<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------------------
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended: Commission file number:
DECEMBER 31, 1998 0-23488
CIBER, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 38-2046833
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
5251 DTC PARKWAY
SUITE 1400
ENGLEWOOD, CO 80111
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
Telephone Number: (303) 220-0100
----------------------
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
----- -----
As of December 31, 1998, there were 53,741,443 shares of the Registrant's
common stock ($0.01 par value) outstanding.
<PAGE>
CIBER, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited):
Consolidated Statements of Operations
Three and six months ended December 31, 1998 and 1997 3
Consolidated Balance Sheets
December 31, 1998 and June 30, 1998 4
Consolidated Statements of Cash Flows
Six months ended December 31, 1998 and 1997 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures About Market
Risk 16
PART II. OTHER INFORMATION 17
SIGNATURES 18
</TABLE>
2
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, DECEMBER 31,
--------------------- ---------------------
IN THOUSANDS, EXCEPT PER SHARE DATA 1997(1) 1998 1997(1) 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Consulting services $123,937 $155,552 $238,627 $303,153
Other revenues 17,724 18,504 32,368 36,561
-------- -------- -------- --------
Total revenues 141,661 174,056 270,995 339,714
-------- -------- -------- --------
Cost of consulting services 81,043 100,164 156,166 194,660
Cost of other revenues 13,028 12,720 23,992 25,221
Selling, general and administrative expenses 33,058 36,955 64,241 74,239
Amortization of intangible assets 970 1,069 1,908 2,151
Merger costs 1,573 -- 2,187 1,535
-------- -------- -------- --------
Operating income 11,989 23,148 22,501 41,908
Interest and other income 419 718 794 1,330
Interest expense (67) -- (170) -
-------- -------- -------- --------
Income before income taxes 12,341 23,866 23,125 43,238
Income tax expense 6,285 9,546 10,585 17,801
-------- -------- -------- --------
Net income $ 6,056 $ 14,320 $ 12,540 $ 25,437
-------- -------- -------- --------
-------- -------- -------- --------
Pro forma information (Note 1):
Historical net income $ 6,056 $ 14,320 $ 12,540 $ 25,437
Pro forma adjustment to income tax expense 795 -- 519 --
-------- -------- -------- --------
Pro forma net income $ 6,851 $ 14,320 $ 13,059 $ 25,437
-------- -------- -------- --------
-------- -------- -------- --------
Pro forma income per share - basic $ 0.13 $ 0.27 $ 0.26 $ 0.48
Pro forma income per share - diluted $ 0.13 $ 0.26 $ 0.25 $ 0.46
Weighted average shares - basic 51,138 53,708 50,783 53,314
Weighted average shares - diluted 53,636 55,478 53,239 55,324
</TABLE>
(1) Restated for poolings of interests through December 31, 1998 - See Note 2.
See accompanying notes to consolidated financial statements.
3
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA 1998(1) 1998
--------- ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 38,238 $ 62,108
Accounts receivable 121,538 136,491
Inventories 618 837
Prepaid expenses and other assets 4,792 3,527
Deferred income taxes 1,458 2,552
-------- --------
Total current assets 166,644 205,515
-------- --------
Property and equipment, at cost 32,561 37,214
Less accumulated depreciation and amortization (15,219) (18,676)
-------- --------
Net property and equipment 17,342 18,538
-------- --------
Intangible assets, net 33,597 35,596
Deferred income taxes 2,068 3,616
Other assets 2,134 2,703
-------- --------
Total assets $221,785 $265,968
-------- --------
-------- --------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables $ 10,989 $ 18,160
Accrued compensation and payroll taxes 25,720 27,843
Deferred revenues 4,097 3,460
Other accrued expenses and liabilities 11,859 10,614
Income taxes payable 3,276 5,411
-------- --------
Total current liabilities 55,941 65,488
-------- --------
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 53,742,000 shares issued and outstanding 522 537
Additional paid-in capital 93,889 103,915
Retained earnings 71,433 96,028
-------- --------
Total shareholders' equity 165,844 200,480
-------- --------
Total liabilities and shareholders' equity $221,785 $265,968
-------- --------
-------- --------
</TABLE>
(1) Restated for poolings of interests through December 31, 1998 - See Note 2.
See accompanying notes to consolidated financial statements.
4
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31,
-----------------------
IN THOUSANDS 1997(1) 1998
-------- --------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 12,540 $ 25,437
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 4,568 5,375
Deferred income taxes (1,636) (2,642)
Other 29 37
Changes in operating assets and liabilities,
net of the effects of acquisitions:
Accounts receivable (20,379) (13,447)
Inventories -- (219)
Other current and long-term assets (3,208) 521
Trade payables 1,313 7,098
Accrued compensation and payroll taxes 3,533 1,881
Deferred revenues 1,755 (637)
Other accrued expenses and liabilities 1,803 (19)
Income taxes payable 6,704 4,799
-------- --------
Net cash provided by operating activities 7,022 28,184
-------- --------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired -- (4,138)
Purchases of property and equipment (4,505) (4,365)
Purchases of investments (905) --
Sales of investments 815 --
-------- --------
Net cash used in investing activities (4,595) (8,503)
-------- --------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 2,924 5,984
Purchases of treasury stock -- (1,795)
Net payments on bank lines of credit (1,985) --
Payments on notes payable (2,600) --
Borrowings on notes payable 247 --
Distributions by merged companies (585) --
-------- --------
Net cash provided by (used in) financing activities (1,999) 4,189
-------- --------
Net increase in cash and cash equivalents 428 23,870
Cash and cash equivalents, beginning of period 27,257 38,238
-------- --------
Cash and cash equivalents, end of period $ 27,685 $ 62,108
-------- --------
-------- --------
</TABLE>
(1) Restated for poolings of interests through December 31, 1998 - See Note 2.
See accompanying notes to consolidated financial statements.
5
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements of CIBER, Inc. and
subsidiaries ("CIBER" or the "Company") have been prepared without audit.
Certain information and note disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. These consolidated financial
statements should be read in conjunction with the audited consolidated
financial statements and notes thereto included in CIBER's Annual Report on
Form 10-K for the fiscal year ended June 30, 1998. In the opinion of
management, these unaudited consolidated financial statements include all
adjustments necessary for a fair presentation of the financial position and
results of operations for the periods presented. Interim results of
operations for the six month period ended December 31, 1998 are not
necessarily indicative of operating results for the full fiscal year.
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 adjustment to income tax expense eliminates the
one-time tax expense or benefit resulting from changes in the tax status of
these merged companies.
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 1,393,071 and
778,855 for the three months and six months ended December 31, 1998,
respectively. There were no antidilutive stock options for the corresponding
periods last year.
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.
(2) POOLINGS OF INTERESTS
From July 1, 1998 to December 31, 1998, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests:
EJR COMPUTER ASSOCIATES ("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 the Company's CIS Division. 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.
6
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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
YEAR ENDED JUNE 30, 1996
Revenues $275,576 $20,389 $295,965
Net income 14,380 401 14,781
Pro forma net income 12,068 401 12,469
Pro forma income per share - diluted $ .26 $ .26
</TABLE>
THE CUSHING GROUP ("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 merged business operates within CIBER's
Spectrum Technology Group, Inc. subsidiary. 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.
(3) ACQUISITIONS
THE DORADUS CORPORATION ("DORADUS") - On November 15, 1998, CIBER acquired
all of the outstanding capital stock of Doradus for approximately $3.9
million in cash. Additional consideration of up to $400,000 may be payable
in one year. The acquisition has been accounted for as a purchase.
Accordingly, CIBER's consolidated financial statements include the results of
operations of Doradus since the date of acquisition. CIBER has recorded
goodwill of approximately $3.8 million related to this acquisition, which
will be amortized over 15 years. If any additional consideration is paid, it
will be recorded as additional goodwill. Doradus, located in Minneapolis,
Minnesota, provided services similar to the CIS division of CIBER.
In the current fiscal year, CIBER paid additional cash consideration of
$150,000 to the former owners of Oasys, Inc. related to the March 1996
acquisition. This additional consideration was recorded as additional
goodwill.
7
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
CIBER Network Services, Inc. ("CNSI"), which was majority owned by certain
officers of the Company, was acquired in December 1996. The terms of the
agreement provided for additional contingent consideration based on certain
performance objectives of CNSI for the 12-month period ended October 31,
1998. CIBER had recorded additional goodwill and a liability of $1,175,000 at
June 30, 1998 in anticipation of the performance objectives being met. In
October 1998, CIBER offered the sellers the option to receive either 90% of
the additional consideration in the form of CIBER common stock valued at
$16.00 per share or 100% of the additional consideration payable in cash. As
a result, 59,479 shares of CIBER common stock were issued and $118,000 was
paid in cash for total consideration of $1,070,000.
(4) SHAREHOLDERS' EQUITY
Changes in shareholder's equity during the six months ended December 31, 1998
were (in thousands):
<TABLE>
<CAPTION>
Common stock Additional Total
---------------- paid-in Retained Treasury shareholders'
Shares Amount capital earnings stock equity
------- ------ ---------- -------- -------- -------------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1998, AS RESTATED (SEE NOTE 2) 52,248 $522 $ 93,889 $71,433 $ -- $165,844
Employee stock purchases and options exercised 483 5 5,979 (746) 746 5,984
Immaterial pooling of interests 961 10 806 -- -- 816
Acquisition consideration 48 -- 100 (96) 1,049 1,053
Tax benefit from exercise of stock options -- -- 3,104 -- -- 3,104
Compensation expense related to stock issuances 2 -- 37 -- -- 37
Purchase of treasury stock -- -- -- -- (1,795) (1,795)
Net income -- -- -- 25,437 -- 25,437
------ ---- -------- ------- ------- --------
BALANCES AT DECEMBER 31, 1998 53,742 $537 $103,915 $96,028 $ -- $200,480
------ ---- -------- ------- ------- --------
------ ---- -------- ------- ------- --------
</TABLE>
(5) STOCK OPTION 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.
8
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 reissued.
In addition, from July 1, 1998 to December 31, 1998, CIBER granted 1,575,876
stock options to certain employees under the Employees' Stock Option Plan at
exercise prices ranging from $16.00 to $27.06 per share.
(6) REVOLVING LINE OF CREDIT
The Company renewed and increased its line of credit during the three months
ended December 31, 1998. The Company has a $35 million revolving line of
credit with a bank. There were no outstanding borrowings under this bank
line at December 31, 1998 and June 30, 1998. Outstanding borrowings bear
interest at the three month London Interbank Offered Rate ("LIBOR") plus 2%.
Borrowings are unsecured. The credit agreement requires a commitment fee of
.225% per annum on any unused portion of the line of credit up to $15
million. The credit agreement expires in December 1999.
(7) SUBSEQUENT EVENTS
Subsequent to December 31, 1998, CIBER completed the following business
combinations:
PARAGON SOLUTIONS, INC. ("PARAGON") - On January 8, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of Paragon for
approximately $4.2 million in cash. This acquisition will be accounted for
as a purchase. Accordingly, the Company's consolidated financial statements
will include the results of operations of Paragon after the date of
acquisition. CIBER will record goodwill of approximately $4.2 million related
to this acquisition, which will be amortized over 15 years. Paragon, located
in Pittsburgh, Pennsylvania, provided software implementation services and
will be part of CIBER's subsidiary, The Summit Group, Inc.
YORK & ASSOCIATES, INC. ("YORK") - On January 29, 1999, York merged with
CIBER in a business combination to be accounted for as a pooling of
interests. The Company issued approximately 550,000 shares of its common
stock in exchange for substantially all of the outstanding assets and
liabilities of York. York, headquartered in Minneapolis, Minnesota,
provided IT consulting and software implementation services similar to
CIBER's subsidiaries, Spectrum Technology Group, Inc. and The Summit Group,
Inc. The accompanying consolidated financial statements have not been
restated for the York merger. The Company's consolidated financial
statements issued in the future will be restated to include the results of
operations, financial position, and cash flows of York.
INTEGRATION SOFTWARE CONSULTANTS, INC. ("ISC") - On February 2, 1999, ISC
merged with CIBER in a business combination to be accounted for as a pooling
of interests. The Company issued approximately 1,270,000 shares of its
common stock in exchange for all of the outstanding common stock of ISC.
ISC, headquartered in Philadelphia, Pennsylvania, provided software
implementation services similar to CIBER's subsidiary, The Summit Group, Inc.
The accompanying consolidated financial statements have not been restated for
the ISC merger. The Company's consolidated financial statements issued in the
future will be restated to include the results of operations, financial
position, and cash flows of ISC.
9
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
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 approximately $5.0 million in cash. Additionally, the
terms of the purchase provide for additional consideration of up to $3.0
million based on contracts signed during the 12-month periods ending January
31, 2000 and 2001. This acquisition will be accounted for as a purchase.
Accordingly, the Company's consolidated financial statements will include the
results of operations of Paradyme HRT after the date of acquisition. CIBER
will record goodwill of approximately $4.5 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 will become CIBER's Global Outsourcing
Practice.
(7) QUARTERLY FINANCIAL INFORMATION
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
pooling of interests business combinations through December 31, 1998.
<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 N/A N/A $339,714
Merger costs 1,535 -- N/A N/A 1,535
Operating income 18,760 23,148 N/A N/A 41,908
Net income 11,117 14,320 N/A N/A 25,437
Pro forma net income 11,117 14,320 N/A N/A 25,437
Pro forma income per share - basic $0.21 $0.27 N/A N/A $0.48
Pro forma income per share - diluted $0.20 $0.26 N/A N/A $0.46
YEAR ENDED JUNE 30, 1998
Revenues $129,334 $141,661 $148,093 $157,400 $576,488
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
YEAR ENDED JUNE 30, 1997
Revenues $88,990 $ 96,552 $108,480 $119,358 $413,380
Merger costs 622 596 -- -- 1,218
Operating income 6,330 6,164 9,695 11,179 33,368
Net income 3,420 3,960 6,407 7,439 21,226
Pro forma net income 3,786 3,847 5,922 6,868 20,423
Pro forma income per share - basic $0.08 $0.08 $0.12 $0.14 $0.43
Pro forma income per share - diluted $0.08 $0.08 $0.12 $0.13 $0.40
</TABLE>
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE HEREIN. 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, 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 PRESSURES, AND COMPETITION. MANY OF THESE
FACTORS ARE BEYOND THE COMPANY'S ABILITY TO PREDICT OR CONTROL. PLEASE REFER
TO A DISCUSSION OF THESE AND OTHER FACTORS IN THE COMPANY'S ANNUAL REPORT ON
FORM 10-K AND OTHER SECURITIES AND EXCHANGE COMMISSION FILINGS. THE COMPANY
DISCLAIMS ANY INTENT OR OBLIGATION TO UPDATE PUBLICLY SUCH FORWARD-LOOKING
STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE EVENTS OR
OTHERWISE. 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 operates the CIBER Information Services ("CIS") Division and the
CIBER Solutions ("Solutions") Division. The CIS Division accounted for
approximately 60% of the Company's total revenues in fiscal 1998, while the
Solutions Division accounted for the remainder. The CIS Division provides
application software development and maintenance services and millenium date
change solutions. The Solutions Division is comprised of the Company's
wholly-owned subsidiaries, Spectrum Technology Group, Inc. ("Spectrum"),
Business Information Technology, Inc. ("BIT"), The Summit Group, Inc.
("Summit") and CIBER Network Services, Inc. ("CNSI"). Spectrum provides
information technology consulting solutions to business problems,
specifically in the areas of data warehousing, data modeling and enterprise
architecture, as well as project management and systems integration services.
BIT specializes in the implementation and integration of PeopleSoft, Inc.
software including Human Resource, Financial Management and Accounting,
Student Administration, Government, Manufacturing and Distribution products.
Summit provides Lawson, J.D. Edwards, Oracle, Baan and other software
implementation services, strategic consulting services, proprietary
warehousing and traffic software, and is an industry remarketer of certain
third party computer products. CNSI provides a wide range of local-area and
wide-area network solutions, from design and procurement to installation and
maintenance with services including Internet and intranet connectivity.
In general, except for CNSI's product sales, the Solutions Division revenues
provide higher gross margins than the CIS Division. However, the Solutions
Division activities also involve higher selling, general and administrative
expenses as a percentage of revenues. Consequently, fluctuations in gross
margin and selling, general and administrative expenses as a percentage of
revenues may be due to changes in the mix of revenues between the CIS
Division and the Solutions Division. Management believes that operating
income before amortization and merger costs, as a percentage of revenues, is
a more meaningful indicator because it reflects the effects of revenue mix.
The Company's largest customer is IBM, which represented approximately 6% of
revenue for the three months and six months ended December 31, 1998. The
Company's contract with IBM was extended through March 31, 1999. This
contract has been renewed three times in the last three years. The Company
and IBM are currently negotiating contract renewal. There is no assurance a
contract renewal can be negotiated or, if negotiated, that contract terms
will be favorable to the Company. If the Company does not renew the IBM
contract or if it is renewed on less favorable terms, the Company's future
operating performance may be adversely impacted.
11
<PAGE>
BUSINESS COMBINATIONS
The Company 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 15 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.
From July 1, 1998 to December 31, 1998, the following companies have merged
with CIBER in business combinations accounted for as poolings of interests.
EJR COMPUTER ASSOCIATES ("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. The Company's consolidated
financial statements have been restated for all periods prior to the merger
to include the results of operations, financial position and cash flows of
EJR.
THE CUSHING GROUP ("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. The effects of
this merger on the Company's revenues, pro forma net income and pro forma
income per share would not have been material. As a result, the Company's
historical financial statements have not been restated for this business
combination.
In addition, on November 15, 1998, CIBER acquired all of the outstanding
capital stock of The Doradus Corporation ("Doradus") for approximately $3.9
million in cash. CIBER's consolidated financial statements include the
results of operations of Doradus since the date of acquisition.
THREE MONTHS ENDED DECEMBER 31, 1998 AS COMPARED TO THREE MONTHS ENDED
DECEMBER 31, 1997
The Company's revenues for the three months ended December 31, 1998 increased
22.9% to $174.1 million from $141.7 million for the quarter ended December
31, 1997. This represents a 25.5% increase in consulting revenues offset by
planned lesser growth in other revenues. For the three months ended December
31, 1998, CIS Division consulting revenues increased 19.6% to $100.7 million
from $84.2 million for the same quarter of last year and the Solutions
Division consulting revenues increased 38.0% to $54.9 million from $39.8
million for the same quarter of last year. Other revenues increased to $18.5
million for the three months ended December 31, 1998 from $17.7 million for
the same quarter last year. CIS Division consulting revenues accounted for
64.7% and 67.9% of total consulting revenues for the three months ended
December 31, 1998 and 1997, respectively. The increase in the CIS Division
revenues is derived primarily from an increase in hours billed and, to a
lesser extent, an increase in average billing rates. The increase in hours
billed is due primarily to internal growth in branch offices. Solutions
Division revenues increased primarily due to increased software
implementation services, and to a lesser extent, increases in other
consulting services and increases in billing rates.
Of the 25.5% increase in consulting revenues for the three months ended
December 31, 1998 in comparison to the three months ended December 31, 1997,
approximately 2.6% was due to revenues from acquired businesses or from
mergers accounted for as immaterial poolings of interests. The remainder of
the increase was due to increased revenues from existing operations.
Management believes this growth is reflective of increased demand for IT
services, including an increased demand for year 2000 related services and
increased demand for enterprise resource planning ("ERP") software
implementation services.
12
<PAGE>
Gross margin percentage improved to 35.1% of revenues for the three months
ended December 31, 1998 from 33.6% of revenues for the same quarter of last
year. This improvement is due to improved gross margins on both consulting
services and other revenues.
Selling, general and administrative expenses were 21.2% of revenues for the
three months ended December 31, 1998 compared to 23.3% of revenues for the
same quarter last year.The decrease as a percentage of revenues is primarily
due to greater economies of scale.
Amortization of intangible assets increased to $1.1 million for the three
months ended December 31, 1998 from $970,000 for the same quarter last year.
This increase was due to the additional intangible assets resulting from
mergers and acquisitions.
Merger costs, primarily transaction related broker and professional costs, of
$1.6 million were incurred during the three months ended December 31, 1997,
while no merger costs were incurred during the three months ended December 31,
1998.
Net interest and other income increased to $718,000 for the three months
ended December 31, 1998 from $352,000 for the same quarter last year due to
increased average cash balances available for investment and the elimination
of borrowings of certain merged companies.
After the pro forma adjustment to income tax expense, if any, the Company's
pro forma effective tax rates for the three months ended December 31, 1998
and 1997 were 40.0% and 44.5%, respectively. The Company's effective tax rate
is higher than its normal effective tax rate for the three months ended
December 31, 1997 due to 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 which
were not subject to income taxes.
The Company's pro forma net income increased 109% to $14.3 million for the
three months ended December 31, 1998 from $6.9 million for the quarter ended
December 31, 1997.
SIX MONTHS ENDED DECEMBER 31, 1998 AS COMPARED TO SIX MONTHS ENDED
DECEMBER 31, 1997
The Company's revenues for the six months ended December 31, 1998 increased
25.4% to $339.7 million from $271.0 million for the six months ended December
31, 1997. This represents a 27.0% increase in consulting revenues offset by a
planned lesser growth in other revenues. For the six months ended December
31, 1998, CIS Division consulting revenues increased 21.5% to $196.3 million
from $161.5 million for the same period of last year and the Solutions
Division consulting revenues increased 38.6% to $106.8 million from $77.1
million for the same period of last year. Other revenues increased 13.0% to
$36.6 million for the six months ended December 31, 1998 from $32.4 million
for the same period last year. CIS Division consulting revenues accounted
for 64.8% and 67.7% of total consulting revenues for the six months ended
December 31, 1998 and 1997, respectively. The increase in the CIS Division
revenues is derived primarily from an increase in hours billed and, to a
lesser extent, an increase in average billing rates. The increase in hours
billed is due primarily to internal growth in branch offices. Solutions
Division revenues increased primarily due to increased software
implementation services, and to a lesser extent, increases in other
consulting services and increases in billing rates.
Of the 27.0% increase in consulting revenues for the six months ended
December 31, 1998 in comparison to the six months ended December 31, 1997,
approximately 2.0% was due to revenues from acquired businesses or from
mergers accounted for as immaterial poolings of interests. The remainder of
the increase was due to increased revenues from existing operations.
Management believes this growth is reflective of increased demand for IT
services, including an increased demand for year 2000 related services and
increased demand for enterprise resource planning ("ERP") software
implementation services.
13
<PAGE>
Gross margin percentage improved to 35.3% of revenues for the six months
ended December 31, 1998 from 33.5% of revenues for the same period of last
year. This improvement is due to improved gross margins on both consulting
services and other revenues.
Selling, general and administrative expenses were 21.9% of revenues for the
six months ended December 31, 1998 compared to 23.7% of revenues for the same
period last year. The decrease as a percentage of revenues is primarily due
to greater economies of scale.
Amortization of intangible assets increased to $2.2 million for the six
months ended December 31, 1998 from $1.9 million for the same period last
year. This increase was due to the additional intangible assets resulting
from mergers and acquisitions.
Merger costs, primarily transaction related broker and professional costs, of
$1.5 million were incurred during the six months ended December 31, 1998
compared to $2.2 million for the same period last year.
Net interest and other income increased to $1.3 million for the six months ended
December 31, 1998 from $624,000 for the same period last year due to increased
average cash balances available for investment and the elimination of borrowings
of certain merged companies.
After the pro forma adjustment to income tax expense, if any, the Company's
pro forma effective tax rates for the six months ended December 31, 1998 and
1997 were 41.2% and 43.5%, respectively. The Company's effective tax rate is
higher than its normal effective tax rate for the six months ended December
31, 1998 and 1997 due to 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 which
were not subject to income taxes.
The Company's pro forma net income increased 94.8% to $25.4 million for the
six months ended December 31, 1998 from $13.1 million for the six months
ended December 31, 1997.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1998, the Company had $140.0 million of working capital, of
which $62.1 million was cash and cash equivalents, and had a current ratio of
3.1:1. 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 1999.
Net cash provided by operating activities was $28.2 million and $7.0 million
for the six months ended December 31, 1998 and 1997, respectively.
The Company's accounts receivable totaled $136.5 million at December 31, 1998
compared to $121.5 million at June 30, 1998. This increase is primarily a
result of the Company's increase in revenues and also the mix shift to more
solution oriented engagements. Generally, due to the high quality and large
size of the Company's clients, bad debt expenses have averaged less than 0.1%
of revenue for the last several years. Accounts receivable days sales
outstanding ("DSO") was 72 days at December 31, 1998 as compared to 70 days
at June 30, 1998, which management believes is in line with industry
standards.
Net cash used in investing activities was $8.5 million during the six months
ended December 31, 1998 and 1997. The Company used cash of $3.9 million
during the six months ended December 31, 1998 for the Doradus acquisition and
$268,000 for additional consideration related to previous acquisitions. The
Company also purchased property and equipment of $4.4 million and $4.5
million during the six months ended December 31, 1998 and 1997, respectively.
Net cash provided by (used in) financing activities was $4.2 million and ($2.0
million) during the six months ended December 31, 1998 and 1997, respectively.
The Company obtained net cash proceeds from sales of
14
<PAGE>
common stock of $6.0 million and $2.9 million during the six months ended
December 31, 1998 and 1997, respectively. During the six months ended
December 31, 1998, CIBER purchased 101,000 shares of treasury stock for $1.8
million. These treasury shares 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 renewed and increased its line of credit during the three months
ended December 31, 1998. The Company has a $35 million revolving line of
credit with a bank. There were no outstanding borrowings under this bank line
at December 31, 1998 and June 30, 1998. Outstanding borrowings bear interest
at the three month London Interbank Offered Rate ("LIBOR") plus 2%.
Borrowings are unsecured. The credit agreement requires a commitment fee of
.225% per annum on any unused portion of the line of credit up to $15
million. The credit agreement expires in December 1999.
The Company's subsidiary, CNSI, has a $7.5 million unsecured inventory
financing line of credit with a financial corporation. The amount outstanding
totaled approximately $2.0 million at December 31, 1998 and is included in
trade payables on the Company's balance sheet.
The Company expects, although there can be no assurance, to be able to renew
these lines of credit on similar terms.
YEAR 2000
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 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 expects to complete this by
March 31, 1999. CIBER relies on the services of the landlords of its offices,
telecommunications companies, banks, utilities, commercial airlines, and
insurance companies, among others. 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 to correct the negative effects on CIBER
in the event the Year 2000 issue results in the unavailability of services.
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 affect on CIBER.
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 affect 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
15
<PAGE>
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 vendor's warranties. CIBER makes no warranties regarding Year
2000 compliance of any of the products it resells. CIBER's subsidiary, The
Summit Group, Inc. ("Summit"), has developed and licensed certain warehousing
and traffic software products that have been modified to be Year 2000
compliant. After testing of the modifications by a third party, Summit will
offer the Year 2000 compliant software version to its existing customers.
This is expected to be complete by June 30, 1999.
Many of CIBER's clients need to repair or replace their legacy systems
because of Year 2000 issues. CIBER believes this will favorably impact the
demand for its services and products. CIBER believes that its direct Year
2000 services, like code renovation, will diminish over time. CIBER also
believes that as companies focus on Year 2000 issues, other less critical
projects are being delayed. Therefore, CIBER does not expect a decrease in
the demand for its services as the Year 2000 draws closer. However, given
the lack of precedent for an issue of this nature and magnitude, CIBER's
ability to forecast the impact of this issue on quarter to quarter operations
is limited. In addition, the business interruption of any of CIBER's
significant clients, resulting from their Year 2000 issues, could have a
material adverse affect on CIBER.
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 1999 addressing
the Year 2000 issue are not material. 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 scheduled 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. 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.
RECENT ACCOUNTING PRONOUNCEMENTS
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standard No. 131, "Disclosures about
Segments of an Enterprise and Related Information" ("SFAS 131"). This
standard requires disclosure of financial and descriptive information about
an entity's reportable operating segments. This standard is effective for
fiscal years beginning after December 15, 1997 and requires restatement of
comparative information for prior periods. The Company will provide the
disclosures required by SFAS 131, if any, in its fiscal year 1999 annual
financial statements. In addition, the Company believes the future adoption
of FASB Statements No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits", No. 133, "Accounting for Derivative Instruments and
Hedging Activities" and No. 134, "Accounting for Mortgage-Backed Securities
Retained after the Securitization of Mortgage Loans Held for Sale by a
Mortgage Banking Enterprise" will not have a material affect on its financial
statements.
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.
16
<PAGE>
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the Annual Meeting of Shareholders of CIBER, Inc. held on
October 29, 1998, the following matters were voted upon with the
results as indicated below.
1) Election of Directors
<TABLE>
<CAPTION>
For Withhold
--- --------
<S> <C> <C>
Roy L. Burger 38,702,199 89,781
James G. Brocksmith, Jr. 38,703,439 88,541
</TABLE>
The terms of offices as a director of Bobby G. Stevenson, Mac J.
Slingerlend, Richard A. Montoni, James A. Rutherford and Archibald J.
McGill continued after the meeting.
2) The ratification of KPMG Peat Marwick LLP as the Company's independent
auditors for the fiscal year ending June 30, 1999.
<TABLE>
<CAPTION>
For Against Abstain
--- ------- -------
<S> <C> <C>
38,760,240 19,745 11,995
</TABLE>
ITEM 5. OTHER INFORMATION
On January 29, 1999, York & Associates, Inc. ("York") merged with
CIBER in a business combination to be accounted for as a pooling of
interests. The Company issued approximately 550,000 shares of its
common stock in exchange for substantially all of the outstanding
assets and liabilities of York. A copy of the CIBER News Release
announcing this merger is attached as an exhibit.
On February 2, 1999, Integration Software Consultants, Inc. ("ISC")
merged with CIBER in a business combination to be accounted for as a
pooling of interests. The Company issued approximately 1,270,000
shares of its common stock in exchange for all of the outstanding
common stock of ISC. A copy of the CIBER News Release announcing
this merger is attached as an exhibit.
17
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit 10.1 - Unsecured Credit Agreement with UMB Bank Colorado
dated December 1, 1998
Exhibit 27.1 - Financial Data Schedule
Exhibit 99.1 - News Release dated January 28, 1999 announcing the
merger with York & Associates, Inc.
Exhibit 99.2 - News Release dated January 28, 1999 announcing the
merger with Integration Software Consultants, Inc.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
CIBER, INC.
(Registrant)
Date February 10, 1999 By /s/ Mac J. Slingerlend
------------------ -----------------------
Mac J. Slingerlend
President and Chief Executive Officer
Date February 10, 1999 By /s/ Richard A. Montoni
------------------ -----------------------
Richard A. Montoni
Executive Vice President/Chief
Financial Officer
18
<PAGE>
EXHIBIT 10.1
UNSECURED CREDIT AGREEMENT
between
CIBER, INC.
and
UMB BANK COLORADO
Dated as of December 1, 1998
<PAGE>
UNSECURED CREDIT AGREEMENT
THIS AGREEMENT, dated as of the 1st day of December, 1998 is made by and
between CIBER, INC., a Delaware corporation (the "Borrower") and UMB Bank
Colorado, a Colorado banking corporation ("UMB").
WHEREAS, the Borrower has requested an aggregate credit facility of up
to $35,000,000 in revolving loans under this Unsecured Credit Agreement for
working capital purposes and acquisitions, with the portion thereof used for
acquisitions to be converted to term loans; and
WHEREAS, UMB is willing to extend such credit facility to the Borrower
on the terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the premises and the mutual promises
herein contained, the parties mutually agree as follows:
1. DEFINITIONS.
1.1 ACCOUNTING TERMS. All accounting and financial terms used
herein are used with the meanings such terms are given in accordance with
generally accepted accounting principles, except as may be otherwise
specifically provided in this Agreement.
1.2 DEFINED TERMS.
"AGREEMENT" means this Unsecured Credit Agreement, as
amended from time to time.
"AUTHORIZED OFFICER" means Mac J. Slingerlend, or such other
officer or employee of the Borrower whose authority to perform acts to be
performed only by an Authorized
<PAGE>
Officer under this Agreement is evidenced to UMB by a certified copy of an
appropriate resolution of the Board of Directors of the Borrower.
"BUSINESS DAY" means any day other than a Saturday or Sunday
on which UMB is not authorized or required to close.
"CONSOLIDATED NET OPERATING INCOME" means the net operating
income of the Borrower and its Subsidiaries as shown on its annual audited
consolidated financial statements or on its interim unaudited consolidated
financial statements, all as prepared on a consistent basis in accordance
with generally accepted accounting principles; provided that, for purposes of
calculating Consolidated Net Operating Income for any period, (I) any Person
which was not a Consolidated Subsidiary at the beginning of such period but
was a Consolidated Subsidiary at the end of such period shall be deemed to
have been a Consolidated Subsidiary for the entire period and (II) any person
which was a Consolidated Subsidiary at the beginning of such period but was
not a Consolidated Subsidiary at the end of such period shall be deemed to
have not been a Consolidated Subsidiary for the entire period.
"CONSOLIDATED SUBSIDIARY" means at any date any Subsidiary
or other entity the accounts of which would be consolidated with those of the
Borrower in its consolidated financial statements as of such date.
"DEBT" of any Person means at any date, without duplication,
all obligations of such Person for borrowed money and all obligations of such
Person evidenced by bonds, debentures, notes or other similar instruments
"DEBT SERVICE COVERAGE RATIO" means, as of the end of each
calendar quarter, the ratio of (i) Consolidated Net Operating Income plus
amortization allowances for the calendar
2
<PAGE>
quarter of the Borrower and its Subsidiaries then most recently ended
multiplied by four (4) to (ii) the total of all current maturities of
long-term Debt of the Borrower and its Subsidiaries.
"GOVERNMENTAL AUTHORITY" means any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government, including, without limitation, any agency, body,
commission, court or department thereof, whether federal, state, local or
foreign.
"LIBOR RATE" means the three-month LIBOR as published from
time to time in the western edition of The Wall Street Journal, if such rate
is available.
"LOAN DOCUMENTS" means this Agreement, the Notes and any
other documents, instruments or writings now or hereafter executed and
delivered by or on behalf of the Borrower to UMB to further evidence or
govern the Loans.
"LOAN" and "LOANS" means advances pursuant to the Revolving
Credit or loans under the Term Credit.
"NOTES" OR "NOTES" means the Revolving Credit Notes or the
Term Credit Notes, as the context may require.
"PERSON" means and includes an individual, a partnership, a
joint venture, a corporation, a limited liability company, a trust, an
unincorporated organization and a Governmental Authority.
"PROPERTY" means (i) any property or asset of any kind,
real, personal or mixed, tangible or intangible, wherever situated and (ii)
any right, title or interest in or to any such property or asset.
3
<PAGE>
"SUBSIDIARY" shall mean any corporation or other entity of
which capital stock or other ownership interests having ordinary voting power
to elect a majority of the board of directors or other persons performing
similar functions is at the time directly or indirectly owned by the
Borrower. For purposes hereof, "control" means the possession, directly or
indirectly, of the power to direct or cause the direction of management and
policies of corporations, partnerships or other business entities in which a
direct or indirect ownership interest exists, whether through the ownership
of voting securities, by contract or otherwise.
1.3 SINGULAR AND PLURAL. The foregoing definitions shall be
equally applicable to both the singular and plural forms of the defined terms.
2. REVOLVING CREDIT.
2.1 THE REVOLVING CREDIT. Subject to all terms and conditions
hereof, UMB agrees to lend to the Borrower during the period of time
beginning on the date hereof and ending on December 1, 1999, such amount or
amounts as the Borrower may from time to time request to borrow up to an
aggregate outstanding principal amount owing to UMB of, but not exceeding at
any time, $35,000,000.00 less the principal amount of all Term Loans made
pursuant to Section 2.3 hereof (the "Revolving Credit"). The Borrower may
prepay all or any part of the outstanding obligations hereunder at any time
on one (1) business day's prior notice and without penalty. Any prepayment
of the outstanding amount of all Loans under the Revolving Credit shall
include accrued interest thereon. Upon any payment prior to December 1, 1999
of Loans under the Revolving Credit, UMB agrees to lend to the Borrower from
time to time during the period beginning upon the date of this Agreement and
ending on November 30, 1999, an aggregate principal amount not to exceed the
difference between (i) the then outstanding aggregate principal amount of the
Borrower's
4
<PAGE>
aggregate indebtedness under the Revolving Credit, and (ii) the amount of the
Revolving Credit; provided, however, that UMB shall have no obligation to
make any such Loan if an Event of Default has occurred and is then
continuing, regardless of whether any required notice has been given.
At the time of execution hereof, an Authorized Officer of the Borrower
shall execute promissory note in the form of Exhibit B attached hereto and
incorporated herein by reference (the "Revolving Credit Note" which shall
include all extensions and renewals thereof and replacements therefor, if
any). The Revolving Credit Note shall be due and payable to UMB in full on
December 1, 1999. As the Borrower desires to obtain Loans pursuant to the
Revolving Credit hereunder, it shall verbally give UMB notice of the
Borrower's intention to borrow pursuant to the Revolving Credit as early as
possible on or before the proposed date of borrowing. UMB may conclusively
rely on any such verbal request which shall have been received by it in good
faith from a Person reasonably believed to be an Authorized Officer. Upon
compliance with all conditions of lending stated in this Agreement applicable
to the Revolving Credit, UMB shall disburse the amount of the requested Loan
to the Borrower by causing the same to be deposited in the Borrower's account
number 7170565624 at UMB, and the Borrower hereby authorizes the
disbursement of borrowings under the Revolving Credit in such manner. All
borrowings and payments by the Borrower under the Revolving Credit shall be
recorded by UMB on its books and records and the principal amount outstanding
from time to time, plus interest payable thereon, shall be determined by
reference to the books and records of UMB. Such books and records shall be
rebuttably presumed to be correct as to such matters. In the event of any
conflict between the terms of the Revolving Credit Note executed hereunder
and the terms of this Agreement, the terms of the Revolving Credit Note shall
control. All Loans of the Borrower under the Revolving Credit shall be
reduced to zero by December 1, 1999.
5
<PAGE>
2.2 MANDATORY PREPAYMENT OF REVOLVING CREDIT. In the event that
the maximum principal amount of Loans which is outstanding under the
Revolving Credit is at any time greater than the maximum amount which is then
authorized to be outstanding thereunder, the Borrower will immediately, upon
written notice from UMB, pay to UMB the difference between the outstanding
principal amount and the principal amount then authorized to be outstanding
thereunder plus all accrued interest thereon.
2.3 TERM CREDIT. If no Event of Default has occurred and is
continuing, regardless of whether any required notice has been given, and all
terms and conditions of this Agreement are then being complied with, UMB may,
in its sole discretion, at any time within six (6) months of the date of any
Loan under the Revolving Credit all of the proceeds of which are used to
acquire another business entity or all or substantially all of the Property
of another business entity upon request of the Borrower allow the Borrower to
convert such Loan to a term loan (the "Term Credit"). At the time of the
making of each Loan under the Term Credit, an Authorized Officer of the
Borrower shall execute a promissory note in the form of Exhibit C attached
hereto and incorporated herein by reference (the "Term Credit Note" which
shall include all extensions and renewals thereof, if any). Each Term Credit
Note payable to UMB shall be payable by the Borrower to UMB in eleven (11)
equal consecutive monthly payments of principal and interest and a final
payment of principal and interest, such first eleven (11) payments to be
based upon a five (5) year amortization. Each Loan to the Borrower under the
Term Credit shall mature and be payable in full one year from the date of the
Term Credit Note evidencing such Loan.
The amount of the Revolving Credit shall be automatically and
permanently reduced by the principal amount of each Term Credit Note as of
the date of each such Note.
6
<PAGE>
The Borrower may prepay all or any part of the obligations under any
Term Credit Note at any time, upon one (1) day's prior notice and without
penalty. Any prepayment of the full amount of any Term Credit Note shall
include accrued interest thereon. Any prepayment of less than the full
amount of any Term Credit Note shall be first applied on the last maturing
installment or installments of principal. No prepayments of principal on any
Term Credit Note may be reborrowed by the Borrower. In the event of any
conflict between the terms of any Term Credit Note and the terms of this
Agreement, the terms of such Term Credit Note shall control.
3. INTEREST/FEES.
3.1 INTEREST RATE. Each Loan under the Revolving Credit and
under the Term Credit shall bear interest, on the outstanding principal
amount thereof, for each day from the date such Loan is made until it becomes
due, at a rate equal to the LIBOR plus 200 basis points. The LIBOR shall be
initially determined for all Loans under the Revolving Credit and for each
Loan under the Term Credit, as of the Business Day immediately preceding the
initial Loan under the Revolving Credit and for each Loan under the Term
Credit, as the case may be, and thereafter for all loans under the Revolving
Credit and for each Term Credit Note as of the first (1st) day of each
December, March, June and September of each year, such rate so determined to
be fixed through such initial determination period and during each three (3)
month determination period thereafter. Interest on the Revolving Credit Note
shall be payable monthly on the first (1st) business day of each calendar
month. Interest on each Term Credit Note shall be payable as provided in
such Note.
3.2 CALCULATION OF INTEREST. Interest shall be computed on the
basis of days elapsed and assuming a 360-day year.
7
<PAGE>
3.3 CREDIT COMMITMENT FEE. The Borrower shall pay to UMB
commencing on December 31, 1998, and continuing on the last day of each
March, June, September and December thereafter, so long as the Revolving
Credit is available, a commitment fee equal to .225%, on an annualized basis,
of the average daily unused portion of the first Fifteen Million and no/100
Dollars ($15,000,000) of the Revolving Credit during the immediately
preceding three (3) month period ending March 31, June 30, September 30 or
December 31 or any shorter period in the case of the first period or in the
event of the full termination of the Revolving Credit (the "Commitment Fee
Periods"). Effective as of the relevant payment date, the obligation to pay
the commitment fee shall be an absolute obligation of the Borrower, not
subject to cancellation or reduction for any reason, including, without
limitation, termination, in whole or in part, of the Revolving Credit, and,
once paid, the commitment fee shall be non-refundable; provided, however, to
the extent the Revolving Credit is reduced or terminated, then the fee
payable by the Borrower for the next succeeding Commitment Fee Periods shall
be accordingly reduced. UMB is hereby authorized by the Borrower to
automatically debit any of the Borrower's accounts with UMB for the payment
of any commitment fee due and payable hereunder. UMB shall give notice of
any such debit to the Borrower when any such debit is made. The Revolving
Credit commitment fee shall be computed on the basis of days elapsed and
assuming a 360-day year.
3.4 BUSINESS DAY. If any installment of principal or interest
on any Loan becomes due and payable on a day other than a Business Day, the
maturity of the installment of principal or interest shall be extended to the
next succeeding Business Day, and interest shall be payable during such
extension of maturity.
8
<PAGE>
4. CONDITIONS TO MAKING LOANS. UMB's obligation to make any Loan
pursuant to this Agreement shall be subject to compliance by the Borrower
with all of its obligations hereunder and to the following specific
conditions being met by the Borrower at the time of the making of each
borrowing hereunder:
4.1 NO ADVERSE CHANGE IN BUSINESS. The Borrower shall not have
experienced any material adverse change in the conduct of its business,
operations, financial condition or otherwise since the date of this Agreement.
4.2 REPRESENTATIONS. The covenants, representations and
warranties made in Sections 5, 6 and 7 shall be true and correct as of the
date of each borrowing made hereunder, and an Authorized Officer of the
Borrower shall certify in writing to the same; provided, however, the
representations and warranties made with respect to financial statements
shall be deemed to refer to the most recent financial statements furnished to
UMB pursuant to Section 5.1 hereof.
4.3 REQUIRED CONSENTS AND APPROVALS. All approvals required
from the Board of Directors of the Borrower for the execution of this
Agreement, the borrowings contemplated hereunder and the execution of all
documents to be executed hereunder have been obtained and shall be in full
force and effect.
4.4 NO DEFAULTS.
(1) The Borrower shall be in compliance with all of the terms and
conditions hereof, and no Event of Default shall have occurred and be
continuing, regardless of whether any required notice has been given; and
9
<PAGE>
(2) After giving effect to the requested borrowing and to each
borrowing that has been made and is then unpaid, the aggregate principal
amount of all outstanding Loans shall not exceed the sum of the Revolving
Credit then in effect.
4.5 APPLICATION CONSTITUTES REPRESENTATION. Each verbal
application by the Borrower for any borrowing shall be and constitute a
representation that the representations set forth in Sections 4.1 through 4.4
hereof are true and correct.
5. AFFIRMATIVE COVENANTS. The Borrower covenants and agrees from the
date hereof and until payment in full of all obligations incurred pursuant to
this Agreement, that it shall comply with each of the following provisions:
5.1 FINANCIAL AND BUSINESS INFORMATION. The Borrower will
furnish to UMB as soon as reasonably available after the end of each fiscal
year, but in no event later than 120 days following the end of its fiscal
year, its audited consolidated financial statements without qualification
including, at a minimum, a balance sheet, statements of income and
stockholders' equity and a statement of cash flows for such fiscal year, all
of which shall have been reported by independent certified public accountants
and which shall be in conformity with generally accepted accounting
principles consistently applied. The Borrower will furnish to UMB for each
calendar month as soon as reasonably available, its consolidated financial
statements for the immediately preceding calendar month, all such financial
statements to be certified by the Chief Financial Officer or Chief Accounting
Officer of the Borrower. Such monthly financial statements shall include a
balance sheet and statements of income and stockholders' equity.
Notwithstanding the foregoing, in the event applicable regulations of the
Securities and Exchange Commission prohibit the disclosure of monthly
financial statements the Borrower shall provide UMB with quarterly financial
statements in the same
10
<PAGE>
form as would otherwise be required for monthly financial statements no later
than 45 days following the end of each calendar quarter of the Borrower. The
Borrower further agrees to at all times keep accurate and complete records of
its financial condition and of its assets, and it agrees that it will furnish
to UMB, at the Borrower's expense, from time to time such other and further
information regarding its and its Subsidiaries' financial condition as UMB
may reasonably request, including upon such request by UMB, an opportunity or
opportunities for employees or representatives of UMB to inspect, audit,
check, examine and copy books and records of the Borrower and its
Subsidiaries and meet with representatives of the Borrower to discuss the
business and financial condition of the Borrower and its Subsidiarie. Within
30 days after the end of each calendar month, the Borrower will furnish to
UMB a certificate of the Chief Financial Officer or the Chief Accounting
Officer of the Borrower in the form of Exhibit A attached hereto (i) setting
forth in reasonable detail the calculations required to establish whether the
Borrower was in compliance with the requirements of Sections 5.5, 5.6 and
5.7 on the date of such financial statements and (ii) stating, to the best of
his or her knowledge and belief after due inquiry and review of the
Borrower's books and records, whether there exists on the date of such
certificate any Event of Default, regardless of whether any required notice
has been given, and, if any Event of Default exists, setting forth the
details thereof and the action which the Borrower is taking or proposes to
take with respect thereto.
5.2 CORPORATE EXISTENCE AND MAINTENANCE OF PROPERTY. Subject to
the terms of Section 6.1 of this Agreement, the Borrower will, and will cause
its Subsidiaries to, do or cause to be done all things necessary or
appropriate to preserve and keep in full force and effect and in good
standing its and their corporate existence, its and their authority to
continue to do business and conduct its and their operations and its and
their rights and franchises now or hereafter possessed.
11
<PAGE>
Subject to the terms of Section 6.1 of this Agreement, the Borrower will, and
will cause its Subsidiaries to, preserve and maintain its and their property
and assets used or useful in the conduct of its and their business and cause
the same to be kept in good repair, working order and condition.
5.3 TAXES, CHARGES AND CLAIMS. The Borrower will, and will
cause its Subsidiaries to, pay and discharge all taxes, assessments,
governmental charges or levies invoked upon it or them or its or their income
or profits or its or their property or assets and all indebtedness payable by
it or them before the same shall be deemed in default, as well as all lawful
claims for labor, materials and supplies which, if unpaid, might become a
lien or charge upon such property or assets or any part thereof, provided,
however, that the Borrower and its Subsidiaries shall not be required to pay
and discharge any such tax, assessment, charge, levy, claim or indebtedness
so long as the validity thereof shall be contested in good faith by an
appropriate proceeding, and the Borrower or any of its Subsidiaries, as the
case may be, shall have set aside on its books adequate reserves to cover the
contested item.
5.4 LOCATION OF RECORDS. The location of the Borrower's books
and records and the books and records of each of its Subsidiaries shall not
be changed by the Borrower or any of its Subsidiaries without giving written
notice of the address of the new location to UMB at least 30 days prior to
such a change.
5.5 LEVERAGE RATIO. At all times while any Loans are
outstanding under the Revolving Credit and/or the Term Credit hereunder, at
all times prior to December 1, 1999 and until all obligations of the Borrower
hereunder are paid in full the Borrower will maintain a ratio of total
consolidated liabilities to consolidated net worth of not more than 1.5 to 1.
12
<PAGE>
5.6 NET WORTH. At all times while any Loans are outstanding
under the Revolving Credit and/or the Term Credit hereunder, at all times
prior to December 1, 1999 and until all obligations of the Borrower hereunder
are paid in full the Borrower will maintain a consolidated net worth of not
less than $90,000,000.
5.7 DEBT SERVICE COVERAGE RATIO. At all times while any Loans
are outstanding under the Revolving Credit and/or the Term Credit hereunder,
at all times prior to December 1, 1999 and until all obligations of the
Borrower hereunder are paid in full, the Borrower will maintain a debt
service coverage ratio of at least 1.5 to 1.0.
5.8 BANKING ACCOUNTS. The Borrower shall maintain all of its,
and shall cause all of its Subsidiaries to maintain all of their, primary
deposit accounts with UMB or any of its affiliates. UMB or its affiliates,
as the case may be, will in accordance with its or their Account Analysis
procedures give credit to the Borrower and its Subsidiaries for their account
balances, to the extent thereof, against charges for banking services
provided to the Borrower and its Subsidiaries; provided, however, to the
extent such account balances are insufficient to generate sufficient credits
during any calendar quarter to offset all charges for banking services
provided during such quarter the Borrower agrees to pay to UMB or its
affiliates, as the case may be, upon notice thereof the difference between
the total charges for banking services during such quarter and the amount of
account balance credits applied thereto.
6. NEGATIVE COVENANTS. The Borrower covenants and agrees from the
date hereof until payment in full of all obligations incurred pursuant to
this Agreement, that the Borrower shall comply with each of the following
provisions:
13
<PAGE>
6.1 CONSOLIDATIONS, MERGERS AND SALES OF ASSETS. The Borrower
will not (i) consolidate or merge with or into any other Person unless the
Borrower is the surviving corporation and immediately after and giving effect
thereto no Event of Default, regardless of whether any required notice has
been given, shall have occurred and be continuing or (ii) sell, lease or
otherwise transfer all or substantially all of its Properties to any other
Person. The Borrower will not permit any Subsidiary to consolidate with,
merge with or into or transfer all or substantially all of its Properties to
any Person other than the Borrower or a wholly-owned Consolidated Subsidiary.
The Borrower will not, and will not permit any Subsidiary to, sell, lease or
otherwise transfer any substantial part of its Properties to any other Person
(except, in the case of a Subsidiary, to the Borrower or a wholly-owned
Consolidated Subsidiary) except for cash in an amount not less than the fair
market value thereof.
6.2 LIMITATION ON DIVIDENDS. So long as no Event of Default or
a Default has occurred and is then continuing, regardless of whether any
required notice has been given, the Borrower may declare and pay dividends on
shares of its outstanding common stock.
6.3 LOANS AND GUARANTEES. The Borrower will not make any loans
or advances to any Person other than its Subsidiaries which in the aggregate
at any time exceed $500,000. The Borrower will not, nor will it permit any
of its Subsidiaries to, guarantee the obligations of or otherwise be or
become responsible for the obligations of any other Person other than a
Subsidiary to the extent the aggregate outstanding amount of all such
guarantees or responsibilities at any time exceeds $500,000 without the prior
written consent of UMB.
6.4 NO QUARTERLY LOSSES. The Borrower shall not incur a
consolidated net loss in any calendar quarter.
14
<PAGE>
7. REPRESENTATIONS AND WARRANTIES. In order to induce UMB to extend
credit to the Borrower hereunder, the Borrower hereby represents and warrants
to UMB as of the date hereof and at all times hereafter while any obligations
are outstanding under this Agreement that:
7.1 CORPORATE EXISTENCE AND AUTHORITY. The Borrower is duly
incorporated and existing in good standing under the laws of the State of
Delaware and is qualified to do business as a foreign corporation in every
jurisdiction where the ownership of its Property or the nature of its
business requires qualification. Each Subsidiary of the Borrower is duly
incorporated in its respective state of incorporation and is existing in good
standing under the laws of such state and is qualified to do business as a
foreign corporation in every jurisdiction where the ownership of its
respective Property or the nature of its respective business requires
qualification. All ownership interests of the Borrower in such Subsidiaries
are held free and clear of all liens and encumbrances. The Borrower is duly
authorized to execute and deliver this Agreement, to borrow monies hereunder
and to execute and deliver Notes evidencing borrowings under this Agreement.
The execution and delivery of this Agreement and of all Notes evidencing
borrowings under this Agreement does not conflict with any provision of law,
any order of any court or Government Authority, the Articles of Incorporation
or By-laws of the Borrower or any agreement binding upon it.
7.2 TAX RETURNS. The Borrower has filed all tax returns which
are required to be filed and has paid, or made adequate provision for the
payment of, all taxes which have or may become due pursuant to said returns
or to assessments received by the Borrower. The Borrower knows of no
material additional assessments for which adequate reserves determined in
accordance with generally accepted accounting principles have not been
established. The Borrower has made adequate provision for the payment of all
current taxes.
15
<PAGE>
7.3 FINANCIAL AND OTHER INFORMATION. All balance sheets and
statements of income and financial condition of the Borrower furnished by the
Borrower to UMB are materially correct and complete.
7.4 INSURANCE. The Borrower shall maintain, with financially
sound and reputable insurance companies, insurance against liability for
hazards and risks and liability to persons and property to the extent and in
the manner customary for companies in similar businesses similarly situated.
All policies of insurance maintained by the Borrower may contain reasonable
deductibles in amounts generally acceptable for companies similarly situated
in the Borrower's industry and the Borrower may self insure as to those risks
for which self insuring is reasonably acceptable for companies similarly
situated in the Borrower's industry.
8. EVENTS OF DEFAULT. "Event of Default" shall mean any one or more
of the following:
8.1 Failure of the Borrower to cure, within 5 business days
after receipt of written notice of the same, any default in the payment of
principal or of interest or any other amount payable under this Agreement on
any obligations of the Borrower incurred pursuant to the terms and conditions
of this Agreement when and as the same shall become due and payable, whether
at the maturity date stated on any Note evidencing such obligations or at a
date fixed for prepayment or by acceleration or otherwise.
8.2 Material breach by the Borrower of any covenant, obligation
or requirement contained herein or in any document required to be executed
pursuant hereto or failure of the Borrower, within 30 days after receipt of
written notice specifying the same, to materially perform any covenant,
obligation or requirement contained in this Agreement or in the other Loan
Documents.
16
<PAGE>
8.3 Any representation or warranty made by the Borrower
hereunder being untrue in any material respect now or hereafter; or any
schedule, statement, report, notice, information or writing furnished by the
Borrower to UMB being untrue in any material respect as of the date the facts
set forth therein are stated or certified.
8.4 Failure of any of the Borrower or any Subsidiary to cure,
within 5 business days after receipt of written notice of the same, any
default in the payment of principal or of interest on any Debt of the
Borrower or any Subsidiary payable to UMB other than indebtedness incurred
hereunder or payable to any person or entity other than UMB in the amount of
$10,000,000 or more when and as the same shall become due and payable,
whether at the maturity date stated on any note evidencing such Debt or at a
date fixed for prepayment or by acceleration or otherwise.
8.5 The Borrower or any Subsidiary shall admit in writing their
inability to pay their debts as they mature; or the Borrower or any
Subsidiary shall make a general assignment for the benefit of creditors or
the Borrower or any Subsidiary, consents to, applies for or acquiesces in the
appointment of a trustee or receiver for any of them or for substantially all
of the Property of any of them; or the Borrower or any Subsidiary shall
suffer proceedings under any law relating to bankruptcy, insolvency or
reorganization or the release of debtors to be instituted by or against it,
and if contested, not dismissed or stayed within 60 days; the Borrower or any
Subsidiary shall suffer any writ of attachment or execution or any similar
process to be issued or levied against any material portion of its Property
which is not released, stayed, bonded or vacated within 60 days after its
issue or levy.
9. ACCELERATION. In the event of the occurrence of any one or more
Events of Default which are defined in paragraph 8 of this Agreement, and if
such Event of Default is not cured within
17
<PAGE>
the allowed grace period and shall be continuing, UMB may declare the entire
principal amount of all Notes executed hereunder, together with accrued
interest thereon, to be immediately due and payable, and in the event of the
occurrence of any one or more such Events of Default and if such Event of
Default is continuing, UMB may terminate the Revolving Credit and the Term
Credit, all without further notice of any kind to the Borrower. Upon the
occurrence of an Event of Default, UMB may proceed to enforce payment of all
obligations of the Borrower to UMB under this Agreement and may exercise any
and all rights and remedies possessed by it.
10. GENERAL.
10.1 NOTICES. All notices hereunder shall be deemed to be
received 3 days after being deposited in the U.S. Mail addressed to either
party hereto at the following addresses or such other address as, from time
to time, either party identifies in a written notice to the other given
pursuant to this Section 10.1 at least thirty (30) days prior to the
effective date of such new address:
If to UMB:
UMB Bank Colorado
1670 Broadway
Denver, Colorado 80202-4838
Attention: Ned C. Voth
If to the Borrower:
CIBER, Inc.
5251 DTC Parkway, Suite 1400
Englewood, Colorado 801112-0029
Attention: Mac J. Slingerlend.
18
<PAGE>
10.2 NO WAIVERS. No failure or delay by UMB in exercising any
right, power or privilege hereunder shall operate as a waiver thereof; nor
shall any single or partial modification or waiver of any provision of this
Agreement or of any Note executed hereunder or a single or partial exercise
of any such right, power or privilege preclude any other or further exercise
of such or of any other right, power or privilege.
10.3 OFFSETS. The Borrower specifically agrees that upon the
occurrence of an Event of Default regardless of whether any required notice
has been given, and if such Event of Default is continuing, UMB shall be
entitled to exercise a right of setoff at any time, irrespective of the
stated maturity of all Notes executed hereunder evidencing the obligations of
the Borrower to UMB, and irrespective of the fact that UMB has not given any
notice of such setoff.
10.4 COLORADO LAW. This Agreement and all Notes issued hereunder
shall be deemed to be contracts made under and shall be construed in
accordance with the laws of the state of Colorado.
10.5 SEVERABILITY. In the event any one or more of the
provisions of this Agreement or of any Note executed and delivered hereunder
shall be invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions shall not in any way
be affected or impaired thereby.
10.6 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall constitute an original but when taken
together shall constitute but one agreement.
10.7 TITLES AND HEADINGS. All titles and headings which are used
in this Agreement are used solely for the convenience of the parties hereto
and are not part of the agreement of the parties.
19
<PAGE>
10.8 ASSIGNMENT. This Agreement and all provisions hereof shall
be binding upon and shall inure to the benefit of the parties hereto and
their respective successors and assigns; provided, however, that the Borrower
may not assign any rights hereunder without the prior written consent of UMB;
and provided further that the Borrower acknowledges and agrees that UMB may,
without notice, assign all or any part of their rights and obligations
hereunder to any other bank or lender, at their sole discretion, or may grant
one or more participation interests in any of the obligations of the Borrower
hereunder to any other lender.
10.9 EXPENSES. The Borrower agrees to pay all out of pocket
expenses, including reasonable attorneys fees, incurred by UMB in connection
with the preparation and amendment of this Agreement and, to the extent allow
by law, the enforcement of the rights of UMB in connection with this
Agreement and all Notes executed and delivered pursuant hereto and in
connection with any amendment, extension or renewal thereof, or waivers
thereunder.
10.10 WAIVER OF JURY TRIAL. IN THE EVENT OF ANY DISPUTE BETWEEN
THE BORROWER AND UMB RELATED IN ANY WAY TO THIS AGREEMENT WHICH BECOMES THE
SUBJECT OF ANY JUDICIAL PROCEEDING IN ANY COURT OF LAW, THE BORROWER AND UMB
HEREBY EACH WAIVE ANY RIGHT WHICH THEY MAY RESPECTIVELY HAVE TO A TRIAL BY
JURY.
10.11 INCORPORATION BY REFERENCE. Each of the Revolving Credit
Notes, the Term Credit Notes and the other Loan Documents are hereby made
subject to all of the terms, covenants, conditions, obligations, stipulations
and agreements contained in this Agreement to the same extent and effect as if
fully set forth therein, and this Agreement is hereby made subject to all of the
terms, covenants, conditions, obligations, stipulations and agreements contained
in the Revolving Credit
20
<PAGE>
Notes, the Term Credit Notes and the other Loan Documents to the same extent
and effect as if fully set forth herein. All Exhibits hereto are
incorporated herein by reference. All representations and warranties of the
Borrower contained herein in Section 7 have been or will be relied upon by
UMB notwithstanding any investigation made by or on behalf of them.
10.12 INTEREST RATE LIMITATION. Notwithstanding any provisions of
this Agreement or any of the Revolving Credit Notes, the Term Credit Notes or
the Loan Documents, in no event shall the amount of interest paid or agreed
to be paid by the Borrower exceed an amount computed at the highest rate of
interest permissible under applicable law. If, from any circumstances
whatsoever, fulfillment of any provision of this Agreement, the Revolving
Credit Notes, the Term Credit Notes or any Loan Document at the time
performance of such provision shall be due, shall involve exceeding the
interest rate limitation validly prescribed by law which a court of competent
jurisdiction may deem applicable hereto, then, the obligations to be
fulfilled shall be reduced to an amount computed at the highest rate of
interest permissible under applicable law, and if for any reason whatsoever
UMB shall ever receive as interest an amount which would be deemed unlawful
under such applicable law, such interest shall be automatically applied to
the payment of principal of the amounts outstanding hereunder (whether or not
then due and payable) and not to the payment of interest, or shall be
refunded to the Borrower if such principal and all other obligations of the
Borrower to UMB have been paid in full.
11. PRIOR AGREEMENTS SUPERSEDED/COMPLETE AGREEMENT. This Agreement and
all documents referred to herein contain the entire agreement of the parties
hereto with respect to the subject matter hereof and supersede the terms and
conditions of all prior agreements of the parties pertaining to the subject
matter hereof, specifically including but not limited to that certain Credit
Agreement between the parties dated as of December 1, 1997 and all documents
referred to therein ; provided, however, this Agreement shall not supersede any
agreements of the Borrower set forth in any promissory notes outstanding as of
the date hereof which have been executed by the Borrower
21
<PAGE>
and are not paid in full by use of the proceeds of any borrowing hereunder or
other funds available to the Borrower and in the event such promissory notes
are not so paid within thirty (30) days of the date hereof, all terms of such
promissory notes modified hereby shall be deemed to be in full force and
effect as if this Agreement had not been executed.
- - ------------------------------------------------------------------------------
IN WITNESS WHEREOF, the parties hereto have executed and made this
Agreement effective as of the day and year first stated above.
CIBER, INC. UMB BANK COLORADO
By /s/ Mac J. Slingerlend By /s/ Ned C. Voth
--------------------------- -----------------------
Mac J. Slingerlend Ned C. Voth
President, Chief Operating Chairman and Chief
Officer and Treasurer Executive Officer
22
<PAGE>
EXHIBIT "A" TO
UNSECURED CREDIT
AGREEMENT
BORROWER'S CERTIFICATE
Date:
-----------------
To: UMB Bank Colorado
From: CIBER, Inc. (for itself and its Subsidiaries)
Pursuant to the Unsecured Credit Agreement dated as of December 1, 1998
between CIBER, Inc. ("Borrower") and UMB Bank Colorado (the "Bank") and all
amendments therein, if any (the "Agreement"), Borrower hereby certifies to
the following as of the date first stated above:
<TABLE>
<CAPTION>
Financial Covenants COMPLIANCE
- - ------------------- -----------------------
ACTUAL YES NO
------ ----- -----
<S> <C> <C> <C>
1. Consolidated Net Worth must
exceed $90,000,000 at all times.
2. Leverage Ratio must not exceed 1.5:1.0
at all times.
3. Debt Service Coverage Ratio (as of the end
of the most recent calendar quarter) must
be at least 1.5:1.0.
</TABLE>
As used herein, all terms have the same meaning as that stated in the
Agreement and Notes executed pursuant thereto.
BORROWER IS NOT IN DEFAULT OR IN BREACH OF ANY OF ITS OBLIGATIONS UNDER THE
AGREEMENT, ANY NOTES EXECUTED PURSUANT THERETO OR ON ANY OTHER LIABILITY TO
BANK.
CIBER, INC.
By:
---------------------
Title:
------------------
Date:
-------------------
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FORM 10-Q OF CIBER, INC. FOR THE QUARTER ENDED DECEMBER 31, 1998 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> DEC-31-1998
<EXCHANGE-RATE> 1
<CASH> 62,108
<SECURITIES> 0
<RECEIVABLES> 136,491
<ALLOWANCES> 0
<INVENTORY> 837
<CURRENT-ASSETS> 205,515
<PP&E> 37,214
<DEPRECIATION> 18,676
<TOTAL-ASSETS> 265,968
<CURRENT-LIABILITIES> 65,488
<BONDS> 0
0
0
<COMMON> 537
<OTHER-SE> 199,943
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<TOTAL-REVENUES> 339,714
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<OTHER-EXPENSES> 77,925
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</TABLE>
<PAGE>
EXHIBIT 99.1
CIBER CONSULTANTS IN BUSINESS / ENGINEERING / RESEARCH
-- CIBER, INC. NEWS RELEASE --
For Immediate Release Contact:
Kara Kennedy
Shareholder Relations
303/220-0100
CIBER ANNOUNCES MERGER WITH YORK & ASSOCIATES, INC.
Englewood, Colorado - January 28, 1999 - CIBER, Inc. ("CIBER")
(NYSE: CBR) announced today the closing of a merger with York & Associates,
Inc. ("York"), a privately held provider of IT consulting services,
headquartered in St. Paul, MN.
"York brings to CIBER a broad solutions based practice in the areas
of business consulting, IT strategic planning, ERP implementation, project
management and custom application software design, development and
architecture. They enjoy one of the best reputations in their geography,
having served some of the largest companies in the Twin Cities Metro area
over the past 18 years. We were very impressed with the quality and work
ethic of their people and the company's ability to deliver high value
services. Their broad based offerings through one organization fit the
business model that CIBER is committed to implementing on a national basis,"
stated Larry Greenwood, CIBER's EVP and Co-COO. "Dick York, President and
founder of York & Associates, Inc. will continue to direct CIBER's solutions
practice in the Twin Cities," Mr. Greenwood continued.
"We are very excited about this combination and the ability it gives
us to bring a greater depth and breadth of resources to our clients, thus
more effectively competing with the national firms in our geography. The
people at CIBER share our values of providing high quality service in a
customer intimate business model while maintaining the quality of life for
our employees," stated Mr. York.
York generates annualized revenues of approximately $8 million; the
combination will be accounted for as a pooling of interests.
CIBER, Inc. is a premier provider of system integration consulting
services. Employing 6,000+ employees located in over 80 offices in more than
20 states plus Canada, CIBER offers leveraged information technology
integration solutions in five principal areas: management consulting
aligning business/IT solutions (including E-Business, data warehousing and
component integration), Enterprise Applications Solutions (EAS/ERP)
implementation and outsourcing services, network technology
design/integration consulting and professional staff augmentation services.
CIBER's wholly-owned subsidiaries include Spectrum Technology Group, Inc.,
Business Information Technology, Inc., The Summit Group, Inc., CIBER
Information Services, Inc. and CIBER Network Services, Inc.
"Safe Harbor" Statement under the Private Securities Litigation Reform
Act of 1995: Forward-looking statements involve risks and uncertainties that
could cause actual results to vary materially from such statements. Please
refer to discussions of certain of these risks and uncertainties in the
Company's Annual Reports, 10-Ks, 10-Qs and other Securities and Exchange
Commission filings.
# # #
CIBER, INC., 5251 DTC PARKWAY, SUITE 1400, ENGLEWOOD, CO 80111
HTTP://WWW.CIBER.COM
<PAGE>
EXHIBIT 99.2
CIBER CONSULTANTS IN BUSINESS / ENGINEERING / RESEARCH
-- CIBER, INC. NEWS RELEASE --
For Immediate Release Contact:
Kara Kennedy
Shareholder Relations
303/220-0100
CIBER ANNOUNCES NEW
SAP PRACTICE
Englewood, Colorado - January 28, 1999 - CIBER, Inc. ("CIBER")
(NYSE: CBR) announced today the pending closing of a merger with Integration
Software Consultants, Inc. ("ISC"), a privately held provider of SAP
consulting services, headquartered in Chadds Ford, PA. The merger is
scheduled to close next week.
"For a long time we have wanted to establish a substantial and
credible SAP Practice to augment CIBER's industry leading ERP/EAS
implementation activity. We had turned away several such opportunities before
meeting the Integration Software Consultants' management team. We believe
Robert van der Linden, Jeff McDowell and Mark Gaeto will do an excellent job
of growing this practice domestically (initially) and internationally
(later)," stated Mac Slingerlend, CIBER's President/CEO. We are becoming
increasingly "Practice" focused; this addition to our business model will
lead CIBER's SAP Practice. This is an exciting kick-start to the #1 platform
in ERP/EAS applications solutions," Mr. Slingerlend concluded.
"We considered several opportunities, but CIBER's consistent
performance, pro-active business model and employee culture made a tough
decision easier. Our leadership group generally comes out of SAP America and
our close ties to SAP will assist the further development of our new Practice
with CIBER," said Rob van der Linden, Integration's President.
Integration Software Consultants generates annualized revenues of
approximately $18 million; the combination will be accounted for as a pooling
of interests.
CIBER, Inc. is a premier provider of system integration consulting
services. Employing 6,000+ employees located in over 80 offices in more than
20 states plus Canada, CIBER offers leveraged information technology
integration solutions in five principal areas: management consulting aligning
business/IT solutions (including E-Business, data warehousing and component
integration), Enterprise Applications Solutions (EAS/ERP) implementation and
outsourcing services, network technology design/integration consulting and
professional staff augmentation services. CIBER's wholly-owned subsidiaries
include Spectrum Technology Group, Inc., Business Information Technology,
Inc., The Summit Group, Inc., CIBER Information Services, Inc. and CIBER
Network Services, Inc.
"Safe Harbor" Statement under the Private Securities Litigation
Reform Act of 1995: Forward-looking statements involve risks and
uncertainties that could cause actual results to vary materially from such
statements. Please refer to discussions of certain of these risks and
uncertainties in the Company's Annual Reports, 10-Ks, 10-Qs and other
Securities and Exchange Commission filings.
# # #
CIBER, INC., 5251 DTC PARKWAY, SUITE 1400, ENGLEWOOD, CO 80111
HTTP://WWW.CIBER.COM
