<PAGE>
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
CIBER, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form of Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
<PAGE>
25TH ANNIVERSARY
CIBER, Inc.
5251 DTC Parkway, Suite 1400
Englewood, Colorado 80111
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 28, 1999
TO THE SHAREHOLDERS OF CIBER, INC.:
NOTICE IS HEREBY GIVEN that the 1999 Annual Meeting of Shareholders (the
"Meeting") of CIBER, Inc., a Delaware corporation (the "Company"), will be
held on Thursday, October 28, 1999 at 10:00 a.m. local time, at Glenmoor
Country Club, 110 Glenmoor Drive, Cherry Hills Village, Colorado, for the
following purposes:
(1) To elect three Class II Directors of the Company to serve for a term
of three years.
(2) To approve an amendment to the Company's Certificate of Incorporation
to increase the number of authorized shares of Common Stock from
80,000,000 to 100,000,000 shares.
(3) To approve an increase in the number of shares of Common Stock
reserved for issuance pursuant to the Company's Equity Incentive Plan
from 8,000,000 to 10,500,000 shares.
(4) To transact such other business as may properly come before
the Meeting or any adjournment of postponements thereof.
The foregoing items of business are more fully described in the
accompanying Proxy Statement. The Board of Directors of the Company fixed the
close of business on September 10, 1999 as the record date for the
determination of shareholders entitled to notice of and to vote at the
Meeting and at any adjournment or postponement thereof. Consequently, only
holders of the Company's Common Stock at the close of business on September
10, 1999 will be entitled to notice of and to vote at the Meeting. A complete
list of shareholders entitled to vote at the Meeting will be available for
examination during business hours by any shareholder, for purposes related to
the Meeting, for a period of ten days prior to the Meeting at the Company's
corporate offices at 5251 DTC Parkway, Suite 1400, Englewood, Colorado.
Whether or not you plan to attend the Meeting in person, please
complete, date and sign the accompanying proxy card and return it promptly in
the enclosed envelope to ensure your representation at the Meeting. You are
cordially invited to attend the Meeting and, if you do so, you may personally
vote, regardless of whether you have submitted a signed proxy. Thank you.
By order of the Board of Directors,
Bobby G. Stevenson
Chairman of the Board
Englewood, Colorado
September 24, 1999
<PAGE>
CIBER, INC.
-----
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
OCTOBER 28, 1999
-----
This Proxy Statement and the accompanying proxy card are being
furnished in connection with the solicitation of proxies by and on behalf of
the Board of Directors (the "Board") of CIBER, Inc., a Delaware corporation
(the "Company"), to be used at the 1999 Annual Meeting of Shareholders of the
Company (the "Meeting") to be held on Thursday, October 28, 1999 at 10:00
a.m. local time, at Glenmoor Country Club, 110 Glenmoor Drive, Cherry Hills
Village, Colorado, and at any adjournment or postponement thereof. This Proxy
Statement and the accompanying proxy card are first being mailed to the
holders of record of the Company's Common Stock, $.01 par value per share
(the "Common Stock"), on or about September 24, 1999.
Shareholders of the Company represented at the Meeting will consider
and vote upon (i) the election of three Class II Directors to serve on the
Board until the 2002 Annual Meeting of Shareholders or until their successors
have been duly elected and qualified, (ii) an amendment to the Company's
Certificate of Incorporation to increase the number of authorized shares of
Common Stock from 80,000,000 to 100,000,000, (iii) an increase in the number
of shares of Common Stock reserved for issuance pursuant to the Company's
Equity Incentive Plan from 8,000,000 to 10,500,000 and (iv) such other
business as may properly come before the Meeting or any adjournment or
adjournments thereof. The Company is not aware of any other business to be
presented for consideration at the Meeting. If any other matters properly
come before the Meeting, the persons designated as agents in the enclosed
proxy will vote on such matters in accordance with their best judgment.
VOTING AND SOLICATION OF PROXIES
Only holders of record of the Common Stock at the close of business
on September 10, 1999 (the "Record Date") will be entitled to notice of and
to vote at the Meeting. As of the Record Date, 59,110,399 shares of Common
Stock were outstanding. Each shareholder is entitled to one vote for each
share of Common Stock held of record on the Record Date for each proposal
submitted for shareholder consideration at the Meeting. The presence, in
person or by proxy, of the holders of not less than one-third of the shares
of Common Stock entitled to vote at the Meeting is necessary to constitute a
quorum for the conduct of business at the Meeting. To be elected, a director
must receive a plurality of the votes present in person or represented by
proxy and entitled to vote on the election. The affirmative vote of a
majority of the shares of Common Stock issued and outstanding is required to
approve the proposal to amend the Company's Certificate of Incorporation.
Abstentions and broker non-votes will have the same effect as a vote against
the proposal. With respect to all other matters, the affirmative vote of the
majority of such quorum will be the act of the shareholders. Abstentions will
have the same effect as a vote against such proposals and broker non-votes
will have no impact on the outcome of such proposals. "Broker non-votes" are
proxies with respect to shares held in record name by brokers or nominees, as
to which (i) instructions have not been received from the beneficial owners
or persons entitled to vote and (ii) the broker or nominee does not have
discretionary voting power under applicable national securities exchange
rules or the instrument under which it serves in such capacity.
All shares represented by properly executed proxies will, unless
such proxies have previously been revoked, be voted at the Meeting in
accordance with the directions on the proxies. A proxy may be revoked at any
time prior to final tabulation of the votes. Shareholders may revoke proxies
by written notice to the Secretary of the Company, by delivery of a proxy
bearing a later date, or by personally appearing at the Meeting and casting a
contrary vote. If no direction is indicated, the shares will be voted in
favor of the Board of Directors' nominees for director, for the amendment to
the Company's Certificate of Incorporation to increase the number of
authorized shares of the Company's Common Stock and for the increase in the
number of shares reserved for issuance pursuant to the Company's Equity
Incentive Plan, as listed in this Proxy Statement. The persons named in the
proxies will have discretionary authority to vote all proxies with respect to
additional matters that are properly presented for action at the Meeting.
1
<PAGE>
The executive officers and directors of the Company as a group own
or may be deemed to control approximately 22% of the outstanding shares of
Common Stock of the Company. Each of the executive officers and directors has
indicated his intent to vote all shares of Common Stock owned or controlled
by him in favor of each item set forth herein.
The proxy solicitation is made by and on behalf of the Board of
Directors. Solicitation of proxies for use at the Meeting may be made in
person or by mail by directors, officers and regular employees of the
Company. Such persons will receive no additional compensation for any
solicitation activities. Copies of solicitation materials will be furnished
to banks, brokerage houses, fiduciaries and custodians holding in their names
shares of Common Stock beneficially owned by others to forward to such
beneficial owners. The Company may reimburse persons representing beneficial
owners of Common Stock for their costs of forwarding solicitation materials
to such beneficial owners. The Company will bear the entire cost of
solicitation of proxies, including the preparation, assembly, printing and
mailing of this Proxy Statement, the proxy and any additional information
furnished to shareholders.
PROPOSAL 1 - ELECTION OF DIRECTORS
Directors constituting approximately one-third of the Board of
Directors are elected each year for a three-year term at the Company's Annual
Meeting of Shareholders or until their successors are duly elected by the
shareholders. The terms of Messrs. Mac J. Slingerlend and James A. Rutherford
expire in 1999 (the "Class II Directors"); the terms of Messrs. Bobby G.
Stevenson, Richard A. Montoni and Archibald J. McGill expire in 2000 (the
"Class III Directors") and the terms of Messrs. Roy L. Burger and James G.
Brocksmith, Jr. expire in 2001 (the "Class I Directors"). The Board has
nominated Messrs. Mac J. Slingerlend, James A. Rutherford and Paul E. Rudolph
(to become a new director) to serve for three-year terms to expire at the
2002 Annual Meeting of Shareholders or until their successors are elected and
qualified.
Vacancies on the Board may be filled by the affirmative vote of a
majority of the remaining directors then in office. A director elected to
fill a vacancy (including a vacancy created by an increase in the Board)
shall serve for the remainder of the full term of the new directorship or of
the class of directors in which the vacancy occurred. Officers are elected by
and serve at the discretion of the Board.
Shares represented by all proxies by the Board and not marked so as
to withhold authority to vote for Messrs. Mac J. Slingerlend, James A.
Rutherford and Paul E. Rudolph will be voted for the election of Messrs. Mac
J. Slingerlend, James A. Rutherford and Paul E. Rudolph. To be elected, each
nominee must receive the favorable vote of a plurality of the votes cast. If
any of the nominees are unavailable or unwilling to serve as director,
persons named in the proxy intend to cast votes for which they hold proxies
in favor of the election of such other person as the Board may designate. The
Board knows of no reason why any of Messrs. Mac J. Slingerlend, James A.
Rutherford or Paul E. Rudolph should be unable or unwilling to serve on the
Board. See "Directors and Executive Officers" below for biographical
information for the persons nominated as directors.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" EACH OF THE NOMINEES
2
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the Company's directors and executive
officers, their ages, positions currently held with the Company, the year
elected as director or appointment as officer and class of directorship. For
information about the ownership of the Company's voting securities held by
each director, director nominee or executive officer, see "Securities
Ownership of Certain Beneficial Owners and Management."
<TABLE>
<CAPTION>
Served as
Officer or
Name Age Positions Director Since Class
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson 57 Chairman and Founder 1974 Class III
Mac J. Slingerlend 52 Chief Executive Officer, President, 1989 Class II
Secretary and Director
Paul E. Rudolph 42 Chief Operating Officer 1999 Class II
(proposed)
Richard A. Montoni 48 Chief Financial Officer, Executive 1996 Class III
Vice President, Treasurer and Director
Joseph A. Mancuso 53 Senior Vice President/Custom 1994 -
Solutions Group - President
Donald R. Hahl 49 Senior Vice President/Strategic 1997 -
Solutions Group - President
James A. Rutherford 53 Director 1994 Class II
Roy L. Burger 44 Director 1995 Class I
James G. Brocksmith, Jr. 58 Director 1998 Class I
Archibald J. McGill 68 Director 1998 Class III
</TABLE>
BOBBY G. STEVENSON. Mr. Stevenson is Chairman of the Board of
Directors and one of the original founders of the Company. Mr. Stevenson was
Vice President in charge of recruiting and management of the technical staff
from 1974 until November 1977 when he became Chief Executive Officer. As
Chief Executive Officer, he had been responsible for all operations of the
Company from 1977 to 1998.
MAC J. SLINGERLEND. Mr. Slingerlend joined the Company in January
1989 as Executive Vice President/Chief Financial Officer and was elected a
director in 1994. He was made President and Chief Operating Officer in 1996
and was promoted to Chief Executive Officer in March 1998 and became
Secretary in 1998. Prior to joining the Company, Mr. Slingerlend spent 15
years in the banking industry, primarily as a commercial lender, and five
years in corporate financial positions in the cable television and
hospitality industries.
PAUL E. RUDOLPH. Mr. Rudolph joined the Company in June 1999 as
Chief Operating Officer. Prior to his employment with CIBER, Mr. Rudolph
served as President of EDS' Electronic Business unit from 1996 to 1999. Since
joining EDS in 1979 and until 1996, Mr. Rudolph held a variety of management
and technical leadership roles spanning multiple industry groups.
RICHARD A. MONTONI. Mr. Montoni has been the Company's Executive
Vice President/Chief Financial Officer and a director since October 1996. He
became Treasurer in 1998. Prior to joining the Company, Mr. Montoni was a
partner with KPMG LLP, where he worked for approximately 20 years with
companies in the high technology, manufacturing, merchandising and
distribution industries. Mr. Montoni is a member of the American Institute of
Certified Public Accountants and the Colorado Society of Certified Public
Accountants.
3
<PAGE>
JOSEPH A. MANCUSO. Effective July 1, 1999, Mr. Mancuso became Senior
Vice President/Custom Solutions Group - President. Mr. Mancuso has also
served as President of the CIBER Information Services Division since March of
1998. Previously, Mr. Mancuso was Divisional Vice President in charge of
eastern operations from 1996 to 1998. Mr. Mancuso joined CIBER as a result of
CIBER acquiring CPU, Inc. in 1994 and served as Regional Vice President from
1994 to 1996 in charge of southeast branch operations. From 1993 to 1994 Mr.
Mancuso was a Vice President for CPU, Inc.
DONALD R. HAHL. Effective July 1, 1999, Mr. Hahl became Senior Vice
President/Strategic Solutions Group - President. From March 1998 to June
1999, Mr. Hahl was President/CIBER Solutions Division. From August 1997 to
February 1998, Mr. Hahl was President of Spectrum Technology Group, Inc. Mr.
Hahl joined CIBER in 1996 when Spectrum merged into CIBER. Mr. Hahl was a
co-founder of Spectrum in 1979 and served as Vice President/Consulting
Services when the merger occurred.
JAMES A. RUTHERFORD. Mr. Rutherford has been a director of the
Company since February 1994. He is currently a managing director of Wingset
Investments Ltd., a private venture capital company located in New Albany,
Ohio. Prior to forming Wingset in 1995, Mr. Rutherford was one of the
founders of Goal Systems International, Inc., serving in various executive
positions, including Chief Executive Officer, and as a director from its
incorporation in 1977 until its sale in 1992. Mr. Rutherford is also a
trustee of Case Western Reserve University and a director of Symix Systems,
Inc., Columbus, Ohio, as well as several private corporations.
ROY L. BURGER. Mr. Burger has been a director of the Company since
November 1995. Mr. Burger has approximately 22 years of experience in the
equipment leasing and finance industry and has arranged the financing of more
than $2 billion of equipment and real estate. Mr. Burger currently serves as
President and Chief Executive Officer of Boulder Capital Group, a company
founded by him in 1986 that specializes in equipment leasing. In May 1998,
Boulder Capital Group, together with 11 other finance companies, merged and
consolidated to become part of UniCapital Corporation ("UniCapital"). Mr.
Burger served on the Board of Directors of UniCapital during its first year
of listing on the New York Stock Exchange.
JAMES G. BROCKSMITH, JR. Mr. Brocksmith has been a director of the
Company since July 1998. Mr. Brocksmith served as a partner of KPMG LLP from
1971 to January 1997. From 1990 to October 1996, Mr. Brocksmith served as the
Deputy Chairman of the Board and Chief Operating Officer of KPMG LLP. Since
January 1997, Mr. Brocksmith has been a self-employed business consultant for
several companies. Mr. Brocksmith is a member of the board of directors of
two publicly traded companies; Nationwide Financial Services, Inc., a
provider of life insurance, mutual funds and pension products, and Vistana,
Inc., a leading developer and operator of vacation ownership resorts.
ARCHIBALD J. MCGILL. Mr. McGill has been a director of the Company
since September 1998. Mr. McGill has served in executive capacities at IBM
and AT&T and was President of Rothschild Venture Capital. He is on the board
of directors of several small high-technology companies. From 1985 to the
present, Mr. McGill has been the President of Chardonnay, Inc., a venture
capital investment company.
BOARD COMMITTEES AND MEETINGS
The Board met fifteen times (including telephone meetings) during
the Company's 1999 fiscal year. Each director participated in all of the
board meetings and committee meetings (of which such director was a member)
held during fiscal 1999; except that one of the directors was unable to
attend one meeting. The Board has an Audit Committee and a Compensation
Committee but does not have a Nominating Committee or any committee
performing a similar function.
COMPENSATION COMMITTEE. The principal responsibilities of the
Compensation Committee are the administration and grant of awards under the
Company's Equity Incentive Plan (the "Employees' Plan") and the Stock
Purchase Plan, as well as the recommendation of annual salaries for senior
management to the Company's Board. The current members of the Compensation
Committee are Messrs. Rutherford, Burger, Brocksmith and McGill. The
Compensation Committee met five times in fiscal 1999.
AUDIT COMMITTEE. The principal responsibilities of the Audit
Committee are to meet periodically with representatives of the Company's
independent auditors to review the general scope of audit coverage, including
consideration of the Company's accounting practices and procedures and system
of internal accounting controls, and
4
<PAGE>
to review any transactions that may involve a conflict of interest, and to
report to the Board with respect thereto. The Audit Committee also recommends
to the Board the appointment of the Company's independent auditors. The
current members of the Audit Committee are Messrs. Rutherford, Burger,
Brocksmith and McGill. The Audit Committee met twice in fiscal 1999.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), requires the Company's directors, executive officers
and persons who beneficially own greater than 10% of a registered class of
the Company's equity securities to file initial reports of ownership and
changes in ownership of such securities with the Securities and Exchange
Commission (the "Commission") and the Company. Based solely upon its review
of copies of the Section 16(a) reports the Company has received and written
representations from certain reporting persons, the Company believes that
during its fiscal year ended June 30, 1999, all of its directors, executive
officers and greater than 10% beneficial owners were in compliance with their
filing requirements except that Mac J. Slingerlend reported one transaction
late on an amended Form 4 and James A. Rutherford reported one transaction
late on an amended Form 4.
5
<PAGE>
SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial
ownership of the Company's Common Stock at September 1, 1999, and stock
options exercisable for shares of Common Stock within sixty days of such
date, held by (i) each person or group of persons known by the Company to own
beneficially more than five percent (5%) of the outstanding Common Stock,
(ii) each director and nominee for director of the Company, (iii) each Named
Executive Officer (as defined under "Executive Compensation" below) and (iv)
all executive officers and directors of the Company as a group. All
information is taken from or based upon ownership filings made by such
persons with the Commission or upon information provided by such persons to
the Company. Unless otherwise indicated, the shareholders listed below have
sole voting and investment power with respect to the shares reported as owned.
<TABLE>
<CAPTION>
Name of Amount and nature of Percent of
beneficial owner beneficial ownership class
---------------- -------------------- ----------
<S> <C> <C>
Bobby G. Stevenson(1) 12,005,139 20%
Mac J. Slingerlend(2) 830,053 1%
Paul E. Rudolph -- --
Richard A. Montoni(3) 76,549 *
Joseph A. Mancuso(4) 41,984 *
Donald R. Hahl(5) 219,578 *
Lawrence D. Greenwood(6) 157,507 *
William E. Storrison(7) 35,002 *
James A. Rutherford(8) 80,684 *
Roy L. Burger(8) 24,557 *
James G. Brocksmith, Jr.(8) 10,458 *
Archibald J. McGill(8) 10,458 *
All directors and executive
officers as a group (12 persons)(9) 13,491,969 22%
*less than 1%
</TABLE>
(1) The address of Mr. Stevenson is c/o CIBER, Inc., 5251 DTC Parkway, Suite
1400, Englewood, CO 80111. Includes shares held by the Bobby G. Stevenson
Revocable Trust, of which Mr. Stevenson is the settler, trustee and
beneficiary. Excludes 87,100 shares of Common Stock held in the Irrevocable
First Stevenson Charitable Remainder Unitrust, of which shares Mr. Stevenson
disclaims beneficial ownership.
(2) Includes options to purchase 725,224 shares of Common Stock.
(3) Includes options to purchase 75,659 shares of Common Stock.
(4) Includes options to purchase 39,649 shares of Common Stock.
(5) Includes options to purchase 14,599 shares of Common Stock.
6
<PAGE>
(6) Includes options to purchase 15,268 shares of Common Stock.
(7) Includes options to purchase 35,002 shares of Common Stock.
(8) Includes options to purchase 36,000, 23,000, 10,000 and 10,000 shares of
Common Stock for Messrs. Rutherford, Burger, Brocksmith and McGill,
respectively.
(9) Includes options to purchase 984,401 shares of Common Stock.
COMPENSATION OF DIRECTORS
COMPENSATION OF DIRECTORS
All non-employee directors receive shares of CIBER Common Stock
valued at approximately $2,500 for each meeting attended and are paid a
$6,000 semi-annual retainer. All directors are reimbursed for their expenses
in attending meetings. Non-employee directors receive stock options under the
Non-employee Directors' Stock Option Plan for serving on the Board. Employee
directors do not receive additional compensation for serving on the Board.
Under the terms of the Non-employee Directors' Stock Option Plan
(the "Directors' Plan"), the Company may grant to non-employee directors
awards of stock options. The Directors' Plan provides for an initial
authorization of 200,000 shares of Common Stock and is administered by the
Board. Each option granted under the Directors' Plan expires ten years from
the date of grant. The Directors' Plan provides for an initial grant of
options to purchase 20,000 shares of Common Stock to each non-employee
director when such director takes office, which options vest in equal annual
installments over two years. Additionally, after each year of service, each
non-employee director receives a grant of options to purchase 4,000 shares of
Common Stock; such options vest one year after the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no Compensation Committee Interlocks in fiscal 1999.
7
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth compensation information with respect
to Mr. Slingerlend, the Company's Chief Executive Officer and the Company's
four most highly paid executive officers with annual compensation in excess
of $100,000 (the "Named Executive Officers") for services rendered for the
fiscal years ended June 30, 1999, 1998 and 1997. See "Employment Agreements".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-term
Annual Compensation Compensation
------------------- --------------
Securities All Other
Name and Fiscal Underlying Compensation
Principal Position Year Salary ($) Bonus ($) Options (#) ($) (1)
------------------ ---- ---------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Mac J. Slingerlend 1999 362,500 132,372 45,000 7,523
Chief Executive Officer, 1998 325,000 150,000 400,000 6,864
President and Secretary 1997 300,000 140,000 20,000 7,163
Richard A. Montoni 1999 267,500 73,935 60,000 5,284
Chief Financial Officer, 1998 250,000 98,846 20,000 6,394
Executive Vice President 1997 163,431 100,000 100,000 3,228
and Treasurer
Joseph A. Mancuso 1999 232,500 61,250 45,000 3,888
Senior Vice President/Custom 1998 -- -- -- --
Solutions Group - President 1997 -- -- -- --
Donald R. Hahl 1999 232,500 57,380 45,000 4,051
Senior Vice President/Strategic 1998 185,000 41,621 10,400 5,665
Solutions Group - President 1997 -- -- -- --
Lawrence D. Greenwood(2) 1999 275,000 69,275 37,500 4,437
Vice President 1998 256,250 84,423 210,400 6,635
1997 -- -- -- --
William E. Storrison(3) 1999 275,000 37,500 37,500 2,504
Executive Vice President 1998 237,500 138,654 240,000 3,345
1997 200,000 131,049 40,000 5,032
</TABLE>
(1) Consists of amounts contributed under the Company's 401(k) Savings Plan and
amounts paid by the Company for life insurance benefits. Savings Plan
contributions for the fiscal years ended June 30, 1999, 1998 and 1997 were:
Mr. Slingerlend - $2,760, $2,615 and $4,175; Mr. Montoni - $3,150, $4,319
and $1,250; Mr. Mancuso - $3,357, 0 and 0; Mr. Hahl - $3,655, $3,655 and 0;
Mr. Greenwood - $3,110, $3,462 and 0; Mr. Storrison - $2,190, $3,000 and
$4,674, respectively.
(2) Resigned from position of Executive Vice President prior to fiscal year end
and was not considered an executive officer at year end.
(3) Resigned from position of Executive Vice President subsequent to fiscal
year end.
8
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information regarding options granted to
the Named Executive Officers during the fiscal year ended June 30, 1999.
<TABLE>
<CAPTION> Potential Realizable Value at
Number of Assumed Annual Rates of Stock Price
Securities Percent of Total Appreciation for
Underlying Options Granted Exercise or Option Term (1)
Options to Employees in Base Price Expiration --------------
Name Granted (#) Fiscal Year ($/Share) Date 5%($) 10%($)
---- ----------- ----------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Mac J. Slingerlend(2) 30,000 1.1% $27.06 9/1/08 510,584 1,293,920
15,000 .5% $16.00 10/9/08 150,935 382,498
Richard A. Montoni(3) 40,000 1.5% $27.06 9/1/08 680,778 1,725,226
20,000 .7% $16.00 10/9/08 201,246 509,998
Joseph A. Mancuso(4) 30,000 1.1% $27.06 9/1/08 510,584 1,293,920
15,000 .5% $16.00 10/9/08 150,935 382,498
Donald R. Hahl(4) 30,000 1.1% $27.06 9/1/08 510,584 1,293,920
15,000 .5% $16.00 10/9/08 150,935 382,498
Lawrence D. Greenwood(5) 25,000 .9% $27.06 9/1/08 425,487 1,078,266
12,500 .5% $16.00 10/9/08 125,779 318,749
William E. Storrison(5) 25,000 .9% $27.06 9/1/08 425,487 1,078,266
12,500 .5% $16.00 10/9/08 125,779 318,749
</TABLE>
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock. No assurance can be made that the amounts reflected in these
columns will be achieved.
(2) Options for 30,000 shares were granted on 9/1/98 that vest: 3,000 on
9/1/99; 4,500 on 9/1/00; 6,000 on 9/1/01; 7,500 on 9/1/02; and 9,000 on
9/1/03. Options for 15,000 shares were granted on 10/9/98 that vest: 1,500
on 11/1/99; 2,250 on 11/1/00; 3,000 on 11/1/01; 3,750 on 11/1/02; and 4,500
on 11/1/03.
(3) Options for 40,000 shares were granted on 9/1/98 that vest: 7,500 on
9/1/99; 8,750 on 9/1/00; 10,000 on 9/1/01, 6,250 on 9/1/02; and 7,500 on
9/1/03. Options for 20,000 shares were granted on 10/9/98 that vest: 3,750
on 11/1/99; 4,375 on 11/1/00; 5,000 on 11/1/01; 3,125 on 11/1/02; and 3,750
on 11/1/03.
(4) Options for 30,000 shares were granted on 9/1/98 that vest: 7,667 on
9/1/99; 8,167 on 9/1/00; 8,666 on 9/1/01; 2,500 on 9/1/02; and 3,000 on
9/1/03. Options for 15,000 shares were granted on 10/9/98 that vest: 3,834
on 11/1/99; 4,083 on 11/1/00; 4,333 on 11/1/01; 1,250 on 11/1/02; and 1,500
on 11/1/03.
(5) Options for 25,000 shares were granted on 9/1/98 that vest in three equal
annual installments beginning 9/1/99. Options for 12,500 shares were
granted on 10/9/98 that vest in three equal installments beginning 11/1/99.
OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding
options held by the Named Executive Officers as of June 30, 1999.
<TABLE>
<CAPTION>
Shares Number of Securities Underlying Value of Unexercised
Acquired Unexercised Options at Money Options at
On Value Fiscal Year End (#) Fiscal Year End ($)
Name Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
---- ------------ ------------ ------------------------- -------------------------
<S> <C> <C> <C> <C>
Mac J. Slingerlend 61,110 2,163,826 715,558 / 451,661 13,458,976 / 913,516
Richard A. Montoni -- -- 41,884 / 134,116 88,378 / 218,746
Joseph A. Mancuso 9,000 124,118 15,315 / 71,667 63,496 / 141,668
Donald R. Hahl -- -- 3,466 / 51,934 7,040 / 60,959
Lawrence D. Greenwood -- -- 3,468 / 44,432 7,044 / 53,143
William E. Storrison 66,668 1,068,963 26,666 / 118,334 135,407 / 215,622
</TABLE>
9
<PAGE>
EMPLOYMENT AGREEMENT
The Company has employment agreements with each of the Named
Executive Officers, which have a term of one year and are renewable annually.
Each employment agreement provides that an officer's compensation will
include a base and a bonus. In the event that an officer's employment is
terminated upon a change in control of the Company, upon death or disability
of the officer or without cause, the officer will be entitled to a severance
payment of up to three times their annual compensation which varies based
upon the cause of termination and officer position. Officers are also
entitled to receive continuance of medical, dental and disability benefits
for 18 months following termination, which varies based on the officer's
position.
LONG-TERM DEFERRED COMPENSATION PLAN
The Company has agreed to make certain post-employment payments to
Messrs. Slingerlend and Montoni, or their designated beneficiaries, except in
the event of a termination for cause. The payments will be made for 15 years
after Messrs. Slingerlend and Montoni's termination of employment with the
Company and will range from $60,000 to $100,000 and $30,000 to $75,000 per
year, respectfully, based on Messrs. Slingerlend and Montoni's age at the
time of termination of employment. The benefits are also subject to certain
vesting provisions.
THE COMPENSATION COMMITTEE REPORT
COMPENSATION POLICIES
The Compensation Committee (the "Committee") of the Board consists
of its independent non-employee directors. The purpose of the Committee is to
develop policies and make specific recommendations with respect to the
compensation of the Company's executive officers, with the objective that a
fair relationship exists between executive pay and the creation of
shareholder value.
The Committee, among other things, considers the performance of the
Company's operations, compensation of executive officers of competitors,
salary surveys of industry-related positions, the salary history of the
particular officer and other compensation in place, including stock option
awards. There is no singular objective formula by which compensation is
determined and the decisions are ultimately subjective.
FISCAL 1999 COMPENSATION
With respect to the Company's chief executive officer and the other
Named Executive Officers, the Committee focused principally upon establishing
appropriate base salary and incentive compensation. The chief executive
officer and each of the other Named Executive Officers are parties to
employment agreements with the Company that provide for base salary and
bonuses at stipulated performance levels for Messrs. Slingerlend, Montoni,
Mancuso, Hahl, Greenwood and Storrison. The base salary and bonuses granted
the chief executive officer and the other Named Executive Officers with
respect to fiscal 1999 are consistent with the Committee's objectives.
The Company has periodically granted stock options in order to
provide certain of its executives with a competitive total compensation
package and to reward them for their contribution to the Company's long-term
performance, as well as to align a portion of their compensation with the
market value of the Common Stock. During fiscal 1999, stock options were
granted to Messrs. Slingerlend, Montoni, Mancuso, Hahl, Greenwood and
Storrison and to other members of management based upon their actual and
potential contributions to the Company.
Compensation Committee
James A. Rutherford
Roy L. Burger
James G. Brocksmith, Jr.
Archibald J. McGill
10
<PAGE>
PERFORMANCE GRAPH
The following provides a comparison of the 5 year cumulative total
return* among CIBER, Inc., the S & P 500 Index and two Peer Groups.
[COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN GRAPH]
Peer Group 1 (presented in CIBER, Inc.'s fiscal 1998 Proxy Statement)
includes: Cambridge Technology Partners (Massachusetts), Inc., Computer
Horizons Corp., Computer Task Group, Inc., Keane, Inc., Renaissance
Worldwide, Inc., Sapient Corp., Technology Solutions Co. and Whittman-Hart,
Inc. Due to the Company's growth, the Company believes that Peer Group 1 is
no longer representative of its peers; therefore, the Company has selected H
& Q Information Services Sector (Peer Group 2) as its Peer Group for future
years. Peer Group 2 (subject to change annually according to H & Q
Information Services Sector) includes: Affiliated Computer Services, Inc.,
Cambridge Technology Partners (Massachusetts), Inc., Computer Sciences Corp.,
Electronic Data Systems Corp., First Consulting Group, Inc., International
Network Services, Keane, Inc., Renaissance Worldwide, Inc., Sapient Corp.,
Syntel, Inc., USWeb Corp. and Whittman-Hart, Inc.
* Assumes $100 invested on June 30, 1994 in stock or index including
reinvestment of dividends. The Company's fiscal year ends June 30.
Corresponding index value and Common Stock price values are given below:
<TABLE>
<CAPTION>
6/94 6/95 6/96 6/97 6/98 6/99
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CIBER, Inc. 100 203 503 781 1,737 874
Peer Group 1 100 162 397 626 958 517
Peer Group 2 100 128 165 146 184 203
S & P 500 100 126 159 214 279 342
CIBER, Inc. Closing Stock Price 2.188 4.438 11.000 17.094 38.000 19.125
</TABLE>
11
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 2, 1996, the Company purchased CIBER Network Services,
Inc. ("CNSI"), which was 85% owned by Bobby G. Stevenson, Mac J. Slingerlend
and Prasong Suvarnasorn, each of whom were and remain officers and/or
directors of the Company. Mr. Stevenson is also the Company's largest
shareholder. In October 1998, additional contingent consideration of $1.2
million was paid to the selling shareholders, of which Messrs. Stevenson,
Slingerlend and Suvarnasorn and members of their families received an
aggregate of 46,925 shares of Common Stock and cash of $118,000. In May 1999,
final contingent consideration of $200,000 was paid to the selling
shareholders, of which Messrs. Stevenson, Slingerlend and Suvarnasorn and
members of their families received an aggregate of 5,300 shares of Common
Stock and cash of $50,000.
PROPOSAL 2 - AMENDMENT TO CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK
GENERAL
On August 17, 1999, the Board adopted a resolution proposing that
the Company's Certificate of Incorporation be amended to increase the total
number of shares of Common Stock that the Company is authorized to issue from
80,000,000 to 100,000,000 shares.
PURPOSES
The additional authorized shares will benefit the Company by
providing flexibility to the Board of Directors without further action or
authorization by shareholders (except as required by law), in responding to
business needs and opportunities as they arise, and for other corporate
purposes. These corporate purposes might include the obtaining of capital
funds through public and private offerings of shares of Common Stock or of
securities convertible into shares of Common Stock or the acquisition of
businesses, technologies or other assets. In addition, the Board may deem it
appropriate to issue shares of Common Stock for distribution to the Company's
shareholders in the event of a stock dividend or stock split, or for
distributions pursuant to employee benefit plans. If such additional
authorized shares of Common Stock are subsequently issued to other than
existing shareholders, the percentage interest of existing shareholders in
the Company will be reduced. The issuance of any additional shares will be on
terms deemed by the Board to be in the best interests of the Company and its
shareholders.
In addition, the Company may seek to raise additional capital from
time to time and the Board believes that it is prudent to have additional
shares of Common Stock available for such purpose and for general corporate
purposes, including business combinations, grants of stock options and
recapitalizations, which transactions can be consummated expediently only if
the proposal to amend the Company's Certificate of Incorporation to increase
the number of authorized shares of Common Stock of the Company is approved by
holders of a majority of the issued and outstanding shares of Common Stock.
The Board will determine whether, when and on what terms the issuance of
shares of Common Stock may be warranted in connection with any of the
foregoing purposes.
The Board believes that the proposed increase in the number of
authorized shares of Common Stock will give the Company greater flexibility
by allowing shares of Common Stock to be issued by the Board of Directors
without the delay and expense of a special meeting of shareholders.
If the proposed Amendment is adopted by the shareholders, it will
become effective upon the filing and recording of a Certificate of Amendment
as required by the General Corporation Law of the State of Delaware.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENT
TO THE CERTIFICATE OF INCORPORATION TO INCREASE THE NUMBER
OF AUTHORIZED SHARES OF COMMON STOCK
12
<PAGE>
PROPOSAL 3 - AMENDMENT TO THE EQUITY INCENTIVE PLAN
The demand for skilled information technology consultants has
increased significantly in recent years and management expects this trend to
continue. As an integral element of the Company's approach to attracting,
motivating and retaining employees in such a competitive labor market, it has
issued and plans to continue to issue Common Stock-based incentives,
primarily stock options, to employees. In addition, management believes
additional options to purchase Common Stock will be required for issuance to
employees of companies that may be merged with or acquired by the Company in
the future, in part to replace existing options of merged or acquired
companies that may exist. As of September 10, 1999, the Company had 13,641
options available for future issuance under its Equity Incentive Plan (the
"Employees' Plan"). Therefore, to ensure the continued availability of the
Employees' Plan to attract, motivate and retain employees, on August 17,
1999, the Board of Directors approved an amendment to the Employees' Plan to
increase the number of shares of Common Stock reserved for issuance
thereunder from 8,000,000 to 10,500,000 shares, subject to the approval by
the Company's shareholders at the Meeting. Assuming no unusual matter to the
contrary (such as a significant business combination), management expects the
increase in the number of shares reserved under the Employees' Plan to be
sufficient through October 31, 2000. The affirmative vote of a majority of
the shares of the Company's Common Stock represented at the Meeting will be
required to approve the amendment to the Employees' Plan.
EMPLOYEES' EQUITY INCENTIVE PLAN
The Employees' Plan was adopted by the Board of Directors and
shareholders of the Company in January 1994. A total of 8,000,000 shares of
Common Stock are currently reserved for issuance under the Employees' Plan.
The purpose of the Employees' Plan is to provide long-term incentives to the
Company's officers, employees and consultants and to encourage and enable
such participants who are in a position to make significant contributions to
the success of the Company to acquire a closer identification of their
interests with those of the Company.
The Employees' Plan may be administered by the Board or a committee
to which the Board has delegated authority (the "Committee"). Any Committee
which makes grants to officers of the Company must be comprised of
disinterested non-employee members of the Board of Directors. Subject to the
terms of the Employees' Plan, the Committee determines the persons to whom
awards are granted, the type of award granted, the number of shares granted,
the vesting schedule, the type of consideration to be paid to the Company
upon exercise of options and the term of any option (which cannot exceed ten
years). No participant may be granted awards in any one calendar year with
respect to more than 1,000,000 shares of Common Stock. Under the Employees'
Plan, the Committee may grant awards of restricted stock, stock options and
supplemental bonuses or any combination thereof.
Under the Employees' Plan, the Committee may grant both incentive
stock options ("ISOs") intended to qualify under Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), and options that are not
qualified as incentive stock options ("NSOs"). ISOs may only be granted to
persons who are employees of the Company. ISOs may not be granted under the
Employees' Plan at an exercise price of less than the fair market value of
the Common Stock on the date of grant and the term of these options cannot
exceed ten years. The exercise price of an ISO granted to a holder of more
than 10% of the Common Stock must be at least 110% of the fair market value
of the Common Stock on the date of grant, and the term of these options
cannot exceed five years. The exercise price of NSOs may, at the discretion
of the Committee, be granted at less than the fair market value of the Common
Stock on the date of grant. No options under the Employees' Plan may be
granted after January 2004.
Under the performance award component of the Employees' Plan,
participants may be granted an award denominated in shares of Common Stock or
in dollars. Achievement of the performance target, or multiple performance
targets, established by the Committee relating to corporate, group, unit or
individual performance, based upon standards set by the Committee, will
entitle the participant to payment of the full amount specified with respect
to the award, subject to adjustment at the discretion of the Committee in the
event of performance exceeding the minimum performance targets, but below the
maximum performance target applicable to such award. Payment may be made in
cash, Common Stock or any combination thereof, as determined by the Committee
before the end of a performance cycle by reason of death, disability or
retirement.
Under the restricted stock component of the Employees' Plan, the
Committee may, in selected cases, issue to a participant a given number of
shares of restricted stock. Restricted stock under the Employees' Plan is Common
Stock restricted as to sale pending fulfillment of such vesting schedule and
employment requirements as the Committee determines. Prior to the fulfilling of
the restrictions, the participant will nevertheless be entitled to
13
<PAGE>
receive distributions in liquidation and dividends on, and to vote the shares
of, the restricted stock. The Employees' Plan provides for forfeiture of
restricted stock for breach of conditions of grant.
The Board may amend or terminate the Employees' Plan at any time
without approval of the shareholders. However, shareholder approval is
required for any amendment to the Employees' Plan if shareholder approval is
required to enable the plan to satisfy any applicable statutory requirements,
which includes an amendment that increases the number of shares for which
options may be granted or changes the person eligible to participate in the
Plan. However, no action by the Board or shareholders may alter or impair any
award previously granted without the consent of the award holder.
Through September 10, 1999, options to purchase up to an aggregate
of 10,102,580 shares of Common Stock have been granted under the Employees'
Plan, of which options to purchase 2,055,758 shares of Common Stock have been
exercised and options for 2,116,221 shares have been canceled. Options to
purchase shares of Common Stock issued under the Employees' Plan to all Named
Executive Officers as a group during fiscal years 1997, 1998 and 1999 were as
follows for the years indicated: 1997 - 160,000 shares; 1998 - 880,800
shares; and 1999 - 270,000 shares. The market value of the Common Stock
underlying the currently outstanding options is $108,974,793 based upon the
closing price of $18.375 on September 10, 1999.
FEDERAL INCOME TAX CONSEQUENCES OF THE EMPLOYEES' PLAN
The following is a general summary of the federal income tax
consequences that may apply to recipients of options, restricted stock,
performance shares and performance units under the Employees' Plan. Because
the application of the tax laws may vary according to individual
circumstances, a participant should seek professional tax advice concerning
the tax consequences to him or her of participation in the Employees' Plan,
including the potential application and effect of state, local and foreign
tax laws and estate and gift tax considerations.
INCENTIVE STOCK OPTIONS. A participant who is granted an ISO
recognizes no taxable income when the ISO is granted and generally recognizes
no taxable income upon exercise of the ISO, but will recognize alternative
minimum income upon such exercise (see below). A participant who exercises an
ISO recognizes taxable gain or loss when he or she sells these shares
purchased pursuant to the ISO. Any gain or loss recognized on the sale of
shares acquired upon exercise of an ISO is taxed as capital gain or loss if
the shares have been held for at least one year from the date the option was
exercised and for at least two years after the option was granted. In this
event, the Company receives no deduction with respect to the ISO shares. If
the participant disposes of the shares before the required holding periods
have elapsed (a "disqualifying disposition"), he or she is taxed as though he
or she exercised an NSO (see below), except that the compensation income on
exercise of the option is recognized in the year of the disqualifying
disposition, and the compensation income may not exceed the excess of the
amount realized on the sale of the stock over the exercise price for such
stock.
EFFECT OF ALTERNATIVE MINIMUM TAX. For purposes of determining the
alternative minimum taxable income ("AMTI") of an individual, ISOs exercised
during a taxable year will give rise to AMTI to the extent of the excess of
the fair market value of the shares acquired pursuant to such ISO over the
exercise price paid. Therefore, although generally an individual will have no
regular taxable income associated with the exercise of an ISO, such
individual may have AMTI and, depending upon his or her specific facts and
circumstances for such tax year, a resulting tax liability.
NON-STATUTORY STOCK OPTIONS. The tax treatment of NSOs differs
significantly from the tax treatment of ISOs. Although, no taxable income is
recognized when an NSO is granted, upon the exercise of an NSO, the
difference between the fair market value of the shares on the date of
exercise and the exercise price of the option is taxable as ordinary
compensation income to the recipient. In addition, subject to certain
limitations attributable to payments of excess compensation, the Company is
entitled to a compensation deduction for the amount of ordinary income
recognized by the option holder.
WITHHOLDING. The Company may withhold any taxes required by any law
or regulation of any governmental authority, whether federal, state or local,
in connection with any stock option or other award under the Employees' Plan,
including, but not limited to withholding of any portion of any payment or
withholding from other compensation payable to the participant, unless such
person reimburses the Company for such amount.
14
<PAGE>
IMPLEMENTATION. If the proposed amendment to the Employees' Plan is
adopted by the shareholders, it will become effective immediately and be
reflected in the amended Employees' Plan, which Plan will be filed in the
Company's minutes book.
The full text of the proposed amendment to the Equity Incentive Plan
and the current Plan are attached to this proxy statement as Appendix A and
should be read in its entirety.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE APPROVAL
OF THE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK
RESERVED FOR ISSUANCE UNDER THE EMPLOYEES' PLAN
INDEPENDENT AUDITORS
Representatives of KPMG LLP are expected to attend the Meeting. The
representatives will have an opportunity to make a statement and will be
available to respond to appropriate questions.
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders may submit proposals on matters appropriate for
shareholder action at the Company's annual shareholder meetings. Such
proposals must be received by the Company not later than May 26, 2000 to be
considered for inclusion in the proxy statement and proxy relating to the
2000 Annual Meeting of Shareholders. Proposals submitted after August 9, 2000
are considered untimely. The persons named in the Company's proxies will have
discretionary authority to vote all proxies with respect to any untimely
proposals. Any shareholder proposals should be addressed to: Corporate
Secretary, CIBER, Inc., 5251 DTC Parkway, Suite 1400, Englewood, CO 80111.
ANNUAL REPORT TO SHAREHOLDERS, MANAGEMENT'S DISCUSSION
AND ANALYSIS AND CONSOLIDATED FINANCIAL STATEMENTS
The 1999 Annual Report of the Company, as filed with the Commission,
is being mailed to the shareholders with this Proxy Statement. The 1999
Annual Report is not to be considered part of the soliciting material.
Management's Discussion and Analysis of Financial Condition and
Results of Operations and the Company's audited consolidated financial
statements and notes thereto, as contained in the Company's Annual Report on
Form 10-K for the fiscal year ended June 30, 1999, are included herein on
pages F-1 through F-25.
By order of the Board of Directors,
Bobby G. Stevenson
Chairman of the Board
Englewood, Colorado
September 24, 1999
15
<PAGE>
APPENDIX A
PROPOSED OCTOBER 28, 1999 AMENDMENT TO CIBER'S EQUITY INCENTIVE PLAN
Section 4.1 of the Company's Equity Incentive Plan, as amended and
restated as of May 4, 1998, shall be deleted in its entirety and replaced
with the following:
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
4.3, 10,500,000 Shares are authorized for issuance under the Plan in
accordance with the provisions of the Plan and subject to such restrictions
or other provisions as the Committee may from time to time deem necessary;
provided, however, that no Participant may be granted Awards in any one
calendar year with respect to more than 1,000,000 Shares. The Shares may be
divided among the various Plan components as the Committee shall determine.
Shares which may be issued upon the exercise of Options shall be applied to
reduce the maximum number of Shares remaining available for use under the
Plan. The Company shall at all times during the term of the Plan and while
any Options are outstanding retain as authorized and unissued Stock, or as
treasury Stock, at least the number of Shares from time to time required
under the provisions of the Plan, or otherwise assure itself of its ability
to perform its obligations hereunder.
THE FULL TEXT OF THE CURRENT EQUITY INCENTIVE PLAN
PRIOR TO APPROVAL OF THE AMENDMENT IS SET FORTH BELOW
CIBER, INC.
EQUITY INCENTIVE PLAN
(Amended and Restated as of May 4, 1998)
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. CIBER, Inc. hereby amends and restates the CIBER,
Inc. Equity Incentive Plan (the "Plan") for certain officers, employees and
consultants of the Company.
1.2 PURPOSES. The purposes of the Plan are to provide the officers,
employees and consultants of the Company selected for participation in the
Plan with added incentives to continue in the long-term service of the
Company and to create in such persons a more direct interest in the future
success of the operations of the Company by relating incentive compensation
to increases in stockholder value, so that the income of such persons is more
closely aligned with the income of the Company's stockholders. The Plan is
also designed to enhance the ability of the Company to attract, retain and
motivate officers, employees and consultants by providing an opportunity for
investment in the Company.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the meanings set
forth below:
(a) "AFFILIATED CORPORATION" means (i) any corporation or other
entity (including but not limited to a partnership) that directly, or through
one or more intermediaries controls, is controlled by, or is under common
control with, CIBER, Inc., or (ii) any entity in which the Company has a
significant equity interest, as determined by the Committee.
(b) "AWARD" means a grant made under this Plan in the form of
Stock, Options, Restricted Stock, Performance Shares, or Performance Units.
(c) "BOARD" means the Board of Directors of the Company.
(d) "COMMITTEE" means (i) the Board, or (ii) one or more
committees of the Board to whom the Board has delegated all or part of its
authority under this Plan. Any committee under clause (ii) hereof which makes
grants to "officers" of the Company (as that term is defined in Rule 16a-1(f)
promulgated under the Exchange Act) shall be composed of not less than the
minimum number of persons from time to time required by
A-1
<PAGE>
Rule 16b-3, each of whom, to the extent necessary to comply with Rule 16b-3
only, shall be a "non-employee director" within the meaning of Rule
16b-3(b)(3)(i).
(e) "COMPANY" means CIBER, Inc., a Delaware corporation,
together with its Affiliated Corporations except where the context otherwise
requires.
(f) "EFFECTIVE DATE" means January 31, 1994.
(g) "ELIGIBLE EMPLOYEES" means full-time key employees
(including, without limitation, officers and directors who are also
employees) of the Company or any Affiliated Corporation or any division
thereof, upon whose judgment, initiative and efforts the Company is, or will
be, important to the successful conduct of its business.
(h) "EXCHANGE ACT" shall mean the Securities Exchange Act of
1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any date, the value of the
Stock determined as follows:
(i) If the Stock is listed on any established stock
exchange or a national market system, its Fair Market Value shall be the
closing sales price for such Stock (or the closing bid, if no sales were
reported) as quoted on such exchange or system for the last market trading
day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Committee deems reliable;
(ii) If the Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value
of a Share shall be the mean between the high bid and low asked prices for
the Stock on the last market trading day prior to the day of determination,
as reported in The Wall Street Journal or such other source as the Committee
deems reliable;
(iii) In the absence of an established market for the
Stock, the Fair Market Value shall be determined in good faith by the
Committee.
(j) "INCENTIVE STOCK OPTION" means any Option designated as
such and granted in accordance with the requirements of Section 422 of the
Internal Revenue Code.
(k) "INTERNAL REVENUE CODE" means the Internal Revenue Code of
1986, as it may be amended from time to time, and the rules and regulations
promulgated thereunder.
(l) "NON-STATUTORY OPTION" means any Option other than an
Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock at a stated price
for a specified period of time.
(n) "OPTION PRICE" means the price at which shares of Stock
subject to an Option may be purchased, determined in accordance with Section
7.2(b).
(o) "PARTICIPANT" means an Eligible Employee or part-time
employee of, or consultant to, the Company designated by the Committee from
time to time during the term of the Plan to receive one or more Awards under
the Plan.
(p) "PERFORMANCE CYCLE" means the period of time as specified
by the Committee over which Performance Share or Performance Units are to be
earned.
(q) "PERFORMANCE SHARES" means an Award made pursuant to
Section 9 which entitles a Participant to receive Shares, their cash
equivalent or a combination thereof based on the achievement of performance
targets during a Performance Cycle.
A-2
<PAGE>
(r) "PERFORMANCE UNITS" means an Award made pursuant to Section
9 which entitles a Participant to receive cash, Stock or a combination
thereof based on the achievement of performance targets during a Performance
Cycle.
(s) "PLAN YEAR" means each 12-month period beginning July 1 and
ending the following June 30, except that for the first year of the Plan it
shall begin on the Effective Date and extend to June 30 of that year.
(t) "RESTRICTED STOCK" means Stock granted under Section 8 that
is subject to restrictions imposed pursuant to said Section.
(u) "RULE 16b-3" shall mean Rule 16b-3 as promulgated by the
Securities and Exchange Commission under the Exchange Act, or any successor
rule or regulation thereto as in effect from time to time.
(v) "SERVICE PROVIDER" means an employee of or consultant to
the Company.
(w) "SHARE" means a share of Stock.
(x) "STOCK" means the common stock, $.01 par value, of the
Company.
(y) GENDER AND NUMBER. Except when otherwise indicated by the
context, the masculine gender shall also include the feminine gender, and the
definition of any term herein in the singular shall also include the plural.
SECTION 3
PLAN ADMINISTRATION
3.1 AUTHORITY OF COMMITTEE. The Plan shall be administered by the
Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted to eligible Participants; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection with, Awards; (iv) determine the terms and
conditions of any Award; (v) determine whether, to what extent, and under
what circumstances Awards may be settled or exercised in cash, Shares, other
securities, other Awards or other property, or canceled, forfeited, or
suspended and the method or methods by which Awards may be settled,
exercised, canceled, forfeited, or suspended; (vi) determine whether, to what
extent, and under what circumstances cash, shares, other securities, other
Awards, other property, and other amounts payable with respect to an Award
shall be deferred either automatically or at the election of the holder
thereof or of the Committee; (vii) correct any defect, supply any omission,
reconcile any inconsistency and otherwise interpret and administer the Plan
and any instrument or agreement relating to the Plan or any Award hereunder;
(viii) establish, amend, suspend, or waive such rules and regulations and
appoint such agents as it shall deem appropriate for the proper
administration of the Plan; and (ix) make any other determination and take
any other action that the Committee deems necessary or desirable for the
administration of the Plan. To the extent necessary or appropriate, the
Committee may adopt sub-plans consistent with the Plan to conform to
applicable state or foreign securities or tax laws. A majority of the members
of the Committee may determine its actions and fix the time and place of its
meetings.
3.2 DETERMINATIONS UNDER THE PLAN. Unless otherwise expressly
provided in the Plan all designations, determinations, interpretations, and
other decisions under or with respect to the Plan or any Award shall be
within the sole discretion of the Committee, may be made at any time and
shall be final, conclusive, and binding upon all persons, including the
Company, any Affiliated Corporation, any Participant, any holder or
beneficiary of any Award, and any shareholder. No member of the Committee
shall be liable for any action, determination or interpretation made in good
faith, and all members of the Committee shall, in addition to their rights as
directors, be fully protected by the Company with respect to any such action,
determination or interpretation.
A-3
<PAGE>
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in Section
4.3, 8,000,000 Shares are authorized for issuance under the Plan in
accordance with the provisions of the Plan and subject to such restrictions
or other provisions as the Committee may from time to time deem necessary;
provided, however, that no Participant may be granted Awards in any one
calendar year with respect to more than 1,000,000 Shares. The Shares may be
divided among the various Plan components as the Committee shall determine.
Shares which may be issued upon the exercise of Options shall be applied to
reduce the maximum number of Shares remaining available for use under the
Plan. The Company shall at all times during the term of the Plan and while
any Options are outstanding retain as authorized and unissued Stock, or as
treasury Stock, at least the number of Shares from time to time required
under the provisions of the Plan, or otherwise assure itself of its ability
to perform its obligations hereunder.
4.2 UNUSED AND FORFEITED STOCK. Any Shares that are subject to an
Award under this Plan which are not used because the terms and conditions of
the Award are not met, including any Shares that are subject to an Option
which expires or is terminated for any reason, any Shares which are used for
full or partial payment of the purchase price of Shares with respect to which
an Option is exercised and any Shares retained by the Company pursuant to
Section 15.2 shall automatically become available for use under the Plan.
Notwithstanding the foregoing, any Shares used for full or partial payment of
the purchase price of the Shares with respect to which an Option is exercised
and any Shares retained by the Company pursuant to Section 15.2 that were
originally Incentive Stock Option Shares must still be considered as having
been granted for purposes of determining whether the Share limitation
provided for in Section 4.1 has been reached for purposes of Incentive Stock
Option grants.
4.3 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If the Company
shall at any time increase or decrease the number of its outstanding Shares
of Stock or change in any way the rights and privileges of such Shares by
means of the payment of a stock dividend or any other distribution upon such
Shares payable in Stock, or through a stock split, subdivision,
consolidation, combination, reclassification or recapitalization involving
the Stock, then in relation to the Stock that is affected by one or more of
the above events, the numbers, rights and privileges of (i) the shares of
Stock as to which Awards may be granted under the Plan, and (ii) the Shares
of Stock then included in each outstanding Option, Performance Share or
Performance Unit granted hereunder, shall be increased, decreased or changed
in like manner as if they had been issued and outstanding, fully paid and
nonassessable at the time of such occurrence.
4.4 DIVIDEND PAYABLE IN STOCK OF ANOTHER CORPORATION, ETC. If the
Company shall at any time pay or make any dividend or other distribution upon
the Stock payable in securities of another corporation or other property
(except money or Stock), a proportionate part of such securities or other
property shall be set aside and delivered to any Participant then holding an
Award for the particular type of Stock for which the dividend or other
distribution was made, upon exercise thereof in the case of Options, and the
vesting thereof in the case of other Awards. Prior to the time that any such
securities or other property are delivered to a Participant in accordance
with the foregoing, the Company shall be the owner of such securities or
other property and shall have the right to vote the securities, receive any
dividends payable on such securities, and in all other respects shall be
treated as the owner. If securities or other property which have been set
aside by the Company in accordance with this Section are not delivered to a
Participant because an Award is not exercised or otherwise vested, then such
securities or other property shall remain the property of the Company and
shall be dealt with by the Company as it shall determine in its sole
discretion.
4.5 OTHER CHANGES IN STOCK. In the event there shall be any change,
other than as specified in Sections 4.3 and 4.4, in the number or kind of
outstanding shares of Stock or of any stock or other securities into which
the Stock shall be changed or for which it shall have been exchanged, and if
the Committee shall in its discretion determine that such change equitably
requires an adjustment in the number or kind of Shares subject to outstanding
Awards or which have been reserved for issuance pursuant to the Plan but are
not then subject to an Award, then such adjustments shall be made by the
Committee and shall be effective for all purposes of the Plan and on each
outstanding Award that involves the particular type of stock for which a
change was effected.
4.6 RIGHTS TO SUBSCRIBE. If the Company shall at any time grant to
the holders of its Stock rights to subscribe pro rata for additional shares
thereof or for any other securities of the Company or of any other
A-4
<PAGE>
corporation, there shall be reserved with respect to the Shares then subject
to an Award held by any Participant of the particular class of Stock
involved, the Stock or other securities which the Participant would have been
entitled to subscribe for if immediately prior to such grant the Participant
had exercised his entire Option, or otherwise vested in his entire Award. If,
upon exercise of any such Option or the vesting of any other Award, the
Participant subscribes for the additional Stock or other securities, the
Participant shall pay to the Company the price that is payable by the
Participant for such Stock or other securities.
4.7 GENERAL ADJUSTMENT RULES. If any adjustment or substitution
provided for in this Section 4 shall result in the creation of a fractional
Share under any Award, the Company shall, in lieu of selling or otherwise
issuing such fractional Share, pay to the Participant a cash sum in an amount
equal to the product of such fraction multiplied by the Fair Market Value of
a Share on the date the fractional Share would otherwise have been issued. In
the case of any such substitution or adjustment affecting an Option, the
total Option Price for the shares of Stock then subject to an Option shall
remain unchanged but the Option Price per shall under each such Option shall
be equitably adjusted by the Committee to reflect the greater or lesser
number of shares of Stock or other securities into which the Stock subject to
the Option may have been changed.
4.8 DETERMINATION BY COMMITTEE, ETC. Adjustments under this Section
4 shall be made by the Committee, whose determinations with regard thereto
shall be final and binding upon all persons.
SECTION 5
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated with another
corporation (other than a merger or consolidation in which the Company is the
continuing corporation and which does not result in any reclassification or
change of outstanding Shares), or if all or substantially all of the assets
or more than 50% of the outstanding voting stock of the Company is acquired
by any other corporation, business entity or person (other than a sale or
conveyance in which the Company continues as a holding company of an entity
or entities that conduct the business or businesses formerly conducted by the
Company), or in case of a reorganization (other than a reorganization under
the United States Bankruptcy Code) or liquidation of the Company, and if the
provisions of Section 10 do not apply, the Committee, or the board of
directors of any corporation assuming the obligations of the Company, shall,
have the power and discretion to prescribe the terms and conditions for the
exercise, or modification, of any outstanding Awards granted hereunder. By
way of illustration, and not by way of limitation, the Committee may provide
for the complete or partial acceleration of the dates of exercise of the
Options, or may provide that such Options will be exchanged or converted into
options to acquire securities of the surviving or acquiring corporation, or
may provide for a payment or distribution in respect of outstanding Options
(or the portion thereof that is currently exercisable) in cancellation
thereof. The Committee may remove restrictions on Restricted Stock and may
modify the performance requirements for any other Awards. The Committee may
provide that Stock or other Awards granted hereunder must be exercised in
connection with the closing of such transaction, and that if not so exercised
such Awards will expire. Any such determinations by the Committee may be made
generally with respect to all Participants, or may be made on a case-by-case
basis with respect to particular Participants. The provisions of this Section
5 shall not apply to any transaction undertaken for the purpose of
reincorporating the Company under the laws of another jurisdiction, if such
transaction does not materially affect the beneficial ownership of the
Company's capital stock.
SECTION 6
PARTICIPATION
Participants in the Plan shall be those Eligible Employees,
part-time employees or consultants who, in the judgment of the Committee, are
performing, or during the term of their incentive arrangement will perform,
important services in the management, operation and development of the
Company, and significantly contribute, or are expected to significantly
contribute, to the achievement of long-term corporate economic objectives.
Participants may be granted from time to time one or more Awards; provided,
however, that the grant of each such Award shall be separately approved by
the Committee, and receipt of one such Award shall not result in automatic
receipt of any other Award, written notice shall be given to such person,
specifying the terms, conditions, rights and duties related thereto; and
further provided that Incentive Stock Options shall not be granted to (i)
consultants, (ii) part-time employees or (iii) Eligible Employees of any
partnership or other entity which is included within the definition of an
Affiliated Corporation but whose employees are not permitted to receive
Incentive Stock
A-5
<PAGE>
Options under the Internal Revenue Code. Each Participant shall enter into an
agreement with the Company, in such form as the Committee shall determine and
which is consistent with the provisions of the Plan, specifying such terms,
conditions, rights and duties. Awards shall be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date shall be
the date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such agreement
entered into hereunder, the provisions of the Plan shall govern.
SECTION 7
STOCK OPTIONS
7.1 GRANT OF OPTIONS. Coincident with or following designation for
participation in the Plan, a Participant may be granted one or more Options.
The Committee in its sole discretion shall designated whether an Option is to
be considered an Incentive Stock Option or a Non-Statutory Option. The
Committee may grant both an Incentive Stock Option and a Non-Statutory Option
to the same Participant at the same time or at different times. Incentive
Stock Options and Non-Statutory Options, whether granted at the same or
different times, shall be deemed to have been awarded in separate grants,
shall be clearly identified, and in no event shall the exercise of one Option
affect the right to exercise any other Option or affect the number of Shares
for which any other Option may be exercised.
7.2 OPTION AGREEMENTS. Each Option granted under the Plan shall be
evidenced by a written stock option agreement which shall be entered into by
the Company and the Participant to whom the Option is granted (the "Option
Holder"), and which shall contain the following terms and conditions, as well
as such other terms and conditions not inconsistent therewith, as the
Committee may consider appropriate in each case.
(a) NUMBER OF SHARES. Each stock option agreement shall state
that it covers a specified number of Shares, as determined by the Committee.
To the extent that the aggregate Fair Market Value of Shares with respect to
which Options designated as Incentive Stock Options are exercisable for the
first time by any Participant during any year (under all plans of the Company
and any Affiliated Corporation) exceeds $100,000, such Options shall be
treated as not being Incentive Stock Options. The foregoing shall be applied
by taking Options into account in the order in which they were granted. For
the purposes of the foregoing, the Fair Market Value of any Share shall be
determined as of the time the Option with respect to such Share is granted.
In the event the foregoing results in a portion of an Option designated as an
Incentive Stock Option exceeding the $100,000 limitation, only such excess
shall be treated as not being an Incentive Stock Option.
(b) PRICE. The price at which each Share covered by an Option
may be purchased shall be determined in each case by the Committee and set
forth in the stock option agreement, but in no event shall the Option Price
for each Share covered by an Incentive Stock Option be less than the Fair
Market Value of the Stock on the date the Option is granted; provided,
however, that the Option Price for each Share covered by a Non-Statutory
Option may be granted at any price less than Fair Market Value, in the sole
discretion of the Committee; and provided further that the Option Price for
each Share covered by an Incentive Stock Option granted to an Eligible
Employee who then owns stock possessing more than 10% of the total combined
voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company must be at least 110% of the Fair
Market Value of the Stock subject to the Incentive Stock Option on the date
the Option is granted.
(c) DURATION OF OPTIONS. Each stock option agreement shall
state the period of time, determined by the Committee, within which the
Option may be exercised by the Option Holder (the "Option Period"). The
Option Period must expire, in all cases, not more than ten years from the
date an Option is granted; provided, however, that the Option Period of an
Incentive Stock Option granted to an Eligible Employee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company
must expire not more than five years from the date such an Option is granted.
Each stock option agreement shall also state the periods of time, if any, as
determined by the Committee, when incremental portions of each Option shall
vest. If any Option is not exercised during its Option Period, it shall be
deemed to have been forfeited and or no further force or effect.
(d) TERMINATION OF SERVICE, DEATH, DISABILITY, ETC. Except as
otherwise determined by the Committee, each stock option agreement shall
provide as follows with respect to the exercise of the Option upon an Option
Holder ceasing to be a Service Provider or on the death or disability of the
Option Holder:
A-6
<PAGE>
(i) If the Option Holder ceases to be a Service
Provider within the Option Period for cause, as determined by the Company,
the Option shall thereafter be void for all purposes. As used in this Section
7.2(d), "cause" shall mean a gross violation, as determined by the Company,
of the Company's established policies and procedures. The effect of this
Section 7.2(d)(i) shall be limited to determining the consequences of a
termination, and nothing in this Section 7.2(d)(i) shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any Service Provider.
(ii) If the Option Holder ceases to be a Service
Provider with the Company in a manner determined by the Board, in its sole
discretion, to constitute retirement (which determination shall be
communicated to the Option Holder within 10 days of such termination), the
Option may be exercised by the Option Holder, or in the case of death by the
persons specified in clause (iii) of this Section 7.2(d), within three months
following his or her retirement if the Option is an Incentive Stock Option or
within twelve months following his or her retirement if the Option is a
Non-Statutory Stock Option (provided in each case that such exercise must
occur within the Option Period), but not thereafter. In any such case, the
Option may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date the Option Holder ceases to be a
Service Provider.
(iii) If the Option Holder dies (A) while he or she is a
Service Provider, (B) within the three-month period referred to in clause (v)
below, or (C) within the three or twelve-month period referred to in clause
(ii) above, the Option may be exercised by those entitled to do so under the
Option Holder's will or by the laws of descent and distribution within twelve
months following the Option Holder's death (provided that such exercise must
occur within the Option Period), but not thereafter. In any such case, the
Option may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date of the Option Holder's death or at
such time as the Option Holder ceased to be a Service Provider, whichever is
earlier.
(iv) If the Option Holder becomes disabled (within the
meaning of Section 22(e) of the Internal Revenue Code) while a Service
Provider, Incentive Stock Options held by the Option Holder may be exercised
by the Option Holder within twelve months following the date the Option
Holder ceases to be a Service Provider (provided that such exercise must
occur within the Option Period), but not thereafter. If the Option Holder
becomes disabled (within the meaning of Section 22(e) of the Internal Revenue
Code) while a Service Provider or within three-month period referred to in
clause (v) below or within the twelve month period following his or her
retirement as provided in clause (ii) above, Non-Statutory Options held by
the Option Holder may be exercised by the Option Holder within twelve months
following the date of the Option Holder's disability (provided that such
exercise must occur within the Option Period), but not thereafter. In any
such case, the Option may be exercised only as to the Shares as to which the
Option had become exercisable on or before the date the Option Holder ceased
to be a Service Provider.
(v) If the Option Holder ceases to be a Service Provider
(which for this purpose means that the Option Holder is no longer employed by
or consulting with the Company or an Affiliated Corporation) within the
Option Period for any reason other than cause, retirement as provided in
clause (ii) above, disability as provided in clause (iv) above or the Option
Holder's death, the Option may be exercised by the Option Holder within three
months following the date of such cessation (provided that such exercise must
occur within the Option Period), but not thereafter. In any such case, the
Option may be exercised only as to the Shares as to which the Option had
become exercisable on or before the date that the Option Holder ceases to be
a Service Provider.
(e) TRANSFERABILITY. Except as otherwise determined by the
Committee, Options shall not be transferable by the Option Holder except by
will or pursuant to the laws of descent and distribution or pursuant to a
"qualified domestic relations order" as defined by the Internal Revenue Code
or Title I of the Employee Retirement Income Security Act of 1974 ("ERISA");
each Option shall be exercisable during the Option Holder's lifetime only by
him or her, or in the event of disability or incapacity, by his or her
guardian or legal representative; and Shares issuable pursuant to any Option
shall be delivered only to or for the account of the Option Holder, or in the
event of disability or incapacity, by his or her guardian or legal
representative.
(f) EXERCISE, PAYMENTS, ETC.
(i) Each stock option agreement shall provide that the
method for exercising the Option granted therein shall be by delivery to the
Corporate Secretary of the Company of written notice specifying
A-7
<PAGE>
the number of Shares with respect to which such Option is exercised (which
must be in a minimum amount of 25 Shares) and payment of the Option Price.
Such notice shall be in a form satisfactory to the Committee and shall
specify the particular Option (or portion thereof) which is being exercised
and the number of Shares with respect to which the Option is being exercised.
The exercise of the Option shall be deemed effective upon receipt of such
notice by the Corporate Secretary and payment to the Company. The purchase of
such Stock shall take place at the principal offices of the Company upon
delivery of such notice, at which time the purchase price of the Stock shall
be paid in full by any of the methods or any combination of the methods set
forth in (ii) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder. If certificates representing Stock are used to pay all or part
of the Option Price, separate certificates for the same number of shares of
Stock shall be issued by the Company and delivered to the Option Holder
representing each certificate used to pay the Option Price, and an additional
certificate shall be issued by the Company and delivered to the Option Holder
representing the additional shares, in excess of the Option Price, to which
the Option Holder is entitled as a result of the exercise of the Option.
(ii) The exercise price shall be paid by any of the
following methods or any combination of the following methods:
(A) in cash;
(B) by cashier's check payable to the order of the
Company;
(C) by delivery to the Company of certificates
representing the number of Shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase price of the Stock purchased
pursuant to the Option, properly endorsed for transfer to the Company;
provided however, that Shares used for this purpose must have been held by
the Option Holder for such minimum period of time as may be established from
time to time by the Committee; and provided further that the Fair Market
Value of any Shares delivered in payment of the purchase price upon exercise
of the Option shall be the Fair Market Value as of the exercise date, which
shall be the date of delivery of the certificates for the Stock used as
payment of the Option Price; or
(D) by delivery to the Company of a properly
executed notice of exercise together with irrevocable instructions to a
broker to deliver to the Company promptly the amount of the proceeds of the
sale of all or a portion of the Stock or of a loan from the broker to the
Option Holder necessary to pay the exercise price.
(iii) In the discretion of the Committee, the Company may
guaranty a third-party loan obtained by a Participant to pay part or all of
the Option Price of the Shares provided that such loan or the Company's
guaranty is secured by the Shares.
(g) DATE OF GRANT. An option shall be considered as having been
granted on the date specified in the grant resolution of the Committee.
(h) WITHHOLDING.
(A) NON-STATUTORY OPTIONS. Each stock option agreement
covering Non-Statutory Options shall provide that, upon exercise of the
Option, the Option Holder shall make appropriate arrangements with the
Company to provide for the amount of additional withholding required by
applicable federal and state income tax laws, including payment of such taxes
through delivery of Stock or by withholding Stock to be issued under the
Option, as provided in Section 15.
(B) INCENTIVE OPTIONS. In the event that a Participant
makes a disposition (as defined in Section 424(c) of the Internal Revenue
Code) of any Stock acquired pursuant to the exercise of an Incentive Stock
Option prior to the later of (i) the expiration of two years from the date on
which the Incentive Stock Option was granted or (ii) the expiration of one
year from the date on which the Option was exercised, the Participant shall
send written notice to the Company at its principal office in Denver,
Colorado (Attention: Corporate Secretary) of the date of such disposition,
the number of shares disposed of, the amount of proceeds received from such
disposition, and any other information relating to such disposition as the
Company may reasonably request. The Participant
A-8
<PAGE>
shall, in the event of such a disposition, make appropriate arrangements with
the Company to provide for the amount of additional withholding, if any,
required by applicable federal and state income tax laws.
(i) ADJUSTMENT OF OPTIONS. Subject to the limitations contained
in Sections 7 and 14, the Committee may make any adjustment in the Option
Price, the number of shares subject to, or the terms of, an outstanding
Option and a subsequent granting of an Option by amendment or by substitution
of an outstanding Option. Such amendment, substitution, or re-grant may
result in terms and conditions (including Option Price, number of shares
covered, vesting schedule or exercise period) that differ from the terms and
conditions of the original Option. The Committee may not, however, adversely
affect the rights of any Participant to previously granted Options without
the consent of such Participant. If such action is affected by amendment, the
effective date of such amendment shall be the date of the original grant.
7.3 STOCKHOLDER PRIVILEGES. No Option Holder shall have any rights
as a stockholder with respect to any Shares covered by an Option until the
Option Holder becomes the holder of record of such Stock, and no adjustments
shall be made for dividends or other distributions or other rights as to
which there is a record date preceding the date such Option Holder becomes
the holder of record of such Stock, except as provided in Section 4.
SECTION 8
RESTRICTED STOCK AWARDS
8.1 AWARDS GRANTED BY COMMITTEE. Coincident with or following
designation for participation in the Plan, a Participant may be granted one
or more Restricted Stock Awards consisting of Shares. The number of Shares
granted as a Restricted Stock Award shall be determined by the Committee.
8.2 RESTRICTIONS. A Participant's right to retain a Restricted Stock
Award granted to him under Section 8.1 shall be subject to such restrictions,
including but not limited to his continuing to perform as a Service Provider
for a restriction period specified by the Committee, or the attainment of
specified performance goals and objectives, as may be established by the
Committee with respect to such Award. The Committee may in its sole
discretion require different periods of service or different performance
goals and objectives with respect to (i) different Participants, (ii)
different Restricted Stock Awards, or (iii) separate, designated portions of
the Shares constituting a Restricted Stock Award.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A Participant
shall have all voting, dividend, liquidation and other rights with respect to
Stock in accordance with its terms received by him as a Restricted Stock
Award under this Section 8 upon his becoming the holder of record of such
Stock; provided, however, that the Participant's right to sell, encumber or
otherwise transfer such Stock shall be subject to the limitations of Section
11.2 hereof.
8.4 ENFORCEMENT OF RESTRICTIONS. The Committee may in its sole
discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.2 and 8.3:
(a) placing a legend on the stock certificates referring to the
restrictions;
(b) requiring the Participant to keep the stock certificates,
duly endorsed, in the custody of the Company while the restrictions remain in
effect; or
(c) requiring that the stock certificates, duly endorsed, be
held in the custody of a third party while the restrictions remain in effect.
8.5 TERMINATION OF SERVICE, DEATH, DISABILITY, ETC. In the event of
the death or disability (within the meaning of Section 22(e) of the Internal
Revenue Code) of a Participant, or the retirement of a Participant as
provided in Section 7.2(d)(ii), all service period and other restrictions
applicable to Restricted Stock Awards then held by him shall lapse, and such
Awards shall become fully nonforfeitable. Subject to Sections 5 and 10, in
the event a Participant ceases to be a Service Provider for any other reason,
any Restricted Stock Awards as to which the service period or other
restrictions have not been satisfied shall be forfeited.
A-9
<PAGE>
SECTION 9
PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 AWARDS GRANTED BY COMMITTEE. Coincident with or following
designation for participation in the Plan, a Participant may be granted
Performance Shares or Performance Units.
9.2 AMOUNT OF AWARD. The Committee shall establish a maximum amount
of a Participant's Award, which amount shall be denominated in Shares in the
case of Performance Shares or in dollars in the case of Performance Units.
9.3 COMMUNICATION OF AWARD. Written notice of the maximum amount of
a Participant's Award and the Performance Cycle determined by the Committee
shall be given to a Participant as soon as practicable after approval of the
Award by the Committee.
9.4 AMOUNT OF AWARD PAYABLE. The Committee shall establish maximum
and minimum performance targets to be achieved during the applicable
Performance Cycle. Performance targets established by the Committee shall
relate to corporate, group, unit or individual performance and may be
established in terms of earnings, growth in earnings, ratios of earnings to
equity or assets, or such other measures or standards determined by the
Committee. Multiple performance targets may be used and the components of
multiple performance targets may be given the same or different weighting in
determining the amount of an Award earned, and may relate to absolute
performance or relative performance measured against other groups, units,
individuals or entities. Achievement of the maximum performance target shall
entitle the Participant to payment (subject to Section 9.6) at the full or
maximum amount specified with respect to the Award; provided, however, that
notwithstanding any other provisions of this Plan, in the case of an Award of
Performance Shares the Committee in its discretion may establish an upper
limit on the amount payable (whether in cash or Stock) as a result of the
achievement of the maximum performance target. The Committee may also
establish that a portion of a full or maximum amount of a Participant's Award
will be paid (subject to Section 9.6) for performance which exceeds the
minimum performance target but falls below the maximum performance target
applicable to such Award.
9.5 ADJUSTMENTS. At any time prior to payment of a Performance Share
or Performance Unit Award, the Committee may adjust previously established
performance targets or other terms and conditions to reflect events such as
changes in laws, regulations, or accounting practice, or mergers,
acquisitions or divestitures.
9.6 PAYMENTS OF AWARDS. Following the conclusion of each Performance
Cycle, the Committee shall determine the extent to which performance targets
have been attained, and the satisfaction of any other terms and conditions
with respect to an Award relating to such Performance Cycle. The Committee
shall determine what, if any, payment is due with respect to an Award and
whether such payment shall be made in cash, Stock or some combination.
Payment shall be made in a lump sum or installments, as determined by the
Committee, commencing as promptly as practicable following the end of the
applicable Performance Cycle, subject to such terms and conditions and in
such form as may be prescribed by the Committee.
9.7 TERMINATION OF EMPLOYMENT. If a Participant ceases to be a
Service Provider before the end of a Performance Cycle by reason of his
death, disability as provided in Section 7.2(d)(iv), or retirement as
provided in Section 7.2(d)(ii), the Performance Cycle for such Participant
for the purpose of determining the amount of the Award payable shall end at
the end of the calendar quarter immediately preceding the date on which such
Participant ceased to be a Service Provider. The amount of an Award payable
to a Participant to whom the preceding sentence is applicable shall be paid
at the end of the Performance Cycle and shall be that fraction of the Award
computed pursuant to the preceding sentence the numerator of which is the
number of calendar quarters during the Performance Cycle during all of which
said Participant was a Service Provider and the denominator of which is the
number of full calendar quarters in the Performance Cycle. Upon any other
termination of Participant's services as a Service Provider during a
Performance Cycle, participation in the Plan shall cease and all outstanding
Awards of Performance Shares or Performance Units to such Participant shall
be canceled.
A-10
<PAGE>
SECTION 10
CHANGE IN CONTROL
10.1 OPTIONS, RESTRICTED STOCK. In the event of a change in control
of the Company as defined in Section 10.3, then the Committee may, in its
sole discretion, without obtaining stockholder approval, to the extent
permitted in Section 14, take any or all of the following actions: (a)
accelerate the exercise dates of any outstanding Options or make all such
Options fully vested and exercisable; (b) grant a cash bonus award to any
Option Holder in an amount necessary to pay the Option Price of all or any
portion of the Options then held by such Option Holder; (c) pay cash to any
or all Option Holders in exchange for the cancellation of their outstanding
Options in an amount equal to the different between the Option Price of such
Options and the greater of the tender offer price for the underlying Stock or
the Fair Market Value of the Stock on the date of the cancellation of the
Options; (d) make any other adjustments or amendments to the outstanding
Options; and (e) eliminate all restrictions with respect to Restricted Stock
and deliver Shares free of restrictive legends to any Participant.
10.2 PERFORMANCE SHARES AND PERFORMANCE UNITS. Under the
circumstances described in Section 10.1, the Committee may, in its sole
discretion, and without obtaining stockholder approval, to the extent
permitted in Section 14, provide for payment of outstanding Performance
Shares and Performance Units at the maximum award level or any percentage
thereof.
10.3 DEFINITION. For purposes of the Plan, a "change in control"
shall be deemed to have occurred if: (a) any "person" or "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Exchange Act), other than a
trustee or other fiduciary holding securities under an employee benefit plan
of the Company or under a trust, the grantor of which is Bobby G. Stevenson,
or Bobby G. Stevenson, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the Exchange Act), directly or indirectly, of more than 33%
of the then outstanding voting stock of the Company; 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 the Company'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 the Company approve
a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company 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 the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
SECTION 11
RIGHTS OF EMPLOYEES; PARTICIPANTS
11.1 EMPLOYMENT. Nothing contained in the Plan or in any Award
granted under the Plan shall confer upon any Participant any right with
respect to the continuation of his or her services as a Service Provider, or
interfere in any way with the right of the Company, subject to the terms of
any separate employment or consulting agreement to the contrary, at any time
to terminate such services or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Award.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute a termination of Participant's services as a
Service Provider shall be determined by the Committee at the time.
11.2 NONTRANSFERABILITY. Except as provided in Section 11.3, no
right or interest of any Participant in an Award granted pursuant to the Plan
shall be assignable or transferable during the lifetime of the Participant
except pursuant to a "qualified domestic relations order" as defined by the
Internal Revenue Code or Title I of ERISA, either voluntarily or
involuntarily, or be subjected to any lien, directly or indirectly, by
operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge or bankruptcy. In the event or a Participant's death, a
Participant's rights and interests in Options shall, to the extent provided
in Section 7, be transferable by testamentary will or the laws of descent and
distribution, and payment of any amounts due under the Plan shall be made to,
and exercise of any Options may be made by, the Participant's legal
representatives, heirs or legatees. If, in the opinion of the Committee, a
person entitled to payments or to exercise rights with respect to the
A-11
<PAGE>
Plan is disabled from caring for his affairs because of mental condition,
physical condition or age, payment due such person may be made to, and such
rights shall be exercised by, such person's guardian, conservator or other
legal personal representative upon furnishing the Committee with evidence
satisfactory to the Committee of such status. Transfers shall not be deemed
to include transfers to the Company or "cashless exercise" procedures with
third parties who provide financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with applicable laws and the
authorization of the Committee.
11.3 PERMITTED TRANSFERS. Pursuant to conditions and procedures
established by the Committee from time to time, the Committee may permit
Awards to be transferred to, exercised by and paid to certain persons or
entities related to a Participant, including but not limited to members of
the Participant's immediate family, charitable institutions, or trusts or
other entities whose beneficiaries or beneficial owners are members of the
Participant's immediate family and/or charitable institutions. In the case of
initial Awards, at the request of the Participant, the Committee may permit
the naming of the related person or entity as the Award recipient. Any
permitted transfer shall be subject to the condition that the Committee
receive evidence satisfactory to it that the transfer is being made for
estate and/or tax planning purposes on a gratuitous or donative basis and
without consideration (other than nominal consideration). Notwithstanding the
foregoing, Incentive Stock Options shall only be transferable to the extent
permitted by Section 422 of the Internal Revenue Code and the treasury
regulations thereunder.
SECTION 12
GENERAL RESTRICTIONS
12.1 INVESTMENT REPRESENTATIONS. The Company may require any person
to whom an Option or other Award is granted, as a condition of exercising
such Option or receiving Stock under the Award, to give written assurances in
substance and form satisfactory to the Company and its counsel to the effect
that such person is acquiring the Stock subject to the Option or the Award
for his own account for investment and not with any present intention or
selling or otherwise distributing the same, and to such other effects as the
Company deems necessary or appropriate in order to comply with federal and
applicable state securities laws. Legends evidencing such restrictions may be
placed on the certificates evidencing the Stock.
12.2 COMPLIANCE WITH SECURITIES LAWS. Each Award shall be subject to
the requirement that, if at any time counsel to the Company shall determine
that the listing, registration or qualification of the Shares subject to such
Award upon any securities exchange or under any state or federal law, or the
consent or approval of any governmental or regulatory body, is necessary as a
condition of, or in connection with, the issuance or purchase of Shares
thereunder, such Award may not be accepted or exercised in whole or in part
unless such listing, registration, qualification, consent or approval shall
have been effected or obtained on conditions acceptable to the Committee.
Nothing herein shall be deemed to require the Company to apply for or to
obtain such listing, registration or qualification.
12.3 STOCK RESTRICTION AGREEMENT. The Committee may provide that
shares of Stock issuable upon the exercise of an Option shall, under certain
conditions, be subject to restrictions whereby the Company has a right of
first refusal with respect to such shares or a right or obligation to
repurchase all or a portion of such shares, which restrictions may survive a
Participant's cessation or termination as a Service Provider.
SECTION 13
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a
Participant as a result of the exercise of an Option or the grant or vesting
of any other Award shall not constitute "earnings" with respect to which any
other benefits of such Participant are determined, including without
limitation benefits under any pension, profit sharing, life insurance or
salary continuation plan.
SECTION 14
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time may amend
or modify, the Plan; provided, however, that no amendment or modification may
become effective without approval of the amendment or modification by the
stockholders if stockholder approval is required to enable the Plan to
satisfy any applicable
A-12
<PAGE>
statutory or regulatory requirements, or if the Company, on the advice of
counsel, determines that stockholder approval is otherwise necessary or
desirable.
No amendment, modification or termination of the Plan shall in any
manner adversely affect any Awards theretofore granted under the Plan,
without the consent of the Participant holding such Awards.
SECTION 15
WITHHOLDING
15.1 WITHHOLDING REQUIREMENT. The Company's obligations to deliver
Shares upon the exercise of an Option, or upon the vesting of any other
Award, shall be subject to the Participant's satisfaction of all applicable
federal, state and local income and other tax withholding requirements.
15.2 WITHHOLDING WITH STOCK. At the time the Committee grants an
Award, it may, in its sole discretion, grant the Participant an election to
pay all such amounts of tax withholding, or any part thereof, by electing to
transfer to the Company, or to have the Company withhold from Shares
otherwise issuable to the Participant, Shares having a value equal to the
amount required to be withheld or such lesser amount as may be elected by the
Participant. All elections shall be subject to the approval or disapproval of
the Committee. The value of Shares to be withheld shall be based on the Fair
Market Value of the Stock on the date that the amount of tax to be withheld
is to be determined (the "Tax Date"). Any such elections by Participants to
have Shares withheld for this purpose will be subject to the following
restrictions:
(a) All elections must be made prior to the Tax Date;
(b) All elections shall be irrevocable; and
(c) If the Participant is an officer or director of the Company
within the meaning of Section 16 of the Exchange Act ("Section 16"), the
Participant must satisfy the requirements of such Section 16 and any
applicable rules thereunder with respect to the use of Stock to satisfy such
tax withholding obligation.
SECTION 16
SECTION 162(m) PROVISIONS
16.1 LIMITATIONS. Notwithstanding any other provision of this Plan,
if the Committee determines at the time any Restricted Stock Award or
Performance Award is granted to a Participant that such Participant is, or is
likely to be at the time he or she recognizes income for federal income tax
purposes in connection with such Award, a Covered Employee (within the
meaning of Section 162(m)(3) of the Internal Revenue Code), then the
Committee may provide that this Section 16 is applicable to such Award.
16.2 PERFORMANCE GOALS. If an Award is subject to this Section 16,
then the lapsing of restrictions thereon and the distribution of cash, Shares
or other property pursuant thereto, as applicable, shall be subject to the
achievement of one or more objective performance goals established by the
Committee, which shall be based on the attainment of one or any combination
of the following: specified levels of earnings per share from continuing
operations, operating income, revenues, gross margin, return on operating
assets, return on equity, economic value added, stock price appreciation,
total stockholder return (measured in terms of stock price appreciation and
dividend growth), or cost control, of the Company or Affiliated Corporation
(or any division thereof) for or within which the Participant is primarily
employed. Such performance goals also may be based upon the attaining
specified levels of Company performance under one or more of the measures
described above relative to the performance of other corporations. Such
performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Internal Revenue Code and the regulations thereunder.
16.3 ADJUSTMENTS. Notwithstanding any provision of the Plan other
than Section 10, with respect to any Award that is subject to this Section
16, the Committee may not adjust upwards the amount payable pursuant to such
Award, nor may it waive the achievement of the applicable performance goals
except in the case of the death or disability of the Participant.
A-13
<PAGE>
16.4 OTHER RESTRICTIONS. The Committee shall have the power to
impose such other restrictions on Awards subject to this Section 16 as it may
deem necessary or appropriate to ensure that such Awards satisfy all
requirements for "performance-based compensation" within the meaning of
Section 162(m)(4)(B) of the Internal Revenue Code or any successor thereto.
SECTION 17
BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into arrangements with
one or more banks, brokers or other financial institutions to facilitate the
disposition of shares acquired upon exercise of Stock Options, including,
without limitation, arrangements for the simultaneous exercise of Stock
Options and sale of the Shares acquired upon such exercise.
SECTION 18
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the submission of
the Plan to stockholders of the Company for approval shall be construed as
creating any limitations on the power or authority of the Board to adopt such
other or additional incentive or other compensation arrangements of whatever
nature as the Board may deem necessary or desirable or preclude or limit the
continuation of any other plan, practice or arrangement for the payment of
compensation or fringe benefits to employees or consultants generally, or to
any class or group of employees or consultants, which the Company or any
Affiliated Corporation now has lawfully put into effect, including, without
limitation, any retirement, pension, savings and stock purchase plan,
insurance, death and disability benefits and executive short-term incentive
plans.
SECTION 19
REQUIREMENTS OF LAW
19.1 REQUIREMENTS OF LAW. The issuance of Stock and the payment of
cash pursuant to the Plan shall be subject to all applicable laws, rules and
regulations.
19.2 RULE 16B-3. Transactions under the Plan and within the scope of
Rule 16b-3 are intended to comply with all applicable conditions of Rule
16b-3. To the extent any provision of the Plan or any action by the Committee
under the Plan fails to so comply, such provision or action shall, without
further action by any person, be deemed to be automatically amended to the
extent necessary to effect compliance with Rule 16b-3; provided, however,
that if such provision or action cannot be amended to effect such compliance,
such provision or action shall be deemed null and void to the extent
permitted by law and deemed advisable by the Committee.
19.3 GOVERNING LAW. The Plan and all agreements hereunder shall be
construed in accordance with and governed by the laws of the State of
Delaware.
SECTION 20
DURATION OF THE PLAN
No Award shall be granted under the Plan after ten years from the
Effective Date; provided, however, that any Award theretofore granted may,
and the authority of the Board or the Committee to amend, alter, adjust,
suspend, discontinue, or terminate any such Award or to waive any conditions
or rights under any such Award shall, extend beyond such date.
Dated: May 4, 1998.
CIBER, Inc.
By: /s/ Mac J. Slingerlend
-------------------------------------
Mac J. Slingerlend
President and Chief Executive Officer
A-14
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO. WITH THE EXCEPTION OF HISTORICAL MATTERS AND
STATEMENTS OF CURRENT STATUS, CERTAIN MATTERS DISCUSSED BELOW ARE
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES
THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM TARGETS OR
PROJECTED RESULTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER
MATERIALLY, INCLUDE, AMONG OTHERS, YEAR 2000 EFFECTS, GROWTH THROUGH BUSINESS
COMBINATIONS AND INTERNAL EXPANSION, THE ABILITY TO ATTRACT AND RETAIN
QUALIFIED CONSULTANTS, DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE
ABSENCE OF LONG-TERM CONTRACTS, MANAGEMENT OF A LARGE AND RAPIDLY GROWING
BUSINESS, PROJECT RISKS, PRICING AND MARGIN PRESSURE, COMPETITION, POTENTIAL
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS, PRICE VOLATILITY, AND
INTERNATIONAL EXPANSION, WHICH ARE DISCUSSED HEREIN UNDER THE CAPTION
"FACTORS THAT MAY AFFECT FUTURE RESULTS". MANY OF THESE FACTORS ARE BEYOND
THE COMPANY'S ABILITY TO PREDICT OR CONTROL. IN ADDITION, AS A RESULT OF
THESE AND OTHER FACTORS, THE COMPANY'S PAST FINANCIAL PERFORMANCE SHOULD NOT
BE RELIED ON AS AN INDICATION OF FUTURE PERFORMANCE.
OVERVIEW
The Company's revenues have increased from $234.1 million in fiscal 1995 to
$719.7 million in fiscal 1999, a compound annual growth rate of 32%. CIBER is
a provider of information technology consulting services in the following
areas:
- Strategic IT & Management Consulting
- e.Business Solutions
- ERP/Enterprise Software Solutions
- Custom IT Solutions
- Enterprise Systems & Network Integration
- Enterprise Outsourcing
CIBER has grown significantly through mergers and acquisitions, as well as
through internal growth. For purposes of this report, the term "acquisition"
refers to business combinations accounted for as a purchase and the term
"merger" refers to business combinations accounted for as a pooling of
interests. The Company's acquisitions involve the capitalization of
intangible assets, which intangible assets are generally amortized over
periods of up to 20 years for financial reporting purposes. The Company's
consolidated financial statements include the results of operations of an
acquired business since the date of acquisition. Mergers result in a one-time
charge in the period in which the transaction is completed for costs
associated with the business combination. Unless the effects are immaterial,
the Company's consolidated financial statements are restated for all periods
prior to a merger to include the results of operations, financial position
and cash flows of the merged company. In addition, selling, general and
administrative expenses may vary as a percentage of revenues depending on the
fluctuations in the selling, general and administrative expenses of merged
companies, if any, during any given period. CIBER completed 10 business
combinations in each of the fiscal years ended June 30, 1999 and 1998, and 6
business combinations in the fiscal year ended June 30, 1997.
F-1
<PAGE>
The following table sets forth, for the years indicated, certain items from
the Company's consolidated statements of operations, expressed as a
percentage of revenues and percentage change in the dollar amount of such
items compared to the prior year:
<TABLE>
<CAPTION>
Dollar %
Percentage of Revenues Increase (Decrease)
Year Ended June 30, Year to Year
--------------------------------------- -----------------------------
1997 1998 1999 1997:1998 1998:1999
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 39.5% 24.8%
Gross margin 32.6% 34.9% 35.6% 48.9 27.6
Selling, general and administrative expenses 23.5 23.4 21.9 38.4 17.3
---------------------------------------
Operating income before amortization
and merger costs 9.1 11.5 13.7 76.1 48.3
Amortization of intangible assets .7 .7 1.1 27.5 91.1
Merger costs .3 .8 .2 272.6 (66.2)
---------------------------------------
Operating income 8.1 10.0 12.4 73.4 54.4
Interest and other income, net .2 .3 .4 48.6 72.0
---------------------------------------
Income before income taxes 8.3 10.3 12.8 72.7 54.8
Income tax expense 3.2 4.0 5.2 74.0 63.5
---------------------------------------
Net income 5.1% 6.3% 7.6% 71.9 49.4
---------------------------------------
---------------------------------------
Pro forma net income 4.9% 5.9% 7.6% 67.8 59.0
---------------------------------------
---------------------------------------
</TABLE>
FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
The Company's revenues for fiscal 1999 increased 24.8% to $719.7 million from
$576.5 million for fiscal 1998. This represents a 27.8% increase in
consulting revenues offset by a planned decrease in other revenues, primarily
sales of computer hardware products. Other revenues decreased to $59.3
million in fiscal 1999 from $59.8 million in fiscal 1998. The increase in
revenues is derived primarily from an increase in hours billed and, to a
lesser extent, an increase in average billing rates.
Of the 27.8% increase in consulting revenues for fiscal 1999 in comparison to
fiscal 1998, approximately 9% was due to revenues from acquired businesses or
immaterial poolings of interests and approximately 19% was due to organic
growth of existing operations. Organic growth for the year was driven by a
strong demand for ERP implementation services and was lessened, to some
extent, due to declining direct Year 2000 service revenues.
Gross margin percentage improved to 35.6% of revenues in fiscal 1999 from
34.9% in fiscal 1998. This improvement was due to improved gross margins on
both consulting services and other revenues. Gross margins on consulting
services have increased as a larger percentage of the Company's revenues are
derived from higher margin solutions oriented and project work.
Selling, general and administrative expenses were 21.9% of revenues for
fiscal 1999 compared to 23.4% of revenues for fiscal 1998. The decrease as a
percentage of revenues is primarily due to greater economies of scale,
including reduced administrative costs of certain merged companies. As the
Company's focus continues to shift to more solutions oriented and project
work, selling, general and administrative expenses will tend to increase as a
percentage of sales and partially offset the generally higher gross margins
on such work.
Amortization of intangible assets increased to $7.5 million in fiscal 1999
from $3.9 million in fiscal 1998. This increase was due to the additional
amortization of intangible assets resulting from recent mergers and
acquisitions. Fiscal 1999 acquisitions will increase amortization in future
years to approximately $12 million per year.
Merger costs, primarily transaction related broker and professional costs, of
$1.5 million were incurred in fiscal 1999 compared to $4.5 million in fiscal
1998.
Net interest and other income increased to $2.6 million in fiscal 1999 from
$1.5 million in fiscal 1998 due to increased average cash balances available
for investment and the elimination of borrowings of certain merged companies.
F-2
<PAGE>
After the pro forma adjustment, if any, to income tax expense, the Company's
pro forma effective tax rates for fiscal 1999 and 1998 were 40.8% and 42.3%,
respectively. The Company's effective tax rate is higher than its normal tax
rate due to nondeductible merger costs. Nondeductible amortization resulting
from fiscal 1999 acquisitions has also increased the Company's effective tax
rate. The pro forma adjustment to income tax expense reflects the exclusion
of the one-time income tax effects related to changes in the tax status of
certain merged companies and imputes income tax expense for S corporation
operations that were not subject to income taxes.
The Company's pro forma net income increased 59.0% to $54.5 million in fiscal
1999 from $34.3 million in fiscal 1998.
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
The Company's revenues for fiscal 1998 increased 39.5% to $576.5 million from
$413.4 million for fiscal 1997. This represents a 44.2% increase in
consulting revenues and an 8.8% increase in other revenues. Other revenues
increased to $59.8 million in fiscal 1998 from $54.9 million in fiscal 1997.
The increase in revenues is derived primarily from an increase in hours
billed and, to a lesser extent, an increase in average billing rates.
Of the 44.2% increase in consulting revenues for fiscal 1998 in comparison to
fiscal 1997, approximately 8% was due to revenues from acquired businesses or
immaterial poolings of interests and approximately 36% was due to organic
growth of existing operations. This growth was from increased demand for IT
services, including an increased demand for year 2000 related services and
increased demand for ERP software implementation services.
Gross margin percentage improved to 34.9% of revenues in fiscal 1998 from
32.6% of revenues in fiscal 1997. This improvement is due to improved gross
margins on both consulting services and other revenues.
Selling, general and administrative expenses were 23.4% of revenues for
fiscal 1998 compared to 23.5% of revenues for fiscal 1997.
Amortization of intangible assets increased to $3.9 million in fiscal 1998
from $3.1 million in fiscal 1997. This increase was due primarily to the
Company's acquisitions in fiscal 1998.
Merger costs, primarily transaction related broker and professional costs, of
$4.5 million were incurred in fiscal 1998 compared to $1.2 million in fiscal
1997.
Net interest income increased to $1.5 million in fiscal 1998 from $1.0
million in fiscal 1997 due to increased average cash balances available for
investments and the elimination of borrowings of certain merged companies.
After the pro forma adjustment to income tax expense, the Company's pro forma
effective tax rates for fiscal 1998 and 1997 were 42.3% and 40.6%,
respectively. This increase was primarily due to increased nondeductible
merger costs. The pro forma adjustment to income tax expense reflects the
exclusion of the one-time income tax effects related to changes in the tax
status of certain merged companies and imputes income tax expense for S
corporation operations that were not subject to income taxes.
The Company's pro forma net income increased 67.8% to $34.3 million in fiscal
1998 from $20.4 million in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999, the Company had $149.9 million of working capital, of which
$64.2 million was cash and cash equivalents, and had a current ratio of 3:1.
The Company has primarily used its operating cash flow and the net proceeds
from public offerings to finance working capital needs and acquisitions. The
Company believes that its cash and cash equivalents, its operating cash flow
and the availability of credit under its bank revolving line of credit will
be sufficient to finance working capital needs through at least fiscal 2000.
In June 1999, CIBER's Board of Directors authorized the repurchase of up to
10% of CIBER's outstanding stock. At June 30, 1999, CIBER had purchased
500,000 shares for $8.7 million under this program. In July and August 1999,
CIBER purchased an additional 1,480,000 treasury shares for $24.9 million and
may, depending on circumstances, purchase more. Furthermore, CIBER may use
cash to purchase businesses. As a result, CIBER may borrow to finance such
activities. Future borrowings may include bank, private or public debt.
F-3
<PAGE>
Net cash provided by operating activities was $17.8 million, $27.1 million
and $64.7 million in fiscal 1997, 1998 and 1999, respectively. Changes in
operating assets and liabilities have used significant amounts of cash,
primarily as a result of increases in accounts receivable.
The Company's accounts receivable increased 52.4% and 24.2% in fiscal 1998
and 1999, respectively, primarily as a result of the Company's increase in
revenues. The Company's accounts receivable totaled $151.0 million at June
30, 1999 compared to $121.5 million at June 30, 1998. Accounts receivable
days sales outstanding ("DSO") was 71 days at June 30, 1999, which management
believes is in line with industry standards.
Net cash used in investing activities in fiscal 1997, 1998 and 1999 was $27.4
million, $11.2 million and $40.5 million, respectively. The Company used cash
of $19.3 million, $351,000 and $26.5 million for acquisitions during fiscal
1997, 1998 and 1999, respectively. The Company also purchased property and
equipment of $7.2 million, $11.7 million and $14.0 million during fiscal
1997, 1998 and 1999, respectively.
Net cash provided by (used in) financing activities in fiscal 1997, 1998 and
1999 was $12.9 million, ($4.9 million), and $1.8 million respectively. The
Company obtained net cash proceeds from sales of common stock of $22.9
million, $5.8 million and $14.8 million in fiscal 1997, 1998 and 1999,
respectively. Various companies that have been acquired or have merged with
CIBER have had outstanding balances on lines of credit and notes payable.
Upon acquisition by or merger with CIBER, these borrowings were paid in full.
During fiscal 1999, CIBER purchased 706,000 shares of treasury stock for
$13.0 million. Of these treasury shares, 206,000 were reissued as additional
consideration related to the acquisition of CNSI and as sales of common stock
under CIBER's Employee Stock Purchase Plan.
The Company has a $35 million unsecured revolving line of credit with a bank.
There were no outstanding borrowings under this bank line at June 30, 1998
and 1999. Outstanding borrowings bear interest at the three month London
Interbank Offered Rate ("LIBOR") plus 2%. The credit agreement requires a
commitment fee of 0.225% per annum on any unused portion of the line of
credit up to $20 million. The credit agreement expires in December 1999. The
Company expects, although there can be no assurance, to be able to renew this
line of credit on similar terms.
YEAR 2000 COMPLIANCE
THE FOLLOWING STATEMENTS ARE "YEAR 2000 READINESS DISCLOSURES" IN CONFORMANCE
WITH THE YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT OF 1998.
The "Year 2000" issue is the result of computer programs using two digits
rather than four to define the applicable year. Computer software and
hardware and other devices with embedded technology that are date sensitive
may recognize a date using "00" as the year 1900 rather than the year 2000.
This could result in a system failure or miscalculations causing disruptions
of CIBER's operations.
CIBER has instituted various projects to address the Year 2000 issue. CIBER
believes its material internal information technology ("IT") systems,
including payroll, billing and accounting systems, are currently Year 2000
compliant. For significant third-party software applications, CIBER has
obtained confirmation that the software is Year 2000 compliant. CIBER has
completed testing and remediation, if necessary, of all internally developed
software.
CIBER is currently evaluating its non-IT systems, such as building security,
elevators, fire-safety systems, telephones, voice mail and other systems
containing embedded microprocessors as well as evaluating the Year 2000
readiness of its significant suppliers. CIBER relies on the services of the
landlords of its offices, telecommunications companies, banks, utilities,
commercial airlines, and insurance companies, among others. As of June 30,
1999, CIBER has received Year 2000 compliance status information from all of
its significant suppliers. Of these, 53% have indicated that they are
currently Year 2000 compliant. The remainder have indicated that they plan to
be Year 2000 compliant by December 31, 1999. If CIBER does not obtain
reasonable assurances from its significant third-party vendors and suppliers
that there will be no interruption of service as a result of the Year 2000
issue, CIBER intends to devise contingency plans. There can be no assurance
that any contingency plans developed by CIBER will prevent such service
interruption on the part of one or more of CIBER's vendors from having a
material adverse effect on CIBER.
F-4
<PAGE>
CIBER's principal business is providing IT services. Some of CIBER's services
are directly or indirectly related to the Year 2000 issue, including Year
2000 remediation services. CIBER provides services to clients that assist the
client in their Year 2000 projects. In addition, CIBER provides services to
clients directly related to client systems that may or may not be Year 2000
compliant. Due to the potential significance of the Year 2000 issue upon
client operations and upon any failure of critical client systems to which
CIBER has provided services, CIBER may be subject to claims regardless of
whether the failure is related to the services provided by CIBER. If
asserted, the resolution of such claims, including defense costs, could have
a material adverse effect on CIBER. CIBER generally attempts to include
provisions in client contracts that, among other things, disclaim implied
warranties, limit the duration of any express warranties, limit CIBER's
maximum liability and disclaim any warranties for projects managed by the
client. There can be no assurance that CIBER will be able to obtain these
contractual protections in future client contracts, or that such provisions
will protect CIBER from, or limit the amount of, any liability arising from
claims against CIBER.
As a reseller of certain IT products, CIBER only passes to its customers the
applicable vendors' warranties. CIBER makes no warranties regarding Year 2000
compliance of any of the products it resells. CIBER has developed and
licensed certain warehousing and traffic software products that have
subsequently been modified to be Year 2000 compliant. Year 2000 compliant
versions have been tested both internally and by a third party. CIBER is
offering the Year 2000 compliant software versions to its prior and existing
customers at no charge. CIBER plans to contact all its customers and make
available the Year 2000 compliant software by September 30, 1999.
As described above, CIBER has identified various potential issues associated
with the Year 2000 issue. CIBER is devoting internal resources and is working
with its suppliers to help ensure that CIBER's business is not substantially
interrupted as a result of the Year 2000. CIBER believes that the total
amounts spent by it to date and that it expects to spend in fiscal 2000
addressing the Year 2000 issue will be less than $250,000. CIBER currently
does not have a contingency plan in the event of a particular system not
being Year 2000 compliant. Such a plan will be developed if it becomes clear
that CIBER is not going to achieve its compliance objectives. Although CIBER
expects to identify and resolve all Year 2000 problems that could materially
adversely affect its business operations, management believes that it is not
possible to determine with certainty that all Year 2000 problems affecting
CIBER, its vendors, or its clients have been identified or corrected. If
CIBER is required to implement any contingency plan, it could have a material
adverse effect on CIBER's operations. In addition, the business interruption,
resulting from Year 2000 issues, of any of CIBER's significant clients could
have a material adverse effect on CIBER. This discussion of CIBER's Year 2000
efforts, management's expectations relating to Year 2000 compliance and the
possible affects on CIBER are forward-looking statements.
SEASONALITY
The Company experiences a moderate amount of seasonality. Typically,
operating income as a percentage of revenues is lowest in the last quarter of
each calendar year (the Company's second fiscal quarter) because more
holidays and vacations are taken at that time of year resulting in fewer
hours billed in that period.
RECENT ACCOUNTING PRONOUNCEMENTS
The Company believes that recent accounting pronouncements will not have a
material effect on its financial position or results of operations.
The Financial Accounting Standards Board (FASB) has proposed a new statement
that would, among other things, eliminate the pooling of interests method of
accounting for business combinations. The proposed statement would require
all business combinations to be recorded using the purchase method of
accounting and any resulting excess purchase price over the fair value of
acquired net assets ("goodwill") would be charged to earnings over a period
of not more than 20 years. The proposal would also allow the reporting of
earnings per share excluding amortization of goodwill. The proposed
accounting would be effective for business combinations after the effective
date. The actual pronouncement, when issued, will likely have changes from
the exposure draft. If issued, management believes this pronouncement would
increase the amount of goodwill recorded for subsequent business combinations
(as CIBER has historically completed a large percentage of business
combinations as poolings of interests) and also increase the amortization
charge against earnings. As a result, management believes its internal
operating metrics, excluding amortization of intangibles, should also be
considered when evaluating the Company's performance. Management also expects
investors to place increasing emphasis on "Cash EPS".
F-5
<PAGE>
FACTORS THAT MAY AFFECT FUTURE RESULTS
Included in this report and elsewhere from time to time in other written
reports and oral statements, including but not limited to, the Annual Report
to Shareholders, quarterly shareholder letters, news releases and investor
presentations, are forward-looking statements about the Company's business
strategies, market potential, future financial performance and other matters
which reflect management's current expectations. Without limiting the
foregoing, the words "believes", "anticipates", "plans", "expects" and
similar expressions are intended to identify forward-looking statements. The
Company disclaims any intent or obligation to update publicly such
forward-looking statements. Actual results may differ materially from those
projected in any such forward-looking statements due to a number of factors,
including, without limitation, those set forth below.
The Company operates in a dynamic and rapidly changing environment that
involves numerous risks and uncertainties. The following section lists some,
but not all, of the risks and uncertainties that may have a material adverse
effect on the Company's business, financial condition, results of operations
and the market price of its common stock.
YEAR 2000 EFFECTS - IT services industry growth in 1999 and 1998 was driven
to a great extent by Year 2000 dynamics. This growth was caused not only by
increased demand for direct Year 2000 services, such as code remediation, but
also indirect services, such as ERP systems implementation and replacement of
non-compliant legacy systems.
Towards the end of fiscal 1999, CIBER's growth began to slow as companies
completed Year 2000 readiness programs and became reluctant, in many cases,
to commence significant new initiatives until Year 2000 failure risks have
passed, generally during the first half of calendar 2000.
Management believes there will be significant increased future demand for IT
services driven by e.business and other factors that will follow the Year
2000 transition period, beginning sometime during the first half of calendar
2000. However, during this transition period, revenues and operating
performance may decline. Given the lack of precedent for an issue of this
nature and magnitude, CIBER's ability to forecast the impact on future
results is limited.
GROWTH THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION - As an integral
part of its business strategy, the Company intends to continue to expand by
acquiring information technology businesses. The Company continuously
evaluates potential business combinations and aggressively pursues attractive
transactions. From July 1, 1996 through June 30, 1999, the Company completed
26 business combinations. The success of this strategy depends not only upon
the Company's ability to identify and acquire businesses on a cost-effective
basis, but also upon its ability to integrate acquired operations into its
organization effectively, to retain and motivate key personnel and to retain
clients of acquired businesses. Business combinations involve numerous risks,
including the ability to manage geographically remote offices, the diversion
of management's attention from other business concerns and the risks of
entering markets in which the Company has limited or no direct experience. In
addition, acquisitions may involve the expenditure of significant funds and
the incurrence of significant charges associated with the amortization of
goodwill or other intangible assets or future write-downs of the recorded
values of assets acquired. There can be no assurance the Company will be able
to combine additional business, or that any business combination will result
in benefits to the Company, or that management will be able to manage
effectively the resulting business. Additionally, the Company experiences
competition for business combinations.
The Company may open new offices in attractive markets with its own
personnel. Many of the Company's branch offices were originally start-up
operations. Not all branch offices, whether start-up or acquired, have been
successful. The Company's growth rate has been due, in part, to the growth of
industry demand for information technology professional services. There can
be no assurance that this increased industry demand will continue in future
periods. There can be no assurance that the Company will be able to
successfully start up, identify, acquire, or integrate future successful
branch office operations.
ABILITY TO ATTRACT AND RETAIN QUALIFIED CONSULTANTS - The Company's future
success will depend in part on its ability to hire and retain adequately
trained personnel who can address the changing and increasingly sophisticated
needs of its clients. The Company's on-going personnel needs arise from: (i)
increased demand for the Company's services, (ii) turnover, which is
generally high in the industry and (iii) client requests for consultants
trained in the newest software and hardware technologies. Few of the
Company's employees are bound by non-compete agreements. Competition for
personnel in the information technology services industry is significant and
the Company has had,
F-6
<PAGE>
and expects to continue to have, difficulty in attracting and retaining an
optimal level of qualified consultants. In particular, competition is intense
for the limited number of qualified project managers and professionals with
specialized skills, such as a working knowledge of certain sophisticated
software. There can be no assurance that the Company will be successful in
attracting and retaining the personnel it requires to continue to grow.
DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE ABSENCE OF LONG-TERM
CONTRACTS - The Company's five largest clients accounted for 15% of the
Company's total revenues for the fiscal year ended June 30, 1999. No one
client accounted for more than 10% of the Company's total revenues in fiscal
1999. CIBER strives to develop long-term relationships with its clients. Most
client assignments are from three to twelve months, however, many of the
Company's client relationships have continued for many years. Although they
may be subject to penalty provisions, clients may generally cancel a contact
at any time. In addition, under many contracts, clients may reduce their use
of the Company's services under such contract without penalty. The
termination or significant reduction of its business relationship with any of
its significant clients would have a material adverse effect on the Company.
Additionally, the Company has a significant relationship with PeopleSoft as a
PeopleSoft implementation partner. In fiscal 1999, the Company derived
approximately 10% of its total revenues from clients who purchased
implementation services for their PeopleSoft software. In the event
PeopleSoft products become obsolete or non-competitive or if the Company
should lose its "implementation partner" status with PeopleSoft, the Company
could suffer a material adverse effect.
MANAGEMENT OF A LARGE AND RAPIDLY GROWING BUSINESS - The Company's rapid
growth could place a substantial strain on its operational, administrative
and financial resources. The Company's ability to manage the growth of its
staff and facilities effectively will require it to continue to improve its
operational, financial and other internal systems, and to train, motivate and
manage its consultants. If the Company's management is unable to manage
growth effectively or its consultants are unable to achieve anticipated
performance levels, or if the integration of new businesses results in a
material diversion of management's attention from the day-to-day operations
of the business, the Company's results of operations would be materially
adversely affected.
PROJECT RISKS - The Company has provided and intends to continue to provide
project services to its clients. Projects are distinguishable from the
Company's professional services staff supplementation contracts by the level
of responsibility assumed by the Company and the potentially longer and more
costly sales cycle of a project. These factors may cause fluctuations in
quarterly results. In a typical project, the Company assumes major
responsibilities for the management of the project and/or the design of
deliverables that results in a client-specific outcome. With professional
services staff supplementation contracts, the Company's clients generally
maintain responsibility for the overall tasks. The failure of a project or
the failure of the Company to provide project services in a satisfactory
manner could have a material adverse effect on the Company. Further, the
Company may undertake projects on a fixed-price basis and also may guarantee
performance based upon defined operating specifications. Cost overruns,
unsatisfactory performance or unanticipated difficulties in completing
projects could have a material adverse effect on the Company's results of
operations.
PRICING AND MARGIN PRESSURE - Many of the Company's larger clients purchase
information technology services primarily from a limited number of
pre-approved vendors. In order to remain on its clients' vendor lists and to
develop new client relationships, the Company must satisfy client
requirements at competitive rates. Although the Company continually attempts
to lower its costs, there are other companies that may offer the same or
similar services at equal or lower costs. Furthermore, if competition
intensifies between information technology service providers, there may be
increased demand for qualified consultants resulting in upward market
pressure on consultant compensation. There can be no assurance that the
Company will be able to compete effectively on pricing or other requirements
and, as a result, the Company could lose clients or be unable to maintain
historic gross margin levels or to operate profitably. With respect to the
Company's implementation services for software packages, the manufacturers of
such software may have training or other requirements that inhibit the
Company from competing effectively with other packaged software
implementation providers. In addition, as the Company expands its service
offerings to include a greater number of fixed-price projects, the Company
may experience a decrease in margins as a result of unanticipated cost
overruns resulting from the inability to meet various project requirements.
COMPETITION - The Company operates in a highly competitive and rapidly
changing industry and competes with a variety of companies. Most of these
competing companies, many of which are significantly larger and have greater
financial, technical and marketing resources, provide the same services as
those offered by, and some offer a wider variety of services than, the
Company. Many large accounting and management consulting firms offer services
that overlap with a significant portion of the Company's services, and the
Company competes with the internal
F-7
<PAGE>
information technology staffs of its clients and potential clients. Also,
computer hardware and software vendors are becoming increasingly involved in
systems integration projects. There can be no assurance that the Company will
be able to continue to compete successfully with its existing or future
competitors or that competition will not have a material adverse effect on
the Company's results of operations.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS - The Company's
quarterly operating results may fluctuate significantly in the future as a
result of a variety of factors, many of which are outside the Company's
control. Factors that may affect the Company's quarterly revenues or
operating results generally include: costs relating to the expansion of the
Company's business, the extent and timing of business acquisitions, the
incurrence of merger costs, the timing of assignments from customers, the
seasonal nature of the Company's business due to variations in holidays and
vacation schedules, the introduction of new services by the Company or its
competitors, price competition or price changes, general economic conditions
and economic conditions specific to the information technology, consulting,
or information technology staffing industries. Quarterly sales and operating
results can be difficult to forecast even in the short term. Due to all of
the foregoing factors, it is possible that the Company's revenues or
operating results in one or more future quarters will fail to meet or exceed
the expectations of security analysts or investors. In such event, the
trading price of the Company's common stock would likely be materially
adversely affected.
PRICE VOLATILITY - The market price of the Company's common stock could be
subject to significant fluctuations in response to variations in quarterly
operating results, the Company's prospects, changes in earnings estimates by
securities analysts and by economic, financial and other factors and market
conditions that can affect the capital markets generally, the industry
segment of which the Company is a part, the NYSE, including the level of, and
fluctuations in, the trading prices of stocks generally and sales of
substantial amounts of the Company's common stock in the market, or the
perception that such sales could occur, and by other events that are
difficult to predict and are beyond the Company's control. In addition, the
securities markets have experienced significant price and volume fluctuations
from time to time in recent years that have often been unrelated or
disproportionate to the operating performance of particular companies. These
broad fluctuations may adversely affect the market price of the Company's
common stock.
INTERNATIONAL EXPANSION - In future periods, CIBER may significantly expand
its international operations, which currently includes offices in Toronto and
Vancouver, Canada. Such international operations will be subject to political
and economic uncertainties, fluctuations in foreign currency exchange rates
and new tax and legal requirements. Other risks inherent in managing
international operations include geographically distant locations, customers
and employees speaking different languages and different cultural approaches
to the conduct of business.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company has no activities in derivative financial or commodity
instruments. The Company's exposure to market risks, (i.e, interest rate
risk, foreign currency exchange rate risk, equity price risk) through other
financial instruments, including, among others, cash equivalents, accounts
receivable, lines of credit, is not material.
F-8
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CIBER, Inc.:
We have audited the accompanying consolidated balance sheets of CIBER, Inc.
and subsidiaries as of June 30, 1998 and 1999, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of the
years in the three-year period ended June 30, 1999. 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, 1998 and 1999, and the results of their
operations and their cash flows for each of the years in the three-year
period ended June 30, 1999, in conformity with generally accepted accounting
principles.
KPMG LLP
Denver, Colorado
August 12, 1999
F-9
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
IN THOUSANDS, EXCEPT PER SHARE DATA 1997(1) 1998(1) 1999
----------- ----------- ------------
<S> <C> <C> <C>
Consulting services $358,437 $516,692 $660,384
Other revenues 54,943 59,796 59,277
----------- ----------- ------------
Total revenues 413,380 576,488 719,661
----------- ----------- ------------
Cost of consulting services 237,254 332,356 423,131
Cost of other revenues 41,152 43,150 40,176
Selling, general and administrative expenses 97,301 134,640 157,959
Amortization of intangible assets 3,087 3,936 7,520
Merger costs 1,218 4,538 1,535
----------- ----------- ------------
Operating income 33,368 57,868 89,340
Interest and other income 1,467 1,767 2,640
Interest expense (434) (232) -
----------- ----------- ------------
Income before income taxes 34,401 59,403 91,980
Income tax expense 13,175 22,926 37,485
----------- ----------- ------------
Net income $ 21,226 $ 36,477 $ 54,495
----------- ----------- ------------
----------- ----------- ------------
Pro forma information (unaudited) (Note 1(j)):
Historical net income $ 21,226 $ 36,477 $ 54,495
Pro forma adjustment to income tax expense (803) (2,207) -
----------- ----------- ------------
Pro forma net income $ 20,423 $ 34,270 $ 54,495
----------- ----------- ------------
----------- ----------- ------------
Pro forma income per share - basic $ .43 $ .67 $ .98
Pro forma income per share - diluted $ .40 $ .64 $ .95
Weighted average shares - basic 47,894 51,355 55,362
Weighted average shares - diluted 50,613 53,843 57,141
</TABLE>
(1) Restated for poolings of interests through June 30, 1999 - See Note 2.
See accompanying notes to consolidated financial statements.
F-10
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1999
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------
IN THOUSANDS, EXCEPT SHARE DATA 1998(1) 1999
------------- --------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 38,238 $ 64,215
Accounts receivable 121,538 150,976
Inventories 618 395
Prepaid expenses and other assets 4,792 2,943
Deferred income taxes 1,458 2,915
------------- --------------
Total current assets 166,644 221,444
------------- --------------
Property and equipment, at cost 32,561 47,997
Less accumulated depreciation and amortization (15,219) (22,866)
------------- --------------
Net property and equipment 17,342 25,131
------------- --------------
Intangible assets, net 33,597 157,012
Deferred income taxes 2,068 1,694
Other assets 2,134 3,351
------------- --------------
Total assets $221,785 $408,632
------------- --------------
------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables $ 10,989 $ 13,502
Accrued compensation and payroll taxes 25,720 36,845
Deferred revenues 4,097 3,850
Other accrued expenses and liabilities 11,859 10,118
Income taxes payable 3,276 7,181
------------- --------------
Total current liabilities 55,941 71,496
------------- --------------
Commitments and contingencies
Shareholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued - -
Common stock, $0.01 par value, 80,000,000 shares authorized,
52,248,000 and 58,933,000 shares issued and outstanding 522 589
Additional paid-in capital 93,889 222,652
Retained earnings 71,433 122,607
Treasury stock, 500,000 shares at cost - (8,712)
------------- --------------
Total shareholders' equity 165,844 337,136
------------- --------------
Total liabilities and shareholders' equity $221,785 $408,632
------------- --------------
------------- --------------
</TABLE>
(1) Restated for poolings of interests through June 30, 1999 - See Note 2.
See accompanying notes to consolidated financial statements.
F-11
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL TOTAL
------------ PAID-IN RETAINED TREASURY SHAREHOLDERS'
IN THOUSANDS SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1996 (1) 46,707 $467 $ 39,122 $ 34,131 $ - $ 73,720
Public offering, net of offering costs of $1,390 1,220 12 16,915 - - 16,927
Employee stock purchases and options exercised 1,432 14 3,316 - - 3,330
Acquisition consideration 186 2 2,567 - - 2,569
Sale of common stock by merged companies - - 2,651 - - 2,651
Tax benefit from exercise of stock options - - 6,366 - - 6,366
Termination of S corporation tax status of merged company - - 2,041 (2,041) - -
Compensation expense related to stock options 2 - 62 - - 62
Net income - - - 21,226 - 21,226
Distributions by merged companies - - - (8,536) - (8,536)
Adjustment to conform year end of merged companies - - - (701) - (701)
-----------------------------------------------------------------------
BALANCES AT JUNE 30, 1997 (1) 49,547 495 73,040 44,079 - 117,614
Note payable paid with stock 51 1 1,105 - - 1,106
Employee stock purchases and options exercised 1,407 14 5,752 - - 5,766
Acquisition consideration 96 1 1,150 - - 1,151
Immaterial poolings of interests 1,145 11 347 1,834 - 2,192
Tax benefit from exercise of stock options - - 9,149 - - 9,149
Termination of S corporation tax status of merged company - - 3,287 (3,287) - -
Compensation expense related to stock and stock options 2 - 59 - - 59
Net income - - - 36,477 - 36,477
Distributions by merged companies - - - (7,670) - (7,670)
-----------------------------------------------------------------------
BALANCES AT JUNE 30, 1998 (1) 52,248 522 93,889 71,433 - 165,844
Employee stock purchases and options exercised 1,435 14 14,738 (3,225) 3,225 14,752
Acquisition consideration 4,286 43 106,492 (96) 1,049 107,488
Immaterial pooling of interests 961 10 806 - - 816
Tax benefit from exercise of stock options - - 5,499 - - 5,499
Compensation expense related to stock and stock options 3 - 395 - - 395
Stock options exchanged for accrued compensation - - 833 - - 833
Net income - - - 54,495 - 54,495
Purchases of treasury stock - - - - (12,986) (12,986)
-----------------------------------------------------------------------
BALANCES AT JUNE 30, 1999 58,933 $589 $222,652 $122,607 $ (8,712) $337,136
-----------------------------------------------------------------------
-----------------------------------------------------------------------
</TABLE>
(1) Restated for poolings of interests through June 30, 1999 - See Note 2.
See accompanying notes to consolidated financial statements.
F-12
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997, 1998 AND 1999
<TABLE>
<CAPTION>
IN THOUSANDS 1997(1) 1998(1) 1999
------------ ---------- -----------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $21,226 $36,477 $54,495
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,297 9,468 15,110
Deferred income taxes (859) (4,672) (2,049)
Other 32 48 395
Changes in operating assets and liabilities, net of the effect of
acquisitions:
Accounts receivable (14,830) (35,442) (17,789)
Inventories 1,927 299 223
Other current and long-term assets (2,373) (3,806) 1,510
Trade payables (1,322) (2,072) 1,782
Accrued compensation and payroll taxes 3,516 6,610 9,212
Deferred revenues 156 2,034 (247)
Other accrued expenses and liabilities 194 3,402 (4,211)
Income taxes payable 3,866 14,783 6,252
------------ ---------- -----------
Net cash provided by operating activities 17,830 27,129 64,683
------------ ---------- -----------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (19,290) (351) (26,500)
Purchases of property and equipment (7,230) (11,665) (13,972)
Purchases of investments (2,039) (905) -
Sales of investments 1,111 1,695 -
------------ ---------- -----------
Net cash used in investing activities (27,448) (11,226) (40,472)
------------ ---------- -----------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 22,908 5,766 14,752
Purchases of treasury stock - - (12,986)
Net payments on bank lines of credit (1,568) (1,985) -
Borrowings on notes payable 3,545 247 -
Payments on notes payable (3,451) (2,650) -
Distributions by merged companies (8,536) (6,300) -
------------ ---------- -----------
Net cash provided by (used in) financing activities 12,898 (4,922) 1,766
------------ ---------- -----------
Net increase in cash and cash equivalents 3,280 10,981 25,977
Cash and cash equivalents, beginning of year 24,398 27,257 38,238
Adjustment to conform fiscal year of merged companies (421) - -
------------ ---------- -----------
Cash and cash equivalents, end of year $27,257 $38,238 $64,215
------------ ---------- -----------
------------ ---------- -----------
</TABLE>
(1) Restated for poolings of interests through June 30, 1999 - See Note 2.
See accompanying notes to consolidated financial statements.
F-13
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1998 AND 1999
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
CIBER, Inc. ("CIBER" or the "Company") is a provider of information
technology ("IT") consulting services. At August 31, 1999, CIBER had
approximately 6,500 employees located in 45 major cities in 25 states plus
Canada, and offered IT solutions in the following areas:
- Strategic IT & Management Consulting
- e.Business Solutions
- ERP/Enterprise Software Solutions
- Custom IT Solutions
- Enterprise Systems & Network Integration
- Enterprise Outsourcing
(b) PRINCIPLES OF CONSOLIDATION AND INTERIM FINANCIAL INFORMATION
The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries. All material intercompany balances and
transactions have been eliminated.
(c) CASH EQUIVALENTS
All highly liquid investments purchased with a maturity of three months or
less are considered to be cash equivalents. Cash equivalents consist of money
market funds of $10,199,000 and $19,601,000 at June 30, 1998 and 1999,
respectively, and investment grade commercial paper of $21,179,000 and
$33,213,000 at June 30, 1998 and 1999, respectively.
(d) INVENTORIES
Inventories consist of computer networking equipment and supplies and are
stated at the lower of cost or market using the first-in, first-out method.
(e) PROPERTY AND EQUIPMENT
Property and equipment, which consists primarily of computer equipment and
furniture, is stated at cost. Depreciation is computed using straight-line
and accelerated methods over the estimated useful lives, ranging primarily
from five to seven years. Depreciation expense was $3,210,000, $5,532,000 and
$7,590,000 for the years ended June 30, 1997, 1998 and 1999, respectively.
(f) COSTS OF DEVELOPING COMPUTER SOFTWARE FOR INTERNAL USE
Direct costs of time and material incurred for the development of software
for internal use are capitalized as property and equipment. These costs are
depreciated using the straight-line method over the estimated useful life of
the software, ranging from three to seven years.
(g) INTANGIBLE ASSETS
Intangible assets consist of goodwill, client lists and noncompete
agreements. Goodwill is amortized over 12 to 20 years. Client lists are
amortized over the estimated useful lives ranging from two to eight years.
Noncompete agreements are amortized over the terms of the contracts that
range from one to six years. Amortization is recorded using the straight-line
method.
F-14
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Intangible assets are reviewed for impairment when events indicate the
carrying amount of intangible assets may not be recoverable. 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.
(h) REVENUE RECOGNITION
CIBER provides consulting services under time-and-material and fixed-price
contracts. CIBER recognizes revenue under time-and-material contracts as
hours and costs are incurred. For fixed-price contracts, revenue is
recognized on the basis of the estimated percentage of completion based on
costs incurred relative to total estimated costs. Losses, if any, on
fixed-price contracts are recognized when the loss is determined.
Other revenues include sales of computer hardware products, software license
and maintenance fees, and commissions on computer product sales. Revenues
related to the sale of computer products are recognized when the products are
shipped. Software license fee revenues are recognized over the period of the
software implementation and revenues from maintenance agreements are
recognized ratably over the maintenance period.
(i) 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
bases 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.
Certain companies which merged with CIBER in business combinations accounted
for as poolings of interests had elected S corporation status for U.S.
federal income tax purposes, and therefore, were generally not subject to
income taxes. Accordingly, no income tax expense is included in the
historical consolidated financial statements for the operations of these
companies prior to their merger with CIBER. The related net deferred tax
asset or liability of these companies at the date of their respective mergers
with CIBER is recorded as income tax benefit or expense.
(j) PRO FORMA NET INCOME
Pro forma net income has been presented because certain companies, which have
merged with CIBER in business combinations accounted for as poolings of
interests, were S corporations and generally not subject to income taxes.
Accordingly, no provision for income taxes has been included in the
historical consolidated financial statements for the operations of these
companies prior to their merger with CIBER. The pro forma adjustment to
income taxes has been computed as if the merged companies had been taxable
entities subject to income taxes for all periods prior to their merger with
CIBER at the marginal rates applicable in such periods. In addition, the pro
forma adjustments to income tax expense for the years ended June 30, 1997 and
1998 eliminate the income tax expense (benefit) of $1,717,000 and ($135,000),
respectively, representing the one-time income tax expense (benefit)
resulting from the termination of the S corporation status of these
companies. There was no pro forma adjustment to income tax expense for the
year ended June 30, 1999.
(k) PRO FORMA INCOME PER SHARE
Basic EPS is computed by dividing income available to common shareholders by
the weighted average number of common shares outstanding for the period.
Diluted EPS includes the effects of the potential dilution of the Company's
stock options, determined using the treasury stock method. The computation of
weighted average shares includes the shares and options issued in connection
with business combinations accounted for as poolings of interests as if they
had been outstanding for all periods prior to the merger. The number of
antidilutive stock options omitted from the computation of weighted average
shares was 1,182,000 for the year ended June 30, 1999. There were no
antidilutive stock options for the years ended June 30, 1998 and 1997.
(l) STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123 ("SFAS
123"), the Company accounts for
F-15
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
stock-based compensation in accordance with the provisions of Accounting
Principles Board Opinion 25, and related interpretations ("APB 25"). The
Company measures stock-based 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. The pro forma disclosures of net
income and income per share, as if the fair-value based method defined in
SFAS 123 had been applied, are provided in Note 10.
(m) ESTIMATES
The preparation of these financial statements 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.
(n) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates 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.
(o) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year presentation.
(2) POOLINGS OF INTERESTS
In fiscal 1999, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
EJR COMPUTER ASSOCIATES, INC. ("EJR") - On August 11, 1998, CIBER issued
1,155,516 shares of its common stock and assumed substantially all of EJR's
liabilities in exchange for all of the assets of EJR. EJR, located in
Hoboken, New Jersey, provided data processing consulting and project
management services similar to CIBER. CIBER'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 EJR. For
restatement purposes, EJR's year end was conformed to CIBER's June 30 fiscal
year end.
Selected financial data of CIBER and of EJR, prior to its merger with CIBER,
and on a combined basis, were (in thousands, except per share data):
<TABLE>
<CAPTION>
CIBER EJR COMBINED
------------ -------------- -------------
<S> <C> <C> <C>
YEAR ENDED JUNE 30, 1998
Revenues $ 550,421 $ 26,067 $ 576,488
Net income (loss) 36,510 (33) 36,477
Pro forma net income (loss) 34,303 (33) 34,270
Pro forma income per share - diluted $ .65 $ .64
YEAR ENDED JUNE 30, 1997
Revenues $ 390,817 $ 22,563 $ 413,380
Net income 20,696 530 21,226
Pro forma net income 19,893 530 20,423
Pro forma income per share - diluted $ .40 $ .40
</TABLE>
THE CUSHING GROUP, INC. ("CUSHING") - On August 31, 1998, CIBER issued
961,135 shares of its common stock and assumed substantially all of Cushing's
liabilities in exchange for all of the assets of Cushing. Cushing,
headquartered in Nashua, New Hampshire, provided distributed object
technology consulting services. The effects of this merger on CIBER's
revenues, pro forma net income and pro forma income per share would not have
been material. As a result, CIBER's historical financial statements have not
been restated for this business combination and the equity of Cushing at the
merger date was combined with CIBER's.
F-16
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In fiscal 1998, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
THE SUMMIT GROUP, INC. ("SUMMIT") - On May 4, 1998, CIBER issued 4,262,860
shares of its common stock in connection with the merger of Summit with CIBER.
STEP CONSULTING, INC. ("STEP") - On April 30, 1998, CIBER issued 131,242
shares of its common stock in connection with the merger of Step with CIBER.
COMPUTER RESOURCE ASSOCIATES, INC. ("CRA") - On March 2, 1998, CIBER issued
530,910 shares of its common stock in connection with the merger of CRA with
CIBER.
ADVANCED SYSTEMS ENGINEERING, INC. ("ASE") - On March 2, 1998, CIBER issued
382,602 shares of its common stock in connection with the merger of ASE with
CIBER.
TECHWARE CONSULTING, INC. ("TECHWARE") - On November 26, 1997, CIBER issued
747,836 shares of its common stock in connection with the merger of Techware
with CIBER.
FINANCIAL DYNAMICS, INC. ("FDI") - On November 24, 1997, CIBER issued
1,128,054 shares of its common stock and granted options for 97,220 shares of
its common stock (at an aggregate exercise price of $217,000) in connection
with the merger of FDI with CIBER.
THE CONSTELL GROUP, INC. ("CONSTELL") - On October 24, 1997, CIBER issued
500,000 shares of its common stock in connection with the merger of Constell
with CIBER.
BAILEY & QUINN, INC. ("BQI") - On October 22, 1997, CIBER issued
approximately 148,000 shares of its common stock in connection with the
merger of BQI with CIBER.
SOFTWAREXPRESS, INC. D/B/A RELIANT INTEGRATION SERVICES, INC. ("RELIANT") -
On August 21, 1997, CIBER issued 1,183,276 shares of its common stock in
connection with the merger of Reliant with CIBER.
KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, CIBER issued
861,700 shares of its common stock in connection with the merger of KCM with
CIBER.
In fiscal 1997, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
TECHNICAL SUPPORT GROUP, INC. ("TSG") - On November 27, 1996, CIBER issued
740,752 shares of its common stock in connection with the merger of TSG with
CIBER.
TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG") - On November 26, 1996, CIBER
issued 484,358 shares of its common stock and granted options for 326,014
shares of the Company's common stock (at an aggregate exercise price of
$547,000) in connection with the merger of TMG with CIBER.
SPECTRUM TECHNOLOGY GROUP, INC. ("SPECTRUM") - On September 3, 1996, CIBER
issued 1,706,232 shares of its common stock in connection with the merger of
Spectrum with CIBER.
(3) ACQUISITIONS
CIBER made certain acquisitions for cash or cash and stock, as 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.
ACQUISITIONS FROM JULY 1, 1998 THROUGH JUNE 30, 1999
DIGITAL SOFTWARE CORPORATION ("DSC") - On April 30, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of DSC for
$6.9 million in cash. CIBER has recorded goodwill of $7.0 million related to
this
F-17
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
acquisition, which will be amortized over 15 years. DSC, located in Aurora,
Colorado, provided software engineering services similar to CIBER.
COMPAID CONSULTING SERVICES, INC. ("COMPAID") - On March 2, 1999, CIBER
acquired all of the outstanding capital stock of Compaid for approximately
$9.7 million. The purchase price is subject to adjustment based on
finalization of the Compaid balance sheet at the acquisition date. CIBER has
recorded goodwill of approximately $7.5 million related to this acquisition,
which will be amortized over 15 years. Compaid, headquartered in Atlanta,
Georgia, provided services similar to CIBER.
BUSINESS IMPACT SYSTEMS, INC. ("BIS") - On February 26, 1999, CIBER issued
2,401,028 shares of its common stock and granted options for 3,634 shares of
its common stock (at an aggregate purchase price of $40,000) in exchange for
substantially all of the outstanding assets and liabilities of BIS. The
aggregate purchase price was $62.2 million, including acquisition costs.
CIBER has recorded goodwill of $55.6 million related to this acquisition,
which will be amortized over 20 years. BIS, headquartered in Herndon,
Virginia, provided enterprise integration services and will operate as
CIBER's Enterprise Integration Practice.
PARADYME HR TECHNOLOGIES CORPORATION ("PARADYME HRT") - On February 5, 1999,
CIBER acquired certain assets, liabilities and all of the business operations
of Paradyme HRT for $5.0 million. Additionally, the terms of the purchase
provide for additional consideration of up to $3.0 million based on certain
performance criteria during the 12-month periods ending January 31, 2000 and
2001. CIBER has recorded goodwill of $4.4 million related to this
acquisition, which will be amortized over 15 years. Any additional
consideration paid will be accounted for as additional goodwill. Paradyme
HRT, located in Columbia, South Carolina, provided ERP Outsourcing services
and HR/Payroll business services and has become CIBER's Enterprise
Outsourcing Practice.
INTEGRATION SOFTWARE CONSULTANTS, INC. ("ISC") - On February 2, 1999, CIBER
issued 1,280,289 shares of its common stock in exchange for all of the
outstanding common stock of ISC. The aggregate purchase price was $34.0
million, including acquisition costs. CIBER has recorded goodwill of $31.9
million related to this acquisition, which will be amortized over 20 years.
ISC, headquartered in Philadelphia, Pennsylvania, provided SAP software
implementation services.
YORK & ASSOCIATES, INC. ("YORK") - On January 29, 1999, CIBER issued 548,857
shares of its common stock and granted options for 30,643 shares of its
common stock (at an aggregate exercise price of $159,000) in exchange for
substantially all of the outstanding assets and liabilities of York. The
aggregate purchase price was $14.5 million, including acquisition costs.
CIBER has recorded goodwill of $12.2 million related to this acquisition,
which will be amortized over 20 years. York, headquartered in St. Paul,
Minnesota, provided IT consulting and software implementation services
similar to CIBER.
PARAGON SOLUTIONS, INC. ("PARAGON") - On January 8, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of Paragon for
$4.4 million. Additionally, the terms of the purchase provide for additional
consideration of up to $3.3 million based on certain performance criteria
during the 12-month periods ending December 31, 1999 and 2000. CIBER has
recorded goodwill of $4.3 million related to this acquisition, which will be
amortized over 15 years. Any additional consideration paid will be accounted
for as additional goodwill. Paragon, located in Pittsburgh, Pennsylvania,
provided Oracle software implementation services.
THE DORADUS CORPORATION ("DORADUS") - On November 15, 1998, CIBER acquired
all of the outstanding capital stock of Doradus for $4.0 million. Additional
consideration of $100,000 was paid in April 1999 and up to an additional
$300,000 may be payable in one year. Any additional consideration is recorded
as goodwill when paid. CIBER has recorded goodwill of $4.0 million related to
this acquisition, which will be amortized over 15 years. Doradus, located in
Minneapolis, Minnesota, provided IT consulting services similar to CIBER.
The following unaudited pro forma financial information presents the combined
results of operations of CIBER, DSC, Compaid, BIS, Paradyme HRT, ISC, York,
Paragon and Doradus as if the acquisitions had occurred as of the beginning
of fiscal years 1998 and 1999, after giving effect to certain adjustments,
including amortization of goodwill and other intangible assets, decreased
interest revenue as a result of the cash paid for the acquisitions, and the
related income tax effects. The pro forma financial information does not
necessarily reflect the results of operations that would have occurred had
CIBER and the eight acquired companies constituted a single entity during
such periods.
F-18
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
IN THOUSANDS 1998 1999
--------- ---------
<S> <C> <C>
Revenues $ 632,976 $ 767,481
Net income 34,668 52,858
Pro forma net income 32,461 52,858
Pro forma income per share - basic $ .58 $ .89
Pro forma income per share - diluted $ .56 $ .86
</TABLE>
For income tax purposes, the acquisitions of Compaid, BIS, ISC, York and
Doradus were non-taxable transactions.
ACQUISITIONS FROM JULY 1, 1996 THROUGH JUNE 30, 1998
DAVIS, THOMAS & ASSOCIATES, INC. ("DTA") - On March 14, 1997, CIBER acquired
the business operations and certain assets of DTA for $13.5 million,
consisting of $13.2 million in cash and the assumption of $339,000 of
liabilities. CIBER recorded goodwill of $13.1 million related to this
acquisition.
CIBER NETWORK SERVICES, INC. ("CNSI") - On December 2, 1996, CIBER acquired
CNSI, which was majority owned by certain officers of the Company, for
consideration of $3.7 million, consisting of 137,262 shares of CIBER's common
stock and $1.2 million in cash. In addition, CIBER assumed net liabilities of
$772,000, resulting in a total initial purchase price of $4.5 million. The
terms of the purchase also provided for future contingent consideration based
on certain performance objectives of CNSI. During fiscal year 1998, CIBER
paid additional consideration of $1.2 million, consisting of 48,692 shares of
CIBER common stock and $124,000 in cash. During fiscal year 1999, CIBER paid
additional consideration of $1.3 million, consisting of 66,703 shares of
CIBER common stock and $168,000 in cash as a final settlement to the purchase
agreement. The additional consideration was accounted for as additional
goodwill. The Company has recorded total goodwill of $6.8 million related to
this acquisition. For income tax purposes, this acquisition was a non-taxable
transaction.
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.
The aggregate purchase price was $5.0 million, of which $4.8 million has been
allocated to goodwill and $229,000 has been allocated to other net assets.
In the current fiscal year, CIBER paid final additional cash consideration of
$688,000 to the former owners of Oasys, Inc. related to the March 1996
acquisition. This additional consideration was recorded as goodwill.
(4) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1998 1999
---------- ---------
<S> <C> <C>
Billed accounts receivable $ 95,472 $ 129,547
Unbilled accounts receivable 28,576 24,773
---------- ---------
124,048 154,320
Less allowance for doubtful accounts (2,510) (3,344)
---------- ---------
$ 121,538 $ 150,976
---------- ---------
---------- ---------
</TABLE>
(5) PROPERTY AND EQUIPMENT
Property and equipment consist of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Computer equipment and software $ 20,855 $ 29,741
Furniture and fixtures 8,034 11,187
Leaseholds and other 3,672 7,069
--------- ---------
32,561 47,997
Less accumulated depreciation (15,219) (22,866)
--------- ---------
$ 17,342 $ 25,131
--------- ---------
--------- ---------
</TABLE>
F-19
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(6) INTANGIBLE ASSETS
Intangible assets consist of the following at June 30 (in thousands):
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Goodwill $ 32,715 $ 160,218
Client lists 6,801 6,801
Noncompete agreements 3,834 7,266
--------- ---------
43,350 174,285
Less accumulated amortization (9,753) (17,273)
--------- ---------
$ 33,597 $ 157,012
--------- ---------
--------- ---------
</TABLE>
(7) REVOLVING LINES OF CREDIT AND NOTES PAYABLE
CIBER has a $35 million unsecured revolving line of credit with a bank. There
were no outstanding borrowings under this bank line of credit at June 30,
1998 and 1999. Outstanding borrowings bear interest at the three month London
Interbank Offered Rate ("LIBOR") plus 2%. The credit agreement requires a
commitment fee of 0.225% per annum on any unused portion of the line of
credit up to $20 million. The credit agreement expires in December 1999. The
terms and conditions of the credit agreement include several covenants,
including those whereby CIBER agrees to the maintenance of a certain net
worth and debt service coverage ratios, among other things. 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.
Several companies which have merged with CIBER since July 1, 1997 had
outstanding balances under revolving lines of credit and notes payable. These
lines of credit and notes payable were secured by certain assets of the
merged companies. Upon merger with CIBER, these revolving lines of credit and
notes payable were paid in full and canceled. In connection with a business
combination during fiscal 1998, CIBER issued 50,938 shares of its common
stock having a value of $1,106,000 in satisfaction of a note payable,
including accrued interest.
(8) LEASES
The Company has noncancelable operating leases for office space. Rental
expense for operating leases totaled $5,974,000, $8,636,000 and $10,730,000
for the years ended June 30, 1997, 1998 and 1999, respectively.
Future minimum lease payments as of June 30, 1999 are (in thousands):
<TABLE>
<CAPTION>
Year ending June 30:
<S> <C>
2000 $ 10,969
2001 9,590
2002 8,225
2003 6,149
2004 4,055
Thereafter 3,162
---------
Total minimum lease payments $ 42,150
---------
---------
</TABLE>
F-20
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(9) INCOME TAXES
Income tax expense (benefit) for the years ended June 30 consists of the
following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Current:
Federal $ 11,236 $ 23,190 $ 34,005
State and local 2,324 4,005 5,297
Foreign 474 403 232
-------- -------- --------
14,034 27,598 39,534
-------- -------- --------
Deferred:
Federal (721) (3,988) (1,773)
State and local (138) (684) (276)
-------- -------- --------
(859) (4,672) (2,049)
-------- -------- --------
Income tax expense $ 13,175 $ 22,926 $ 37,485
-------- -------- --------
-------- -------- --------
</TABLE>
Income tax expense differs from the amounts computed by applying the
statutory U.S. federal income tax to income before income taxes as a result
of the following (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
-------- -------- --------
<S> <C> <C> <C>
Income tax expense at the federal statutory rate of 35% $ 12,040 $ 20,791 $ 32,193
Increase (decrease) resulting from:
State and local income taxes, net of federal income tax benefit 1,275 2,152 3,263
Nondeductible merger costs 383 1,540 537
Nondeductible amortization - - 1,008
Termination of S corporation status of merged companies, including
state income taxes, net of federal income tax benefit 1,717 (135) -
S corporation income of merged companies (2,312) (1,568) -
Other 72 146 484
-------- -------- --------
Income tax expense $ 13,175 $ 22,926 $ 37,485
-------- -------- --------
-------- -------- --------
Effective tax rate 38.3% 38.6% 40.8%
-------- -------- --------
-------- -------- --------
</TABLE>
TAX BENEFIT OF STOCK OPTIONS EXERCISED - For the years ended June 30, 1997,
1998 and 1999, CIBER recognized $6,366,000, $9,149,000 and $5,499,000,
respectively, as a direct increase to additional paid-in capital for the
income tax benefit resulting from the exercise of stock options by employees.
The components of the net deferred tax asset or liability at June 30 are as
follows (in thousands):
<TABLE>
<CAPTION>
1998 1999
--------- ---------
<S> <C> <C>
Deferred tax assets:
Intangible assets, due to differences in amortization periods $ 2,068 $ 3,272
Accounts payable 206 228
Accrued expenses, not currently tax deductible 2,101 3,008
Deferred revenue 1,240 1,032
Other - 428
--------- ---------
5,615 7,968
Deferred tax liabilities:
Capitalized software costs - (1,559)
Accounts receivable (2,089) (1,800)
--------- ---------
Net deferred tax asset $ 3,526 $ 4,609
--------- ---------
--------- ---------
Balance sheet classification of deferred tax asset:
Deferred tax asset - current $ 1,458 $ 2,915
Deferred tax asset - long term 2,068 1,694
--------- ---------
Deferred tax asset $ 3,526 $ 4,609
--------- ---------
--------- ---------
</TABLE>
F-21
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Deferred taxes related to accounts payable and accounts receivable are
primarily related to certain merged companies utilizing the cash basis of
accounting for income tax purposes prior to their merger with CIBER. Based on
its evaluation of current and anticipated future taxable income, the Company
believes sufficient taxable income will be generated to realize the deferred
tax assets.
(10) STOCK PURCHASE AND STOCK OPTION PLANS
The Company has five stock-based compensation plans, which are described
below.
EMPLOYEE STOCK PURCHASE PLAN - The Company has 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. Up to 2,000,000 shares of common stock may be issued under the
Employee Stock Purchase Plan. During the years ended June 30, 1997, 1998 and
1999 employees purchased 179,440, 197,565 and 486,405 shares of common stock,
respectively.
1989 STOCK OPTION 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
twenty years after the date of grant through 2013.
EMPLOYEES' STOCK OPTION PLAN - The Company has a stock option plan for
employees and up to 8,000,000 shares of the Company's common stock are
authorized for issuance under this plan. The plan administrators may grant to
officers, employees and consultants, restricted stock, stock options,
performance bonuses or any combination thereof. The number and nature of
awards granted 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.
DIRECTORS' STOCK OPTION PLAN - Up to 200,000 shares of the Company's common
stock are authorized for issuance to non-employee, non-affiliate directors
under this plan. Such 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 expire 10 years from the date of grant.
DIRECTORS' STOCK COMPENSATION PLAN - Up to 50,000 shares of the Company's
common stock are authorized for issuance to non-employee directors under this
plan. Each non-employee director is issued shares having a fair market value
of approximately $2,500 for attendance at each meeting of the Company's Board
of Directors. During the years ended June 30, 1997, 1998 and 1999, the
Company issued 1,664, 1,233 and 1,980 shares, respectively, of common stock
under this plan.
At June 30, 1999, there were 8,200,000 shares of common stock reserved for
future issuance under the Company's stock-based compensation plans.
On September 1, 1998, the Board of Directors authorized a repricing program
for employees who were originally granted options under the Employees' Stock
Option Plan from March 1, 1998 to August 31, 1998 at exercise prices ranging
from $28.88 to $38.00 that repriced all of these outstanding stock options to
an exercise price of $27.06 per share. Options to purchase 537,050 shares of
common stock were repriced. The repriced options follow the vesting schedule
of the original options granted.
On October 9, 1998, the Board of Directors authorized another repricing
program for employees who were originally granted options under the
Employees' Stock Option Plan on October 1, 1998 at an exercise price of
$20.13 that repriced all of these outstanding stock options to an exercise
price of $16.00 per share. Options to purchase 71,200 shares of common stock
were repriced. The repriced options follow the vesting schedule of the
original options granted.
On October 9, 1998, the Board of Directors authorized a program which allowed
certain directors, who were originally granted options under the Directors'
Stock Option Plan from October 1, 1997 to September 30, 1998 at exercise
prices ranging from $21.53 to $40.25, to cancel these stock options and
replace them with options under the Employees' Stock Option Plan at an
exercise price of $16.00 per share. Options to purchase 48,000 shares of
common stock were replaced.
F-22
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company applies APB 25 in accounting for its stock-based compensation
plans. The compensation cost that has been expensed for these plans for the
years ended June 30, 1997, 1998 and 1999 was $62,000, $59,000 and $395,000,
respectively. Had the Company determined compensation cost for its
stock-based compensation plans based on the fair value at the grant date, as
calculated in accordance with SFAS 123, the Company's net income, pro forma
net income, and pro forma income per share for the years ended June 30 would
have been reduced to the pro forma amounts indicated below (in thousands,
except per share data):
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C> <C>
Net income As reported $21,226 $36,477 $54,495
Pro forma 19,021 31,516 51,353
Pro forma net income As reported 20,423 34,270 54,495
Pro forma 18,218 29,309 51,353
Pro forma income per share - basic As reported .43 .67 .98
Pro forma .38 .57 .93
Pro forma income per share - diluted As reported .40 .64 .95
Pro forma .36 .54 .90
</TABLE>
The effect of applying SFAS 123 in this disclosure may not be indicative of
the effect on reported net income for future years. SFAS 123 does not apply
to options granted prior to July 1, 1995.
The fair value of options at the date of grant was estimated using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
1997 1998 1999
------- ------- -------
<S> <C> <C> <C>
Expected life 5 years 5 years 5 years
Risk free interest rate 6.3% 6.0% 4.8%
Expected volatility 50% 50% 80%
Dividend yield 0% 0% 0%
</TABLE>
A summary of the status of the Company's stock option plans as of June 30 and
changes during the years ending on those dates is presented below (shares in
thousands):
<TABLE>
<CAPTION>
1997 1998 1999
--------------------- --------------------- ---------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
-------- -------- -------- -------- --------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,503 $1.67 4,103 $ 4.17 5,187 $ 12.34
Granted 1,052 12.24 2,541 21.04 2,760 22.57
Exercised (1,252) 1.26 (1,213) 2.11 (960) 4.73
Canceled (200) 8.44 (244) 16.61 (1,590) 24.34
-------- -------- ---------
Outstanding at end of year 4,103 $4.17 5,187 $12.34 5,397 $15.38
-------- -------- ---------
-------- -------- ---------
Options exercisable at year end 2,313 1,850 1,875
-------- -------- ---------
-------- -------- ---------
</TABLE>
The weighted average fair values of options granted during fiscal 1997, 1998
and 1999 were $6.43, $11.45 and $16.24, respectively.
F-23
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A summary of the range of exercise prices and the weighted-average
contractual life of outstanding stock options at June 30, 1999 is as follows
(shares in thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
----------------------------------------------- -------------------------------
WEIGHTED
NUMBER WEIGHTED AVERAGE NUMBER WEIGHTED
RANGE OF OUTSTANDING AVERAGE REMAINING EXERCISABLE AVERAGE
EXERCISE PRICES JUNE 30, 1999 EXERCISE PRICE LIFE (YEARS) JUNE 30, 1999 EXERCISE PRICE
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ 0.01 - $ 4.44 1,199 $ 0.82 9.6 1,113 $ 0.72
5.19 - 15.88 547 10.67 7.1 311 10.46
16.00 - 19.25 2,070 16.75 8.5 280 17.08
19.38 - 29.44 1,581 26.26 9.1 171 26.28
- -------------------------------------------------------------------------------------------------------
$ 0.01 - $29.44 5,397 $ 15.38 8.8 1,875 $ 7.10
- -------------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------------
</TABLE>
(11) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CNSI on December 2, 1996 (see Note 3), CNSI was
85% beneficially owned by certain officers of the Company. These officers and
their families received $1,159,000 in cash and 108,996 shares of CIBER common
stock as initial consideration for their ownership interests in CNSI. CIBER
also repaid approximately $898,000 to the Company's Chairman and members of
his family for outstanding obligations owed to them by CNSI at the time of
the acquisition. During fiscal 1998, additional consideration of $1.2 million
was paid to the selling shareholders, of which certain officers of the
Company and members of their families received 40,832 shares of CIBER common
stock and cash of $118,000. During fiscal 1999, additional consideration of
$1.3 million was paid, of which certain officers of the Company and members
of their families received 52,225 shares of CIBER common stock and cash of
$168,000 as final settlement to the purchase agreement.
Certain officers of the Company also guaranteed an inventory financing line
of credit to CNSI which had an outstanding balance of approximately $1.1
million at December 2, 1996. These personal guarantees were released upon the
acquisition of CNSI. CNSI had a bank line of credit, with an outstanding
balance of $1.9 million at December 2, 1996, that was guaranteed by the
Company's Chairman. Upon the acquisition of CNSI, the Company repaid and
canceled this bank line of credit and the personal guarantee of the Chairman
was released.
(12) 401(k) SAVINGS PLAN AND OTHER RETIREMENT PLANS
CIBER has a savings plan 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. In addition, certain companies which have merged
with CIBER in business combinations accounted for as poolings of interests
have had similar defined contribution retirement plans. CIBER recorded
expense of approximately $2,815,000, $4,519,000 and $4,555,000 for the years
ended June 30, 1997, 1998 and 1999, respectively, related to these plans.
(13) BUSINESS AND CREDIT CONCENTRATIONS
CIBER's clients are located principally throughout the United States. Its
revenue and accounts receivable are concentrated with large companies in
several industries. CIBER's largest client accounted for approximately 5%, 5%
and 6% of total revenues for the years ended June 30, 1997, 1998 and 1999,
respectively. In addition, CIBER's five largest clients accounted for, in the
aggregate, approximately 15%, 14% and 15% of CIBER's total revenues for the
years ended June 30, 1997, 1998 and 1999, respectively. CIBER has a policy to
regularly monitor the creditworthiness of its clients and generally does not
require collateral. CIBER has a concentration of revenues related to clients
purchasing software from PeopleSoft, Inc. ("PeopleSoft"). Approximately 8%,
9% and 10% of CIBER's total revenues for the years ended June 30, 1997, 1998
and 1999, respectively, were generated from implementing PeopleSoft software.
CIBER also has concentrations of credit risk in cash and cash equivalents,
which are invested in investment grade commercial paper and money market
funds.
F-24
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(14) SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION
Supplemental statement of cash flow information for the years ended June 30 is
as follows (in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
--------- --------- ---------
<S> <C> <C> <C>
Noncash investing and financing activities:
Cash paid for acquisitions:
Fair value of assets acquired $ 28,854 $ - $ 142,514
Liabilities assumed (5,965) - (10,586)
Common stock issued in connection with acquisitions (2,469) - (106,285)
Accrued acquisition costs payable (1,175) - -
Additional cash consideration on previous acquisitions 45 351 857
--------- --------- ---------
Cash paid for acquisitions $ 19,290 $ 351 $ 26,500
--------- --------- ---------
--------- --------- ---------
Issuance of common stock in satisfaction
of acquisition costs payable $ 100 $ 1,151 $ 1,203
Stock options exchanged for accrued compensation $ - $ - $ 833
Property and other assets distributed by merged company $ - $ 1,370 $ -
Cash paid for interest $ 364 $ 182 $ -
Cash paid for income taxes $ 9,113 $ 12,194 $ 32,941
</TABLE>
(15) SELECTED 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 poolings of
interests business combinations through June 30, 1999.
<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
IN THOUSANDS, EXCEPT PER SHARE DATA QUARTER QUARTER QUARTER QUARTER TOTAL
------- ------- ------- ------- -----
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 1999
Revenues $165,658 $174,056 $184,901 $195,046 $719,661
Amortization of intangible assets 1,082 1,069 2,314 3,055 7,520
Merger costs 1,535 - - - 1,535
Operating income 18,760 23,148 23,880 23,552 89,340
Net income 11,117 14,320 14,883 14,175 54,495
Pro forma net income 11,117 14,320 14,883 14,175 54,495
Pro forma income per share - basic $0.21 $0.27 $0.27 $0.24 $0.98
Pro forma income per share - diluted $0.20 $0.26 $0.26 $0.24 $0.95
YEAR ENDED JUNE 30, 1998
Revenues $129,334 $141,661 $148,093 $157,400 $576,488
Amortization of intangible assets 938 970 978 1,050 3,936
Merger costs 614 1,573 504 1,847 4,538
Operating income 10,512 11,989 17,728 17,639 57,868
Net income 6,484 6,056 11,387 12,550 36,477
Pro forma net income 6,208 6,851 10,657 10,554 34,270
Pro forma income per share - basic $0.12 $0.13 $0.21 $0.20 $0.67
Pro forma income per share - diluted $0.12 $0.13 $0.20 $0.19 $0.64
</TABLE>
F-25
<PAGE>
[GRAPHIC OMITTED][GRAPHIC OMITTED]
CIBER, INC., 5251 DTC PARKWAY, SUITE 1400 ENGLEWOOD, COLORADO 80111
The undersigned hereby appoints Bobby G. Stevenson and Mac J. Slingerlend, or
either of them, with full power of substitution, as attorneys-in-fact, agents
and proxies (the "Proxies") to vote on behalf of the undersigned all shares
of common stock, $.01 par value, of CIBER, Inc. (the "Company"), that the
undersigned is entitled to vote at the 1999 Annual Meeting of Shareholders
(the "Meeting"), to be held at Glenmoor Country Club, 110 Glenmoor Drive,
Cherry Hills Village, Colorado, on Thursday, October 28, 1999, at 10:00 a.m.
(local time), and at any and all adjournments or postponements thereof, as
follows:
1. The election of the following nominees for Class II directors: Mac J.
Slingerlend, James A. Rutherford and Paul E. Rudolph.
/ / FOR / / WITHHOLD
INSTRUCTIONS: To withhold your vote for any individual nominee, mark FOR
above and strike out the nominee's or nominees' name(s).
2. The amendment to the Company's Certificate of Incorporation to increase the
number of authorized shares of Common Stock from 80,000,000 to 100,000,000
shares.
/ / FOR / / AGAINST / / ABSTAIN
3. The increase in number of shares of Common Stock reserved for issuance
pursuant to the Company's Equity Incentive Plan from 8,000,000 to
10,500,000 shares.
/ / FOR / / AGAINST / / ABSTAIN
4. In their discretion, such Proxies are authorized to vote upon such other
business as may properly come before the Meeting or any adjournments or
postponements thereof.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR"
ALL OF THE ABOVE LISTED PROPOSITIONS.
THIS PROXY WILL BE VOTED AS DIRECTED, BUT IF NO INSTRUCTIONS ARE SPECIFIED,
THIS PROXY WILL BE VOTED FOR EACH OF THE PROPOSITIONS STATED. IF ANY OTHER
BUSINESS IS PRESENTED AT SUCH MEETING, THIS PROXY WILL BE VOTED BY THE
PROXIES IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD OF DIRECTORS
KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE MEETING. THIS PROXY IS
SOLICITED BY THE BOARD OF DIRECTORS.
Should the undersigned be present and elect to vote at the Meeting, or at any
adjournments or postponements thereof, and after notification to the Secretary
of the Company at the Meeting of the shareholder's decision to terminate this
proxy, the power of the Proxies shall be deemed terminated and of no further
force and effect. The undersigned may also revoke this proxy by filing a
subsequently dated proxy or by notifying the Secretary of the Company of his or
her decision to terminate this proxy prior to the final tabulation of the votes.
The undersigned acknowledges receipt from the Company prior to the execution of
this proxy of the Notice of the Meeting and a Proxy Statement.
Dated: __________________________, 1999
---------------------------------------
---------------------------------------
Please sign exactly as your name appears
on this Proxy card. When signing as
attorney, executor, administrator,
agent, trustee or guardian, please give
your full title. If shares are held
jointly, each holder should sign. If
signing on behalf of a corporation, the
full corporate name should be indicated
and an authorized corporate officer
should sign.
PLEASE COMPLETE, DATE, SIGN AND MAIL THIS PROXY PROMPTLY
IN THE ENCLOSED POSTAGE PREPAID ENVELOPE.
