<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------
FORM 10-KT
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM JULY
1, 1999 TO DECEMBER 31, 1999.
Commission File Number 0-23488
CIBER, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 38-2046833
(State or other jurisdiction (I.R.S. Employer Identification No.)
of incorporation or organization)
5251 DTC PARKWAY, SUITE 1400, ENGLEWOOD, COLORADO 80111
(Address of principal executive offices) (Zip Code)
(303) 220-0100
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of exchange on which registered
-------------- ------------------------------------
COMMON STOCK $0.01 PAR VALUE NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act:
NONE
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. X Yes No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. X
---
The aggregate market value of the voting stock (Common Stock) held by
non-affiliates of the registrant as of January 31, 2000 was $1,071,039,697 based
upon the closing price of $22.75 per share as reported on the New York Stock
Exchange on that date.
As of January 31, 2000, there were 59,465,102 shares of the registrant's Common
Stock outstanding.
================================================================================
<PAGE>
CIBER, INC.
FORM 10-K
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
----
<S> <C>
Item 1. Business 3
Item 2. Properties 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 10
PART II
Item 5. Market for the Company's Common Stock and Related Shareholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 12
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 20
Item 8. Financial Statements and Supplementary Data 21
Item 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 44
PART III
Item 10. Directors and Executive Officers 44
Item 11. Executive Compensation 46
Item 12. Security Ownership of Certain Beneficial Owners and Management 49
Item 13. Certain Relationships and Related Transactions 50
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K 50
Signatures 52
</TABLE>
2
<PAGE>
PART I
ITEM 1. BUSINESS
GENERAL
CIBER, Inc. ("CIBER" or the "Company") is a provider of information technology
("IT") consulting services. At December 31, 1999, CIBER had approximately 6,000
employees located in 45 major cities in the United States plus Canada and the
Netherlands. CIBER now manages its business in three groups, the Custom
Solutions Group ("CSG"), the Enterprise Application Solutions Group ("EAS") and
CIBER Enterprise Outsourcing ("CEO"). CSG provides application support, data
warehousing consulting, middleware and systems integration, IT outsourcing,
networking solutions and products and management consulting. EAS provides
enterprise software selection, implementation and integration services,
including PeopleSoft, SAP, Oracle, J. D. Edwards, Lawson, LogisticsPRO, Commerce
One and Siebel Systems, among others, as well as related hardware sizing and
procurement. In 1999, CEO began providing enterprise application hosting or
application service provider ("ASP") services.
The Company began operations in 1974 to assist companies in need of computer
programming support. In the mid-1980s, the Company initiated a growth strategy
that included expanding its range of computer-related services, developing a
professional sales force and selectively acquiring or merging established
complementary companies. Since fiscal 1995, after restatements for poolings of
interests business combinations, the Company's revenues have increased from
$234.1 million to $719.7 million in fiscal 1999, a compound annual growth rate
of 32%.
BUSINESS STRATEGY
The Company's strategy is to expand its business by continuing to build
long-term relationships with major clients based on providing high-quality
information technology services tailored to meet client needs, with an emphasis
on services involving electronic business ("e.business"). The Company's
traditional model has been expanded to include a comprehensive array of services
that constitute the major element of the Company's e.business offering,
including: management consulting, information systems design, development,
integration and implementation, and project management services. The Company's
strategy includes the following key elements:
- - e.BUSINESS FOCUS. Electronic business is a revolutionary transformation for
the way government, business and society relate to one another and handle their
relationships. e.Business spans a broad range of initiatives, from web-enabling
legacy applications, to creating enterprise portals, to completely rebuilding an
organization with an electronic business model.
- - BUILD STRONG CLIENT RELATIONSHIPS. The Company is committed to providing IT
services that meet the demands of mid to large size organizations with
substantial data processing operations. Management believes the Company's
emphasis on building long-term relationships with major clients has been a
primary reason for the Company's success. Most of the Company's largest clients
have been clients for many years.
- - GROW THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION. The Company
intends to expand by acquiring companies that broaden CIBER's array of
consulting services, that have strategic client relationships or that are
located in attractive geographic locations, including overseas. The Company also
intends to expand the operations of existing offices primarily by providing
additional information technology consulting services to existing clients. The
Company may also start new branches in attractive markets with its own
personnel.
- - EXPAND INTEGRATION, IMPLEMENTATION AND OTHER SERVICES. The Company's
historical time and material custom programming services have expanded to
include management level strategic systems solutions, as well as the
implementation of clients' long-term information technology strategies, from
design and development of their information systems through testing and
implementation, to migration from mainframe to client/server architectures, as
well as package software project implementation. As a result of
3
<PAGE>
these efforts, the Company is taking greater responsibility for projects and
providing greater value-added services to its clients. This expansion of focus,
combined with the Company's processes, methodologies, tools and templates, help
position the Company as a full-service provider for its existing and new
clients' information technology and application needs.
- - FOCUS ON QUALITY SERVICE. The Company seeks to be a leader in providing
quality services and processes to its clients. Certain of CIBER's operations
have received ISO 9001 certification as well as certain customer quality awards.
ISO 9001 certification has enhanced the Company's ability (i) to achieve
preferred supplier status from larger companies, (ii) to satisfy current and
prospective clients who insist on a documented quality assurance system and
(iii) to improve its operations by facilitating cost controls and other
efficiencies on a continuing basis.
SERVICES
CIBER's operations are organized in Groups and Practices. CIBER's primary IT
solution offerings are:
CUSTOM SOLUTIONS GROUP
- - Custom application development and maintenance, including web application
development, web design and web enablement
- - Data warehousing solutions, from data marts to business intelligence
- - IT outsourcing, including legacy systems, data center services, network
administration and help desk services
- - Middleware integration, including integration architecture, application
infrastructure and development
- - System integration
- - Network solutions, including
- LAN/WAN integration
- Intranet/Extranet
- Security services
- Backup services
- Hardware procurement
- - Management consulting, including business strategy & optimization, IT
strategy & architecture and program management
ENTERPRISE APPLICATION SOLUTIONS GROUP
Provides enterprise application solutions for ERP (enterprise resource
planning), supply chain management and customer relationship management
applications. Services include:
- Software selection
- Software implementation and integration for:
- Agresso
- Baan
- Commerce One
- Epicor
- J.D. Edwards
- Lawson
- LogisticsPRO
- Oracle
- PeopleSoft
- Siebel Systems
- SAP
- Hardware sizing and procurement
- Authorized remarketer of hardware from IBM, Hewlett-Packard and
Sun Microsystems
4
<PAGE>
CIBER ENTERPRISE OUTSOURCING
- - Application hosting services
- - Business processing services
- - Enabling services
BUSINESS COMBINATIONS
The Company has expanded its geographic breadth and technical expertise,
increased its client base and believes it has achieved other competitive
advantages through business combinations. Given the highly fragmented nature of
the information technology services industry, the Company intends to pursue
business combinations as part of its growth and operation strategy, including
possible international opportunities. The success of this strategy depends not
only upon the Company's ability to identify and acquire businesses on a cost
effective basis, but also upon its ability to integrate acquired operations into
its organization effectively, to retain and motivate personnel and to retain
clients of acquired or merged companies. In reviewing potential business
combinations, the Company focuses on the target company's geographic area,
client base, capabilities in specific technical services, acquisition
availability, cost, anticipated financial performance, sales, management and
recruiting of personnel and potential client demand, among other factors. From
July 1, 1996 to December 31, 1999, the Company has completed the following
business combinations:
5
<PAGE>
<TABLE>
<CAPTION>
APPROXIMATE
CONSIDERATION,
DATE NAME MAIN OFFICE IN MILLIONS (1)
- ------------------- --------------------------------------- --------------------------- -----------------
<S> <C> <C> <C>
December 1999 Solution Partners B.V. Eindhoven, the Netherlands $14.1 (2)
December 1999 Interactive Papyrus, Inc. (3) Colorado Springs, Colorado $6.2
November 1999 Software Design Concepts, Inc. Philadelphia, Pennsylvania $12.0
October 1999 Waterstone Consulting, Inc. Chicago, Illinois $30.7
October 1999 The Isadore Group, Inc. Phoenix, Arizona $18.3 (4)
April 1999 Digital Software Corporation Aurora, Colorado $6.9
March 1999 Compaid Consulting Services, Inc. Atlanta, Georgia $9.7
February 1999 Business Impact Systems, Inc. Herndon, Virginia $62.2
February 1999 Paradyme HR Technologies Corporation Columbia, South Carolina $8.0 (5)
February 1999 Integration Software Consultants, Inc. Philadelphia, Pennsylvania $34.0
January 1999 York & Associates, Inc. St. Paul, Minnesota $14.5
January 1999 Paragon Solutions, Inc. Pittsburgh, Pennsylvania $6.9
November 1998 The Doradus Corporation Minneapolis, Minnesota $4.1
August 1998 The Cushing Group, Inc. Nashua, New Hampshire $24.1
August 1998 EJR Computer Associates, Inc. Hoboken, New Jersey $36.0
May 1998 The Summit Group, Inc. Mishawaka, Indiana $133.7
April 1998 Step Consulting, Inc. Greensboro, North Carolina $4.3
March 1998 Computer Resource Associates, Inc. Harrisburg, Pennsylvania $17.6
March 1998 Advanced Systems Engineering, Inc. Aurora, Colorado $12.7
November 1997 Techware Consulting, Inc. Irving, Texas $16.4
November 1997 Financial Dynamics, Inc. McLean, Virginia $25.0
October 1997 The Constell Group, Inc. Elmwood Park, New Jersey $11.4
October 1997 Bailey & Quinn, Inc. Norcross, Georgia $3.4
August 1997 SoftwarExpress, Inc. - d/b/a Reliant Menlo Park, California $23.7
Integration Services, Inc.
July 1997 KCM Computer Consulting, Inc. Calverton, Maryland $15.3
March 1997 Davis, Thomas & Associates, Inc. Minneapolis, Minnesota $13.5
December 1996 CIBER Network Services, Inc. Edison, New Jersey $6.9
November 1996 Technical Support Group, Inc. Chicago, Illinois $13.5
November 1996 Technology Management Group, Inc. Seattle, Washington $13.7
September 1996 Spectrum Technology Group, Inc. Somerville, New Jersey $16.6
July 1996 DataFocus, Inc. (6) Fairfax, Virginia $5.0
-----------------
$620.4
=================
</TABLE>
(1) APPROXIMATE CONSIDERATION INCLUDES THE VALUE OF CIBER COMMON STOCK
(BASED ON THE CLOSING PRICE OF THE STOCK ON THE MERGER DATE) AND
OPTIONS FOR CIBER COMMON STOCK ISSUED, IF A MERGER, OR CASH PAID
(INCLUDING ANY CONTINGENT CONSIDERATION), COMMON STOCK ISSUED AND
LIABILITIES ASSUMED, IF AN ACQUISITION.
(2) IF THE ACQUIRED BUSINESS ACHIEVES CERTAIN LEVELS OF REVENUE AND NET
INCOME, THE COMPANY WILL BE REQUIRED TO PAY ADDITIONAL CONSIDERATION OF
UP TO $1.5 MILLION IN CASH.
(3) CIBER ACQUIRED 78% OF INTERACTIVE PAPYRUS, INC.
(4) IF THE ACQUIRED BUSINESS ACHIEVES CERTAIN LEVELS OF REVENUE OR NET
INCOME, THE COMPANY WILL BE REQUIRED TO PAY ADDITIONAL CONSIDERATION OF
UP TO $10.4 MILLION IN CASH.
(5) INCLUDES ADDITIONAL CONSIDERATION OF $3.0 MILLION.
(6) THE COMPANY ACQUIRED ONLY THE BUSINESS SYSTEMS DEVELOPMENT DIVISION OF
THIS COMPANY.
6
<PAGE>
CLIENTS
The Company focuses its marketing efforts on mid to large size companies and
other organizations, such as governments, with substantial needs for IT service
solutions. Such clients afford the Company opportunities to develop long-term
relationships based on the high quality, consistent services the Company has
provided for 26 years. Although most assignments are from three to twelve
months, many of the Company's client relationships have continued for more than
10 years.
The ability to serve large clients in diverse industries demonstrates the
Company's adaptability to a wide variety of client environments. Whether clients
are in the services or manufacturing sector, the Company provides consultants
having skills matching the requirements of each project. The Company routinely
satisfies the diverse information technology needs of clients in a wide variety
of industries.
Certain customers account for a significant portion of the Company's
revenues. The Company's five largest clients represented approximately 15%,
14%, 15% and 16% of the Company's total revenues for the years ended June 30,
1997, 1998 and 1999, and the six months ended December 31, 1999,
respectively. Some of the Company's significant clients include: American
Express Company, AT&T, City & County of San Francisco, Commonwealth of
Pennsylvania, Ford Motor Company, Federal Deposit Insurance Corporation, IBM,
Lockheed Martin, MCI Telecommunications Corporation and the State of Georgia.
The Company generally prices its services to clients on a time-and-materials
basis and maintains price ranges that reflect the technical skills and
experience levels of the Company's consultants. The Company has provided and
intends to continue to provide project services to its clients. Projects are
distinguishable from the Company's professional services staff supplementation
consulting by the level of responsibility assumed by the Company. In a typical
project, the Company assumes major responsibilities for the management of the
project and/or the design of deliverables that results in a client-specific
outcome. With professional services staff supplementation contracts, the
Company's clients generally maintain responsibility for the overall task. EAS
revenues are generally from project engagements. CSG revenues are derived from a
mix of project and staff supplementation engagements. The failure of a project
or the failure of the Company to provide project services in a satisfactory
manner could have a material adverse effect on the Company. Further, the Company
may undertake projects on a fixed price basis and also may guarantee performance
based upon defined operating specifications. Cost overruns, unsatisfactory
performance or unanticipated difficulties in completing projects could have a
material adverse effect on the Company's results of operations.
Many larger clients have limited the number of information technology vendors
they use. In order to achieve the reduction in the number of vendors used,
companies often review and screen both existing and potential vendors and
generate select lists of approved vendors. The factors considered for placement
of a company on a vendor list include geographic and technical breadth of
operations, quality assurance programs, reliability and cost effectiveness.
SALES FORCE
At January 31, 2000, the Company maintained an experienced sales force of
approximately 215 employees who market the Company's services to senior business
executives, chief information officers, information systems managers and others
who purchase IT solution services. The purchasing departments of many of the
Company's larger clients commonly select a limited list of preferred vendors.
Once on the vendor list, the Company's sales representatives are eligible to
work directly with managers of projects or application systems seeking
consultant assistance. New client contacts are generated through a variety of
methods, including client referrals, trade shows, personal sales calls, direct
mailings to targeted clients and telemarketing.
7
<PAGE>
OFFICES
The Company's branch office network is integral to its business strategy.
Through the branch office network, the Company can (i) offer a broad range of
consulting services on a local basis, (ii) respond to changing market demands
for information technology services through a variety of contacts in many
industries and geographic areas and (iii) maintain a quality professional staff
because of its nationwide reputation and its training programs. Additionally,
the offices can market their services as being provided by a company with a
national presence and a long history in the information technology services
business.
The Company believes its operating procedures and financial controls are two of
its primary strengths. Business plans, generally at either the office level or
the practice level, are prepared annually and include monthly projections for
the ensuing fiscal year. Results are tracked monthly to compare actual
performance to projected results. The Company has centralized accounting and
cash management functions to help ensure integrity of data and control of
information flow. Operating data is available on a weekly basis. The Company
believes that these processes enhance results from acquired businesses as well.
The Company established its office network through the internal start-up and
staffing of offices in new geographic locations and through the acquisition of
information technology services companies, their professional staffs and client
relationships. The Company's network of offices currently consists of
approximately 45 offices in the United States plus Canada and the Netherlands.
The number of consultants working out of any office ranges from as few as 10 to
over 300.
CONSULTANTS
The Company's future success will depend in part on its ability to hire and
retain adequately trained personnel who can address the changing and
increasingly sophisticated needs of its clients. The Company's on-going
consultant needs arise from (i) increasing demand for the Company's services,
(ii) turnover, which is generally high in the industry, and (iii) the clients'
requests for consultants trained in the newest technologies. Few of the
Company's employees are bound by non-compete agreements. Competition for
personnel in the information technology services industry is significant and the
Company has had, and expects to continue to have, difficulty in attracting and
retaining an optimal level of qualified personnel. In particular, competition
for the limited number of qualified project managers and professionals with
certain specialized skills, such as a working knowledge of certain technologies,
is intense. Because of this, the recruitment of the Company's skilled consultant
group is a critical element to the Company's success. The Company devotes
significant resources to meeting its personnel requirements. At January 31,
2000, the Company had approximately 125 full-time recruiters in its offices and
approximately 20 in its National Recruiting Group. The National Recruiting Group
maintains a national, proprietary database of relocatable and harder to find
consultants (due to unique or specialized skill sets), augments local
recruiting, advertises nationally and over the Internet for new consultants,
travels to branches to train new recruiters and performs related tasks.
The Company offers a number of programs designed to retain its trained
personnel. The Company offers a tuition reimbursement program and provides
technical training courses that are available for home study. The Company also
makes available to employees an employee stock purchase plan, a matching
provision as part of its 401(k) savings plan, and stock options.
It is often difficult to match the availability of consultants with client
requirements. Pre-marketing and lead times from clients help, but consultant
availability remains a significant factor in determining whether the Company or
a competitor will obtain the available business. The Company believes that
careful coordination of its recruiting and sales activities gives it an
advantage over many of its smaller competitors.
8
<PAGE>
COMPETITION
The information technology services industry is extremely competitive and
characterized by continuous changes in customer requirements and improvements in
technologies. The Company's competition varies significantly from city to city
as well as by the type of service provided. The Company believes that no one
competitor dominates any of its markets.
The Company's principal competitors frequently include: Cambridge Technology
Partners, Inc., Computer Sciences Corporation, Electronic Data Systems
Corporation, Keane, Inc., Sapient, Inc. and Whittman-Hart, Inc. Many large
accounting and consulting firms offer services that overlap with a significant
portion of the Company's services. Many of the Company's competitors are larger
and have greater financial, technical, sales and marketing resources than CIBER.
In addition, the Company must frequently compete with a client's own internal
information technology staff. The Company expects to encounter additional
competition as it enters new markets.
In order to maintain and develop new client relationships, the Company must
offer its services at competitive rates. There are competitors that may offer
the same or similar services as the Company at similar or lower rates.
Additionally, certain of the Company's clients require reduced rates after
services have commenced. There can be no assurance that the Company will be able
to compete effectively on pricing or other requirements and, as a result, the
Company could lose clients or be unable to maintain historic gross margin levels
or to operate profitably. With respect to the Company's implementation services
for software packages, the vendors of such software may have training or other
requirements that inhibit the Company from competing effectively with other
packaged software implementation providers. In addition, the vendors of such
software offer implementation services similar to the Company which, in certain
situations, can place the Company at a competitive disadvantage.
EMPLOYEES
As of December 31, 1999, CIBER had approximately 6,000 full-time employees,
including approximately 1,000 personnel in administrative positions and
approximately 5,000 billable consultants. Administrative personnel are
principally branch managers, sales representatives, recruiters and
administrative assistants located throughout the Company's offices. None of
the Company's employees are subject to a collective bargaining arrangement.
CIBER has entered into employment agreements with its executive officers.
CIBER believes its relations with its employees are good.
ITEM 2. PROPERTIES
CIBER's corporate office is located at 5251 DTC Parkway, Suite 1400, Englewood,
Colorado 80111, where the Company leases approximately 38,500 square feet of
office space. This lease expires in December 2003.
CIBER leases office space at various other locations under leases ranging from
month-to-month up to ten-year terms. CIBER had office leases totaling
approximately 601,000 square feet at December 31, 1999. Total office rent
expense for all offices was $10.7 million and $6.2 million for the year ended
June 30, 1999 and the six months ended December 31, 1999, respectively. The
Company's facilities are adequate for its current level of operations.
ITEM 3. LEGAL PROCEEDINGS
From time to time, CIBER is included in litigation relating to claims arising
out of its operations in the normal course of business. CIBER is not currently
involved in any legal proceedings, the resolution of which, in management's
opinion, would have a material effect on the Company's business or results of
operations.
9
<PAGE>
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of Shareholders of CIBER, Inc. was held on October 28, 1999.
The results to the matters that were voted upon were reported on Form 10-Q for
the quarter ended September 30, 1999.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS
The Company's common stock is listed on the New York Stock Exchange under the
symbol "CBR." The table below sets forth the high and low sales price per share
of the Company's common stock for the periods indicated.
<TABLE>
<CAPTION>
High Low
---- ---
Fiscal Year Ended June 30, 1998
<S> <C> <C>
First Quarter 24.25 16.56
Second Quarter 29.00 19.75
Third Quarter 35.63 23.41
Fourth Quarter 38.00 28.38
Fiscal Year Ended June 30, 1999
First Quarter 40.88 18.25
Second Quarter 27.94 13.31
Third Quarter 29.50 17.88
Fourth Quarter 23.38 16.19
Transition Period Ended December 31, 1999
First Quarter 20.13 14.94
Second Quarter 29.81 13.75
</TABLE>
As of December 31, 1999, the approximate number of beneficial owners of common
stock was 30,000.
The Company's policy is to retain its earnings to support the growth of the
Company's business. Accordingly, the Board of Directors of the Company has never
declared cash dividends on its common stock and has no present plans to do so.
RECENT SALES OF UNREGISTERED SECURITIES
On October 29, 1999, CIBER acquired Waterstone Consulting, Inc. ("Waterstone")
in a business combination accounted for as purchase. CIBER issued to the former
shareholders of Waterstone 243,347 shares of its common stock, having an
aggregate value of $4.0 million, which were not registered under the Securities
Act of 1933. The unregistered shares were issued in reliance upon Section 4(2)
of the Securities Act of 1933, as amended, as a sale by the Company not
involving a public offering. No underwriters were involved with such issuance of
common stock.
10
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1995 1996 1997 1998 1999 1998 1999
- ---------------------------------------- -- ---------- ------------- ---------- ---------- ----------- ----------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Revenues $ 234,060 295,965 413,380 576,488 719,661 339,714 362,000
Amortization of intangible assets $ 1,395 1,795 3,087 3,936 7,520 2,151 6,754
Merger costs $ 1,075 901 1,218 4,538 1,535 1,535 -
Operating income $ 13,789 19,944 33,368 57,868 89,340 41,908 29,225
Net income $ 9,777 14,781 21,226 36,477 54,495 25,437 17,643
Pro forma net income $ 8,164 12,469 20,423 34,270 54,495 25,437 17,643
Pro forma income per share - basic $ .20 .28 .43 .67 .98 .48 .31
Pro forma income per share - diluted $ .18 .26 .40 .64 .95 .46 .30
Cash dividends $ - - - - - - -
- ---------------------------------------- -- ---------- ------------- ---------- ---------- ----------- ----------- ----------
Weighted average shares - basic 40,551 44,240 47,894 51,355 55,362 53,314 57,345
Weighted average shares - diluted 44,513 47,711 50,613 53,843 57,141 55,324 58,496
- ---------------------------------------- -- ---------- ------------- ---------- ---------- ----------- ----------- ----------
BALANCE SHEET DATA:
Total assets $ 76,241 111,486 165,354 221,785 408,632 265,968 422,568
Total long-term liabilities $ 350 460 1,075 - - - 5,355
Total shareholders' equity $ 38,896 73,720 117,614 165,844 337,136 265,968 342,256
Shares outstanding at end of period 40,743 46,707 49,547 52,248 58,933 53,742 59,414
- ---------------------------------------- -- ---------- ------------- ---------- ---------- ----------- ----------- ----------
FINANCIAL PERFORMANCE:
Revenue growth 35.0% 26.4% 39.7% 39.5% 24.8% 25.4% 6.6%
Operating income margin 5.9% 6.7% 8.1% 10.0% 12.4% 12.3% 8.1%
Pro forma net income margin 3.5% 4.2% 4.9% 5.9% 7.6% 7.5% 4.9%
Stock price at end of period $ 4.44 11.00 17.09 38.00 19.13 27.81 27.50
</TABLE>
CIBER changed its fiscal year end to December 31 from June 30, effective
December 31, 1999. Accordingly, CIBER has presented financial information for
the six months ended December 31, 1999 (the "transition period") as well as
financial information for the six months ended December 31, 1998 for comparative
purposes.
11
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THE FOLLOWING DISCUSSION OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S CONSOLIDATED FINANCIAL
STATEMENTS AND NOTES THERETO. WITH THE EXCEPTION OF HISTORICAL MATTERS AND
STATEMENTS OF CURRENT STATUS, CERTAIN MATTERS DISCUSSED BELOW ARE
FORWARD-LOOKING STATEMENTS THAT INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM TARGETS OR PROJECTED
RESULTS. FACTORS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY, INCLUDE,
AMONG OTHERS, YEAR 2000 EFFECTS, GROWTH THROUGH BUSINESS COMBINATIONS AND
INTERNAL EXPANSION, THE ABILITY TO ATTRACT AND RETAIN QUALIFIED CONSULTANTS,
DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE ABSENCE OF LONG-TERM CONTRACTS,
MANAGEMENT OF A LARGE AND RAPIDLY GROWING BUSINESS, PROJECT RISKS, PRICING AND
MARGIN PRESSURE, COMPETITION, POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING
RESULTS, PRICE VOLATILITY, AND INTERNATIONAL EXPANSION, WHICH ARE DISCUSSED
HEREIN UNDER THE CAPTION "FACTORS THAT MAY AFFECT FUTURE RESULTS." MANY OF THESE
FACTORS ARE BEYOND THE COMPANY'S ABILITY TO PREDICT OR CONTROL. IN ADDITION, AS
A RESULT OF THESE AND OTHER FACTORS, THE COMPANY'S PAST FINANCIAL PERFORMANCE
SHOULD NOT BE RELIED ON AS AN INDICATION OF FUTURE PERFORMANCE.
OVERVIEW
CIBER now manages its business in three groups, the Custom Solutions Group
("CSG"), the Enterprise Application Solutions Group ("EAS") and CIBER Enterprise
Outsourcing ("CEO"). CSG provides application support, data warehousing
consulting, middleware and systems integration, IT outsourcing, networking
solutions and products and management consulting. EAS provides enterprise
software selection, implementation and integration services, including
PeopleSoft, SAP, Oracle, J. D. Edwards, Lawson, LogisticsPRO, Commerce One and
Siebel Systems, among others, as well as related hardware sizing and
procurement. In 1999, CEO began providing enterprise application hosting or
application service provider ("ASP") services.
CIBER has grown through mergers and acquisitions, as well as through internal
growth. For purposes of this report, the term "acquisition" refers to business
combinations accounted for as a purchase and the term "merger" refers to
business combinations accounted for as a pooling of interests. The Company's
acquisitions involve the capitalization of intangible assets, which intangible
assets are generally amortized over periods of up to 20 years for financial
reporting purposes. The Company's consolidated financial statements include the
results of operations of an acquired business since the date of acquisition.
Mergers result in a one-time charge in the period in which the transaction is
completed for costs associated with the business combination. Unless the effects
are immaterial, the Company's consolidated financial statements are restated for
all periods prior to a merger to include the results of operations, financial
position and cash flows of the merged company. In addition, selling, general and
administrative expenses may vary as a percentage of revenues depending on the
fluctuations in the selling, general and administrative expenses of merged
companies, if any, during any given period. CIBER completed 5 business
combinations in the six months ended December 31, 1999, 10 business combinations
in each of the fiscal years ended June 30, 1999 and 1998, and 6 business
combinations in the fiscal year ended June 30, 1997.
CIBER's other revenues include sales of computer hardware products, commissions
on computer and software product sales and software license and maintenance
fees. CIBER sold its software business in September 1999.
CIBER's largest customer is IBM, which represented approximately 7% of total
revenues for the six months ended December 31, 1999. CIBER's national contract
with IBM expires March 31, 2000. CIBER and IBM are currently negotiating a
contract renewal. This contract has been renewed each of the past four years.
There is no assurance a contract renewal can be negotiated or, if negotiated,
that the contract terms will be favorable to the Company. If CIBER does not
renew the IBM contract or if it is renewed on less favorable terms, CIBER's
future operating performance may be adversely impacted.
12
<PAGE>
The following table sets forth, for the periods indicated, certain items from
the Company's consolidated statements of operations, expressed as a percentage
of revenues:
<TABLE>
<CAPTION>
Six Months Ended
Year Ended June 30, December 31,
1997 1998 1999 1998 1999
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Gross margin 32.6% 34.9% 35.6% 35.3% 33.1%
Selling, general and administrative expenses 23.5 23.4 21.9 21.9 23.2
------------- ------------ ------------ ------------ ------------
Operating income before amortization
and merger costs 9.1 11.5 13.7 13.4 9.9
Amortization of intangible assets .7 .7 1.1 .6 1.8
Merger costs .3 .8 .2 .5 -
------------- ------------ ------------ ------------ ------------
Operating income 8.1 10.0 12.4 12.3 8.1
Interest and other income, net .2 .3 .4 .4 .4
------------- ------------ ------------ ------------ ------------
Income before income taxes 8.3 10.3 12.8 12.7 8.5
Income tax expense 3.2 4.0 5.2 5.2 3.6
------------- ------------ ------------ ------------ ------------
Net income 5.1% 6.3% 7.6% 7.5% 4.9%
============= ============ ============ ============ ============
Pro forma net income (1) 4.9% 5.9%
============= ============
</TABLE>
(1) Includes the effects of pro forma adjustments to income tax expense as a
result of merged companies.
SIX MONTHS ENDED DECEMBER 31, 1999 AS COMPARED TO SIX MONTHS ENDED DECEMBER 31,
1998
CIBER's total revenues for the six months ended December 31, 1999 increased 7%
to $362.0 million from $339.7 million for the six months ended December 31,
1998. This represents a 13% increase in consulting services revenues offset by a
planned decrease in other revenues, primarily sales of computer hardware
products. Other revenues decreased to $20.9 million for the six months ended
December 31, 1999 from $36.6 million for the same period of last year.
Management expects that the decrease in other revenues will likely continue in
the future due in part to the sale of CIBER's software business on September 30,
1999. Of the 13% increase in consulting services revenues, approximately 12% was
due to revenues from acquired businesses and approximately 1% was due to organic
growth of existing operations. CSG consulting revenues increased 4.6% while EAS
consulting revenues increased 35.0%. EAS consulting revenues increased to
approximately 26% of total consulting revenues for the six months ended December
31, 1999 from 22% in the same period last year.
Gross margin percentage decreased to 33.1% of revenues for the six months ended
December 31, 1999 from 35.3% of revenues for the same period of last year. This
decrease is due to declining gross margins on consulting services offset by
improved gross margins on other revenues. Consulting services gross margins
declined primarily due to a decrease in the utilization levels of professional
staff and a decrease in the number of professional staff resulting from industry
wide softness surrounding Year 2000 concerns. CSG gross margin on consulting
services declined to 29.5% for the six months ending December 31, 1999 from
33.0% in 1998 while EAS consulting margin declined to 41.6% from 46.1% last
year. Gross margin on other revenues increased due to decreased sales of lower
margin computer hardware products.
Selling, general and administrative expenses were 23.2% of revenues for the six
months ended December 31, 1999 compared to 21.9% of revenues for the same period
of last year. This increase is due primarily to additional costs incurred for
new programs implemented to position the Company for future growth, including
the addition of key senior and executive management team members, a new branding
and marketing initiative, and internal systems development. As CIBER's focus
continues to shift to more solutions-oriented and project work, selling, general
and administrative expenses are expected to increase as a percentage of sales
and partially offset the expected higher gross margins on such work.
13
<PAGE>
Amortization of intangible assets increased to $6.8 million for the six months
ended December 31, 1999 from $2.2 million for the same period of last year. This
increase was due to the additional intangible assets resulting from
acquisitions.
No merger costs were incurred during the six months ended December 31, 1999,
while merger costs, primarily transaction related broker and professional costs,
of $1.5 million were incurred during the six months ended December 31, 1998.
Interest income decreased to $920,000 for the six months ended December 31, 1999
from $1.3 million for the same period of last year due to decreased average cash
balances available for investment. Interest expense was $190,000 for the six
months ended December 31, 1999, while no interest was incurred during the same
period of last year. This increase was due to borrowings under CIBER's line of
credit during the six months ended December 31, 1999. Included in other income
for the six months ended December 31, 1999 is a $827,000 gain on the sale of the
LogisticsPRO software business (see Note 4 of Notes to Consolidated Financial
Statements). Management believes the sale of this software business will help to
maintain CIBER's independence and avoid conflicts with significant partners with
whom LogisticsPRO might otherwise compete. The sale allows CIBER to focus on its
IT consulting services business rather than selling proprietary products. In
addition, management believes that CIBER's profitability in the next 12 months
will be favorably impacted as a result of the sale due to decreased sales,
marketing and software development costs. As part of the sale, the purchaser
assumed all agreements for software maintenance which resulted in a reduction in
the balance of deferred revenues.
CIBER's effective tax rate for the six months ended December 31, 1999 was 42.6%
compared to 41.2% for the same period of last year. CIBER's effective tax rate
for the six months ended December 31, 1999 has increased due to increased
nondeductible amortization resulting from acquisitions.
CIBER's net income decreased to $17.6 million for the six months ended December
31, 1999 from $25.4 million for the same period of last year.
FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998
The Company's total revenues for fiscal 1999 increased 24.8% to $719.7 million
from $576.5 million for fiscal 1998. This represents a 27.8% increase in
consulting revenues offset by a planned decrease in other revenues, primarily
sales of computer hardware products. Other revenues decreased to $59.3 million
in fiscal 1999 from $59.8 million in fiscal 1998. The increase in consulting
revenues is derived primarily from an increase in hours billed and, to a lesser
extent, an increase in average billing rates.
Of the 27.8% increase in consulting revenues for fiscal 1999 in comparison to
fiscal 1998, approximately 9% was due to revenues from acquired businesses or
immaterial poolings of interests and approximately 19% was due to organic growth
of existing operations. Organic growth for the year was driven by a strong
demand for ERP implementation services and was lessened, to some extent, due to
declining direct Year 2000 service revenues. CSG consulting revenues increased
20.9% while EAS consulting revenues increased 59.0%. EAS consulting revenues
increased to approximately 23% of total consulting revenues in fiscal 1999 from
19% in 1998.
Gross margin percentage improved to 35.6% of revenues in fiscal 1999 from 34.9%
in fiscal 1998. This improvement was due to improved gross margins on both
consulting services and other revenues. Gross margins on consulting services
have increased as a larger percentage of the Company's revenues are derived from
higher margin solutions oriented and project work. EAS consulting margins
improved to 46.4% in fiscal 1999 from 44.9% in 1998 which was offset somewhat by
a decline in CSG consulting margin to 32.6% in 1999 from 33.4% in 1998.
Selling, general and administrative expenses were 21.9% of revenues for fiscal
1999 compared to 23.4% of revenues for fiscal 1998. The decrease as a percentage
of revenues is primarily due to greater economies of scale, including reduced
administrative costs of certain merged companies.
14
<PAGE>
Amortization of intangible assets increased to $7.5 million in fiscal 1999 from
$3.9 million in fiscal 1998. This increase was due to the additional
amortization of intangible assets resulting from mergers and acquisitions.
Merger costs, primarily transaction related broker and professional costs, of
$1.5 million were incurred in fiscal 1999 compared to $4.5 million in fiscal
1998.
Net interest and other income increased to $2.6 million in fiscal 1999 from $1.5
million in fiscal 1998 due to increased average cash balances available for
investment and the elimination of borrowings of certain merged companies.
After the pro forma adjustment, if any, to income tax expense, the Company's pro
forma effective tax rates for fiscal 1999 and 1998 were 40.8% and 42.3%,
respectively. The Company's effective tax rate is higher than its normal tax
rate due to nondeductible merger costs. Nondeductible amortization resulting
from fiscal 1999 acquisitions has also increased the Company's effective tax
rate. The pro forma adjustment to income tax expense in fiscal 1998 reflects the
exclusion of the one-time income tax effects related to changes in the tax
status of certain merged companies and imputes income tax expense for S
corporation operations that were not subject to income taxes.
The Company's pro forma net income increased 59.0% to $54.5 million in fiscal
1999 from $34.3 million in fiscal 1998.
FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997
The Company's total revenues for fiscal 1998 increased 39.5% to $576.5 million
from $413.4 million for fiscal 1997. This represents a 44.2% increase in
consulting revenues and an 8.8% increase in other revenues. Other revenues
increased to $59.8 million in fiscal 1998 from $54.9 million in fiscal 1997. The
increase in consulting revenues is derived primarily from an increase in hours
billed and, to a lesser extent, an increase in average billing rates.
Of the 44.2% increase in consulting revenues for fiscal 1998 in comparison to
fiscal 1997, approximately 8% was due to revenues from acquired businesses or
immaterial poolings of interests and approximately 36% was due to organic growth
of existing operations. This growth was from increased demand for IT services,
including an increased demand for Year 2000 related services and increased
demand for ERP software implementation services. CSG consulting revenues
increased 41.0% while EAS consulting revenues increased 59.8%. EAS consulting
revenues increased to approximately 19% of total consulting revenues in fiscal
1998 from 17% in 1997.
Gross margin percentage improved to 34.9% of revenues in fiscal 1998 from 32.6%
of revenues in fiscal 1997. This increase was due to improved gross margins on
both consulting services and other revenues. CSG consulting margins increased to
33.4% in fiscal 1998 from 32.0% in 1997 and EAS consulting margins increased to
44.9% in 1999 from 42.4% in 1998.
Selling, general and administrative expenses were 23.4% of revenues for fiscal
1998 compared to 23.5% of revenues for fiscal 1997.
Amortization of intangible assets increased to $3.9 million in fiscal 1998 from
$3.1 million in fiscal 1997. This increase was due primarily to the Company's
acquisitions in fiscal 1998.
Merger costs, primarily transaction related broker and professional costs, of
$4.5 million were incurred in fiscal 1998 compared to $1.2 million in fiscal
1997.
Net interest income increased to $1.5 million in fiscal 1998 from $1.0 million
in fiscal 1997 due to increased average cash balances available for investments
and the elimination of borrowings of certain merged companies.
15
<PAGE>
After the pro forma adjustment to income tax expense, the Company's pro forma
effective tax rates for fiscal 1998 and 1997 were 42.3% and 40.6%, respectively.
This increase was primarily due to increased nondeductible merger costs. The pro
forma adjustment to income tax expense reflects the exclusion of the one-time
income tax effects related to changes in the tax status of certain merged
companies and imputes income tax expense for S corporation operations that were
not subject to income taxes.
The Company's pro forma net income increased 67.8% to $34.3 million in fiscal
1998 from $20.4 million in fiscal 1997.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1999, the Company had $78.0 million of working capital and had a
current ratio of 2:1. 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
the next year.
In June 1999, CIBER's Board of Directors authorized the repurchase of up to 10%
of CIBER's outstanding stock. CIBER may use significant amounts of cash for
repurchases of its stock or to purchase businesses. As a result, CIBER may
borrow to finance such activities. Future borrowings may include bank, private
or public debt.
Net cash provided by operating activities was $17.8 million, $26.2 million and
$63.4 million in fiscal 1997, 1998 and 1999, respectively, and $29.1 million and
$28.7 million for the six months ended December 31, 1998 and 1999, respectively.
Changes in operating assets and liabilities have used significant amounts of
cash. The Company's accounts receivable totaled $139.4 million at December 31,
1999 compared to $151.0 million at June 30, 1999. Accounts receivable days sales
outstanding ("DSO") was 73 days at December 31, 1999, which management believes
is in line with industry standards.
Net cash used in investing activities was $27.4 million, $11.2 million and $40.5
million in fiscal 1997, 1998 and 1999, respectively, and $8.5 million and $67.3
million for the six months ended December 31, 1998 and 1999, respectively. The
Company used cash for acquisitions of $19.3 million, $351,000 and $26.5 million
during fiscal 1997, 1998 and 1999, respectively, and $4.1 million and $60.1
million during the six months ended December 31, 1998 and 1999, respectively.
The Company also purchased property and equipment of $7.2 million, $11.7 million
and $14.0 million during fiscal 1997, 1998 and 1999, respectively, and $4.4
million and $7.2 million during the six months ended December 31, 1998 and 1999,
respectively.
Net cash provided by (used in) financing activities was $12.9 million, ($4.9
million), and $1.8 million in fiscal 1997, 1998 and 1999, respectively, and $4.2
million and ($20.5 million) in the six months ended December 31, 1998 and 1999,
respectively. The Company obtained net cash proceeds from sales of common stock
of $22.9 million, $5.8 million and $14.8 million in fiscal 1997, 1998 and 1999,
respectively, and $6.0 million and $10.9 million in the six months ended
December 31, 1998 and 1999, respectively. Certain of the companies that have
been acquired or have merged with CIBER have had outstanding balances on lines
of credit and notes payable. Upon acquisition by or merger with CIBER, these
borrowings were paid in full.
CIBER purchased 706,000 shares of treasury stock for $13.0 million during fiscal
1999 and 2,255,000 shares for $36.7 million during the six months ended December
31, 1999. CIBER has reissued some of the treasury shares under CIBER's Employee
Stock Purchase Plan and for acquisitions.
16
<PAGE>
CIBER has a $50 million unsecured revolving line of credit with a bank. At
December 31, 1999, CIBER had $5,355,000 outstanding under this line of credit.
There were no outstanding borrowings under this bank line of credit at June 30,
1998 and 1999. Outstanding borrowings bear interest at the three month London
Interbank Offered Rate ("LIBOR") plus 2%. The credit agreement requires a
commitment fee of 0.225% per annum on any unused portion of the line of credit
up to $25 million. On July 1, 2000, the amount available under the line of
credit will be reduced to $35 million and the maximum unused portion of the line
of credit on which the commitment fee is based will be reduced to $20 million.
The credit agreement expires on January 31, 2001. CIBER expects, although there
can be no assurance, to be able to renew this line of credit on similar terms.
In December 1999, CIBER announced its plans to create an Application Service
Provider ("ASP") joint venture. It is planned that the joint venture entity will
be CIBER's existing subsidiary CIBER Enterprise Outsourcing, Inc. In
anticipation of the venture, in February 2000, CIBER Enterprise Outsourcing,
Inc. changed its name to Agilera.com, Inc. ("Agilera"). It is planned that the
venture will be formed by the private sale of approximately $45 million of
Agilera preferred stock to new investors. It is anticipated that CIBER will
initially have approximately a 42% voting interest in Agilera after the sale of
preferred stock, which ownership percentage may decrease in the event of future
sales of common stock by Agilera. There can be no assurances that this
transaction will be completed as described above or at all or that the joint
venture, if formed, will be successful.
SEASONALITY
The Company experiences a moderate amount of seasonality. Typically, operating
income as a percentage of revenues is lowest in the last quarter of each
calendar year because more holidays and vacations are taken at that time of year
resulting in fewer hours billed in that period.
FACTORS THAT MAY AFFECT FUTURE RESULTS
Included in this report and elsewhere from time to time in other written reports
and oral statements, including but not limited to, the Annual Report to
Shareholders, quarterly shareholder letters, news releases and investor
presentations, are forward-looking statements about the Company's business
strategies, market potential, future financial performance and other matters
which reflect management's current expectations. Without limiting the foregoing,
the words "believes," "anticipates," "plans," "expects" and similar expressions
are intended to identify forward-looking statements. The Company disclaims any
intent or obligation to update publicly such forward-looking statements. Actual
results may differ materially from those projected in any such forward-looking
statements due to a number of factors, including, without limitation, those set
forth below.
The Company operates in a dynamic and rapidly changing environment that involves
numerous risks and uncertainties. The following section lists some, but not all,
of the risks and uncertainties that may have a material adverse effect on the
Company's business, financial condition, results of operations and the market
price of its common stock.
YEAR 2000 EFFECTS - IT services industry demand in 1999 and 1998 was impacted to
a great extent by Year 2000 dynamics. In fiscal 1998 and in the first half of
fiscal 1999 growth was caused not only by increased demand for direct Year 2000
services, such as code remediation, but also indirect services, such as ERP
systems implementation and replacement of non-compliant legacy systems. Towards
the end of fiscal 1999 and through the six months ended December 31, 1999,
CIBER's growth slowed as companies completed Year 2000 readiness programs and
became reluctant, in many cases, to commence significant new initiatives until
Year 2000 failure risks have passed, generally during the first half of calendar
2000.
Management believes there will be significant increased future demand for IT
services driven by e.business and other factors that will follow the Year 2000
transition period, beginning sometime during the first half of calendar 2000.
However, during this transition period, revenues and operating performance may
decline. Given the lack of precedent for an issue of this nature and magnitude,
CIBER's ability to forecast the impact on future results is limited.
17
<PAGE>
GROWTH THROUGH BUSINESS COMBINATIONS AND INTERNAL EXPANSION - As an integral
part of its business strategy, the Company intends to continue to expand by
acquiring information technology businesses. The Company continuously evaluates
potential business combinations and aggressively pursues attractive
transactions. From July 1, 1996 through December 31, 1999, the Company completed
31 business combinations. The success of this strategy depends not only upon the
Company's ability to identify and acquire businesses on a cost-effective basis,
but also upon its ability to integrate acquired operations into its organization
effectively, to retain and motivate key personnel and to retain clients of
acquired businesses. Business combinations involve numerous risks, including the
ability to manage geographically remote offices, the diversion of management's
attention from other business concerns and the risks of entering markets in
which the Company has limited or no direct experience. In addition, acquisitions
may involve the expenditure of significant funds and the incurrence of
significant charges associated with the amortization of goodwill or other
intangible assets or future write-downs of the recorded values of assets
acquired. There can be no assurance the Company will be able to combine
additional business, or that any business combination will result in benefits to
the Company, or that management will be able to manage effectively the resulting
business. Additionally, the Company experiences competition for business
combinations.
The Company may open new offices in attractive markets with its own personnel.
Many of the Company's branch offices were originally start-up operations. Not
all branch offices, whether start-up or acquired, have been successful. The
Company's growth rate has been due, in part, to the growth of industry demand
for information technology professional services. There can be no assurance that
this increased industry demand will continue in future periods. There can be no
assurance that the Company will be able to successfully start up, identify,
acquire, or integrate future successful branch office operations.
ABILITY TO ATTRACT AND RETAIN QUALIFIED CONSULTANTS - The Company's future
success will depend in part on its ability to hire and retain adequately trained
personnel who can address the changing and increasingly sophisticated needs of
its clients. The Company's on-going personnel needs arise from: (i) increased
demand for the Company's services, (ii) turnover, which is generally high in the
industry and (iii) client requests for consultants trained in the newest
software and hardware technologies. For example, demand for IT services related
to e.Business, web-enabled and internet technology has increased significantly
while demand for services related to legacy based technology has generally
softened. Few of the Company's employees are bound by non-compete agreements.
Competition for personnel in the information technology services industry is
significant and the Company has had, and expects to continue to have, difficulty
in attracting and retaining an optimal level of qualified consultants. In
particular, competition is intense for the limited number of qualified project
managers and professionals with specialized skills, such as a working knowledge
of certain sophisticated software. There can be no assurance that the Company
will be successful in attracting and retaining the personnel it requires to
continue to grow.
DEPENDENCE ON SIGNIFICANT RELATIONSHIPS AND THE ABSENCE OF LONG-TERM CONTRACTS -
The Company's five largest clients accounted for 15% and 16% of the Company's
total revenues for the year ended June 30, 1999 and the six months ended
December 31, 1999, respectively. No one client accounted for more than 10% of
the Company's total revenues in fiscal 1999 or in the six months ended December
31, 1999. CIBER strives to develop long-term relationships with its clients.
Most client assignments are from three to twelve months, however, many of the
Company's client relationships have continued for many years. Although they may
be subject to penalty provisions, clients may generally cancel a contact at any
time. In addition, under many contracts, clients may reduce their use of the
Company's services under such contract without penalty. The termination or
significant reduction of its business relationship with any of its significant
clients would have a material adverse effect on the Company. Additionally, the
Company has a significant relationship with PeopleSoft as a PeopleSoft
implementation partner. Approximately 8% of CIBER's total revenues is derived
from clients who purchase implementation services for their PeopleSoft software.
In the event PeopleSoft products become obsolete or non-competitive or if the
Company should lose its "implementation partner" status with PeopleSoft, the
Company could suffer a material adverse effect.
18
<PAGE>
MANAGEMENT OF A LARGE AND RAPIDLY GROWING BUSINESS - The Company's rapid growth
could place a substantial strain on its operational, administrative and
financial resources. The Company's ability to manage the growth of its staff and
facilities effectively will require it to continue to improve its operational,
financial and other internal systems, and to train, motivate and manage its
consultants. If the Company's management is unable to manage growth effectively
or its consultants are unable to achieve anticipated performance levels, or if
the integration of new businesses results in a material diversion of
management's attention from the day-to-day operations of the business, the
Company's results of operations would be materially adversely affected.
PROJECT RISKS - The Company has provided and intends to continue to provide
project services to its clients. Projects are distinguishable from the Company's
professional services staff supplementation contracts by the level of
responsibility assumed by the Company. In addition, projects generally have a
longer and more costly sales cycle. These factors may cause fluctuations in
quarterly results. In a typical project, the Company assumes major
responsibilities for the management of the project and/or the design of
deliverables that results in a client-specific outcome. With professional
services staff supplementation contracts, the Company's clients generally
maintain responsibility for the overall tasks. The failure of a project or the
failure of the Company to provide project services in a satisfactory manner
could have a material adverse effect on the Company. Further, the Company may
undertake projects on a fixed-price basis and also may guarantee performance
based upon defined operating specifications. Cost overruns, unsatisfactory
performance or unanticipated difficulties in completing projects could have a
material adverse effect on the Company's results of operations.
PRICING AND MARGIN PRESSURE - Many of the Company's larger clients purchase
information technology services primarily from a limited number of pre-approved
vendors. In order to remain on its clients' vendor lists and to develop new
client relationships, the Company must satisfy client requirements at
competitive rates. Although the Company continually attempts to lower its costs,
there are other companies that may offer the same or similar services at equal
or lower costs. Furthermore, if competition intensifies between information
technology service providers, there may be increased demand for qualified
consultants resulting in upward market pressure on consultant compensation.
There can be no assurance that the Company will be able to compete effectively
on pricing or other requirements and, as a result, the Company could lose
clients or be unable to maintain historic gross margin levels or to operate
profitably. With respect to the Company's implementation services for software
packages, the manufacturers of such software may have training or other
requirements that inhibit the Company from competing effectively with other
packaged software implementation providers. In addition, as the Company expands
its service offerings to include a greater number of fixed-price projects, the
Company may experience a decrease in margins as a result of unanticipated cost
overruns resulting from the inability to meet various project requirements.
COMPETITION - The Company operates in a highly competitive and rapidly changing
industry and competes with a variety of companies. Most of these competing
companies, many of which are significantly larger and have greater financial,
technical and marketing resources, provide the same services as those offered
by, and some offer a wider variety of services than, the Company. Many large
accounting and management consulting firms offer services that overlap with a
significant portion of the Company's services, and the Company competes with the
internal information technology staffs of its clients and potential clients.
Also, computer hardware and software vendors are becoming increasingly involved
in systems integration projects. There can be no assurance that the Company will
be able to continue to compete successfully with its existing or future
competitors or that competition will not have a material adverse effect on the
Company's results of operations.
POTENTIAL FLUCTUATIONS IN QUARTERLY OPERATING RESULTS - The Company's quarterly
operating results may fluctuate significantly in the future as a result of a
variety of factors, many of which are outside the Company's control. Factors
that may affect the Company's quarterly revenues or operating results generally
include: costs relating to the expansion of the Company's business, the extent
and timing of business acquisitions, the incurrence of merger costs, the timing
of assignments from customers, the seasonal nature of the Company's business due
to variations in holidays and vacation schedules, the introduction of new
services by the Company or its competitors, price competition or price changes,
19
<PAGE>
general economic conditions and economic conditions specific to the information
technology, consulting, or information technology staffing industries. Quarterly
sales and operating results can be difficult to forecast even in the short term.
Due to all of the foregoing factors, it is possible that the Company's revenues
or operating results in one or more future quarters will fail to meet or exceed
the expectations of security analysts or investors. In such event, the trading
price of the Company's common stock would likely be materially adversely
affected.
PRICE VOLATILITY - The market price of the Company's common stock could be
subject to significant fluctuations in response to variations in quarterly
operating results, the Company's prospects, changes in earnings estimates by
securities analysts and by economic, financial and other factors and market
conditions that can affect the capital markets generally, the industry segment
of which the Company is a part, the NYSE, including the level of, and
fluctuations in, the trading prices of stocks generally and sales of substantial
amounts of the Company's common stock in the market, or the perception that such
sales could occur, and by other events that are difficult to predict and are
beyond the Company's control. In addition, the securities markets have
experienced significant price and volume fluctuations from time to time in
recent years that have often been unrelated or disproportionate to the operating
performance of particular companies. These broad fluctuations may adversely
affect the market price of the Company's common stock.
INTERNATIONAL EXPANSION - In future periods, CIBER may significantly expand its
international operations, which currently includes offices in Toronto and
Vancouver, Canada and Eindhoven, the Netherlands. Such international operations
will be subject to political and economic uncertainties, fluctuations in foreign
currency exchange rates and new tax and legal requirements. Other risks inherent
in managing international operations include geographically distant locations,
customers and employees speaking different languages and different cultural
approaches to the conduct of business.
ITEM 7A. 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, except as noted below.
The Company has a $50 million revolving line of credit with a bank. As of
December 31, 1999, the Company had $5.4 million outstanding under this line of
credit. The interest rate on the line of credit is based on LIBOR, plus 2%.
Therefore, as LIBOR fluctuates, the Company may experience changes in interest
expense that could impact financial results. If LIBOR were to increase or
decrease by 1%, the result would be an annual increase or decrease in interest
expense of approximately $54,000 for the revolving line of credit, assuming
an outstanding balance of $5.4 million.
20
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Shareholders
CIBER, Inc.:
We have audited the accompanying consolidated balance sheets of CIBER, Inc. and
subsidiaries as of June 30, 1998 and 1999, and December 31, 1999 and the related
consolidated statements of operations, shareholders' equity and cash flows for
each of the years in the three-year period ended June 30, 1999, and the
six-month period ended December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of CIBER, Inc. and
subsidiaries as of June 30, 1998 and 1999, and December 31, 1999 and the results
of their operations and their cash flows for each of the years in the three-year
period ended June 30, 1999, and the six-month period ended December 31, 1999, in
conformity with generally accepted accounting principles.
KPMG LLP
Denver, Colorado
February 4, 2000
21
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED JUNE 30, 1997, 1998 AND 1999, AND
THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
IN THOUSANDS, EXCEPT PER SHARE DATA 1997 1998 1999 1998 1999
------------ ----------- ----------- ------------- -----------
(unaudited)
<S> <C> <C> <C> <C> <C>
Consulting services $358,437 $516,692 $660,384 $303,153 $341,123
Other revenues 54,943 59,796 59,277 36,561 20,877
------------ ----------- ----------- ------------- -----------
Total revenues 413,380 576,488 719,661 339,714 362,000
------------ ----------- ----------- ------------- -----------
Cost of consulting services 237,254 332,356 423,131 194,660 229,853
Cost of other revenues 41,152 43,150 40,176 25,221 12,239
Selling, general and administrative expenses 97,301 134,640 157,959 74,239 83,929
Amortization of intangible assets 3,087 3,936 7,520 2,151 6,754
Merger costs 1,218 4,538 1,535 1,535 -
------------ ----------- ----------- ------------- -----------
Operating income 33,368 57,868 89,340 41,908 29,225
Interest income 1,467 1,767 2,640 1,330 920
Interest expense (434) (232) - - (190)
Other income, net - - - - 778
------------ ----------- ----------- ------------- -----------
Income before income taxes 34,401 59,403 91,980 43,238 30,733
Income tax expense 13,175 22,926 37,485 17,801 13,090
------------ ----------- ----------- ------------- -----------
Net income $ 21,226 $ 36,477 $ 54,495 $ 25,437 $17,643
============ =========== =========== ============= ===========
Pro forma information (unaudited) (Note 1(j)):
Historical net income $ 21,226 $ 36,477
Pro forma adjustment to income tax expense (803) (2,207)
============ ===========
Pro forma net income $ 20,423 $ 34,270
============ ===========
Earnings per share - basic $ .43 $ .67 $ .98 $ .48 $ .31
Earnings per share - diluted $ .40 $ .64 $ .95 $ .46 $ .30
Weighted average shares - basic 47,894 51,355 55,362 53,314 57,345
Weighted average shares - diluted 50,613 53,843 57,141 55,324 58,496
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1998 AND 1999, AND DECEMBER 31, 1999
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
IN THOUSANDS, EXCEPT SHARE DATA 1998 1999 1999
------------ ---------------- -----------------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 37,291 $ 61,951 $ 2,858
Accounts receivable 121,538 150,976 139,418
Prepaid expenses and other assets 6,357 5,602 7,595
Deferred income taxes 1,458 2,915 2,960
------------ ---------------- -----------------
Total current assets 166,644 221,444 152,831
------------ ---------------- -----------------
Property and equipment, at cost 32,561 47,997 55,510
Less accumulated depreciation and amortization (15,219) (22,866) (26,947)
------------ ---------------- -----------------
Net property and equipment 17,342 25,131 28,563
------------ ---------------- -----------------
Intangible assets, net 33,597 157,012 233,975
Deferred income taxes 2,068 1,694 1,773
Other assets 2,134 3,351 5,426
------------ ---------------- -----------------
Total assets $221,785 $408,632 $422,568
============ ================ =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Trade payables $ 10,989 $ 13,502 $ 18,102
Acquisition costs payable - 2,098 15,268
Accrued compensation and payroll taxes 25,720 36,845 31,841
Deferred revenues 4,097 3,850 874
Other accrued expenses and liabilities 11,859 8,020 4,945
Income taxes payable 3,276 7,181 3,751
Deferred income taxes - - 67
------------ ---------------- -----------------
Total current liabilities 55,941 71,496 74,848
Bank line of credit - - 5,355
------------ ---------------- -----------------
Total liabilities 55,941 71,496 80,203
------------ ---------------- -----------------
Commitments and contingencies
Minority interest - - 109
Shareholders' equity:
Preferred stock, $0.01 par value, 5,000,000 shares
authorized, no shares issued - - -
Common stock, $0.01 par value, 100,000,000 shares
authorized, 52,248,000, 58,933,000 and 59,414,000 shares
issued and outstanding 522 589 594
Additional paid-in capital 93,889 222,652 230,615
Retained earnings 71,433 122,607 139,312
Treasury stock, 500,000 and 1,717,000 shares at cost - (8,712) (28,265)
------------ ----------------- ----------------
Total shareholders' equity 165,844 337,136 342,256
------------ ----------------- ----------------
Total liabilities and shareholders' equity $221,785 $408,632 $422,568
============ ================ =================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
YEARS ENDED JUNE 30, 1997, 1998 AND 1999,
AND THE SIX MONTHS ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON STOCK PAID-IN RETAINED TREASURY SHAREHOLDERS'
IN THOUSANDS SHARES AMOUNT CAPITAL EARNINGS STOCK EQUITY
------ ------ ------- -------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
BALANCES AT JULY 1, 1996 46,707 $467 $ 39,122 $ 34,131 $ - $ 73,720
Public offering, net of offering costs of $1,390 1,220 12 16,915 - - 16,927
Employee stock purchases and options exercised 1,432 14 3,316 - - 3,330
Acquisition consideration 186 2 2,567 - - 2,569
Sale of common stock by merged companies - - 2,651 - - 2,651
Tax benefit from exercise of stock options - - 6,366 - - 6,366
Termination of S corporation tax status of merged company - - 2,041 (2,041) - -
Compensation expense related to stock options 2 - 62 - - 62
Net income - - - 21,226 - 21,226
Distributions by merged companies - - - (8,536) - (8,536)
Adjustment to conform year end of merged companies - - - (701) - (701)
----------------------------------------------------------------------
BALANCES AT JUNE 30, 1997 49,547 495 73,040 44,079 - 117,614
Note payable paid with stock 51 1 1,105 - - 1,106
Employee stock purchases and options exercised 1,407 14 5,752 - - 5,766
Acquisition consideration 96 1 1,150 - - 1,151
Immaterial poolings of interests 1,145 11 347 1,834 - 2,192
Tax benefit from exercise of stock options - - 9,149 - - 9,149
Termination of S corporation tax status of merged company - - 3,287 (3,287) - -
Compensation expense related to stock and stock options 2 - 59 - - 59
Net income - - - 36,477 - 36,477
Distributions by merged companies - - - (7,670) - (7,670)
----------------------------------------------------------------------
BALANCES AT JUNE 30, 1998 52,248 522 93,889 71,433 - 165,844
Employee stock purchases and options exercised 1,435 14 14,738 (3,225) 3,225 14,752
Acquisition consideration 4,286 43 106,492 (96) 1,049 107,488
Immaterial pooling of interests 961 10 806 - - 816
Tax benefit from exercise of stock options - - 5,499 - - 5,499
Compensation expense related to stock and stock options 3 - 395 - - 395
Stock options exchanged for accrued compensation - - 833 - - 833
Net income - - - 54,495 - 54,495
Purchases of treasury stock - - - - (12,986) (12,986)
----------------------------------------------------------------------
BALANCES AT JUNE 30, 1999 58,933 589 222,652 122,607 (8,712) 337,136
Employee stock purchases and options exercised 457 4 4,485 (923) 7,326 10,892
Acquisition consideration - - 1,590 (15) 9,850 11,425
Tax benefit from exercise of stock options - - 1,664 - - 1,664
Compensation expense related to stock and stock options 24 1 224 - - 225
Net income - - - 17,643 - 17,643
Purchases of treasury stock - - - - (36,729) (36,729)
----------------------------------------------------------------------
BALANCES AT DECEMBER 31, 1999 59,414 $594 $230,615 $139,312 $ (28,265) $342,256
======================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE>
CIBER, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED JUNE 30, 1997, 1998 AND 1999, AND
THE SIX MONTHS ENDED DECEMBER 31, 1998 (UNAUDITED) AND 1999
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
IN THOUSANDS 1997 1998 1999 1998 1999
------------ ----------- ----------- ------------- ------------
OPERATING ACTIVITIES: (unaudited)
<S> <C> <C> <C> <C> <C>
Net income $21,226 $36,477 $54,495 $25,437 $17,643
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 6,297 9,468 15,110 5,375 11,197
Deferred income taxes (859) (4,672) (2,049) (2,642) (77)
Gain on sale of LogisticsPRO - - - - (827)
Other 32 48 395 37 229
Changes in operating assets and liabilities,
net of the effect of acquisitions:
Accounts receivable (14,830) (35,442) (17,789) (13,447) 17,295
Other current and long-term assets (446) (4,454) 416 1,249 (3,968)
Trade payables (1,322) (2,072) 1,782 7,098 4,420
Accrued compensation and payroll taxes 3,516 6,610 9,212 1,881 (7,446)
Deferred revenues 156 2,034 (247) (637) (1,760)
Other accrued expenses and liabilities 194 3,402 (4,211) (19) (5,782)
Income taxes payable 3,866 14,783 6,252 4,799 (2,227)
------------ ----------- ----------- ------------- ------------
Net cash provided by operating activities 17,830 26,182 63,366 29,131 28,697
------------ ----------- ----------- ------------- ------------
INVESTING ACTIVITIES:
Acquisitions, net of cash acquired (19,290) (351) (26,500) (4,138) (60,090)
Purchases of property and equipment (7,230) (11,665) (13,972) (4,365) (7,168)
Purchases of investments (2,039) (905) - - -
Sales of investments 1,111 1,695 - - -
Other - - - - (50)
------------ ----------- ----------- ------------- ------------
Net cash used in investing activities (27,448) (11,226) (40,472) (8,503) (67,308)
------------ ----------- ----------- ------------- ------------
FINANCING ACTIVITIES:
Proceeds from sales of common stock, net 22,908 5,766 14,752 5,984 10,892
Purchases of treasury stock - - (12,986) (1,795) (36,729)
Net (payments) borrowings on bank lines of credit (1,568) (1,985) - - 5,355
Borrowings on notes payable 3,545 247 - - -
Payments on notes payable (3,451) (2,650) - - -
Distributions by merged companies (8,536) (6,300) - - -
------------ ----------- ----------- ------------- ------------
Net cash provided by (used in) financing 12,898 (4,922) 1,766 4,189 (20,482)
activities
------------ ----------- ----------- ------------- ------------
Net increase (decrease) in cash and cash 3,280 10,034 24,660 24,817 (59,093)
equivalents
Cash and cash equivalents, beginning of period 24,398 27,257 37,291 37,291 61,951
Adjustment to conform fiscal year of merged companies (421) - - - -
------------ ----------- ----------- ------------- ------------
Cash and cash equivalents, end of period $27,257 $37,291 $61,951 $62,108 $ 2,858
============ =========== =========== ============= ============
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE>
CIBER, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1997, 1998 AND 1999, AND DECEMBER 31, 1999
(1) NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) NATURE OF OPERATIONS
CIBER, Inc. ("CIBER" or the "Company") is a provider of information technology
("IT") consulting services. At December 31, 1999, CIBER had approximately 6,000
employees located in 45 major cities in the United States plus Canada and the
Netherlands. CIBER now manages its business in three groups, the Custom
Solutions Group ("CSG"), the Enterprise Application Solutions Group ("EAS") and
CIBER Enterprise Outsourcing ("CEO"). CSG provides application support, data
warehousing consulting, middleware and systems integration, IT outsourcing,
networking solutions and products and management consulting. EAS provides
enterprise software selection, implementation and integration services,
including PeopleSoft, SAP, Oracle, J. D. Edwards, Lawson, LogisticsPRO, Commerce
One and Siebel Systems, among others, as well as related hardware sizing and
procurement. In 1999, CEO began providing enterprise application hosting or
application service provider ("ASP") services.
(b) PRINCIPLES OF CONSOLIDATION AND INTERIM FINANCIAL INFORMATION
The consolidated financial statements include the accounts of the Company and
all wholly-owned and majority-owned subsidiaries. All material intercompany
balances and transactions have been eliminated.
(c) CHANGE IN FISCAL YEAR END
CIBER changed its fiscal year end to December 31 from June 30, effective
December 31, 1999. References to fiscal 1999 relate to the year ended June 30,
1999.
Unaudited consolidated statements of operations and cash flows for the six
months ended December 31, 1998 have been included in the accompanying
consolidated financial statements for comparative purposes.
(d) CASH EQUIVALENTS
All highly liquid investments purchased with a maturity of three months or less
are considered to be cash equivalents. Cash equivalents consist of money market
funds of $10,199,000 and $19,601,000 at June 30, 1998 and 1999, respectively,
and investment grade commercial paper of $21,179,000 and $33,213,000 at June 30,
1998 and 1999, respectively. There were no cash equivalents at December 31,
1999.
(e) PROPERTY AND EQUIPMENT
Property and equipment, which consists primarily of computer equipment and
furniture, is stated at cost. Depreciation is computed using straight-line and
accelerated methods over the estimated useful lives, ranging primarily from five
to seven years. Depreciation expense was $3,210,000, $5,532,000, $7,590,000 and
$4,443,000 for the years ended June 30, 1997, 1998 and 1999, and the six months
ended December 31, 1999, respectively.
(f) COSTS OF DEVELOPING COMPUTER SOFTWARE FOR INTERNAL USE
Direct costs of time and material incurred for the development of software for
internal use are capitalized as property and equipment. These costs are
depreciated using the straight-line method over the estimated useful life of the
software, ranging from three to seven years.
26
<PAGE>
(g) INTANGIBLE ASSETS
Intangible assets consist of goodwill, client lists and noncompete agreements.
Goodwill is amortized over 6 to 20 years. Client lists are amortized over the
estimated useful lives ranging from two to eight years. Noncompete agreements
are amortized over the terms of the contracts that range from one to six years.
Amortization is recorded using the straight-line method.
Intangible assets are reviewed for impairment when events indicate the carrying
amount of intangible assets may not be recoverable. Impairments would be
considered to exist when the estimated undiscounted future cash flows expected
to result from the use of the intangible asset are less than the carrying amount
of the asset. Impairment, if any, will be measured based on forecasted future
discounted operating cash flows.
(h) REVENUE RECOGNITION
CIBER provides consulting services under time-and-material and fixed-price
contracts. CIBER recognizes revenue under time-and-material contracts as hours
and costs are incurred. For fixed-price contracts, revenue is recognized on the
basis of the estimated percentage of completion based on costs incurred relative
to total estimated costs. Losses, if any, on fixed-price contracts are
recognized when the loss is determined.
Other revenues include sales of computer hardware products, commissions on
computer and software product sales and software license and maintenance fees.
Revenues related to the sale of computer products are recognized when the
products are shipped. Software license fee revenues are recognized over the
period of the software implementation and revenues from maintenance agreements
are recognized ratably over the maintenance period. On September 30, 1999 CIBER
sold its software business.
(i) INCOME TAXES
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
bases using enacted tax rates expected to apply to taxable income in the years
in which those temporary differences are expected to be recovered or settled. A
tax benefit or expense is recognized for the net change in the deferred tax
asset or liability during the period. The effect on deferred tax assets and
liabilities due to a change in tax rates is recognized in income tax expense in
the period that includes the enactment date.
Certain companies which merged with CIBER in business combinations accounted for
as poolings of interests had elected S corporation status for U.S. federal
income tax purposes, and therefore, were generally not subject to income taxes.
Accordingly, no income tax expense is included in the historical consolidated
financial statements for the operations of these companies prior to their merger
with CIBER. The related net deferred tax asset or liability of these companies
at the date of their respective mergers with CIBER is recorded as income tax
benefit or expense.
(j) PRO FORMA NET INCOME
Pro forma net income has been presented because certain companies, which have
merged with CIBER in business combinations accounted for as poolings of
interests, were S corporations and generally not subject to income taxes.
Accordingly, no provision for income taxes has been included in the historical
consolidated financial statements for the operations of these companies prior to
their merger with CIBER. The pro forma adjustment to income taxes has been
computed as if the merged companies had been taxable entities subject to income
taxes for all periods prior to their merger with CIBER at the marginal rates
applicable in such periods. In addition, the pro forma adjustments to income tax
expense for the years ended June 30, 1997 and 1998 eliminate the income tax
expense (benefit) of $1,717,000 and ($135,000), respectively, representing the
one-time income tax expense (benefit) resulting from the termination of the S
corporation status of these companies.
27
<PAGE>
(k) EARNINGS PER SHARE
Basic EPS is computed by dividing income available to common shareholders by the
weighted average number of common shares outstanding for the period. Diluted EPS
includes the effects of the potential dilution of the Company's stock options,
determined using the treasury stock method. The computation of weighted average
shares includes the shares and options issued in connection with business
combinations accounted for as poolings of interests as if they had been
outstanding for all periods prior to the merger. The number of antidilutive
stock options omitted from the computation of weighted average shares was
1,182,000 and 2,316,000 for the year ended June 30, 1999 and for the six months
ended December 31, 1999, respectively. There were no antidilutive stock options
for the years ended June 30, 1998 and 1997.
(l) STOCK-BASED COMPENSATION
As permitted by Statement of Financial Accounting Standards No. 123 ("SFAS
123"), the Company accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion 25, and related
interpretations ("APB 25"). The Company measures stock-based compensation cost
as the excess, if any, of the quoted market price of CIBER common stock at the
grant date over the amount the employee must pay for the stock. CIBER generally
grants stock options at fair market value at the date of grant. The pro forma
disclosures of net income and income per share, as if the fair-value based
method defined in SFAS 123 had been applied, are provided in Note 11.
(m) MINORITY INTEREST
On December 2, 1999, CIBER acquired approximately 78% of Interactive Papyrus,
Inc. ("IPI"). The minority stockholders' proportionate share of the equity of
IPI is reflected as minority interest in the consolidated balance sheet. The
minority stockholders' proportionate share of the net income of IPI is included
in other income, net in the consolidated statement of operations. The minority
interest in net income of IPI was $4,000 for the six months ended December 31,
1999.
(n) ESTIMATES
The preparation of these financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
(o) FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's financial instruments approximates their
carrying amounts due to the relatively short periods to maturity of the
instruments and/or variable interest rates of the instruments which approximate
current market rates.
(p) RECLASSIFICATIONS
Certain prior year amounts have been reclassified to conform with the current
year presentation.
28
<PAGE>
(2) POOLINGS OF INTERESTS
In fiscal 1999, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
EJR COMPUTER ASSOCIATES, INC. ("EJR") - On August 11, 1998, CIBER issued
1,155,516 shares of its common stock in connection with the merger of EJR with
CIBER.
THE CUSHING GROUP, INC. ("CUSHING") - On August 31, 1998, CIBER issued 961,135
shares of its common stock in connection with the merger of Cushing with CIBER.
In fiscal 1998, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
THE SUMMIT GROUP, INC. ("SUMMIT") - On May 4, 1998, CIBER issued 4,262,860
shares of its common stock in connection with the merger of Summit with CIBER.
STEP CONSULTING, INC. ("STEP") - On April 30, 1998, CIBER issued 131,242 shares
of its common stock in connection with the merger of Step with CIBER.
COMPUTER RESOURCE ASSOCIATES, INC. ("CRA") - On March 2, 1998, CIBER issued
530,910 shares of its common stock in connection with the merger of CRA with
CIBER.
ADVANCED SYSTEMS ENGINEERING, INC. ("ASE") - On March 2, 1998, CIBER issued
382,602 shares of its common stock in connection with the merger of ASE with
CIBER.
TECHWARE CONSULTING, INC. ("TECHWARE") - On November 26, 1997, CIBER issued
747,836 shares of its common stock in connection with the merger of Techware
with CIBER.
FINANCIAL DYNAMICS, INC. ("FDI") - On November 24, 1997, CIBER issued 1,128,054
shares of its common stock and granted options for 97,220 shares of its common
stock (at an aggregate exercise price of $217,000) in connection with the merger
of FDI with CIBER.
THE CONSTELL GROUP, INC. ("CONSTELL") - On October 24, 1997, CIBER issued
500,000 shares of its common stock in connection with the merger of Constell
with CIBER.
BAILEY & QUINN, INC. ("BQI") - On October 22, 1997, CIBER issued approximately
148,000 shares of its common stock in connection with the merger of BQI with
CIBER.
SOFTWAREXPRESS, INC. D/B/A RELIANT INTEGRATION SERVICES, INC. ("RELIANT") - On
August 21, 1997, CIBER issued 1,183,276 shares of its common stock in connection
with the merger of Reliant with CIBER.
KCM COMPUTER CONSULTING, INC. ("KCM") - On July 18, 1997, CIBER issued 861,700
shares of its common stock in connection with the merger of KCM with CIBER.
In fiscal 1997, the following companies merged with CIBER in business
combinations accounted for as poolings of interests:
TECHNICAL SUPPORT GROUP, INC. ("TSG") - On November 27, 1996, CIBER issued
740,752 shares of its common stock in connection with the merger of TSG with
CIBER.
TECHNOLOGY MANAGEMENT GROUP, INC. ("TMG") - On November 26, 1996, CIBER issued
484,358 shares of its common stock and granted options for 326,014 shares of the
Company's common stock (at an aggregate exercise price of $547,000) in
connection with the merger of TMG with CIBER.
29
<PAGE>
SPECTRUM TECHNOLOGY GROUP, INC. ("SPECTRUM") - On September 3, 1996, CIBER
issued 1,706,232 shares of its common stock in connection with the merger of
Spectrum with CIBER.
(3) ACQUISITIONS
CIBER made certain acquisitions for cash or cash and stock, as set forth below.
Each of these acquisitions has been accounted for under the purchase method of
accounting for business combinations and accordingly, the accompanying
consolidated financial statements include the results of operations of each
acquired business since the date of acquisition.
ACQUISITIONS FROM JULY 1, 1999 THROUGH DECEMBER 31, 1999
SOLUTION PARTNERS B.V. ("SOLUTION PARTNERS") - On December 2, 1999, CIBER
acquired all of the outstanding capital stock of Solution Partners for $14.1
million of which approximately $543,000 is included in acquisition costs
payable at December 31, 1999. As part of the purchase price, CIBER issued
171,580 shares of its common stock with a value of $4.0 million.
Additionally, the terms of the purchase provide for additional consideration
of up to $1.5 million based on certain performance criteria during the
12-month periods ending December 31, 2000 and 2001. CIBER has recorded
goodwill of $13.3 million related to this acquisition, which will be
amortized over 20 years. Any additional consideration paid will be accounted
for as additional goodwill. Solution Partners, located in Eindhoven, the
Netherlands, provides e.Business and supply chain solutions using SAP
software to companies throughout Europe. For income tax purposes, the
acquisition of Solution Partners was a non-taxable transaction.
INTERACTIVE PAPYRUS, INC. ("IPI") - On December 2, 1999, CIBER acquired
approximately 78% of the outstanding capital stock of IPI for $6.2 million of
which $5.3 million is included in acquisition costs payable at December 31,
1999. CIBER issued 22,500 shares of its common stock with a value of $450,000 as
part of the purchase price. Acquisition costs payable of $5.2 million was paid
in January 2000. CIBER has recorded goodwill of $5.7 million related to this
acquisition, which will be amortized over 6 years. IPI, located in Colorado
Springs, Colorado, develops interactive web sites to build online business
ventures. For income tax purposes, the acquisition of IPI was a non-taxable
transaction.
SOFTWARE DESIGN CONCEPTS, INC. ("SDC") - On November 15, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of SDC for $9.0
million in cash and the issuance of 160,378 shares of its common stock with a
value of $3.0 million. The aggregate purchase price was $12.0 million of which
$160,000 is included in acquisition costs payable at December 31, 1999. CIBER
has recorded goodwill of $11.5 million related to this acquisition, which will
be amortized over 20 years. SDC, located in Philadelphia, Pennsylvania, provided
software development and consulting services similar to CIBER.
WATERSTONE CONSULTING, INC. ("WATERSTONE") - On October 29, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of Waterstone for
approximately $30.7 million. The purchase price is subject to adjustment based
on finalization of the Waterstone balance sheet at the acquisition date. As part
of the purchase price, CIBER issued 243,347 shares of its common stock with a
value of $4.0 million. At December 31, 1999, acquisition costs payable were
approximately $1.7 million related to this acquisition. CIBER has recorded
goodwill of approximately $29.7 million related to this acquisition, which will
be amortized over 20 years. Waterstone, located in Chicago, Illinois, provided
consulting services specializing in supply chain and customer relationship
management solutions.
THE ISADORE GROUP, INC. ("ISADORE") - On October 15, 1999, CIBER acquired
certain assets, liabilities and all of the business operations of Isadore for
$18.3 million of which $180,000 is included in acquisition costs payable at
December 31, 1999. Additionally, the terms of the purchase provide for
additional consideration of up to $10.4 million based on revenue earned during
the 12-month periods ending December 31, 2000, 2001 and 2002. CIBER has recorded
goodwill of $17.5 million related to this acquisition, which will be amortized
over 20 years. Any additional consideration paid will be accounted for as
additional goodwill. Isadore, located in Phoenix, Arizona, provided PeopleSoft
higher education consulting services.
30
<PAGE>
The following unaudited pro forma financial information presents the combined
results of operations of CIBER, Solution Partners, IPI, SDC, Waterstone and
Isadore as if the acquisitions had occurred as of July 1, 1998, after giving
effect to certain adjustments, including amortization of goodwill and other
intangible assets, decreased interest revenue as a result of the cash paid for
the acquisitions, and the related income tax effects. The pro forma financial
information does not necessarily reflect the results of operations that would
have occurred had CIBER and the five acquired companies constituted a single
entity during such periods.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED
IN THOUSANDS JUNE 30, 1999 DECEMBER 31, 1999
---------------------- -----------------------
<S> <C> <C>
Revenues $ 742,820 $ 374,253
Net income 51,739 16,834
Earnings per share - basic $ .92 $ .29
Earnings per share - diluted $ .90 $ .28
</TABLE>
ACQUISITIONS FROM JULY 1, 1998 THROUGH JUNE 30, 1999
DIGITAL SOFTWARE CORPORATION ("DSC") - On April 30, 1999, CIBER acquired certain
assets, liabilities and all of the business operations of DSC for $6.9 million
in cash. CIBER has recorded goodwill of $7.0 million related to this
acquisition, which will be amortized over 15 years. DSC, located in Aurora,
Colorado, provided software engineering services similar to CIBER.
COMPAID CONSULTING SERVICES, INC. ("COMPAID") - On March 2, 1999, CIBER acquired
all of the outstanding capital stock of Compaid for approximately $9.7 million.
CIBER has recorded goodwill of $7.5 million related to this acquisition, which
will be amortized over 15 years. Compaid, headquartered in Atlanta, Georgia,
provided services similar to CIBER.
BUSINESS IMPACT SYSTEMS, INC. ("BIS") - On February 26, 1999, CIBER issued
2,401,028 shares of its common stock and granted options for 3,634 shares of its
common stock (at an aggregate purchase price of $40,000) in exchange for
substantially all of the outstanding assets and liabilities of BIS. The
aggregate purchase price was $62.2 million, including acquisition costs. CIBER
has recorded goodwill of $55.6 million related to this acquisition, which will
be amortized over 20 years. BIS, headquartered in Herndon, Virginia, provided
enterprise integration services.
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 initial consideration of $5.0 million. The terms of the
purchase provided for additional consideration of up to $3.0 million based on
certain performance criteria during the 12-month periods ending January 31, 2000
and 2001. At December 31, 1999 CIBER believes that the performance criteria will
likely be met, and accordingly has recorded additional goodwill and acquisition
costs payable of $3.0 million related to this acquisition. CIBER paid $2.2
million of this additional consideration in February 2000. CIBER has recorded
total goodwill of $7.4 million related to this acquisition. Paradyme HRT,
located in Columbia, South Carolina, provided ERP Outsourcing services and
HR/Payroll business services and has become CIBER's Enterprise Outsourcing
Practice.
INTEGRATION SOFTWARE CONSULTANTS, INC. ("ISC") - On February 2, 1999, CIBER
issued 1,280,289 shares of its common stock in exchange for all of the
outstanding common stock of ISC. The aggregate purchase price was $34.0 million,
including acquisition costs. CIBER has recorded goodwill of $31.9 million
related to this acquisition, which will be amortized over 20 years. ISC,
headquartered in Philadelphia, Pennsylvania, provided SAP software
implementation services.
YORK & ASSOCIATES, INC. ("YORK") - On January 29, 1999, CIBER issued 548,857
shares of its common stock and granted options for 30,643 shares of its common
stock (at an aggregate exercise price of $159,000) in exchange for substantially
all of the outstanding assets and liabilities of York. The aggregate purchase
price was $14.5 million, including acquisition costs. CIBER has recorded
goodwill of
31
<PAGE>
$12.2 million related to this acquisition, which will be amortized over 20
years. York, headquartered in St. Paul, Minnesota, provided IT consulting and
software implementation services similar to CIBER.
PARAGON SOLUTIONS, INC. ("PARAGON") - On January 8, 1999, CIBER acquired certain
assets, liabilities and all of the business operations of Paragon for $4.4
million. The original terms of the purchase provided for additional
consideration of up to $3.3 million based on certain performance criteria during
the 12-month periods ending December 31, 1999 and 2000. In February 2000,
parties agreed that CIBER would pay a total of $2.5 million in final settlement
of the purchase agreement. CIBER paid $1.8 million in February 2000 and $700,000
is to be paid in July 2000. As a result, CIBER has recorded additional goodwill
and acquisition costs payable of $2.5 million at December 31, 1999. CIBER has
recorded total goodwill of $6.8 million related to this acquisition. Paragon,
located in Pittsburgh, Pennsylvania, provided Oracle software implementation
services.
THE DORADUS CORPORATION ("DORADUS") - On November 15, 1998, CIBER acquired all
of the outstanding capital stock of Doradus for $4.0 million. Additional
consideration of $100,000 was paid in April 1999 and an additional $288,000 was
paid in December 1999. The additional consideration was accounted for as
additional goodwill. CIBER has recorded total goodwill of $4.2 million related
to this acquisition. Doradus, located in Minneapolis, Minnesota, provided IT
consulting services similar to CIBER.
For income tax purposes, the acquisitions of Compaid, BIS, ISC, York and Doradus
were non-taxable transactions.
ACQUISITIONS FROM JULY 1, 1996 THROUGH JUNE 30, 1998
DAVIS, THOMAS & ASSOCIATES, INC. ("DTA") - On March 14, 1997, CIBER acquired the
business operations and certain assets of DTA for $13.5 million, consisting of
$13.2 million in cash and the assumption of $339,000 of liabilities. CIBER
recorded goodwill of $13.1 million related to this acquisition.
CIBER NETWORK SERVICES, INC. ("CNSI") - On December 2, 1996, CIBER acquired
CNSI, which was majority owned by certain officers of the Company, for
consideration of $3.7 million, consisting of 137,262 shares of CIBER's common
stock and $1.2 million in cash. In addition, CIBER assumed net liabilities of
$772,000, resulting in a total initial purchase price of $4.5 million. The terms
of the purchase also provided for future contingent consideration based on
certain performance objectives of CNSI. During fiscal year 1998, CIBER paid
additional consideration of $1.2 million, consisting of 48,692 shares of CIBER
common stock and $124,000 in cash. During fiscal year 1999, CIBER paid
additional consideration of $1.3 million, consisting of 66,703 shares of CIBER
common stock and $168,000 in cash as a final settlement to the purchase
agreement. The additional consideration was accounted for as additional
goodwill. The Company has recorded total goodwill of $6.8 million related to
this acquisition. For income tax purposes, this acquisition was a non-taxable
transaction.
BUSINESS SYSTEMS DEVELOPMENT DIVISION - In July 1996, the Company acquired
certain assets, liabilities and all of the business operations of the Business
Systems Development division of DataFocus, Inc., Fairfax, Virginia. The
aggregate purchase price was $5.0 million, of which $4.8 million has been
allocated to goodwill and $229,000 has been allocated to other net assets.
During fiscal year 1999, CIBER paid final additional cash consideration of
$688,000 to the former owners of Oasys, Inc. related to the March 1996
acquisition. This additional consideration was recorded as goodwill.
(4) SALE OF LOGISTICSPRO
On September 30, 1999, CIBER sold its LogisticsPRO software business for $2.0
million resulting in a gain of $827,000 that is included in other income. The
after-tax gain is $496,000 or $.01 per diluted share. In connection with the
sale, CIBER entered into a royalty (licensing) agreement under which CIBER will
receive a percentage of certain future revenues, as defined in the agreement, up
to $3.5 million over the next five years. The software business was sold to an
entity owned by the management of the LogisticsPRO business as well as two
non-executive officers of CIBER.
32
<PAGE>
(5) ACCOUNTS RECEIVABLE
Accounts receivable consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1999 1999
-------------- --------------- ----------------
<S> <C> <C> <C>
Billed accounts receivable $ 95,472 $129,547 $116,003
Unbilled accounts receivable 28,576 24,773 26,058
-------------- --------------- ----------------
124,048 154,320 142,061
Less allowance for doubtful accounts (2,510) (3,344) (2,643)
============== =============== ================
$121,538 $150,976 $139,418
============== =============== ================
</TABLE>
The activity in the allowance for doubtful accounts consist of the following (in
thousands):
<TABLE>
<CAPTION>
BALANCE AT NET CHARGE BALANCE AT
BEGINNING TO COSTS AND END
OF PERIOD EXPENSES (1) OTHER (2) OF PERIOD
---------------- --------------- ------------ --------------
<S> <C> <C> <C> <C>
Year ended June 30, 1997 $ 178 679 - 857
Year ended June 30, 1998 857 1,523 130 2,510
Year ended June 30, 1999 2,510 453 381 3,344
Six months ended December 31, 1999 3,344 (705) 4 2,643
</TABLE>
(1) Represents additions charged to costs and expenses net of accounts written
off.
(2) Represents additions due to business combinations accounted for as purchases
and immaterial poolings of interests.
(6) PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1999 1999
------------- ------------- -----------------
<S> <C> <C> <C>
Computer equipment and software $ 20,855 $ 32,499 $ 38,978
Furniture and fixtures 8,034 11,187 11,557
Leaseholds and other 3,672 4,311 4,975
------------- ------------- -----------------
32,561 47,997 55,510
Less accumulated depreciation (15,219) (22,866) (26,947)
============= ============= =================
$ 17,342 $ 25,131 $ 28,563
============= ============= =================
</TABLE>
(7) INTANGIBLE ASSETS
Intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1999 1999
--------------- -------------- -------------------
<S> <C> <C> <C>
Goodwill $ 32,715 $ 160,218 $ 243,667
Client lists 6,801 6,801 6,801
Noncompete agreements 3,834 7,266 7,534
--------------- -------------- -------------------
43,350 174,285 258,002
Less accumulated amortization (9,753) (17,273) (24,027)
=============== ============== ===================
$ 33,597 $ 157,012 $ 233,975
=============== ============== ===================
</TABLE>
33
<PAGE>
(8) REVOLVING LINES OF CREDIT AND NOTES PAYABLE
CIBER has a $50 million unsecured revolving line of credit with a bank. At
December 31, 1999, CIBER had $5,355,000 outstanding under this line of credit.
There were no outstanding borrowings under this bank line of credit at June 30,
1998 and 1999. Outstanding borrowings bear interest at the three month London
Interbank Offered Rate ("LIBOR") plus 2% (7.88% at December 31, 1999). The
credit agreement requires a commitment fee of 0.225% per annum on any unused
portion of the line of credit up to $25 million. On July 1, 2000, the amount
available under the line of credit will be reduced to $35 million and the
maximum unused portion of the line of credit on which the commitment fee is
based will be reduced to $20 million. The credit agreement expires on January
31, 2001. The terms and conditions of the credit agreement include several
covenants, including those whereby CIBER agrees to the maintenance of a certain
net worth and debt service coverage ratios, among other things. Amounts advanced
under the line of credit can be used to consummate an acquisition and may be
required by the bank to be converted into a five-year term note payable in equal
amounts of interest and principal; in such event, the line of credit would be
reduced by the amount of the term note.
Several companies which have merged with CIBER since July 1, 1997 had
outstanding balances under revolving lines of credit and notes payable. These
lines of credit and notes payable were secured by certain assets of the merged
companies. Upon merging with CIBER, these revolving lines of credit and notes
payable were paid in full and canceled. In connection with a business
combination during fiscal 1998, CIBER issued 50,938 shares of its common stock
valued at $1,106,000 in satisfaction of a note payable, including accrued
interest.
(9) LEASES
The Company has noncancelable operating leases for office space. Rental expense
for operating leases totaled $5,974,000, $8,636,000, $10,730,000 and $6,218,000
for the years ended June 30, 1997, 1998 and 1999, and the six months ended
December 31, 1999, respectively.
Future minimum lease payments as of December 31, 1999 are (in thousands):
<TABLE>
<CAPTION>
<S> <C>
Year ending December 31:
2000 $ 10,175
2001 9,936
2002 7,892
2003 5,567
2004 2,827
Thereafter 2,794
============
Total minimum lease payments $ 39,191
============
</TABLE>
34
<PAGE>
(10) INCOME TAXES
<TABLE>
<CAPTION>
Income tax expense (benefit) consists of the following (in thousands):
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
1997 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Current:
Federal $11,236 $23,190 $34,005 $11,082
State and local 2,324 4,005 5,297 1,829
Foreign 474 403 232 256
------------------------------------------------------------------
14,034 27,598 39,534 13,167
------------------------------------------------------------------
Deferred:
Federal (721) (3,988) (1,773) (66)
State and local (138) (684) (276) (11)
------------------------------------------------------------------
(859) (4,672) (2,049)
(77)
==================================================================
Income tax expense $13,175 22,926 $37,485 $13,090
==================================================================
</TABLE>
Income tax expense differs from the amounts computed by applying the statutory
U.S. federal income tax to income before income taxes as a result of the
following (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS
ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
1997 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Income tax expense at the federal statutory rate of 35% $12,040 $20,791 $32,193 $10,757
Increase (decrease) resulting from:
State and local income taxes, net of federal income tax benefit 1,275 2,152 3,263 1,182
Nondeductible merger costs 383 1,540 537 -
Nondeductible amortization - - 1,008 1,114
Termination of S corporation status of merged companies,
including state income taxes, net of federal income tax 1,717 (135) - -
S corporation income of merged companies (2,312) (1,568) - -
Other 72 146 484 37
===================================================
Income tax expense $13,175 $22,926 $37,485 $13,090
===================================================
Effective tax rate 38.3% 38.6% 40.8% 42.6%
============ ========== =========== ===============
</TABLE>
TAX BENEFIT OF STOCK OPTIONS EXERCISED - For the years ended June 30, 1997, 1998
and 1999, and the six months ended December 31, 1999, CIBER recognized
$6,366,000, $9,149,000, $5,499,000 and $1,664,000, respectively, as a direct
increase to additional paid-in capital for the income tax benefit resulting from
the exercise of stock options by employees.
35
<PAGE>
The components of the net deferred tax asset or liability are as follows (in
thousands):
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1999 1999
---- ---- ----
<S> <C> <C> <C>
Deferred tax assets:
Intangible assets, due to differences in amortization periods $ 2,068 $ 3,272 $ 3,481
Accounts payable 206 228 130
Accrued expenses, not currently tax deductible 2,101 3,008 2,825
Deferred revenue 1,240 1,032 141
Other - 428 306
------------------------------------------------
5,615 7,968 6,883
Deferred tax liabilities:
Capitalized software costs - (1,559) (1,527)
Accounts receivable (2,089) (1,800) (690)
------------------------------------------------
Net deferred tax asset $ 3,526 $ 4,609 $ 4,666
================================================
Balance sheet classification of deferred tax asset (liability):
Deferred tax asset - current $ 1,458 $ 2,915 $ 2,960
Deferred tax asset - long term 2,068 1,694 1,773
Deferred tax liability - current - - (67)
------------------------------------------------
Net deferred tax asset $ 3,526 $ 4,609 $ 4,666
================================================
</TABLE>
Based on its evaluation of current and anticipated future taxable income, the
Company believes sufficient taxable income will be generated to realize the
deferred tax assets.
(11) STOCK PURCHASE AND STOCK OPTION PLANS
The Company's compensation plans are described below.
EMPLOYEE STOCK PURCHASE PLAN - The Company has a stock purchase plan that allows
eligible employees to purchase, through payroll deductions, shares of the
Company's common stock at 85% of the fair market value at specified dates. Up to
2,000,000 shares of common stock may be issued under the Employee Stock Purchase
Plan. During the years ended June 30, 1997, 1998 and 1999, and the six months
ended December 31, 1999, employees purchased 179,440, 197,565, 633,405 and
440,115 shares of common stock, respectively.
1989 STOCK OPTION PLAN - The Company established a stock option plan in 1989
that was discontinued during fiscal 1994. The options are 100% vested as of July
1, 1995 and are subject to certain restrictions. The options expire twenty years
after the date of grant through 2013.
EMPLOYEES' STOCK OPTION PLAN - The Company has a stock option plan for employees
and up to 10,500,000 shares of the Company's common stock are authorized for
issuance under this plan. The plan administrators may grant to officers,
employees and consultants, restricted stock, stock options, performance bonuses
or any combination thereof. The number and nature of awards granted is
determined by the Compensation Committee of the Board of Directors. Options
become exercisable as determined at the date of grant by the Board of Directors
and expire within 10 years from the date of grant.
DIRECTORS' STOCK OPTION PLAN - Up to 200,000 shares of the Company's common
stock are authorized for issuance to non-employee, non-affiliate directors under
this plan. Such stock options are non-discretionary and granted annually at the
fair market value of the Company's common stock on the date of grant. The number
of options granted annually is fixed by the plan. Options expire 10 years from
the date of grant.
36
<PAGE>
DIRECTORS' STOCK COMPENSATION PLAN - Up to 50,000 shares of the Company's common
stock are authorized for issuance to non-employee directors under this plan.
Each non-employee director is issued shares having a fair market value of
approximately $2,500 for attendance at each meeting of the Company's Board of
Directors. During the years ended June 30, 1997, 1998 and 1999, and the six
months ended December 31, 1999, the Company issued 1,664, 1,233, 1,980 and 1,445
shares, respectively, of common stock under this plan.
At December 31, 1999, there were 9,644,300 shares of CIBER common stock reserved
for future issuance under the Company's stock-based compensation plans.
CIBER ENTERPRISE OUTSOURCING, INC. EQUITY INCENTIVE PLAN - In October 1999,
CIBER's subsidiary, CIBER Enterprise Outsourcing, Inc. ("CEO") adopted the CIBER
Enterprise Outsourcing Equity Incentive Plan. Up to 1,000,000 of CEO's shares
are authorized for issuance under this plan. Under the plan, the plan committee
may grant to officers, employees and consultants stock options, restricted
stock, performance shares or performance units. The number and nature of awards
granted is determined by a committee of the Board of Directors of CEO. Options
become exercisable as determined at the date of grant by the committee and
expire within 10 years from the date of grant. In October 1999, CEO issued
options for 810,811 shares of its stock at an exercise price of $1.665 per share
(estimated fair value at the date of grant). Options for 567,567 were
immediately vested and the remainder vest over three years. All of these options
are outstanding at December 31, 1999.
INTERACTIVE PAPYRUS, INC. EQUITY INCENTIVE PLAN - In December 1999, CIBER's
subsidiary, Interactive Papyrus, Inc. ("IPI") adopted the Interactive Papyrus,
Inc. Equity Incentive Plan. Up to 3,000,000 of IPI's shares are authorized for
issuance under this plan. Under the plan, the plan committee may grant to
officers, employees and consultants stock options, restricted stock, performance
shares or performance units. The number and nature of awards granted is
determined by a committee of the Board of Directors of IPI. Options become
exercisable as determined at the date of grant by the committee and expire
within 10 years from the date of grant. In December 1999, IPI issued options for
664,000 shares of its stock at an exercise price of $0.90 per share (estimated
fair value at the date of grant). These options vested over three to four years
and all are outstanding at December 31, 1999.
On September 1, 1998, the Board of Directors authorized a repricing program for
employees who were originally granted options under the Employees' Stock Option
Plan from March 1, 1998 to August 31, 1998 at exercise prices ranging from
$28.88 to $38.00 that repriced all of these outstanding stock options to an
exercise price of $27.06 per share. Options to purchase 537,050 shares of common
stock were repriced. The repriced options follow the vesting schedule of the
original options granted.
On October 9, 1998, the Board of Directors authorized another repricing program
for employees who were originally granted options under the Employees' Stock
Option Plan on October 1, 1998 at an exercise price of $20.13 that repriced all
of these outstanding stock options to an exercise price of $16.00 per share.
Options to purchase 71,200 shares of common stock were repriced. The repriced
options follow the vesting schedule of the original options granted.
On October 9, 1998, the Board of Directors authorized a program which allowed
certain directors, who were originally granted options under the Directors'
Stock Option Plan from October 1, 1997 to September 30, 1998 at exercise prices
ranging from $21.53 to $40.25, to cancel these stock options and replace them
with options under the Employees' Stock Option Plan at an exercise price of
$16.00 per share. Options to purchase 48,000 shares of common stock were
replaced.
37
<PAGE>
The Company applies APB 25 in accounting for its stock-based compensation plans.
The compensation cost that has been expensed for these plans for the years ended
June 30, 1997, 1998 and 1999, and the six months ended December 31, 1999 was
$62,000, $59,000, $333,000 and $167,000, respectively. Had the Company
determined compensation cost for its stock-based compensation plans based on the
fair value at the grant date, as calculated in accordance with SFAS 123, the
Company's net income, pro forma net income, and pro forma income per share would
have been reduced to the pro forma amounts indicated below (in thousands, except
per share data):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
1997 1998 1999 1999
------------ ---------- ---------- -----------------
<S> <C> <C> <C> <C>
Net income As reported $21,226 $36,477 $54,495 $17,643
Pro forma 19,021 31,516 41,373 11,323
Pro forma net income As reported 20,423 34,270
Pro forma 18,218 29,309
Earnings per share - basic As reported .43 .67 .98 .31
Pro forma .38 .57 .75 .20
Earnings per share - diluted As reported .40 .64 .95 .30
Pro forma .36 .54 .72 .19
</TABLE>
The effect of applying SFAS 123 in this disclosure may not be indicative of the
effect on reported net income for future years. SFAS 123 does not apply to
options granted prior to July 1, 1995.
The fair value of options at the date of grant was estimated using the
Black-Scholes option pricing model with the following weighted-average
assumptions:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
1997 1998 1999 1999
----------- ----------- ---------- -----------------
<S> <C> <C> <C> <C>
Expected life 5 years 5 years 5 years 5 years
Risk free interest rate 6.3% 6.0% 4.8% 6.0%
Expected volatility 50% 50% 80% 60%
Dividend yield 0% 0% 0% 0%
</TABLE>
38
<PAGE>
A summary of the status of the Company's stock option plans as of June 30, 1997,
1998 and 1999, and changes during the years ending on those dates is presented
below (shares in thousands):
<TABLE>
<CAPTION>
1997 1998 1999
------------------------ ------------------------ ------------------------
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
--------- ----------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 4,503 $1.67 4,103 $ 4.17 5,187 $ 12.34
Granted 1,052 12.24 2,541 21.04 2,760 22.57
Exercised (1,252) 1.26 (1,213) 2.11 (960) 4.73
Canceled (200) 8.44 (244) 16.61 (1,623) 24.34
--------- --------- ---------
Outstanding at end of year 4,103 $4.17 5,187 $12.34 5,364 $15.36
========= ========= =========
Options exercisable at year end 2,313 1,850 1,875
========= ========= =========
</TABLE>
A summary of the status of the Company's stock option plans as of December 31,
1999 and changes during the six months ending on that date is presented below
(shares in thousands):
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
EXERCISE
SHARES PRICE
--------- ----------------
<S> <C> <C>
Outstanding at beginning of period 5,364 $15.36
Granted 2,457 18.46
Exercised (476) 10.17
Canceled (387) 21.39
---------
Outstanding at end of period 6,958 $16.48
=========
Options exercisable at period end 2,270
=========
</TABLE>
The weighted average fair values of options granted during the years ended June
30, 1997, 1998 and 1999, and during the six months ended December 31, 1999 were
$6.43, $11.45, $16.24 and $9.20, respectively.
A summary of the range of exercise prices and the weighted-average contractual
life of outstanding stock options at December 31, 1999 is as follows (shares in
thousands):
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
------------------------------------------------ ---------------------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE WEIGHTED
RANGE OF NUMBER EXERCISE REMAINING NUMBER AVERAGE
EXERCISE PRICES OUTSTANDING PRICE LIFE (YEARS) EXERCISABLE EXERCISE PRICE
- ------------------------- ---------------- -------------- ---------------- --- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
$ 0.01 - $16.31 2,369 $ 8.40 8.7 1,529 $ 4.75
16.63 - 18.31 2,367 17.71 8.6 388 17.11
18.44 - 29.44 2,222 23.77 8.9 353 26.19
- ----------- --- --------- ---------------- -------------- ---------------- --- ----------------- ---------------
$ 0.01 - $29.44 6,958 $ 16.48 8.7 2,270 $ 10.19
=========== === ========= ================ ============== ================ === ================= ===============
</TABLE>
39
<PAGE>
(12) RELATED PARTY TRANSACTIONS
Prior to the acquisition of CNSI on December 2, 1996 (see Note 3), CNSI was 85%
beneficially owned by certain officers of the Company. These officers and their
families received $1,159,000 in cash and 108,996 shares of CIBER common stock as
initial consideration for their ownership interests in CNSI. CIBER also repaid
approximately $898,000 to the Company's Chairman and members of his family for
outstanding obligations owed to them by CNSI at the time of the acquisition.
During fiscal 1998, additional consideration of $1.2 million was paid to the
selling shareholders, of which certain officers of the Company and members of
their families received 40,832 shares of CIBER common stock and cash of
$118,000. During fiscal 1999, additional consideration of $1.3 million was paid,
of which certain officers of the Company and members of their families received
52,225 shares of CIBER common stock and cash of $168,000 as final settlement of
the purchase agreement.
Certain officers of the Company also guaranteed an inventory financing line of
credit to CNSI which had an outstanding balance of approximately $1.1 million at
December 2, 1996. These personal guarantees were released upon the acquisition
of CNSI. CNSI had a bank line of credit, with an outstanding balance of $1.9
million at December 2, 1996, that was guaranteed by the Company's Chairman. Upon
the acquisition of CNSI, the Company repaid and canceled this bank line of
credit and the personal guarantee of the Chairman was released.
Included in other assets at December 31, 1999 is notes receivable from officers
of $860,000.
(13) 401(k) SAVINGS PLAN AND OTHER RETIREMENT PLANS
CIBER has a savings plan under Section 401(k) of the Internal Revenue Code.
Company contributions are determined based on the employee's completed years of
service, the employee's contribution and the Company's matching contribution
percentage. In addition, certain companies which have merged with CIBER in
business combinations accounted for as poolings of interests have had similar
defined contribution retirement plans. CIBER recorded expense of approximately
$2,815,000, $4,519,000, $4,555,000 and $2,464,000 for the years ended June 30,
1997, 1998 and 1999, and the six months ended December 31, 1999, respectively,
related to these plans.
(14) BUSINESS AND CREDIT CONCENTRATIONS
CIBER's clients are located principally throughout the United States. Its
revenue and accounts receivable are concentrated with large companies in several
industries. CIBER's largest client accounted for approximately 5%, 5%, 6% and
7% of total revenues for the years ended June 30, 1997, 1998 and 1999, and the
six months ended December 31, 1999, respectively. In addition, CIBER's five
largest clients accounted for, in the aggregate, approximately 15%, 14%, 15% and
16% of CIBER's total revenues for the years ended June 30, 1997, 1998 and 1999,
and the six months ended December 31, 1999, respectively. CIBER has a policy to
regularly monitor the creditworthiness of its clients and generally does not
require collateral. CIBER has a concentration of revenues related to clients
purchasing software from PeopleSoft, Inc. ("PeopleSoft"). Approximately 8%, 9%,
10% and 8% of CIBER's total revenues for the years ended June 30, 1997, 1998 and
1999, and the six months ended December 31, 1999, respectively, were generated
from implementing PeopleSoft software.
40
<PAGE>
(15) SEGMENT INFORMATION
Prior to January 1, 2000, CIBER operated as one segment. In January 2000, CIBER
began managing its business in three operating segments, differentiated by
products and services offered. Accordingly, the information for the years ended
June 30, 1997, 1998 and 1999, and the six months ended December 31, 1998 and
1999 has been presented below as if the Company had been managed similarly in
those periods. The segments are the Custom Solutions Group ("CSG"), the
Enterprise Applications Solutions Group ("EAS") and CIBER Enterprise Outsourcing
("CEO"). CSG provides application support, data warehousing consulting,
middleware and systems integration, IT outsourcing, networking solutions and
products and management consulting. EAS provides enterprise software selection,
implementation and integration services, including PeopleSoft, SAP, Oracle, J.
D. Edwards, Lawson, LogisticsPRO, Commerce One and Siebel Systems, among others,
as well as related hardware sizing and procurement. In 1999, CEO began providing
enterprise application hosting or application service provider ("ASP") services.
CIBER evaluates each segment based on operating income before amortization of
intangible assets and merger costs and without allocation of corporate costs.
The accounting policies of the reportable segments are the same as those
disclosed in the Summary of Significant Accounting Policies. The following
presents information about CIBER's segments:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
1997 1998 1999 1998 1999
--------------- --------------- -------------- ------------- ------------
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
CSG $343,859 $467,463 $549,779 $266,917 $264,349
EAS 69,961 109,910 172,938 74,391 95,160
CEO - - 1,591 - 2,783
Other - - - - 1,800
Inter-segment (440) (885) (4,647) (1,594) (2,092)
=============== =============== ============== ============= ============
Total $413,380 $576,488 $719,661 $339,714 $362,000
=============== =============== ============== ============= ============
Income (loss) from operations:
CSG $33,909 $56,517 $77,182 $36,729 $31,216
EAS 7,325 17,942 34,791 14,471 16,989
CEO - - (765) - (3,131)
Corporate and other (3,561) (8,117) (12,813) (5,606) (9,095)
--------------- --------------- -------------- ------------- ------------
Total 37,673 66,342 98,395 45,594 35,979
Amortization of intangibles (3,087) (3,936) (7,520) (2,151) (6,754)
Merger costs (1,218) (4,538) (1,535) (1,535) -
Net interest and other income 1,033 1,535 2,640 1,330 1,508
=============== =============== ============== ============= ============
Income before income taxes $34,401 $59,403 $91,980 $43,238 $30,733
=============== =============== ============== ============= ============
Total assets:
CSG $115,720 $118,432 $114,955 $103,497
EAS 35,529 64,203 43,462 55,296
CEO - 1,723 - 5,843
Corporate and other 70,536 224,274 107,551 257,932
--------------- -------------- ------------- ------------
$221,785 $408,632 $265,968 $422,568
=============== ============== ============= ============
</TABLE>
International operations comprise less than 5% of CIBER's total revenues.
41
<PAGE>
(16) SUPPLEMENTAL STATEMENT OF CASH FLOW INFORMATION
Supplemental statement of cash flow information is as follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEARS ENDED JUNE 30, DECEMBER 31,
1997 1998 1999 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Cash paid for acquisitions:
Fair value of assets acquired $ 28,854 $ - $ 142,514 $ 84,373
Liabilities assumed (5,965) - (10,586) (5,371)
Common stock issued in connection with acquisitions (2,469) - (106,285) (11,425)
Accrued acquisition costs payable (1,175) - - (7,888)
Minority interest - - - (105)
Additional cash consideration for previous
acquisitions 45 351 857 506
----------------------------------------------------------------
Cash paid for acquisitions $ 19,290 $ 351 $ 26,500 $ 60,090
================================================================
Noncash investing and financing activities:
Issuance of common stock in satisfaction
of acquisition costs payable $ 100 $ 1,151 $ 1,203 $ -
Stock options exchanged for accrued compensation $ - $ - $ 833 $ -
Property and other assets distributed by merged company $ - $ 1,370 $ - $ -
Cash paid for interest $ 364 $ 182 $ - $ 186
Cash paid for income taxes $ 9,113 $ 12,194 $ 32,941 $ 15,139
</TABLE>
42
<PAGE>
(17) SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
The following table sets forth certain statements of operations data for each of
the quarters indicated below and, in the opinion of management, contains all
adjustments, consisting only of normal recurring adjustments, necessary for a
fair presentation thereof.
<TABLE>
<CAPTION>
QUARTER QUARTER QUARTER QUARTER
IN THOUSANDS, EXCEPT PER SHARE DATA ENDED ENDED ENDED ENDED
SEPTEMBER 30 DECEMBER 31 MARCH 31 JUNE 30 TOTAL
------------- ------------ --------- -------- ------
<S> <C> <C> <C> <C> <C>
SIX MONTHS ENDED DECEMBER 31, 1999
Revenues $187,042 $174,958 n/a n/a $362,000
Amortization of intangible assets 3,023 3,731 n/a n/a 6,754
Operating income 16,400 12,825 n/a n/a 29,225
Net income 10,260 7,383 n/a n/a 17,643
Earnings per share - basic $0.18 $0.13 n/a n/a $0.31
Earnings per share - diluted $0.18 $0.13 n/a n/a $0.30
FISCAL YEAR ENDED JUNE 30, 1999
Revenues $165,658 $174,056 $184,901 $195,046 $719,661
Amortization of intangible assets 1,082 1,069 2,314 3,055 7,520
Merger costs 1,535 - - - 1,535
Operating income 18,760 23,148 23,880 23,552 89,340
Net income 11,117 14,320 14,883 14,175 54,495
Earnings per share - basic $0.21 $0.27 $0.27 $0.24 $0.98
Earnings per share - diluted $0.20 $0.26 $0.26 $0.24 $0.95
FISCAL YEAR ENDED JUNE 30, 1998
Revenues $129,334 $141,661 $148,093 $157,400 $576,488
Amortization of intangible assets 938 970 978 1,050 3,936
Merger costs 614 1,573 504 1,847 4,538
Operating income 10,512 11,989 17,728 17,639 57,868
Net income 6,484 6,056 11,387 12,550 36,477
Pro forma net income 6,208 6,851 10,657 10,554 34,270
Pro forma income per share - basic $0.12 $0.13 $0.21 $0.20 $0.67
Pro forma income per share - diluted $0.12 $0.13 $0.20 $0.19 $0.64
</TABLE>
43
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS
The Company's directors and executive officers are as follows:
<TABLE>
<CAPTION>
SERVED AS
OFFICER OR
DIRECTOR
NAME AGE POSITIONS SINCE CLASS
- -------------------------------- ---------- -------------------------------------------- ------------- --------------
<S> <C> <C> <C> <C>
Bobby G. Stevenson 57 Chairman and Founder 1974 Class III
Mac J. Slingerlend 52 Chief Executive Officer, President, 1989 Class II
Secretary and Director
Paul E. Rudolph 42 Chief Operating Officer and Director 1999 Class II
Richard A. Montoni 48 Chief Financial Officer, Executive Vice 1996 Class III
President, Treasurer and Director
Joseph A. Mancuso 53 Senior Vice President/Custom Solutions 1994 -
Group - President
Donald R. Hahl 49 Senior Vice President/e.Strategy 1997 -
James A. Rutherford 54 Director 1994 Class II
Roy L. Burger 44 Director 1995 Class I
James G. Brocksmith, Jr. 59 Director 1998 Class I
Archibald J. McGill 68 Director 1998 Class III
</TABLE>
BOBBY G. STEVENSON. Mr. Stevenson is Chairman of the Board of Directors and one
of the original founders of the Company. Mr. Stevenson was Vice President in
charge of recruiting and management of the technical staff from 1974 until
November 1977 when he became Chief Executive Officer. As Chief Executive
Officer, he had been responsible for all operations of the Company from 1977 to
1998.
MAC J. SLINGERLEND. Mr. Slingerlend joined the Company in January 1989 as
Executive Vice President/Chief Financial Officer and was elected a director in
1994. He was made President and Chief Operating Officer in 1996 and was promoted
to Chief Executive Officer in March 1998 and became Secretary in 1998. Prior to
joining the Company, Mr. Slingerlend spent 15 years in the banking industry,
primarily as a commercial lender, and five years in corporate financial
positions in the cable television and hospitality industries.
PAUL E. RUDOLPH. Mr. Rudolph joined the Company in June 1999 as Chief
Operating Officer and was elected a director in October 1999. Prior to his
employment with CIBER, Mr. Rudolph served as President of EDS' Electronic
Business unit from 1996 to 1999. Since joining EDS in 1979 and until 1996,
Mr. Rudolph held a variety of management and technical leadership roles
spanning multiple industry groups.
44
<PAGE>
RICHARD A. MONTONI. Mr. Montoni has been the Company's Executive Vice
President/Chief Financial Officer and a director since October 1996. He became
Treasurer in 1998. Prior to joining the Company, Mr. Montoni was a partner with
KPMG LLP, where he worked for approximately 20 years with companies in the high
technology, manufacturing, merchandising and distribution industries. Mr.
Montoni is a member of the American Institute of Certified Public Accountants
and the Colorado Society of Certified Public Accountants.
JOSEPH A. MANCUSO. Effective July 1, 1999, Mr. Mancuso became Senior Vice
President/Custom Solutions Group - President. Mr. Mancuso has also served as
President of the CIBER Information Services Division since March of 1998.
Previously, Mr. Mancuso was Divisional Vice President in charge of eastern
operations from 1996 to 1998. Mr. Mancuso joined CIBER as a result of CIBER
acquiring CPU, Inc. in 1994 and served as Regional Vice President from 1994 to
1996 in charge of southeast branch operations. From 1993 to 1994 Mr. Mancuso was
a Vice President for CPU, Inc.
DONALD R. HAHL. Effective January 1, 2000, Mr. Hahl became Senior Vice
President/e.Stategy. From July 1, 1999 to December 31, 1999, Mr. Hahl was Senior
Vice President/Strategic Solutions Group - President. From March 1998 to June
1999, Mr. Hahl was President/CIBER Solutions Division. From August 1997 to
February 1998, Mr. Hahl was President of Spectrum Technology Group, Inc.
("Spectrum"). Mr. Hahl joined CIBER in 1996 when Spectrum merged into CIBER. Mr.
Hahl was a co-founder of Spectrum in 1979 and served as Vice
President/Consulting Services when the merger occurred.
JAMES A. RUTHERFORD. Mr. Rutherford has been a director of the Company since
February 1994. He is currently a managing director of Wingset Investments Ltd.,
a private venture capital company located in New Albany, Ohio. Prior to forming
Wingset in 1995, Mr. Rutherford was one of the founders of Goal Systems
International, Inc., serving in various executive positions, including Chief
Executive Officer, and as a director from its incorporation in 1977 until its
sale in 1992. Mr. Rutherford is also a trustee of Case Western Reserve
University and a director of Symix Systems, Inc., Columbus, Ohio, as well as
several private corporations.
ROY L. BURGER. Mr. Burger has been a director of the Company since November
1995. Mr. Burger has approximately 22 years of experience in the equipment
leasing and finance industry and has arranged the financing of more than $2
billion of equipment and real estate. Mr. Burger currently serves as President
and Chief Executive Officer of Boulder Capital Group, a company founded by him
in 1986 that specializes in equipment leasing. In May 1998, Boulder Capital
Group, together with 11 other finance companies, merged and consolidated to
become part of UniCapital Corporation ("UniCapital"). Mr. Burger served on the
Board of Directors of UniCapital during its first year of listing on the New
York Stock Exchange.
JAMES G. BROCKSMITH, JR. Mr. Brocksmith has been a director of the Company since
July 1998. Mr. Brocksmith served as a partner of KPMG LLP from 1971 to January
1997. From 1990 to October 1996, Mr. Brocksmith served as the Deputy Chairman of
the Board and Chief Operating Officer of KPMG LLP. Since January 1997, Mr.
Brocksmith has been a self-employed business consultant for several companies.
Mr. Brocksmith is a member of the board of directors of two publicly traded
companies; Nationwide Financial Services, Inc., a provider of life insurance,
mutual funds and pension products, and Vistana, Inc., a leading developer and
operator of vacation ownership resorts.
ARCHIBALD J. MCGILL. Mr. McGill has been a director of the Company since
September 1998. Mr. McGill has served in executive capacities at IBM and AT&T
and was President of Rothschild Venture Capital. He is on the board of directors
of several small high-technology companies. From 1985 to the present, Mr. McGill
has been the President of Chardonnay, Inc., a venture capital investment
company.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), requires the Company's directors, executive officers and persons who
beneficially own greater than 10% of a registered class of the Company's equity
securities to file initial reports of ownership and changes in ownership of such
securities with the Securities and Exchange Commission (the "Commission") and
the Company.
45
<PAGE>
Based solely upon its review of copies of the Section 16(a) reports the Company
has received and written representations from certain reporting persons, the
Company believes that during the six months ended December 31, 1999, all of its
directors, executive officers and greater than 10% beneficial owners were in
compliance with their filing requirements.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth compensation information with respect to Mr.
Slingerlend, the Company's Chief Executive Officer and the Company's four most
highly paid executive officers with annual compensation in excess of $100,000
(the "Named Executive Officers") for services rendered for the years ended June
30, 1999, 1998 and 1997, and for the six months ended December 31, 1999. See
"Employment Agreements".
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
------------------- ------------
SECURITIES ALL OTHER
NAME AND FISCAL UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR (1) SALARY ($) BONUS ($) OPTIONS (#) ($) (2)
------------------ -------- ---------- --------- ----------- -------
<S> <C> <C> <C> <C> <C>
Mac J. Slingerlend Transition period 237,500 70,000 200,000 8,439
Chief Executive Officer, 1999 362,500 132,372 45,000 7,523
President and Secretary 1998 325,000 150,000 400,000 6,864
1997 300,000 140,000 20,000 7,163
Paul E. Rudolph Transition period 225,000 110,000 600,000 2,190
Chief Operating Officer 1999 -- -- -- --
1998 -- -- -- --
1997 -- -- -- --
Richard A. Montoni Transition period 162,500 55,000 60,000 3,887
Chief Financial Officer, 1999 267,500 73,935 60,000 5,284
Executive Vice President 1998 250,000 98,846 20,000 6,394
and Treasurer 1997 163,431 100,000 100,000 3,228
Joseph A. Mancuso Transition period 150,000 20,000 36,000 345
Senior Vice President/Custom 1999 232,500 61,250 45,000 3,888
Solutions Group - President 1998 -- -- -- --
1997 -- -- -- --
Donald R. Hahl Transition period 132,500 17,500 24,000 208
Senior Vice President e.Stategy 1999 232,500 57,380 45,000 4,051
1998 185,000 41,621 10,400 5,665
1997 -- -- -- --
</TABLE>
(1) CIBER changed its fiscal year to December 31 from June 30, effective
December 31, 1999. Accordingly, fiscal years 1999, 1998 and 1997 refer to
the 12 months ended June 30. The transition period refers to the six months
ended December 31, 1999.
(2) Consists of amounts contributed under the Company's 401(k) Savings Plan and
amounts paid by the Company for life insurance benefits. Savings Plan
contributions for the six months ended December 31, 1999 and the years
ended June 30, 1999, 1998 and 1997 were: Mr. Slingerlend - $625, $2,760,
$2,615 and $4,175; Mr. Montoni - 0, $3,150, $4,319 and $1,250; Mr. Mancuso
- 0, $3,357, 0 and 0; Mr. Hahl - 0, $3,655, $3,655 and 0, respectively. Mr.
Rudolph did not contribute any amounts to CIBER's Savings Plan during the
periods reported.
46
<PAGE>
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information regarding options granted to the
Named Executive Officers during the six months ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF POTENTIAL REALIZABLE VALUE AT
SECURITIES PERCENT OF TOTAL ASSUMED ANNUAL RATES OF STOCK PRICE
UNDERLYING OPTIONS GRANTED EXERCISE OR APPRECIATION FOR
OPTIONS TO EMPLOYEES IN BASE PRICE EXPIRATION OPTION TERM (1)
---------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ----------- ----------- --------- ---- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Mac J. Slingerlend(2) 200,000 8.2% $18.31 9/1/09 2,303,327 5,837,082
Paul E. Rudolph (3) 600,000 24.6% $19.13 7/1/09 7,216,566 18,288,195
Richard A. Montoni(2) 60,000 2.5% $18.31 9/1/09 690,998 1,751,125
Joseph A. Mancuso(2) 36,000 1.5% $18.31 9/1/09 414,599 1,050,675
Donald R. Hahl(2) 24,000 1.0% $18.31 9/1/09 276,399 700,450
</TABLE>
(1) Amounts reflect certain assumed rates of appreciation set forth in the
Commission's executive compensation disclosure rules. Actual gains, if any,
on stock option exercises will depend on the future performance of the
Common Stock. No assurance can be made that the amounts reflected in these
columns will be achieved.
(2) Options were granted on 9/1/99 that vest in three equal annual installments
beginning 9/1/00.
(3) Options for 600,000 shares were granted on 7/1/99 that vest: 80,000 on
7/1/00; 80,000 on 7/1/01; 80,000 on 7/1/02, 80,000 on 7/1/03; and 280,000
on 7/1/04.
On October 28, 1999, Mr. Slingerlend and Mr. Montoni were granted options to
purchase 135,135 and 216,216 shares, respectively, of CIBER's subsidiary CIBER
Enterprise Outsourcing, Inc. ("CEO") stock at an exercise price of $1.665 per
share, which were immediately vested. On December 2, 1999, Mr. Slingerlend, Mr.
Rudolph and Mr. Mancuso were granted options to purchase 120,000, 60,000 and
60,000 shares, respectively, of CIBER's subsidiary Interactive Papyrus, Inc.
("IPI") stock at an exercise price of $0.90 per share, which vest over three
years. The options granted to purchase CEO and IPI stock are not included in the
number of securities underlying options granted as listed in the Summary
Compensation Table and the Option Grants in the Last Fiscal Year table.
OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information concerning outstanding options held
by the Named Executive Officers as of December 31, 1999.
<TABLE>
<CAPTION>
SHARES NUMBER OF SECURITIES UNDERLYING VALUE OF UNEXERCISED
ACQUIRED UNEXERCISED OPTIONS AT MONEY OPTIONS AT
ON VALUE FISCAL YEAR END (#) FISCAL YEAR END ($)
NAME EXERCISE (#) REALIZED ($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- ------------ ------------ ------------------------- --------------------------
<S> <C> <C> <C> <C>
Mac J. Slingerlend -- -- 726,724/640,500 19,580,326/6,167,053
Paul E. Rudolph -- -- 0/600,000 0/5,025,000
Richard A. Montoni -- -- 79,409/156,591 760,825/1,254,049
Joseph A. Mancuso -- -- 43,483/79,499 453,272/572,992
Donald R. Hahl -- -- 18,433/60,967 119,581/394,768
</TABLE>
47
<PAGE>
EMPLOYMENT AGREEMENT
The Company has employment agreements with each of the Named Executive Officers.
Each officer's agreement has a term of one year and is renewable annually,
except for Mr. Rudolph's agreement, which has a term of five years and is
renewable annually, thereafter. Each employment agreement provides that an
officer's compensation will include a base and a bonus. In the event that an
officer's employment is terminated upon a change in control of the Company, upon
death or disability of the officer or without cause, the officer will be
entitled to a severance payment of up to three times their annual compensation
which varies based upon the cause of termination and officer position. Officers
are also entitled to receive continuance of medical, dental and disability
benefits for up to 18 months following termination, which varies based on the
officer's position. Certain officers have received loans from the Company, the
terms of which are described under Item 13, "Certain Relationships and Related
Transactions."
LONG-TERM DEFERRED COMPENSATION PLAN
The Company has agreed to make certain post-employment payments to Messrs.
Slingerlend and Montoni, or their designated beneficiaries, except in the event
of a termination for cause. The payments will be made for 15 years after Messrs.
Slingerlend's and Montoni's termination of employment with the Company and will
range from $60,000 to $100,000 and $30,000 to $75,000 per year, respectively,
based on Messrs. Slingerlend's and Montoni's age at the time of termination of
employment. The benefits are also subject to certain vesting provisions.
COMPENSATION OF DIRECTORS
All non-employee directors receive shares of CIBER Common Stock valued at
approximately $2,500 for each meeting attended and are paid a $6,000 semi-annual
retainer. All directors are reimbursed for their expenses in attending meetings.
Non-employee directors receive stock options under the Non-employee Directors'
Stock Option Plan for serving on the Board. Employee directors do not receive
additional compensation for serving on the Board.
Under the terms of the Non-employee Directors' Stock Option Plan (the
"Directors' Plan"), the Company may grant to non-employee directors awards of
stock options. The Directors' Plan provides for an initial authorization of
200,000 shares of Common Stock and is administered by the Board. Each option
granted under the Directors' Plan expires ten years from the date of grant. The
Directors' Plan provides for an initial grant of options to purchase 20,000
shares of Common Stock to each non-employee director when such director takes
office, which options vest in equal annual installments over two years.
Additionally, after each year of service, each non-employee director receives a
grant of options to purchase 4,000 shares of Common Stock; such options vest one
year after the date of grant.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
There were no Compensation Committee Interlocks during the six months ended
December 31, 1999.
48
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding beneficial ownership of the
Company's Common Stock at January 31, 2000, and stock options exercisable for
shares of Common Stock within sixty days of such date, held by (I) each person
or group of persons known by the Company to own beneficially more than five
percent (5%) of the outstanding Common Stock, (ii) each director and nominee for
director of the Company, (iii) each Named Executive Officer (as defined under
"Executive Compensation" above) and (iv) all executive officers and directors of
the Company as a group. All information is taken from or based upon ownership
filings made by such persons with the Commission or upon information provided by
such persons to the Company. Unless otherwise indicated, the shareholders listed
below have sole voting and investment power with respect to the shares reported
as owned.
<TABLE>
<CAPTION>
NAME OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
---------------- -------------------- -----
<S> <C> <C>
Bobby G. Stevenson(1) 12,035,302 20%
Mac J. Slingerlend(2) 820,388 1%
Paul E. Rudolph -- --
Richard A. Montoni(3) 80,584 *
Joseph A. Mancuso(4) 46,178 *
Donald R. Hahl(5) 224,222 *
James A. Rutherford(6) 84,847 *
Roy L. Burger(6) 28,720 *
James G. Brocksmith, Jr.(6) 10,621 *
Archibald J. McGill(6) 10,621 *
T. Rowe Price Associates, Inc. (7) 3,696,700 6%
All directors and executive
officers as a group (10 persons)(8) 13,341,483 22%
</TABLE>
*less than 1%
(1)The address of Mr. Stevenson is c/o CIBER, Inc., 5251 DTC Parkway, Suite
1400, Englewood, CO 80111. Includes shares held by the Bobby G. Stevenson
Revocable Trust, of which Mr. Stevenson is the settler, trustee and beneficiary.
Excludes 84,000 shares of Common Stock held in the Irrevocable First Stevenson
Charitable Remainder Unitrust, of which shares Mr. Stevenson disclaims
beneficial ownership.
(2)Includes options to purchase 726,724 shares of Common Stock.
(3)Includes options to purchase 79,409 shares of Common Stock.
(4)Includes options to purchase 43,483 shares of Common Stock.
(5)Includes options to purchase 18,433 shares of Common Stock.
49
<PAGE>
(6)Includes options to purchase 40,000, 27,000, 10,000 and 10,000 shares of
Common Stock for Messrs. Rutherford, Burger, Brocksmith and McGill,
respectively.
(7)Address: 100 East Pratt Street, Baltimore, MD 21202.
(8)Includes options to purchase 955,049 shares of Common Stock.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In October 1999, in accordance with his employment agreement dated June 1, 1999,
CIBER loaned to Paul E. Rudolph, Chief Operating Officer, $500,000 for the
purchase of a home. Such loan is forgiven in the form of a bonus over a term of
60 months, starting July 1, 1999, as long as Mr. Rudolph remains an employee of
CIBER. The loan is secured by Mr. Rudolph's home. CIBER's outstanding balance on
the loan receivable from Mr. Rudolph was $450,000 at December 31, 1999. The loan
bears interest at 5.45%.
In July 1999 CIBER loaned to Joseph A. Mancuso, Senior Vice President, $300,000
for the purchase of a home. The note requires repayment of at least $30,000
annually and the balance is payable in full in five years or sooner in the event
Mr. Mancuso is no longer an employee of CIBER. The loan is secured by a second
mortgage on Mr. Mancuso's residence. CIBER's outstanding balance on the loan
receivable from Mr. Mancuso was $300,000 at December 31, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) Financial Statements
The following financial statements are filed as part of this report:
Independent Auditors' Report
Consolidated Statements of Operations - Years Ended June 30, 1997,
1998 and 1999, and the Six Months Ended December 31, 1998
(unaudited) and 1999.
Consolidated Balance Sheets - June 30, 1998 and 1999, and December
31, 1999
Consolidated Statements of Shareholders' Equity - Years Ended June
30, 1997, 1998 and 1999, and the Six Months Ended December 31,
1999
Consolidated Statements of Cash Flows - Years Ended June 30, 1997,
1998 and 1999, and the Six Months Ended December 31, 1998
(unaudited) and 1999
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
None
50
<PAGE>
(3) EXHIBITS
NUMBER DESCRIPTION OF EXHIBITS
3(I) Amended and Restated Certificate of Incorporation of CIBER,
Inc.; Certificate of Amendment to Amended and Restated
Certificate of Incorporation of CIBER, Inc. dated October 29,
1996; Certificate of Amendment to Amended and Restated
Certificate of Incorporation of CIBER, Inc. dated March 4,
1998 incorporated by reference to the Quarterly Report on Form
10-Q for the quarter ended March 31, 1998; Certificate of
Amendment to Amended and Restated Certificate of Incorporation
of CIBER, Inc. dated October 29, 1999 incorporated by
reference to the Quarterly Report on Form 10-Q for the quarter
ended September 30, 1999
3(ii) Amended and Restated Bylaws of the Company as adopted August
17,1999, incorporated by reference to the Quarterly Report on
Form 10-Q for the quarter ended September 30, 1999
4.1 Form of Common Stock Certificate (1)
4.2 Rights Agreement, dated as of August 31, 1998, between the
Company and UMB Bank, N. A., and exhibits, incorporated by
reference to the Form 8-K filed by the Company on September
16, 1998
10.1 1989 CIBER, Inc. Employee Stock Option Plan (1)
10.2 Form of CIBER, Inc. Non-Employee Directors' Stock Option Plan
(1)
10.3 Implementation Partners Agreement dated September 1, 1993, by
and between Business Information Technology, Inc. and
PeopleSoft, Inc., incorporated by reference to the
Registration Statement on Form S-1, as amended (File No.
33-96988), on September 15, 1995
10.4 Salary Continuation Retirement Plan for Mac J. Slingerlend,
incorporated by reference to the Annual Report on Form 10-K
for the year ended June 30, 1996
10.5 CIBER, Inc. Salary Continuation Retirement Plan for Richard A.
Montoni, incorporated by reference to the Current Report on
Form 8-K filed with the Commission on December 12, 1996
10.6 CIBER, Inc. Equity Incentive Plan (Amended and restated as of
May 4, 1998 and subsequently amended as of October 28, 1999)
incorporated by reference to the Proxy Statement for the year
ended June 30, 1999
10.7 CIBER Enterprise Outsourcing, Inc. Equity Incentive Plan
10.8 Interactive Papyrus, Inc. Equity Incentive Plan
10.9 CIBER, Inc. Non-Employee Directors' Stock Compensation Plan
(as amended July 1, 1997), incorporated by reference to the
Annual Report on Form 10-K for the year ended June 30, 1998
10.10 Unsecured Credit Agreement with UMB Bank Colorado dated
November 1, 1999, incorporated by reference to the Quarterly
Report on Form 10-Q for the quarter ended September 30, 1999
10.11 Agreement and Plan of Reorganization and Liquidation by and
among CIBER, Inc., CIBER Integration Services, Inc., Business
Impact Systems, Inc. and the Affiliated Stockholders of
Business Impact Systems, Inc. dated February 26, 1999,
incorporated by reference to the Current Report on Form 8-K
filed with the Commission on July 1, 1999
10.12 Employment Agreement between the Company and Mac J.
Slingerlend (2)
10.13 Employment Agreement between the Company and Paul E. Rudolph
(2)
10.14 Employment Agreement between the Company and Richard A.
Montoni (2)
10.15 Employment Agreement between the Company and Joseph A.
Mancuso (2)
10.16 Employment Agreement between the Company and Donald R. Hahl
(2)
10.17 Promissory Note between the Company and Joseph A. Mancuso,
incorporated by reference to the Quarterly Report on Form 10-Q
for the quarter ended September 30, 1999
21.1 List of Subsidiaries
23.1 Consent of KPMG LLP
27.1 Financial Data Schedule for the six months ended December 31,
1999
(1) Incorporated by reference to the Registration Statement on
Form S-1, as amended (File No. 33-74774),
as filed with the Commission on February 2, 1994.
(2) Incorporated by reference to the Annual Report on Form 10-K
for the year ended June 30, 1999
(b) REPORTS ON FORM 8-K DURING THE QUARTER ENDED DECEMBER 31, 1999
A Report on Form 8-K was filed on December 10, 1999 that announced
the change in the Company's fiscal year-end from June 30 to December
31, effective December 31, 1999.
51
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CIBER, INC.
(Registrant)
Date: February 29, 2000 By /s/ Mac J. Slingerlend
-----------------------------------
Mac J. Slingerlend
CHIEF EXECUTIVE OFFICER, PRESIDENT
AND SECRETARY
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
<TABLE>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Bobby G. Stevenson Chairman and Founder February 29, 2000
----------------------
Bobby G. Stevenson
/s/ Mac J. Slingerlend Chief Executive Officer, President, February 29, 2000
---------------------- Secretary and Director
Mac J. Slingerlend
/s/ Paul E. Rudolph Chief Operating Officer and Director February 29, 2000
----------------------
Paul E. Rudolph
/s/ Richard A. Montoni Chief Financial Officer, Executive Vice February 29, 2000
---------------------- President, Treasurer and Director
Richard A. Montoni (Principal Financial Officer)
/s/ Christopher L. Loffredo Vice President/Chief Accounting Officer February 29, 2000
--------------------------- (Principal Accounting Officer)
Christopher L. Loffredo
/s/ James A. Rutherford Director February 29, 2000
-----------------------
James A. Rutherford
___________________ Director February 29, 2000
Roy L. Burger
/s/ James G. Brocksmith, Jr. Director February 29, 2000
----------------------------
James G. Brocksmith, Jr.
/s/ Archibald J. McGill, Director February 29, 2000
-------------------------
Archibald J. McGill
</TABLE>
52
<PAGE>
CIBER ENTERPRISE OUTSOURCING, INC.
EQUITY INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. CIBER Enterprise Outsourcing, Inc. (the
"Company") hereby establishes the CIBER Enterprise Outsourcing, Inc. Equity
Incentive Plan (the "Plan") for certain officers, employees and consultants
of the Company.
1.2 PURPOSES. The purposes of the Plan are to provide the
officers, employees and consultants of the Company selected for participation
in the Plan with added incentives to continue in the long-term service of the
Company and to create in such persons a more direct interest in the future
success of the operations of the Company by relating incentive compensation
to increases in stockholder value, so that the income of such persons is more
closely aligned with the income of the Company's stockholders. The Plan is
also designed to enhance the ability of the Company to attract, retain and
motivate officers, employees and consultants by providing an opportunity for
investment in the Company.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the
meanings set forth below:
(a) "AFFILIATED CORPORATION" means (i) any
corporation or other entity (including but not limited to a partnership) that
directly, or through one or more intermediaries controls, is controlled by,
or is under common control with, the Company, or (ii) any entity in which the
Company has a significant equity interest, as determined by the Committee.
(b) "AWARD" means a grant made under this
Plan in the form of Stock, Options, Restricted Stock, Performance Shares, or
Performance Units.
(c) "BOARD" means the Board of Directors of
the Company.
(d) "COMMITTEE" means (i) the Board, or (ii)
one or more committees of the Board to whom the Board has delegated all or
part of its authority under this Plan. Any committee under clause (ii) hereof
which makes grants to "officers" of the Company (as that term is defined in
Rule 16a-1(f) promulgated under the Exchange Act) shall be composed of not
less than the minimum number of persons from time to time required by Rule
16b-3, each of whom, to the extent necessary to comply with Rule 16b-3 only,
shall be a "non-employee director" within the meaning of Rule 16b-3(b)(3)(i).
<PAGE>
(e) "COMPANY" means CIBER Enterprise
Outsourcing, Inc., a Delaware corporation, together with its Affiliated
Corporations except where the context otherwise requires.
(f) "EFFECTIVE DATE" means October 28, 1999.
(g) "ELIGIBLE EMPLOYEES" means full-time key
employees (including, without limitation, officers (whether or not full-time)
and directors who are also employees) of the Company or any Affiliated
Corporation or any division thereof, upon whose judgment, initiative and
efforts the Company is, or will be, important to the successful conduct of
its business.
(h) "EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any
date, the value of the Stock determined as follows:
(i) If the Stock is listed on any
established stock exchange or a national market system, its Fair Market Value
shall be the closing sales price for such Stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable;
(ii) If the Stock is regularly quoted by
a recognized securities dealer but selling prices are not reported, the Fair
Market Value of a Share shall be the mean between the high bid and low asked
prices for the Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Committee deems reliable;
(iii) In the absence of an established
market for the Stock, the Fair Market Value shall be determined in good faith
by the Committee.
(j) "INCENTIVE STOCK OPTION" means any Option
designated as such and granted in accordance with the requirements of Section
422 of the Internal Revenue Code.
(k) "INTERNAL REVENUE CODE" means the
Internal Revenue Code of 1986, as it may be amended from time to time, and
the rules and regulations promulgated thereunder.
(l) "NON-STATUTORY OPTION" means any Option
other than an Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock
at a stated price for a specified period of time.
(n) "OPTION PRICE" means the price at which
shares of Stock subject to an Option may be purchased, determined in
accordance with Section 7.2(b).
-2-
<PAGE>
(o) "PARTICIPANT" means an Eligible Employee
or part-time employee of, or consultant or director to, the Company
designated by the Committee from time to time during the term of the Plan to
receive one or more Awards under the Plan.
(p) "PERFORMANCE CYCLE" means the period of
time as specified by the Committee over which Performance Share or
Performance Units are to be earned.
(q) "PERFORMANCE SHARES" means an Award made
pursuant to Section 9 which entitles a Participant to receive Shares, their
cash equivalent or a combination thereof based on the achievement of
performance targets during a Performance Cycle.
(r) "PERFORMANCE UNITS" means an Award made
pursuant to Section 9 which entitles a Participant to receive cash, Stock or
a combination thereof based on the achievement of performance targets during
a Performance Cycle.
(s) "PLAN YEAR" means each 12-month period
beginning July 1 and ending the following June 30, except that for the first
year of the Plan it shall begin on the Effective Date and extend to June 30
of that year.
(t) "RESTRICTED STOCK" means Stock granted
under Section 8 that is subject to restrictions imposed pursuant to said
Section.
(u) "RULE 16b-3" shall mean Rule 16b-3 as
promulgated by the Securities and Exchange Commission under the Exchange Act,
or any successor rule or regulation thereto as in effect from time to time.
(v) "SERVICE PROVIDER" means an employee or
director of or consultant to the Company.
(w) "SHARE" means a share of Stock.
(x) "STOCK" means the common stock, $.01 par
value, of the Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by
the context, the masculine gender shall also include the feminine gender, and
the definition of any term herein in the singular shall also include the
plural.
SECTION 3
PLAN ADMINISTRATION
3.1 AUTHORITY OF COMMITTEE. The Plan shall be administered
by the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted to eligible Participants; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection with, Awards; (iv) determine
-3-
<PAGE>
the terms and conditions of any Award; (v) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash,
Shares, other securities, other Awards or other property, or canceled,
forfeited, or suspended and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, shares, other
securities, other Awards, other property, and other amounts payable with
respect to an Award shall be deferred either automatically or at the election
of the holder thereof or of the Committee; (vii) correct any defect, supply
any omission, reconcile any inconsistency and otherwise interpret and
administer the Plan and any instrument or agreement relating to the Plan or
any Award hereunder; (viii) establish, amend, suspend, or waive such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan. To the extent necessary or appropriate, the
Committee may adopt sub-plans consistent with the Plan to conform to
applicable state or foreign securities or tax laws. A majority of the members
of the Committee may determine its actions and fix the time and place of its
meetings.
3.2 DETERMINATIONS UNDER THE PLAN. Unless otherwise
expressly provided in the Plan all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at
any time and shall be final, conclusive, and binding upon all persons,
including the Company, any Affiliated Corporation, any Participant, any
holder or beneficiary of any Award, and any shareholder. No member of the
Committee shall be liable for any action, determination or interpretation
made in good faith, and all members of the Committee shall, in addition to
their rights as directors, be fully protected by the Company with respect to
any such action, determination or interpretation.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
Section 4.3, one hundred (100) Shares are authorized for issuance under the
Plan in accordance with the provisions of the Plan and subject to such
restrictions or other provisions as the Committee may from time to time deem
necessary; provided, however, that no Participant may be granted Awards in
any one calendar year with respect to more than fifty (50) Shares. The Shares
may be divided among the various Plan components as the Committee shall
determine. Shares which may be issued upon the exercise of Options shall be
applied to reduce the maximum number of Shares remaining available for use
under the Plan. The Company shall at all times during the term of the Plan
and while any Options are outstanding retain as authorized and unissued
Stock, or as treasury Stock, at least the number of Shares from time to time
required under the provisions of the Plan, or otherwise assure itself of its
ability to perform its obligations hereunder.
4.2 UNUSED AND FORFEITED STOCK. Any Shares that are subject
to an Award under this Plan which are not used because the terms and
conditions of the Award are not met, including any Shares that are subject to
an Option which expires or is terminated for any reason, any Shares which are
used for full or partial payment of the purchase price of Shares with respect
to which an Option is exercised and any Shares retained by the Company
pursuant to Section 15.2 shall automatically become available for use under
the Plan. Notwithstanding the foregoing, any Shares
-4-
<PAGE>
used for full or partial payment of the purchase price of the Shares with
respect to which an Option is exercised and any Shares retained by the
Company pursuant to Section 15.2 that were originally Incentive Stock Option
Shares must still be considered as having been granted for purposes of
determining whether the Share limitation provided for in Section 4.1 has been
reached for purposes of Incentive Stock Option grants.
4.3 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If
the Company shall at any time increase or decrease the number of its
outstanding Shares of Stock or change in any way the rights and privileges of
such Shares by means of the payment of a stock dividend or any other
distribution upon such Shares payable in Stock, or through a stock split,
subdivision, consolidation, combination, reclassification or recapitalization
involving the Stock, then in relation to the Stock that is affected by one or
more of the above events, the numbers, rights and privileges of (i) the
shares of Stock as to which Awards may be granted under the Plan, and (ii)
the Shares of Stock then included in each outstanding Option, Performance
Share or Performance Unit granted hereunder, shall be increased, decreased or
changed in like manner as if they had been issued and outstanding, fully paid
and nonassessable at the time of such occurrence.
4.4 DIVIDEND PAYABLE IN STOCK OF ANOTHER CORPORATION, ETC.
If the Company shall at any time pay or make any dividend or other
distribution upon the Stock payable in securities of another corporation or
other property (except money or Stock), a proportionate part of such
securities or other property shall be set aside and delivered to any
Participant then holding an Award for the particular type of Stock for which
the dividend or other distribution was made, upon exercise thereof in the
case of Options, and the vesting thereof in the case of other Awards. Prior
to the time that any such securities or other property are delivered to a
Participant in accordance with the foregoing, the Company shall be the owner
of such securities or other property and shall have the right to vote the
securities, receive any dividends payable on such securities, and in all
other respects shall be treated as the owner. If securities or other property
which have been set aside by the Company in accordance with this Section are
not delivered to a Participant because an Award is not exercised or otherwise
vested, then such securities or other property shall remain the property of
the Company and shall be dealt with by the Company as it shall determine in
its sole discretion.
4.5 OTHER CHANGES IN STOCK. In the event there shall be any
change, other than as specified in Sections 4.3 and 4.4, in the number or
kind of outstanding shares of Stock or of any stock or other securities into
which the Stock shall be changed or for which it shall have been exchanged,
and if the Committee shall in its discretion determine that such change
equitably requires an adjustment in the number or kind of Shares subject to
outstanding Awards or which have been reserved for issuance pursuant to the
Plan but are not then subject to an Award, then such adjustments shall be
made by the Committee and shall be effective for all purposes of the Plan and
on each outstanding Award that involves the particular type of stock for
which a change was effected.
4.6 RIGHTS TO SUBSCRIBE. If the Company shall at any time
grant to the holders of its Stock rights to subscribe pro rata for additional
shares thereof or for any other securities of the Company or of any other
corporation, there shall be reserved with respect to the Shares then subject
to an Award held by any Participant of the particular class of Stock
involved, the Stock or other securities which the Participant would have been
entitled to subscribe for if immediately prior to such grant the Participant
had exercised his entire Option, or otherwise vested in his entire Award.
-5-
<PAGE>
If, upon exercise of any such Option or the vesting of any other Award, the
Participant subscribes for the additional Stock or other securities, the
Participant shall pay to the Company the price that is payable by the
Participant for such Stock or other securities.
4.7 GENERAL ADJUSTMENT RULES. If any adjustment or
substitution provided for in this Section 4 shall result in the creation of a
fractional Share under any Award, the Company shall, in lieu of selling or
otherwise issuing such fractional Share, pay to the Participant a cash sum in
an amount equal to the product of such fraction multiplied by the Fair Market
Value of a Share on the date the fractional Share would otherwise have been
issued. In the case of any such substitution or adjustment affecting an
Option, the total Option Price for the shares of Stock then subject to an
Option shall remain unchanged but the Option Price per shall under each such
Option shall be equitably adjusted by the Committee to reflect the greater or
lesser number of shares of Stock or other securities into which the Stock
subject to the Option may have been changed.
4.8 DETERMINATION BY COMMITTEE, ETC. Adjustments under this
Section 4 shall be made by the Committee, whose determinations with regard
thereto shall be final and binding upon all persons.
SECTION 5
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated
with another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification or change of outstanding Shares), or if all or substantially
all of the assets or more than 50% of the outstanding voting stock of the
Company is acquired by any other corporation, business entity or person
(other than a sale or conveyance in which the Company continues as a holding
company of an entity or entities that conduct the business or businesses
formerly conducted by the Company), or in case of a reorganization (other
than a reorganization under the United States Bankruptcy Code) or liquidation
of the Company, and if the provisions of Section 10 do not apply, the
Committee, or the board of directors of any corporation assuming the
obligations of the Company, shall, have the power and discretion to prescribe
the terms and conditions for the exercise, or modification, of any
outstanding Awards granted hereunder. By way of illustration, and not by way
of limitation, the Committee may provide for the complete or partial
acceleration of the dates of exercise of the Options, or may provide that
such Options will be exchanged or converted into options to acquire
securities of the surviving or acquiring corporation, or may provide for a
payment or distribution in respect of outstanding Options (or the portion
thereof that is currently exercisable) in cancellation thereof. The Committee
may remove restrictions on Restricted Stock and may modify the performance
requirements for any other Awards. The Committee may provide that Stock or
other Awards granted hereunder must be exercised in connection with the
closing of such transaction, and that if not so exercised such Awards will
expire. Any such determinations by the Committee may be made generally with
respect to all Participants, or may be made on a case-by-case basis with
respect to particular Participants. The provisions of this Section 5 shall
not apply to any transaction undertaken for the purpose of reincorporating
the Company under the laws of another jurisdiction, if such transaction does
not materially affect the beneficial ownership of the Company's capital stock.
-6-
<PAGE>
SECTION 6
PARTICIPATION
Participants in the Plan shall be those Eligible Employees,
part-time employees or consultants who, in the judgment of the Committee, are
performing, or during the term of their incentive arrangement will perform,
important services in the management, operation and development of the
Company, and significantly contribute, or are expected to significantly
contribute, to the achievement of long-term corporate economic objectives.
Participants may be granted from time to time one or more Awards; provided,
however, that the grant of each such Award shall be separately approved by
the Committee, and receipt of one such Award shall not result in automatic
receipt of any other Award, written notice shall be given to such person,
specifying the terms, conditions, rights and duties related thereto; and
further provided that Incentive Stock Options shall not be granted to (i)
Eligible Employees of any partnership or other entity which is included
within the definition of an Affiliated Corporation but whose employees are
not permitted to receive Incentive Stock Options under the Internal Revenue
Code or (ii) consultants. Each Participant shall enter into an agreement with
the Company, in such form as the Committee shall determine and which is
consistent with the provisions of the Plan, specifying such terms,
conditions, rights and duties. Awards shall be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date shall be
the date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such agreement
entered into hereunder, the provisions of the Plan shall govern.
SECTION 7
STOCK OPTIONS
7.1 GRANT OF OPTIONS. Coincident with or following
designation for participation in the Plan, a Participant may be granted one
or more Options. The Committee in its sole discretion shall designated
whether an Option is to be considered an Incentive Stock Option or a
Non-Statutory Option. The Committee may grant both an Incentive Stock Option
and a Non-Statutory Option to the same Participant at the same time or at
different times. Incentive Stock Options and Non-Statutory Options, whether
granted at the same or different times, shall be deemed to have been awarded
in separate grants, shall be clearly identified, and in no event shall the
exercise of one Option affect the right to exercise any other Option or
affect the number of Shares for which any other Option may be exercised.
7.2 OPTION AGREEMENTS. Each Option granted under the Plan
shall be evidenced by a written stock option agreement which shall be entered
into by the Company and the Participant to whom the Option is granted (the
"Option Holder"), and which shall contain the following terms and conditions,
as well as such other terms and conditions not inconsistent therewith, as the
Committee may consider appropriate in each case.
(a) NUMBER OF SHARES. Each stock option
agreement shall state that it covers a specified number of Shares, as
determined by the Committee. To the extent that the aggregate Fair Market
Value of Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Participant during any year
(under all plans of the Company and any Affiliated Corporation) exceeds
$100,000, such Options shall be treated as not
-7-
<PAGE>
being Incentive Stock Options. The foregoing shall be applied by taking
Options into account in the order in which they were granted. For the
purposes of the foregoing, the Fair Market Value of any Share shall be
determined as of the time the Option with respect to such Share is granted.
In the event the foregoing results in a portion of an Option designated as an
Incentive Stock Option exceeding the $100,000 limitation, only such excess
shall be treated as not being an Incentive Stock Option.
(b) PRICE. The price at which each Share
covered by an Option may be purchased shall be determined in each case by the
Committee and set forth in the stock option agreement, but in no event shall
the Option Price for each Share covered by an Incentive Stock Option be less
than the Fair Market Value of the Stock on the date the Option is granted;
provided, however, that the Option Price for each Share covered by a
Non-Statutory Option may be granted at any price less than Fair Market Value,
in the sole discretion of the Committee; and provided further that the Option
Price for each Share covered by an Incentive Stock Option granted to an
Eligible Employee who then owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company must be at least 110% of the Fair
Market Value of the Stock subject to the Incentive Stock Option on the date
the Option is granted.
(c) DURATION OF OPTIONS. Each stock option
agreement shall state the period of time, determined by the Committee, within
which the Option may be exercised by the Option Holder (the "Option Period").
The Option Period must expire, in all cases, not more than ten years from the
date an Option is granted; provided, however, that the Option Period of an
Incentive Stock Option granted to an Eligible Employee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company
must expire not more than five years from the date such an Option is granted.
Each stock option agreement shall also state the periods of time, if any, as
determined by the Committee, when incremental portions of each Option shall
vest. If any Option is not exercised during its Option Period, it shall be
deemed to have been forfeited and or no further force or effect.
(d) TERMINATION OF SERVICE, DEATH,
DISABILITY, ETC. Except as otherwise determined by the Committee, each stock
option agreement shall provide as follows with respect to the exercise of the
Option upon an Option Holder ceasing to be a Service Provider or on the death
or disability of the Option Holder:
(i) If the Option Holder ceases to be
a Service Provider within the Option Period for cause, as determined by the
Company, the Option shall thereafter be void for all purposes. As used in
this Section 7.2(d), "cause" shall mean a gross violation, as determined by
the Company, of the Company's established policies and procedures. The effect
of this Section 7.2(d)(i) shall be limited to determining the consequences of
a termination, and nothing in this Section 7.2(d)(i) shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any Service Provider.
(ii) If the Option Holder ceases to be
a Service Provider with the Company in a manner determined by the Board, in
its sole discretion, to constitute retirement (which determination shall be
communicated to the Option Holder within 10 days of such termination), the
Option may be exercised by the Option Holder, or in the case of death by the
persons specified in
-8-
<PAGE>
clause (iii) of this Section 7.2(d), within three months following his or her
retirement if the Option is an Incentive Stock Option or within twelve months
following his or her retirement if the Option is a Non-Statutory Stock Option
(provided in each case that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be exercised
only as to the Shares as to which the Option had become exercisable on or
before the date the Option Holder ceases to be a Service Provider.
(iii) If the Option Holder dies (A)
while he or she is a Service Provider, (B) within the three-month period
referred to in clause (v) below, or (C) within the three or twelve-month
period referred to in clause (ii) above, the Option may be exercised by those
entitled to do so under the Option Holder's will or by the laws of descent
and distribution within twelve months following the Option Holder's death
(provided that such exercise must occur within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
Shares as to which the Option had become exercisable on or before the date of
the Option Holder's death or at such time as the Option Holder ceased to be a
Service Provider, whichever is earlier.
(iv) If the Option Holder becomes
disabled (within the meaning of Section 22(e) of the Internal Revenue Code)
while a Service Provider, Incentive Stock Options held by the Option Holder
may be exercised by the Option Holder within twelve months following the date
the Option Holder ceases to be a Service Provider (provided that such
exercise must occur within the Option Period), but not thereafter. If the
Option Holder becomes disabled (within the meaning of Section 22(e) of the
Internal Revenue Code) while a Service Provider or within three-month period
referred to in clause (v) below or within the twelve month period following
his or her retirement as provided in clause (ii) above, Non-Statutory Options
held by the Option Holder may be exercised by the Option Holder within twelve
months following the date of the Option Holder's disability (provided that
such exercise must occur within the Option Period), but not thereafter. In
any such case, the Option may be exercised only as to the Shares as to which
the Option had become exercisable on or before the date the Option Holder
ceased to be a Service Provider.
(v) If the Option Holder ceases to be
a Service Provider (which for this purpose means that the Option Holder is no
longer employed by or consulting with the Company or an Affiliated
Corporation) within the Option Period for any reason other than cause,
retirement as provided in clause (ii) above, disability as provided in clause
(iv) above or the Option Holder's death, the Option may be exercised by the
Option Holder within three months following the date of such cessation
(provided that such exercise must occur within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
Shares as to which the Option had become exercisable on or before the date
that the Option Holder ceases to be a Service Provider
(e) TRANSFERABILITY. Except as otherwise
determined by the Committee, Options shall not be transferable by the Option
Holder except by will or pursuant to the laws of descent and distribution or
pursuant to a "qualified domestic relations order" as defined by the Internal
Revenue Code or Title I of the Employee Retirement Income Security Act of
1974 ("ERISA"); each Option shall be exercisable during the Option Holder's
lifetime only by him or her, or in the event of disability or incapacity, by
his or her guardian or legal representative; and Shares issuable pursuant to
any Option shall be delivered only to or for the account of the Option
Holder, or in the event of disability or incapacity, by his or her guardian
or legal representative.
-9-
<PAGE>
(f) EXERCISE, PAYMENTS, ETC.
(i) Each stock option agreement shall
provide that the method for exercising the Option granted therein shall be by
delivery to the Corporate Secretary of the Company of written notice
specifying the number of Shares with respect to which such Option is
exercised (which may be required to be a minimum number of Shares as
established by the Committee in its discretion) and payment of the Option
Price. Such notice shall be in a form satisfactory to the Committee and shall
specify the particular Option (or portion thereof) which is being exercised
and the number of Shares with respect to which the Option is being exercised.
The exercise of the Option shall be deemed effective upon receipt of such
notice by the Corporate Secretary and payment to the Company. The purchase of
such Stock shall take place at the principal offices of the Company upon
delivery of such notice, at which time the purchase price of the Stock shall
be paid in full by any of the methods or any combination of the methods set
forth in (ii) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder. If certificates representing Stock are used to pay all or part
of the Option Price, separate certificates for the same number of shares of
Stock shall be issued by the Company and delivered to the Option Holder
representing each certificate used to pay the Option Price, and an additional
certificate shall be issued by the Company and delivered to the Option Holder
representing the additional shares, in excess of the Option Price, to which
the Option Holder is entitled as a result of the exercise of the Option.
(ii) The exercise price shall be paid by
any of the following methods or any combination of the following methods:
(A) in cash;
(B) by cashier's check
payable to the order of the Company;
(C) if authorized by the
Committee, in its sole discretion, by delivery to the Company of certificates
representing the number of Shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase price of the Stock purchased
pursuant to the Option, properly endorsed for transfer to the Company;
provided however, that Shares used for this purpose must have been held by
the Option Holder for such minimum period of time as may be established from
time to time by the Committee; and provided further that the Fair Market
Value of any Shares delivered in payment of the purchase price upon exercise
of the Option shall be the Fair Market Value as of the exercise date, which
shall be the date of delivery of the certificates for the Stock used as
payment of the Option Price; or
(D) if authorized by the
Committee, in its sole discretion, by delivery to the Company of a properly
executed notice of exercise together with irrevocable instructions to a
broker to deliver to the Company promptly the amount of the proceeds of the
sale of all or a portion of the Stock or of a loan from the broker to the
Option Holder necessary to pay the exercise price.
(iii) In the discretion of the
Committee, the Company may guaranty a third-party loan obtained by a
Participant to pay part or all of the Option Price of the Shares provided
that such loan or the Company's guaranty is secured by the Shares.
-10-
<PAGE>
(g) DATE OF GRANT. An option shall be
considered as having been granted on the date specified in the grant
resolution of the Committee.
(h) WITHHOLDING.
(A) NON-STATUTORY OPTIONS.
Each stock option agreement covering Non-Statutory Options shall provide
that, upon exercise of the Option, the Option Holder shall make appropriate
arrangements with the Company to provide for the amount of additional
withholding required by applicable federal and state income tax laws,
including payment of such taxes through delivery of Stock or by withholding
Stock to be issued under the Option, as provided in Section 15.
(B) INCENTIVE OPTIONS. In
the event that a Participant makes a disposition (as defined in Section
424(c) of the Internal Revenue Code) of any Stock acquired pursuant to the
exercise of an Incentive Stock Option prior to the later of (i) the
expiration of two years from the date on which the Incentive Stock Option was
granted or (ii) the expiration of one year from the date on which the Option
was exercised, the Participant shall send written notice to the Company at
its principal office (Attention: Corporate Secretary) of the date of such
disposition, the number of shares disposed of, the amount of proceeds
received from such disposition, and any other information relating to such
disposition as the Company may reasonably request. The Participant shall, in
the event of such a disposition, make appropriate arrangements with the
Company to provide for the amount of additional withholding, if any, required
by applicable federal and state income tax laws.
(i) ADJUSTMENT OF OPTIONS. Subject
to the limitations contained in Sections 7 and 14, the Committee may make any
adjustment in the Option Price, the number of shares subject to, or the terms
of, an outstanding Option and a subsequent granting of an Option by amendment
or by substitution of an outstanding Option. Such amendment, substitution, or
re-grant may result in terms and conditions (including Option Price, number
of shares covered, vesting schedule or exercise period) that differ from the
terms and conditions of the original Option. The Committee may not, however,
adversely affect the rights of any Participant to previously granted Options
without the consent of such Participant. If such action is affected by
amendment, the effective date of such amendment shall be the date of the
original grant.
7.3 STOCKHOLDER PRIVILEGES. No Option Holder shall have any
rights as a stockholder with respect to any Shares covered by an Option until
the Option Holder becomes the holder of record of such Stock, and no
adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Option
Holder becomes the holder of record of such Stock, except as provided in
Section 4.
SECTION 8
RESTRICTED STOCK AWARDS
8.1 AWARDS GRANTED BY COMMITTEE. Coincident with or
following designation for participation in the Plan, a Participant may be
granted one or more Restricted Stock Awards
-11-
<PAGE>
consisting of Shares. The number of Shares granted as a Restricted Stock
Award shall be determined by the Committee.
8.2 RESTRICTIONS. A Participant's right to retain a
Restricted Stock Award granted to him under Section 8.1 shall be subject to
such restrictions, including but not limited to his continuing to perform as
a Service Provider for a restriction period specified by the Committee, or
the attainment of specified performance goals and objectives, as may be
established by the Committee with respect to such Award. The Committee may in
its sole discretion require different periods of service or different
performance goals and objectives with respect to (i) different Participants,
(ii) different Restricted Stock Awards, or (iii) separate, designated
portions of the Shares constituting a Restricted Stock Award.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A
Participant shall have all voting, dividend, liquidation and other rights
with respect to Stock in accordance with its terms received by him as a
Restricted Stock Award under this Section 8 upon his becoming the holder of
record of such Stock; provided, however, that the Participant's right to
sell, encumber or otherwise transfer such Stock shall be subject to the
limitations of Section 11.2 hereof.
8.4 ENFORCEMENT OF RESTRICTIONS. The Committee may in its
sole discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.2 and 8.3:
(a) placing a legend on the stock
certificates referring to the restrictions;
(b) requiring the Participant to keep the
stock certificates, duly endorsed, in the custody of the Company while the
restrictions remain in effect; or
(c) requiring that the stock certificates,
duly endorsed, be held in the custody of a third party while the restrictions
remain in effect.
8.5 TERMINATION OF SERVICE, DEATH, DISABILITY, ETC. In the
event of the death or disability (within the meaning of Section 22(e) of the
Internal Revenue Code) of a Participant, or the retirement of a Participant
as provided in Section 7.2(d)(ii), all service period and other restrictions
applicable to Restricted Stock Awards then held by him shall lapse, and such
Awards shall become fully nonforfeitable. Subject to Sections 5 and 10, in
the event a Participant ceases to be a Service Provider for any other reason,
any Restricted Stock Awards as to which the service period or other
restrictions have not been satisfied shall be forfeited.
SECTION 9
PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 AWARDS GRANTED BY COMMITTEE. Coincident with or
following designation for participation in the Plan, a Participant may be
granted Performance Shares or Performance Units.
9.2 AMOUNT OF AWARD. The Committee shall establish a
maximum amount of a Participant's Award, which amount shall be denominated in
Shares in the case of Performance Shares or in dollars in the case of
Performance Units.
-12-
<PAGE>
9.3 COMMUNICATION OF AWARD. Written notice of the maximum
amount of a Participant's Award and the Performance Cycle determined by the
Committee shall be given to a Participant as soon as practicable after
approval of the Award by the Committee.
9.4 AMOUNT OF AWARD PAYABLE. The Committee shall establish
maximum and minimum performance targets to be achieved during the applicable
Performance Cycle. Performance targets established by the Committee shall
relate to corporate, group, unit or individual performance and may be
established in terms of earnings, growth in earnings, ratios of earnings to
equity or assets, or such other measures or standards determined by the
Committee. Multiple performance targets may be used and the components of
multiple performance targets may be given the same or different weighting in
determining the amount of an Award earned, and may relate to absolute
performance or relative performance measured against other groups, units,
individuals or entities. Achievement of the maximum performance target shall
entitle the Participant to payment (subject to Section 9.6) at the full or
maximum amount specified with respect to the Award; provided, however, that
notwithstanding any other provisions of this Plan, in the case of an Award of
Performance Shares the Committee in its discretion may establish an upper
limit on the amount payable (whether in cash or Stock) as a result of the
achievement of the maximum performance target. The Committee may also
establish that a portion of a full or maximum amount of a Participant's Award
will be paid (subject to Section 9.6) for performance which exceeds the
minimum performance target but falls below the maximum performance target
applicable to such Award.
9.5 ADJUSTMENTS. At any time prior to payment of a
Performance Share or Performance Unit Award, the Committee may adjust
previously established performance targets or other terms and conditions to
reflect events such as changes in laws, regulations, or accounting practice,
or mergers, acquisitions or divestitures.
9.6 PAYMENTS OF AWARDS. Following the conclusion of each
Performance Cycle, the Committee shall determine the extent to which
performance targets have been attained, and the satisfaction of any other
terms and conditions with respect to an Award relating to such Performance
Cycle. The Committee shall determine what, if any, payment is due with
respect to an Award and whether such payment shall be made in cash, Stock or
some combination. Payment shall be made in a lump sum or installments, as
determined by the Committee, commencing as promptly as practicable following
the end of the applicable Performance Cycle, subject to such terms and
conditions and in such form as may be prescribed by the Committee.
9.7 TERMINATION OF EMPLOYMENT. If a Participant ceases to
be a Service Provider before the end of a Performance Cycle by reason of his
death, disability as provided in Section 7.2(d)(iv), or retirement as
provided in Section 7.2(d)(ii), the Performance Cycle for such Participant
for the purpose of determining the amount of the Award payable shall end at
the end of the calendar quarter immediately preceding the date on which such
Participant ceased to be a Service Provider. The amount of an Award payable
to a Participant to whom the preceding sentence is applicable shall be paid
at the end of the Performance Cycle and shall be that fraction of the Award
computed pursuant to the preceding sentence the numerator of which is the
number of calendar quarters during the Performance Cycle during all of which
said Participant was a Service Provider and the denominator of which is the
number of full calendar quarters in the Performance Cycle. Upon any
-13-
<PAGE>
other termination of Participant's services as a Service Provider during a
Performance Cycle, participation in the Plan shall cease and all outstanding
Awards of Performance Shares or Performance Units to such Participant shall
be canceled.
SECTION 10
CHANGE IN CONTROL
10.1 OPTIONS, RESTRICTED STOCK. In the event of a change in
control of the Company as defined in Section 10.3, then the Committee may, in
its sole discretion, without obtaining stockholder approval, to the extent
permitted in Section 14, take any or all of the following actions:(a)
accelerate the exercise dates of any outstanding Options or make all such
Options fully vested and exercisable; (b) grant a cash bonus award to any
Option Holder in an amount necessary to pay the Option Price of all or any
portion of the Options then held by such Option Holder; (c) pay cash to any
or all Option Holders in exchange for the cancellation of their outstanding
Options in an amount equal to the different between the Option Price of such
Options and the greater of the tender offer price for the underlying Stock or
the Fair Market Value of the Stock on the date of the cancellation of the
Options; (d) make any other adjustments or amendments to the outstanding
Options; and (e) eliminate all restrictions with respect to Restricted Stock
and deliver Shares free of restrictive legends to any Participant.
10.2 PERFORMANCE SHARES AND PERFORMANCE UNITS. Under the
circumstances described in Section 10.1, the Committee may, in its sole
discretion, and without obtaining stockholder approval, to the extent
permitted in Section 14, provide for payment of outstanding Performance
Shares and Performance Units at the maximum award level or any percentage
thereof.
10.3 DEFINITION. For purposes of the Plan, a "change in
control" shall be deemed to have occurred if: (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company, is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of more than
33 1/3% of the then outstanding voting stock of the Company; or (b) at any
time during any period of three consecutive years (not including any period
prior to the Effective Date), individuals who at the beginning of such period
constitute the Board (and any new director whose election by the Board or
whose nomination for election by the Company's stockholders was approved by a
vote of at least two-thirds of the directors then still in office who either
were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof; or (c) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
-14-
<PAGE>
SECTION 11
RIGHTS OF EMPLOYEES; PARTICIPANTS
11.1 EMPLOYMENT. Nothing contained in the Plan or in any
Award granted under the Plan shall confer upon any Participant any right with
respect to the continuation of his or her services as a Service Provider, or
interfere in any way with the right of the Company, subject to the terms of
any separate employment or consulting agreement to the contrary, at any time
to terminate such services or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Award.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute a termination of Participant's services as a
Service Provider shall be determined by the Committee at the time.
11.2 NONTRANSFERABILITY. Except as provided in Section
11.3, no right or interest of any Participant in an Award granted pursuant to
the Plan shall be assignable or transferable during the lifetime of the
Participant except pursuant to a "qualified domestic relations order" as
defined by the Internal Revenue Code or Title I of ERISA, either voluntarily
or involuntarily, or be subjected to any lien, directly or indirectly, by
operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge or bankruptcy. In the event or a Participant's death, a
Participant's rights and interests in Options shall, to the extent provided
in Section 7, be transferable by testamentary will or the laws of descent and
distribution, and payment of any amounts due under the Plan shall be made to,
and exercise of any Options may be made by, the Participant's legal
representatives, heirs or legatees. If, in the opinion of the Committee, a
person entitled to payments or to exercise rights with respect to the Plan is
disabled from caring for his affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights
shall be exercised by, such person's guardian, conservator or other legal
personal representative upon furnishing the Committee with evidence
satisfactory to the Committee of such status. Transfers shall not be deemed
to include transfers to the Company or "cashless exercise" procedures with
third parties who provide financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with applicable laws and the
authorization of the Committee.
11.3 PERMITTED TRANSFERS. Pursuant to conditions and
procedures established by the Committee from time to time, the Committee may
permit Awards to be transferred to, exercised by and paid to certain persons
or entities related to a Participant, including but not limited to members of
the Participant's immediate family, charitable institutions, or trusts or
other entities whose beneficiaries or beneficial owners are members of the
Participant's immediate family and/or charitable institutions. In the case of
initial Awards, at the request of the Participant, the Committee may permit
the naming of the related person or entity as the Award recipient. Any
permitted transfer shall be subject to the condition that the Committee
receive evidence satisfactory to it that the transfer is being made for
estate and/or tax planning purposes on a gratuitous or donative basis and
without consideration (other than nominal consideration). Notwithstanding the
foregoing, Incentive Stock Options shall only be transferable to the extent
permitted by Section 422 of the Internal Revenue Code and the treasury
regulations thereunder.
-15-
<PAGE>
SECTION 12
GENERAL RESTRICTIONS
12.1 INVESTMENT REPRESENTATIONS. The Company may require
any person to whom an Option or other Award is granted, as a condition of
exercising such Option or receiving Stock under the Award, to give written
assurances in substance and form satisfactory to the Company and its counsel
to the effect that such person is acquiring the Stock subject to the Option
or the Award for his own account for investment and not with any present
intention or selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws. Legends evidencing such
restrictions may be placed on the certificates evidencing the Stock.
12.2 COMPLIANCE WITH SECURITIES LAWS. Each Award shall be
subject to the requirement that, if at any time counsel to the Company shall
determine that the listing, registration or qualification of the Shares
subject to such Award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory
body, is necessary as a condition of, or in connection with, the issuance or
purchase of Shares thereunder, such Award may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to the
Committee. Nothing herein shall be deemed to require the Company to apply for
or to obtain such listing, registration or qualification.
12.3 STOCK RESTRICTION AGREEMENT. The Committee may provide
that shares of Stock issuable upon the exercise of an Option shall, under
certain conditions, be subject to restrictions whereby the Company has a
right of first refusal with respect to such shares or a right or obligation
to repurchase all or a portion of such shares, which restrictions may survive
a Participant's cessation or termination as a Service Provider.
SECTION 13
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a
Participant as a result of the exercise of an Option or the grant or vesting
of any other Award shall not constitute "earnings" with respect to which any
other benefits of such Participant are determined, including without
limitation benefits under any pension, profit sharing, life insurance or
salary continuation plan.
SECTION 14
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time
may amend or modify, the Plan; provided, however, that no amendment or
modification may become effective without approval of the amendment or
modification by the stockholders if stockholder approval is required to
enable the Plan to satisfy any applicable statutory or regulatory
requirements, or if the Company, on the advice of counsel, determines that
stockholder approval is otherwise necessary or desirable.
-16-
<PAGE>
No amendment, modification or termination of the Plan shall
in any manner adversely affect any Awards theretofore granted under the Plan,
without the consent of the Participant holding such Awards.
SECTION 15
WITHHOLDING
15.1 WITHHOLDING REQUIREMENT. The Company's obligations to
deliver Shares upon the exercise of an Option, or upon the vesting of any
other Award, shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and other tax withholding
requirements.
15.2 WITHHOLDING WITH STOCK. At the time the Committee
grants an Award, it may, in its sole discretion, grant the Participant an
election to pay all such amounts of tax withholding, or any part thereof, by
electing to transfer to the Company, or to have the Company withhold from
Shares otherwise issuable to the Participant, Shares having a value equal to
the amount required to be withheld or such lesser amount as may be elected by
the Participant. All elections shall be subject to the approval or
disapproval of the Committee. The value of Shares to be withheld shall be
based on the Fair Market Value of the Stock on the date that the amount of
tax to be withheld is to be determined (the "Tax Date"). Any such elections
by Participants to have Shares withheld for this purpose will be subject to
the following restrictions:
(a) All elections must be made prior to the
Tax Date;
(b) All elections shall be irrevocable; and
(c) If the Participant is an officer or
director of the Company within the meaning of Section 16 of the Exchange Act
("Section 16"), the Participant must satisfy the requirements of such Section
16 and any applicable rules thereunder with respect to the use of Stock to
satisfy such tax withholding obligation.
SECTION 16
SECTION 162(m) PROVISIONS
16.1 LIMITATIONS. Notwithstanding any other provision of
this Plan, if the Committee determines at the time any Restricted Stock Award
or Performance Award is granted to a Participant that such Participant is, or
is likely to be at the time he or she recognizes income for federal income
tax purposes in connection with such Award, a Covered Employee (within the
meaning of Section 162(m)(3) of the Internal Revenue Code), then the
Committee may provide that this Section 16 is applicable to such Award.
16.2 PERFORMANCE GOALS. If an Award is subject to this
Section 16, then the lapsing of restrictions thereon and the distribution of
cash, Shares or other property pursuant thereto, as applicable, shall be
subject to the achievement of one or more objective performance goals
established by the Committee, which shall be based on the attainment of one
or any combination of
-17-
<PAGE>
the following: specified levels of earnings per share from continuing
operations, operating income, revenues, gross margin, return on operating
assets, return on equity, economic value added, stock price appreciation,
total stockholder return (measured in terms of stock price appreciation and
dividend growth), or cost control, of the Company or Affiliated Corporation
(or any division thereof) for or within which the Participant is primarily
employed. Such performance goals also may be based upon the attaining
specified levels of Company performance under one or more of the measures
described above relative to the performance of other corporations. Such
performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Internal Revenue Code and the regulations thereunder.
16.3 ADJUSTMENTS. Notwithstanding any provision of the Plan
other than Section 10, with respect to any Award that is subject to this
Section 16, the Committee may not adjust upwards the amount payable pursuant
to such Award, nor may it waive the achievement of the applicable performance
goals except in the case of the death or disability of the Participant.
16.4 OTHER RESTRICTIONS. The Committee shall have the power
to impose such other restrictions on Awards subject to this Section 16 as it
may deem necessary or appropriate to ensure that such Awards satisfy all
requirements for "performance-based compensation" within the meaning of
Section 162(m)(4)(B) of the Internal Revenue Code or any successor thereto.
SECTION 17
BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into
arrangements with one or more banks, brokers or other financial institutions
to facilitate the disposition of shares acquired upon exercise of Stock
Options, including, without limitation, arrangements for the simultaneous
exercise of Stock Options and sale of the Shares acquired upon such exercise.
SECTION 18
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the
submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitations on the power or authority of the Board
to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board may deem necessary or desirable
or preclude or limit the continuation of any other plan, practice or
arrangement for the payment of compensation or fringe benefits to employees
or consultants generally, or to any class or group of employees or
consultants, which the Company or any Affiliated Corporation now has lawfully
put into effect, including, without limitation, any retirement, pension,
savings and stock purchase plan, insurance, death and disability benefits and
executive short-term incentive plans.
-18-
<PAGE>
SECTION 19
REQUIREMENTS OF LAW
19.1 REQUIREMENTS OF LAW. The issuance of Stock and the
payment of cash pursuant to the Plan shall be subject to all applicable laws,
rules and regulations.
19.2 RULE 16b-3. Transactions under the Plan and within the
scope of Rule 16b-3 are intended to comply with all applicable conditions of
Rule 16b-3. To the extent any provision of the Plan or any action by the
Committee under the Plan fails to so comply, such provision or action shall,
without further action by any person, be deemed to be automatically amended
to the extent necessary to effect compliance with Rule 16b-3; provided,
however, that if such provision or action cannot be amended to effect such
compliance, such provision or action shall be deemed null and void to the
extent permitted by law and deemed advisable by the Committee.
19.3 GOVERNING LAW. The Plan and all agreements hereunder
shall be construed in accordance with and governed by the laws of the State
of Delaware.
SECTION 20
DURATION OF THE PLAN
No Award shall be granted under the Plan after ten years
from the Effective Date; provided, however, that any Award theretofore
granted may, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under any such Award shall, extend beyond such date.
Dated: October 28, 1999.
CIBER ENTERPRISE OUTSOURCING, INC.
By: /s/ Mac J. Slingerlend
---------------------------------
Mac J. Slingerlend
Chief Executive Officer and Executive Vice
President
-19-
<PAGE>
INTERACTIVE PAPYRUS, INC.
EQUITY INCENTIVE PLAN
SECTION 1
INTRODUCTION
1.1 ESTABLISHMENT. Interactive Papyrus, Inc. (the
"Company") hereby establishes the Interactive Papyrus, Inc. Equity Incentive
Plan (the "Plan") for certain officers, employees and consultants of the
Company.
1.2 PURPOSES. The purposes of the Plan are to provide the
officers, employees and consultants of the Company selected for participation
in the Plan with added incentives to continue in the long-term service of the
Company and to create in such persons a more direct interest in the future
success of the operations of the Company by relating incentive compensation
to increases in stockholder value, so that the income of such persons is more
closely aligned with the income of the Company's stockholders. The Plan is
also designed to enhance the ability of the Company to attract, retain and
motivate officers, employees and consultants by providing an opportunity for
investment in the Company.
SECTION 2
DEFINITIONS
2.1 DEFINITIONS. The following terms shall have the
meanings set forth below:
(a) "AFFILIATED CORPORATION" means (i) any
corporation or other entity (including but not limited to a partnership) that
directly, or through one or more intermediaries controls, is controlled by,
or is under common control with, the Company, or (ii) any entity in which the
Company has a significant equity interest, as determined by the Committee.
(b) "AWARD" means a grant made under this
Plan in the form of Stock, Options, Restricted Stock, Performance Shares, or
Performance Units.
(c) "BOARD" means the Board of Directors of
the Company.
(d) "COMMITTEE" means (i) the Board, or (ii)
one or more committees of the Board to whom the Board has delegated all or
part of its authority under this Plan. Any committee under clause (ii) hereof
which makes grants to "officers" of the Company (as that term is defined in
Rule 16a-1(f) promulgated under the Exchange Act) shall be composed of not
less than the minimum number of persons from time to time required by Rule
16b-3, each of whom, to the extent necessary to comply with Rule 16b-3 only,
shall be a "non-employee director" within the meaning of Rule 16b-3(b)(3)(i).
<PAGE>
(e) "COMPANY" means Interactive Papyrus,
Inc., a Delaware corporation, together with its Affiliated Corporations
except where the context otherwise requires.
(f) "EFFECTIVE DATE" means December 2, 1999.
(g) "ELIGIBLE EMPLOYEES" means full-time key
employees (including, without limitation, officers (whether or not full-time)
and directors who are also employees) of the Company or any Affiliated
Corporation or any division thereof, upon whose judgment, initiative and
efforts the Company is, or will be, important to the successful conduct of
its business.
(h) "EXCHANGE ACT" shall mean the Securities
Exchange Act of 1934, as amended.
(i) "FAIR MARKET VALUE" means, as of any
date, the value of the Stock determined as follows:
(i) If the Stock is listed on any
established stock exchange or a national market system, its Fair Market Value
shall be the closing sales price for such Stock (or the closing bid, if no
sales were reported) as quoted on such exchange or system for the last market
trading day prior to the time of determination, as reported in The Wall
Street Journal or such other source as the Committee deems reliable;
(ii) If the Stock is regularly quoted
by a recognized securities dealer but selling prices are not reported, the
Fair Market Value of a Share shall be the mean between the high bid and low
asked prices for the Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Committee deems reliable;
(iii) In the absence of an established
market for the Stock, the Fair Market Value shall be determined in good faith
by the Committee.
(j) "INCENTIVE STOCK OPTION" means any Option
designated as such and granted in accordance with the requirements of Section
422 of the Internal Revenue Code.
(k) "INTERNAL REVENUE CODE" means the
Internal Revenue Code of 1986, as it may be amended from time to time, and
the rules and regulations promulgated thereunder.
(l) "NON-STATUTORY OPTION" means any Option
other than an Incentive Stock Option.
(m) "OPTION" means a right to purchase Stock
at a stated price for a specified period of time.
(n) "OPTION PRICE" means the price at which
shares of Stock subject to an Option may be purchased, determined in
accordance with Section 7.2(b).
-2-
<PAGE>
(o) "PARTICIPANT" means an Eligible Employee
or part-time employee of, or consultant or director to, the Company
designated by the Committee from time to time during the term of the Plan to
receive one or more Awards under the Plan.
(p) "PERFORMANCE CYCLE" means the period of
time as specified by the Committee over which Performance Share or
Performance Units are to be earned.
(q) "PERFORMANCE SHARES" means an Award made
pursuant to Section 9 which entitles a Participant to receive Shares, their
cash equivalent or a combination thereof based on the achievement of
performance targets during a Performance Cycle.
(r) "PERFORMANCE UNITS" means an Award made
pursuant to Section 9 which entitles a Participant to receive cash, Stock or
a combination thereof based on the achievement of performance targets during
a Performance Cycle.
(s) "PLAN YEAR" means each 12-month period
beginning July 1 and ending the following June 30, except that for the first
year of the Plan it shall begin on the Effective Date and extend to June 30
of that year.
(t) "RESTRICTED STOCK" means Stock granted
under Section 8 that is subject to restrictions imposed pursuant to said
Section.
(u) "RULE 16b-3" shall mean Rule 16b-3 as
promulgated by the Securities and Exchange Commission under the Exchange Act,
or any successor rule or regulation thereto as in effect from time to time.
(v) "SERVICE PROVIDER" means an employee or
director of or consultant to the Company.
(w) "SHARE" means a share of Stock.
(x) "STOCK" means the common stock, $.01 par
value, of the Company.
2.2 GENDER AND NUMBER. Except when otherwise indicated by
the context, the masculine gender shall also include the feminine gender, and
the definition of any term herein in the singular shall also include the
plural.
SECTION 3
PLAN ADMINISTRATION
3.1 AUTHORITY OF COMMITTEE. The Plan shall be administered
by the Committee. Subject to the terms of the Plan and applicable law, and in
addition to other express powers and authorizations conferred on the
Committee by the Plan, the Committee shall have full power and authority to:
(i) designate Participants; (ii) determine the type or types of Awards to be
granted to eligible Participants; (iii) determine the number of Shares to be
covered by, or with respect to which payments, rights, or other matters are
to be calculated in connection with, Awards; (iv) determine
-3-
<PAGE>
the terms and conditions of any Award; (v) determine whether, to what extent,
and under what circumstances Awards may be settled or exercised in cash,
Shares, other securities, other Awards or other property, or canceled,
forfeited, or suspended and the method or methods by which Awards may be
settled, exercised, canceled, forfeited, or suspended; (vi) determine
whether, to what extent, and under what circumstances cash, shares, other
securities, other Awards, other property, and other amounts payable with
respect to an Award shall be deferred either automatically or at the election
of the holder thereof or of the Committee; (vii) correct any defect, supply
any omission, reconcile any inconsistency and otherwise interpret and
administer the Plan and any instrument or agreement relating to the Plan or
any Award hereunder; (viii) establish, amend, suspend, or waive such rules
and regulations and appoint such agents as it shall deem appropriate for the
proper administration of the Plan; and (ix) make any other determination and
take any other action that the Committee deems necessary or desirable for the
administration of the Plan. To the extent necessary or appropriate, the
Committee may adopt sub-plans consistent with the Plan to conform to
applicable state or foreign securities or tax laws. A majority of the members
of the Committee may determine its actions and fix the time and place of its
meetings.
3.2 DETERMINATIONS UNDER THE PLAN. Unless otherwise
expressly provided in the Plan all designations, determinations,
interpretations, and other decisions under or with respect to the Plan or any
Award shall be within the sole discretion of the Committee, may be made at
any time and shall be final, conclusive, and binding upon all persons,
including the Company, any Affiliated Corporation, any Participant, any
holder or beneficiary of any Award, and any shareholder. No member of the
Committee shall be liable for any action, determination or interpretation
made in good faith, and all members of the Committee shall, in addition to
their rights as directors, be fully protected by the Company with respect to
any such action, determination or interpretation.
SECTION 4
STOCK SUBJECT TO THE PLAN
4.1 NUMBER OF SHARES. Subject to adjustment as provided in
Section 4.3, 3,000,000 Shares are authorized for issuance under the Plan in
accordance with the provisions of the Plan and subject to such restrictions
or other provisions as the Committee may from time to time deem necessary;
provided, however, that no Participant may be granted Awards in any one
calendar year with respect to more than 300,000 Shares. The Shares may be
divided among the various Plan components as the Committee shall determine.
Shares which may be issued upon the exercise of Options shall be applied to
reduce the maximum number of Shares remaining available for use under the
Plan. The Company shall at all times during the term of the Plan and while
any Options are outstanding retain as authorized and unissued Stock, or as
treasury Stock, at least the number of Shares from time to time required
under the provisions of the Plan, or otherwise assure itself of its ability
to perform its obligations hereunder.
4.2 UNUSED AND FORFEITED STOCK. Any Shares that are subject
to an Award under this Plan which are not used because the terms and
conditions of the Award are not met, including any Shares that are subject to
an Option which expires or is terminated for any reason, any Shares which are
used for full or partial payment of the purchase price of Shares with respect
to which an Option is exercised and any Shares retained by the Company
pursuant to Section 15.2 shall automatically become available for use under
the Plan. Notwithstanding the foregoing, any Shares
-4-
<PAGE>
used for full or partial payment of the purchase price of the Shares with
respect to which an Option is exercised and any Shares retained by the
Company pursuant to Section 15.2 that were originally Incentive Stock Option
Shares must still be considered as having been granted for purposes of
determining whether the Share limitation provided for in Section 4.1 has been
reached for purposes of Incentive Stock Option grants.
4.3 ADJUSTMENTS FOR STOCK SPLIT, STOCK DIVIDEND, ETC. If
the Company shall at any time increase or decrease the number of its
outstanding Shares of Stock or change in any way the rights and privileges of
such Shares by means of the payment of a stock dividend or any other
distribution upon such Shares payable in Stock, or through a stock split,
subdivision, consolidation, combination, reclassification or recapitalization
involving the Stock, then in relation to the Stock that is affected by one or
more of the above events, the numbers, rights and privileges of (i) the
shares of Stock as to which Awards may be granted under the Plan, and (ii)
the Shares of Stock then included in each outstanding Option, Performance
Share or Performance Unit granted hereunder, shall be increased, decreased or
changed in like manner as if they had been issued and outstanding, fully paid
and nonassessable at the time of such occurrence.
4.4 DIVIDEND PAYABLE IN STOCK OF ANOTHER CORPORATION, ETC.
If the Company shall at any time pay or make any dividend or other
distribution upon the Stock payable in securities of another corporation or
other property (except money or Stock), a proportionate part of such
securities or other property shall be set aside and delivered to any
Participant then holding an Award for the particular type of Stock for which
the dividend or other distribution was made, upon exercise thereof in the
case of Options, and the vesting thereof in the case of other Awards. Prior
to the time that any such securities or other property are delivered to a
Participant in accordance with the foregoing, the Company shall be the owner
of such securities or other property and shall have the right to vote the
securities, receive any dividends payable on such securities, and in all
other respects shall be treated as the owner. If securities or other property
which have been set aside by the Company in accordance with this Section are
not delivered to a Participant because an Award is not exercised or otherwise
vested, then such securities or other property shall remain the property of
the Company and shall be dealt with by the Company as it shall determine in
its sole discretion.
4.5 OTHER CHANGES IN STOCK. In the event there shall be any
change, other than as specified in Sections 4.3 and 4.4, in the number or
kind of outstanding shares of Stock or of any stock or other securities into
which the Stock shall be changed or for which it shall have been exchanged,
and if the Committee shall in its discretion determine that such change
equitably requires an adjustment in the number or kind of Shares subject to
outstanding Awards or which have been reserved for issuance pursuant to the
Plan but are not then subject to an Award, then such adjustments shall be
made by the Committee and shall be effective for all purposes of the Plan and
on each outstanding Award that involves the particular type of stock for
which a change was effected.
4.6 RIGHTS TO SUBSCRIBE. If the Company shall at any time
grant to the holders of its Stock rights to subscribe pro rata for additional
shares thereof or for any other securities of the Company or of any other
corporation, there shall be reserved with respect to the Shares then subject
to an Award held by any Participant of the particular class of Stock
involved, the Stock or other securities which the Participant would have been
entitled to subscribe for if immediately prior to such grant the Participant
had exercised his entire Option, or otherwise vested in his entire Award.
-5-
<PAGE>
If, upon exercise of any such Option or the vesting of any other Award, the
Participant subscribes for the additional Stock or other securities, the
Participant shall pay to the Company the price that is payable by the
Participant for such Stock or other securities.
4.7 GENERAL ADJUSTMENT RULES. If any adjustment or
substitution provided for in this Section 4 shall result in the creation of a
fractional Share under any Award, the Company shall, in lieu of selling or
otherwise issuing such fractional Share, pay to the Participant a cash sum in
an amount equal to the product of such fraction multiplied by the Fair Market
Value of a Share on the date the fractional Share would otherwise have been
issued. In the case of any such substitution or adjustment affecting an
Option, the total Option Price for the shares of Stock then subject to an
Option shall remain unchanged but the Option Price per shall under each such
Option shall be equitably adjusted by the Committee to reflect the greater or
lesser number of shares of Stock or other securities into which the Stock
subject to the Option may have been changed.
4.8 DETERMINATION BY COMMITTEE, ETC. Adjustments under this
Section 4 shall be made by the Committee, whose determinations with regard
thereto shall be final and binding upon all persons.
SECTION 5
REORGANIZATION OR LIQUIDATION
In the event that the Company is merged or consolidated
with another corporation (other than a merger or consolidation in which the
Company is the continuing corporation and which does not result in any
reclassification or change of outstanding Shares), or if all or substantially
all of the assets or more than 50% of the outstanding voting stock of the
Company is acquired by any other corporation, business entity or person
(other than a sale or conveyance in which the Company continues as a holding
company of an entity or entities that conduct the business or businesses
formerly conducted by the Company), or in case of a reorganization (other
than a reorganization under the United States Bankruptcy Code) or liquidation
of the Company, and if the provisions of Section 10 do not apply, the
Committee, or the board of directors of any corporation assuming the
obligations of the Company, shall, have the power and discretion to prescribe
the terms and conditions for the exercise, or modification, of any
outstanding Awards granted hereunder. By way of illustration, and not by way
of limitation, the Committee may provide for the complete or partial
acceleration of the dates of exercise of the Options, or may provide that
such Options will be exchanged or converted into options to acquire
securities of the surviving or acquiring corporation, or may provide for a
payment or distribution in respect of outstanding Options (or the portion
thereof that is currently exercisable) in cancellation thereof. The Committee
may remove restrictions on Restricted Stock and may modify the performance
requirements for any other Awards. The Committee may provide that Stock or
other Awards granted hereunder must be exercised in connection with the
closing of such transaction, and that if not so exercised such Awards will
expire. Any such determinations by the Committee may be made generally with
respect to all Participants, or may be made on a case-by-case basis with
respect to particular Participants. The provisions of this Section 5 shall
not apply to any transaction undertaken for the purpose of reincorporating
the Company under the laws of another jurisdiction, if such transaction does
not materially affect the beneficial ownership of the Company's capital stock.
-6-
<PAGE>
SECTION 6
PARTICIPATION
Participants in the Plan shall be those Eligible Employees,
part-time employees or consultants who, in the judgment of the Committee, are
performing, or during the term of their incentive arrangement will perform,
important services in the management, operation and development of the
Company, and significantly contribute, or are expected to significantly
contribute, to the achievement of long-term corporate economic objectives.
Participants may be granted from time to time one or more Awards; provided,
however, that the grant of each such Award shall be separately approved by
the Committee, and receipt of one such Award shall not result in automatic
receipt of any other Award, written notice shall be given to such person,
specifying the terms, conditions, rights and duties related thereto; and
further provided that Incentive Stock Options shall not be granted to (i)
Eligible Employees of any partnership or other entity which is included
within the definition of an Affiliated Corporation but whose employees are
not permitted to receive Incentive Stock Options under the Internal Revenue
Code or (ii) consultants. Each Participant shall enter into an agreement with
the Company, in such form as the Committee shall determine and which is
consistent with the provisions of the Plan, specifying such terms,
conditions, rights and duties. Awards shall be deemed to be granted as of the
date specified in the grant resolution of the Committee, which date shall be
the date of any related agreement with the Participant. In the event of any
inconsistency between the provisions of the Plan and any such agreement
entered into hereunder, the provisions of the Plan shall govern.
SECTION 7
STOCK OPTIONS
7.1 GRANT OF OPTIONS. Coincident with or following
designation for participation in the Plan, a Participant may be granted one
or more Options. The Committee in its sole discretion shall designated
whether an Option is to be considered an Incentive Stock Option or a
Non-Statutory Option. The Committee may grant both an Incentive Stock Option
and a Non-Statutory Option to the same Participant at the same time or at
different times. Incentive Stock Options and Non-Statutory Options, whether
granted at the same or different times, shall be deemed to have been awarded
in separate grants, shall be clearly identified, and in no event shall the
exercise of one Option affect the right to exercise any other Option or
affect the number of Shares for which any other Option may be exercised.
7.2 OPTION AGREEMENTS. Each Option granted under the Plan
shall be evidenced by a written stock option agreement which shall be entered
into by the Company and the Participant to whom the Option is granted (the
"Option Holder"), and which shall contain the following terms and conditions,
as well as such other terms and conditions not inconsistent therewith, as the
Committee may consider appropriate in each case.
(a) NUMBER OF SHARES. Each stock option
agreement shall state that it covers a specified number of Shares, as
determined by the Committee. To the extent that the aggregate Fair Market
Value of Shares with respect to which Options designated as Incentive Stock
Options are exercisable for the first time by any Participant during any year
(under all plans of the Company and any Affiliated Corporation) exceeds
$100,000, such Options shall be treated as not
-7-
<PAGE>
being Incentive Stock Options. The foregoing shall be applied by taking
Options into account in the order in which they were granted. For the
purposes of the foregoing, the Fair Market Value of any Share shall be
determined as of the time the Option with respect to such Share is granted.
In the event the foregoing results in a portion of an Option designated as an
Incentive Stock Option exceeding the $100,000 limitation, only such excess
shall be treated as not being an Incentive Stock Option.
(b) PRICE. The price at which each Share
covered by an Option may be purchased shall be determined in each case by the
Committee and set forth in the stock option agreement, but in no event shall
the Option Price for each Share covered by an Incentive Stock Option be less
than the Fair Market Value of the Stock on the date the Option is granted;
provided, however, that the Option Price for each Share covered by a
Non-Statutory Option may be granted at any price less than Fair Market Value,
in the sole discretion of the Committee; and provided further that the Option
Price for each Share covered by an Incentive Stock Option granted to an
Eligible Employee who then owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company or any parent or
subsidiary corporation of the Company must be at least 110% of the Fair
Market Value of the Stock subject to the Incentive Stock Option on the date
the Option is granted.
(c) DURATION OF OPTIONS. Each stock option
agreement shall state the period of time, determined by the Committee, within
which the Option may be exercised by the Option Holder (the "Option Period").
The Option Period must expire, in all cases, not more than ten years from the
date an Option is granted; provided, however, that the Option Period of an
Incentive Stock Option granted to an Eligible Employee who then owns stock
possessing more than 10% of the total combined voting power of all classes of
stock of the Company or any parent or subsidiary corporation of the Company
must expire not more than five years from the date such an Option is granted.
Each stock option agreement shall also state the periods of time, if any, as
determined by the Committee, when incremental portions of each Option shall
vest. If any Option is not exercised during its Option Period, it shall be
deemed to have been forfeited and or no further force or effect.
(d) TERMINATION OF SERVICE, DEATH,
DISABILITY, ETC. Except as otherwise determined by the Committee, each stock
option agreement shall provide as follows with respect to the exercise of the
Option upon an Option Holder ceasing to be a Service Provider or on the death
or disability of the Option Holder:
(i) If the Option Holder ceases to
be a Service Provider within the Option Period for cause, as determined by
the Company, the Option shall thereafter be void for all purposes. As used in
this Section 7.2(d), "cause" shall mean a gross violation, as determined by
the Company, of the Company's established policies and procedures. The effect
of this Section 7.2(d)(i) shall be limited to determining the consequences of
a termination, and nothing in this Section 7.2(d)(i) shall restrict or
otherwise interfere with the Company's discretion with respect to the
termination of any Service Provider.
(ii) If the Option Holder ceases to
be a Service Provider with the Company in a manner determined by the Board,
in its sole discretion, to constitute retirement (which determination shall
be communicated to the Option Holder within 10 days of such termination), the
Option may be exercised by the Option Holder, or in the case of death by the
persons specified in
-8-
<PAGE>
clause (iii) of this Section 7.2(d), within three months following his or her
retirement if the Option is an Incentive Stock Option or within twelve months
following his or her retirement if the Option is a Non-Statutory Stock Option
(provided in each case that such exercise must occur within the Option
Period), but not thereafter. In any such case, the Option may be exercised
only as to the Shares as to which the Option had become exercisable on or
before the date the Option Holder ceases to be a Service Provider.
(iii) If the Option Holder dies (A)
while he or she is a Service Provider, (B) within the three-month period
referred to in clause (v) below, or (C) within the three or twelve-month
period referred to in clause (ii) above, the Option may be exercised by those
entitled to do so under the Option Holder's will or by the laws of descent
and distribution within twelve months following the Option Holder's death
(provided that such exercise must occur within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
Shares as to which the Option had become exercisable on or before the date of
the Option Holder's death or at such time as the Option Holder ceased to be a
Service Provider, whichever is earlier.
(iv) If the Option Holder becomes
disabled (within the meaning of Section 22(e) of the Internal Revenue Code)
while a Service Provider, Incentive Stock Options held by the Option Holder
may be exercised by the Option Holder within twelve months following the date
the Option Holder ceases to be a Service Provider (provided that such
exercise must occur within the Option Period), but not thereafter. If the
Option Holder becomes disabled (within the meaning of Section 22(e) of the
Internal Revenue Code) while a Service Provider or within three-month period
referred to in clause (v) below or within the twelve month period following
his or her retirement as provided in clause (ii) above, Non-Statutory Options
held by the Option Holder may be exercised by the Option Holder within twelve
months following the date of the Option Holder's disability (provided that
such exercise must occur within the Option Period), but not thereafter. In
any such case, the Option may be exercised only as to the Shares as to which
the Option had become exercisable on or before the date the Option Holder
ceased to be a Service Provider.
(v) If the Option Holder ceases to
be a Service Provider (which for this purpose means that the Option Holder is
no longer employed by, a director of, or consulting with the Company or an
Affiliated Corporation) within the Option Period for any reason other than
cause, retirement as provided in clause (ii) above, disability as provided in
clause (iv) above or the Option Holder's death, the Option may be exercised
by the Option Holder within three months following the date of such cessation
(provided that such exercise must occur within the Option Period), but not
thereafter. In any such case, the Option may be exercised only as to the
Shares as to which the Option had become exercisable on or before the date
that the Option Holder ceases to be a Service Provider
(e) TRANSFERABILITY. Except as otherwise
determined by the Committee, Options shall not be transferable by the Option
Holder except by will or pursuant to the laws of descent and distribution or
pursuant to a "qualified domestic relations order" as defined by the Internal
Revenue Code or Title I of the Employee Retirement Income Security Act of
1974 ("ERISA"); each Option shall be exercisable during the Option Holder's
lifetime only by him or her, or in the event of disability or incapacity, by
his or her guardian or legal representative; and Shares issuable pursuant to
any Option shall be delivered only to or for the account of the Option
Holder, or in the event of disability or incapacity, by his or her guardian
or legal representative.
-9-
<PAGE>
(f) EXERCISE, PAYMENTS, ETC.
(i) Each stock option agreement
shall provide that the method for exercising the Option granted therein shall
be by delivery to the Corporate Secretary of the Company of written notice
specifying the number of Shares with respect to which such Option is
exercised (which may be required to be a minimum number of Shares as
established by the Committee in its discretion) and payment of the Option
Price. Such notice shall be in a form satisfactory to the Committee and shall
specify the particular Option (or portion thereof) which is being exercised
and the number of Shares with respect to which the Option is being exercised.
The exercise of the Option shall be deemed effective upon receipt of such
notice by the Corporate Secretary and payment to the Company. The purchase of
such Stock shall take place at the principal offices of the Company upon
delivery of such notice, at which time the purchase price of the Stock shall
be paid in full by any of the methods or any combination of the methods set
forth in (ii) below. A properly executed certificate or certificates
representing the Stock shall be issued by the Company and delivered to the
Option Holder. If certificates representing Stock are used to pay all or part
of the Option Price, separate certificates for the same number of shares of
Stock shall be issued by the Company and delivered to the Option Holder
representing each certificate used to pay the Option Price, and an additional
certificate shall be issued by the Company and delivered to the Option Holder
representing the additional shares, in excess of the Option Price, to which
the Option Holder is entitled as a result of the exercise of the Option.
(ii) The exercise price shall be paid
by any of the following methods or any combination of the following methods:
(A) in cash;
(B) by cashier's check
payable to the order of the Company;
(C) if authorized by the
Committee, in its sole discretion, by delivery to the Company of certificates
representing the number of Shares then owned by the Option Holder, the Fair
Market Value of which equals the purchase price of the Stock purchased
pursuant to the Option, properly endorsed for transfer to the Company;
provided however, that Shares used for this purpose must have been held by
the Option Holder for such minimum period of time as may be established from
time to time by the Committee; and provided further that the Fair Market
Value of any Shares delivered in payment of the purchase price upon exercise
of the Option shall be the Fair Market Value as of the exercise date, which
shall be the date of delivery of the certificates for the Stock used as
payment of the Option Price; or
(D) if authorized by the
Committee, in its sole discretion, by delivery to the Company of a properly
executed notice of exercise together with irrevocable instructions to a
broker to deliver to the Company promptly the amount of the proceeds of the
sale of all or a portion of the Stock or of a loan from the broker to the
Option Holder necessary to pay the exercise price.
(iii) In the discretion of the
Committee, the Company may guaranty a third-party loan obtained by a
Participant to pay part or all of the Option Price of the Shares provided
that such loan or the Company's guaranty is secured by the Shares.
-10-
<PAGE>
(g) DATE OF GRANT. An option shall be
considered as having been granted on the date specified in the grant
resolution of the Committee.
(h) WITHHOLDING.
(A) NON-STATUTORY OPTIONS.
Each stock option agreement covering Non-Statutory Options shall provide
that, upon exercise of the Option, the Option Holder shall make appropriate
arrangements with the Company to provide for the amount of additional
withholding required by applicable federal and state income tax laws,
including payment of such taxes through delivery of Stock or by withholding
Stock to be issued under the Option, as provided in Section 15.
(B) INCENTIVE OPTIONS. In
the event that a Participant makes a disposition (as defined in Section
424(c) of the Internal Revenue Code) of any Stock acquired pursuant to the
exercise of an Incentive Stock Option prior to the later of (i) the
expiration of two years from the date on which the Incentive Stock Option was
granted or (ii) the expiration of one year from the date on which the Option
was exercised, the Participant shall send written notice to the Company at
its principal office in Denver, Colorado (Attention: Corporate Secretary) of
the date of such disposition, the number of shares disposed of, the amount of
proceeds received from such disposition, and any other information relating
to such disposition as the Company may reasonably request. The Participant
shall, in the event of such a disposition, make appropriate arrangements with
the Company to provide for the amount of additional withholding, if any,
required by applicable federal and state income tax laws.
(i) ADJUSTMENT OF OPTIONS. Subject
to the limitations contained in Sections 7 and 14, the Committee may make any
adjustment in the Option Price, the number of shares subject to, or the terms
of, an outstanding Option and a subsequent granting of an Option by amendment
or by substitution of an outstanding Option. Such amendment, substitution, or
re-grant may result in terms and conditions (including Option Price, number
of shares covered, vesting schedule or exercise period) that differ from the
terms and conditions of the original Option. The Committee may not, however,
adversely affect the rights of any Participant to previously granted Options
without the consent of such Participant. If such action is affected by
amendment, the effective date of such amendment shall be the date of the
original grant.
7.3 STOCKHOLDER PRIVILEGES. No Option Holder shall have any
rights as a stockholder with respect to any Shares covered by an Option until
the Option Holder becomes the holder of record of such Stock, and no
adjustments shall be made for dividends or other distributions or other
rights as to which there is a record date preceding the date such Option
Holder becomes the holder of record of such Stock, except as provided in
Section 4.
SECTION 8
RESTRICTED STOCK AWARDS
8.1 AWARDS GRANTED BY COMMITTEE. Coincident with or
following designation for participation in the Plan, a Participant may be
granted one or more Restricted Stock Awards
-11-
<PAGE>
consisting of Shares. The number of Shares granted as a Restricted Stock
Award shall be determined by the Committee.
8.2 RESTRICTIONS. A Participant's right to retain a
Restricted Stock Award granted to him under Section 8.1 shall be subject to
such restrictions, including but not limited to his continuing to perform as
a Service Provider for a restriction period specified by the Committee, or
the attainment of specified performance goals and objectives, as may be
established by the Committee with respect to such Award. The Committee may in
its sole discretion require different periods of service or different
performance goals and objectives with respect to (i) different Participants,
(ii) different Restricted Stock Awards, or (iii) separate, designated
portions of the Shares constituting a Restricted Stock Award.
8.3 PRIVILEGES OF A STOCKHOLDER, TRANSFERABILITY. A
Participant shall have all voting, dividend, liquidation and other rights
with respect to Stock in accordance with its terms received by him as a
Restricted Stock Award under this Section 8 upon his becoming the holder of
record of such Stock; provided, however, that the Participant's right to
sell, encumber or otherwise transfer such Stock shall be subject to the
limitations of Section 11.2 hereof.
8.4 ENFORCEMENT OF RESTRICTIONS. The Committee may in its
sole discretion require one or more of the following methods of enforcing the
restrictions referred to in Section 8.2 and 8.3:
(a) placing a legend on the stock
certificates referring to the restrictions;
(b) requiring the Participant to keep the
stock certificates, duly endorsed, in the custody of the Company while the
restrictions remain in effect; or
(c) requiring that the stock certificates,
duly endorsed, be held in the custody of a third party while the restrictions
remain in effect.
8.5 TERMINATION OF SERVICE, DEATH, DISABILITY, ETC. In the
event of the death or disability (within the meaning of Section 22(e) of the
Internal Revenue Code) of a Participant, or the retirement of a Participant
as provided in Section 7.2(d)(ii), all service period and other restrictions
applicable to Restricted Stock Awards then held by him shall lapse, and such
Awards shall become fully nonforfeitable. Subject to Sections 5 and 10, in
the event a Participant ceases to be a Service Provider for any other reason,
any Restricted Stock Awards as to which the service period or other
restrictions have not been satisfied shall be forfeited.
SECTION 9
PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 AWARDS GRANTED BY COMMITTEE. Coincident with or
following designation for participation in the Plan, a Participant may be
granted Performance Shares or Performance Units.
9.2 AMOUNT OF AWARD. The Committee shall establish a
maximum amount of a Participant's Award, which amount shall be denominated in
Shares in the case of Performance Shares or in dollars in the case of
Performance Units.
-12-
<PAGE>
9.3 COMMUNICATION OF AWARD. Written notice of the maximum
amount of a Participant's Award and the Performance Cycle determined by the
Committee shall be given to a Participant as soon as practicable after
approval of the Award by the Committee.
9.4 AMOUNT OF AWARD PAYABLE. The Committee shall establish
maximum and minimum performance targets to be achieved during the applicable
Performance Cycle. Performance targets established by the Committee shall
relate to corporate, group, unit or individual performance and may be
established in terms of earnings, growth in earnings, ratios of earnings to
equity or assets, or such other measures or standards determined by the
Committee. Multiple performance targets may be used and the components of
multiple performance targets may be given the same or different weighting in
determining the amount of an Award earned, and may relate to absolute
performance or relative performance measured against other groups, units,
individuals or entities. Achievement of the maximum performance target shall
entitle the Participant to payment (subject to Section 9.6) at the full or
maximum amount specified with respect to the Award; provided, however, that
notwithstanding any other provisions of this Plan, in the case of an Award of
Performance Shares the Committee in its discretion may establish an upper
limit on the amount payable (whether in cash or Stock) as a result of the
achievement of the maximum performance target. The Committee may also
establish that a portion of a full or maximum amount of a Participant's Award
will be paid (subject to Section 9.6) for performance which exceeds the
minimum performance target but falls below the maximum performance target
applicable to such Award.
9.5 ADJUSTMENTS. At any time prior to payment of a
Performance Share or Performance Unit Award, the Committee may adjust
previously established performance targets or other terms and conditions to
reflect events such as changes in laws, regulations, or accounting practice,
or mergers, acquisitions or divestitures.
9.6 PAYMENTS OF AWARDS. Following the conclusion of each
Performance Cycle, the Committee shall determine the extent to which
performance targets have been attained, and the satisfaction of any other
terms and conditions with respect to an Award relating to such Performance
Cycle. The Committee shall determine what, if any, payment is due with
respect to an Award and whether such payment shall be made in cash, Stock or
some combination. Payment shall be made in a lump sum or installments, as
determined by the Committee, commencing as promptly as practicable following
the end of the applicable Performance Cycle, subject to such terms and
conditions and in such form as may be prescribed by the Committee.
9.7 TERMINATION OF EMPLOYMENT. If a Participant ceases to
be a Service Provider before the end of a Performance Cycle by reason of his
death, disability as provided in Section 7.2(d)(iv), or retirement as
provided in Section 7.2(d)(ii), the Performance Cycle for such Participant
for the purpose of determining the amount of the Award payable shall end at
the end of the calendar quarter immediately preceding the date on which such
Participant ceased to be a Service Provider. The amount of an Award payable
to a Participant to whom the preceding sentence is applicable shall be paid
at the end of the Performance Cycle and shall be that fraction of the Award
computed pursuant to the preceding sentence the numerator of which is the
number of calendar quarters during the Performance Cycle during all of which
said Participant was a Service Provider and the denominator of which is the
number of full calendar quarters in the Performance Cycle. Upon any
-13-
<PAGE>
other termination of Participant's services as a Service Provider during a
Performance Cycle, participation in the Plan shall cease and all outstanding
Awards of Performance Shares or Performance Units to such Participant shall
be canceled.
SECTION 10
CHANGE IN CONTROL
10.1 OPTIONS, RESTRICTED STOCK. In the event of a change in
control of the Company as defined in Section 10.3, then the Committee may, in
its sole discretion, without obtaining stockholder approval, to the extent
permitted in Section 14, take any or all of the following actions: (a)
accelerate the exercise dates of any outstanding Options or make all such
Options fully vested and exercisable; (b) grant a cash bonus award to any
Option Holder in an amount necessary to pay the Option Price of all or any
portion of the Options then held by such Option Holder; (c) pay cash to any
or all Option Holders in exchange for the cancellation of their outstanding
Options in an amount equal to the different between the Option Price of such
Options and the greater of the tender offer price for the underlying Stock or
the Fair Market Value of the Stock on the date of the cancellation of the
Options; (d) make any other adjustments or amendments to the outstanding
Options; and (e) eliminate all restrictions with respect to Restricted Stock
and deliver Shares free of restrictive legends to any Participant.
10.2 PERFORMANCE SHARES AND PERFORMANCE UNITS. Under the
circumstances described in Section 10.1, the Committee may, in its sole
discretion, and without obtaining stockholder approval, to the extent
permitted in Section 14, provide for payment of outstanding Performance
Shares and Performance Units at the maximum award level or any percentage
thereof.
10.3 DEFINITION. For purposes of the Plan, a "change in
control" shall be deemed to have occurred if: (a) any "person" or "group"
(within the meaning of Sections 13(d) and 14(d)(2) of the Exchange Act),
other than a trustee or other fiduciary holding securities under an employee
benefit plan of the Company or under a trust, the grantor of which is Bobby
G. Stevenson, or Bobby G. Stevenson, is or becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of
more than 33 1/3% of the then outstanding voting stock of the Company; or (b)
at any time during any period of three consecutive years (not including any
period prior to the Effective Date), individuals who at the beginning of such
period constitute the Board (and any new director whose election by the Board
or whose nomination for election by the Company's stockholders was approved
by a vote of at least two-thirds of the directors then still in office who
either were directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority thereof; or (c) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other
than a merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities
of the surviving entity) at least 80% of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders approve a
plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's
assets.
-14-
<PAGE>
SECTION 11
RIGHTS OF EMPLOYEES; PARTICIPANTS
11.1 EMPLOYMENT. Nothing contained in the Plan or in any
Award granted under the Plan shall confer upon any Participant any right with
respect to the continuation of his or her services as a Service Provider, or
interfere in any way with the right of the Company, subject to the terms of
any separate employment or consulting agreement to the contrary, at any time
to terminate such services or to increase or decrease the compensation of the
Participant from the rate in existence at the time of the grant of an Award.
Whether an authorized leave of absence, or absence in military or government
service, shall constitute a termination of Participant's services as a
Service Provider shall be determined by the Committee at the time.
11.2 NONTRANSFERABILITY. Except as provided in Section
11.3, no right or interest of any Participant in an Award granted pursuant to
the Plan shall be assignable or transferable during the lifetime of the
Participant except pursuant to a "qualified domestic relations order" as
defined by the Internal Revenue Code or Title I of ERISA, either voluntarily
or involuntarily, or be subjected to any lien, directly or indirectly, by
operation of law, or otherwise, including execution, levy, garnishment,
attachment, pledge or bankruptcy. In the event or a Participant's death, a
Participant's rights and interests in Options shall, to the extent provided
in Section 7, be transferable by testamentary will or the laws of descent and
distribution, and payment of any amounts due under the Plan shall be made to,
and exercise of any Options may be made by, the Participant's legal
representatives, heirs or legatees. If, in the opinion of the Committee, a
person entitled to payments or to exercise rights with respect to the Plan is
disabled from caring for his affairs because of mental condition, physical
condition or age, payment due such person may be made to, and such rights
shall be exercised by, such person's guardian, conservator or other legal
personal representative upon furnishing the Committee with evidence
satisfactory to the Committee of such status. Transfers shall not be deemed
to include transfers to the Company or "cashless exercise" procedures with
third parties who provide financing for the purpose of (or who otherwise
facilitate) the exercise of Awards consistent with applicable laws and the
authorization of the Committee.
11.3 PERMITTED TRANSFERS. Pursuant to conditions and
procedures established by the Committee from time to time, the Committee may
permit Awards to be transferred to, exercised by and paid to certain persons
or entities related to a Participant, including but not limited to members of
the Participant's immediate family, charitable institutions, or trusts or
other entities whose beneficiaries or beneficial owners are members of the
Participant's immediate family and/or charitable institutions. In the case of
initial Awards, at the request of the Participant, the Committee may permit
the naming of the related person or entity as the Award recipient. Any
permitted transfer shall be subject to the condition that the Committee
receive evidence satisfactory to it that the transfer is being made for
estate and/or tax planning purposes on a gratuitous or donative basis and
without consideration (other than nominal consideration). Notwithstanding the
foregoing, Incentive Stock Options shall only be transferable to the extent
permitted by Section 422 of the Internal Revenue Code and the treasury
regulations thereunder.
-15-
<PAGE>
SECTION 12
GENERAL RESTRICTIONS
12.1 INVESTMENT REPRESENTATIONS. The Company may require
any person to whom an Option or other Award is granted, as a condition of
exercising such Option or receiving Stock under the Award, to give written
assurances in substance and form satisfactory to the Company and its counsel
to the effect that such person is acquiring the Stock subject to the Option
or the Award for his own account for investment and not with any present
intention or selling or otherwise distributing the same, and to such other
effects as the Company deems necessary or appropriate in order to comply with
federal and applicable state securities laws. Legends evidencing such
restrictions may be placed on the certificates evidencing the Stock.
12.2 COMPLIANCE WITH SECURITIES LAWS. Each Award shall be
subject to the requirement that, if at any time counsel to the Company shall
determine that the listing, registration or qualification of the Shares
subject to such Award upon any securities exchange or under any state or
federal law, or the consent or approval of any governmental or regulatory
body, is necessary as a condition of, or in connection with, the issuance or
purchase of Shares thereunder, such Award may not be accepted or exercised in
whole or in part unless such listing, registration, qualification, consent or
approval shall have been effected or obtained on conditions acceptable to the
Committee. Nothing herein shall be deemed to require the Company to apply for
or to obtain such listing, registration or qualification.
12.3 STOCK RESTRICTION AGREEMENT. The Committee may provide
that shares of Stock issuable upon the exercise of an Option shall, under
certain conditions, be subject to restrictions whereby the Company has a
right of first refusal with respect to such shares or a right or obligation
to repurchase all or a portion of such shares, which restrictions may survive
a Participant's cessation or termination as a Service Provider.
SECTION 13
OTHER EMPLOYEE BENEFITS
The amount of any compensation deemed to be received by a
Participant as a result of the exercise of an Option or the grant or vesting
of any other Award shall not constitute "earnings" with respect to which any
other benefits of such Participant are determined, including without
limitation benefits under any pension, profit sharing, life insurance or
salary continuation plan.
SECTION 14
PLAN AMENDMENT, MODIFICATION AND TERMINATION
The Board may at any time terminate, and from time-to-time
may amend or modify, the Plan; provided, however, that no amendment or
modification may become effective without approval of the amendment or
modification by the stockholders if stockholder approval is required to
enable the Plan to satisfy any applicable statutory or regulatory
requirements, or if the Company, on the advice of counsel, determines that
stockholder approval is otherwise necessary or desirable.
-16-
<PAGE>
No amendment, modification or termination of the Plan shall
in any manner adversely affect any Awards theretofore granted under the Plan,
without the consent of the Participant holding such Awards.
SECTION 15
WITHHOLDING
15.1 WITHHOLDING REQUIREMENT. The Company's obligations to
deliver Shares upon the exercise of an Option, or upon the vesting of any
other Award, shall be subject to the Participant's satisfaction of all
applicable federal, state and local income and other tax withholding
requirements.
15.2 WITHHOLDING WITH STOCK. At the time the Committee
grants an Award, it may, in its sole discretion, grant the Participant an
election to pay all such amounts of tax withholding, or any part thereof, by
electing to transfer to the Company, or to have the Company withhold from
Shares otherwise issuable to the Participant, Shares having a value equal to
the amount required to be withheld or such lesser amount as may be elected by
the Participant. All elections shall be subject to the approval or
disapproval of the Committee. The value of Shares to be withheld shall be
based on the Fair Market Value of the Stock on the date that the amount of
tax to be withheld is to be determined (the "Tax Date"). Any such elections
by Participants to have Shares withheld for this purpose will be subject to
the following restrictions:
(a) All elections must be made prior to the
Tax Date;
(b) All elections shall be irrevocable; and
(c) If the Participant is an officer or
director of the Company within the meaning of Section 16 of the Exchange Act
("Section 16"), the Participant must satisfy the requirements of such Section
16 and any applicable rules thereunder with respect to the use of Stock to
satisfy such tax withholding obligation.
SECTION 16
SECTION 162(m) PROVISIONS
16.1 LIMITATIONS. Notwithstanding any other provision of
this Plan, if the Committee determines at the time any Restricted Stock Award
or Performance Award is granted to a Participant that such Participant is, or
is likely to be at the time he or she recognizes income for federal income
tax purposes in connection with such Award, a Covered Employee (within the
meaning of Section 162(m)(3) of the Internal Revenue Code), then the
Committee may provide that this Section 16 is applicable to such Award.
16.2 PERFORMANCE GOALS. If an Award is subject to this
Section 16, then the lapsing of restrictions thereon and the distribution of
cash, Shares or other property pursuant thereto, as applicable, shall be
subject to the achievement of one or more objective performance goals
established by the Committee, which shall be based on the attainment of one
or any combination of
-17-
<PAGE>
the following: specified levels of earnings per share from continuing
operations, operating income, revenues, gross margin, return on operating
assets, return on equity, economic value added, stock price appreciation,
total stockholder return (measured in terms of stock price appreciation and
dividend growth), or cost control, of the Company or Affiliated Corporation
(or any division thereof) for or within which the Participant is primarily
employed. Such performance goals also may be based upon the attaining
specified levels of Company performance under one or more of the measures
described above relative to the performance of other corporations. Such
performance goals shall be set by the Committee within the time period
prescribed by, and shall otherwise comply with the requirements of, Section
162(m) of the Internal Revenue Code and the regulations thereunder.
16.3 ADJUSTMENTS. Notwithstanding any provision of the Plan
other than Section 10, with respect to any Award that is subject to this
Section 16, the Committee may not adjust upwards the amount payable pursuant
to such Award, nor may it waive the achievement of the applicable performance
goals except in the case of the death or disability of the Participant.
16.4 OTHER RESTRICTIONS. The Committee shall have the power
to impose such other restrictions on Awards subject to this Section 16 as it
may deem necessary or appropriate to ensure that such Awards satisfy all
requirements for "performance-based compensation" within the meaning of
Section 162(m)(4)(B) of the Internal Revenue Code or any successor thereto.
SECTION 17
BROKERAGE ARRANGEMENTS
The Committee, in its discretion, may enter into
arrangements with one or more banks, brokers or other financial institutions
to facilitate the disposition of shares acquired upon exercise of Stock
Options, including, without limitation, arrangements for the simultaneous
exercise of Stock Options and sale of the Shares acquired upon such exercise.
SECTION 18
NONEXCLUSIVITY OF THE PLAN
Neither the adoption of the Plan by the Board nor the
submission of the Plan to stockholders of the Company for approval shall be
construed as creating any limitations on the power or authority of the Board
to adopt such other or additional incentive or other compensation
arrangements of whatever nature as the Board may deem necessary or desirable
or preclude or limit the continuation of any other plan, practice or
arrangement for the payment of compensation or fringe benefits to employees
or consultants generally, or to any class or group of employees or
consultants, which the Company or any Affiliated Corporation now has lawfully
put into effect, including, without limitation, any retirement, pension,
savings and stock purchase plan, insurance, death and disability benefits and
executive short-term incentive plans.
-18-
<PAGE>
SECTION 19
REQUIREMENTS OF LAW
19.1 REQUIREMENTS OF LAW. The issuance of Stock and the
payment of cash pursuant to the Plan shall be subject to all applicable laws,
rules and regulations.
19.2 RULE 16b-3. Transactions under the Plan and within the
scope of Rule 16b-3 are intended to comply with all applicable conditions of
Rule 16b-3. To the extent any provision of the Plan or any action by the
Committee under the Plan fails to so comply, such provision or action shall,
without further action by any person, be deemed to be automatically amended
to the extent necessary to effect compliance with Rule 16b-3; provided,
however, that if such provision or action cannot be amended to effect such
compliance, such provision or action shall be deemed null and void to the
extent permitted by law and deemed advisable by the Committee.
19.3 GOVERNING LAW. The Plan and all agreements hereunder
shall be construed in accordance with and governed by the laws of the State
of Delaware.
SECTION 20
DURATION OF THE PLAN
No Award shall be granted under the Plan after ten years
from the Effective Date; provided, however, that any Award theretofore
granted may, and the authority of the Board or the Committee to amend, alter,
adjust, suspend, discontinue, or terminate any such Award or to waive any
conditions or rights under any such Award shall, extend beyond such date.
-19-
<PAGE>
Dated: December 2, 1999.
INTERACTIVE PAPYRUS, INC.
By: /s/ Erin Geegan
---------------------------------
Name: Erin Geegan
-------------------------------
Title: CEO
------------------------------
-20-
<PAGE>
Exhibit 21.1
CIBER, INC.
LIST OF SUBSIDIARIES
AS OF JANUARY 31, 2000
CIBER Associates, Inc., a Delaware corporation
CIBER of Canada, Inc., an Ontario corporation
CIBER Enterprise Outsourcing, Inc., a Delaware corporation
CIBER International, Inc., a Delaware corporation
CIBER International Holdings C.V., a Netherlands partnership
Solution Partners B.V., a Netherlands company
Beleggingsmaatschappij Sampro B.V., a Netherlands company
Interactive Papyrus, Inc., a Delaware corporation
CIBER Technology Services, Inc., a Delaware corporation
CIBER Technologies, Inc., a Delaware corporation
<PAGE>
Exhibit 23.1
CONSENT OF INDEPENDENT AUDITORS
The Board of Directors
CIBER, Inc.:
We consent to incorporation by reference in the registration statements on Form
S-8 (Nos. 33-81320-3, 33-87978, 33-88046, 33-88048, 33-88050, 333-15091,
333-25543, 333-25545, 333-59015 and 333-61287) and Form S-4 (Nos. 333-31905 and
333-69031) of CIBER, Inc. of our report dated February 4, 2000, relating to the
consolidated balance sheets of CIBER, Inc. and subsidiaries as of June 30, 1998
and 1999, and December 31, 1999, and the related consolidated statements of
operations, shareholders' equity and cash flows for each of the years in the
three-year period ended June 30, 1999, and the six-month period ended December
31, 1999, which report appears in the December 31, 1999 Transition Report on
Form 10-KT of CIBER, Inc.
KPMG LLP
Denver, Colorado
February 28, 2000
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 2,858
<SECURITIES> 0
<RECEIVABLES> 139,418
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 152,831
<PP&E> 55,510
<DEPRECIATION> 26,947
<TOTAL-ASSETS> 422,568
<CURRENT-LIABILITIES> 74,848
<BONDS> 0
0
0
<COMMON> 594
<OTHER-SE> 341,662
<TOTAL-LIABILITY-AND-EQUITY> 422,568
<SALES> 0
<TOTAL-REVENUES> 362,000
<CGS> 0
<TOTAL-COSTS> 242,092
<OTHER-EXPENSES> 90,683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 190
<INCOME-PRETAX> 30,733
<INCOME-TAX> 13,090
<INCOME-CONTINUING> 17,643
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,643
<EPS-BASIC> .31
<EPS-DILUTED> .30
</TABLE>
