $70,000
On or after November 1, 2005 $75,000
<PAGE>
1.2. "BENEFICIARY" means the beneficiary determined under section 4 to
receive any benefits under the Plan that become payable after the death of
the Participant.
1.3. "BENEFIT COMMENCEMENT DATE" means the first day of the month next
following the later of (i) the date on which the Participant attains the age
of 60 years or (ii) the date of termination of the Participant's employment
with the Company.
1.4. "COMPANY" means CIBER, INC., a Delaware corporation.
1.5. "EFFECTIVE DATE" means the date of adoption of this Plan by the
Company, which is indicated at the end of this Plan document.
1.6. "PARTICIPANT" means RICHARD A. MONTONI.
1.7. "PLAN" means this CIBER, INC. Salary Continuation Retirement Plan
for Richard A. Montoni, as set forth herein and as may hereafter be
amended from time to time.
1.8. "SPOUSE" means, with respect to the Participant, the person to
whom the Participant is legally married, or to whom he was legally married at
the time of his death. The term "spouse" specifically excludes a former
spouse if the marriage was terminated by divorce, annulment, or dissolution,
rather than by the death of one of the parties.
2. PURPOSES. The Participant is a valued employee of the Company. The
Company recognizes that the Participant has performed his services with
ability and distinction, and that the growth and success of the Company's
business reflects and will reflect the services rendered by the Participant.
To reward and retain the services of the Participant, and to assist the
Participant in providing for the contingencies of retirement, the Company
adopts this Plan to provide certain salary continuation retirement benefits
to the Participant or the Participant's Beneficiary. The
2
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Company and the Participant intend that: (a) this Plan is unfunded for tax
purposes and for purposes of Title I of the Employee Retirement Income
Security Act of 1974; (b) this Plan is maintained by the Company primarily
for the purpose of providing deferred compensation for the Participant; and
(c) the Participant is one of a select group of management or highly
compensated employees of the Company.
3. SALARY CONTINUATION BENEFITS.
3.1. AMOUNT AND PAYMENT OF BENEFITS. Except as provided in section
3.2, the Company shall pay salary continuation benefits as provided in this
Plan. The salary continuation benefits under this Plan shall consist of
fifteen annual payments of the Participant's Annual Benefit Amount, payable
on the Benefit Commencement Date and each year thereafter on the anniversary
of the Benefit Commencement Date until a total of fifteen annual payments has
been made. The Company may, at its sole option and at any time after the
employee's employment has been terminated, prepay the benefits under this
Plan by paying a lump sum, in cash, equal to the then present value of all
remaining unpaid payments, calculated using a discount rate of 8% per annum.
Upon such prepayment, the Company shall have no further obligations under
this Plan.
3.2. FORFEITURE OF BENEFITS ON TERMINATION FOR CAUSE. If the
Participant's employment with the Company is terminated for cause, then all
benefits under this Plan shall be forfeited, and no salary continuation
benefits shall be payable under this Plan. For this purpose, "cause" means
(a) commission of a felony, or (b) fraud or misappropriation or intentional
material damage to the property or business of the Company, provided that
such "cause" shall have been
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found by a majority vote of the members of the Board of Directors of the
Company (other than the Participant, if he is a member of the Board of
Directors).
3.3. RECIPIENT. The salary continuation benefits under this Plan shall
be paid as follows:
a. All payments that become payable during the Participant's
lifetime shall be paid to the Participant.
b. Any payments that become payable following the Participant's
death shall be paid to the Participant's Beneficiary.
4. BENEFICIARY.
4.1. DESIGNATION. The Participant may from time to time designate a
Beneficiary to receive amounts that may become payable under this Plan
following the Participant's death. If more than one Beneficiary is named, the
shares and/or precedence of each shall be indicated. The Participant may at
any time revoke or change any previous beneficiary designation. Any
beneficiary designation or any revocation or change of a previous beneficiary
designation shall be in writing, shall be signed by the Participant, shall be
effective only upon its actual receipt by the Company, and shall be in the
form of Exhibit A attached hereto.
4.2. NO DESIGNATED BENEFICIARY. If there is no beneficiary designation
in effect for the Participant at the time when any amounts become payable to
the Participant's Beneficiary, or if the Beneficiary designated by the
Participant is not then living or in existence, then the Participant's
Beneficiary shall be, and the payment(s) shall be made to:
a. The Participant's surviving Spouse, if any;
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b. If the Participant has no surviving Spouse, then to the
Participant's personal representative, to be distributed as a part of the
Participant's estate.
4.3. WITHHOLDING BENEFITS. If the Company is in doubt as to the proper
Beneficiary to receive any payment under this Plan, the Company may withhold
payment until the matter is finally adjudicated.
4.4. INCOMPETENT PAYEE. If the Participant or any Beneficiary is a
minor or otherwise legally incompetent, the Company may make payment to the
Participant's or Beneficiary's conservator or legal guardian or, in the sole
and absolute discretion of the Company, to the Participant's or Beneficiary's
parent or another relative of the Beneficiary. The receipt of a conservator,
guardian, parent or other relative to whom a payment is made under this
section shall be a complete discharge of the Company, and the Company shall
have no obligation to see to the application of any payment so made.
4.5. DISCHARGE OF COMPANY. Any payment made by the Company in good
faith and in accordance with the provisions of this Plan shall fully
discharge the Company from all further obligations with respect to that
payment.
5. RELATIONSHIP TO OTHER AGREEMENTS. This Plan does not constitute a
contract of employment between the Company and the Participant. No provision
of this Plan shall restrict the right of the Company to discharge or
terminate the Employment of the Participant, nor the right of the Participant
to terminate the Participant's employment with the Company.
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6. UNFUNDED PLAN.
6.1. COMPANY'S OBLIGATIONS. The Company's obligations under this Plan
shall be an unfunded and unsecured promise to make benefit payments in the
future. The Company shall not, under any circumstances, be obligated to fund
its financial obligations under this Plan.
6.2. RIGHTS OF PARTICIPANTS AND BENEFICIARIES. In seeking to enforce
payment of benefits under this Plan, the Participant or the Participant's
Beneficiary shall have the status and rights, but only the status and rights,
of general unsecured creditors of the Company.
6.3. NO RIGHTS IN SPECIFIC ASSETS. No assets held, or acquired in the
future, by the Company, shall be considered to be held or acquired in
connection with or as security for the liabilities of the Company pursuant to
this Plan, and shall not be deemed to be held under any trust for the benefit
of the Participants or their Beneficiaries, or be deemed security for the
performance of the obligations of the Company under this Plan, but shall be
and remain general, unpledged and unrestricted assets of the Company. The
Participant hereby acknowledges that the Participant's participation in the
acquisition of any general asset for the Company shall not constitute a
representation to the Participant, the Participant's Beneficiary, or any
other person claiming through the Participant, that any of them has any
special or beneficial interest in any general asset of the Company.
7. INALIENABILITY. Except as specifically provided in this Plan with
respect to the Participant's right to designate a Beneficiary, the
Participant's right to benefits hereunder is personal to the Participant, and
neither the Participant nor the Participant's Beneficiary shall have any
right to anticipate, sell, assign, mortgage, pledge, or otherwise dispose of
or encumber any of the benefits
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provided for under this Plan, nor shall such benefits be liable for the debts
or obligations of the Participant or the Participant's Beneficiary, or be
subject to attachment, garnishment, execution, creditors bill, or other legal
or equitable process.
8. CLAIMS PROCEDURE. The following provisions are part of this Plan and are
intended to meet the requirements of the Employee Retirement Income Security
Act of 1974:
8.1. NAMED FIDUCIARY. The "named fiduciary" is the Company.
8.2. UNFUNDED PLAN. This Plan is unfunded.
8.3. BASIS OF PAYMENT OF BENEFITS. The basis of payment of benefits
under this Plan is that the Company shall pay the benefits out of its general
assets, in accordance with the terms of this Plan.
8.4. CLAIMS PROCEDURE.
a. CLAIM. A person who believes that he or she is being denied a
claim for benefits to which he or she is entitled under this Plan (a
"Claimant") may file a written request for such benefit with the Company,
setting forth the claim. The request must be addressed to the President of
the Company at the Company's then principal place of business.
b. DECISION ON A CLAIM. If a claim is denied, the President shall
deliver a written explanation to the Claimant, setting forth: (a) the
specific reason or reasons for the denial; (b) references to the pertinent
provisions of this Plan on which the denial is based; (c) a description of
any additional material or information necessary for the Claimant to perfect
the claim and an explanation of why that material or information is
necessary; (d) appropriate information as to the steps to be taken if the
Claimant wishes to submit the claim for review; and
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(e) the time limit for requesting a review of the claim under section 8.4.c.
The written explanation shall be delivered to the Claimant within 90 days
after receipt of the claim by the Company.
c. REVIEW OF A DENIED CLAIM. A Claimant shall have 60 days
following receipt of the denial of a claim to request a review of the denial.
A request for review shall be in writing and addressed to the President at
the Company's then principal place of business. The Claimant may submit
pertinent documents and written issues and comments. The President shall
review the denial of the claim, and shall furnish the Claimant with a
decision on review within 60 days after receipt of the Claimant's request for
review. The decision on review shall be in writing, shall be written in a
manner calculated to be understood by the Claimant, and shall include
specific reasons for the decision and specific references to the pertinent
provisions of this Plan on which the decision is based.
9. MISCELLANEOUS.
9.1. AMENDMENT OR TERMINATION. This Plan may be amended or terminated
only in a written instrument signed by both the Company and the Participant.
9.2. INUREMENT. The terms of this Plan shall be binding upon, and
shall inure to the benefit of, the Company, the Participant, the Participant's
Beneficiary, and their respective heirs, personal representatives,
successors, and permitted assigns.
9.3. GOVERNING LAW. This Plan shall be governed by and construed in
accordance with the laws of the State of Colorado.
9.4. EXHIBIT. The Exhibit attached hereto is incorporated herein by
reference.
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IN WITNESS WHEREOF, the Company has adopted this Plan effective as of
the date indicated below.
"Company"
CIBER, INC., a
Delaware corporation
Effective date: By:
November 1, 1996 ------------------------------------
Name: Mac J. Slingerlend
Title: President
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EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS
CIBER, INC.:
We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 33-88046, 33-88048, 33-88050, 33-87978, 33-81320-3 and 333-15091) and
Form S-4 (No. 33-02740) of CIBER, Inc. 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, 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, stockholders' equity, and cash flows for each of the
years in the three-year period ended June 30, 1996, which report appears herein.
/s/ KPMG Peat Marwick LLP
KPMG PEAT MARWICK LLP
Denver, Colorado
December 10, 1996
