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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
COTELLIGENT, INC.
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(Name of Registrant as Specified In Its Charter)
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(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
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COTELLIGENT, INC.
101 CALIFORNIA STREET, SUITE 2050
SAN FRANCISCO, CALIFORNIA 94111
-------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD SEPTEMBER 6, 2000
To the Stockholders:
The Annual Meeting of Stockholders of Cotelligent, Inc. ("Cotelligent" or the
"Company") will be held at the Hyatt Regency in San Francisco, California on the
6th day of September at 9:00 a.m., Pacific Daylight Savings Time, for the
following purposes:
1. To elect three Directors, each to serve for the terms specified
in the attached proxy statement or until his or her successor is
elected and qualified.
2. To approve increasing the number of shares of Common Stock
available for purchase by employees under the Cotelligent, Inc.
Employee Stock Purchase Plan from 300,000 to 950,000 shares of
Common Stock.
3. To consider and act on the appointment of Arthur Andersen LLP as
the Company's independent certified public accountants.
4. To transact such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record as of the close of business on July 21, 2000 are
entitled to receive notice of and to vote at the meeting. A list of such
stockholders shall be open to the examination of any stockholder, for any
purpose germane to the meeting, during ordinary business hours, for a period of
ten days prior to the meeting, at the principal executive offices of the
Company, 101 California Street, Suite 2050, San Francisco, California 94111.
By Order of the Board of Directors
Lorraine E. Vega
Secretary
San Francisco, California
July 28, 2000
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO FILL
IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES OF
COMMON STOCK PERSONALLY EVEN IF YOU HAVE PREVIOUSLY SUBMITTED A PROXY.
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COTELLIGENT, INC.
101 CALIFORNIA STREET, SUITE 2050
SAN FRANCISCO, CALIFORNIA 94111
----------------------
PROXY STATEMENT
----------------------
INTRODUCTION
The accompanying Proxy is solicited by and on behalf of the Board of Directors
of Cotelligent, Inc., a Delaware corporation (the "Company" or "Cotelligent"),
for use only at the 2000 Annual Meeting of Stockholders (the "Annual Meeting")
to be held at the Hyatt Regency in San Francisco, California on the 6th day of
September, 2000 at 9:00 a.m., Pacific Daylight Savings Time, and at any
adjournment thereof. The approximate date on which this Proxy Statement and
accompanying Proxy will first be given or sent to stockholders is August 5,
2000.
Each Proxy executed and returned by a stockholder may be revoked at any time
thereafter by written notice to that effect to the Company, attention of the
Secretary, before the Annual Meeting, or to the Secretary or the Inspectors of
Election at the Annual Meeting, or by execution and return of a later-dated
Proxy, except as to any matter voted upon before such revocation.
Proxies in the accompanying form will be voted in accordance with the
specifications made and, where no specifications are given, such Proxies will be
voted:
. FOR the election as Directors of the nominees named herein, and if
any one or more of such nominees should become unavailable for
election for any reason then FOR the election of any substitute
nominee that the Board of Directors of the Company may propose;
. FOR the increase in the number of shares of Common Stock available
for purchase by employees under the Cotelligent, Inc. Employee Stock
Purchase Plan from 300,000 to 950,000 shares; and
. FOR the appointment of Arthur Andersen LLP as the Company's
independent certified public accountants.
In the discretion of the proxy holders, the Proxies will also be voted FOR or
AGAINST such other matters as may properly come before the meeting. Management
of the Company is not aware of any other matters to be presented for action at
the meeting.
RECORD DATE AND VOTING SECURITIES
The Board of Directors has fixed the close of business on July 21, 2000 as the
record date for the determination of stockholders entitled to receive notice of
and to vote at the Annual Meeting. The outstanding stock of the Company on July
21, 2000 consisted of 15,199,082 shares of Common Stock, par value $.01 per
share (the "Common Stock"), each of which is entitled to one vote. Shares of
Common Stock held by the Company are not voted.
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The presence, in person or by Proxy, of the holders of a majority of the
shares of Common Stock of the Company entitled to vote at the Annual Meeting
will constitute a quorum for the transaction of business at such meeting.
Abstentions and broker non-votes will be counted for purposes of determining the
presence or absence of a quorum.
Assuming a quorum, the nominees receiving a plurality of the votes of the
shares of the Common Stock present in person or by Proxy at the Annual Meeting
and entitled to vote on the election of directors will be elected as directors.
The proposal to approve the increase in the number of shares of Common Stock
available for purchase by employees under the Cotelligent, Inc. Employee Stock
Purchase Plan requires the affirmative vote of the holders of a majority of the
shares of the Common Stock present in person or by Proxy at the Annual Meeting
and entitled to vote on such proposal. The proposal to approve the appointment
of Arthur Andersen LLP as the Company's independent certified public accounts
requires the affirmative vote of the holders of a majority of the shares of the
Common Stock present in person or by Proxy at the Annual Meeting and entitled to
vote on such proposal.
While there is no definitive statutory or case law authority in Delaware as to
the proper treatment of abstentions and broker non-votes, the Company intends to
apply the principles set forth below.
With regard to the election of directors, only shares that are voted in favor
of a particular director nominee will be counted towards the achievement of a
plurality. Votes that are withheld and broker non-votes, if any, will have no
effect on the outcome of the election of directors.
With regard to the proposal to approve the increase in the number of shares of
Common Stock available for purchase by employees under the Cotelligent, Inc.
Employee Stock Purchase Plan, abstentions will be counted as present in person
or by Proxy and entitled to vote on this proposal and will have the same effect
as a vote against this proposal. Broker non-votes, if any, will not be counted
as present in person or by Proxy and entitled to vote on this proposal and will
not be given effect in determining whether approval by the requisite majority of
the shares has been obtained with respect to this proposal.
With regard to the proposal to appoint Arthur Andersen LLP as the Company's
independent certified public accountants, abstentions will be counted as present
in person or by Proxy and entitled to vote on this proposal and will have the
same effect as a vote against this proposal. Broker non-votes, if any, will not
be counted as present in person or by Proxy and entitled to vote on this
proposal and will not be given effect in determining whether approval by the
requisite majority of the shares has been obtained with respect to this
proposal.
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SECURITY OWNERSHIP OF CERTAIN
BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth as of July 21, 2000 information regarding the
beneficial ownership of the Common Stock of the Company by (i) each person known
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each of the Company's directors, (iii) each named executive officer and each
officer named in the Summary Compensation Table and (iv) all executive officers
and directors as a group. All persons listed have an address c/o the Company's
principal executive offices and have sole voting and investment power with
respect to their shares unless otherwise indicated.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED
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NAME NUMBER PERCENT
---- ----------------- -----------------
<S> <C> <C>
Wellington Management Company, LLP (1)............................... 1,359,400 8.93%
James R. Lavelle (2)................................................. 1,171,975 7.71%
Daniel E. Jackson (3)................................................ 999,473 6.58%
Jeffrey J. Bernardis (4)............................................. 128,520 0.85%
B. Tom Green (5)..................................................... 80,847 0.53%
Harvey L. Poppel (6)................................................. 77,928 0.51%
Anthony M. Frank (5)................................................. 77,156 0.51%
Edward E. Faber (5).................................................. 68,021 0.45%
Curtis J. Parker (7)................................................. 47,069 0.30%
Lorraine E. Vega (8)................................................. 18,750 0.12%
Ralph H. Baxter (9).................................................. 5,000 0.03%
Michael L. Evans (10)................................................ 264,281(10)
Herbert D. Montgomery (11)........................................... 0 0.00%
All executive officers and directors as a group (10 persons) (12).... 2,674,739 17.60%
</TABLE>
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(1) The address of the stockholder is 75 State Street, Boston, Massachusetts,
02109. Data obtained from the stockholder's Schedule 13G/A, filed with the
Securities and Exchange Commission, on February 11, 2000.
(2) Includes 266,667 shares issuable upon exercise of options exercisable
within 60 days from June 30, 2000.
(3) Includes 150,000 shares issuable upon exercise of options exercisable
within 60 days from June 30, 2000.
(4) Includes 6,500 shares issuable upon exercise of options exercisable within
60 days from June 30, 2000.
(5) Includes 25,000 shares issuable upon exercise of options exercisable within
60 days from June 30, 2000.
(6) Includes 15,000 shares issuable upon exercise of options exercisable within
60 days from June 30, 2000.
(7) Includes 44,375 shares issuable upon exercise of options exercisable within
60 days from June 30, 2000.
(8) Includes 18,750 shares issuable upon exercise of options exercisable within
60 days from June 30, 2000.
(9) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days from June 30, 2000.
(10) Mr. Evans resigned as President and Chief Operating Officer on August 31,
1999. The number of shares reported as being beneficially owned by him is
as of the last day of his employment, August 31, 1999. His shareholdings
are not counted toward the number of shares held by all executive officers
and directors as a group.
(11) Mr. Montgomery resigned as Senior Vice President, Chief Financial Officer
and Treasurer on June 30, 1999.
(12) Includes 581,292 shares issuable upon exercise of options exercisable
within 60 days from June 30, 2000.
ELECTION OF DIRECTORS
The number of directors on the Board of Directors is currently fixed at nine.
Pursuant to the Company's Certificate of Incorporation and By-laws, the Board of
Directors is divided into three classes serving staggered three-year terms. One
class of directors is elected at each annual meeting of stockholders to serve
for the following three years. Currently there are three directors whose terms
expire in 2002, two directors whose terms expire in 2001 and three directors
whose terms will expire at the Annual Meeting. The members whose terms expire
at the Annual Meeting are Anthony M. Frank, James R. Lavelle and Ralph H.
Baxter, Jr., who was chosen in March 2000 by the Board to serve for the
remainder of the term of a vacant seat on the Board. The Company's Board of
Directors has nominated Anthony M. Frank, James R. Lavelle and Ralph H. Baxter,
Jr., each to serve for a term expiring at the Annual Meeting in 2003 or until
their successors shall have been duly elected and qualified. The Company's Board
of Directors is searching for an appropriate person to be appointed as the ninth
director who, if located prior to the Annual Meeting in 2001, would serve until
that Annual Meeting. The persons named as proxies in the accompanying proxy, or
their
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substitutes, will vote for such nominees at the Annual Meeting. If, for any
reason not currently known, any nominee is not available for election, another
person or persons who may be nominated will be voted for in the discretion of
the proxy holders.
The following sets forth information concerning each of the nominees for
election to the Board of Directors and each director whose term continues,
including his or her name, age, principal occupation or employment during at
least the past five years and the period during which such person has served as
a director of the Company.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
FOR A THREE YEAR TERM EXPIRING AT THE ANNUAL MEETING IN 2003:
Anthony M. Frank is 69 years old and is a director of the Company. He joined
the Company in that capacity in March 1993. In September 1994 Mr. Frank became
co-founding General Partner and Chairman of Belvedere Capital Partners, the
general partner of the California Community Financial Institutions Fund the
primary purpose of which is investing in California community banks. From 1992
to 1994, Mr. Frank was an independent financial consultant and venture
capitalist. From March 1988 to March 1992, Mr. Frank served as the Postmaster
General of the United States. From 1971 until 1988, he served as Chairman and
Chief Executive Officer of First Nationwide Bank. Mr. Frank is a graduate of
Dartmouth College and was an overseer of the Tuck School of Business. He is also
a director of several companies, including The Charles Schwab Corporation,
Crescent Real Estate Equities Ltd., General American Investors, Temple Inland
Corporation and Bedford Properties Investors.
James R. Lavelle is 49 years old and is the founder, Chairman of the Board and
Chief Executive Officer of the Company. Mr. Lavelle has served as Chief
Executive Officer since he founded the Company in 1993. From inception of the
Company until August 1995, Mr. Lavelle was also Chairman of the Board of the
Company, a position that he reassumed in April 1996. From 1985 to 1993, he was
a business consultant specializing in strategic marketing and organization
development. From 1983 to 1985, Mr. Lavelle was Senior Manager and Director of
Management Consulting Services for the San Francisco office of KMG Main Hurdman,
an international accounting firm. Prior to that, he was Manager, Management
Consulting Services in the San Francisco office of Price Waterhouse LLP, an
international accounting firm. Mr. Lavelle has a bachelors degree from
University of California at Santa Barbara and a Master of Business
Administration degree from University of Santa Clara.
Ralph H. Baxter, Jr. is 53 years old and joined the Company as a director in
March 2000 after having been appointed by the Board of Directors to fulfill the
term of a vacant seat on the Board. Mr. Baxter is Chairman and Chief Executive
Officer of the law firm of Orrick, Herrington & Sutcliffe, LLP. Mr. Baxter
serves on a number of advisory boards, including the Dean's Committee for
International Development of the Kennedy School of Government, Harvard
University, and the Executive Committee of the San Francisco Partnership, a
business and government alliance dedicated to advancing economic growth and
development in the City and County of San Francisco. A 1974 graduate of the
University of Virginia School of Law, Mr. Baxter served on the Editorial Board
of the Virginia Law Review and now serves on the University's Dean's Council. He
received an A.B. degree from Stanford University in 1968 and an M.A. degree from
Catholic University in 1970.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE COMPANY'S STOCKHOLDERS
VOTE FOR THE ELECTION OF ANTHONY M. FRANK, JAMES R. LAVELLE AND RALPH H. BAXTER,
JR. AS DIRECTORS OF THE COMPANY.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
MEMBERS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2001:
Jeffrey J. Bernardis is 43 years old and is a director of the Company. He
joined the Company in that capacity in August 1995. Since May 2000, Mr.
Bernardis has been the Vice President of Wireless
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Applications. From September 1999 until May 2000, he served as the Company's
Vice President of Strategy and Planning. In February 1999, he became the Vice
President of the Company's Technology Solutions practice and served in that
capacity until September 1999. From January 1995 until February 1999, Mr.
Bernardis served as President of BFR Co., Inc. ("BFR"), which was a wholly-owned
subsidiary of the Company until its merger into Cotelligent USA, Inc., another
wholly-owned subsidiary of the Company, in March 1999. Prior thereto, Mr.
Bernardis had served since 1985 as Vice President of Technical Services for BFR.
Mr. Bernardis received a bachelor of science degree in computer science from
Pennsylvania State University.
B. Tom Green is 58 years old and is a director of the Company. He joined the
Company in that capacity in March 1993. In 1998, Mr. Green co-founded Employee
Service.com, an outsourcer of HR services. Mr. Green is President of Sovus
Partners, a firm that creates and operates American-Russian businesses in
Russia. From 1982 to 1988, he worked on a voluntary basis with the United
States government to improve diplomatic relations with the Soviet Union. Prior
to 1982, Mr. Green's positions included General Manager of Transamerica's
Southern California Title Insurance division and President of General Mills'
first restaurant division. Mr. Green received a bachelor's degree in civil
engineering from Stanford University and a Master of Business Administration
degree from the Stanford Graduate School of Business.
MEMBERS WHOSE TERMS EXPIRE AT THE ANNUAL MEETING IN 2002:
Edward E. Faber is 67 years old and is Vice Chairman of the Board of Directors
of the Company. Mr. Faber joined the Company as a director in March 1993 and
served as Chairman from August 1995 to April 1996. From 1990 through 1992, he
was Vice Chairman, President and Chief Executive Officer of Supercuts, Inc., a
company specializing in hairstyling. Mr. Faber was founding President and Chief
Executive Officer of Computerland Corporation ("Computerland"), a company
specializing in the sale of computer equipment and accessories, from 1976
through 1983. He retired from Computerland in 1983 and returned in 1985 as
Chairman of the Board and Chief Executive Officer, serving in that capacity
until 1987 when he again retired. Mr. Faber is a director of Discover Resorts,
Inc., Employer Services.com and Outdoor Broadcasting TV.com. Mr. Faber has a
bachelor of science degree from Cornell University and served as an officer in
the United States Marine Corps.
Harvey L. Poppel is 62 years old and is a director of the Company. He joined
the Company in that capacity in October 1995. From 1985 to December 1996, Mr.
Poppel was Managing Director of Broadview Associates, LLC (now Broadview
International, LLC), a firm specializing in mergers and acquisitions in the
information technology field. Mr. Poppel retired from Broadview Associates
effective December 31, 1996. Prior to joining Broadview Associates, LLC, Mr.
Poppel spent 18 years at Booz, Allen & Hamilton, during which time he held a
number of positions, including Senior Vice President and Managing Officer of the
Information Industry Practice and as a member of its board of directors. He is a
director of Larscom, Inc. Mr. Poppel is a Certified Management Consultant and
received a bachelors degree and a Master of Science degree from Rensselaer
Polytechnic Institute.
Daniel E. Jackson is 40 years old and is a director of the Company, as well as
its President and Chief Operating Officer. Mr. Jackson has served as a director
of the Company since September 1999. Mr. Jackson was promoted to the position
of Chief Operating Officer and President in July 2000. Mr. Jackson served as
Executive Vice President, Chief Financial Officer and Treasurer from June 1999
until July 2000. From May 1998 until June 1999, Mr. Jackson served in the
capacities of Executive Vice President, Corporate Development and General
Counsel. Mr. Jackson served as Senior Vice President of Corporate Development
and General Counsel since September 1995, as Secretary from September 1996 until
September 1997 and as Chief Financial Officer from November 1996 until January
1998. From 1994 to 1995, Mr. Jackson served as Vice President and General
Counsel of an affiliate of Notre Venture Capital, Ltd., a partnership
specializing in industry consolidation transactions. Prior thereto, he was
Corporate Counsel and Secretary of Sanifill, Inc., an environmental services
company, from its founding in 1990 through 1994. From 1986 until 1990, Mr.
Jackson was an associate at Morgan, Lewis & Bockius LLP in New York, where he
practiced law in the areas of securities and mergers and acquisitions. Mr.
Jackson received a bachelor of science degree in
5
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business administration from The Ohio State University and a Juris Doctor degree
from the University of Pennsylvania.
OTHER EXECUTIVE OFFICERS OF THE COMPANY
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Jeffrey B. Van Horn ............. 40 Executive Vice President, Chief
Financial Officer and Treasurer
Curtis J. Parker.................. 45 Vice President and Chief Accounting
Officer
Lorraine E. Vega.................. 44 Vice President, General Counsel and
Secretary
</TABLE>
Jeffrey B. Van Horn is 40 years old and joined the Company on July 10, 2000 as
the Executive Vice President, Chief Financial Officer and Treasurer of the
Company. Prior to joining the Company, from June 1998 until February 1999, Mr.
Van Horn was Senior Vice President of Investments and Secretary of AvalonBay
Communities, Inc., an equity real estate investment trust (REIT) in the business
of developing, redeveloping, acquiring and managing multifamily apartment
communities in high barrier-to-entry markets of the United States. Mr. Van Horn
assumed this position upon the merger of Bay Apartment Communities, Inc. and
Avalon Properties, Inc. Prior to the merger, from June 1996 until June 1998,
Mr. Van Horn was the Vice President, Chief Financial Officer, and Treasurer of
Bay Apartment Communities, Inc., and its Secretary from September 1997 until
June 1998. From 1982 to June 1996, Mr. Van Horn was employed by the San
Francisco office of Arthur Andersen LLP, an international accounting firm, and
served as a partner from September 1995 to June 1996. Mr. Van Horn is a
California licensed CPA and a member of both the California Society of CPA's and
the American Institute of Certified Public Accountants. Mr. Van Horn has a
bachelor of arts degree in Business Administration with a concentration in
Accounting from California State University, Stanislaus.
Curtis J. Parker is 45 years old and is Vice President and Chief Accounting
Officer of the Company. Mr. Parker has served as Vice President and Chief
Accounting Officer since November 1996. From January 1996 until March 1996, he
served as a consultant to the Company and was appointed Corporate Controller in
March 1996. From 1988 through 1995, Mr. Parker was employed by Burns Philp Food
Inc., a manufacturer of food products, where he rose to the position of Vice
President - Finance for the Industrial Products Division. Mr. Parker has a
Bachelor of Commerce degree from the University of British Columbia and is a
Certified Public Accountant.
Lorraine E. Vega is 44 years old and is Vice President, General Counsel and
Secretary of the Company. Ms. Vega has served as Vice President and General
Counsel since June 1999. Ms. Vega has announced her resignation from the
Company, which will be effective at the close of business on July 28, 2000.
Ms. Vega served as Corporate Counsel from May 1997 until June 1999, and was
appointed Secretary in September 1997. From April 1989 to April 1997, she was
employed by Burns Philp Inc., a food products manufacturer, where she served as
General Counsel and Secretary to the North American operations from 1991 through
April 1997 and as Director of Taxes from 1989 to 1991. Ms. Vega has a bachelor
of science degree in accounting from the University of San Diego and a Juris
Doctor degree from St. John's University School of Law.
BOARD ORGANIZATION AND COMMITTEES
During the fiscal year ended March 31, 2000, the Board held nine meetings.
Each of the Directors attended at least 75% of the meetings of the Board and the
committees on which he or she served during the fiscal year ended March 31,
2000.
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The Board of Directors has established committees to perform certain of its
functions, including the Audit Committee, the Compensation Committee and the
Executive Committee. The functions of each of these committees, and its members,
are set forth below.
AUDIT COMMITTEE
The Audit Committee reviews the internal controls of the Company, the
objectivity of its financial reporting and the environmental standards and
controls of the Company and meets with appropriate Company financial personnel
and the Company's independent certified public accountants in connection with
these reviews. The Audit Committee also recommends to the Board the appointment
of independent certified public accountants to serve as auditors for the
following year. During the fiscal year ended March 31, 2000 the Audit Committee
met five times. The Audit Committee currently consists of B. Tom Green, Edward
E. Faber and Harvey L. Poppel.
COMPENSATION COMMITTEE
The Compensation Committee advises and makes recommendations to the Board with
respect to salaries and bonuses to be paid to officers and other employees of
the Company. The Compensation Committee also administers the Company's 1998
Long-Term Incentive Plan. During the fiscal year ended March 31, 2000, the
Compensation Committee met six times. The Compensation Committee currently
consists of Ralph H. Baxter, Jr., Edward E. Faber and Anthony M. Frank.
EXECUTIVE COMMITTEE
The Executive Committee serves as the nominating committee of the Board and
generally handles other matters that are time critical and cannot be handled in
a reasonable manner by the entire Board. The Executive Committee reviews the
size and composition of the Board of Directors, apportions the directors into
classes and makes recommendations with respect to nominations for election of
directors. The Executive Committee will consider recommendations from
stockholders for nominees to serve as directors if such proposals are submitted
in writing to the Company, 101 California Street, Suite 2050, San Francisco,
California 94111, Attention: Executive Committee. During the fiscal year ended
March 31, 2000, this committee did not meet. The Executive Committee currently
consists of James R. Lavelle, Jeffrey J. Bernardis, Anthony M. Frank, B. Tom
Green and Harvey L. Poppel.
DIRECTOR COMPENSATION
Each director who is not an employee of the Company receives an annual
retainer fee of $20,000. Directors serving on a committee receive an annual fee
of $2,000 per committee membership, while directors serving on a committee as
chairperson receive an annual fee of $2,500 per committee chaired.
Each non-employee director receives an automatic annual option grant under the
1998 Long-Term Incentive Plan to acquire 5,000 shares of Common Stock on the
date of each of the Company's annual meetings held after September 9, 1998. All
of such options have or will have an exercise price equal to the fair market
value of the Common Stock on the date of grant, are or will be exercisable
immediately except as limited by the rules and regulations of the Securities Act
of 1933, as amended (the "Securities Act"), and the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and will expire ten years from the date
of grant. Directors are also reimbursed for out-of-pocket expenses incurred for
attending meetings of the Board of Directors or committees thereof, or for other
expenses incurred in their capacity as directors.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
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The following report of the Compensation Committee of the Board of Directors
of Cotelligent shall not be deemed incorporated by reference by any general
statement incorporating this proxy statement by reference into any filing under
the Securities Act, or under the Exchange Act, and shall not be deemed filed
under either of the Securities Act or the Exchange Act except to the extent that
Cotelligent specifically incorporates this information by reference.
OVERVIEW
The key components of executive officer compensation are salary, bonus and
equity-based awards.
The members of the Compensation Committee hold primary responsibility for
determining executive officer compensation levels, subject to the terms of
executive employment agreements. The Compensation Committee is composed
entirely of independent outside directors of Cotelligent, none of whom are or
have been officers or employees of Cotelligent. The Compensation Committee has
adopted a compensation philosophy intended to align compensation with
Cotelligent's overall business strategy. The philosophy guiding the executive
compensation program is designed to link executive compensation and stockholder
value. The goals of the program are to:
. Compensate executive employees in a manner that aligns the employees'
interests with the interests of the stockholders;
. Encourage continuation of Cotelligent's entrepreneurial spirit;
. Reward executives for successful long-term strategic management;
. Recognize outstanding performance; and
. Attract and retain highly qualified and motivated executives.
The Compensation Committee believes that Cotelligent's executive compensation
program should consist primarily of base salaries, performance bonuses and
equity-based awards. The Compensation Committee has structured these
compensation elements to motivate and reward executive management for
performance that builds long-term shareholder value. In particular, base
salaries and discretionary bonuses have been designed to give Cotelligent's
executives the potential to earn in excess of competitive industry compensation
if certain subjective and objective operating and performance goals for
Cotelligent are achieved. Moreover, the Compensation Committee will continue
granting Cotelligent's executives and other key employees stock options and/or
other equity-based awards at current market value. Such options have no
monetary value to the executives unless and until the market price of
Cotelligent's Common Stock increases. In this manner, Cotelligent's executives
will be compensated as shareholder value increases. The Compensation Committee
anticipates that discretionary bonus payments and option grants made during
fiscal 2000 and thereafter will be based on multiple subjective and objective
measurements and criteria linked to building long-term shareholder value.
The cash compensation paid to Cotelligent's executive officers during 2000 was
in accordance with arms-length negotiations between Cotelligent and such
executive officers. Stock option grants were based on arms-length negotiations
with the respective grantees and were approved by the Compensation Committee.
CHIEF EXECUTIVE OFFICER'S COMPENSATION
Mr. James R. Lavelle, the Company's Chairman and Chief Executive Officer, is a
party to a three-year employment agreement which was negotiated at arms-length
and became effective on January 5, 2000. This employment agreement supercedes
prior employment agreements which the Company had entered into with Mr. Lavelle.
Mr. Lavelle's employment agreement provides for a minimum base salary of
$450,000 (subject to increase by the Compensation Committee) and the right to
receive annually discretionary incentive bonuses provided by the Compensation
Committee and to receive stock option grants at the discretion of the
Compensation Committee. Effective April 1, 1999, Mr. Lavelle's annual base
salary was increased by the
8
<PAGE>
Compensation Committee to $450,000. Mr. Lavelle may also participate in
Cotelligent's Long-Range Incentive Bonus Plan.
Mr. Lavelle was eligible for, but did not receive, a bonus in fiscal year 2000
of up to 100% of his base salary based upon the achievement of performance
objectives measured by certain quantitative and qualitative criteria.
Quantitative criteria consisted of: the stock price performance; the earnings
per share for the fiscal year; the operating profits for the fiscal year; the
market capitalization of the Company; and the number of stock analysts covering
the Company. Qualitative criteria consisted of: the progress of the Company's
branding program; Company restructuring; the integration of acquired companies;
management of executive personnel; and investor relations.
This report is submitted by the members of the Compensation Committee.
COMPENSATION COMMITTEE
Edward E. Faber
Anthony M. Frank
Ralph H. Baxter, Jr.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
All of the members of the Compensation Committee are non-employee Directors of
the Company and are not former officers of the Company or its subsidiaries. No
executive officer of the Company serves as a member of the board of directors or
on the compensation committee of a corporation for which any of the Company's
Directors serving on the Compensation Committee or on the Board of Directors of
the Company is an executive officer.
9
<PAGE>
EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth certain information regarding the compensation
earned by or awarded to the Chief Executive Officer and remaining executive
officers of the Company for each of the fiscal years ended March 31, 2000, 1999
and 1998.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
---------------------------------------------------------- --------------
FISCAL OPTIONS/
NAME AND PRINCIPAL POSITION YEAR SALARY($)(4) BONUS($) OTHER($) SARs(#)
--------------------------- --------- -------------- ----------- ------------ --------------
<S> <C> <C> <C> <C> <C>
James R. Lavelle...................... 2000 450,000 0 18,000(8) 0
Chairman and Chief Executive 1999 350,000 0 12,000(8) 200,000
Officer 1998 283,542 200,000 6,000(8) 0
Daniel E. Jackson..................... 2000 368,750 0 18,000(8) 0
President and Chief Operating 5,470(9)
Officer (1) 1999 491,430 0 10,500(8) 150,000
8,443(9)
1998 307,518 150,000 6,000(8) 0
10,846(9)
Lorraine E. Vega...................... 2000 160,000 0 0 0
Vice President, General Counsel 1999 139,167 0 0 7,500
and Secretary 1998 108,974(6) 26,000 0 22,500
Curtis J. Parker...................... 2000 160,000 0 0 0
Vice President and Chief 1999 125,000 1,554 0 5,000
Accounting Officer 1998 115,000 28,750 0 2,500
Herbert D. Montgomery................. 2000 293,091(5) 0 4,500(8) 0
Former Senior Vice President, 1999 200,000 0 6,000(8) 30,000
Chief Financial Officer 1998 52,179(6) 15,000 1,000(8) 100,000
and Treasurer (2)
Michael L. Evans...................... 2000 565,727(7) 0 7,000(8) 0
Director, President and 1999 250,000 150,000 10,500(8) 150,000
Chief Operating Officer (3) 1998 167,500 0 6,000(8) 0
</TABLE>
(1) Mr. Jackson became President and Chief Operating Officer in July 2000,
prior to which he served as Executive Vice President, Chief Financial
Officer and Treasurer.
(2) Mr. Montgomery resigned as Senior Vice President, Chief Financial Officer
and Treasurer on June 30, 1999.
(3) Mr. Evans resigned as President and Chief Operating Officer on August 31,
1999.
(4) Base salary and commissions earned.
(5) Of the total compensation paid to Mr. Montgomery, $206,250 was paid after
his resignation according to the terms of his employment agreement (as
discussed below in "Employment Agreements"), and $24,341 was paid as
accrued vacation time following his resignation. Reflects salary received
for a partial year.
(6) Reflects salary received for a partial year.
(7) Of the total compensation paid to Mr. Evans, $393,000 was paid as severance
pay and $26,894 was paid as accrued vacation time following his
resignation.
(8) Represents payments made as an automobile allowance.
(9) Imputed interest on below market loans. See "Certain Transactions."
10
<PAGE>
STOCK OPTION GRANTS TABLE
The following table sets forth, as to the executive officers named in the
Summary Compensation Table, information related to the grant of stock options
pursuant to the Company's 1998 Long-Term Incentive Plan during the fiscal year
ended March 31, 2000.
OPTIONS GRANTED IN FISCAL 2000
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL REALIZABLE VALUE
AT ASSUMED ANNUAL RATES
NUMBER OF PERCENTAGE OF TOTAL EXERCISE OR OF STOCK PRICE APPRECIATION
SECURITIES OPTIONS GRANTED TO BASE PRICE PER FOR OPTION TERM($)(4)
UNDERLYING EMPLOYEES IN FISCAL SHARE ----------------------------------
NAME OPTIONS GRANTED 2000 ($/SHARE)(3) 5% 10%
---- --------------- -------------------- ---------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
James R. Lavelle 0 0% 0 0 0
Daniel E. Jackson 0 0% 0 0 0
Lorraine E. Vega 0 0% 0 0 0
Curtis J. Parker 0 0% 0 0 0
Michael L. Evans(1) 0 0% 0 0 0
Herbert D. Montgomery(2) 0 0% 0 0 0
</TABLE>
----------------
(1) Mr. Evans resigned as President and Chief Operating Officer on August 31,
1999.
(2) Mr. Montgomery resigned as Senior Vice President, Chief Financial Officer
and Treasurer on June 30, 1999.
(3) The exercise price per share for all options granted is equal to the market
price of the underlying Common Stock as of the date of grant.
(4) The potential realizable value has been determined using market price on
the date the options were granted, compounded annually over seven years,
net of exercise price. These values have been determined based upon
assumed rates of appreciation and are not intended to forecast the future
value or trading prices of the Company's Common Stock. There can be no
assurance that the amounts reflected in this table will be achieved.
11
<PAGE>
STOCK OPTION EXERCISES AND YEAR END VALUES TABLE
The following table shows, as to the executive officers named in the Summary
Compensation Table, information with respect to the unexercised options to
purchase Common Stock granted under the 1995 and 1998 Long-Term Incentive Plans
and held as of March 31, 2000.
VALUE OF OPTIONS AT MARCH 31, 2000
<TABLE>
<CAPTION>
NUMBER
OF NUMBER OF SECURITIES VALUE OF UNEXERCISED
SHARES UNDERLYING UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
ACQUIRED VALUE HELD AT MARCH 31, 2000 AT MARCH 31, 2000 ($)(1)
ON REALIZED ---------------------------------- -------------------------------
NAME EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----- ---------- ---------- -------------- --------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
James R. Lavelle 0 0 266,667 133,333 0 0
Daniel E. Jackson 37,176 33,617 150,000 100,000 0 0
Lorraine E. Vega 0 0 13,125 16,875 0 0
Curtis J. Parker 0 0 42,500 5,000 0 0
Herbert D. 0 0 0 0 0 0
Montgomery(2)
Michael L. Evans(3) 0 0 0 0 0 0
</TABLE>
-----------------
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options. The value of the
unexercised options represents the difference between the exercise price of
such options and the closing market price ($5.8125) of the Company's Common
Stock on the New York Stock Exchange on March 31, 2000.
(2) Mr. Montgomery resigned as Senior Vice President, Chief Financial Officer
and Treasurer on June 30, 1999.
(3) Mr. Evans resigned as President and Chief Operating Officer on August 31,
1999.
EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE
Effective January 5, 2000, the Company entered into new employment agreement
with Mr. James R. Lavelle, Cotelligent's Chairman and Chief Executive Officer.
The employment agreement for Mr. Lavelle is for a term of three years and,
unless terminated or not renewed by him, continues thereafter on a year-to-year
basis on the same terms and conditions. Mr. Lavelle's employment agreement
provides that, in the event of termination of employment by the Company without
cause, he shall be entitled to receive from the Company an amount equal to (i)
three times his most recent base annual salary plus (ii) three times his most
recent annual bonus (not including any payments made under Cotelligent's Long-
Range Bonus Incentive Plan), without regard to whether he obtains subsequent
employment. His employment agreements provides that, in the event of a change in
control of the Company where he has not received at least five days notice of
such change in control, he will be deemed to have been terminated without cause
and shall be entitled to compensation as respectively described in the preceding
sentence. Additionally, in such event he will not be bound by any non-compete
terms in his employment agreement, as discussed below. If given at least five
days notice of such change in control, he may elect to terminate his employment
agreement and collect the respective compensation provided above.
Effective January 25, 2000, the Company entered into new employment agreement
with Mr. Daniel E. Jackson, Cotelligent's President and Chief Operating Officer.
The employment agreement is for a term of two years and, unless terminated or
not renewed by him, continues thereafter on a year-to-year basis on the same
terms and conditions. Mr. Jackson's employment agreement provides that, in the
event of termination of employment by the Company without cause, he shall be
entitled to receive from the Company an amount
12
<PAGE>
equal to (i) two times his most recent base annual salary plus (ii) two times
his most recent annual bonus (not including any payments made under
Cotelligent's Long-Range Bonus Incentive Plan), without regard to whether he
obtains subsequent employment. His employment agreements provides that, in the
event of a change in control of the Company where he has not received at least
five days notice of such change in control, he will be deemed to have been
terminated without cause and shall be entitled to compensation as respectively
described in the preceding sentence. Additionally, in such event he will not be
bound by any non-compete terms in his employment agreement, as discussed below.
If given at least five days notice of such change in control, he may elect to
terminate his employment agreement and collect the respective compensation
provided above.
In the event of a change in control, Mr. Lavelle and Mr. Jackson are entitled
to reimbursement for any excise taxes the employee incurs under Section 4999 of
the Internal Revenue Code, as well as any interest or penalties related to the
excise tax and any entitlements outside of the employment agreement that are
described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code. In the
employment agreements of both, a "change in control" is deemed to occur if: (1)
any person or entity, other than the Company, a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the common stock of the Company, or an
employee benefit plan of Company or a subsidiary of Company, acquires directly
or indirectly Beneficial Ownership (as defined in Rule 13d-3 of the Securities
Exchange Act of 1934, as amended) of any voting security of the Company and
immediately after such acquisition such person or entity is, directly or
indirectly, the Beneficial Owner of voting securities representing 30% or more
of the total voting power of all of the then-outstanding voting securities of
the Company; (2) a change in the composition of the individuals on the Board of
Directors as a result of which fewer than one-half of the incumbent directors
are directors who either (a) had been directors of Company on the date 24 months
prior to the date of the event that constitutes a change in control (the
"original directors") or (b) were elected, or nominated with the affirmative
votes of at least a majority of the aggregate of the original directors who were
still in office at the time of the election or nomination and the directors
whose election or nomination was previously so approved; (3) the consummation of
a merger or consolidation of Company with or into another entity or any other
corporate reorganization, if more than 50% of the combined voting power of the
continuing or surviving entity's securities outstanding immediately after such
merger, consolidation or other reorganization is owned by persons who were not
stockholders of Company immediately prior to such merger, consolidation or other
reorganization; or (4) the sale, transfer or other disposition of all or
substantially all of the Company's assets.
The employment agreements of Mr. Lavelle and Mr. Jackson contain a covenant-
not-to-compete with the Company for a period of two years immediately following
the termination of employment; or, in the case of a termination without cause,
for a period of one year following the termination of his employment; or, in the
case of a change in control in which the employee is not given at least five
days notice of such change in control, the covenant not-to-compete does not
apply for any period of time. If any court of competent jurisdiction determines
that the scope, time or territorial restrictions contained in the covenant are
unreasonable, the covenant-not-to-compete shall be reduced to the maximum period
permitted by such court. The compensation to which such employee is entitled
shall nonetheless be paid to the employee.
Annual base salary paid to Mr. Lavelle for the period from April 1, 1999 was
increased by the Compensation Committee to $450,000 from $350,000. For the
fiscal year 2000, he was eligible for, but did not receive, a bonus. In the
fiscal year 2001, he is eligible to receive a bonus based upon achieving certain
performance objectives and upon the operating results of the Company, which
objectives and results are established by the Compensation Committee. Pursuant
to the Long-Range Bonus Incentive Plan, Mr. Lavelle is eligible for bonuses in
fiscal years 2003 and 2006 based upon the operating results of the Company.
Annual base salary paid to Daniel E. Jackson was increased effective April 1,
1999 from $225,000 to $350,000. His annual base salary was increased by the
Compensation Committee from $350,000 to $375,000 effective July 1, 1999. For the
fiscal year 2000, he was eligible for, but did not receive, a bonus. In the
fiscal year 2001, he is eligible to receive a bonus based upon achieving certain
performance objectives and upon the operating results of the Company, which
objectives and results are established by the
13
<PAGE>
Compensation Committee. Pursuant to the Long-Range Bonus Incentive Plan, Mr.
Jackson is eligible for bonuses in fiscal years 2003 and 2006 based upon the
operating results of the Company.
Ms. Lorraine E. Vega and Mr. Curtis J. Parker each executed Change of Control
Agreements with the Company in January 2000. Other than the Change of Control
Agreement, the Company has not entered into a written employment agreement with
either of them. The Change of Control Agreements each provide that in the event
of a change in control of the Company where the employee has not received
written notice at least five business days prior to the anticipated closing date
of the transaction giving rise to the change in control from the successor that
such successor is willing and able to confirm continued employment of the
employee, or where the successor notifies the employee that they will be demoted
or their duties will be significantly limited and the employee notifies the
successor that they do not accept such changes in duties, each person shall
receive a lump sum payment equal to the amount of their then annual base salary,
and all options then unvested to the employee shall vest.
In the event of a change in control, Ms. Vega and Mr. Parker are entitled to
reimbursement for any excise taxes the employee incurs under Section 4999 of the
Internal Revenue Code. In the employment agreements of both, a "change in
control" is deemed to occur if: (1) any person or entity, other than the
Company, a corporation owned directly or indirectly by the stockholders of the
Company in substantially the same proportions as their ownership of the common
stock of the Company, or an employee benefit plan of Company or a subsidiary of
Company, acquires directly or indirectly Beneficial Ownership (as defined in
Rule 13d-3 of the Securities Exchange Act of 1934, as amended) of any voting
security of the Company 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 Company (2) 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; (3) the
stockholders of the Company approve a merger, consolidation, recapitalization or
reorganization of the Company, 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 the Company 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 (4) the liquidation of the
Company, or sale, transfer or other disposition of all or substantially all of
the Company's assets.
Prior to his resignation as President and Chief Operating Officer in August,
1999, Michael L. Evans received an annual base salary of $375,000. Upon his
resignation, Mr. Evans received a severance payment of $393,000 according to the
terms of his employment agreement, and a payment for accrued vacation time of
$26,894.
Prior to his resignation as Senior Vice President, Chief Financial Officer and
Treasurer on June 30, 1999, Mr. Herbert D. Montgomery received an annual base
salary of $275,000. According to the terms of his employment agreement with the
Company, Mr. Montgomery continues to collect severance payments from Cotelligent
at an amount equal to his annual base salary. Severance payments continue for
the period of time that would have been the term of the employment agreement,
three years, but for its termination. Therefore, these payments will terminate
on January 26, 2001.
14
<PAGE>
PERFORMANCE GRAPH
The following chart compares the yearly percentage change in the cumulative
total stockholder return on the Company's Common Stock from March 31, 1996
through March 31, 2000, with the cumulative total return on the Russell 2000
Index and the NASDAQ Composite Index. The comparison assumes $100, as of
February 14, 1996, the date of the Company's initial public offering (the
"Offering"), was invested in the Company's Common Stock and in each of the
foregoing indices and assumes reinvestment of dividends, as applicable.
Cotelligent's Offering price of $9.00 was used as the beginning price of the
Common Stock. Dates on the following chart represent the last day of the
indicated fiscal year. Cotelligent has paid no dividends during the periods
shown.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
COMPANY/INDEX MARCH 31, 1996 MARCH 31, 1997 MARCH 31, 1998 MARCH 31, 1999 MARCH 31, 2000
-------------------------- -------------- -------------- -------------- -------------- ---------------
<S> <C> <C> <C> <C> <C>
Cotelligent, Inc. $130.55 $102.78 $329.17 $ 98.61 $ 64.59
Russell 2000 Index $103.21 $106.52 $149.47 $123.65 $167.63
NASDAQ Composite Index $101.23 $112.01 $168.30 $225.67 $419.26
</TABLE>
CERTAIN TRANSACTIONS
The Company leases office space for its facilities in Somerset, New Jersey
from BFR Properties, a partnership owned by Jeffrey J. Bernardis, a director of
the Company, as well as persons who had been principal stockholders of BFR prior
to the consummation of the acquisition of BFR by the Company and its subsequent
merger into Cotelligent USA, Inc. The annual cost of such rental is
approximately $203,000, and the lease ran through March 31, 2000. The Company
believes that the rent for such property does not exceed the fair market value
thereof.
15
<PAGE>
The Company has used the services of the law firm of Orrick, Herrington &
Sutcliffe, LLP, in which Mr. Baxter, a director of the Company, is a partner,
for a variety of matters and intends to continue to do so in the future.
From May 1996 through early July 1996, the Company advanced to Daniel E.
Jackson, President and Chief Operating Officer, $250,000 to facilitate
relocation of his residence to Northern California. Of the amount due, there is
a remaining balance of $82,500. The remaining balance is evidenced by a demand
note. The note is non-interest bearing and the principal balance is due July
15, 2001 or upon termination of employment if prior to the due date.
Since the beginning of the 2000 fiscal year, the Company has advanced to
Mr. Jackson an aggregate amount of approximately $480,000, evidenced by five
separate unsecured demand promissory notes, three dated August 11, 1999, one
dated September 30, 1999, and one dated November 23, 1999. The purpose of such
advances was to cover margin calls made on brokerage accounts held by Mr.
Jackson which are secured by shares of the Company. The August 11th notes bear
interest annually at a rate of 7.75%, while the two later notes bear interest at
8% and 8.75%, respectively.
On May 5, 2000, Mr. Jackson repaid $68,270 of principal and $31,730 of
interest. On June 30, 2000, Mr. Jackson repaid $182,649 of principal and $5,111
of interest on two of the August 11th notes, extinguishing the amount due on one
of the two notes. As of June 30, the notes have an aggregate unpaid principal
balance of $311,581 and no accrued unpaid interest, and all will become due and
payable in full on various dates between June and November, 2001.
On March 31, 1996, the Company advanced to James R. Lavelle, Chairman of the
Board and Chief Executive Officer of the Company, $37,902, evidenced by an
unsecured demand promissory note bearing interest annually at a rate of 6%.
As of June 30, 2000, the amount of interest accrued on the note is $9,804.
The entire amount of such advance and interest accrued remains outstanding.
Since the beginning of the 2000 fiscal year, the Company has advanced to
Mr. Lavelle an aggregate amount of $569,000, evidenced by six separate unsecured
demand promissory notes, four dated August 11, 1999, one dated September 7, 1999
and one dated October 4, 1999. The purpose of such advances was to cover margin
calls made on brokerage accounts held by Mr. Lavelle which are secured by shares
of the Company. Two of the August 11th notes bear interest annually at a rate of
7.75%, and two bear interest annually at a rate of 8%. The September 7th and
October 4th notes each bear interest at 8.25%.
On May 1, 2000, Mr. Lavelle repaid $5,911 of principal and $44,090 of
interest. On June 30, 2000, Mr. Lavelle repaid $217,890 of principal and $7,426
of interest on the four August 11th notes, extinguishing the amount due on three
of the four notes. As of June 30, 2000, the notes have an aggregate unpaid
principal balance of $373,683 and no accrued unpaid interest, and all will
become due and payable in full on various dates between August and October,
2001.
Since the beginning of the 2000 fiscal year, the Company advanced to
Michael L. Evans, former President and Chief Operating Officer of the Company,
an aggregate amount of $455,649, evidenced by five separate deed of trust notes,
each dated September 1, 1999, and each bearing interest annually at a rate of
8.25%. As of June 30, 2000, the accrued interest on the notes was approximately
$31,639. The aggregate amount of such advances remain outstanding and are all
due in full August 31, 2000. The advances to Mr. Evans are secured by a second
security interest in property owned by Mr. Evans. The purpose of such advances
was to cover margin calls made on brokerage accounts held by Mr. Evans which are
secured by shares of the Company.
Mr. Lavelle and Mr. Jackson each held during the fiscal year 2000 a 25% share
in, and were each directors of, Lexar Capital Management, LLC, which was the
general partner of Lexar Capital Partners I ("LCP I"), a small venture capital
fund. In September 1998, LCP I became a 33% shareholder in MarketDrive
Interactive, Inc. ("MarketDrive"), an internet technology company. Messrs.
Lavelle and Jackson served as directors of MarketDrive. In January 1999,
Cotelligent USA, Inc., a wholly owned subsidiary of the Company, entered into an
agreement (the "Agreement") with MarketDrive to provide certain consulting
services to MarketDrive. The Agreement, negotiated at arms length, provided for
the provision of services at rates typical of those charged to other clients of
the Company for comparable services. In September 1999, the Company invested
$250,000 in MarketDrive, acquiring shares of MarketDrive's Class A common stock
in return. In April 2000, MarketDrive was acquired by Classified
16
<PAGE>
Ventures, Inc. ("Classified Ventures"), an independent company unaffiliated with
Mr. Lavelle, Mr. Jackson or the Company, and Mr. Lavelle, Mr. Jackson and the
Company each received shares in Classified Ventures, Inc. in return for their
interests in MarketDrive. The shares of Mr. Lavelle, Mr. Jackson and the Company
in Classified Ventures, taken separately or added together, are a minority
interest in Classified Ventures, unable to exert control over it. As of June 21,
2000, Classified Ventures, Inc. owed the Company approximately $527,000 for
services rendered by the Company.
On September 8, 1999, the stockholders approved the Cotelligent, Inc. 1999
Leveraged Stock Purchase Plan (the "LSPP") which authorizes the purchase of
shares of Common Stock by eligible employees who are selected by the
Compensation Committee of the Board (the "Committee") to participate in the LSPP
on terms and conditions determined by the Committee. Since the LSPP's inception
through March 31, 2000, Mr. Lavelle was issued 750,000 shares and Mr. Jackson
was issued 736,842 shares. Shares issued under the LSPP resulted in notes
receivable from Mr. Lavelle for $2,671,875 at 5.93% interest and from
Mr. Jackson for $2,625,000 at 5.93% interest. The total principal amount of the
notes remain outstanding. The notes (1) are secured by the pledge of Cotelligent
stock issued; (2) are full recourse as to the employee, except that in the case
of death, disability, termination by the Company without cause or a change of
control of the Company, recourse against the employees is limited to the pledged
stock; and (3) have a term of five years from date of issuance, provided that if
the stock is sold, the loan shall be prepaid, and if the stock is not sold, the
loan may not be prepaid. The stock issued under the LSPP is restricted from sale
in the open market for a period of two years from the date of issuance,
provided, however, that in the case of death, disability, termination by the
Company without cause or change of control of the Company, the stock may be sold
and the proceeds used to repay the loan.
17
<PAGE>
APPROVAL OF THE INCREASE IN THE NUMBER OF SHARES OF COMMON STOCK AVAILABLE FOR
PURCHASE BY EMPLOYEES UNDER THE COTELLIGENT, INC. EMPLOYEE STOCK PURCHASE PLAN
FROM 300,000 TO 950,000
APPROVAL OF THE AMENDMENT TO THE EMPLOYEE STOCK PURCHASE PLAN INCREASING THE
NUMBER OF SHARES TO 950,000
Since 1996, the Company has maintained the Employee Stock Purchase Plan (the
"Stock Purchase Plan"), for the purpose of encouraging employee participation in
the ownership of the Company by offering eligible employees of the Company and
its subsidiaries an opportunity to purchase shares of Common Stock of the
Company at a discount through payroll deductions. All 300,000 shares of Common
Stock originally reserved under the Stock Purchase Plan have been issued. The
Board of Directors amended the Stock Purchase Plan, effective October 31, 1999,
to increase the number of shares of Common Stock available for issuance from
300,000 to 950,000 shares. In order to preserve favorable tax treatment
available to participants in the Stock Purchase Plan the amendment is being
submitted to stockholders for their approval.
DESCRIPTION OF THE STOCK PURCHASE PLAN
The Stock Purchase Plan, and the description of the Stock Purchase Plan
contained herein, is qualified in its entirety by reference to the Stock
Purchase Plan which is attached hereto as Exhibit A.
Under the Stock Purchase Plan, eligible employees of the Company and its
subsidiaries may participate by electing to have payroll deductions made in an
amount of not less than 1% nor more than 7% of the employee's compensation,
provided that the Market Value (as defined in the Stock Purchase Plan) of Common
Stock (determined at the beginning of each Purchase Period) purchased in any
year may not exceed $25,000. All permanent full-time employees will be eligible
to participate upon completion of 180 days of continuing employment. However,
any beneficial owner of 5% or more of the Common Stock shall not be eligible to
participate.
Eligible employees may elect to participate by delivering a completed purchase
agreement prior to the beginning of each three-month "Purchase Period". At the
end of each Purchase Period, each participant's payroll deductions are applied
to acquire Common Stock at a price equal to 85% of the Market Value of the
Common Stock on either the first day or the last day of the Purchase Period,
whichever is lower. Shares purchased under the Stock Purchase Plan may not be
sold or otherwise disposed of for a period of six months from the last day of
the Purchase Period (the "Exercise Date").
Employees may voluntarily withdraw from participation in the Stock Purchase Plan
by notifying the Company at such time in advance as the committee designated to
administer the Stock Purchase Plan shall determine. An employee's participation
shall cease upon termination of employment for any reason, or otherwise if such
employee no longer qualifies as an eligible employee. Upon any withdrawal from
participation, all payroll deductions not applied to purchase Common Stock will
be returned to the employee (except in the case of certain inactive employees
who are awaiting assignment).
The number of shares of Common Stock reserved for purchase under the Stock
Purchase Plan, as amended, is 950,000. Except pursuant to an adjustment as a
result of a change in the Company's capital structure, the number of shares of
Common Stock reserved for purchase under the Stock Purchase Plan will not be
decreased as a result of a decrease in the number of shares outstanding. Such
reserved shares may be made available by the Company from either authorized and
unissued shares or treasury shares.
The Stock Purchase Plan may be amended in any respect at any time by the Board
of Directors, except that where stockholder approval is necessary or desirable
to comply with applicable law, such amendment shall be conditional on such
approval. The Stock Purchase Plan may be terminated at any time by the Board of
Directors.
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<PAGE>
FEDERAL INCOME TAX CONSIDERATIONS
Subject to the stockholders' approval of the amendment, the Stock Purchase Plan
is intended to qualify as an "employee stock purchase plan" within the meaning
of Section 423 of the Internal Revenue Code of 1986, as amended (the "Code"),
and it is intended to comply with the provisions of Sections 421 and 424 of the
Code as well. The following discussion is intended for the information of
stockholders considering how to vote their shares, and not as tax guidance to
individuals who participate in the Stock Purchase Plan.
Under Section 423 of the Code as currently in effect, there are no federal
income tax consequences in connection with the acquisition of Common Stock
pursuant to the Stock Purchase Plan until the year in which the participant
sells or otherwise disposes of the shares, or, if earlier, the year in which the
participant dies. If the shares are sold or otherwise disposed of prior to a
participant's death, then the income tax consequences will depend upon whether
or not the shares are sold within two years after the applicable Offering Date.
If the shares are sold or disposed of more than two years after the applicable
Offering Date, then the participant will recognize ordinary income in an amount
equal to the lesser of (i) 15% of the fair market value of the shares on the
applicable Offering Date, or (ii) the amount by which the fair market value of
the shares at the time of such sale or disposition exceeds the amount paid for
the shares, and the Company will not be entitled to any income tax deduction.
If the shares are sold or otherwise disposed of within two years after the
applicable Offering Date, a participant will generally recognize ordinary income
in the amount by which the fair market value of the shares on the applicable
Exercise Date exceeds the amount paid for the shares, and the Company will be
entitled to a corresponding income tax deduction.
In either case, the participant may also have a capital gain or loss (long- term
or short-term depending upon the length of time the shares were held) in an
amount equal to the difference between the amount realized upon the sale and the
participant's adjusted tax basis in the shares (the amount paid for the shares
plus the amount of ordinary income which the participant must recognize at the
time of the sale).
In the event of the death of a participant prior to a sale or other disposition
of the shares (whether or not within two years after the applicable Offering
Date), a participant will be subject to ordinary income tax in an amount equal
to the lesser of (i) 15% of the fair market value of the shares on the
applicable Offering Date, or (ii) the amount, if any, by which the fair market
value of the shares as of the date of death exceeds the amount actually paid for
the shares.
Should the shareholders fail to approve the amendment, in all cases a
participant will recognize ordinary income on each Exercise Date in an amount by
which the fair market value of the Shares purchased on such date exceeds the
purchase price paid for such shares, and the Company will be entitled to a
corresponding income tax deduction.
The affirmative vote of a majority of the outstanding shares of Common Stock
present in person or represented by Proxy at the Annual Meeting and entitled to
vote is required to approve the amendment to the Stock Purchase Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY VOTE FOR THE APPROVAL OF THE AMENDMENT TO THE COMPANY EMPLOYEE STOCK
PURCHASE PLAN.
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SELECTION OF ARTHUR ANDERSEN LLP AS CERTIFIED PUBLIC ACCOUNTANTS
On September 8, 1999, the shareholders of the Company approved the appointment
of Arthur Andersen LLP ("Arthur Andersen") to serve as the Company's independent
certified public accountants to audit the Company's financial statements for the
fiscal year ending March 31, 2000. Arthur Anderson audited the Company's
financial statements for the fiscal year ending March 31, 2000.
Since the appointment of Arthur Andersen, there have been no disagreements
between the Company and Arthur Andersen regarding any matter of accounting
principles or practices, financial statement disclosure or auditing scope and
procedure which, if not resolved to the satisfaction of Arthur Andersen, would
have caused Arthur Andersen to make reference to the subject matter of the
disagreement in connection with its report.
Representatives of Arthur Andersen are expected to be present at the Annual
Meeting, with the opportunity to make a statement if they desire to do so, and
are expected to be available to respond to appropriate questions.
The affirmative vote of a majority of the Common Stock of the Company present,
in person or by proxy, and entitled to vote at the meeting is required for the
approval of the selection of Arthur Andersen as the Company's independent
certified public accountants.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE
COMPANY APPROVE THE SELECTION OF ARTHUR ANDERSEN LLP AS THE COMPANY'S
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS FOR THE FISCAL YEAR ENDING MARCH 31,
2001.
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COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the
Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file initial reports of
ownership and reports of changes in ownership with the Securities and Exchange
Commission (the "SEC"). Such persons are required by SEC regulation to furnish
the Company with copies of all Section 16(a) forms they file.
Based solely on its review of the copies of such forms received by the Company
with respect to fiscal 2000, or written representations from certain reporting
persons, to the best of the Company's knowledge, all forms were filed on a
timely basis.
STOCKHOLDER PROPOSALS
The Company has changed its fiscal year to end on December 31, and, therefore,
the Annual Meeting of Stockholders is expected to occur in May or June of 2001.
As a result, stockholders may present proposals for inclusion in the Company's
fiscal 2001 proxy statement provided they are received by the Company no later
than January 1, 2001 and are otherwise in compliance with applicable Securities
and Exchange Commission regulations.
GENERAL
Management does not intend to bring any business before the meeting other than
the matters referred to in the accompanying notice. If, however, any other
matters properly come before the meeting, it is intended that the persons named
in the accompanying Proxy will vote pursuant to the Proxy in accordance with
their best judgment on such matters.
A copy of the Company's most recent Annual Report on Form 10-K will be made
available without charge upon written request to: Cotelligent, Inc., 101
California Street, Suite 2050, San Francisco, California 94111, Attention:
Investor Relations Administrator.
OTHER INFORMATION
The cost of solicitation of Proxies will be borne by the Company. Proxy cards
and materials will also be distributed to beneficial owners of Common Stock
through brokers, custodians, nominees and other like parties, and the Company
expects to reimburse such parties for their charges and expenses.
Lorraine E. Vega
Secretary
San Francisco, California
July 28, 2000
21
<PAGE>
Exhibit A
COTELLIGENT, INC.
EMPLOYEE STOCK PURCHASE PLAN
(including amendments through Octeober 31, 1999)
ARTICLE I
Introduction
Sec. 1.01 Statement of Purpose. The purpose of the Cotelligent, Inc.
Employee Stock Purchase Plan is to provide eligible employees of the Company and
its Subsidiaries, who wish to become stockholders, an opportunity to purchase
Common Stock of the Company. The Board of Directors of the Company believes
that employee participation in ownership will be to the mutual benefit of both
the employees and the Company.
Sec. 1.02 Internal Revenue Code Considerations. The Plan is intended
to constitute an "employee stock purchase plan" within the meaning of section
423 of the Internal Revenue Code of 1986, as amended.
ARTICLE II
Definitions
Sec. 2.01 "Administrative Committee" means the committee appointed by
the Board to administer the Plan, as provided in Section 6.04 hereof.
Sec. 2.02 "Board" means the Board of Directors of the Company.
Sec. 2.03 "Code" means the Internal Revenue Code of 1986, as amended.
Sec. 2.04 "Company" means Cotelligent, Inc., a Delaware corporation.
Sec. 2.05 "Compensation" means the total remuneration paid, during
the period of reference, to an Employee by the Company or a Subsidiary,
including regular salary or wages, overtime payments, bonuses, commissions and
vacation pay, to which has been added (a) any elective deferral amounts by which
the Employee has had his current remuneration reduced for the purposes of
funding a contribution to any plan sponsored by the Company and satisfying the
requirements of section 401(k) of the Code, and (b) any amounts by which the
Employee's compensation has been reduced pursuant to a compensation reduction
agreement between the Employee and the Company for the purpose of funding
benefits through any cafeteria plan sponsored by the Company meeting the
requirements of section 125 of the Code. There shall be excluded from
"Compensation" for the purposes of the Plan, whether or not reportable as income
by the Employee,
<PAGE>
expense reimbursements of all types, payments in lieu of expenses, the Company
contributions to any qualified retirement plan or other program of deferred
compensation (except as provided above), the Company contributions to Social
Security or worker's compensation, the costs paid by the Company in connection
with fringe benefits and relocation, including gross-ups, and any amounts
accrued for the benefit of Employee, but not paid, during the period of
reference.
Sec. 2.06 "Continuous Service" means the period of time during which
the Employee has been employed by the Company or a Subsidiary and during which
there has been no interruption of Employee's employment by the Company. For
this purpose, periods during which an Employee is on Temporary Inactive Status
shall not be considered to be interruptions of Continuous Service. If
determined by the Administrative Committee, periods of service with an entity
prior to its becoming a Subsidiary shall be taken into account.
Sec. 2.07 "Effective Date" shall mean August 16, 1996, if within
twelve months of that date, the Plan is or has been approved at a meeting of the
stockholders of the Company by the affirmative vote of the holders of the
majority of Common Stock of the Company outstanding.
Sec. 2.08 "Eligible Employee" means each person who:
(a) is an Employee whose customary employment is for more than
20 hours per week and more than 5 months in any calendar year;
(b) is an Employee on the Effective Date, or otherwise has
completed at least 180 days of Continuous Service; and
(c) is not deemed for purposes of section 423(b)(3) of the Code
to own stock possessing 5% or more of the total combined voting power or
value of all classes of stock of the Company.
Sec. 2.09 "Employee" means each person employed by the Company or a
Subsidiary.
Sec. 2.10 "Exercise Date" means the last day of each Purchase Period.
Sec. 2.11 "Market Value" means, with respect to Stock, the fair
market value of such Stock, determined by such methods or procedures as shall be
established from time to time by the Administrative Committee, provided,
however, that if the Stock is listed on a national securities exchange or quoted
in an interdealer quotation system, the Market Value of such Stock on a given
date shall be based upon the last sales price or, if unavailable, the average of
the closing bid and asked prices per share of the Stock on such date (or, if
there was no trading or quotation in the Stock on such date, on the next
preceding date on which there was trading or quotation) as provided by one of
such organizations.
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Sec. 2.12 "Offering" means the offering of shares of Stock under the
Plan.
Sec. 2.13 "Offering Date" means the first business day of each
February, May, August and November during which the Plan is in effect, or such
dates as may otherwise be specified by the Administrative Committee, provided,
however, that the first Offering Date shall be the Effective Date and the next
subsequent Offering Date shall be November 1, 1996.
Sec. 2.14 "Participant" means each Eligible Employee who elects to
participate in the Plan.
Sec. 2.15 "Plan" means the Cotelligent, Inc. Employee Stock Purchase
Plan, as the same is set forth herein and as the same may hereafter be amended.
Sec. 2.16 "Purchase Agreement" means the document prescribed by the
Administrative Committee pursuant to which an Eligible Employee has enrolled to
be a Participant.
Sec. 2.17 "Purchase Period" means the period beginning on an Offering
Date and ending on the business day preceding the next following Offering Date.
Sec. 2.18 "Purchase Price" means such term as it is defined in
Section 4.03 hereof.
Sec. 2.19 "Stock" means Common Stock of the Company.
Sec. 2.20 "Stock Purchase Account" means a noninterest bearing
account consisting of all amounts withheld from an Employee's compensation (or
otherwise paid into the Plan) for the purpose of purchasing shares of Stock for
such employee under the Plan, reduced by all amounts applied to the purchase of
Stock for such Employee under the Plan.
Sec. 2.21 "Subsidiary" shall mean a corporation described in section
424(f) of the Code that has, with the permission of the Board, adopted the Plan.
Sec. 2.22 "Temporary Inactive Status" shall describe the status of a
former hourly Employee whose employment was terminated upon completion of an
assignment for the Company or a Subsidiary, for so long as such former Employee
(i) remains available for future assignments with the Company or a Subsidiary,
(ii) has not, directly or indirectly, accepted an assignment from or a position
with an entity unaffiliated with the Company and its Subsidiaries, and (iii)
otherwise remains in good standing with the Company and its Subsidiaries.
A-3
<PAGE>
ARTICLE III
Admission to Participation
Sec. 3.01 Initial Participation. Any Eligible Employee may elect to
be a Participant and may become a Participant by executing and filing with the
Administrative Committee a Purchase Agreement at such time in advance and on
such forms as prescribed by the Administrative Committee. The effective date of
an Eligible Employee's participation shall be the Offering Date next following
the date on which the Administrative Committee receives from the Eligible
Employee a properly executed and timely filed Purchase Agreement. Participation
in the Plan will continue automatically from one Purchase Period to another
unless notice is given pursuant to Section 3.02.
Sec. 3.02 Voluntary Discontinuance of Participation. Any Participant
may voluntarily withdraw from the Plan by filing a Notice of Withdrawal with the
Administrative Committee at such time in advance as the Administrative Committee
may specify. Upon such withdrawal, there shall be paid to the Participant the
amount, if any, standing to his credit in his Stock Purchase Account.
Sec. 3.03 Involuntary Discontinuance of Participation. If a
Participant ceases to be an Eligible Employee, the entire amount, if any,
standing to the Participant's credit in his Stock Purchase Account shall be
refunded to him. Notwithstanding the foregoing, should a Participant cease to
be an Eligible Employee by reason of acquiring Temporary Inactive Status, such
Participant may continue to participate through the end of the Purchase Period
during which such status was acquired with respect to payroll deductions
attributable to the portion of the Purchase Period prior to the time such status
was acquired.
Sec. 3.04 Readmission to Participation. Any Eligible Employee who
has previously been a Participant, who has discontinued participation, and who
wishes to be reinstated as a Participant may again become a Participant for any
subsequent Purchase Period by executing and filing with the Administrative
Committee, at such time in advance as the Administrative Committee shall
determine, a new Purchase Agreement on forms provided by the Administrative
Committee. Reinstatement to Participant status shall be effective no earlier
than the Offering Date that occurs six months following the Exercise Date for
the Purchase Period in which the Eligible Employee discontinued participation.
Notwithstanding the foregoing, readmission of any Eligible Employee may be
suspended for such time as may be necessary to comply with Rule 16b-3
promulgated under the Securities Exchange Act of 1934.
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<PAGE>
ARTICLE IV
Stock Purchase
Sec. 4.01 Reservation of Shares. There shall be 950,000 shares of
Stock reserved for the Plan, subject to adjustment in accordance with the
antidilution provisions hereinafter set forth. Except as provided in Section
5.02 hereof, the aggregate number of shares that may be purchased under the Plan
shall not exceed the number of shares reserved for the Plan.
Sec. 4.02 Limitation on Shares Available. The maximum number of
shares of Stock that may be purchased for each Participant on an Exercise Date
is the least of (a) the number of shares of Stock that can be purchased by
applying the full balance of his Stock Purchase Account to such purchase of
shares at the Purchase Price (as hereinafter determined), or (b) the
Participant's proportionate part of the maximum number of whole shares of Stock
available within the limitation established by the maximum aggregate number of
such shares reserved for the Plan, as stated in Section 4.01 hereof.
Notwithstanding the foregoing, if any person entitled to purchase shares
pursuant to any offering hereunder would be deemed for the purposes of section
423(b)(3) of the Code to own stock (including any number of shares that such
person would be entitled to purchase hereunder) possessing 5% or more of the
total combined voting power or value of all classes of stock of Company, the
maximum number of shares that such person shall be entitled to purchase pursuant
to the Plan shall be reduced to that number which, when added to the number of
shares of Stock that such person is so deemed to own (excluding any number of
shares that such person would be entitled to purchase hereunder), is one less
than such 5%. Any portion of a Participant's Stock Purchase Account that cannot
be applied by reason of the foregoing limitation shall remain in the
Participant's Stock Purchase Account for application to the purchase of Stock on
the next Offering Date (unless withdrawn before that Offering Date).
Sec. 4.03 Purchase Price of Shares. The Purchase Price per share of
the Stock sold to Participants pursuant to any Offering shall be the sum of (a)
85% of the Market Value of such share on the Offering Date on which such
Offering commences or on the Exercise Date on which such Offering expires,
whichever is lower, and (b) any transfer, excise or similar tax imposed on the
transaction pursuant to which such share of Stock is purchased. If the Exercise
Date with respect to the purchase of Stock is a day on which the stock is
selling ex-dividend but is on or before the record date for such dividend, then
for Plan purposes the Purchase Price per share will be increased by an amount
equal to the dividend per share. In no event shall the Purchase Price be less
than the par value of the Stock.
Sec. 4.04 Exercise of Purchase Privilege.
(a) Subject to the provisions of Section 4.02 above, if on the
date of the last paycheck of a Participant issued prior to any Exercise
Date there is a credit balance in the Participant's Stock Purchase Account,
there shall be purchased for the Participant at the Purchase Price for the
Purchase Period that expires on such Exercise Date the largest number
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<PAGE>
of whole shares of Stock, as can be purchased with the entire amount
standing to the Participant's credit in his Stock Purchase Account on such
paycheck issue date. Each such purchase shall be deemed to have occurred on
the Exercise Date occurring at the close of the Offering for which the
purchase was made.
(b) Any amount remaining in the Stock Purchase Account on the
Exercise Date after the purchase of the maximum number of whole shares
shall remain in the Stock Purchase Account to the credit of the Participant
and applied to purchase additional shares of Stock on subsequent Exercise
Dates.
(c) Notwithstanding anything contained herein to the contrary, a
Participant may not during any calendar year purchase shares of Stock
having an aggregate Market Value, determined at the time of each Offering
Date during such calendar year, of more than $25,000.
Sec. 4.05 Establishment of Stock Purchase Account. Each Participant
shall authorize payroll deductions from Compensation for the purposes of funding
his Stock Purchase Account. In the Purchase Agreement, each Participant shall
authorize a deduction from each payment of his Compensation during a Purchase
Period, which deduction shall be not less than 1% nor more than 7% of the gross
amount of such payment, subject to Section 4.04(c). Subject to Section 3.02, a
Participant may not reduce or increase his payroll deduction rate during any
Purchase Period. However, a Participant may change the deduction to any
permissible level for any subsequent Offering by filing notice thereof at such
time preceding the Offering Date on which such subsequent Offering commences as
the Administrative Committee shall determine.
Sec. 4.06 Payment for Stock. The Purchase Price for all shares of
Stock purchased by a Participant under the Plan shall be paid out of the
Participant's Stock Purchase Account. As of each Exercise Date, the entire
amount standing to the credit of each Participant in his Stock Purchase Account
on the date of the last paycheck issued to the Participant prior to the Exercise
Date in the Purchase Period that expires on such Exercise Date shall be charged
with the aggregate Purchase Price of the shares of Stock purchased by such
Participant on the Exercise Date. No interest shall be paid or payable with
respect to any amount held in the Participant's Stock Purchase Account.
Sec. 4.07 Share Ownership; Issuance of Certificates.
(a) The shares purchased by a Participant on an Exercise Date
shall, for all purposes, be deemed to have been issued and/or sold at the
close of business on such Exercise Date. Prior to that time, none of the
rights or privileges of a stockholder of the Company shall inure to the
Participant with respect to such shares. All the shares of Stock purchased
under the Plan shall be delivered by the Company in a manner as determined
by the Administrative Committee.
A-6
<PAGE>
(b) The Administrative Committee, in its sole discretion, may
determine that the shares of Stock shall be delivered by the Company (i) by
issuing and delivering to the Participant a certificate for the number of
whole shares of Stock purchased by such Participant on an Exercise Date or
during a calendar year, or (ii) by issuing and delivering a certificate or
certificates for the number of shares of Stock purchased by all
Participants on an Exercise Date or during a calendar year to a member firm
of the New York Stock Exchange which is also a member of the National
Association of Securities Dealers, as selected by the Administrative
Committee from time to time, which shares shall be maintained by such
member firm in separate brokerage accounts of each Participant, or (iii) by
issuing and delivering a certificate or certificates for the number of
shares of Stock purchased by all Participants on an Exercise Date or during
the calendar year to a bank or trust company or affiliate thereof, as
selected by the Administrative Committee from time to time, which shares
shall be maintained by such bank or trust company or affiliate in separate
accounts for each Participant or, if he designates on his Stock Purchase
Agreement, in his name jointly with his spouse, with right of survivorship.
A Participant who is a resident of a jurisdiction that does not recognize
such joint tenancy may have a certificate or account in his name as tenant
in common with his spouse, without right of survivorship. Such designation
may be changed by filing a notice thereof signed by the Participant and his
spouse. Such spouse shall be bound by all of the terms and conditions of
the Plan as if such spouse were a Participant.
Sec. 4.08 Restrictions on Resale. Stock acquired under the Plan may
not be sold or otherwise disposed of for at least six months after the Exercise
date on which the shares were acquired, except in the case of death or
disability. Any Stock certificates delivered to a Participant prior to the
expiration of such six month period shall contain a legend to reflect such
restriction.
ARTICLE V
Special Adjustments
Sec. 5.01 Shares Unavailable. If, on any Exercise Date, the
aggregate funds available for the purchase of Stock would purchase a number of
shares in excess of the number of shares then available for purchase under the
Plan, the following events shall occur:
(a) The number of shares that would otherwise be purchased by
each Participant shall be proportionately reduced on the Exercise Date in
order to eliminate such excess;
(b) The Plan shall automatically terminate immediately after the
Exercise Date as of which the supply of available shares is exhausted; and
A-7
<PAGE>
(c) Any amount remaining in the Stock Purchase Account of each
of the Participants shall be repaid to such Participants.
Sec. 5.02 Antidilution Provisions. The aggregate number of shares of
Stock reserved for purchase under the Plan, as hereinabove provided, and the
calculation of the Purchase Price per share may be appropriately adjusted to
reflect any increase or decrease in the number of issued shares of Stock
resulting from a subdivision or consolidation of shares or other capital
adjustment, or the payment of a stock dividend, or other increase or decrease in
such shares, if effected without receipt of consideration by the Company. Any
such adjustment shall be made by the Administrative Committee acting with the
consent of, and subject to the approval of, the Board.
Sec. 5.03 Effect of Certain Transactions. Subject to any required
action by the stockholders, if the Company shall be the surviving or resulting
corporation in any merger or consolidation, or if the Company shall be merged
for the purpose of changing the jurisdiction of its incorporation, any Offering
hereunder shall pertain to and apply to the shares of stock of the Company or
the survivor. However, in the event of a dissolution or liquidation of the
Company, or of a merger or consolidation in which the Company is not the
surviving or resulting corporation, the Plan and any Offering hereunder shall
terminate upon the effective date of such dissolution, liquidation, merger or
consolidation, and the balance then standing to the credit of each Participant
in his Stock Purchase Account shall be returned to him.
ARTICLE VI
Miscellaneous
Sec. 6.01 Nonalienation. The right to purchase shares of Stock under
the Plan is personal to the Participant, is exercisable only by the Participant
during his lifetime except as hereinafter set forth, and may not be assigned or
otherwise transferred by the Participant. Notwithstanding the foregoing, there
shall be delivered to the executor, administrator or other personal
representative of a deceased Participant such shares of Stock and such residual
balance as may remain in the Participant's Stock Purchase Account as of the date
the Participant's death occurs. However, such representative shall be bound by
the terms and conditions of the Plan as if such representative were a
Participant.
Sec. 6.02 Administrative Costs. The Company shall pay all
administrative expenses associated with the operation of the Plan. No
administrative charges shall be levied against the Stock Purchase Accounts of
the Participants.
Sec. 6.03 Collection of Taxes. The Company shall be entitled to
require any Participant to remit, through payroll withholding or otherwise, any
tax that it determines it is so obligated to collect with respect to the
issuance of Stock hereunder, or the subsequent sale or disposition of such
Stock, and the Administrative Committee shall institute such mechanisms as shall
insure the collection of such taxes.
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Sec. 6.04 Administrative Committee. The Compensation Committee of
the Board shall appoint an Administrative Committee, which shall have the
authority and power to administer the Plan and to make, adopt, construe, and
enforce rules and regulations not inconsistent with the provisions of the Plan.
The Administrative Committee shall adopt and prescribe the contents of all forms
required in connection with the administration of the Plan, including, but not
limited to, the Purchase Agreement, payroll withholding authorizations,
withdrawal documents, and all other notices required hereunder. The
Administrative Committee shall have the fullest discretion permissible under law
in the discharge of its duties. The Administrative Committee's interpretations
and decisions in respect of the Plan, the rules and regulations pursuant to
which it is operated, and the rights of Participants hereunder shall be final
and conclusive.
Sec. 6.05 Amendment of the Plan. The Board may amend the Plan
without the consent of stockholders or Participants, except that any such action
shall be subject to the approval of the Company's stockholders at or before the
next annual meeting of stockholders for which the record date is after such
Board action if such stockholder approval is required by any federal or state
law or regulation or the rules of any stock exchange or automated quotation
system on which the Stock may then be listed or quoted, and the Board may
otherwise, in its discretion, determine to submit other such changes to the Plan
to stockholders for approval; provided, however, that, without the consent of an
affected Participant, no such action may materially impair the rights of such
Participant under any award theretofore granted to him.
Sec. 6.06 Termination of the Plan. The Plan shall continue in effect
unless terminated pursuant to action by the Board, which shall have the right to
terminate the Plan at any time without prior notice to any Participant and
without liability to any Participant. Upon the termination of the Plan, the
balance, if any, then standing to the credit of each Participant in his Stock
Purchase Account shall be refunded to him.
Sec. 6.07 Repurchase of Stock. The Company shall not be required to
purchase or repurchase from any Participant any of the shares of Stock that the
Participant acquired under the Plan.
Sec. 6.08 Notice. A Purchase Agreement and any notice that a
Participant files pursuant to the Plan shall be on the form prescribed by the
Administrative Committee and shall be effective only when received by the
Administrative Committee.
Sec. 6.09 Government Regulation. The Company's obligation to sell
and to deliver the Stock under the Plan is at all times subject to all approvals
of any governmental authority required in connection with the authorization,
issuance, sale or delivery of such Stock.
Sec. 6.10 Headings, Captions, Gender. The headings and captions
herein are for convenience of reference only and shall not be considered as part
of the text. The masculine shall include the feminine, and vice versa.
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Sec. 6.11 Severability of Provisions; Prevailing Law. The provisions
of the Plan shall be deemed severable. In the event any such provision is
determined to be unlawful or unenforceable by a court of competent jurisdiction
or by reason of a change in an applicable statute, the Plan shall continue to
exist as though such provision had never been included therein (or, in the case
of a change in an applicable statute, had been deleted as of the date of such
change). The Plan shall be governed by the laws of the State of Delaware, to
the extent such laws are not in conflict with, or superseded by, federal law.
A-10
<PAGE>
DETACH HERE
PROXY
COTELLIGENT, INC.
101 California Street, Suite 2050
San Francisco, California 94111
This Proxy is solicited on behalf of the Board of Directors of Cotelligent,
Inc., a Delaware corporation (the "Company" or "Cotelligent") for use only at
the 2000 Annual Meeting of Stockholders (the "Annual Meeting") to be held at the
Hyatt Regency, San Francisco, 5 Embarcadero Center, California on the 6th day of
September, 2000 at 9:00 a.m., Pacific Daylight Time, and at any adjournments
thereof. The approximate date on which this Proxy and accompanying Proxy
Statement will first be given or sent to stockholders is August 4, 2000.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, YOU ARE URGED TO FILL
IN, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
RETURN ENVELOPE. IF YOU ATTEND THE ANNUAL MEETING, YOU MAY VOTE YOUR SHARES OF
COMMON STOCK PERSONALLY EVEN IF YOU HAVE PREVIOUSLY SUBMITTED A PROXY.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
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VOTE BY TELEPHONE VOTE BY INTERNET
Its fast, convenient and immediate! Its fast, convenient and your vote is
Call Toll-Free on a Touch-Tone Phone immediately confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
------------------------------------------------- ---------------------------------------------------------
Follow these four easy steps: Follow these four easy steps:
1. Read the accompanying Proxy 1. Read the accompanying Proxy
Statement/Prospectus and Proxy Card. Statement/Prospectus and Proxy Card.
2. Call the toll-free number 2. Go to the Website
1-877-PRX-VOTE (1-877-779-8683). For http://www.eproxyvote.com/cgz
shareholders residing outside the United
States call collect on a touch-tone phone 3. Enter your 14-digit Voter Control Number
1-201-536-8073. located on your Proxy Card above your name.
3. Enter your 14-digit Voter Control Number 4. Follow the instructions provided.
located on your Proxy Card above your name.
4. Follow the recorded instructions.
------------------------------------------------- ---------------------------------------------------------
Your vote is important! Your vote is important!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/cgz anytime!
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Do not return your Proxy Card if you are voting by Telephone or Internet
DETACH HERE
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[X] Please mark ____
votes as in |
this example. |
1. Election of Directors 2. To approve the increase in the FOR AGAINST ABSTAIN
Nominees: (01) Anthony M. Frank, (02) James R. Lavelle, number of shares available for [ ] [ ] [ ]
(03) Ralph H. Baxter, Jr., each for a three year term. purchase by employees under the
Cotelligent, Inc. Employee Stock
FOR WITHHELD Purchase Plan from 300,000 to
[ ] [ ] 950,000.
[ ] _______________________________________ 3. To approve the appointment of FOR AGAINST ABSTAIN
For all nominees expect as noted above Arthur Andersen LLP as the [ ] [ ] [ ]
Company's independent certified
public accountants.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Signature:__________________________________ Date:__________________ Signature:_______________________________ Date:______________
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