As filed with the Securities and Exchange Commission on May 29 , 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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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 of Industrial Classification Identification
incorporation or Code Number) 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)
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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)
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Copy to:
Daniel E. Jackson, Esq. David W. Pollak, Esq.
Cotelligent Group, Inc. Morgan, Lewis & Bockius LLP
101 California Street, Suite 2050 101 Park Avenue
San Francisco, California 94111 New York, New York 10178
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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|
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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. |_|
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<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
====================================================================================================================================
Amount To Be Proposed Maximum Proposed Maximum Amount of
Title of Each Class of Registered Offering Price Per Unit(1) Aggregate Offering Price(1) Registration Fee
Securities to be Register
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<S> <C> <C> <C> <C>
Common Stock, $.01 par value.............4,000,000 $19.50 $78,000,000 $15,600
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(1) Estimated solely for purposes of calculating the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, and based
on the average high and low sale prices of the Common Stock reported on the New
York Stock Exchange on May 27 , 1998.
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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, as amended, or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
PROSPECTUS
SUBJECT TO COMPLETION, DATED MAY 29, 1998
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.
4,000,000 Shares
COTELLIGENT GROUP, INC.
Common Stock
This Prospectus covers 4,000,000 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 New York Stock Exchange.
On May 27 , 1998, the closing price of the Common Stock of the Company on the
New York Stock Exchange was $19.50 per share as published in The Wall Street
Journal on May 28 , 1998.
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 7 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 May 29, 1998
NY02A/214177.3
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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 New York Stock Exchange. Proxy statements
and other information concerning the Company can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
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 Quarterly Report on Form 10-Q for the fiscal
quarter ended December 31, 1997, as filed with the Commission
on February 18, 1998;
2. The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended September 30, 1997, as filed with the Commission
on November 15, 1997;
3. The Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended June 30, 1997, as filed with the Commission
on August 15, 1997;
4. The Company's Annual Report on Form 10-K for the Company's
fiscal year ended March 31, 1997, as filed with the
Commission on June 30, 1997 (excluding the financial
statements included in such Annual Report);
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5. The Company's Current Reports on Form 8-K as filed with the
Commission on September 24, 1997, October 28, 1997, January
16, 1998 (as amended on January 23, 1998), February 4, 1998,
March 2, 1998 (including the financial statements included
therein) and March 11, 1998; and
6. 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 February
18, 1998.
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
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.
NY02A/214177.3
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THE COMPANY
Cotelligent Group, Inc. ("Cotelligent" or the "Company") is a software
professional services firm providing information technology ("IT") consulting
services, including staff augmentation, project management and outsourcing
services, to businesses with complex IT operations. The Company operates offices
in 22 metropolitan areas across the United States. The Company provides its
clients with IT professionals who are proficient in a wide variety of hardware
and software platforms. Cotelligent's IT professionals are primarily billed on a
time and materials basis and offer clients specialized expertise in
implementation services including applications design, programming, development
and maintenance, client/server design and development, systems software design,
systems engineering, systems integration, intranet/internet design and
development and network design and management services. At December 31, 1997,
the Company had approximately 2,700 employees, including a technical staff of
approximately 2,200 IT professionals, providing services to approximately 550
clients across a broad spectrum of commercial industries throughout the United
States, including telecommunications, technology and financial services. The
Company's clients include AT&T Corp., AT&T Wireless Services, Bell
Communications Research, Cargill Financial Services Corp., Frito-Lay, JC Penney,
Inc., Liberty Mutual Insurance Co., Lucent Technologies Inc., MCI Communications
Corporation, Mercantile Bankshares Corporation, Microsoft Corporation, Monsanto
Company, Office Depot, Inc., Pacific Bell and US West, Inc.
The IT consulting services industry is expected to experience continued
growth over the next several years. According to Dataquest estimates, United
States spending for IT professional services (excluding training and education)
will be approximately $68 billion in 1998 and is projected to grow at a compound
annual growth rate of 14% through 2000. This increased demand for IT consulting
services is largely fueled by: (i) increasing pressure on businesses to generate
timely, accurate business information; (ii) the proliferation of more powerful
and less expensive computer hardware/software; (iii) the trend away from
centralized mainframes and custom applications to personal computer-driven
systems, employing a broad range of complex software applications; and (iv) the
emergence of the Year 2000 issue, which has caused companies to seek out and
implement more advanced IT systems and solutions. As a result, businesses have
invested, and are likely to continue to invest, significant amounts of capital
to build, support and update their IT infrastructures. Concurrent with this
increase in IT-related expenditures, competition has pressured corporations to
reduce or eliminate costs unrelated to core operational competencies. As such,
businesses are increasingly turning to IT consulting services companies such as
Cotelligent to help them appropriately staff and manage a wide array of IT
consulting and support needs. By contracting with Cotelligent, corporations can
access skilled IT professionals on an "as-needed" basis, converting their fixed
labor costs into variable costs and reducing their costs of recruiting, hiring,
training and terminating permanent employees.
The Company's goal is to be a leading nationwide provider of IT
consulting services, including staff augmentation, project management and
outsourcing services, to businesses with complex IT operations. To accomplish
this goal, the Company has implemented a business strategy consisting of two
distinct components. First, the Company has adopted an operating strategy for
internal growth by: (i) creating an infrastructure to effectively recruit and
retain qualified IT professionals; (ii) leveraging its local client
relationships in a coordinated effort to provide services on a national scope to
its larger accounts; (iii) operating with a decentralized management structure
to foster an environment in which "best practices" are shared on a Company-wide
basis, allowing successful strategies to be implemented at various operating
locations; (iv) leveraging the Cotelligent brand by transitioning from the local
names of the operating units to Cotelligent's national identity; and (v)
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 business strategy, the Company intends to
broaden the geographic and technical scope of its operations by acquiring
established firms that offer complementary IT consulting services in new or
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existing regions and that will expand the depth and breadth of services provided
to clients. The IT consulting industry is highly fragmented. According to INPUT,
an international research firm, approximately 3,500 IT consulting services
businesses with annual revenues in excess of $1 million provide services and
expertise in the United States. As a result of this fragmentation, the IT
consulting services industry has recently experienced consolidation as smaller,
regional firms have become less able to effectively compete with larger,
national IT consulting services firms which often possess greater access to
capital and IT professionals as well as the service capabilities required to
serve large companies that are consolidating their vendor lists. To capitalize
on this industry fragmentation and trend towards consolidation, the company has
developed an acquisition strategy based on a philosophy to: (i) purchase local
or regional IT consulting services firms with successful, proven operating
models; (ii) allow the acquired company to operate in a manner consistent with
its historical practice and as dictated by local market conditions, rather than
converting the operations to a standardized national business model; and (iii)
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.
In February 1996, the Company acquired, simultaneously with the closing of
its initial public offering (the "IPO"), four established providers (the
"Initially Acquired Companies") of IT consulting services to serve as a
foundation to execute its growth strategy. Since the IPO, the Company has
acquired sixteen additional IT consulting services firms (the "Subsequent
Acquisitions") which have strengthened the Company's operations by diversifying
its base of Fortune 1000 clients, expanding its national presence, broadening
its nationwide resource pool and client base and increasing the Company's
capabilities and expertise.
The Company was incorporated in February 1993 under the laws of the State
of California as TSX, a California corporation. In November 1995, the Company
changed its jurisdiction of incorporation to Delaware and its name to
Cotelligent Group, Inc. Unless the context otherwise requires, references in
this Prospectus to the " Company" and to "Cotelligent" refer to TSX, a
California corporation, and Cotelligent Group, Inc., a Delaware corporation.
The Company's executive offices are located at 101 California Street,
Suite 2050, San Francisco, California 94111 and its telephone number is (415)
439-6400.
NY02A/214177.3
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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 within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, and are intended to be covered by
the safe harbors created thereby. 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.
Dependence on Availability of Qualified Technical Consultants
The Company is dependent upon its ability to attract, hire and retain
IT professionals who possess the skills and experience necessary to meet the
service requirements of its clients. The Company must continually identify,
screen and retain qualified IT professionals to keep pace with increasing client
demand for rapidly evolving technologies and changing client needs. Further,
many of the IT professionals provided by the Company to its clients are not
committed to provide their services exclusively to the Company. The Company
competes 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
staffing companies. In the past, the Company has experienced difficulties in
identifying and retaining qualified IT professionals and has therefore been
unable in certain instances to fill requests for services from clients. There
can be no assurance that qualified IT professionals will be available to the
Company in sufficient numbers. An inability to locate, retain and successfully
place qualified IT professionals to fill client requests could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Integration of Operating Units
Prior to February 20, 1996, the date of the IPO, Cotelligent was a
non-operating entity and generated no revenue. Since the IPO, the Company has
acquired the Subsequent Acquisitions, eight of which were acquired in the fiscal
year ended March 31, 1997 and eight of were acquired in the fiscal year ended
March 31, 1998. There can be no assurance that the Company will be able to
successfully integrate its operating units on an economic or operational basis
or that the Company's 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 operating
units 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.
In addition, the Company intends to expand its business through the
acquisition of additional IT consulting services businesses. There can be no
assurance that the Company will be able to successfully integrate acquired
businesses, if any, into the Company's infrastructure without substantial costs,
delays or other operational or financial problems. Further, the Company's
ability to manage future growth will depend significantly upon the Company's
ability to integrate its operating units and any acquired businesses and develop
Company-wide systems and operating procedures. An inability of the Company to
successfully integrate the operating units or any acquired businesses would have
a material adverse effect on the Company's business, financial condition and
results of operations.
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Reliance on and Retention of Key Management
The Company's operations are dependent on the continued efforts of its
executive officers and on the senior management of the operating units. 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 any specified period. The Company
also expects that in order to pursue its operating 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 operating
units. 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 businesses or prospects could be adversely affected.
The Company does not maintain key man life insurance covering any of its
executive officers or other members of senior management.
Pricing and Margin Pressure
Many of the Company's larger clients purchase IT services primarily
from a limited number of pre-approved vendors. In order to remain on its
clients' vendor lists and to develop new client relationships, the Company must
satisfy client requirements at competitive rates. Although the Company
continually attempts to lower its costs, there are other IT consulting services
organizations and temporary placement agencies that provide the same or similar
services at equal or lower costs. Furthermore, as competition intensifies
between IT consulting services providers, there may be increased demand for
qualified IT professionals resulting in upward market pressure on compensation
rates. Additionally, certain of the Company's clients require that their vendors
reduce rates after services have commenced. There can be no assurance that the
Company will be able to compete effectively on pricing or other requirements
and, as a result, the Company could lose clients or be unable to maintain
historical gross profit levels or to operate profitably.
Competition
The IT consulting services industry is highly competitive, fragmented
and subject to rapid change. There are numerous companies engaged in the
Company's business, many of which have greater technical, financial or marketing
resources than the Company. Competition in the IT consulting services industry
includes 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. 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 markets 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, the Company may lose its existing clients or have difficulty acquiring
new clients. There can be no assurance that the Company will be able to compete
effectively against present and future competitors or that competitive pressures
will not have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, the Company competes for
qualified IT professionals 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.
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Risks Related to Acquisitions
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, if any, without substantial costs, delays or other operational or
financial problems. Acquisitions may also involve a number of specials risks,
including diversion of management's attention, failure to retain key acquired
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. 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 effect 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.
Need for Acquisition Financing
The Company currently intends to finance future acquisitions by using cash,
notes and/or shares of its Common Stock for all or a portion of the
consideration to be paid. 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
execute 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 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, which may have an adverse effect on the future prospects of the
Company. The Company has a $40.0 million syndicated revolving line of credit
facility (the "Credit Line") available for working capital and other general
corporate purposes, which may include acquisitions. There can be no assurance,
however, that the Credit Line will be sufficient for the Company's needs.
Absence of Long-Term Contracts; Client Concentration
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. In addition, for the nine months ended December 31, 1997, the Company's
largest client accounted for approximately 8% of the Company's revenues and the
Company's ten largest clients accounted for approximately 31% of the Company's
revenues. 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. 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 IT professionals
or the Company's clients devote substantial resources to such conversions and
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decrease their expenditures on projects worked on by the Company's IT
professionals, the Company's business, financial condition and results of
operations may be materially adversely affected.
Possible Fluctuation of Results and Volatility of Stock Price
The Company's revenues, gross margins and operating margins for any
particular quarter are generally affected by business mix and billing rates,
resource requirements, marketing activities, retention rates and the timing and
size of client projects. 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.
Project Risks
The Company's IT professionals are often deployed 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 actions taken by
its IT professionals 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.
Anti-Takeover Provisions
The Company has a stockholder rights plan in effect (the "Rights
Plan"). Under the terms of the Rights Plan, the holders of the Common Stock
received one preferred share purchase right (each, a "Right"), as a dividend for
each share of Common Stock held as the close of business on September 24, 1997.
Each Right entitles the holder to buy 1/10,000 of a share of Series A Junior
Participating Preferred Stock of the Company at an exercise price of $90.00.
Further, each Right gives the holder the right to buy one share of Common Stock
of the Company having twice the value of the exercise price of the Rights if a
person or group acquires beneficial ownership of 20% or more of the Common Stock
or commences a tender or exchange offer that would result in such a person or
group owning 20% or more of the Common Stock. In addition, 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 the Rights Plan
and this "blank-check" preferred stock may have the effect of delaying,
discouraging, inhibiting, preventing or rendering more difficult 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.
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USE OF PROCEEDS
This Prospectus relates to shares of Common Stock of the Company which
may be offered and issued by the Company from time to time in connection with
the acquisition of other businesses or properties, and upon exercise or
conversion of, warrants, options, convertible debentures or other similar
instruments issued by the Company from time to time in connection with any such
acquisition. Other than the businesses or properties acquired, there will be no
proceeds to the Company from these offerings.
OUTSTANDING SECURITIES COVERED BY THIS PROSPECTUS
This Prospectus, as appropriately amended or supplemented, may be used
from time to time by persons who have received shares of Common Stock covered by
the Registration Statement in acquisitions of businesses or properties by the
Company, or their transferees, and who wish to offer and sell such shares (such
persons are herein referred to as the "Selling Stockholder" or "Selling
Stockholders") in transactions in which they and any broker-dealer through whom
such shares are sold may be deemed to be underwriters within the meaning of the
Act. The Company may consent to the use of this Prospectus for a limited period
of time by the Selling Shareholders, subject to limitations and conditions which
may be varied by agreement between the Company and the Selling Stockholders.
The Company will receive none of the proceeds from any such sales. Any
commissions paid or concessions allowed to any broker-dealer, and, if any
broker-dealer purchases such shares as principal, any profits received on the
resale of such shares, may be deemed to be underwriting discounts and
commissions under the Act. Printing, certain legal, filing and other similar
expenses of this offering will be paid by the Company. Selling Stockholders will
bear all other expenses of this offering, including any brokerage fees,
underwriting discounts or commissions.
There presently are no arrangements or understandings, formal or
informal, pertaining to the distribution of the shares as described herein. Upon
the Company's being notified by a Selling Stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
through a block trade, special offering, exchange distribution or secondary
distribution, a supplemented Prospectus will be filed, pursuant to Rule 424(b)
under the Act, setting forth (i) the name of each Selling Stockholder and of the
participating broker-dealer(s), (ii) the number of shares involved, (iii) the
price at which such shares were sold, (iv) the commissions paid or discounts or
concessions allowed to such broker-dealer(s), where applicable, (v) that such
broker-dealer(s) did not conduct any investigation to verify the information set
out in this Prospectus and (vi) other facts material to the transaction.
Selling Stockholders may sell the shares being offered hereby from time
to time in transactions (which may involve crosses and block transactions) on
the New York Stock Exchange or such other securities exchange on which the
Company's Common Stock may be listed, in negotiated transactions or otherwise,
at market prices prevailing at the time of sale or at negotiated prices. Selling
Stockholders may sell some or all of the shares in transactions involving
broker-dealers, who may act solely as agent and/or may acquire shares as
principal. Broker-dealers participating in such transactions as agent may
receive commissions from Selling Stockholders (and, if they act as agent for the
purchaser of such shares, from such purchaser), such commissions computed in
appropriate cases in accordance with the applicable rules of the New York Stock
Exchange or such other securities exchange on which the Company's Common Stock
may be listed, which commissions may be negotiated rates where permissible under
such rules. Participating broker-dealers may agree with Selling Stockholders to
sell a specified number of shares at a stipulated price per share and, to the
extent such broker-dealer is unable to do so acting as agent for Selling
Stockholders, to purchase as principal any unsold shares at the price required
to fulfill the broker-dealer's commitment to Selling Stockholders.
11
<PAGE>
In addition or alternatively, the shares registered hereby may be sold
by Selling Stockholders and/or by or through other broker-dealers in special
offerings, exchange distributions or secondary distributions pursuant to and in
compliance with the governing rules of the New York Stock Exchange or such other
securities exchange on which the Company's Common Stock may be listed, and in
connection therewith, commissions in excess of the customary commission
prescribed by the rules of such securities exchange may be paid to participating
broker-dealers, or, in the case of certain secondary distributions, a discount
or concession from the offering price may be allowed to participating
broker-dealers in excess of such customary commission. Broker-dealers who
acquire shares as principal thereafter may resell such shares from time to time
in transactions (which may involve crosses and block transactions and which may
involve sales to and through other broker-dealers, including transactions of the
nature described in the preceding two sentences) on the New York Stock Exchange
or such other securities exchange on which the Company's Common Stock may be
listed, in negotiated transactions or otherwise, at market prices prevailing at
the time of sale or at negotiated prices, and, in connection with such resales,
may pay to or receive commissions from the purchasers of such shares.
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 May 27, 1998, the
Company had outstanding 14,096,368 shares of Common Stock and no shares of
Preferred Stock. As of May 27, 1998, there were 109 record holders of Common
Stock. The following summary is qualified in its entirety by reference to the
Compan s Certificate of Incorporation, copies of which are available on request
to the Company.
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. 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 New York Stock Exchange under the
symbol "CGZ".
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,
12
<PAGE>
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.
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.
Stockholder Rights Plan
On September 9, 1997, the Board of Directors declared a dividend
distribution of one right (each, a "Right") for each outstanding share of Common
Stock of the Company to stockholders of record at the close of business on
September 24, 1997. Each Right entitles the registered holder to purchase from
the Company a unit consisting of one one-ten thousandth of a share (a "Unit") of
the Series A Junior Participating Preferred Stock, par value $0.01 per share, of
the Company (the "Preferred Shares"), or a combination of securities and assets
of equivalent value, at a Purchase Price of $90.00 per Unit, subject to
adjustment. The description and terms of the Rights are set forth in a Rights
Plan (the "Rights Plan") between the Company and BankBoston, N.A., a Rights
Agent.
Initially, ownership of the Rights is evidenced by the Common Stock
certificates representing shares then outstanding, and no separate Rights
Certificates will be distributed. The Rights will separate from the Common Stock
and a Distribution Date will occur upon the earlier of (i) 10 days following a
public announcement that a person or group of affiliated or associated persons
(an "Acquiring Person") has acquired, or obtained the right to acquire,
beneficial ownership of 20% or more of the outstanding shares of Common Stock
(the "Stock Acquisition Date"), or (ii) the close of business on such date as
may be fixed by the Board of Directors, which date shall not be more than 65
days following the commencement of a tender offer or exchange offer that would
result in a person or group beneficially owing 20% or more of the outstanding
shares or Common Stock. Until the Distribution Date, (i) the Rights will be
evidenced by the Common Stock certificates and will be transferred with and only
with such Common Stock certificates, (ii) new Common Stock certificates issued
after September 24, 1997 will contain a notation incorporating the Rights Plan
by reference and (iii) the surrender for transfer of any certificates for Common
Stock outstanding will also constitute the transfer of the Rights associated
with the Common Stock represented by such certificate.
Except in the circumstances described below, after the Distribution Date
each Right will be exercisable into one one-ten thousandth of a Preferred Share
(a "Preferred Share Fraction"). Each Preferred Share Fraction carries voting and
dividend rights that are intended to produce the equivalent of one share of
Common Stock. The voting and dividend rights of the Preferred Shares are subject
to adjustment in the event of dividends, subdivisions and combinations with
respect to the Common Stock of the Company. In lieu of issuing certificates for
Preferred Share Fractions which are less than an integral multiple of one
Preferred Share (i.e. 10,000 Preferred Share Fractions), the Company may pay
cash representing the current market value of the Preferred Share Fractions.
In the event that at any time following the Stock Acquisition Date, (i)
the Company is the surviving corporation in a merger with an Acquiring Person
and its Common Stock remain outstanding, (ii) a Person becomes the beneficial
13
<PAGE>
owner of more than 20% of the then outstanding Common Stock other than pursuant
to a tender offer that provides fair value to all stockholders, (iii) an
Acquiring Person engages in one or more "self-dealing" transactions as set forth
in the Rights Plan, or (iv) during such time as there is an Acquiring Person an
event occurs that results in such Acquiring Person's ownership interest being
increased by more than 1% (e.g., a reverse stock split), each holder of a Right
will thereafter have the right to receive, upon exercise, Common Stock (or, in
certain circumstances, cash, property or other securities of the Company) having
a value equal to two times the exercise price of the Right. In lieu of requiring
payment of the Purchase Price upon exercise of the Rights following any such
event, the Company may permit the holders simply to surrender the Rights, in
which event they will be entitled to receive Common Stock (and other property,
as the case may be) with a value of 50% of what could be purchased by payment of
the full Purchase Price. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in clause (i), (ii), (iii) or (iv) of
this paragraph, all Rights that are, or (under certain circumstances specified
in the Rights Plan) were, beneficially owned by any Acquiring Person who was
involved in the transaction giving rise to any such event will be null and void.
However, Rights are not exercisable following the occurrence of any of the
events set forth above until such time as the Rights are no longer redeemable by
the Company as set forth below.
In the event that, at any time following the Stock Acquisition Date,
(i) the Company is acquired in a merger or other business combination
transaction in which the Company is not the surviving corporation (other than a
merger that is described in, or that follows a tender offer or exchange offer
described in, the second preceding paragraph), or (ii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights that previously have been voided as set forth above) shall
thereafter have the right to receive, upon exercise, common shares of the
acquiring company having a value equal to two times the exercise price of the
Right. Again, provision is made to permit surrender of the Rights in exchange
for one-half of the value otherwise purchasable. The events set forth in this
paragraph and in the second preceding paragraph are referred to as the
"Triggering Events."
At any time until ten days following the Stock Acquisition Date, the
Company may redeem the Rights in whole, but not in part, at a price of $0.01 per
Right. That ten day redemption period may be extended by the Board of Directors
so long as the Rights are still redeemable. Under certain circumstances set
forth in the Rights Plan, the decision to redeem will require the concurrence of
a majority of the Continuing Directors (as defined in the Rights Plan).
Immediately upon the action of the Board of Director ordering redemption of the
Rights, with, where required, the concurrence of the Continuing Directors, the
Rights will terminate and the only right of the holders of Rights will be to
receive the $0.01 redemption price.
This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Right Plan, which has been
filed with the Securities and Exchange Commission (the "Commission") and is
incorporated herein by reference.
Transfer Agent and Registrar
The Transfer Agent and Registrar for the Common Stock is The First
National Bank of Boston.
NY02A/214177.3
14
<PAGE>
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 Financial Statements incorporated by reference in this Registration
Statement, to the extent and for the periods indicated in the reports, have been
audited by Arthur Andersen LLP, independent public accountants, and are included
herein in reliance upon the authority of said firm as experts in giving said
reports.
NY02A/214177.3
15
<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
-------------------------
Page
Available Information...............................3
Incorporation of Certain Documents by Reference.....3
The Company.........................................5
Risk Factors........................................7
Use of Proceeds....................................10
Outstanding Securities.............................10
Description of Capital Stock.......................12
Plan of Distribution...............................15
Legal Matters......................................15
Experts............................................15
4,000,000 SHARES
COTELLIGENT GROUP, INC.
COMMON STOCK
May 29, 1998
16
<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.
The Company maintains liability insurance for the benefit of its
directors and officers.
Item 21. Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
4.1 Form of certificate evidencing ownership of Common Stock of the Registrant (Exhibit 4.1 of
the Registration Statement on Form S-1 (File No. 33-80267) is hereby incorporated by
reference)
4.2 Form of Rights Certificate (Exhibit B to Exhibit 4.1 of the Registration Statement on Form
S-1 (File No. 33-80267) is hereby incorporated by reference)
II-2
<PAGE>
5.1 Opinion of Morgan, Lewis & Bockius LLP*
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)*
24 Power of Attorney (included with the signature page hereof)*
</TABLE>
----------------
* File herewith
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
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
II-3
<PAGE>
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 (5) 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-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has duly
caused this Registration Statement on Form S-4 to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of San Francisco,
California, on this 29 day of May, 1998.
COTELLIGENT GROUP, INC.
By:
--------------------------------
James R. Lavelle
Chairman of the Board and
Chief Executive Officer
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated. Each person whose signature appears below
hereby authorizes and constitutes James R. Lavelle, Michael L. Evans Daniel E.
Jackson and Herbert D. Montgomery, and each of them singly, his true and lawful
attorneys-in-fact with full power of substitution and resubstitution for him and
in his name, place and stead, in any and all capacities (including his capacity
as a director and/or officer of Cotelligent Group, Inc.) to sign and file any
and all amendments to this report with all exhibits thereto, and other documents
in connection therewith with the Securities and Exchange Commission, and he
hereby ratifies and confirms as all that said attorneys-in-fact or any of them,
or this or his substitutes, may lawfully do or cause to be done by virtue
hereof.
<TABLE>
<S> <C> <C>
Signature Capacity In Which Signed Date
/s/ James R. Lavelle Chairman of the Board and May 29, 1998
- ------------------------- Chief Executive Officer (Principal
James R. Lavelle Executive Officer)
/s/ Edward E. Faber Vice Chairman of the Board May 29, 1998
- --------------------------
Edward E. Faber
/s/ Michael L. Evans President and Chief Operating Officer May 29, 1998
- --------------------------- and Director
Michael L. Evans
/s/ Herbert D. Montgomery Senior Vice President, Chief May 29, 1998
- ---------------------------- Financial Officer and Treasurer
Herbert D. Montgomery (Principal Financial Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<S> <C> <C>
Signature Capacity In Which Signed Date
/s/ Curtis J. Parker Vice President, Chief Accounting May 29, 1998
- ----------------------------- Officer (Principal Accounting
Curtis J. Parker Officer)
/s/ Susan E. Trice Director May 29, 1998
- ------------------------------
Susan E. Trice
/s/ John E. Chamberlain Director May 29, 1998
- -------------------------------
John E. Chamberlain
/s/ Anthony M. Frank Director May 29, 1998
- --------------------------------
Anthony M. Frank
/s/ B. Tom Green Director May 29, 1998
- --------------------------------
B. Tom Green
/s/ Harvey L. Poppel Director May 29, 1998
- --------------------------------
Harvey L. Poppel
/s/ Jeffrey J. Bernardis Director May 29, 1998
- --------------------------------
Jeffrey J. Bernardis
/s/ Daniel M. Beals Director May 29, 1998
- ---------------------------------
Daniel M. Beals
</TABLE>
II-6
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
<S> <C>
4.1 Form of certificate evidencing ownership of Common Stock of the Registrant (Exhibit 4.1 of
the Registration Statement on Form S-1 (File No. 33-80267) is hereby incorporated by reference)
4.2 Form of Rights Certificate (Exhibit B to Exhibit 4.1 of the Registration Statement on Form
S-1 (File No. 33-80267) is hereby incorporated by reference)
5.1 Opinion of Morgan, Lewis & Bockius LLP*
23.1 Consent of Arthur Andersen LLP*
23.2 Consent of Morgan, Lewis & Bockius LLP (contained in Exhibit 5.1)*
24 Power of Attorney (included with the signature page hereof)*
</TABLE>
----------------
* File herewith
NY02A/214177.3
II-7
[Letterhead of Morgan, Lewis & Bockius LLP]
101 Park Avenue
New York, NY 10178-0600
212-309-6000
Fax: 212-309-6273
May 29, 1998
Cotelligent Group, Inc.
101 California Street
Suite 2050
San Francisco, CA 94111
Re: Shelf Registration Statement on Form S-4
Ladies and Gentlemen:
We have acted as counsel to Cotelligent Group, Inc., a Delaware
corporation (the "Company"), in connection with the filing of a Registration
Statement on Form S-4, including the exhibits thereto (the "Registration
Statement"), under the Securities Act of 1933, as amended (the "Act"), for the
registration by the Company of 4,000,000 shares (the "Shares") of Common Stock,
par value $.01 per share, which may be issued from time to time in connection
with the acquisition by the Company of other businesses, 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
("Other Securities") issued by the Company from time to time in connection with
any such acquisition.
In connection with this opinion, we have examined originals, or
copies certified or otherwise identified to our satisfaction, of the
Registration Statement and such other documents and records as we have deemed
necessary. We have assumed that (i) the Registration Statement, and any
amendments thereto, will have become effective; and (ii) all Shares will be
issued in compliance with applicable federal and state securities laws.
With respect to the issuance of any Shares, we have assumed that
the issuance of such Shares will have been duly authorized and, if applicable,
such Shares will have been reserved for issuance upon the exercise or conversion
of Other Securities; and we have further assumed that the Shares will have been
issued, and the certificates evidencing the same will have been duly executed
and delivered, against receipt of the consideration approved by the Company,
which will be no less than the par value thereof.
Based upon the foregoing, we are of the opinion that, upon
issuance, all of the Shares will be duly authorized and validly issued, fully
paid and non-assessable.
The foregoing opinion is limited to the laws of the State of
Delaware.
We consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of our name under the caption "Legal
Matters." In giving this consent, we do not admit that we are acting within the
category of persons whose consent is required under Section 7 of the Act.
Very truly yours,
/s/ Morgan, Lewis & Bockius LLP
MORGAN, LEWIS & BOCKIUS LLP
NY02A/216658.1
<PAGE>
[Letterhead of Arthur Andersen LLP]
As independent public accountants, we hereby consent to the use of our report
dated February 20, 1998 and to all references to our Firm incorporated by
reference in this registration statement.
/s/ Arthur Andersen LLP
San Francisco, California
May 29, 1998
