<PAGE>
As filed with the Securities and Exchange Commission on March 19, 1997
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------
POST-EFFECTIVE AMENDMENT NO. 1
TO
FORM S-1
ON FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-----------
COTELLIGENT GROUP, INC.
(Exact name of registrant as specified in its charter)
- - ----------------------- -------------------------------- --------------------
Delaware 7379 94-3173918
(State or other (Primary Standard (I.R.S. Employer
jurisdiction Industrial Classification Identification Number)
of incorporation or Code Number)
organization)
- - ----------------------- -------------------------------- ---------------------
101 California Street, Suite 2050
San Francisco, California 94111
(415) 439-6400
(Address, including zip code, and
telephone number, including area code, of
registrant's principal executive offices)
-----------
James R. Lavelle
Chairman of the Board and Chief Executive Officer
Cotelligent Group, Inc.
101 California Street, Suite 2050
San Francisco, California 94111
(415) 439-6400
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
-----------
Copy to:
Daniel E. Jackson, Esq.
Cotelligent Group, Inc.
101 California Street, Suite 2050
San Francisco, California 94111
(415) 439-6400
-----------
Approximate date of commencement of proposed
sale to the public: From time to time after this
registration statement becomes effective.
-----------
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, check the following box. X
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. o
-----------
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a)
may determine.
<PAGE>
- - -------------------------------------------------------------------------------
- - -------------------------------------------------------------------------------
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
PROSPECTUS
SUBJECT TO COMPLETION, DATED MARCH 18, 1997
3,500,000 Shares
COTELLIGENT GROUP, INC.
Common Stock
This Prospectus covers 3,500,000 shares of common stock, $.01
par value (the "Common Stock"), which may be offered and issued by
Cotelligent Group, Inc. (the "Company") from time to time in connection
with the merger with or acquisition by the Company of other businesses or
assets, and which may be reserved for issuance pursuant to, or offered
and issued upon exercise or conversion of, warrants, options, convertible
notes or other similar instruments issued by the Company from time to
time in connection with any such merger or acquisition.
It is expected that the terms of acquisitions involving the
issuance of securities covered by this Prospectus will be determined by
direct negotiations with the owners or controlling persons of the
businesses or assets to be merged with or acquired by the Company, and
that the shares of Common Stock issued will be valued at prices
reasonably related to market prices current either at the time the terms
of a merger or acquisition are agreed upon or at or about the time of
delivery of shares. No underwriting discounts or commissions will be
paid, although finder's fees may be paid from time to time with respect
to specific mergers or acquisitions. Any person receiving any such fees
may be deemed to be an underwriter within the meaning of the Securities
Act of 1933, as amended (the "Securities Act").
The Common Stock is included for quotation on the Nasdaq
National Market. On March 14, 1997, the closing price of the Common
Stock on the Nasdaq National Market was $17.50 per share as published in
The Wall Street Journal on March 17, 1997.
All expenses of this offering will be paid by the Company. The
Company is a Delaware corporation and all references herein to the
Company refer to the Company and its subsidiaries. The executive offices
of the Company are located at 101 California Street, Suite 2050, San
Francisco, California 94111 and its telephone number is (415) 439-6400.
The Common Stock offered hereby invokes a high degree of
risk. See "Risk Factors" commencing on page 6 hereof.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is March 19, 1997
2
<PAGE>
- - -------------------------------------------------------------------------------
This Prospectus incorporates documents by reference which are not
presented herein or delivered herewith. These documents are available upon
request from Cotelligent Group, Inc., 101 California Street, Suite 2050,
San Francisco, California 94111 (telephone number (415) 439-6400)
Attention: Secretary. In order to ensure timely delivery of the documents,
any request should be made by a date which is five business days prior to the
date on which the final investment decision must be made. See "Incorporation
of Certain Documents by Reference."
- - -------------------------------------------------------------------------------
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith files reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed by the Company can be inspected and
copied at the public reference facilities maintained by the Commission at 450
Fifth Street, N.W., Washington, D.C. 20549 and at its Regional Offices located
at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511, and 7 World Trade Center, 13th Floor, New York, New York
10048. Copies of such material can be obtained at prescribed rates from the
Public Reference Section of the Commission, Room 1024, 450 Fifth Street, N.W.
Plaza, Washington, D.C. 20549. The Commission maintains an Internet Web site
that contains reports, proxy and information statements and other information
regarding issuers that file electronically with the Commission. The address of
that site is http://www.sec.gov.
The Common Stock is listed on the Nasdaq National Market. Proxy
statements and other information concerning the Company can also be inspected at
the offices of the Nasdaq National Market, 1735 K Street, Washington D.C. 20006.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed by the Company with the Commission
pursuant to the Exchange Act are incorporated herein by reference:
1. The Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1996;
2. The Company's Quarterly Reports for the fiscal quarters ended
June 30, 1996, September 30, 1996 and December 31, 1996, as
filed with the Commission on August 15, 1996, November 14,
1996 (as amended on November 15, 1996) and February 14, 1997,
respectively;
3. The Company's Current Reports on Form 8-K as filed with the
commission on July 12, 1996 (as amended on Form 8-K/A on
September 11, 1996), August 26, 1996, October 15, 1996 (as
amended on Form 8-K/A on December 12, 1996), November 25,
1996, December 11, 1996 (as amended on Form 8-K/A on February
10, 1997) and March 17, 1997; and
4. The description of the Company's Common Stock registered under
the Exchange Act contained in the Company's Registration
Statement on Form 8-A as filed with the Commission on
December 20, 1995 (as amended on February 6, 1996).
All reports and other documents filed by the Company with the
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act
3
<PAGE>
subsequent to the date of this Prospectus and prior to the termination of the
offering made hereby shall be deemed to be incorporated herein by reference. Any
statement contained herein or in a document all or a portion of which is
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein or in a prospectus
supplement modifies or supersedes such statement. Any such statement so modified
or superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus.
The Company will provide without charge to each person to whom a copy
of this Prospectus has been delivered, on the written or oral request of such
person, a copy of any and all of the information that has been or may be
incorporated by reference in this Prospectus (not including exhibits to the
information that is incorporated by reference unless such exhibits are
specifically incorporated by reference into the information that this Prospectus
incorporates). Written requests for such copies should be directed to
Cotelligent Group, Inc., 101 California Street, Suite 2050, San Francisco,
California 94111, Attention: Secretary. Telephone requests may be directed to
the Company's Secretary at (415) 439-6400.
THE COMPANY
Cotelligent Group, Inc. is a software professional services
firm providing information technology ("IT") consultants on a contract basis and
consulting and outsourcing services to businesses with complex IT operations.
The Company operates offices in 18 metropolitan areas including Boston,
Cleveland, Dallas, Denver, Minneapolis, New York, Pittsburgh, San
Francisco/Silicon Valley and Seattle. Supplementing its full-time technical
staff of approximately 1,500 with a database of over 100,000 technical
consultants, the Company provides its clients with highly-qualified IT
professionals who are proficient in a wide variety of hardware and software
platforms. Cotelligent's technical consultants are primarily billed on a time
and materials basis and offer clients specialized expertise in applications
design, programming, development and maintenance, client/server design and
development, systems software design, systems engineering and integration and
intranet/internetworking. At December 31, 1996, the Company's technical
consultants were providing services to approximately 550 clients in a broad
range of industries.
The Company's goal is to be a leading nationwide provider of
IT consultants on a contract basis and consulting and outsourcing services. To
accomplish this goal, the Company has implemented a growth strategy consisting
of two distinct components. First, the Company has adopted a strategy for
internal growth by: (i) creating an infrastructure to recruit and retain
qualified technical consultants; (ii) fostering an environment in which
knowledge, expertise and information is shared on a Company-wide basis, allowing
successful strategies to be implemented at various operating locations; (iii)
leveraging its local client relationships in a coordinated effort to provide
services on a national scope to its larger accounts; and (iv) pursuing strategic
alliances with nationally established technology companies such as Microsoft
Corporation, through which the Company will enhance its technical support
capabilities and strengthen certain of its key business relationships. As the
second part of its growth strategy, the Company intends to broaden the
geographic scope of its operations by acquiring established firms that offer
complementary IT consulting services in new or existing regions and will expand
the depth and breadth of services provided to clients. The Company's acquisition
strategy is based on a philosophy to: (a) purchase local or regional IT
consulting services firms with successful, proven operating models; (b) allow
the operations to remain in place, rather than converting the acquisition to a
standardized national business model; and (c) improve the acquired company's
profitability by passing on the operating and financial benefits associated with
national firm status. The Company believes that this philosophy differentiates
Cotelligent from other potential acquirors and is attractive to acquisition
candidates who wish to preserve their corporate culture. The Company also
believes that this acquisition strategy will allow it to secure assignments from
clients seeking to do business with national IT consulting services firms, as
well as regional businesses seeking local relationships.
4
<PAGE>
In February 1996, the Company acquired, simultaneously with
the closing of its initial public offering (the "IPO"), four established
providers (the "Founding Companies") of IT consulting services to serve as a
foundation to execute its growth strategy. Since the IPO, the Company has
acquired eight additional IT consulting services firms which have strengthened
the Company's operations by diversifying its base of Fortune 1000 clients in
different geographic markets and by increasing the range and mix of IT
consulting services offered by the Company.
RECENT ACQUISITIONS
Pursuant to its business strategy, the Company has acquired
eight IT consulting services businesses (collectively, the "Subsequent
Acquisitions") in its fiscal year commencing April 1, 1996. These acquisitions
have expanded the Company's national presence, broadened its nationwide resource
pool and client base and increased the Company's capabilities and expertise by
providing an increased range and mix of IT consulting services. Certain
information relating to these acquisitions is summarized in the following table:
<TABLE>
<CAPTION>
ACQUIRED COMPANY ACQUISITION LOCATIONS NUMBER OF
DATE CONSULTANTS AT
DECEMBER 31, 1996
- - ---------------------------------------- -------------------- ---------------------------------- -------------------
<S> <C> <C> <C>
ESP Software Services, Inc. June 28, 1996 Minneapolis, MN 139
INNOVA Solutions, Inc. June 28, 1996 Dallas, TX, St. Louis, MO 136
JasTech, Inc. and JasTech of September 30, 1996 Cleveland, OH, Ft. Lauderdale, FL 97
Florida, Inc.
Data Processing Professionals, Inc. October 7, 1996 St. Louis, MO 32
Pittsburgh Business Consultants, Inc. November 27, 1996 Pittsburgh, PA, Denver, CO, 329
Cedar Rapids, IA, San Diego, CA,
Colorado Springs, CO
Consulting Services Division of Daleen November 29, 1996 Boca Raton, FL 12
Technologies
United Data Processing, Inc. February 10, 1997 Portland, OR 50
TRC Computers, Inc. February 10, 1997 San Jose, CA, Los Angeles, CA 37
</TABLE>
5
<PAGE>
RISK FACTORS
Prospective investors should carefully consider the following risk
factors, in addition to the other information contained in this Prospectus, in
evaluating an investment in the shares of Common Stock offered hereby.
This Prospectus contains certain statements of a forward-looking nature
relating to future events or the future financial performance of the Company.
Prospective investors are cautioned that such statements are only predictions
and that actual events or results may differ materially. In evaluating such
statements, prospective investors should specifically consider the various
factors identified in this Prospectus, including the matters set forth
below, which could cause actual results to differ materially from those
indicated by such forward-looking statements.
Absence of Combined Operating History
Cotelligent was founded in February 1993 and generated no
revenue prior to the consummation of the IPO. Simultaneously with the closing of
the IPO, Cotelligent acquired the Founding Companies. Prior to the consummation
of the IPO, the Founding Companies operated as separate independent entities.
Since the IPO, the Company has acquired the Subsequent Acquisitions
(collectively, the Founding Companies and the Subsequent Acquisitions are
referred to as the "Member Firms.") There can be no assurance that the Company
will be able to integrate the Member Firms on an economic or operational basis.
The Company's management group has been assembled only recently, and there can
be no assurance that the management group will be able to oversee the combined
entity and effectively implement the Company's business strategy. The combined
historical financial results of the Company cover periods when the Member Firms
and Cotelligent were not under common control or management and as such may not
be indicative of the Company's future financial or operating results. An
inability of the Company to integrate the Member Firms would have a material
adverse effect on the Company's business, financial condition and results of
operations.
Dependence on Availability of Qualified Technical Consultants
The Company is dependent upon its ability to attract, hire and
retain technical consultants who possess the skills and experience necessary to
meet the service requirements of its clients. The Company must continually
identify, screen and retain qualified technical consultants to keep pace with
increasing client demand for rapidly evolving technologies and changing client
needs. In addition, because many of the technical consultants provided by the
Company to its clients are not committed to provide their services exclusively
to the Company, the Company must compete with other companies in a variety of
industry segments seeking to engage the services of such personnel. Competition
for individuals with proven technical skills is intense. The Company competes
for such individuals with other providers of technical services, systems
integrators, providers of outsourcing services, computer systems consultants,
clients and temporary personnel agencies. In the past, the Company has
experienced difficulties in identifying and retaining qualified technical
consultants and has therefore been unable in certain instances to fill requests
for services from clients. There can be no assurance that qualified technical
consultants will be available to the Company in sufficient numbers. An inability
to locate, retain and successfully place qualified technical consultants to fill
client requests could have a material adverse effect on the Company's business,
financial condition and results of operations.
Implementation of Business Strategy
The Company intends to expand its operations through the
acquisition of additional IT consulting services businesses. There can be no
assurance that the Company will be able to identify, acquire or profitably
manage additional businesses or successfully integrate acquired businesses, if
any, into the Company without substantial costs, delays or other operational or
financial problems. Further, the Company's ability to manage future growth, if
any, will depend significantly upon the Company's ability to integrate the
Member Firms and any acquired businesses and develop Company-wide systems and
operating procedures. Acquisitions may also involve a number of special risks,
including diversion of management's attention, failure to retain key acquired
6
<PAGE>
personnel, risks associated with unanticipated events, circumstances or legal
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on the Company's business, financial
condition and results of operations. The Company's growth will therefore be
dependent on a number of factors, including the hiring and training of qualified
regional management personnel, the development and recruitment of a base of
qualified technical consultants within a geographic market, the integration of
new personnel into the Company's network of Member Firms and the Company's
ability to initiate, develop and maintain client relationships. Further, if
competition for acquisition candidates increases, the purchase price of such
target companies may increase to the point that otherwise viable acquisitions
become cost prohibitive. Client satisfaction or performance problems at a single
acquired firm could have a material adverse impact on the reputation of the
Company as a whole. In addition, there can be no assurance that acquired
businesses, if any, will achieve anticipated revenues and earnings. The
inability of the Company to implement and manage its acquisition strategy
successfully may have an adverse effect on the future prospects of the Company.
Competition
The IT consulting services industry is highly competitive,
fragmented and subject to rapid change. There are numerous other companies
engaged in the Company's business, many of which have greater technical,
financial or marketing resources than the Company. The market includes
participants in a variety of market segments, including local, regional and
national systems consulting and integration firms, professional service
divisions of applications software firms, the professional service groups of
computer equipment companies, management information outsourcing companies,
certain "Big Six" accounting firms and general management consulting firms.
Certain competitors operate in several of the Company's markets, and others may
choose to enter the Company's markets in the future. In addition, the Company
intends to enter new markets and offer new services by acquiring companies and
expects that one or more of its competitors will have a presence in each of such
new markets and are or will be providing such new services. The majority of the
Company's competitors are smaller regional firms with a strong presence in their
respective local markets. Further, many of the larger companies which have
traditionally made up a substantial portion of the Company's target market have
recently been consolidating their vendor lists to a smaller number of preferred
service providers. To the extent the Company is unable to meet the necessary
requirements of such larger companies and become a preferred service provider,
its ability to attract and retain such clients will be adversely affected. As a
result of these factors, the Company may lose clients or have difficulty
acquiring new clients. An inability to compete successfully in its marketplace
would have a material adverse effect on the Company's business, financial
condition and results of operations.
In addition, the Company competes for qualified technical
consultants and viable acquisition candidates. There can be no assurance that
the Company will be successful in attracting, hiring and retaining such
personnel or in implementing its acquisition program. See "Risk
Factors--Dependence on Availability of Qualified Technical Consultants"
and "Implementation of Business Strategy."
Need for Acquisition Financing
The Company currently intends to finance future acquisitions
by using cash and/or shares of its Common Stock for all or a portion of the
consideration to be paid, including the shares of Common Stock registered
hereby. If the Common Stock does not maintain a sufficient value, or potential
acquisition candidates are unwilling to accept Common Stock as part or all of
the consideration for the sale of their businesses, the Company may be required
to use more of its cash resources, if available, to initiate and maintain its
acquisition program. If the Company does not have sufficient cash resources, its
growth could be limited unless it is able to obtain additional capital through
additional debt or equity financing. There can be no assurance that the Company
will be able to obtain such financing if and when it is needed or that, if
available, it will be available on terms the Company deems acceptable. As a
result, the Company might be unable to successfully implement its acquisition
strategy. The inability of the Company to implement and manage its acquisition
strategy successfully may have an adverse effect on the future prospects of the
Company.
7
<PAGE>
The Company will also need additional funds to implement its
acquisition and internal growth strategies. The Company has a line of credit
facility for use for working capital and other general corporate purposes, which
may include acquisitions. There can be no assurance, however, that the line of
credit will be sufficient for the Company's needs.
Client Concentration; Absence of Long-Term Contracts
A relatively small number of clients has recently accounted
for a significant portion of the Company's revenues. For the nine months ended
December 31, 1996, one client accounted for approximately 10% of the Company's
revenues and 10 clients accounted for approximately 35% of the Company's
revenues. Except for the Company's two largest clients which accounted for
approximately 18% of the Company's revenues, no other client accounted for more
than 3%. There can be no assurance that these clients will continue to engage
the Company for additional projects or do so at the same revenue levels. In
addition, a significant amount of the Company's revenues are primarily derived
from services provided in response to client requests or on an
assignment-by-assignment basis, and the Company's engagements, generally billed
on a time and materials or arranged fee basis, are terminable at any time by
clients, generally without penalty. There can be no assurance that existing
clients will continue to use the Company's services at historical levels, if at
all. Loss of a major client could have a material adverse effect on the
Company's business, financial condition and results of operations.
Year 2000 Conversion Efforts
As the Year 2000 approaches, many date sensitive computer
applications will fail because they are unable to process dates properly beyond
December 31, 1999. Businesses will thus be required to devote significant
resources to converting their information systems over the next three years. In
the event that Year 2000 conversions result in a significant increase in
competition for technical consultants or the Company's clients devote
substantial resources to such conversions and decrease their expenditures on
projects worked on by the Company's technical consultants, the Company's
business, financial condition and results of operations may be materially
adversely affected.
Possible Volatility of Stock Price
The Company's revenues, gross margin and operating margin for
any particular quarter are generally affected by staffing mix and billing rates,
resource requirements, marketing activities and the timing and size of
engagements. Results for any quarter are not necessarily indicative of the
results that the Company may achieve for any subsequent fiscal quarter or for a
full fiscal year and may cause the market price of the Common Stock to
fluctuate, perhaps substantially. In addition, in recent years the stock market
in general, and the shares of high growth companies in particular, have
experienced extreme price fluctuations, often for reasons unrelated to the
performance of a particular company's business. These broad market and industry
fluctuations may adversely affect the market price of the Common Stock.
Employment Liability Risks
Service providers such as the Company are in the business of
employing people and placing them in the workplace of other businesses. An
attendant risk of such activity includes possible claims of discrimination and
harassment, employment of illegal aliens and other similar claims. A failure to
avoid these risks may result in negative publicity for the Company and the
payment by the Company of money damages or fines. Although the Company
historically has not had any significant problems in this area, there can be no
assurance that the Company will not experience such problems in the future.
The Company is also exposed to liability with respect to
8
<PAGE>
actions taken by its employees while on assignment, such as damages caused by
employee errors, misuse of client-proprietary information or theft of client
property. Due to the nature of the Company's assignments and the potential
liability with respect thereto, there can be no assurance that any insurance
maintained by the Company will be adequate to cover any such liability. To the
extent that such insurance is not sufficient in amount or scope to cover a loss,
the Company's business, financial condition and results of operations could be
materially adversely affected.
Reliance on Key Personnel; Management of Technical Consultants
The Company's operations are dependent on the continued
efforts of its executive officers and on the senior management of the Member
Firms. While the Company has entered into employment agreements with certain of
these individuals, there can be no assurance that any individual will continue
in his or her present capacity with the Company for a specified period. The
Company also expects that in order to pursue its business strategy successfully,
it will be required to hire additional management personnel at regional levels
to implement adequate Company-wide systems and controls at each of the Member
Firms. If the Company is unable to hire, train and integrate new management
personnel effectively, or if such personnel are unable to achieve anticipated
performance levels, the Company's business, financial condition and results of
operations could be adversely affected. Furthermore, the Company will likely be
dependent on the senior management of businesses, if any, that may be acquired
in the future. If any of these people become unable to continue in their present
roles, or if the Company is unable to attract and retain other skilled
employees, the Company's business or prospects could be adversely affected. The
Company does not own and does not intend to obtain key man life insurance
covering any of its executive officers or other members of senior management.
In addition, the Company's staff includes a number of highly
qualified technical consultants who have a broad range of career opportunities.
The Company believes that its ability to retain such individuals and attract
additional qualified technical consultants depends significantly on the freedom
such persons are given to pursue their individual objectives within the Company
and on a compensation system that motivates and rewards individual achievements.
To the extent that such an environment were to result in a lack of coordination
of projects or in competition among professionals or working groups, or were the
Company to lose such personnel or be unable to identify, hire and retain
additional technical consultants, the quality of the Company's services could
suffer. In such event, the Company's business, financial condition and results
of operations could be materially adversely affected.
Shares Eligible for Future Sale
The market price of the Common Stock could be adversely
affected by the sale of substantial amounts of Common Stock in the public
market.
The Company issued 2,725,500 shares of Common Stock in the
IPO, all of which may be sold in the public market. In addition, simultaneously
with the closing of the IPO, the stockholders of the Founding Companies
received, in the aggregate, 2,906,875 shares of Common Stock (not including
300,000 shares of Common Stock sold by one selling stockholder in the IPO) as a
portion of the consideration for their businesses and James R. Lavelle, Chairman
of the Board and Chief Executive Officer of the Company, received 238,732 shares
of Common Stock. In addition, the Company issued an aggregate of 3,435,211
shares of Common Stock to the stockholders of the Subsequent Acquisitions as
consideration for their businesses. Except for the 3,435,211 shares issued to
the stockholders of the Subsequent Acquisitions, none of the aforementioned
shares have been registered under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, may not be resold except in transactions
registered under the Securities Act or pursuant to an exemption therefrom.
Certain stockholders of the Founding Companies who received shares of Common
Stock have piggyback registration rights with respect to such shares. Such
piggyback registration rights do not give such stockholders the right to include
any of their shares in any shelf registration to register shares to be used
solely in connection with acquisitions, such as the Registration Statement of
which this Prospectus forms a part.
9
<PAGE>
Anti-Takeover Provisions
The Board of Directors of the Company is empowered to issue up
to 500,000 shares of preferred stock, and to determine the price, rights,
preferences and privileges of such shares, without any further stockholder
action. The existence of this "blank-check" preferred stock could render more
difficult or discourage an attempt to obtain control of the Company by means of
a tender offer, merger, proxy contest or otherwise. In addition, this
"blank-check" preferred stock, and any issuance thereof, may have an adverse
effect on the market price of the Common Stock. The Company's Certificate of
Incorporation provides for a "staggered" Board of Directors, which may also have
the effect of inhibiting a change of control of the Company and may have an
adverse effect on the market price of the Common Stock.
DESCRIPTION OF CAPITAL STOCK
General
The Company's authorized capital stock consists of 100,000,000 shares
of Common Stock, par value $0.01 per share, and 500,000 shares of preferred
stock, par value $0.01 per share (the "Preferred Stock"). As of March 14,
1997, the Company had outstanding 9,697,369 shares of Common Stock and no shares
of Preferred Stock. As of March 14, 1997, there were 96 record holders of
Common Stock.
Common Stock
The holders of Common Stock are entitled to one vote for each share on
all matters voted upon by stockholders, including the election of directors.
Subject to the rights of any then-outstanding shares of Preferred
Stock, the holders of the Common Stock are entitled to such dividends as may be
declared in the discretion of the Board of Directors out of funds legally
available therefor. See "Dividend Policy." Holders of Common Stock are entitled
to share ratably in the net assets of the Company upon liquidation after payment
or provision for all liabilities and any preferential liquidation rights of any
Preferred Stock then outstanding. The holders of Common Stock have no preemptive
rights to purchase shares of stock of the Company. Shares of Common Stock are
not subject to any redemption provisions and are not convertible into any other
securities of the Company. All outstanding shares of Common Stock are, and the
shares of Common Stock to be issued pursuant to this Prospectus will be, upon
payment therefor, fully paid and non-assessable.
The Common Stock is traded on the Nasdaq National Market under the
symbol "COTL."
Preferred Stock
Preferred Stock may be issued from time to time by the Board of
Directors as shares of one or more classes or series. Subject to the provisions
of the Company's Certificate of Incorporation and limitations prescribed by law,
the Board of Directors is expressly authorized to adopt resolutions to issue the
shares, to fix the number of shares and to change the number of shares
constituting any series, and to provide for or change the voting powers,
designations, preferences and relative, participating, optional or other special
rights, qualifications, limitations or restrictions thereof, including dividend
rights (including whether dividends are cumulative), dividend rates, terms of
redemption (including sinking fund provisions), redemption prices, conversion
rights and liquidation preferences of the shares constituting any class or
series of the Preferred Stock, in each case without any further action or vote
by the stockholders. The Company has no current plans to issue any shares of
Preferred Stock of any class or series.
10
<PAGE>
One of the effects of undesignated Preferred Stock may be to enable the
Board of Directors to render more difficult or to discourage an attempt to
obtain control of the Company by means of a tender offer, proxy contest, merger
or otherwise, and thereby to protect the continuity of the Company's management.
The issuance of shares of the Preferred Stock pursuant to the Board of
Directors' authority described above may adversely affect the rights of the
holders of Common Stock. For example, Preferred Stock issued by the Company may
rank prior to the Common Stock as to dividend rights, liquidation preference or
both, may have full or limited voting rights and may be convertible into shares
of Common Stock. Accordingly, the issuance of shares of Preferred Stock may
discourage bids for the Common Stock or may otherwise adversely affect the
market price of the Common Stock.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is The First
National Bank of Boston.
PLAN OF DISTRIBUTION
The Company will issue shares of Common Stock from time to time in
connection with the acquisition by the Company of other businesses or assets. It
is expected that the terms of the acquisitions involving the issuance of
securities covered by this Prospectus will be determined by direct negotiations
with the owners or controlling persons of the businesses or assets to be merged
with or acquired by the Company. No underwriting discounts or commissions will
be paid, although finder's fees may be paid from time to time with respect to
specific mergers or acquisitions. Any person receiving such fees may be deemed
to be an underwriter within the meaning of the Securities Act.
LEGAL MATTERS
The validity of the issuance of the shares of Common Stock offered by this
Prospectus has been passed upon for the Company by Morgan, Lewis & Bockius LLP,
New York, New York.
EXPERTS
The consolidated financial statements of Cotelligent Group, Inc. as of
March 31, 1996 and 1995 and for each of the three years in the period ended
March 31, 1996, the financial statements of Pittsburgh Business Consultants,
Inc. as of December 31, 1995 and 1994 and for each of the two years in the
period ended December 31, 1995, the financial statements of JasTech, Inc. as of
December 31, 1995 and 1994 and for each of the two years in the period ended
December 31, 1995, the financial statements of ESP Software Services, Inc. as of
December 1995 and 1994 for each of the two years in the period ended December
31, 1995, the financial statements of INNOVA Solutions, Inc. as of December 31,
1995 and 1994 and for each of the two years in the period ended December 31,
1995 and the combined financial statements of the Combined Predecessor
Companies, the consolidated financial statements of Financial Data
Services, Inc., the financial statements of BFR Co., Inc., the combined
financial statements of Data Arts & Sciences, Inc. and the financial
statements of Chamberlain Associates, Inc. as of March 31, 1995 and 1994 and
for each of the two years in the period ended March 31, 1995 and for the period
April 1, 1995 through February 19, 1996 incorporated by reference in this
Prospectus have been so incorporated in reliance on the reports of Price
Waterhouse LLP, independent accountants, given on authority of said firm as
experts in auditing and accounting.
11
<PAGE>
No dealer, representative or any other person has been authorized to give
any information or to make any representations other than those contained in
this Prospectus, and if given or made, such information or representations must
not be relied upon as having been authorized by the Company. Neither the
delivery of this Prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained herein is
correct as of any date subsequent to the date hereof. This Prospectus does not
constitute an offer to sell or a solicitation of an offer to buy any securities
offered hereby by anyone in any jurisdiction in which such offer or solicitation
is not authorized or in which the person making such offer or solicitation is
not qualified to do so or to anyone to whom it is unlawful to make such offer or
solicitation.
-------------------------
TABLE OF CONTENTS
-------------------------
<TABLE>
<S> <C> <C> <C>
Available Information...............................3 Risk Factors........................................6
Incorporation of Certain Information by Reference...3 Description of Capital Stock.......................10
The Company.........................................4 Plan of Distribution...............................11
Recent Acquisitions.................................5 Legal Matters......................................11
Experts............................................11
</TABLE>
12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers.
The Company's By-laws provide that the Company shall, to the
fullest extent permitted by Section 145 of the General Corporation Law of the
State of Delaware, as amended from time to time, indemnify all persons whom it
may indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of
Delaware permits a corporation, under specified circumstances, to indemnify its
directors, officers, employees or agents against expenses (including attorney's
fees), judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Seven of the Company's Certificate of Incorporation
provides that the Company's directors will not be personally liable to the
Company or its stockholders for monetary damages resulting from breaches of
their fiduciary duty as directors except (a) for any breach of the duty of
loyalty to the Company or its stockholders, (b) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, (c) under Section 174 of the General Corporation Law of the State of
Delaware, which makes directors liable for unlawful dividends or unlawful stock
repurchases or redemptions or (d) for transactions from which directors derive
improper personal benefit.
In accordance with Delaware law, the Company has entered into
indemnification agreements with its directors, pursuant to which it has agreed
to pay certain expenses, including attorneys' fees, judgments, fines and amounts
paid in settlement incurred by such directors in connection with certain
actions, suits or proceedings. These agreements require directors to repay the
amount of any expenses advanced if it shall be determined that they shall not
have been entitled to indemnification.
The Company maintains liability insurance for the benefit of its
directors and officers.
<TABLE>
<CAPTION>
Item 21. Exhibits and financial Statement Schedules
Exhibit
Number Description
<S> <C>
3.1 Certificate of Incorporation of Cotelligent (Exhibit 3.1 of the Registration Statement
on Form S-1 (File No. 33-80267) effective February 16, 1996, is hereby incorporated by
reference)
II-2
<PAGE>
Exhibit
Number Description
3.2 By-laws of Cotelligent (Exhibit 3.2 of the Registration Statement on Form S-1 (File No.
33-80267) effective February 16, 1996, is hereby incorporated by reference)
4.1 Form of certificate evidencing ownership of Common Stock of Cotelligent (Exhibit 4.1 of
the Registration Statement on Form S-1 (File No. 33-80267) effective February 16, 1996,
is hereby incorporated by reference)
5.1 Opinion of Morgan, Lewis & Bockius LLP*
10.1 Form of Employment Agreement between Cotelligent and James R. Lavelle
10.2 Form of Employment Agreement between Cotelligent and Michael L. Evans
10.3 Form of Employment Agreement between Cotelligent and Daniel E. Jackson
10.4 Form of Employment Agreement among BFR Co., Inc., Cotelligent and Jeffrey J. Bernardis
10.5 Form of Employment Agreement among Chamberlain Associates, Inc., Cotelligent and John
E. Chamberlain
10.6 Form of Employment Agreement among Chamberlain Associates, Inc., Cotelligent and Linda
M. Cassell
10.7 Form of Employment Agreement among Data Arts & Sciences Inc., Cotelligent and John
C. Travers
10.8 Cotelligent 1995 Long-Term Incentive Plan (Exhibit 10.9 of the Registration Statement
on Form S-1 (File No. 33-80267) effective February 16, 1996, is hereby incorporated by
reference)
10.9 Lease Agreement between BFR Properties and BFR Co., Inc. effective April 1, 1995 at 7
Clyde Road (Exhibit 10.9 to the Form 10-K for the year ended March 31, 1996 is hereby
incorporated by reference)
10.10 Lease Agreement between BFR Properties and BFR Co., Inc. effective April 1, 1995 at 31
Clyde Road (Exhibit 10.10 to the Form 10-K for the year ended March 31, 1996 is hereby
incorporated by reference)
II-3
<PAGE>
Exhibit
Number Description
10.11 Lease Agreement between Quinlan Properties, L.P. and BFR Co., Inc. effective December
29, 1995 (Exhibit 10.11 to the Form 10-K for the year ended March 31, 1996 is hereby
incorporated by reference)
10.12 Sublease Agreement between San Francisco Satellite Center and Cotelligent effective
March 1, 1996 (Exhibit 10.12 to the Form 10-K for the year ended March 31, 1996 is
hereby incorporated by reference)
10.13 Business Loan Agreement between Cotelligent and U.S. Bank of Washington, National
Association effective May 1, 1996 (Exhibit 10.13 to the Form 10-K for the year ended
March 31, 1996 is hereby incorporated by reference)
10.14 Business Loan Agreement between Cotelligent and U.S. Bank of Washington, National
Association effective October 4, 1996. (Exhibit 10 to Form 10-Q for the period ended
September 30, 1996 is hereby incorporated by reference)
21 List of subsidiaries of Cotelligent
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)*
24 Power of Attorney*
-------------------
*Previously filed
</TABLE>
Item 22. Undertakings
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being
made, a post-effective amendment to the registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the registration statement (or the most recent post-effective
amendment thereof) which, individually or in aggregate, represent a fundamental
change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any other
material change to such information in the registration statement.
(2) That for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities being offered therein and the
II-4
<PAGE>
offering of such securities at the time may be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities which are being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act of 1934) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(5) As follows: that prior to any public reoffering of the securities
registered hereunder through use of a prospectus which is a part of this
registration statement, by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes that such
reoffering prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other items of
the applicable form.
(6) That every prospectus (i) that is filed pursuant to paragraph (6)
immediately preceding or (ii) that purports to meet the requirements of Section
10(a)(3) of the Securities Act and is used in connection with an offering of
securities subject to Rule 415, will be filed as part of an amendment to the
registration statement and will not be used until such amendment is effective,
and that, for purposes of determining any liability under the Securities Act,
each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bon a fide offering
thereof.
(7) To respond to requests for information that is incorporated by
reference into the Prospectus pursuant to Items 4, 10(b), 11, or 13 of this
Form, within one (1) business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means. This
includes information contained in documents filed subsequent to the effective
date of the registration statement through the date of responding to the
request.
(8) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved there, that
was not the subject of and included in the registration statement when it became
effective.
(9) Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the Company pursuant to the foregoing provisions, or otherwise, the Company
has been advised that in the opinion of the Commission such indemnification is
against public policy as expressed by the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Company of expenses incurred or paid
by a director, officer or controlling person of the Company in the successful
defense of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered, the
Company will, unless in the opinion of its counsel the matter has been settled
by controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has duly
caused this Post-Effective Amendment No. 1 on Form S-4 to Registration Statement
on Form S-1 to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, California, on this 19th day of March
1997.
COTELLIGENT GROUP, INC.
By: /s/ JAMES R. LAVELLE
---------------------
James R. Lavelle
Chairman of the Board and Chief
Executive Officer
<TABLE>
<CAPTION>
Signature Capacity In Which Signed Date
<S> <C> <C>
/s/ JAMES R. LAVELLE Chairman of the Board and March 19, 1997
- - ------------------------------------
James R. Lavelle Chief Executive Officer
/s/ DANIEL E. JACKSON Senior Vice President, Corporate March 19, 1997
- - ------------------------------------ Development, General Counsel,
Daniel E. Jackson Secretary and Acting Chief Financial
Officer (Principal Financial Officer)
/s/ CURTIS J. PARKER Vice President, Chief Accounting March 19, 1997
- - ------------------------------------ Officer (Principal Accounting
Curtis J. Parker Officer)
/s/ MICHAEL L. EVANS Director March 19, 1997
- - ------------------------------------
Michael L. Evans
Director March , 1997
- - ------------------------------------
Daniel M. Beals
Director March , 1997
- - ------------------------------------
Jeffrey J. Bernardis
II-6
<PAGE>
Signature Capacity In Which Signed Date
* Director March 19, 1997
- - ----------------------------------
Linda M. Cassell
* Director March 19, 1997
- - ----------------------------------
John E. Chamberlain
Director March, 1997
- - ---------------------------------
Anthony M. Frank
* Director March 19, 1997
- - ---------------------------------
B. Tom Green
* Director March 19, 1997
- - ---------------------------------
Harvey L. Poppel
Director March , 1997
- - --------------------------------
John C. Travers
*By: /s/ James R. Lavelle
-------------------------
Attorney-In-Fact
</TABLE>
II-7
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
3.1 Certificate of Incorporation of Cotelligent (Exhibit 3.1 of the Registration Statement on Form
S-1 (File No. 33-80267) effective February 16, 1996, is hereby incorporated by reference)
3.2 By-laws of Cotelligent (Exhibit 3.2 of the Registration Statement on Form S-1 (File No.
33-80267) effective February 16, 1996, is hereby incorporated by reference)
4.1 Form of certificate evidencing ownership of Common Stock of Cotelligent (Exhibit 4.1 of the
Registration Statement on Form S-1 (File No. 33-80267) effective February 16, 1996, is hereby
incorporated by reference)
5.1 Opinion of Morgan, Lewis & Bockius LLP*
10.1 Form of Employment Agreement between Cotelligent and James R. Lavelle
10.2 Form of Employment Agreement between Cotelligent and Michael L. Evans
10.3 Form of Employment Agreement between Cotelligent and Daniel E. Jackson
10.4 Form of Employment Agreement among BFR Co., Inc., Cotelligent and Jeffrey J. Bernardis
10.5 Form of Employment Agreement among Chamberlain Associates, Inc., Cotelligent and John E.
Chamberlain
10.6 Form of Employment Agreement among Chamberlain Associates, Inc., Cotelligent and Linda M.
Cassell
10.7 Form of Employment Agreement among Data Arts & Sciences Inc., Cotelligent and John
C. Travers
10.8 Cotelligent 1995 Long-Term Incentive Plan (Exhibit 10.9 of the Registration Statement on Form
S-1 (File No. 33-80267) effective February 16, 1996, is hereby incorporated by reference)
10.9 Lease Agreement between BFR Properties and BFR Co., Inc. effective April 1, 1995 at 7 Clyde
Road (Exhibit 10.9 to the Form 10-K for the year ended March 31, 1996 is hereby incorporated
by reference)
II-8
<PAGE>
10.10 Lease Agreement between BFR Properties and BFR Co., Inc.
effective April 1, 1995 at 31 Clyde Road (Exhibit 10.10 to the
Form 10-K for the year ended March 31, 1996 is hereby
incorporated by reference)
10.11 Lease Agreement between Quinlan Properties, L.P. and BFR Co., Inc. effective December 29, 1995
(Exhibit 10.11 to the Form 10-K for the year ended March 31, 1996 is hereby incorporated by
reference)
10.12 Sublease Agreement between San Francisco Satellite Center and Cotelligent effective March 1,
1996 (Exhibit 10.12 to the Form 10-K for the year ended March 31, 1996 is hereby incorporated
by reference)
10.13 Business Loan Agreement between Cotelligent and U.S. Bank of Washington, National Association
effective May 1, 1996 (Exhibit 10.13 to the Form 10-K for the year ended March 31, 1996 is
hereby incorporated by reference)
10.14 Business Loan Agreement between Cotelligent and U.S. Bank of Washington, National Association
effective October 4, 1996.
21 List of subsidiaries of Cotelligent
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)*
24 Power of Attorney*
-------------------
*Previously filed
</TABLE>
II-9
<PAGE>
Exhibit 10.1
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") between Cotelligent Group, Inc.
("Cotelligent"), a Delaware corporation, and James R. Lavelle ("Employee") is
hereby entered into and effective as of the 20th day of February, 1996, the date
of the consummation of the initial public offering of the common stock of
Cotelligent ("Effective Date"). This Agreement hereby supersedes any other
employment agreements or understandings, written or oral, between Cotelligent
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, Cotelligent, primarily through companies it
intends to acquire as subsidiaries, will be engaged primarily in the business of
providing contract computer programming and computer consulting services.
References herein to "Cotelligent" are intended to include Cotelligent and these
operating subsidiaries, as may be applicable in the circumstances.
Employee will be employed hereunder by Cotelligent in a confidential
relationship wherein Employee, in the course of his employment with Cotelligent,
will become familiar with and aware of information as to Cotelligent's
customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by Cotelligent, and future plans with
respect thereto, all of which will be established and maintained at great
expense to Cotelligent; this information is a trade secret and constitutes the
valuable good will of Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) Cotelligent hereby employs Employee as President and Chief
Executive Officer. As such, Employee shall have responsibilities, duties and
authority reasonably accorded to and expected of a President and Chief Executive
Officer and will report directly to the Board of Directors of Cotelligent (the
"Board"). Additional or different duties, titles or positions, however, may be
assigned to Employee or may be taken from Employee from time to time by the
Board, provided that any such changes are consistent and compatible with
Employee's experience,
<PAGE>
background and managerial skills. Employee hereby accepts this employment upon
the terms and conditions herein contained and, subject to paragraph 1(c) agrees
to devote his time, attention and efforts to promote and further the business of
Cotelligent.
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by Cotelligent.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
Cotelligent shall compensate Employee as follows:
(a) Base Salary. Employee shall receive no salary from Cotelligent
pursuant to this Agreement until the Effective Date. Beginning on such date, the
base salary payable to Employee shall be $150,000 per year, payable on a regular
basis in accordance with Cotelligent's standard payroll procedures but not less
than monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its reasonable
discretion, any such increase is warranted. Such recommended increase would, in
all likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive year-end bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from Cotelligent in such form and to such extent as
specified below:
(1) Participation for Employee in coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that Cotelligent may have in effect
from time to time, benefits provided to Employee
under this clause (1) to be at least equal to such
benefits provided to Cotelligent executives.
-2-
NY02/219453.4
<PAGE>
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of his services pursuant
to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by
Employee upon submission of any request for
reimbursement, and in a format and manner consistent
with Cotelligent's expense reporting policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than a full year).
(4) Cotelligent shall reimburse Employee $500 per month
for expenses incurred in connection with the leasing
or acquisition of an automobile.
(5) Cotelligent shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Cotelligent-wide employee
benefits as available from time to time.
3. Non-Competition Agreement.
(a) Employee will not, during the period of his employment by or with
Cotelligent, and for a period of two (2) years immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with Cotelligent (including its subsidiaries),
within 100 miles of where Cotelligent or where any of its subsidiaries
conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Cotelligent (including its subsidiaries) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of
Cotelligent (including its subsidiaries), provided that Employee shall
-3-
NY02/219453.4
<PAGE>
be permitted to call upon and hire any member of his or her
immediate family;
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of Cotelligent (including its subsidiaries) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with Cotelligent (including its subsidiaries) within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract programming business, which candidate was
either called upon by Cotelligent (including its subsidiaries) or for
which Cotelligent (including its subsidiaries) made an acquisition
analysis, for the purpose of acquiring such entity.
(v) disclose customers, whether in existence or proposed, of
Cotelligent (including its subsidiaries) to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever except to the extent that Cotelligent (including its
subsidiaries) has in the past disclosed such information to the public
for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to
Cotelligent including its subsidiaries as a result of a breach of the foregoing
covenant, and because of the immediate and irreparable damage that could be
caused to Cotelligent including its subsidiaries for which it would have no
other adequate remedy, Employee agrees that the foregoing covenant may be
enforced by Cotelligent including its subsidiaries in the event of breach by
him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of Cotelligent (including its subsidiaries) on the date of the
execution of this Agreement and the current plans of Cotelligent; but it is also
the intent of Cotelligent and Employee that such covenants be construed and
enforced in accordance with the changing activities and business of Cotelligent
throughout the term of this covenant. For example, if, during the term of this
Agreement, Cotelligent (including its subsidiaries) engages in new and different
-4-
NY02/219453.4
<PAGE>
activities, enters a new business or establishes new locations for its current
activities or business in addition to or other than the activities or business
enumerated under the Recitals above or the locations currently established
therefore, then Employee will be precluded from soliciting the customers or
employees of such new activities or business or from such new location and from
directly competing with such new business within 100 miles of its operating
location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with Cotelligent (including its
subsidiaries), or similar activities or business in locations the operation of
which, under such circumstances, does not violate clause (i) of this paragraph
3, and in any event such new business, activities or location are not in
violation of this paragraph 3 or of Employee's obligations under this paragraph
3, if any, Employee shall not be chargeable with a violation of this paragraph 3
if Cotelligent (including its subsidiaries) shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against Cotelligent
(including its subsidiaries), whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Cotelligent (including its
subsidiaries) of such covenants. It is specifically agreed that the period of
two (2) years stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. Place of Performance.
(a) Employee understands that he may be required by the Board to
relocate from his residence in the San Francisco Bay Area to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement.
-5-
NY02/219453.4
<PAGE>
In such event, Cotelligent will pay all relocation costs to move Employee, his
immediate family and their personal property and effects. Such costs may
include, by way of example, but are not limited to, pre-move visits to search
for a new residence, investigate schools or for other purposes; temporary
lodging and living costs prior to moving into a new permanent residence;
duplicate home carrying costs; all closing costs on the sale of Employee's
residence in the San Francisco Bay Area and on the purchase of a comparable
residence in the new location; and added income taxes that Employee may incur if
any relocation costs are not deductible for tax purposes. The general intent of
the foregoing is that Employee shall not personally bear any out-of-pocket cost
as a result of any relocation, with an understanding that Employee will use his
best efforts to incur only those costs which are reasonable and necessary to
effect a smooth, efficient and orderly relocation with minimal disruption to the
business affairs of Cotelligent and the personal life of Employee and his
family.
(b) Notwithstanding the above, if Employee is requested by the Board of
Cotelligent to relocate and Employee refuses, such refusal shall not constitute
"cause" for termination of this Agreement under the terms of paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), Cotelligent may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished
Cotelligent with a written statement from a qualified doctor to such effect and
provided,
-6-
NY02/219453.4
<PAGE>
further, that, at Cotelligent's request made within thirty (30) days of the date
of such written statement, Employee shall submit to an examination by a doctor
selected by Cotelligent who is reasonably acceptable to Employee or Employee's
doctor and such doctor shall have concurred in the conclusion of Employee's
doctor. In the event this Agreement is terminated pursuant to this Paragraph
5(b), Employee shall receive from Cotelligent, in a lump-sum payment within ten
(10) days of the effective date of termination, the base salary at the rate then
in effect for whatever time period is remaining under the Initial Term of this
Agreement or for one (1) year, whichever amount is greater.
(c) Good Cause. Cotelligent may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of
Cotelligent (including its subsidiaries) which materially and adversely affects
the operations or reputation of Cotelligent (including its subsidiaries); (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by
Cotelligent during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board. Should Employee be
terminated by Cotelligent without cause, Employee shall receive from
Cotelligent, the base salary at the rate then in effect for whatever time period
is remaining under the Initial Term of this Agreement or for one (1) year,
whichever amount is greater (the "Payment Term"); it is specifically understood
and agreed that, in the event Employee's employment is terminated without cause,
Cotelligent shall in all circumstances, during the Payment Term, be required to
pay Employee at an annual rate equal to Employee's most recent annual base
salary, regardless of whether Employee has obtained other employment following
such termination and Employee shall be under no duty to mitigate such amount or
take any action to lessen Cotelligent's liability for such payment, which is
intended to be absolute. Further, any termination without cause by Cotelligent
shall operate to shorten the period set forth in paragraph 3(a) and during which
the terms of paragraph 3 apply to one (1) year from the date of termination of
employment.
-7-
NY02/219453.4
<PAGE>
Employee shall be deemed to have been terminated without cause by Cotelligent if
Employee shall be assigned any duties materially inconsistent with, or
Employee's responsibilities shall be significantly limited, or Employee shall be
significantly demoted, in any case so as not to be serving in a President and
Chief Executive Officer capacity to Cotelligent (and its subsidiaries and
affiliates), and the continuance thereof for a period of 5 business days after
written notice from Employee that he is unwilling to accept such changes in
duties or responsibilities. In the event Employee is terminated without cause,
any and all options which shall have been granted to Employee by Cotelligent
shall immediately vest without further action by Employee and notwithstanding
the terms of any such option grant.
At any time after the commencement of employment, Cotelligent or Employee may,
without cause, terminate this Agreement and Employee's employment, effective
thirty (30) days after written notice is provided to the other party. If
Employee resigns or otherwise terminates his employment without cause pursuant
to this paragraph 5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent and Employee under
this Agreement shall cease as of the effective date of termination, except that
Cotelligent's obligations under paragraph 9 herein and Employee's obligations
under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in
accordance with their terms.
If termination of Employee's employment arises out of Cotelligent's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by Cotelligent,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, Cotelligent shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement or the
-8-
NY02/219453.4
<PAGE>
Employee's employment hereunder is terminated as a result of a breach by
Cotelligent.
6. Return of Company Property. All records, designs, patents, business
plans, financial statements, financial records, manuals, memoranda, lists and
other property delivered to or compiled by Employee by or on behalf of
Cotelligent (including its subsidiaries) or their representatives, vendors or
customers which pertain to the business of Cotelligent (including its
subsidiaries) shall be and remain the property of Cotelligent (including its
subsidiaries) and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
Cotelligent (including its subsidiaries) which is collected by Employee shall be
delivered promptly to Cotelligent without request by it upon termination of
Employee's employment.
7. Inventions. Employee shall disclose promptly to Cotelligent any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of Cotelligent and which Employee conceives as a result of his
employment by Cotelligent. Employee hereby assigns and agrees to assign all his
interests therein to Cotelligent or its nominee. Whenever requested to do so by
Cotelligent, Employee shall execute any and all applications, assignments or
other instruments that Cotelligent shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect Cotelligent's interest therein.
8. Trade Secrets. Employee agrees that he will not, during or after the
term of this Agreement with Cotelligent, disclose the specific terms of
Cotelligent's relationships or agreements with its significant vendors or
customers or any other significant and material trade secret of Cotelligent,
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever other than as required by law
or to attorneys or accountants or other agents of the Company.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by Cotelligent
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then Cotelligent shall indemnify and hold harmless the
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in
-9-
NY02/219453.4
<PAGE>
settlement, as actually and reasonably incurred by Employee in connection
therewith. In the event that both Employee and Cotelligent are made a party to
the same third-party action, complaint, suit or proceeding, Cotelligent agrees
to engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by Cotelligent shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and Cotelligent shall pay all attorneys'
fees and costs of such separate counsel. Further, while Employee is expected at
all times to use his best efforts to faithfully discharge his duties under this
Agreement, Employee cannot be held liable to Cotelligent for errors or omissions
made in good faith where Employee has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of Cotelligent.
10. No Prior Agreements. Employee hereby represents and warrants to
Cotelligent that the execution of this Agreement by Employee and his employment
by Cotelligent and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify Cotelligent for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against Cotelligent based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by Cotelligent on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that Cotelligent may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of Cotelligent hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein Cotelligent and Employee have not received written notice at least five
(5) business days prior to the anticipated
-10-
NY02/219453.4
<PAGE>
closing date of the transaction giving rise to the Change in Control from the
successor to all or a substantial portion of Cotelligent's business and/or
assets that such successor is willing and able as of the closing to assume and
agree to perform Cotelligent's obligations under this Agreement in the same
manner and to the same extent that Cotelligent is hereby required to perform,
then such Change in Control shall be deemed to be a termination of this
Agreement by Cotelligent without cause and the applicable portions of paragraph
5(d) will apply; however, under such circumstances, the amount of the severance
payment due to Employee (a) shall be payable in a lump-sum payment on the
effective date of the termination and (b) shall be triple the amount calculated
under the terms of paragraph 5(d) and the non-competition provisions of
paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to
Cotelligent at least five (5) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though Cotelligent had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by Cotelligent at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of his
vested options to purchase Cotelligent Common Stock, including any options with
accelerated vesting under the provisions of Cotelligent's 1995 Long-Term
Incentive Compensation Plan, such that he may convert the options to shares of
Cotelligent Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Cotelligent and immediately after
-11-
NY02/219453.4
<PAGE>
such acquisition such person or entity is, directly or indirectly, the
Beneficial Owner of voting securities representing 50% or more of the
total voting power of all of the then-outstanding voting securities of
Cotelligent;
(ii) the individuals (A) who, as of the effective date of the
Company's registration statement with respect to its initial public
offering, constitute the Board (the "Original Directors") or (B) who
thereafter are elected to the Board and whose election, or nomination
for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still in office (such
directors becoming "Additional Original Directors" immediately
following their election) or (C) who are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by Cotelligent at
any time that Cotelligent or any member of its Board anticipates
that a Change in Control may take place.
(g) Employee shall be reimbursed by Cotelligent or its
successor for any excise taxes that Employee incurs under Section
4999 of the Internal Revenue Code of 1986, as a result of any
Change in Control. Such amount will be due and payable by
-12-
NY02/219453.4
<PAGE>
Cotelligent or its successor within ten (10) days after Employee delivers a
written request for reimbursement accompanied by a copy of his tax return(s)
showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with Cotelligent or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between
Cotelligent and Employee and of all the terms of this Agreement, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of Cotelligent and Employee, and no term of this Agreement may be waived except
by writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To Cotelligent: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, California 94111
To Employee: James R. Lavelle
4810 Paradise Drive
Tiburon, California 94920
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy
arising under or in connection with this Agreement shall be
settled exclusively by arbitration, conducted before a panel of
three (3) arbitrators in San Francisco, California, in accordance
with the rules of the American Arbitration Association then in
-13-
NY02/219453.4
<PAGE>
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that Cotelligent has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by Cotelligent.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-14-
NY02/219453.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
COTELLIGENT GROUP, INC.
By:______________________________
Name: Duane W. Bell
Title: Senior Vice President
EMPLOYEE:
------------------------------
James R. Lavelle
-15-
NY02/219453.4
<PAGE>
<PAGE>
Exhibit 10.2
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") between Cotelligent Group, Inc.
("Cotelligent"), a Delaware corporation, and Michael L. Evans ("Employee") is
hereby entered into and effective as of the 20th day of February, 1996, the date
of the consummation of the initial public offering of the common stock of
Cotelligent ("Effective Date"). This Agreement hereby supersedes any other
employment agreements or understandings, written or oral, between Cotelligent
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, Cotelligent, primarily through companies it
intends to acquire as subsidiaries, will be engaged primarily in the business of
providing contract computer programming and computer consulting services.
References herein to "Cotelligent" are intended to include Cotelligent and these
operating subsidiaries, as may be applicable in the circumstances.
Employee will be employed hereunder by Cotelligent in a confidential
relationship wherein Employee, in the course of his employment with Cotelligent,
will become familiar with and aware of information as to Cotelligent's
customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by Cotelligent, and future plans with
respect thereto, all of which will be established and maintained at great
expense to Cotelligent; this information is a trade secret and constitutes the
valuable good will of Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) Cotelligent hereby employs Employee as Senior Vice President and
Chief Operating Officer. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Senior Vice President and
Chief Operating Officer and will report directly to the Chief Executive Officer
and the Board of Directors of Cotelligent (the "Board"). Employee shall also act
as President of Financial Data Systems, Inc. ("FDSI") and as such shall have
responsibilities, duties and authority reasonably accorded to and expected of a
President of a
<PAGE>
subsidiary and will report to the Chief Executive Officer of Cotelligent and the
Board. Additional or different duties, titles or positions, however, may be
assigned to Employee or may be taken from Employee from time to time by the
Chief Executive Officer and Board of Cotelligent, provided that any such changes
are consistent and compatible with Employee's experience, background and
managerial skills. Employee hereby accepts this employment upon the terms and
conditions herein contained and, subject to paragraph 1(c) agrees to devote his
time, attention and efforts to promote and further the business of Cotelligent
and FDSI.
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by Cotelligent and FDSI.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
Cotelligent shall compensate Employee as follows:
(a) Base Salary. Employee shall receive no salary from Cotelligent
pursuant to this Agreement until the Effective Date. Beginning on such date, the
base salary payable to Employee shall be $150,000 per year, payable on a regular
basis in accordance with Cotelligent's standard payroll procedures but not less
than monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its reasonable
discretion, any such increase is warranted. Such recommended increase would, in
all likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive year-end bonus awards.
(c) Reserved.
(d) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from Cotelligent in such form and to such extent as
specified below:
-2-
NY02/231660.4
<PAGE>
(1) Participation for Employee in coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that Cotelligent may have in effect
from time to time, benefits provided to Employee
under this clause (1) to be at least equal to such
benefits provided to Cotelligent executives.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of his services pursuant
to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by
Employee upon submission of any request for
reimbursement, and in a format and manner consistent
with Cotelligent's expense reporting policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than a full year).
(4) Cotelligent shall reimburse Employee $500 per month
for expenses incurred in connection with the leasing
or acquisition of an automobile.
(5) Cotelligent shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Cotelligent-wide employee
benefits as available from time to time.
3. Non-Competition Agreement.
(a) Employee will not, during the period of his employment by or with
Cotelligent, and for a period of two (2) years immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with Cotelligent (including its subsidiaries),
within 100 miles
-3-
NY02/231660.4
<PAGE>
of where Cotelligent or where any of its subsidiaries
conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Cotelligent (including its subsidiaries) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of
Cotelligent (including its subsidiaries), provided that Employee shall
be permitted to call upon and hire any member of his or her immediate
family;
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of Cotelligent (including its subsidiaries) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with Cotelligent (including its subsidiaries) within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract programming business, which candidate was
either called upon by Cotelligent (including its subsidiaries) or for
which Cotelligent (including its subsidiaries) made an acquisition
analysis, for the purpose of acquiring such entity.
(v) disclose customers, whether in existence or proposed, of
Cotelligent (including its subsidiaries) to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever except to the extent that Cotelligent (including its
subsidiaries) has in the past disclosed such information to the public
for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to
Cotelligent (including its subsidiaries) as a result of a breach of the
foregoing covenant, and because of the immediate and irreparable damage that
could be caused to Cotelligent (including its subsidiaries) for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by Cotelligent (including its subsidiaries) in the event of breach
by him, by injunctions and restraining orders.
-4-
NY02/231660.4
<PAGE>
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of Cotelligent (including its subsidiaries) on the date of the
execution of this Agreement and the current plans of Cotelligent; but it is also
the intent of Cotelligent and Employee that such covenants be construed and
enforced in accordance with the changing activities and business of Cotelligent
throughout the term of this covenant. For example, if, during the term of this
Agreement, Cotelligent (including its subsidiaries) engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or other than the activities or business
enumerated under the Recitals above or the locations currently established
therefore, then Employee will be precluded from soliciting the customers or
employees of such new activities or business or from such new location and from
directly competing with such new business within 100 miles of its operating
location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with Cotelligent (including its
subsidiaries), or similar activities or business in locations the operation of
which, under such circumstances, does not violate clause (i) of this paragraph
3, and in any event such new business, activities or location are not in
violation of this paragraph 3 or of Employee's obligations under this paragraph
3, if any, Employee shall not be chargeable with a violation of this paragraph 3
if Cotelligent (including its subsidiaries) shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against Cotelligent
(including its subsidiaries), whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Cotelligent (including its
subsidiaries) of such covenants. It is specifically agreed that the period of
two (2) years stated at the beginning of this paragraph 3, during which the
agreements and covenants of
-5-
NY02/231660.4
<PAGE>
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3.
4. Place of Performance.
(a) Employee understands that he may be required by the Board to
relocate from his residence in the Seattle Area to another geographic location
in order to more efficiently carry out his duties and responsibilities under
this Agreement; provided that it is understood that Employee shall not be
required to relocate to the San Francisco Bay Area in order to fulfill his
duties as Senior Vice President and Chief Operating Officer of Cotelligent. In
the event employee is required to relocate, Cotelligent will pay all relocation
costs to move Employee, his immediate family and their personal property and
effects. Such costs may include, by way of example, but are not limited to,
pre-move visits to search for a new residence, investigate schools or for other
purposes; temporary lodging and living costs prior to moving into a new
permanent residence; duplicate home carrying costs; all closing costs on the
sale of Employee's residence in the Seattle Area and on the purchase of a
comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes. The
general intent of the foregoing is that Employee shall not personally bear any
out-of-pocket cost as a result of any relocation, with an understanding that
Employee will use his best efforts to incur only those costs which are
reasonable and necessary to effect a smooth, efficient and orderly relocation
with minimal disruption to the business affairs of Cotelligent and the personal
life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board of
Cotelligent to relocate and Employee refuses, such refusal shall not constitute
"cause" for termination of this Agreement under the terms of paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
-6-
NY02/231660.4
<PAGE>
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), Cotelligent may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished
Cotelligent with a written statement from a qualified doctor to such effect and
provided, further, that, at Cotelligent's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by Cotelligent who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated pursuant to this
Paragraph 5(b), Employee shall receive from Cotelligent, in a lump-sum payment
within ten (10) days of the effective date of termination, the base salary at
the rate then in effect for whatever time period is remaining under the Initial
Term of this Agreement or for one (1) year, whichever amount is greater.
(c) Good Cause. Cotelligent may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of
Cotelligent (including its subsidiaries) which materially and adversely affects
the operations or reputation of Cotelligent (including its subsidiaries); (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by
Cotelligent during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board. Should Employee be
terminated by Cotelligent without cause, Employee shall receive from
Cotelligent, the base salary at the rate then in effect for whatever time period
is remaining under the Initial Term of this Agreement or for one (1) year,
whichever amount is greater (the
-7-
NY02/231660.4
<PAGE>
"Payment Term"); it is specifically understood and agreed that in the event
Employee's employment is terminated without cause, Cotelligent shall in all
circumstances, during the Payment Term, be required to pay Employee at an annual
rate equal to Employee's most recent annual base salary, regardless of whether
Employee has obtained other employment following such termination and Employee
shall be under no duty to mitigate such amount or take any action to lessen
Cotelligent's liability for such payment, which is intended to be absolute.
Further, any termination without cause by Cotelligent shall operate to shorten
the period set forth in paragraph 3(a) and during which the terms of paragraph 3
apply to one (1) year from the date of termination of employment.
Employee shall be deemed to have been terminated without cause by Cotelligent if
Employee shall be assigned any duties materially inconsistent with, or
Employee's responsibilities shall be significantly limited, or Employee shall be
significantly demoted, in any case so as not to be serving in a Senior Vice
President and Chief Operating Officer capacity to Cotelligent (and its
subsidiaries and affiliates), and the continuance thereof for a period of 5
business days after written notice from Employee that he is unwilling to accept
such changes in duties or responsibilities. In the event Employee is terminated
without cause, any and all options which shall have been granted to Employee by
Cotelligent shall immediately vest without further action by Employee and
notwithstanding the terms of any such option grant.
At any time after the commencement of employment, Cotelligent or Employee may,
without cause, terminate this Agreement and Employee's employment, effective
thirty (30) days after written notice is provided to the other party. If
Employee resigns or otherwise terminates his employment without cause pursuant
to this paragraph 5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent and Employee under
this Agreement shall cease as of the effective date of termination, except that
Cotelligent's obligations under paragraph 9 herein and Employee's obligations
under paragraphs 3,
-8-
NY02/231660.4
<PAGE>
6, 7, 8 and 10 herein shall survive such termination in accordance with their
terms.
If termination of Employee's employment arises out of Cotelligent's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by Cotelligent,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, Cotelligent shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement or the Employee's employment hereunder
is terminated as a result of a breach by Cotelligent.
6. Return of Company Property. All records, designs, patents, business
plans, financial statements, financial records, manuals, memoranda, lists and
other property delivered to or compiled by Employee by or on behalf of
Cotelligent (including its subsidiaries) or their representatives, vendors or
customers which pertain to the business of Cotelligent (including its
subsidiaries) shall be and remain the property of Cotelligent (including its
subsidiaries) and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
Cotelligent (including its subsidiaries) which is collected by Employee shall be
delivered promptly to Cotelligent without request by it upon termination of
Employee's employment.
7. Inventions. Employee shall disclose promptly to Cotelligent any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of Cotelligent and which Employee conceives as a result of his
employment by Cotelligent. Employee hereby assigns and agrees to assign all his
interests therein to Cotelligent or its nominee. Whenever requested to do so by
Cotelligent, Employee shall execute any and all applications, assignments or
other instruments that Cotelligent shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect Cotelligent's interest therein.
8. Trade Secrets. Employee agrees that he will not,
during or after the term of this Agreement with Cotelligent,
disclose the specific terms of Cotelligent's relationships or
agreements with its significant vendors or customers or any other
-9-
NY02/231660.4
<PAGE>
significant and material trade secret of Cotelligent, whether in existence or
proposed, to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever other than as required by law or to attorneys or
accountants or other agents of the Company.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by Cotelligent
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then Cotelligent shall indemnify and hold harmless the
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and Cotelligent are made a
party to the same third-party action, complaint, suit or proceeding, Cotelligent
agrees to engage competent legal representation, and Employee agrees to use the
same representation, provided that if counsel selected by Cotelligent shall have
a conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and Cotelligent shall pay all attorneys'
fees and costs of such separate counsel. Further, while Employee is expected at
all times to use his best efforts to faithfully discharge his duties under this
Agreement, Employee cannot be held liable to Cotelligent for errors or omissions
made in good faith where Employee has not exhibited gross, willful and wanton
negligence and misconduct or performed criminal and fraudulent acts which
materially damage the business of Cotelligent.
10. No Prior Agreements. Employee hereby represents and warrants to
Cotelligent that the execution of this Agreement by Employee and his employment
by Cotelligent and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify Cotelligent for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against Cotelligent based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that
he has been selected for employment by Cotelligent on the basis
of his personal qualifications, experience and skills. Employee
agrees, therefore, he cannot assign all or any portion of his
performance under this Agreement. Subject to the preceding two
(2) sentences and the express provisions of paragraph 12 below,
this Agreement shall be binding upon, inure to the benefit of and
-10-
NY02/231660.4
<PAGE>
be enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that Cotelligent may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of Cotelligent hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein Cotelligent and Employee have not received written notice at least five
(5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a substantial
portion of Cotelligent's business and/or assets that such successor is willing
and able as of the closing to assume and agree to perform Cotelligent's
obligations under this Agreement in the same manner and to the same extent that
Cotelligent is hereby required to perform, then such Change in Control shall be
deemed to be a termination of this Agreement by Cotelligent without cause and
the applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the severance payment due to Employee (a) shall be
payable in a lump-sum payment on the effective date of the termination and (b)
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to
Cotelligent at least five (5) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though Cotelligent had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by Cotelligent at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of his
vested options to purchase Cotelligent Common Stock, including any options with
accelerated
-11-
NY02/231660.4
<PAGE>
vesting under the provisions of Cotelligent's 1995 Long-Term Incentive
Compensation Plan, such that he may convert the options to shares of Cotelligent
Common Stock at or prior to the closing of the transaction giving rise to the
Change in Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Cotelligent and immediately after such acquisition such person or
entity is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of
the then-outstanding voting securities of Cotelligent;
(ii) the individuals (A) who, as of the effective date of the
Company's registration statement with respect to its initial public
offering, constitute the Board (the "Original Directors") or (B) who
thereafter are elected to the Board and whose election, or nomination
for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still in office (such
directors becoming "Additional Original Directors" immediately
following their election) or (C) who are elected to the Board and whose
election, or nomination for election, to the Board was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
-12-
NY02/231660.4
<PAGE>
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by Cotelligent at
any time that Cotelligent or any member of its Board anticipates
that a Change in Control may take place.
(g) Employee shall be reimbursed by Cotelligent or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by Cotelligent or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with Cotelligent or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between
Cotelligent and Employee and of all the terms of this Agreement, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of Cotelligent and Employee, and no term of this Agreement may be waived except
by writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To Cotelligent: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, California 94111
To Employee: Michael L. Evans
1717 East Lake Sammamish Parkway N.E.
Redmond, Washington 98053
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
-13-
NY02/231660.4
<PAGE>
15. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in San Francisco, California,
in accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that Cotelligent has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by Cotelligent.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-14-
NY02/231660.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written
COTELLIGENT GROUP, INC.
By:______________________________
Name: James R. Lavelle
Title: President
EMPLOYEE:
------------------------------
Michael L. Evans
-15-
NY02/231660.4
<PAGE>
<PAGE>
Exhibit 10.3
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") between Cotelligent Group, Inc.
("Cotelligent"), a Delaware corporation, and Daniel E. Jackson ("Employee") is
hereby entered into and effective as of the 20th day of February, 1996, the date
of the consummation of the initial public offering of the common stock of
Cotelligent ("Effective Date"). This Agreement hereby supersedes any other
employment agreements or understandings, written or oral, between Cotelligent
and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, Cotelligent, primarily through companies it
intends to acquire as subsidiaries, will be engaged primarily in the business of
providing contract computer programming and computer consulting services.
References herein to "Cotelligent" are intended to include Cotelligent and these
operating subsidiaries, as may be applicable in the circumstances.
Employee will be employed hereunder by Cotelligent in a confidential
relationship wherein Employee, in the course of his employment with Cotelligent,
will become familiar with and aware of information as to Cotelligent's
customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by Cotelligent, and future plans with
respect thereto, all of which will be established and maintained at great
expense to Cotelligent; this information is a trade secret and constitutes the
valuable good will of Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) Cotelligent hereby employs Employee as Senior Vice President,
Corporate Development and General Counsel. As such, Employee shall have
responsibilities, duties and authority reasonably accorded to and expected of a
Senior Vice President and General Counsel and will report directly to the Chief
Executive Officer and the Board of Directors of Cotelligent (the "Board").
Additional or different duties, titles or positions, however, may be assigned to
Employee or may be taken from Employee from time to time by the Chief Executive
Officer and
<PAGE>
Board, provided that any such changes are consistent and compatible with
Employee's experience, background and managerial skills. Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
paragraph 1(c) agrees to devote his time, attention and efforts to promote and
further the business of Cotelligent.
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by Cotelligent.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his services in the operation or affairs of the companies
or enterprises in which such investments are made nor violate the terms of
paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
Cotelligent shall compensate Employee as follows:
(a) Base Salary. Employee shall receive no salary from Cotelligent
pursuant to this Agreement until the Effective Date. Beginning on such date, the
base salary payable to Employee shall be $150,000 per year, payable on a regular
basis in accordance with Cotelligent's standard payroll procedures but not less
than monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its reasonable
discretion, any such increase is warranted. Such recommended increase would, in
all likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive year-end bonus awards.
(c) Stock Options. Cotelligent hereby confirms that the Board has
granted to Employee an option to purchase 92,676 shares of Cotelligent's common
stock ("Cotelligent Common Stock"), at a price per share equal to $2.70 per
share, the fair market value of Cotelligent Common Stock on the date of grant as
determined by the Board. Subject to the last sentence of subsection 5(d) hereof,
Employee's stock options shall vest and become exercisable as follows: 18,535
shares on the day after the closing of the IPO; thereafter, an additional 18,535
shares grant shall vest and become exercisable on the annual anniversary of the
date of initial vesting until all 92,676 shares shall have
-2-
NY02/219370.5
<PAGE>
vested. Any vested options shall be exercisable in whole or in part at any time
for a period ending seven (7) years after the date hereof. If, while these
options are outstanding, Cotelligent shall effect a subdivision, consolidation
or other increase or reduction of the number of shares of Cotelligent Common
Stock outstanding, without receiving compensation therefore at fair value in
money, services or property, then the number of shares of Cotelligent Common
Stock held under option and the option exercise price shall be proportionately
adjusted.
(d) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from Cotelligent in such form and to such extent as
specified below:
(1) Participation for Employee in coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that Cotelligent may have in effect
from time to time, benefits provided to Employee
under this clause (1) to be at least equal to such
benefits provided to Cotelligent executives.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of his services pursuant
to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by
Employee upon submission of any request for
reimbursement, and in a format and manner consistent
with Cotelligent's expense reporting policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than a full year).
(4) Cotelligent shall provide an automobile allowance
of $500 per month.
(5) Cotelligent shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Cotelligent-wide employee
benefits as available from time to time.
3. Non-Competition Agreement.
-3-
NY02/219370.5
<PAGE>
(a) Employee will not, during the period of his employment by or with
Cotelligent, and for a period of two (2) years immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with Cotelligent (including its subsidiaries),
within 100 miles of where Cotelligent or where any of its subsidiaries
conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of Cotelligent (including its subsidiaries) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of
Cotelligent (including its subsidiaries), provided that Employee shall
be permitted to call upon and hire any member of his or her immediate
family;
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of Cotelligent (including its subsidiaries) within the Territory for
the purpose of soliciting or selling products or services in direct
competition with Cotelligent (including its subsidiaries) within the
Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract programming business, which candidate was
either called upon by Cotelligent (includes its subsidiaries) or for
which Cotelligent (including its subsidiaries) made an acquisition
analysis, for the purpose of acquiring such entity.
(v) disclose customers, whether in existence or proposed, of
Cotelligent (including its subsidiaries) to any person, firm,
partnership, corporation or business for any reason or purpose
whatsoever except to the extent that Cotelligent (including its
subsidiaries) has in the past disclosed such information to the public
for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not
be deemed to prohibit Employee from acquiring as an investment
-4-
NY02/219370.5
<PAGE>
not more than one percent (1%) of the capital stock of a competing business,
whose stock is traded on a national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to
Cotelligent (including its subsidiaries) as a result of a breach of the
foregoing covenant, and because of the immediate and irreparable damage that
could be caused to Cotelligent (including its subsidiaries) for which it would
have no other adequate remedy, Employee agrees that the foregoing covenant may
be enforced by Cotelligent (including its subsidiaries) in the event of breach
by him, by injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of Cotelligent (including its subsidiaries) on the date of the
execution of this Agreement and the current plans of Cotelligent; but it is also
the intent of Cotelligent and Employee that such covenants be construed and
enforced in accordance with the changing activities and business of Cotelligent
throughout the term of this covenant. For example, if, during the term of this
Agreement, Cotelligent (including its subsidiaries) engages in new and different
activities, enters a new business or establishes new locations for its current
activities or business in addition to or other than the activities or business
enumerated under the Recitals above or the locations currently established
therefore, then Employee will be precluded from soliciting the customers or
employees of such new activities or business or from such new location and from
directly competing with such new business within 100 miles of its operating
location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with Cotelligent (including its
subsidiaries), or similar activities or business in locations the operation of
which, under such circumstances, does not violate clause (i) of this paragraph
3, and in any event such new business, activities or location are not in
violation of this paragraph 3 or of Employee's obligations under this paragraph
3, if any, Employee shall not be chargeable with a violation of this paragraph 3
if Cotelligent (including its subsidiaries) shall thereafter enter the same,
similar or a competitive (i) business, (ii) course of activities or (iii)
location, as applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
-5-
NY02/219370.5
<PAGE>
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against Cotelligent
(including its subsidiaries), whether predicated on this Agreement or otherwise,
shall not constitute a defense to the enforcement by Cotelligent (including its
subsidiaries) of such covenants. It is specifically agreed that the period of
two (2) years stated at the beginning of this paragraph 3, during which the
agreements and covenants of Employee made in this paragraph 3 shall be
effective, shall be computed by excluding from such computation any time during
which Employee is in violation of any provision of this paragraph 3.
4. Place of Performance.
(a) Employee has been requested by the Board to relocate from his
present residence in Houston, Texas to the San Francisco Bay Area in order to
more efficiently carry out his duties and responsibilities under this Agreement.
Cotelligent will pay all relocation costs to move Employee, his immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's residence in Houston, Texas and on
the purchase of a comparable residence in the San Francisco Bay Area; and added
income taxes that Employee may incur if any relocation costs are not deductible
for tax purposes.
Employee understands that he may be required by the Board to further
relocate from his residence in the San Francisco Bay Area to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement. In such event, Cotelligent will pay all relocation costs
to move Employee, his immediate family and their personal property and effects.
Such costs may include, by way of example, but are not limited to, pre-move
visits to search for a new residence, investigate schools or for other purposes;
temporary lodging and living costs prior to moving into a new permanent
residence; duplicate home carrying costs; all closing costs on the sale of
Employee's residence in the San Francisco Bay Area and on the purchase of a
comparable residence in the new location; and added income taxes that Employee
may incur if any relocation costs are not deductible for tax purposes.
The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of any
-6-
NY02/219370.5
<PAGE>
relocation, with an understanding that Employee will use his best efforts to
incur only those costs which are reasonable and necessary to effect a smooth,
efficient and orderly relocation with minimal disruption to the business affairs
of Cotelligent and the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board of
Cotelligent to further relocate and Employee refuses, such refusal shall not
constitute "cause" for termination of this Agreement under the terms of
paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), Cotelligent may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of such notice period. Also, Employee may terminate his employment
hereunder if his health should become impaired to an extent that makes the
continued performance of his duties hereunder hazardous to his physical or
mental health or his life, provided that Employee shall have furnished
Cotelligent with a written statement from a qualified doctor to such effect and
provided, further, that, at Cotelligent's request made within thirty (30) days
of the date of such written statement, Employee shall submit to an examination
by a doctor selected by Cotelligent who is reasonably acceptable to Employee or
Employee's doctor and such doctor shall have concurred in the conclusion of
Employee's doctor. In the event this Agreement is terminated pursuant to this
paragraph 5(b) Employee shall receive from Cotelligent, in a lump-sum payment
within ten (10) days of the effective date of termination, the base salary at
the rate then in effect for whatever time period is remaining under the Initial
Term of this Agreement or for one (1) year, whichever amount is greater.
-7-
NY02/219370.5
<PAGE>
(c) Good Cause. Cotelligent may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (1) Employee's
willful, material and irreparable breach of this Agreement; (2) Employee's gross
negligence in the performance or intentional nonperformance (continuing for ten
(10) days after receipt of written notice of need to cure) of any of Employee's
material duties and responsibilities hereunder; (3) Employee's willful
dishonesty, fraud or misconduct with respect to the business or affairs of
Cotelligent (including its subsidiaries) which materially and adversely affects
the operations or reputation of Cotelligent (including its subsidiaries); (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by
Cotelligent during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board. Should Employee be
terminated by Cotelligent without cause, Employee shall receive from
Cotelligent, the base salary at the rate then in effect for whatever time period
is remaining under the Initial Term of this Agreement or for one (1) year,
whichever amount is greater (the "Payment Term"); it is specifically understood
and agreed that, in the event Employee's employment is terminated without cause,
Cotelligent shall in all circumstances, during the Payment Term, be required to
pay Employee at an annual rate equal to Employee's most recent annual base
salary, regardless of whether Employee has obtained other employment following
such termination and Employee shall be under no duty to mitigate such amount or
take any action to lessen Cotelligent's liability for such payment, which is
intended to be absolute. Further, any termination without cause by Cotelligent
shall operate to shorten the period set forth in paragraph 3(a) and during which
the terms of paragraph 3 apply to one (1) year from the date of termination of
employment.
Employee shall be deemed to have been terminated without cause by Cotelligent if
Employee shall be assigned any duties materially inconsistent with, or
Employee's responsibilities shall be significantly limited, or Employee shall be
significantly demoted, in any case so as not to be serving in a Senior Vice
President and General Counsel capacity to Cotelligent (and its subsidiaries and
affiliates), and the continuance thereof for a period of 5 business days after
written notice from Employee that he is unwilling to accept such changes in
duties or responsibilities. In the event Employee is terminated without cause,
any and all options which shall have been granted to Employee by Cotelligent
shall immediately vest without further
-8-
NY02/219370.5
<PAGE>
action by Employee and notwithstanding the terms of any such
option grant.
At any time after the commencement of employment, Cotelligent or Employee may,
without cause, terminate this Agreement and Employee's employment, effective
thirty (30) days after written notice is provided to the other party. If
Employee resigns or otherwise terminates his employment without cause pursuant
to this paragraph 5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent and Employee under
this Agreement shall cease as of the effective date of termination, except that
Cotelligent's obligations under paragraph 9 herein and Employee's obligations
under paragraphs 3, 6, 7, 8 and 10 herein shall survive such termination in
accordance with their terms.
If termination of Employee's employment arises out of Cotelligent's failure to
pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by Cotelligent,
as determined by a court of competent jurisdiction or pursuant to the provisions
of paragraph 16 below, Cotelligent shall pay all amounts and damages to which
Employee may be entitled as a result of such breach, including interest thereon
and all reasonable legal fees and expenses and other costs incurred by Employee
to enforce his rights hereunder. Further, none of the provisions of paragraph 3
shall apply in the event this Agreement or the Employee's employment hereunder
is terminated as a result of a breach by Cotelligent.
6. Return of Company Property. All records, designs, patents, business
plans, financial statements, financial records, manuals, memoranda, lists and
other property delivered to or compiled by Employee by or on behalf of
Cotelligent (including its subsidiaries) or their representatives, vendors or
customers which pertain to the business of Cotelligent (including its
subsidiaries) shall be and remain the property of Cotelligent (including its
subsidiaries) and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data
-9-
NY02/219370.5
<PAGE>
pertaining to the business, activities or future plans of Cotelligent (including
its subsidiaries) which is collected by Employee shall be delivered promptly to
Cotelligent without request by it upon termination of Employee's employment.
7. Inventions. Employee shall disclose promptly to Cotelligent any and
all significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment or within one
(1) year thereafter, and which are directly related to the business or
activities of Cotelligent and which Employee conceives as a result of his
employment by Cotelligent. Employee hereby assigns and agrees to assign all his
interests therein to Cotelligent or its nominee. Whenever requested to do so by
Cotelligent, Employee shall execute any and all applications, assignments or
other instruments that Cotelligent shall deem necessary to apply for and obtain
Letters Patent of the United States or any foreign country or to otherwise
protect Cotelligent's interest therein.
8. Trade Secrets. Employee agrees that he will not, during or after the
term of this Agreement with Cotelligent, disclose the specific terms of
Cotelligent's relationships or agreements with its significant vendors or
customers or any other significant and material trade secret of Cotelligent,
whether in existence or proposed, to any person, firm, partnership, corporation
or business for any reason or purpose whatsoever other than as required by law
or to attorneys or accountants or other agents of the Company.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by Cotelligent
against Employee), by reason of the fact that he is or was performing services
under this Agreement, then Cotelligent shall indemnify and hold harmless the
Employee against all expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement, as actually and reasonably incurred by Employee in
connection therewith. In the event that both Employee and Cotelligent are made a
party to the same third-party action, complaint, suit or proceeding, Cotelligent
agrees to engage competent legal representation, and Employee agrees to use the
same representation, provided that if counsel selected by Cotelligent shall have
a conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and Cotelligent shall pay all attorneys'
fees and costs of such separate counsel. Further, while Employee is expected at
all times to use his best efforts to faithfully discharge his duties under this
Agreement, Employee cannot be held liable to Cotelligent for errors or omissions
made in good faith where
-10-
NY02/219370.5
<PAGE>
Employee has not exhibited gross, willful and wanton negligence and misconduct
or performed criminal and fraudulent acts which materially damage the business
of Cotelligent.
10. No Prior Agreements. Employee hereby represents and warrants to
Cotelligent that the execution of this Agreement by Employee and his employment
by Cotelligent and the performance of his duties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify Cotelligent for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against Cotelligent based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by Cotelligent on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Employee understands and acknowledges that Cotelligent may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of Cotelligent hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein Cotelligent and Employee have not received written notice at least five
(5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a substantial
portion of Cotelligent's business and/or assets that such successor is willing
and able as of the closing to assume and agree to perform Cotelligent's
obligations under this Agreement in the same manner and to the same extent that
Cotelligent is hereby required to perform, then such Change in Control shall be
deemed to be a termination of this Agreement by Cotelligent without cause and
the applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the severance payment due to Employee (a) shall be
payable in a lump-sum payment on the effective date of the termination and (b)
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
-11-
NY02/219370.5
<PAGE>
(c) In the case of any Change in Control, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to
Cotelligent at least two (2) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though Cotelligent had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by Cotelligent at or prior to such closing. Further, Employee will be given
sufficient time and opportunity to elect whether to exercise all or any of his
vested options to purchase Cotelligent Common Stock, including any options with
accelerated vesting under the provisions of Cotelligent's 1995 Long-Term
Incentive Compensation Plan, such that he may convert the options to shares of
Cotelligent Common Stock at or prior to the closing of the transaction giving
rise to the Change in Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Cotelligent and immediately after such acquisition such person or
entity is, directly or indirectly, the Beneficial Owner of voting
securities representing 50% or more of the total voting power of all of
the then-outstanding voting securities of Cotelligent;
(ii) the individuals (A) who, as of the effective date of the
Company's registration statement with respect to its initial public
offering, constitute the Board (the "Original Directors") or (B) who
thereafter are elected to the Board and whose election, or nomination
for election, to the Board was approved by a vote of at least
two-thirds (2/3) of the Original Directors then still in office (such
directors becoming "Additional Original Directors" immediately
following their election) or (C) who are elected to the Board and whose
election, or nomination for election, to the
-12-
NY02/219370.5
<PAGE>
Board was approved by a vote of at least two-thirds (2/3) of the
Original Directors and Additional Original Directors then still in
office (such directors also becoming "Additional Original Directors"
immediately following their election) (such individuals being the
"Continuing Directors"), cease for any reason to constitute a majority
of the members of the Board;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or if any such
transaction is consummated and stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by Cotelligent at any time
that Cotelligent anticipates that a Change in Control may take place.
(g) Employee shall be reimbursed by Cotelligent or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by Cotelligent or its successor within ten (10) days after Employee
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with Cotelligent or any of its officers, directors or representatives covering
the same subject matter as this Agreement. This written Agreement is the final,
complete and exclusive statement and expression of the agreement between
Cotelligent and Employee and of all the terms of this Agreement, and it cannot
be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified
-13-
NY02/219370.5
<PAGE>
except by a further writing signed by a duly authorized officer of Cotelligent
and Employee, and no term of this Agreement may be waived except by writing
signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To Cotelligent: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, California 94111
To Employee: Daniel E. Jackson
7505 Morningside
Houston, TX 77030
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. Severability; Headings. If any portion of this Agreement is held
invalid or inoperative, the other portions of this Agreement shall be deemed
valid and operative and, so far as is reasonable and possible, effect shall be
given to the intent manifested by the portion held invalid or inoperative. The
paragraph headings herein are for reference purposes only and are not intended
in any way to describe, interpret, define or limit the extent or intent of the
Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in San Francisco, California,
in accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that Cotelligent has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by Cotelligent.
-14-
NY02/219370.5
<PAGE>
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-15-
NY02/219370.5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first above written.
COTELLIGENT GROUP, INC.
By:____________________________
Name: James R. Lavelle
Title: President
EMPLOYEE:
---------------------------
Daniel E. Jackson
-16-
NY02/219370.5
<PAGE>
Exhibit 10.4
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Cotelligent Group,
Inc., a Delaware corporation ("Cotelligent"), BFR Co., Inc. (the "Subsidiary"),
a wholly-owned subsidiary of Cotelligent, and Jeffrey J. Bernardis ("Employee")
is hereby entered into and effective as of the 20th day of February, 1996, the
date of the consummation of the initial public offering of the common stock of
Cotelligent ("Effective Date"). This Agreement hereby supersedes any other
employment agreements or understandings, written or oral, among the Subsidiary,
Cotelligent and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Subsidiary is engaged primarily in the
business of providing computer consulting and contract programming services.
Employee is employed hereunder by the Subsidiary in a confidential relationship
wherein Employee, in the course of his employment with the Subsidiary, has and
will continue to become familiar with and aware of information as to the
Subsidiary's and Cotelligent's customers, specific manner of doing business,
including the processes, techniques and trade secrets utilized by the Subsidiary
and Cotelligent, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to the Subsidiary and
Cotelligent; this information is a trade secret and constitutes the valuable
good will of the Subsidiary and Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Subsidiary hereby employs Employee as President. As such,
Employee shall have responsibilities, duties and authority reasonably accorded
to and expected of a President and will report directly to the Board of
Directors of the Subsidiary (the "Board"). Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Subsidiary.
-1-
NY02/231539.4
<PAGE>
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by the Subsidiary.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his or her services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
the Subsidiary shall compensate Employee as follows:
(a) Base Salary. Effective on the Effective Date, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Subsidiary's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its reasonable
discretion, any such increase is warranted. Such recommended increase would, in
all likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from the Subsidiary in such form and to such extent
as specified below:
(1) Participation for Employee in coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that the Subsidiary or Cotelligent
may have in effect from time to time, benefits
provided to Employee under this clause (1) to be at
least equal to such benefits provided to Cotelligent
executives.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of his services
pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in
-2-
NY02/231539.4
<PAGE>
reasonable detail by Employee upon submission of any
request for reimbursement, and in a format and manner
consistent with the Subsidiary's expense reporting
policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than the full year).
(4) The Subsidiary shall reimburse Employee $500 per
month for expenses incurred in connection with the
leasing or acquisition of an automobile.
(5) The Subsidiary shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Subsidiary-wide or
Cotelligent-wide employee benefits as available from
time to time.
3. Non-Competition Agreement.
(a) Employee will not, during the period of his employment by or with
the Subsidiary, and for a period of two (2) years immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with the Subsidiary or Cotelligent or any of the
Subsidiaries thereof, within 100 miles of where the Subsidiary or any
of its subsidiaries conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Subsidiary or
Cotelligent (including the respective subsidiaries thereof), provided
that Employee shall be permitted to call upon and hire any member of
his or her immediate family;
-3-
NY02/231539.4
<PAGE>
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Subsidiary or
Cotelligent within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract computer programming business, which candidate
was either called upon by the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) or for which the Subsidiary or
Cotelligent made an acquisition analysis, for the purpose of acquiring
such entity;
(v) disclose customers, whether in existence or proposed, of
the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) or any subsidiary thereof to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to
the extent that the Subsidiary or Cotelligent (including the respective
subsidiaries thereof) has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Subsidiary and Cotelligent as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be caused to the
Subsidiary and Cotelligent for which they would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by Cotelligent or
the Subsidiary in the event of breach by him, by injunctions and restraining
orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Subsidiary or Cotelligent (including Cotelligent's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Cotelligent (including Cotelligent's other subsidiaries); but it is
also the intent of the Subsidiary and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Subsidiary and Cotelligent (including Cotelligent's other subsidiaries)
throughout the term of this covenant. For example,
-4-
NY02/231539.4
<PAGE>
if, during the term of this Agreement, the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) engages in new and different activities,
enters a new business or establishes new locations for its current activities or
business in addition to or other than the activities or business enumerated
under the Recitals above or the locations currently established therefore, then
Employee will be precluded from soliciting the customers or employees of such
new activities or business or from such new location and from directly competing
with such new business within 100 miles of its then-established operating
location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event
that Employee shall cease to be employed hereunder, and shall enter into a
business or pursue other activities not in competition with the Subsidiary or
Cotelligent (including Cotelligent's other subsidiaries), or similar activities
or business in locations the operation of which, under such circumstances, does
not violate clause (i) of this paragraph 3, and in any event such new business,
activities or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Subsidiary or
Cotelligent, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Cotelligent or the Subsidiary of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this paragraph 3, during which the agreements and covenants of
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3.
4. Place of Performance.
-5-
NY02/231539.4
<PAGE>
(a) Employee understands that he may be requested by the Board or
Cotelligent to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Subsidiary
will pay all reasonable relocation costs to move Employee, his immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use his best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Subsidiary and
the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Subsidiary may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of
-6-
NY02/231539.4
<PAGE>
such notice period. Also, Employee may terminate his employment hereunder if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health or his life,
provided that Employee shall have furnished the Subsidiary with a written
statement from a qualified doctor to such effect and provided, further, that, at
the Subsidiary's request made within thirty (30) days of the date of such
written statement, Employee shall submit to an examination by a doctor selected
by the Subsidiary who is reasonably acceptable to Employee or Employee's doctor
and such doctor shall have concurred in the conclusion of Employee's doctor. In
the event this Agreement is terminated pursuant to this paragraph 5(b), Employee
shall receive from the Subsidiary, in a lump-sum payment, within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Initial Term of this Agreement
or for one (1) year, whichever amount is greater.
(c) Good Cause. The Subsidiary may terminate the Agreement ten (10)
days after written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of the Subsidiary or Cotelligent which materially and adversely
affects the operations or reputation of the Subsidiary or Cotelligent; (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by the
Subsidiary during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board of Directors of
Cotelligent. Should Employee be terminated by the Subsidiary without cause,
Employee shall continue to receive from the Subsidiary or Cotelligent the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater (the "Payment Term"); it is specifically understood and agreed that, in
the event Employee's employment is terminated by the Subsidiary without cause,
the Subsidiary shall in all circumstances, during the Payment Term, be required
to pay Employee at an annual rate equal to Employee's most recent annual base
salary, regardless of whether Employee has obtained other employment following
such termination and Employee shall be under no duty to mitigate such amount or
take any action to lessen the Subsidiary's liability for such payment,
-7-
NY02/231539.4
<PAGE>
which is intended to be absolute. Further, any termination without cause by the
Subsidiary shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment.
At any time after the commencement of employment, Employee may, without cause,
terminate this Agreement and Employee's employment, effective thirty (30) days
after written notice is provided to the Subsidiary. If Employee resigns or
otherwise terminates his employment without cause pursuant to this paragraph
5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent, the Subsidiary
and Employee under this Agreement shall cease as of the effective date of
termination, except that the Subsidiary's obligations under paragraph 9 herein
and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall
survive such termination in accordance with their terms.
If termination of Employee's employment arises out of the Subsidiary's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the
Subsidiary, as determined by a court of competent jurisdiction or pursuant to
the provisions of paragraph 16 below, the Subsidiary shall pay all amounts and
damages to which Employee may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Employee to enforce his rights hereunder. Further, none of the
provisions of paragraph 3 shall apply in the event this Agreement or the
Employee's employment hereunder is terminated as a result of a breach by the
Subsidiary.
6. Return of Subsidiary Property. All records, designs, patents,
business plans, financial statements, financial records, manuals, memoranda,
lists and other property delivered to or compiled by Employee by or on behalf of
the Subsidiary, Cotelligent or their representatives, vendors or customers which
pertain to the business of the Subsidiary or Cotelligent shall be and remain the
property of the Subsidiary or Cotelligent, as the case may be, and be subject at
all times to their discretion and
-8-
NY02/231539.4
<PAGE>
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Subsidiary or Cotelligent which is collected by Employee
shall be delivered promptly to the Subsidiary without request by it upon
termination of Employee's employment.
7. Inventions. Employee shall disclose promptly to Cotelligent and the
Subsidiary any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Subsidiary or Cotelligent and which
Employee conceives as a result of his employment by the Subsidiary. Employee
hereby assigns and agrees to assign all his interests therein to the Subsidiary
or its nominee. Whenever requested to do so by the Subsidiary, Employee shall
execute any and all applications, assignments or other instruments that the
Subsidiary shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Subsidiary's
interest therein.
8. Trade Secrets. Employee agrees that he will not, during or after the
term of this Agreement with the Subsidiary, disclose the specific terms of the
Subsidiary's or Cotelligent's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Subsidiary or Cotelligent, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever other than as required by law or to attorneys or accountants or other
agents of the Subsidiary.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Subsidiary or Cotelligent against Employee), by reason of the fact that he is or
was performing services under this Agreement, then the Subsidiary shall
indemnify and hold harmless the Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and the Subsidiary are made a party to the same third-party
action, complaint, suit or proceeding, the Subsidiary or Cotelligent agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by Cotelligent shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Subsidiary or Cotelligent
-9-
NY02/231539.4
<PAGE>
shall pay all attorneys' fees and costs of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Subsidiary or Cotelligent for errors or omissions made in good faith where
Employee has not exhibited gross, willful and wanton negligence and misconduct
or performed criminal and fraudulent acts which materially damage the business
of the Subsidiary.
10. No Prior Agreements. Employee hereby represents and warrants to the
Subsidiary that the execution of this Agreement by Employee and his employment
by the Subsidiary and the performance of his duties hereunder will not violate
or be a breach of any agreement with a former employer, client or any other
person or entity. Further, Employee agrees to indemnify the Subsidiary for any
claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Subsidiary based upon or arising out of any
non-competition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Subsidiary on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Subsidiary may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Subsidiary hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein the Subsidiary and Employee have not received written notice at least
five (5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a substantial
portion of the Subsidiary's business and/or assets that such successor is
willing and able as of the closing to assume and agree to perform the
Subsidiary's obligations under this Agreement in the same manner and to the same
extent that the Subsidiary is hereby required to perform, then such Change in
-10-
NY02/231539.4
<PAGE>
Control shall be deemed to be a termination of this Agreement by the Subsidiary
without cause and the applicable portions of paragraph 5(d) will apply; however,
under such circumstances, the amount of the severance payment due to Employee
(a) shall be payable in a lump-sum payment on the effective date of the
termination and (b) shall be triple the amount calculated under the terms of
paragraph 5(d) and the non-competition provisions of paragraph 3 shall not apply
whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Subsidiary at least five (5) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though the Subsidiary had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Subsidiary at or prior to such closing. Further, Employee will be
given sufficient time and opportunity to elect whether to exercise all or any of
his vested options to purchase Cotelligent Common Stock, including any options
with accelerated vesting under the provisions of Cotelligent's 1995 Stock Option
Plan, such that he may convert the options to shares of Cotelligent Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Subsidiary and immediately after such acquisition such person or entity
is, directly or indirectly, the Beneficial Owner of voting securities
representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Subsidiary;
-11-
NY02/231539.4
<PAGE>
(ii) the individuals (A) who, as of the effective date of
Cotelligent's registration statement with respect to its initial public
offering, constitute the Board of Directors of Cotelligent (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board of Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board of
Directors of Cotelligent;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by the Subsidiary or
Cotelligent at any time that the Subsidiary or Cotelligent or any member of the
Board of Directors of Cotelligent anticipates that a Change in Control may take
place.
(g) Employee shall be reimbursed by the Subsidiary or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Subsidiary or its successor within ten (10) days after Employee
-12-
NY02/231539.4
<PAGE>
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Subsidiary or any of its officers, directors or representatives
covering the same subject matter as this Agreement. This written Agreement is
the final, complete and exclusive statement and expression of the agreement
between the Subsidiary and Employee and of all the terms of this Agreement, and
it cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Subsidiary and Employee, and no term of this Agreement may be waived
except by writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To the Subsidiary: BFR Co., Inc.
31 Clyde Road
Somerset, NJ 08873
Attn: Mr. Jeffrey J. Bernardis
with a copy to: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, CA 94111
Attn: Mr. Duane W. Bell
To Employee: Mr. Jeffrey J. Bernardis
5 Braxton Drive
Bellemeade, NJ 07045
with a copy to: Herold and Haines
25 Independence Boulevard
Warren, NJ 07059-6747
Attn: John McGowan, Esq.
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. Severability; Headings. If any portion of this
Agreement is held invalid or inoperative, the other portions of
this Agreement shall be deemed valid and operative and, so far as
is reasonable and possible, effect shall be given to the intent
-13-
NY02/231539.4
<PAGE>
manifested by the portion held invalid or inoperative. The paragraph headings
herein are for reference purposes only and are not intended in any way to
describe, interpret, define or limit the extent or intent of the Agreement or of
any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in San Francisco, California,
in accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Subsidiary has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Subsidiary.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-14-
NY02/231539.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
BFR CO., INC.
By:____________________________
Name:
Title:
EMPLOYEE:
----------------------------
Jeffrey J. Bernardis
COTELLIGENT GROUP, INC.
By:____________________________
Name:
Title:
-15-
NY02/231539.4
<PAGE>
Exhibit 10.5
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Cotelligent Group,
Inc., a Delaware corporation ("Cotelligent"), Chamberlain Associates,
Incorporated (the "Subsidiary"), a wholly-owned subsidiary of Cotelligent, and
John E. Chamberlain ("Employee") is hereby entered into and effective as of the
20th day of February, 1996, the date of the consummation of the initial public
offering of the common stock of Cotelligent ("Effective Date"). This Agreement
hereby supersedes any other employment agreements or understandings, written or
oral, among the Subsidiary, Cotelligent and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Subsidiary is engaged primarily in the
business of providing computer consulting and contract programming services.
Employee is employed hereunder by the Subsidiary in a confidential relationship
wherein Employee, in the course of his employment with the Subsidiary, has and
will continue to become familiar with and aware of information as to the
Subsidiary's and Cotelligent's customers, specific manner of doing business,
including the processes, techniques and trade secrets utilized by the Subsidiary
and Cotelligent, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to the Subsidiary and
Cotelligent; this information is a trade secret and constitutes the valuable
good will of the Subsidiary and Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Subsidiary hereby employs Employee as President. As such,
Employee shall have responsibilities, duties and authority reasonably accorded
to and expected of a President, and will report directly to the Board of
Directors of the Subsidiary (the "Board"). Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Subsidiary.
-1-
NY02/231891.4
<PAGE>
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by the Subsidiary.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his or her services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
the Subsidiary shall compensate Employee as follows:
(a) Base Salary. Effective on the Effective Date, the base salary
payable to Employee shall be $125,000 per year, payable on a regular basis in
accordance with the Subsidiary's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its reasonable
discretion, any such increase is warranted. Such recommended increase would, in
all likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from the Subsidiary in such form and to such extent
as specified below:
(1) Participation for Employee in coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that the Subsidiary or Cotelligent
may have in effect from time to time, benefits
provided to Employee under this clause (1) to be at
least equal to such benefits provided to Cotelligent
executives.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of his services
pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in
-2-
NY02/231891.4
<PAGE>
reasonable detail by Employee upon submission of any
request for reimbursement, and in a format and manner
consistent with the Subsidiary's expense reporting
policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than the full year).
(4) The Subsidiary shall reimburse Employee $500 per
month for expenses incurred in connection with the
leasing or acquisition of an automobile.
(5) The Subsidiary shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Subsidiary-wide or
Cotelligent-wide employee benefits as available from
time to time.
3. Non-Competition Agreement.
(a) Employee will not, during the period of his employment by or with
the Subsidiary, and for a period of two (2) years immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with the Subsidiary or Cotelligent or any of the
subsidiaries thereof, within 100 miles of where the Subsidiary or any
of its subsidiaries conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Subsidiary or
Cotelligent (including the respective subsidiaries thereof), provided
that Employee shall be permitted to call upon and hire any member of
his or her immediate family;
-3-
NY02/231891.4
<PAGE>
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Subsidiary or
Cotelligent within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract computer programming business, which candidate
was either called upon by the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) or for which the Subsidiary or
Cotelligent made an acquisition analysis, for the purpose of acquiring
such entity;
(v) disclose customers, whether in existence or proposed, of
the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) or any subsidiary thereof to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to
the extent that the Subsidiary or Cotelligent (including the respective
subsidiaries thereof) has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Subsidiary and Cotelligent as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be caused to the
Subsidiary and Cotelligent for which they would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by Cotelligent or
the Subsidiary in the event of breach by him, by injunctions and restraining
orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Subsidiary or Cotelligent (including Cotelligent's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Cotelligent (including Cotelligent's other subsidiaries); but it is
also the intent of the Subsidiary and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Subsidiary and Cotelligent (including Cotelligent's other subsidiaries)
throughout the term of this covenant. For example,
-4-
NY02/231891.4
<PAGE>
if, during the term of this Agreement, the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) engages in new and different activities,
enters a new business or establishes new locations for its current activities or
business in addition to or other than the activities or business enumerated
under the Recitals above or the locations currently established therefore, then
Employee will be precluded from soliciting the customers or employees of such
new activities or business or from such new location and from directly competing
with such new business within 100 miles of its then-established operating
location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event
that Employee shall cease to be employed hereunder, and shall enter into a
business or pursue other activities not in competition with the Subsidiary or
Cotelligent (including Cotelligent's other subsidiaries), or similar activities
or business in locations the operation of which, under such circumstances, does
not violate clause (i) of this paragraph 3, and in any event such new business,
activities or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Subsidiary or
Cotelligent, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Cotelligent or the Subsidiary of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this paragraph 3, during which the agreements and covenants of
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3.
4. Place of Performance.
-5-
NY02/231891.4
<PAGE>
(a) Employee understands that he may be requested by the Board or
Cotelligent to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Subsidiary
will pay all reasonable relocation costs to move Employee, his immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use his best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Subsidiary and
the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Subsidiary may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of
-6-
NY02/231891.4
<PAGE>
such notice period. Also, Employee may terminate his employment hereunder if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health or his life,
provided that Employee shall have furnished the Subsidiary with a written
statement from a qualified doctor to such effect and provided, further, that, at
the Subsidiary's request made within thirty (30) days of the date of such
written statement, Employee shall submit to an examination by a doctor selected
by the Subsidiary who is reasonably acceptable to Employee or Employee's doctor
and such doctor shall have concurred in the conclusion of Employee's doctor. In
the event this Agreement is terminated pursuant to this paragraph 5(b), Employee
shall receive from the Subsidiary, in a lump-sum payment, within ten (10) days
of the effective date of termination, the base salary at the rate then in effect
for whatever time period is remaining under the Initial Term of this Agreement
or for one (1) year, whichever amount is greater.
(c) Good Cause. The Subsidiary may terminate the Agreement ten (10)
days after written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of the Subsidiary or Cotelligent which materially and adversely
affects the operations or reputation of the Subsidiary or Cotelligent; (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by the
Subsidiary during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board of Directors of
Cotelligent. Should Employee be terminated by the Subsidiary without cause,
Employee shall continue to receive from the Subsidiary or Cotelligent the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater (the "Payment Term"); it is specifically understood and agreed that, in
the event Employee's employment is terminated by the Subsidiary without cause,
the Subsidiary shall in all circumstances, during the Payment Term, be required
to pay Employee at an annual rate equal to Employee's most recent annual base
salary, regardless of whether Employee has obtained other employment following
such termination and Employee shall be under no duty to mitigate such amount or
take any action to lessen the Subsidiary's liability for such payment,
-7-
NY02/231891.4
<PAGE>
which is intended to be absolute. Further, any termination without cause by the
Subsidiary shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment.
At any time after the commencement of employment, Employee may, without cause,
terminate this Agreement and Employee's employment, effective thirty (30) days
after written notice is provided to the Subsidiary. If Employee resigns or
otherwise terminates his employment without cause pursuant to this paragraph
5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent, the Subsidiary
and Employee under this Agreement shall cease as of the effective date of
termination, except that the Subsidiary's obligations under paragraph 9 herein
and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall
survive such termination in accordance with their terms.
If termination of Employee's employment arises out of the Subsidiary's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the
Subsidiary, as determined by a court of competent jurisdiction or pursuant to
the provisions of paragraph 16 below, the Subsidiary shall pay all amounts and
damages to which Employee may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Employee to enforce his rights hereunder. Further, none of the
provisions of paragraph 3 shall apply in the event this Agreement or the
Employee's employment hereunder is terminated as a result of a breach by the
Subsidiary.
6. Return of Subsidiary Property. All records, designs, patents,
business plans, financial statements, financial records, manuals, memoranda,
lists and other property delivered to or compiled by Employee by or on behalf of
the Subsidiary, Cotelligent or their representatives, vendors or customers which
pertain to the business of the Subsidiary or Cotelligent shall be and remain the
property of the Subsidiary or Cotelligent, as the case may be, and be subject at
all times to their discretion and
-8-
NY02/231891.4
<PAGE>
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Subsidiary or Cotelligent which is collected by Employee
shall be delivered promptly to the Subsidiary without request by it upon
termination of Employee's employment.
7. Inventions. Employee shall disclose promptly to Cotelligent and the
Subsidiary any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Subsidiary or Cotelligent and which
Employee conceives as a result of his employment by the Subsidiary. Employee
hereby assigns and agrees to assign all his interests therein to the Subsidiary
or its nominee. Whenever requested to do so by the Subsidiary, Employee shall
execute any and all applications, assignments or other instruments that the
Subsidiary shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Subsidiary's
interest therein.
8. Trade Secrets. Employee agrees that he will not, during or after the
term of this Agreement with the Subsidiary, disclose the specific terms of the
Subsidiary's or Cotelligent's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Subsidiary or Cotelligent, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever other than as required by law or to attorneys or accountants or other
agents of the Subsidiary.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Subsidiary or Cotelligent against Employee), by reason of the fact that he is or
was performing services under this Agreement, then the Subsidiary shall
indemnify and hold harmless the Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and the Subsidiary are made a party to the same third-party
action, complaint, suit or proceeding, the Subsidiary or Cotelligent agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by Cotelligent shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Subsidiary or Cotelligent
-9-
NY02/231891.4
<PAGE>
shall pay all attorneys' fees and costs of such separate counsel. Further, while
Employee is expected at all times to use his best efforts to faithfully
discharge his duties under this Agreement, Employee cannot be held liable to the
Subsidiary or Cotelligent for errors or omissions made in good faith where
Employee has not exhibited gross, willful and wanton negligence and misconduct
or performed criminal and fraudulent acts which materially damage the business
of the Subsidiary.
10. No Prior Agreements. Employee hereby represents and warrants to the
Subsidiary that the execution of this Agreement by Employee and his employment
by the Subsidiary and the performance of his duties hereunder will not violate
or be a breach of any agreement with a former employer, client or any other
person or entity. Further, Employee agrees to indemnify the Subsidiary for any
claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Subsidiary based upon or arising out of any
non-competition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Subsidiary on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Subsidiary may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Subsidiary hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein the Subsidiary and Employee have not received written notice at least
five (5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a substantial
portion of the Subsidiary's business and/or assets that such successor is
willing and able as of the closing to assume and agree to perform the
Subsidiary's obligations under this Agreement in the same manner and to the same
extent that the Subsidiary is hereby required to perform, then such Change in
-10-
NY02/231891.4
<PAGE>
Control shall be deemed to be a termination of this Agreement by the Subsidiary
without cause and the applicable portions of paragraph 5(d) will apply; however,
under such circumstances, the amount of the severance payment due to Employee
(a) shall be payable in a lump-sum payment on the effective date of the
termination and (b) shall be triple the amount calculated under the terms of
paragraph 5(d) and the non-competition provisions of paragraph 3 shall not apply
whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Subsidiary at least five (5) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though the Subsidiary had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Subsidiary at or prior to such closing. Further, Employee will be
given sufficient time and opportunity to elect whether to exercise all or any of
his vested options to purchase Cotelligent Common Stock, including any options
with accelerated vesting under the provisions of Cotelligent's 1995 Stock Option
Plan, such that he may convert the options to shares of Cotelligent Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Subsidiary and immediately after such acquisition such person or entity
is, directly or indirectly, the Beneficial Owner of voting securities
representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Subsidiary;
-11-
NY02/231891.4
<PAGE>
(ii) the individuals (A) who, as of the effective date of
Cotelligent's registration statement with respect to its initial public
offering, constitute the Board of Directors of Cotelligent (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board of Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board of
Directors of Cotelligent;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by the Subsidiary or
Cotelligent at any time that the Subsidiary or Cotelligent or any member of the
Board of Directors of Cotelligent anticipates that a Change in Control may take
place.
(g) Employee shall be reimbursed by the Subsidiary or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Subsidiary or its successor within ten (10) days after Employee
-12-
NY02/231891.4
<PAGE>
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Subsidiary or any of its officers, directors or representatives
covering the same subject matter as this Agreement. This written Agreement is
the final, complete and exclusive statement and expression of the agreement
between the Subsidiary and Employee and of all the terms of this Agreement, and
it cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Subsidiary and Employee, and no term of this Agreement may be waived
except by writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To the Subsidiary: Chamberlain Associates, Incorporated
1875 Grant Street, Suite 530
San Mateo, CA 94402
Attn: Mr. John E. Chamberlain
with a copy to: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, CA 94111
Attn: Mr. Duane W. Bell
To Employee: Mr. John E. Chamberlain
1421 Lexington Avenue
San Mateo, CA 94402
with a copy to: Neal Williams
Wise & Shepard
3030 Hansen Way - Suite 100
Palo Alto, CA 94304
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. Severability; Headings. If any portion of this
Agreement is held invalid or inoperative, the other portions of
this Agreement shall be deemed valid and operative and, so far as
-13-
NY02/231891.4
<PAGE>
is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in San Francisco, California,
in accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Subsidiary has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Subsidiary.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-14-
NY02/231891.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CHAMBERLAIN ASSOCIATES, INCORPORATED
By: ____________________________________
Name:
Title:
EMPLOYEE:
------------------------------------
John E. Chamberlain
COTELLIGENT GROUP, INC.
By: ____________________________________
Name:
Title:
-15-
NY02/231891.4
<PAGE>
Exhibit 10.6
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Cotelligent Group,
Inc., a Delaware corporation ("Cotelligent"), Chamberlain Associates,
Incorporated (the "Subsidiary"), a wholly-owned subsidiary of Cotelligent, and
Linda M. Cassell ("Employee") is hereby entered into and effective as of the
20th day of February, 1996, the date of the consummation of the initial public
offering of the common stock of Cotelligent ("Effective Date"). This Agreement
hereby supersedes any other employment agreements or understandings, written or
oral, among the Subsidiary, Cotelligent and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Subsidiary is engaged primarily in the
business of providing computer consulting and contract programming services.
Employee is employed hereunder by the Subsidiary in a confidential relationship
wherein Employee, in the course of her employment with the Subsidiary, has and
will continue to become familiar with and aware of information as to the
Subsidiary's and Cotelligent's customers, specific manner of doing business,
including the processes, techniques and trade secrets utilized by the Subsidiary
and Cotelligent, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to the Subsidiary and
Cotelligent; this information is a trade secret and constitutes the valuable
good will of the Subsidiary and Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Subsidiary hereby employs Employee as Vice- President. As such,
Employee shall have responsibilities, duties and authority reasonably accorded
to and expected of a Vice- President, and will report directly to the President
of the Subsidiary (the "President"). Employee hereby accepts this employment
upon the terms and conditions herein contained and, subject to paragraph 1(c),
agrees to devote her time, attention
-1-
NY02/231883.4
<PAGE>
and efforts to promote and further the business of the
Subsidiary.
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by the Subsidiary.
(c) Employee shall not, during the term of her employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his or her services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
the Subsidiary shall compensate Employee as follows:
(a) Base Salary. Effective on the Effective Date, the base salary
payable to Employee shall be $125,000 per year, payable on a regular basis in
accordance with the Subsidiary's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board of Directors of the Subsidiary
(the "Board") will review Employee's performance and may make increases to such
base salary if, in its reasonable discretion, any such increase is warranted.
Such recommended increase would, in all likelihood, require approval by the
Board or a duly constituted committee thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from the Subsidiary in such form and to such extent
as specified below:
(1) Participation for Employee in coverage for Employee
and her dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that the Subsidiary or Cotelligent
may have in effect from time to time, benefits
provided to Employee under this clause (1) to be at
least equal to such benefits provided to Cotelligent
executives.
-2-
NY02/231883.4
<PAGE>
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of her services pursuant
to this Agreement. All reimbursable expenses shall be
appropriately documented in reasonable detail by
Employee upon submission of any request for
reimbursement, and in a format and manner consistent
with the Subsidiary's expense reporting policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than the full year).
(4) The Subsidiary shall reimburse Employee $500 per
month for expenses incurred in connection with the
leasing or acquisition of an automobile.
(5) The Subsidiary shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Subsidiary-wide or
Cotelligent-wide employee benefits as available from
time to time.
3. Non-Competition Agreement.
(a) Employee will not, during the period of her employment by or with
the Subsidiary, and for a period of two (2) years immediately following the
termination of her employment under this Agreement, for any reason whatsoever,
directly or indirectly, for herself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with the Subsidiary or Cotelligent or any of the
subsidiaries thereof, within 100 miles of where the Subsidiary or any
of its subsidiaries conducts business (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Subsidiary or
Cotelligent (including
-3-
NY02/231883.4
<PAGE>
the respective subsidiaries thereof), provided that Employee shall be
permitted to call upon and hire any member of her or her immediate
family;
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a customer
of the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) within the Territory for the purpose of soliciting or selling
products or services in direct competition with the Subsidiary or
Cotelligent within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract computer programming business, which candidate
was either called upon by the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) or for which the Subsidiary or
Cotelligent made an acquisition analysis, for the purpose of acquiring
such entity;
(v) disclose customers, whether in existence or proposed, of
the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) or any subsidiary thereof to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to
the extent that the Subsidiary or Cotelligent (including the respective
subsidiaries thereof) has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Subsidiary and Cotelligent as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be caused to the
Subsidiary and Cotelligent for which they would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by Cotelligent or
the Subsidiary in the event of breach by her, by injunctions and restraining
orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Subsidiary or Cotelligent (including Cotelligent's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Cotelligent (including Cotelligent's other subsidiaries); but it is
also the intent of the Subsidiary and
-4-
NY02/231883.4
<PAGE>
Employee that such covenants be construed and enforced in accordance with the
changing activities, business and locations of the Subsidiary and Cotelligent
(including Cotelligent's other subsidiaries) throughout the term of this
covenant. For example, if, during the term of this Agreement, the Subsidiary or
Cotelligent (including Cotelligent's other subsidiaries) engages in new and
different activities, enters a new business or establishes new locations for its
current activities or business in addition to or other than the activities or
business enumerated under the Recitals above or the locations currently
established therefore, then Employee will be precluded from soliciting the
customers or employees of such new activities or business or from such new
location and from directly competing with such new business within 100 miles of
its then-established operating location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event
that Employee shall cease to be employed hereunder, and shall enter into a
business or pursue other activities not in competition with the Subsidiary or
Cotelligent (including Cotelligent's other subsidiaries), or similar activities
or business in locations the operation of which, under such circumstances, does
not violate clause (i) of this paragraph 3, and in any event such new business,
activities or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Subsidiary or
Cotelligent, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Cotelligent or the Subsidiary of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this paragraph 3, during which the agreements and covenants of
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3.
-5-
NY02/231883.4
<PAGE>
4. Place of Performance.
(a) Employee understands that she may be requested by the Board or
Cotelligent to relocate from her present residence to another geographic
location in order to more efficiently carry out her duties and responsibilities
under this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Subsidiary
will pay all reasonable relocation costs to move Employee, her immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use her best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Subsidiary and
the personal life of Employee and her family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from her full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Subsidiary
-6-
NY02/231883.4
<PAGE>
may terminate Employee's employment hereunder provided Employee is unable to
resume her full-time duties at the conclusion of such notice period. Also,
Employee may terminate her employment hereunder if her health should become
impaired to an extent that makes the continued performance of her duties
hereunder hazardous to her physical or mental health or her life, provided that
Employee shall have furnished the Subsidiary with a written statement from a
qualified doctor to such effect and provided, further, that, at the Subsidiary's
request made within thirty (30) days of the date of such written statement,
Employee shall submit to an examination by a doctor selected by the Subsidiary
who is reasonably acceptable to Employee or Employee's doctor and such doctor
shall have concurred in the conclusion of Employee's doctor. In the event this
Agreement is terminated pursuant to this paragraph 5(b), Employee shall receive
from the Subsidiary, in a lump-sum payment, within ten (10) days of the
effective date of termination, the base salary at the rate then in effect for
whatever time period is remaining under the Initial Term of this Agreement or
for one (1) year, whichever amount is greater.
(c) Good Cause. The Subsidiary may terminate the Agreement ten (10)
days after written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of the Subsidiary or Cotelligent which materially and adversely
affects the operations or reputation of the Subsidiary or Cotelligent; (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by the
Subsidiary during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board of Directors of
Cotelligent. Should Employee be terminated by the Subsidiary without cause,
Employee shall continue to receive from the Subsidiary or Cotelligent the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater (the "Payment Term"); it is specifically understood and agreed that, in
the event Employee's employment is terminated by the Subsidiary without cause,
the Subsidiary shall in all circumstances, during the Payment Term, be required
to pay Employee at an annual rate equal to Employee's most recent annual base
salary, regardless of whether Employee has obtained other employment following
such termination and
-7-
NY02/231883.4
<PAGE>
Employee shall be under no duty to mitigate such amount or take any action to
lessen the Subsidiary's liability for such payment, which is intended to be
absolute. Further, any termination without cause by the Subsidiary shall operate
to shorten the period set forth in paragraph 3(a) and during which the terms of
paragraph 3 apply to one (1) year from the date of termination of employment.
At any time after the commencement of employment, Employee may, without cause,
terminate this Agreement and Employee's employment, effective thirty (30) days
after written notice is provided to the Subsidiary. If Employee resigns or
otherwise terminates her employment without cause pursuant to this paragraph
5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent, the Subsidiary
and Employee under this Agreement shall cease as of the effective date of
termination, except that the Subsidiary's obligations under paragraph 9 herein
and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall
survive such termination in accordance with their terms.
If termination of Employee's employment arises out of the Subsidiary's failure
to pay Employee on a timely basis the amounts to which she is entitled under
this Agreement or as a result of any other breach of this Agreement by the
Subsidiary, as determined by a court of competent jurisdiction or pursuant to
the provisions of paragraph 16 below, the Subsidiary shall pay all amounts and
damages to which Employee may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Employee to enforce her rights hereunder. Further, none of the
provisions of paragraph 3 shall apply in the event this Agreement or the
Employee's employment hereunder is terminated as a result of a breach by the
Subsidiary.
6. Return of Subsidiary Property. All records, designs,
patents, business plans, financial statements, financial records,
manuals, memoranda, lists and other property delivered to or
compiled by Employee by or on behalf of the Subsidiary,
Cotelligent or their representatives, vendors or customers which
pertain to the business of the Subsidiary or Cotelligent shall be
-8-
NY02/231883.4
<PAGE>
and remain the property of the Subsidiary or Cotelligent, as the case may be,
and be subject at all times to their discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of the
Subsidiary or Cotelligent which is collected by Employee shall be delivered
promptly to the Subsidiary without request by it upon termination of Employee's
employment.
7. Inventions. Employee shall disclose promptly to Cotelligent and the
Subsidiary any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Subsidiary or Cotelligent and which
Employee conceives as a result of her employment by the Subsidiary. Employee
hereby assigns and agrees to assign all her interests therein to the Subsidiary
or its nominee. Whenever requested to do so by the Subsidiary, Employee shall
execute any and all applications, assignments or other instruments that the
Subsidiary shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Subsidiary's
interest therein.
8. Trade Secrets. Employee agrees that she will not, during or after
the term of this Agreement with the Subsidiary, disclose the specific terms of
the Subsidiary's or Cotelligent's relationships or agreements with their
respective significant vendors or customers or any other significant and
material trade secret of the Subsidiary or Cotelligent, whether in existence or
proposed, to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever other than as required by law or to attorneys or
accountants or other agents of the Subsidiary.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Subsidiary or Cotelligent against Employee), by reason of the fact that she is
or was performing services under this Agreement, then the Subsidiary shall
indemnify and hold harmless the Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and the Subsidiary are made a party to the same third-party
action, complaint, suit or proceeding, the Subsidiary or Cotelligent agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by Cotelligent shall have a
conflict of interest
-9-
NY02/231883.4
<PAGE>
that prevents such counsel from representing Employee, Employee may engage
separate counsel and the Subsidiary or Cotelligent shall pay all attorneys' fees
and costs of such separate counsel. Further, while Employee is expected at all
times to use her best efforts to faithfully discharge her duties under this
Agreement, Employee cannot be held liable to the Subsidiary or Cotelligent for
errors or omissions made in good faith where Employee has not exhibited gross,
willful and wanton negligence and misconduct or performed criminal and
fraudulent acts which materially damage the business of the Subsidiary.
10. No Prior Agreements. Employee hereby represents and warrants to the
Subsidiary that the execution of this Agreement by Employee and her employment
by the Subsidiary and the performance of herduties hereunder will not violate or
be a breach of any agreement with a former employer, client or any other person
or entity. Further, Employee agrees to indemnify the Subsidiary for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Subsidiary based upon or arising out of any non-competition
agreement, invention or secrecy agreement between Employee and such third party
which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that she has been
selected for employment by the Subsidiary on the basis of her personal
qualifications, experience and skills. Employee agrees, therefore, she cannot
assign all or any portion of her performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Unless she elects to terminate this Agreement pursuant to (c)
below, Employee understands and acknowledges that the Subsidiary may be merged
or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Subsidiary hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein the Subsidiary and Employee have not received written notice at least
five (5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a substantial
portion of the Subsidiary's business and/or assets that such successor is
willing and able as of the closing to assume and agree to perform the
Subsidiary's obligations under this
-10-
NY02/231883.4
<PAGE>
Agreement in the same manner and to the same extent that the Subsidiary is
hereby required to perform, then such Change in Control shall be deemed to be a
termination of this Agreement by the Subsidiary without cause and the applicable
portions of paragraph 5(d) will apply; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be
triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at her sole
discretion, elect to terminate this Agreement by providing written notice to the
Subsidiary at least five (5) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though the Subsidiary had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Subsidiary at or prior to such closing. Further, Employee will be
given sufficient time and opportunity to elect whether to exercise all or any of
her vested options to purchase Cotelligent Common Stock, including any options
with accelerated vesting under the provisions of Cotelligent's 1995 Stock Option
Plan, such that she may convert the options to shares of Cotelligent Common
Stock at or prior to the closing of the transaction giving rise to the Change in
Control, if she so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Subsidiary and immediately after such acquisition such person or entity
is, directly or indirectly, the Beneficial Owner of voting securities
representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Subsidiary;
-11-
NY02/231883.4
<PAGE>
(ii) the individuals (A) who, as of the effective date of
Cotelligent's registration statement with respect to its initial public
offering, constitute the Board of Directors of Cotelligent (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board of Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board of
Directors of Cotelligent;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by the Subsidiary or
Cotelligent at any time that the Subsidiary or Cotelligent or any member of the
Board of Directors of Cotelligent anticipates that a Change in Control may take
place.
(g) Employee shall be reimbursed by the Subsidiary or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Subsidiary or its successor within ten (10) days after Employee
-12-
NY02/231883.4
<PAGE>
delivers a written request for reimbursement accompanied by a copy of her tax
return(s) showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Subsidiary or any of its officers, directors or representatives
covering the same subject matter as this Agreement. This written Agreement is
the final, complete and exclusive statement and expression of the agreement
between the Subsidiary and Employee and of all the terms of this Agreement, and
it cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Subsidiary and Employee, and no term of this Agreement may be waived
except by writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To the Subsidiary: Chamberlain Associates, Incorporated
1875 Grant Street, Suite 530
San Mateo, CA 94402
Attn: Mr. John E. Chamberlain
with a copy to: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, CA 94111
Attn: Mr. Duane W. Bell
To Employee: Mrs. Linda M. Cassell
1421 Lexington Avenue
San Mateo, CA 94402
with a copy to: Neal Williams
Wise & Shepard
3030 Hansen Way Suite 100
Palo Alto, CA 94304
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. Severability; Headings. If any portion of this
Agreement is held invalid or inoperative, the other portions of
this Agreement shall be deemed valid and operative and, so far as
-13-
NY02/231883.4
<PAGE>
is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. The paragraph headings herein are for
reference purposes only and are not intended in any way to describe, interpret,
define or limit the extent or intent of the Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in San Francisco, California,
in accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Subsidiary has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Subsidiary.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-14-
NY02/231883.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
CHAMBERLAIN ASSOCIATES, INCORPORATED
By:____________________________________
Name:
Title:
EMPLOYEE:
------------------------------------
Linda M. Cassell
COTELLIGENT GROUP, INC.
By:____________________________________
Name:
Title:
-15-
NY02/231883.4
<PAGE>
Exhibit 10.7
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") by and among Cotelligent Group,
Inc., a Delaware corporation ("Cotelligent"), Data Arts & Sciences, Inc. (the
"Subsidiary"), a wholly-owned subsidiary of Cotelligent, and John C. Travers
("Employee") is hereby entered into and effective as of the 20th day of
February, 1996, the date of the consummation of the initial public offering of
the common stock of Cotelligent ("Effective Date"). This Agreement hereby
supersedes any other employment agreements or understandings, written or oral,
among the Subsidiary, Cotelligent and Employee.
R E C I T A L S
The following statements are true and correct:
As of the date of this Agreement, the Subsidiary is engaged primarily in the
business of providing computer consulting and contract programming services.
Employee is employed hereunder by the Subsidiary in a confidential relationship
wherein Employee, in the course of his employment with the Subsidiary, has and
will continue to become familiar with and aware of information as to the
Subsidiary's and Cotelligent's customers, specific manner of doing business,
including the processes, techniques and trade secrets utilized by the Subsidiary
and Cotelligent, and future plans with respect thereto, all of which has been
and will be established and maintained at great expense to the Subsidiary and
Cotelligent; this information is a trade secret and constitutes the valuable
good will of the Subsidiary and Cotelligent.
Therefore, in consideration of the mutual promises, terms, covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
A G R E E M E N T S
1. Employment and Duties.
(a) The Subsidiary hereby employs Employee as President. As such,
Employee shall have responsibilities, duties and authority reasonably accorded
to and expected of a President, and will report directly to the Board of
Directors of the Subsidiary (the "Board"). Employee hereby accepts this
employment upon the terms and conditions herein contained and, subject to
paragraph 1(c), agrees to devote his time, attention and efforts to promote and
further the business of the Subsidiary.
-1-
NY02/231895.4
<PAGE>
(b) Employee shall faithfully adhere to, execute and
fulfill all lawful policies established by the Subsidiary.
(c) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require his or her services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. Compensation. For all services rendered by Employee,
the Subsidiary shall compensate Employee as follows:
(a) Base Salary. Effective on the Effective Date, the base salary
payable to Employee shall be $150,000 per year, payable on a regular basis in
accordance with the Subsidiary's standard payroll procedures but not less than
monthly. On at least an annual basis, the Board will review Employee's
performance and may make increases to such base salary if, in its reasonable
discretion, any such increase is warranted. Such recommended increase would, in
all likelihood, require approval by the Board or a duly constituted committee
thereof.
(b) Incentive Bonus Plan. For fiscal year 1996 and subsequent fiscal
years, Employee shall be eligible to participate in the Cotelligent Compensation
Plan, which sets forth the criteria under which Employee and other officers and
key employees will be eligible to receive bonus awards.
(c) Executive Perquisites, Benefits and Other Compensation.
Employee shall be entitled to receive additional benefits and
compensation from the Subsidiary in such form and to such extent
as specified below:
(1) Participation for Employee in coverage for Employee
and his dependent family members under health,
hospitalization, disability, dental, life and other
insurance plans that the Subsidiary or Cotelligent
may have in effect from time to time, benefits
provided to Employee under this clause (1) to be at
least equal to such benefits provided to Cotelligent
executives.
(2) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by
Employee in the performance of his services
pursuant to this Agreement. All reimbursable
expenses shall be appropriately documented in
-2-
NY02/231895.4
<PAGE>
reasonable detail by Employee upon submission of any
request for reimbursement, and in a format and manner
consistent with the Subsidiary's expense reporting
policy.
(3) Four (4) weeks paid vacation for each year during the
period of employment ending on the anniversary of the
date on which the period of employment commenced (pro
rated for any year in which Employee is employed for
less than the full year).
(4) The Subsidiary shall reimburse Employee $500 per
month for expenses incurred in connection with the
leasing or acquisition of an automobile.
(5) The Subsidiary shall provide Employee with other
executive perquisites as may be available to or
deemed appropriate for Employee by the Board and
participation in all other Subsidiary-wide or
Cotelligent-wide employee benefits as available from
time to time.
3. Non-Competition Agreement.
(a) Employee will not, during the period of his employment by or with
the Subsidiary, and for a period of two (2) years immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in conjunction with any
other person, persons, company, partnership, corporation or business of whatever
nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any business selling any products or services in
direct competition with the Subsidiary or Cotelligent or any of the
subsidiaries thereof, within 100 miles of any location where Subsidiary
or any of its subsidiaries has an office as of the date of termination
(the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) in a sales representative or
managerial capacity for the purpose or with the intent of enticing such
employee away from or out of the employ of the Subsidiary or
Cotelligent (including the respective subsidiaries thereof), provided
that Employee shall be permitted to call upon and hire any member of
his or her immediate family;
-3-
NY02/231895.4
<PAGE>
(iii) call upon any person or entity which is a customer of
Subsidiary or Cotelligent (including the respective subsidiaries
thereof) as of the date of Employee's termination of employment or has
been a customer thereof within the one-year period prior to such
termination, and regardless of whether any such customer is located
within or outside of the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the computer
consulting and contract computer programming business, which candidate
was either called upon by the Subsidiary or Cotelligent (including the
respective subsidiaries thereof) or for which the Subsidiary or
Cotelligent made an acquisition analysis, for the purpose of acquiring
such entity;
(v) disclose customers, whether in existence or proposed, of
the Subsidiary or Cotelligent (including the respective subsidiaries
thereof) or any subsidiary thereof to any person, firm, partnership,
corporation or business for any reason or purpose whatsoever except to
the extent that the Subsidiary or Cotelligent (including the respective
subsidiaries thereof) has in the past disclosed such information to the
public for valid business reasons.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than one percent
(1%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Subsidiary and Cotelligent as a result of a breach of the foregoing covenant,
and because of the immediate and irreparable damage that could be caused to the
Subsidiary and Cotelligent for which they would have no other adequate remedy,
Employee agrees that the foregoing covenant may be enforced by Cotelligent or
the Subsidiary in the event of breach by him, by injunctions and restraining
orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Subsidiary or Cotelligent (including Cotelligent's other
subsidiaries) on the date of the execution of this Agreement and the current
plans of Cotelligent (including Cotelligent's other subsidiaries); but it is
also the intent of the Subsidiary and Employee that such covenants be construed
and enforced in accordance with the changing activities, business and locations
of the Subsidiary and Cotelligent (including Cotelligent's other subsidiaries)
throughout the term of this covenant. For example,
-4-
NY02/231895.4
<PAGE>
if, during the term of this Agreement, the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) engages in new and different activities,
enters a new business or establishes new locations for its current activities or
business in addition to or other than the activities or business enumerated
under the Recitals above or the locations currently established therefore, then
Employee will be precluded from soliciting the customers or employees of such
new activities or business or from such new location and from directly competing
with such new business within 100 miles of its then-established operating
location(s) through the term of this covenant.
It is further agreed by the parties hereto that, in the event
that Employee shall cease to be employed hereunder, and shall enter into a
business or pursue other activities not in competition with the Subsidiary or
Cotelligent (including Cotelligent's other subsidiaries), or similar activities
or business in locations the operation of which, under such circumstances, does
not violate clause (i) of this paragraph 3, and in any event such new business,
activities or location are not in violation of this paragraph 3 or of Employee's
obligations under this paragraph 3, if any, Employee shall not be chargeable
with a violation of this paragraph 3 if the Subsidiary or Cotelligent (including
Cotelligent's other subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Subsidiary or
Cotelligent, whether predicated on this Agreement or otherwise, shall not
constitute a defense to the enforcement by Cotelligent or the Subsidiary of such
covenants. It is specifically agreed that the period of two (2) years stated at
the beginning of this paragraph 3, during which the agreements and covenants of
Employee made in this paragraph 3 shall be effective, shall be computed by
excluding from such computation any time during which Employee is in violation
of any provision of this paragraph 3.
4. Place of Performance.
-5-
NY02/231895.4
<PAGE>
(a) Employee understands that he may be requested by the Board or
Cotelligent to relocate from his present residence to another geographic
location in order to more efficiently carry out his duties and responsibilities
under this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event, if Employee agrees to relocate, the Subsidiary
will pay all reasonable relocation costs to move Employee, his immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to, pre-move visits to search for a new residence,
investigate schools or for other purposes; temporary lodging and living costs
prior to moving into a new permanent residence; duplicate home carrying costs;
all closing costs on the sale of Employee's present residence and on the
purchase of a comparable residence in the new location; and added income taxes
that Employee may incur if any relocation costs are not deductible for tax
purposes. The general intent of the foregoing is that Employee shall not
personally bear any out-of-pocket cost as a result of the relocation, with an
understanding that Employee will use his best efforts to incur only those costs
which are reasonable and necessary to effect a smooth, efficient and orderly
relocation with minimal disruption to the business affairs of the Subsidiary and
the personal life of Employee and his family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall not constitute "cause" for
termination of this Agreement under the terms of paragraph 5(c).
5. Term; Termination; Rights on Termination. The term of this Agreement
shall begin on the date hereof and continue for three (3) years (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
automatically thereafter on a year-to-year basis on the same terms and
conditions contained herein. This Agreement and Employee's employment may be
terminated in any one of the followings ways:
(a) Death. The death of Employee shall immediately
terminate this Agreement with no severance compensation due to
Employee's estate.
(b) Disability. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for four (4) consecutive months, then thirty (30) days after receiving
written notice (which notice may occur before or after the end of such four (4)
month period, but which shall not be effective earlier than the last day of such
four (4) month period), the Subsidiary may terminate Employee's employment
hereunder provided Employee is unable to resume his full-time duties at the
conclusion of
-6-
NY02/231895.4
<PAGE>
such notice period. Also, Employee may terminate his employment hereunder if his
health should become impaired to an extent that makes the continued performance
of his duties hereunder hazardous to his physical or mental health or his life,
provided that Employee shall have furnished the Subsidiary with a written
statement from a qualified doctor to such effect and provided, further, that, at
the Subsidiary's request made within thirty (30) days of the date of such
written statement, Employee shall submit to an examination by a doctor selected
by the Subsidiary who is reasonably acceptable to Employee or Employee's doctor
and such doctor shall have concurred in the conclusion of Employee's doctor. In
the event this Agreement is terminated pursuant to this paragraph 5(b), Employee
shall receive from the Subsidiary or Cotelligent, in a lump-sum payment, within
ten (10) days of the effective date of termination, the base salary at the rate
then in effect for whatever time period is remaining under the Initial Term of
this Agreement or for one (1) year, whichever amount is greater.
(c) Good Cause. The Subsidiary may terminate the Agreement ten (10)
days after written notice to Employee for good cause, which shall be: (1)
Employee's willful, material and irreparable breach of this Agreement; (2)
Employee's gross negligence in the performance or intentional nonperformance
(continuing for ten (10) days after receipt of written notice of need to cure)
of any of Employee's material duties and responsibilities hereunder; (3)
Employee's willful dishonesty, fraud or misconduct with respect to the business
or affairs of the Subsidiary or Cotelligent which materially and adversely
affects the operations or reputation of the Subsidiary or Cotelligent; (4)
Employee's conviction of a felony crime; or (5) chronic alcohol abuse or illegal
drug abuse by Employee. In the event of a termination for good cause, as
enumerated above, Employee shall have no right to any severance compensation.
(d) Without Cause. Employee may only be terminated without cause by the
Subsidiary during the Initial Term hereof if such termination is approved by at
least sixty-six percent (66%) of the members of the Board of Directors of
Cotelligent. Should Employee be terminated by the Subsidiary without cause,
Employee shall continue to receive from the Subsidiary or Cotelligent the base
salary at the rate then in effect for whatever time period is remaining under
the Initial Term of this Agreement or for one (1) year, whichever amount is
greater (the "Payment Term"); it is specifically understood and agreed that, in
the event Employee's employment is terminated by the Subsidiary without cause,
the Subsidiary shall in all circumstances, during the Payment Term, be required
to pay Employee at an annual rate equal to Employee's most recent annual base
salary, regardless of whether Employee has obtained other employment following
such termination and Employee shall be under no duty to mitigate such amount or
take
-7-
NY02/231895.4
<PAGE>
any action to lessen the Subsidiary's liability for such payment, which is
intended to be absolute. Further, any termination without cause by the
Subsidiary shall operate to shorten the period set forth in paragraph 3(a) and
during which the terms of paragraph 3 apply to one (1) year from the date of
termination of employment.
At any time after the commencement of employment, Employee may, without cause,
terminate this Agreement and Employee's employment, effective thirty (30) days
after written notice is provided to the Subsidiary. If Employee resigns or
otherwise terminates his employment without cause pursuant to this paragraph
5(d), Employee shall receive no severance compensation.
(e) Change in Control of Cotelligent. Refer to paragraph
12 below.
Upon termination of this Agreement for any reason provided above, Employee shall
be entitled to receive all compensation earned and all benefits and
reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
paragraph 12. All other rights and obligations of Cotelligent, the Subsidiary
and Employee under this Agreement shall cease as of the effective date of
termination, except that the Subsidiary's obligations under paragraph 9 herein
and Employee's obligations under paragraphs 3, 6, 7, 8 and 10 herein shall
survive such termination in accordance with their terms.
If termination of Employee's employment arises out of the Subsidiary's failure
to pay Employee on a timely basis the amounts to which he is entitled under this
Agreement or as a result of any other breach of this Agreement by the
Subsidiary, as determined by a court of competent jurisdiction or pursuant to
the provisions of paragraph 16 below, the Subsidiary shall pay all amounts and
damages to which Employee may be entitled as a result of such breach, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Employee to enforce his rights hereunder. Further, none of the
provisions of paragraph 3 shall apply in the event this Agreement or the
Employee's employment hereunder is terminated as a result of a breach by the
Subsidiary.
6. Return of Subsidiary Property. All records, designs, patents,
business plans, financial statements, financial records, manuals, memoranda,
lists and other property delivered to or compiled by Employee by or on behalf of
the Subsidiary, Cotelligent or their representatives, vendors or customers which
pertain to the business of the Subsidiary or Cotelligent shall be and remain the
property of the Subsidiary or Cotelligent, as the
-8-
NY02/231895.4
<PAGE>
case may be, and be subject at all times to their discretion and control.
Likewise, all correspondence, reports, records, charts, advertising materials
and other similar data pertaining to the business, activities or future plans of
the Subsidiary or Cotelligent which is collected by Employee shall be delivered
promptly to the Subsidiary without request by it upon termination of Employee's
employment.
7. Inventions. Employee shall disclose promptly to Cotelligent and the
Subsidiary any and all significant conceptions and ideas for inventions,
improvements and valuable discoveries, whether patentable or not, which are
conceived or made by Employee, solely or jointly with another, during the period
of employment or within one (1) year thereafter, and which are directly related
to the business or activities of the Subsidiary or Cotelligent and which
Employee conceives as a result of his employment by the Subsidiary. Employee
hereby assigns and agrees to assign all his interests therein to the Subsidiary
or its nominee. Whenever requested to do so by the Subsidiary, Employee shall
execute any and all applications, assignments or other instruments that the
Subsidiary shall deem necessary to apply for and obtain Letters Patent of the
United States or any foreign country or to otherwise protect the Subsidiary's
interest therein.
8. Trade Secrets. Employee agrees that he will not, during or after the
term of this Agreement with the Subsidiary, disclose the specific terms of the
Subsidiary's or Cotelligent's relationships or agreements with their respective
significant vendors or customers or any other significant and material trade
secret of the Subsidiary or Cotelligent, whether in existence or proposed, to
any person, firm, partnership, corporation or business for any reason or purpose
whatsoever other than as required by law or to attorneys or accountants or other
agents of the Subsidiary.
9. Indemnification. In the event Employee is made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by the
Subsidiary or Cotelligent against Employee), by reason of the fact that he is or
was performing services under this Agreement, then the Subsidiary shall
indemnify and hold harmless the Employee against all expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, as actually
and reasonably incurred by Employee in connection therewith. In the event that
both Employee and the Subsidiary are made a party to the same third-party
action, complaint, suit or proceeding, the Subsidiary or Cotelligent agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by Cotelligent shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee
-9-
NY02/231895.4
<PAGE>
may engage separate counsel and the Subsidiary or Cotelligent shall pay all
attorneys' fees and costs of such separate counsel. Further, while Employee is
expected at all times to use his best efforts to faithfully discharge his duties
under this Agreement, Employee cannot be held liable to the Subsidiary or
Cotelligent for errors or omissions made in good faith where Employee has not
exhibited gross, willful and wanton negligence and misconduct or performed
criminal and fraudulent acts which materially damage the business of the
Subsidiary.
10. No Prior Agreements. Employee hereby represents and warrants to the
Subsidiary that the execution of this Agreement by Employee and his employment
by the Subsidiary and the performance of his duties hereunder will not violate
or be a breach of any agreement with a former employer, client or any other
person or entity. Further, Employee agrees to indemnify the Subsidiary for any
claim, including, but not limited to, attorneys' fees and expenses of
investigation, by any such third party that such third party may now have or may
hereafter come to have against the Subsidiary based upon or arising out of any
non-competition agreement, invention or secrecy agreement between Employee and
such third party which was in existence as of the date of this Agreement.
11. Assignment; Binding Effect. Employee understands that he has been
selected for employment by the Subsidiary on the basis of his personal
qualifications, experience and skills. Employee agrees, therefore, he cannot
assign all or any portion of his performance under this Agreement. Subject to
the preceding two (2) sentences and the express provisions of paragraph 12
below, this Agreement shall be binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective heirs, legal
representatives, successors and assigns.
12. Change in Control.
(a) Unless he elects to terminate this Agreement pursuant to (c) below,
Employee understands and acknowledges that the Subsidiary may be merged or
consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of the Subsidiary hereunder.
(b) In the event of a pending Change in Control (as defined below)
wherein the Subsidiary and Employee have not received written notice at least
five (5) business days prior to the anticipated closing date of the transaction
giving rise to the Change in Control from the successor to all or a substantial
portion of the Subsidiary's business and/or assets that such successor is
willing and able as of the closing to assume and agree to perform the
Subsidiary's obligations under this Agreement in the same manner and to the same
extent that the
-10-
NY02/231895.4
<PAGE>
Subsidiary is hereby required to perform, then such Change in Control shall be
deemed to be a termination of this Agreement by the Subsidiary without cause and
the applicable portions of paragraph 5(d) will apply; however, under such
circumstances, the amount of the severance payment due to Employee (a) shall be
payable in a lump-sum payment on the effective date of the termination and (b)
shall be triple the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall not apply whatsoever.
(c) In any Change in Control situation, Employee may, at his sole
discretion, elect to terminate this Agreement by providing written notice to the
Subsidiary at least five (5) business days prior to the anticipated closing of
the transaction giving rise to the Change in Control. In such case, the
applicable provisions of paragraph 5(d) will apply as though the Subsidiary had
terminated the Agreement without cause; however, under such circumstances, the
amount of the severance payment due to Employee (a) shall be payable in a
lump-sum payment on the effective date of the termination and (b) shall be two
times the amount calculated under the terms of paragraph 5(d) and the
non-competition provisions of paragraph 3 shall all apply for a period of two
(2) years from the effective date of termination.
(d) For purposes of applying paragraph 5 under the circumstances
described in (b) and (c) above, the effective date of termination will be the
closing date of the transaction giving rise to the Change in Control and all
compensation, reimbursements and lump-sum payments due Employee must be paid in
full by the Subsidiary at or prior to such closing. Further, Employee will be
given sufficient time and opportunity to elect whether to exercise all or any of
his vested options to purchase Cotelligent Common Stock, including any options
with accelerated vesting under the provisions of Cotelligent's 1995 Stock Option
Plan, such that he may convert the options to shares of Cotelligent Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if he so desires.
(e) A "Change in Control" shall be deemed to have occurred
if:
(i) any person or entity, other than Cotelligent or an
employee benefit plan of Cotelligent, acquires directly or indirectly
the Beneficial Ownership (as defined in Section 13(d) of the Securities
Exchange Act of 1934, as amended) of any voting security of the
Subsidiary and immediately after such acquisition such person or entity
is, directly or indirectly, the Beneficial Owner of voting securities
representing 50% or more of the total voting power of all of the
then-outstanding voting securities of the Subsidiary;
-11-
NY02/231895.4
<PAGE>
(ii) the individuals (A) who, as of the effective date of
Cotelligent's registration statement with respect to its initial public
offering, constitute the Board of Directors of Cotelligent (the
"Original Directors") or (B) who thereafter are elected to the Board of
Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors then still
in office (such directors becoming "Additional Original Directors"
immediately following their election) or (C) who are elected to the
Board of Directors of Cotelligent and whose election, or nomination for
election, to the Board of Directors of Cotelligent was approved by a
vote of at least two-thirds (2/3) of the Original Directors and
Additional Original Directors then still in office (such directors also
becoming "Additional Original Directors" immediately following their
election) (such individuals being the "Continuing Directors"), cease
for any reason to constitute a majority of the members of the Board of
Directors of Cotelligent;
(iii) the stockholders of Cotelligent shall approve a merger,
consolidation, recapitalization, or reorganization of Cotelligent, a
reverse stock split of outstanding voting securities, or consummation
of any such transaction if stockholder approval is not sought or
obtained, other than any such transaction which would result in at
least 75% of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least 75% of the holders of
outstanding voting securities of Cotelligent immediately prior to the
transaction, with the voting power of each such continuing holder
relative to other such continuing holders not substantially altered in
the transaction; or
(iv) the stockholders of Cotelligent shall approve a plan of
complete liquidation of Cotelligent or an agreement for the sale or
disposition by Cotelligent of all or a substantial portion of
Cotelligent's assets (i.e., 50% or more of the total assets of
Cotelligent).
(f) Employee must be notified in writing by the Subsidiary or
Cotelligent at any time that the Subsidiary or Cotelligent or any member of the
Board of Directors of Cotelligent anticipates that a Change in Control may take
place.
(g) Employee shall be reimbursed by the Subsidiary or its successor for
any excise taxes that Employee incurs under Section 4999 of the Internal Revenue
Code of 1986, as a result of any Change in Control. Such amount will be due and
payable by the Subsidiary or its successor within ten (10) days after Employee
-12-
NY02/231895.4
<PAGE>
delivers a written request for reimbursement accompanied by a copy of his tax
return(s) showing the excise tax actually incurred by Employee.
13. Complete Agreement. This Agreement is not a promise of future
employment. Employee has no oral representations, understandings or agreements
with the Subsidiary or any of its officers, directors or representatives
covering the same subject matter as this Agreement. This written Agreement is
the final, complete and exclusive statement and expression of the agreement
between the Subsidiary and Employee and of all the terms of this Agreement, and
it cannot be varied, contradicted or supplemented by evidence of any prior or
contemporaneous oral or written agreements. This written Agreement may not be
later modified except by a further writing signed by a duly authorized officer
of the Subsidiary and Employee, and no term of this Agreement may be waived
except by writing signed by the party waiving the benefit of such term.
14. Notice. Whenever any notice is required hereunder, it
shall be given in writing addressed as follows:
To the Subsidiary: Data Arts & Sciences, Inc.
8 Strathmore Road
Natick, MA 01760
Attn: President
with a copy to: Cotelligent Group, Inc.
101 California Street-Suite 2050
San Francisco, CA 94111
Attn: Mr. Duane W. Bell
To Employee: Mr. John C. Travers
Data Arts & Sciences, Inc.
8 Strathmore Road
Natick, MA 01760
with a copy to: William B. Dailey
Rosencranz & Dailey
One Beacon Street - Suite 1100
Boston, Massachusetts 02108
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 14.
15. Severability; Headings. If any portion of this
Agreement is held invalid or inoperative, the other portions of
-13-
NY02/231895.4
<PAGE>
this Agreement shall be deemed valid and operative and, so far as is reasonable
and possible, effect shall be given to the intent manifested by the portion held
invalid or inoperative. The paragraph headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define or limit the
extent or intent of the Agreement or of any part hereof.
16. Arbitration. Any unresolved dispute or controversy arising under or
in connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in San Francisco, California,
in accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provision hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back-pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement, and interest thereon in the event the arbitrators determine that
Employee was terminated without disability or good cause, as defined in
paragraphs 5(b) and 5(c), respectively, or that the Subsidiary has otherwise
materially breached this Agreement. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne by the Subsidiary.
17. Governing Law. This Agreement shall in all respects be
construed according to the laws of the State of Delaware.
18. Counterparts. This Agreement may be executed
simultaneously in two (2) or more counterparts each of which
shall be deemed an original and all of which together shall
constitute but one and the same instrument.
-14-
NY02/231895.4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
DATA ARTS & SCIENCES, INC.
By:__________________________
Name:
Title:
EMPLOYEE:
--------------------------
John C. Travers
COTELLIGENT GROUP, INC.
By:__________________________
Name:
Title:
-15-
NY02/231895.4
<PAGE>
Exhibit 21
Cotelligent Group Inc.
Post Effective Amendment to
Form S-1 on Form S-4
The following is a listing of all subsidiaries of Cotelligent Group Inc. All
subsidiaries are wholly-owned as of February 28, 1997.
BFR Co., Inc
Chamberlain Associates, Inc.
Data Arts & Sciences, Inc.
ESP Software Services, Inc.
Financial Data Systems, Inc.
INNOVA Solutions, Inc.
JasTech, Inc.
Data Processing Personnel, Inc.
Pittsburg Business Consultants, Inc.
TRC Computers, Inc.
United Data Processing, Inc.
<PAGE>
Exhibit 23.1
Consent of Independent Accountants
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Cotelligent Group, Inc. of our reports as of the dates,
and related to the financial statements of the companies, listed below which
appear in the Company's Annual Report on Form 10-K for the year ended March 31,
1996:
<TABLE>
<CAPTION>
Company Date
- - ------------------------------- --------------
<S> <C>
Combined Predecessor Companies April 20, 1996
Combined Predecessor Companies April 20, 1996
Financial Data Systems Inc. April 20, 1996
BFR Co., Inc. April 20, 1996
Data Arts & Sciences, Inc. April 20, 1996
Chaberlain Associates, Inc. April 29, 1996
</TABLE>
We also consent to the reference to us under the heading "Selected Financial
Data" in the Company's Annual Report on Form 10-K. However, it should be noted
that Price Waterhouse LLP has not prepared or certified such "Selected Financial
Data."
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Cotelligent Group, Inc. of our reports as of the dates,
and related to the financial statements of the companies listed below which
appear in the Company's Current Report on Form 8-K/A dated September 11, 1996:
<TABLE>
<CAPTION>
Company Date
- - ------------------------------- --------------
<S> <C>
ESP Software Services, Inc. July 23, 1996
INNOVA Solutions July 1, 1996
</TABLE>
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Cotelligent Group, Inc. of our report dated October 11,
1996 for the financial statements of JasTech, Inc. which appears in the
Company's Current Report on Form 8-K/A dated December 12, 1996.
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Cotelligent Group, Inc. of our report dated October 11,
1996 for the financial statements of Pittsburgh Business Consultants, Inc. which
appears in the Company's Current Report on Form 8-K/A dated February 10, 1996.
<PAGE>
We herby consent to the incorporation by reference in this Registration
Statement on Form S-4 of Cotelligent Group, Inc. of our report dated April 20,
1996, except as to the pollings of interests with ESP Software Services, Inc.
and INNOVA Solutions, Inc. which are as of June 28, 1996, the poolings of
interest with JasTech, Inc. which is as of September 30, 1996, and the pooling
of interests with Pittsburgh Business Consultants, Inc. which is as of November
27, 1996, which appear in the Company's Current Report on Form 8-K dated
March 18, 1997.
We also consent to the references to us under the heading "Experts."
Price Waterhouse LLP
Minneapolis, Minnesota
March 19, 1997
