<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 22, 2000
REGISTRATION NO. 333-
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
____________________
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
______________________
COTELLIGENT, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 94-3173918
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
101 CALIFORNIA STREET
SUITE 2050
SAN FRANCISCO, CALIFORNIA 94111
(415) 439-6400
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
_______________
JAMES R. LAVELLE
CHAIRMAN OF THE BOARD, CHIEF EXECUTIVE OFFICER AND PRESIDENT
101 CALIFORNIA STREET
SUITE 2050
SAN FRANCISCO, CALIFORNIA 94111
(415) 439-6400
_______________
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE
NUMBER, INCLUDING AREA CODE, OF AGENT FOR SERVICE OF PROCESS)
_______________
COPIES TO:
DAVID W. POLLAK, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
101 PARK AVENUE
NEW YORK, NEW YORK 10178
TEL: (212) 309-6000
FAX: (212) 309-6273
______________
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the Registration Statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. [ ]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, as amended (the "Securities Act"), other than securities offered only in
connection with dividend or interest reinvestment plans, check the following
box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under
the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER SHARE(1) OFFERING PRICE(1) FEE(2)
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<S> <C> <C> <C> <C>
Common Stock, par value $.01 per 100,000 Shares $5.71875 $571,875 $151
share..............................
====================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended, and
based upon the average of the high and low sale prices of the Common Stock
reported on the New York Stock Exchange on May 17, 2000.
(2) Calculated pursuant to Section 6(b) of the Securities Act of 1933 as
follows: Proposed maximum aggregate offering price per share multiplied by
.000264.
_______________
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
The information in this preliminary prospectus is not complete and may be
changed. These securities may not be sold until the registration statement
filed with the Securities and Exchange Commission is effective. This
preliminary prospectus is not an offer to sell nor does it seek an offer to buy
these securities in any jurisdiction where the offer or sale is not permitted.
+++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION, DATED MAY__, 2000
100,000 SHARES
COTELLIGENT, INC.
COMMON STOCK
_______________
This prospectus relates to the offer and sale of 100,000 shares of common
stock of Cotelligent, Inc. from time to time for the account of our stockholder,
E.W. & Associates, Inc. The shares of common stock covered by this prospectus
were issued to the selling stockholder in a private placement made in connection
with a Forbearance and Reinstatement of Noncompetes Agreement, dated as of May
2, 2000, among us, Cotelligent USA, Inc., E.W. & Associates, Inc. and the
stockholders of E.W. & Associates, Inc., and a Securities Issuance Agreement,
dated as of May 2, 2000, between us and E.W. & Associates, Inc. and/or its
assigns.
We will not receive any of the proceeds from the sale of the shares offered
by this prospectus. All expenses of registration of the shares which may be
offered by this prospectus under the Securities Act will be paid by us (other
than underwriting discounts and selling commissions, and fees and expenses of
advisors to the selling stockholder).
Our common stock is traded on the New York Stock Exchange under the symbol
"CGZ." On May 17, 2000, the closing price of the common stock as reported on the
New York Stock Exchange was $5.9375 per share.
See "Risk Factors" beginning on page 2 to read about certain factors you
should consider before buying shares of our common stock.
_______________
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
_______________
THE DATE OF THIS PROSPECTUS IS MAY , 2000
<PAGE>
RISK FACTORS
- --------------------------------------------------------------------------------
INVESTMENT IN OUR STOCK HAS A DEGREE OF RISK. PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE RISKS DESCRIBED BELOW. THE RISKS AND UNCERTAINTIES
DESCRIBED BELOW MAY NOT BE THE ONLY ONES WE WILL FACE. ADDITIONAL RISKS AND
UNCERTAINTIES NOT PRESENTLY KNOWN TO US OR THAT WE CURRENTLY DEEM NOT MATERIAL
MAY ALSO IMPAIR OUR BUSINESS OPERATIONS. IF ANY OF THE FOLLOWING RISKS ACTUALLY
OCCUR, OUR BUSINESS, FINANCIAL CONDITION OR OPERATING RESULTS COULD BE
MATERIALLY ADVERSELY AFFECTED.
- --------------------------------------------------------------------------------
RISKS RELATED TO OUR INFORMATION TECHNOLOGY BUSINESS
We have signed a non-binding letter of intent to divest our information
technology, or IT, staff augmentation business. See "Recent Developments --
Divestiture of our IT Staff Augmentation Business" for a discussion of this
divestiture. We cannot assure you that this transaction will be completed. Until
the divestiture is completed, we will continue to be subject to all of the
following risks related to our IT business. Once the divestiture has been
completed, we will be subject to the following risks to the extent they relate
to our IT consulting business and to our new joint venture.
IF WE FAIL TO CONTINUE TO ATTRACT AND RETAIN QUALIFIED IT PROFESSIONALS, IT
COULD HARM OUR BUSINESS.
Our success depends upon our ability to attract, hire and retain IT
professionals who possess the necessary skills and experience to service our
clients. We continually identify, screen and retain qualified IT professionals
to keep pace with client demand for rapidly evolving technologies and varying
client needs. We compete for these professionals with our clients, other
providers of technical services, systems integrators, providers of outsourcing
services, computer systems consultants and temporary staffing companies in a
variety of industry segments. Competition for individuals with proven technical
skills is intense. In the past, we have experienced difficulties in identifying
and retaining qualified IT professionals and, in some instances, we were unable
to meet requests for services. We cannot assure you that qualified IT
professionals will continue to be available to us in sufficient numbers.
OUR SUCCESS IS DEPENDENT ON OUR KEY PERSONNEL AND OUR ABILITY TO HIRE ADDITIONAL
MANAGEMENT PERSONNEL AT REGIONAL AND CORPORATE LEVELS.
Our operations are dependent on the continued efforts of our executive
officers and senior management of our operating locations. In addition, we will
likely depend on the senior management of any businesses acquired in the future.
If any of these people are unable or unwilling to continue in his or her present
role, or if we are unable to hire, train and integrate new management personnel
effectively, our business could be adversely affected. We do not currently
maintain key man life insurance covering any of our executive officers or other
members of senior management.
WE FACE PRICING AND MARGIN PRESSURE WHICH COULD ADVERSELY AFFECT OUR REVENUES
AND PROFITABILITY.
Many of our larger clients purchase IT services primarily from a limited
number of pre-approved vendors. In order to remain on vendor lists and attract
new clients, we must provide our services at competitive rates. Although we
continually attempt to reduce our costs, other IT consulting services
organizations and temporary placement agencies provide the same or similar
services at equal or lower costs. In addition, as competition intensifies
between IT consulting services providers, increased demand for qualified IT
professionals may result in upward market pressure on compensation rates.
Further, some of our clients require that vendors reduce rates after services
have commenced. We may not be able to compete effectively on pricing or other
financial requirements and, as a result, we may lose clients or fail to maintain
our historical gross profit levels or operate profitably.
WE FACE INTENSE COMPETITION WHICH COULD ADVERSELY AFFECT OUR REVENUES AND
PROFITABILITY.
The IT consulting services industry is highly competitive, fragmented and
subject to rapid change. Our competitors include local, regional and national
consulting and integration firms, professional service divisions of applications
software firms and the professional service groups of computer equipment
companies. We also compete with management information outsourcing companies,
"Big Five" accounting firms and general management consulting
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firms. The majority of our competitors are smaller regional firms with a strong
presence in local markets. Some of our competitors have greater technical,
financial or marketing resources than we have. In addition, we intend to enter
new markets and expand our service offerings through internal growth and
acquisitions and we expect to encounter additional competition from established
companies in these areas. Further, many large companies have recently
consolidated their vendor lists to a smaller number of preferred service
providers. If we are unable to adequately service these companies and become a
preferred service provider, our ability to acquire new clients and retain
existing clients could be adversely affected. If we cannot compete effectively
in our industry, our revenues and profitability could be adversely affected.
IF WE CANNOT IMPLEMENT AND MANAGE OUR ACQUISITION STRATEGY SUCCESSFULLY OUR
FUTURE PROSPECTS AND GROWTH COULD SUFFER.
We intend to continue to expand our operations through the acquisition of
IT consulting services businesses. Our inability to implement and manage our
acquisition strategy successfully could adversely affect our future prospects
and growth. We may not be able to identify, acquire or profitably manage
additional businesses without substantial costs, delays or other problems. If
competition for acquisition candidates increases, the prices for attractive
acquisition candidates may be bid up to higher levels. In addition,
acquisitions may involve a number of special risks, including: (1) diversion of
management's attention; (2) failure to retain key acquired personnel; (3) risks
associated with unanticipated events, circumstances or legal liabilities; and
(4) amortization of acquired intangible assets. Some or all of these risks
could adversely affect our operations and financial performance. For example,
client satisfaction or performance problems at a single acquired business could
adversely affect our reputation. Further, any businesses acquired in the future
may not achieve anticipated revenues and earnings.
WE MAY HAVE DIFFICULTY FINANCING OUR FUTURE ACQUISITIONS, WHICH COULD LIMIT OUR
GROWTH.
We expect to finance future acquisitions by using cash, notes and/or shares
of our common stock for all or a portion of the consideration to be paid. To
the extent that we issue shares of our common stock as payment for an
acquisition, a material decline in the market price of our common stock could
make our stock less attractive consideration. We may not have sufficient cash
resources to make acquisitions and we may need to obtain additional capital
through debt or equity financing to sustain our growth. Although we have a $49
million credit facility, this facility is not currently available for
acquisitions. We may not be able to obtain additional financing when needed on
satisfactory terms, if at all.
IF THE eBUSINESS MARKET DOES NOT CONTINUE TO DEVELOP, OR IF ITS DEVELOPMENT IS
DELAYED, OUR BUSINESS COULD BE HARMED.
Our future revenue will depend on the development of the eBusiness market.
The failure of this market to develop, or a delay in the development of this
market, could seriously harm our business. The success of eBusiness depends
substantially upon the widespread adoption of the Internet as a primary medium
for commerce and business applications. Critical issues concerning the
commercial use of the Internet, such as security, reliability, cost,
accessibility and quality of service, remain unresolved and may negatively
affect the growth of Internet use or the attractiveness of commerce and business
communications over the Internet.
CAPACITY CONSTRAINTS MAY RESTRICT THE USE OF THE INTERNET AS A COMMERCIAL
MARKETPLACE, RESULTING IN DECREASED DEMAND FOR OUR PRODUCTS.
The Internet infrastructure may not be able to support the demands placed
on it by increased usage or by the transmission of large quantities of data.
Other risks associated with commercial use of the Internet could slow its
growth, including:
. outages and other delays resulting from inadequate network infrastructure;
. slow development of enabling technologies and complementary products; and
. limited availability of cost-effective, high-speed access.
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Delays in the development or adoption of new equipment standards or
protocols required to handle increased levels of Internet activity, or increased
governmental regulation, could cause the Internet to lose its viability as a
means of communication among participants in the supply chain, resulting in
decreased demand for our products.
WE ARE DEPENDENT ON CONTINUED EXPANSION OF THE INTERNET INFRASTRUCTURE.
The recent growth in Internet traffic has caused frequent periods of
decreased performance, requiring Internet service providers and users of the
Internet to upgrade their infrastructures. If Web usage continues to grow
rapidly, the Internet infrastructure may not be able to support the demands
placed on it by this growth and its performance and reliability may decline. If
these outages or delays on the Internet occur frequently, overall Web usage
could grow more slowly or decline. Our ability to increase the speed and scope
of our services to customers is ultimately limited by and dependent upon the
speed and reliability of both the Internet and the capacity of the computer
equipment used by our customers. Consequently, the emergence and growth of the
market for our services is dependent on improvements being made to the entire
Internet and to computer equipment in general to alleviate overloading and
congestion.
WE ARE SUBJECT TO GOVERNMENT REGULATION AND LEGAL UNCERTAINTIES.
The Internet is new and rapidly changing, and federal and state regulation
relating to the Internet is evolving. Currently, there are few laws or
regulations directly applicable to access to the Internet. Due to the
increasing popularity of the Internet, it is possible that laws and regulations
may be enacted covering issues such as user privacy, pricing, taxation, content
and quality of products and services. The adoption of such laws or regulations
could reduce the rate of growth of the Internet, which could materially and
adversely affect our business.
OUR REVENUES AND FINANCIAL CONDITION MAY BE ADVERSELY AFFECTED BY THE LOSS OF
BUSINESS FROM SIGNIFICANT CLIENTS.
Our revenue is primarily derived from services provided in response to
client requests or on an assignment-by-assignment basis. Our engagements,
generally billed on a time and materials or arranged fee basis, are terminable
at any time by our clients, generally without penalty. In addition, for the
year ended March 31, 1999, our largest client and our ten largest clients
accounted for approximately 5% and 24%, respectively, of our revenues. Our
clients may not continue to engage us for projects or use our services at
historical levels, if at all. If we lose a major client or suffer a reduction
in business, our revenue and financial condition may be adversely affected.
OUR FINANCIAL RESULTS ARE SUBJECT TO QUARTERLY FLUCTUATIONS.
Our revenue, gross margins and operating margins for any particular quarter
are generally affected by business mix and billing rates, resource requirements,
marketing activities, retention rates, the timing and size of client projects
and fluctuations in demand is a result of the technology market. Consequently,
you should not deem our results for any quarter to be necessarily indicative of
future results. In addition, any downward fluctuations in our results may cause
a decline in the trading price of our common stock.
WE FACE POTENTIAL LIABILITY DUE TO THE PROJECT NATURE OF OUR BUSINESS WHICH
OFTEN REQUIRES OUR IT PROFESSIONALS TO WORK AT OUR CLIENTS' PLACE OF BUSINESS.
Our IT professionals are often deployed in the workplace of other
businesses. As a result of this activity, we could be subject to possible
claims of discrimination and harassment, employment of illegal aliens or other
similar claims. These types of claims could result in negative publicity for us
and money damages or fines. Although we have not had any significant problems
in this area, we could encounter these problems in the future.
We are also exposed to liability for actions of our IT professionals while
on assignment, including damages caused by employee errors, misuse of client-
proprietary information or theft of client property. Due to the nature of our
assignments and the related potential liability, we cannot assure you that
insurance we maintain, if continually available, will be sufficient in amount or
scope to cover a loss.
RISKS RELATED TO OUR NEW JOINT VENTURE
OUR BUSINESS WILL BE HARMED IF OUR NEW JOINT VENTURE TRANSACTION DOES NOT CLOSE.
3
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We have caused one of our indirect wholly-owned subsidiaries to enter into
an operating agreement with bSmart.to Technologies, Inc., forming a new joint
venture. The closing of this joint venture transaction depends on the
satisfaction of two conditions set forth in the operating agreement and the
execution and delivery of some additional transaction agreements. We have
decided to focus our business on this new joint venture and related solutions
opportunities emerging in wireless Internet communications. As a result, if we
do not close the joint venture transaction, our business will be harmed.
WE ARE FOCUSING OUR BUSINESS ON THE NEW JOINT VENTURE AND WE CANNOT ASSURE YOU
THAT THIS JOINT VENTURE WILL BE SUCCESSFUL.
We have decided to divest our IT staff augmentation business to focus on
our new joint venture and related solutions opportunities emerging in wireless
Internet communications. We have decided to devote significant resources to
this joint venture. We cannot assure you that our joint venture will be
successful. If our joint venture is not successful, our business could be
materially and adversely affected.
OUR JOINT VENTURE HAS NO OPERATING HISTORY ON WHICH AN INVESTOR CAN EVALUATE ITS
BUSINESS.
We have agreed to contribute certain information technology consulting and
implementation and integration services assets and certain administrative
transition services to bSmart.to LLC, a new joint venture with bSmart.to
Technologies, Inc. Our joint venture has no operating history on which an
investor can evaluate its business. You must consider the risks, expenses and
difficulties this joint venture can be expected to encounter in the new and
rapidly evolving wireless Internet communications and information systems area.
These risks include the joint venture's ability to:
. attract and develop a customer base;
. generate sufficient levels of revenues and profitability;
. attract, retain and motivate qualified personnel;
. anticipate and adapt to rapid changes in its markets;
. maintain and enhance its systems to support growth of operations and
increasing the number of users;
. introduce new and enhanced services and products;
. minimize technical difficulties and system downtime; and
. respond to changes in government regulation.
OUR LACK OF EXPERIENCE IN THE AREA OF MBUSINESS MAY ADVERSELY AFFECT OUR NEW
JOINT VENTURE.
We intend our new joint venture to focus on mobile business, or mBusiness,
solutions in the emerging wireless Internet communications and information
systems area. We have no prior experience in the area of mBusiness and cannot
assure you that we will be able to develop the skills required to be successful
in the area of mBusiness. If we cannot develop the skills required to be
successful in the area of mBusiness, the joint venture's business will be
materially and adversely affected.
WE HAVE NEVER WORKED WITH BSMART.TO TECHNOLOGIES, INC. AND DO NOT KNOW IF WE
WILL HAVE A SUCCESSFUL RELATIONSHIP.
We have never worked with bSmart.to Technologies, Inc. The success of our
joint venture will depend on maintaining a good working relationship. Any
disagreements between our management and the management of
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bSmart.to Technologies relating to operating the joint venture could adversely
affect the business and results of operations of our joint venture.
WE OWN A MINORITY OF THE MEMBERSHIP INTERESTS IN THE JOINT VENTURE AND THEREFORE
DO NOT CONTROL THE JOINT VENTURE.
We own 49% of the membership interests in the joint venture and bSmart owns
a 51% interest. In addition, the board of representatives of the joint venture
consists of five members, three of which may be designated by bSmart and two of
which may be designated by us. The joint venture may not take certain
extraordinary actions unless these actions are approved by at least one of
bSmart's designated representatives and one of our designated representatives.
These actions include:
. modifications to the joint venture's business plan;
. the voluntary dissolution or liquidation of the joint venture or the
commencement of bankruptcy related proceedings;
. actions contrary to the preservation of the joint venture's existence;
. acquisitions or dispositions of assets by the joint venture which have a fair
market value in excess of 20% of the fair market value of the joint venture;
. dealings with bSmart or Cotelligent or their affiliates except pursuant to
the terms of the joint venture's operating agreement;
. issuances of new membership interests;
. redemptions or repurchases of membership interests;
. modification of the joint venture's operating agreement;
. additional capital contributions to the joint venture;
. distributions of the joint venture's profits; and
. in the event of a dissolution of the joint venture, removal of the
independent third person engaged to wind up the affairs of the joint venture.
As to all other matters, bSmart will be in a position to control the joint
venture. Actions taken by the joint venture, which may be approved by bSmart
without our support, could impact the results of operations of the joint
venture.
THE JOINT VENTURE IS SUBJECT TO RAPID CHANGES IN TECHNOLOGY AND CONSUMER
PREFERENCES.
The wireless Internet communications and information systems market is
characterized by rapidly changing technology, changes in user and customer
requirements and preferences, frequent new product and service announcements and
evolving new industry standards and practices that could render the joint
venture's existing proprietary technology and systems obsolete. The joint
venture's success will depend, in part, on its ability to enhance its existing
services; develop new services and technology that address the increasingly
sophisticated and varied needs of existing and prospective users; and respond to
technological advances and evolving industry standards and practices on a cost-
effective and timely basis. The development of mobile information and
communications systems and other proprietary technology entails significant
technical, financial and business risks. To be successful, the joint venture
must adapt to the rapidly changing market by continually improving the
performance, features and reliability of its systems and services. The joint
venture could also incur substantial costs to modify its services or
infrastructure to adapt to these changes. The joint venture's business could be
adversely affected if it incurred significant costs without adequate results.
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THE JOINT VENTURE WILL FACE SUBSTANTIAL COMPETITION.
The joint venture will face substantial competition in the wireless
Internet communications and information systems industry. The market for
wireless Internet communications and information systems is rapidly evolving as
a result of the development of new technologies, products and services.
Competitors may have greater name recognition, larger customer bases, and
significant financial, technical and marketing resources. This may allow them
to devote greater resources than our joint venture to the development of their
wireless Internet communications and information systems. These competitors may
also engage in more extensive research and development, adopt more aggressive
pricing policies and make more attractive offers to users. Competitors may
develop products and services that are equal or superior to those of our joint
venture or that achieve greater market acceptance. As a result, competition may
have a material adverse effect on the joint venture's financial results and
prospects.
THE JOINT VENTURE DEPENDS ON INTELLECTUAL PROPERTY LAWS, WHICH MAY NOT FULLY
PROTECT IT FROM UNAUTHORIZED USE OR MISAPPROPRIATION OF ITS PROPRIETARY
TECHNOLOGIES.
The joint venture relies on intellectual property laws, confidentiality
procedures and contractual provisions to protect its proprietary rights in its
products and technology. These measures afford only limited protection to the
joint venture. The joint venture may be unable to avoid infringement or
misappropriation claims regarding current or future technology, or unable to
adequately deter misappropriation or independent third party development of its
technology. In addition, policing unauthorized use of its products is
difficult. We are unable to determine the extent to which piracy of the joint
venture's software products exists and software piracy could become a problem.
Litigation to defend and enforce the joint venture's intellectual property
rights could result in substantial costs and diversion of resources and could
have a material adverse effect on our business, regardless of the final outcome
of such litigation.
THE JOINT VENTURE MAY EXPERIENCE DELAYS IN THE SCHEDULED INTRODUCTION OF NEW OR
UPGRADED TECHNOLOGY, AND ITS PRODUCTS MAY CONTAIN UNDETECTED "BUGS," RESULTING
IN LOSS OF REVENUE AND HARM TO ITS REPUTATION.
The joint venture's technology is particularly complex, because it must
perform in multi-platform environments and respond to customer demand for high
performance and major new product enhancements. The joint venture's new
products can require long development and testing periods before they are
commercially released. If the joint venture experiences delays in the scheduled
introduction of new technology, its customers may become dissatisfied and our
business could be harmed.
Also, despite testing by the joint venture, its technology may contain
undetected errors or "bugs." These bugs could result in a delay or loss of
revenue, diversion of development resources, damage to the joint venture's
reputation, increased service and warranty costs, or impaired market acceptance
and sales of these products, any of which could harm our business.
RISKS RELATED TO THE DIVESTITURE OF OUR IT STAFF AUGMENTATION BUSINESS
For more information about our divestiture of our IT staff augmentation
business, see "Recent Developments-- Divestiture of our IT Staff Augmentation
Business."
WE HAVE ONLY SIGNED A NON-BINDING LETTER OF INTENT AND THE DIVESTITURE MAY NOT
BE COMPLETED AS PLANNED.
We have signed a non-binding letter of intent to divest our IT staff
augmentation business. This sale is still subject to due diligence and other
customary conditions. We cannot assure you that these conditions will be
satisfied or that this transaction will be consummated. If this transaction
does not close and we continue to operate our IT staff augmentation business,
our business will be harmed if key employees leave the company or otherwise make
it difficult for us to operate once they know that the IT staff augmentation
business is for sale. In addition, if we have to pursue another course of action
to divest our IT staff augmentation business, our business could be materially
and adversely affected.
In addition, we currently intend to use the proceeds from the sale of our
IT staff augmentation business to repay in full our existing indebtedness under
our bank facility. The lenders under this credit facility have currently waived
all existing defaults through May 31, 2000. If the transaction does not close,
we will continue to need waivers from our lenders to existing covenant defaults
under this facility and we will need to find other sources of funds to repay
this facility. In addition, the need for continuing waivers of defaults may
restrict our operating flexibility and harm our business.
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IF THE SALE OF OUR IT STAFF AUGMENTATION BUSINESS IS COMPLETED, WE WILL HAVE
CONTINUING OBLIGATIONS TO THE BUYER AS A RESULT OF THE SALE.
If the sale of our IT staff augmentation business is completed, we will be
obligated to indemnify the buyer for some period of time for certain liabilities
which may arise as a result of the sale. Since we have not completed the
negotiations of the specific terms of the sale, we do not know the scope of our
continuing obligations or the time period for which we will remain liable. In
addition, we cannot predict the liabilities that may arise as a result of the
sale. Any indemnification claims made by the buyer could materially and
adversely affect our business.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
documents with the Securities and Exchange Commission. Our file number is 0-
25372. You may read and copy any document we file at the SEC's public reference
room at Judiciary Plaza Building, 450 Fifth Street, NW, Room 1024, Washington,
D.C. 20549. You should call 1-800-SEC-0330 for more information on the public
reference room. The SEC maintains an Internet site at http://www.sec.gov where
certain information regarding issuers may be found.
This prospectus is part of a registration statement that we filed with the
SEC. The registration statement contains more information than this prospectus
regarding Cotelligent and our common stock, including certain exhibits and
schedules. You can get a copy of the registration statement from the SEC at the
address listed above or from its Internet site.
Our common stock is traded on the New York Stock Exchange. Proxy
statements and other information concerning us can also be inspected at the
offices of the New York Stock Exchange, 20 Broad Street, New York, New York
10005.
DOCUMENTS INCORPORATED BY REFERENCE
The SEC allows us to "incorporate" into this prospectus information we file
with the SEC in other documents. This means that we can disclose important
information to you by referring to other documents that contain that
information. The information may include documents filed after the date of this
prospectus which update and supersede the information you read in this
prospectus. The following documents and other materials, which we have filed
with the SEC, are incorporated and specifically made a part of this prospectus
by reference:
(1) Annual Report on Form 10-K for the fiscal year ended March 31, 1999;
(2) Quarterly Reports on Form 10-Q for the quarters ended June 30, 1999,
September 30, 1999 and December 31, 1999;
(3) Current Reports on Form 8-K dated November 30, 1998 (as amended on
February 12, 1999), June 28 1999, September 24, 1999, August 26, 1999,
December 31, 1999, March 6, 2000 and April 27, 2000; and
(4) Description of our securities contained in a Registration Statement on
Form 8-A dated February 18, 1998.
In addition, all documents that we file with the Securities and Exchange
Commission pursuant to Section 13(a), 13(c), 14 or 15(d) of the Securities
Exchange Act of 1934 after the date of this prospectus will be deemed to be
incorporated by reference into this prospectus and to be part of this prospectus
from the date of the filing of such documents with the SEC. Any statement
contained in this prospectus or in a document incorporated or deemed to be
incorporated by reference in this prospectus will be deemed to be modified or
superseded for purposes of this prospectus if a statement contained in this
prospectus or in any other subsequently filed document which also is or is
deemed to be incorporated by reference in this prospectus modifies or supersedes
that statement. Any statement so modified or superseded will not be deemed,
except as so modified or superseded, to constitute a part of this prospectus.
This prospectus incorporates documents by reference that are not presented
in this prospectus or delivered with this prospectus. Copies of these
documents, other than exhibits to these documents that are not specifically
incorporated by reference in this prospectus, are available without charge to
each person to whom a copy of this prospectus is
7
<PAGE>
delivered, upon the written or oral request of that person. Requests for any
information should be directed to Daniel E. Jackson, Executive Vice President,
Chief Financial Officer and Treasurer, Cotelligent, Inc., 101 California Street,
Suite 2050, San Francisco, California 94111 (telephone number (415) 439-6400).
FORWARD-LOOKING STATEMENTS
This prospectus contains both historical and forward-looking statements.
These forward-looking statements are not facts; rather, they are intentions and
expectations relating to our plans, strategies and prospects. These forward-
looking statements are within the meaning of Section 27A of the Securities
Exchange Act and are intended to be covered by the safe harbors created by
Section 27A of the Securities Exchange Act. The forward-looking statements can
generally be identified by our use of words such as "plan," "intend," believe,"
"expect," and other words of similar import. Although we believe that our
plans, intentions and expectations reflected in or suggested by these forward-
looking statements are reasonable, we cannot assure you that we will achieve our
plans, intentions or expectations. We urge you to consider carefully the
important factors that could cause actual results to differ materially from the
forward-looking statements. These factors are described in the section entitled
"Risk Factors" and elsewhere in this prospectus. We make all the forward-
looking statements in this prospectus only as of the date of this prospectus,
and we do not undertake to publicly update these forward-looking statements to
reflect subsequent events.
RECENT DEVELOPMENTS
JOINT VENTURE AGREEMENT
On April 27, 2000, we caused our indirectly wholly-owned subsidiary, CZG
Mobile Ventures, Inc., a Delaware corporation, to enter into an operating
agreement with bSmart.to Technologies, Inc., a Delaware corporation, forming a
joint venture entity called bSmart.to LLC, a Delaware limited liability company.
CZG Mobile Ventures owns a 49% membership interest in the joint venture and
bSmart owns a 51% interest. bSmart is an affiliate of the Buytel Group, a group
of Irish technology organizations, and is in the business of using its patented
technology and systems architecture to facilitate real-time information and
communication for mobile people over a micro-selection of delivery channels.
Upon the consummation of the joint venture transaction, bSmart will
contribute to the joint venture certain technology and trademark rights and
licenses, as well as certain technology support services. We will contribute to
the joint venture (a) through CZG Mobile Ventures, $2,000,000 in cash at closing
and $8,000,000 upon the sale by us of our IT staff augmentation division as
discussed below under "Divestiture of our IT Staff Augmentation Business" and
(b) through our directly wholly-owned subsidiary, Cotelligent USA, Inc., a
California corporation, (1) certain information technology consulting and
implementation and integration services assets and (2) certain administrative
transition services. The joint venture intends to utilize these contributions
to develop and market mBusiness solutions in the emerging wireless Internet
communications area.
The operating agreement sets forth as exhibits certain additional
transaction agreements. Upon the fulfillment of two conditions set forth in the
operating agreement, such additional transaction agreements will be executed and
delivered, and the joint venture transaction closed. The two conditions involve
us obtaining (a) the consent of our creditor, Fleet National Bank, to the
contributions to be made to the joint venture and the release of certain
security interests in the assets to be contributed by Cotelligent USA and
(b) any required third-party consents to the assignment of all material
contracts to be contributed to the joint venture by Cotelligent USA. Because we
have no control over such third parties, there can be no assurance that any or
all third parties will grant such consents and, therefore, that the joint
venture transaction will be consummated.
The additional transaction documents include a five-year warrant granted to
bSmart to purchase our securities totaling 4% of Cotelligent's outstanding
common stock at an exercise price of $8 per share, and a five-year warrant
granted to us to purchase securities of bSmart totaling 4% of bSmart's
outstanding common stock at an exercise price equal to the most recent valuation
of bSmart.
A copy of the operating agreement (including all exhibits) was filed with
the SEC on May 12, 2000 as an Exhibit to our Current Report on Form 8-K. This
summary description of the joint venture transaction does not purport
8
<PAGE>
to be complete and is qualified in its entirety by reference to the operating
agreement, which is incorporated in this prospectus by reference.
DIVESTITURE OF OUR IT STAFF AUGMENTATION BUSINESS
On April 27, 2000, we announced the signing of a non-binding letter of
intent to divest our IT staff augmentation business for approximately $140
million in cash, comprised of the purchase price and receivable proceeds in
excess of working capital requirements. The sale is subject to due diligence
and other customary conditions. If consummated, we expect this transaction to
close by the end of June 2000.
We have decided to divest our IT staff augmentation business in order to
focus on our new joint venture and related solutions opportunities emerging in
wireless Internet communications.
USE OF PROCEEDS
We will not receive any proceeds from the sale of the common stock offered
hereby.
9
<PAGE>
SELLING STOCKHOLDER
The following table sets forth information with respect to the selling
stockholder, including:
. the number and approximate percentage of shares beneficially owned by it
as of May 17, 2000;
. the number of shares registered for sale; and
. the number and approximate percentage of shares to be owned by it after
the completion of this offering.
E.W. & Associates, Inc., which was formerly known as Information Systems
Resources, Inc., and two of its stockholders entered into a purchase and sale of
assets agreement effective as of January 1, 1998, as amended in a letter
agreement dated April 15, 1999, pursuant to which we acquired substantially all
of the assets of E.W. & Associates. In addition, the stockholders of E.W. &
Associates, Inc. who were a party to the purchase and sale of assets agreement
have been employed by us during the past three years and one of these
stockholders is still employed by us as the president of one of our
subsidiaries. Because the selling stockholder may sell all or some portion of
the shares of our common stock beneficially owned by it, only an estimate
(assuming the selling stockholder sells all of its shares offered hereby) can be
given as to the number of shares of our common stock that will be beneficially
owned by the selling stockholder after this offering. The address of the
selling stockholder and the voting and investment power with respect to its
shares is also listed below.
<TABLE>
<CAPTION>
COMMON STOCK COMMON STOCK
BENEFICIALLY OWNED BENEFICIALLY OWNED
PRIOR TO OFFERING/1/ NUMBER AFTER OFFERING
------------------------ OF SHARES --------------------
NAME NUMBER PERCENT OFFERED NUMBER PERCENT
----- ------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C>
E.W. & Associates, Inc./2/ 0 0% 100,000/3/ 0 0%
</TABLE>
- ---------------
<TABLE>
<C> <S>
/1/ Based on a total of 15,183,545 shares of common stock outstanding as of May 17, 2000.
/2/ The address of E.W. & Associates, Inc. is 1401 Oven Park Drive, Suite 201, Tallahassee, FL 32312.
/3/ E.W. & Associates, Inc. has sole voting and investment power with respect to its shares of Cotelligent.
</TABLE>
We have agreed to diligently seek the effectiveness of this registration
statement and to keep this registration statement effective until 180 days
following the effective date or such shorter period as may be required to permit
the public offering and sale of the shares covered by this prospectus by the
selling stockholder until the offer and sale of the shares covered by this
prospectus are completed.
10
<PAGE>
PLAN OF DISTRIBUTION
Sales of the shares of common stock registered under this prospectus may be
made from time to time by the selling stockholder, or, subject to applicable
law, by pledgees, donees, distributees, transferees or other successors in
interest. These sales may be made on the New York Stock Exchange, in the over-
the-counter market, or on another national securities exchange (any of which may
involve crosses and block transactions), or in privately negotiated transactions
or otherwise at prices and terms related to the current market price, or at
negotiated prices. In addition, any shares covered by this prospectus which
qualify for sale pursuant to Section 4(1) of the Securities Act or Rule 144
promulgated thereunder may be sold thereunder rather than pursuant to this
prospectus. Without limiting the generality of the foregoing, the shares may be
sold in one or more of the following types of transactions:
. a block trade in which a broker or dealer so engaged will attempt to
sell the shares as agent but may position and resell a portion of the
block as principal to facilitate the transaction;
. a purchase by a broker or dealer as principal and resale by such
broker or dealer for its account pursuant to this prospectus;
. ordinary brokerage transactions and transactions in which the broker
solicits a purchase; and
. face-to-face transactions between sellers and purchasers without a
broker or dealer.
In effecting sales, brokers or dealers engaged by the selling stockholder
may arrange for other brokers or dealers to participate. Such brokers or
dealers may receive commissions or discounts from the selling stockholder in
amounts to be negotiated.
The selling stockholder and any brokers or dealers who act in connection
with the sale of the shares hereunder may be deemed to be "underwriters" within
the meaning of 2(11) of the Securities Act, and any commissions received by them
or any profit on any resale of the shares as principal might be deemed to be
underwriting discounts and commissions under the Securities Act. We have agreed
to indemnify the selling stockholder and any such broker or dealer who may be
deemed to be an underwriter against certain liabilities, including liabilities
under the Securities Act as an underwriter.
We have advised the selling stockholder that, during such time as they may
be engaged in a distribution of the shares of common stock included herein, they
must comply with the applicable provisions of Regulation M under the Exchange
Act ("Regulation M") and, in connection therewith, the selling stockholder may
not engage in any stabilization activity in connection with any of our
securities, that they must furnish copies of this prospectus to each broker-
dealer through which the shares of our common stock included herein may be
offered, and that they may not bid for or purchase any of our securities or
attempt to induce any person to purchase any of our securities except as
permitted under Regulation M.
LEGAL MATTERS
The validity of the issuance of the shares of common stock offered by this
prospectus has been passed upon for us by Morgan, Lewis & Bockius LLP, New York,
New York.
11
<PAGE>
EXPERTS
The financial statements included in our annual report on Form 10-K for the
fiscal year ended March 31, 1999 incorporated by reference in this prospectus
have been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report dated April 26, 1999, and are included herein in
reliance upon the authority of said firm as experts in giving said report.
12
<PAGE>
- --------------------------------------------------------------------------------
No dealer, representative or any other person has been authorized to give
any information or to make any representations other than those contained in
this prospectus, and if given or made, such information or representations must
not be relied upon as having been authorized by Cotelligent. Neither the
delivery of this prospectus nor any sale made hereunder shall under any
circumstances create any implication that the information contained in this
prospectus is correct as of any date subsequent to the date of this prospectus.
This prospectus does not constitute an offer to sell or a solicitation of an
offer to buy any securities offered by this prospectus by anyone in any
jurisdiction in which such offer or solicitation is not authorized or in which
the person making such offer or solicitation is not qualified to do so or to
anyone to whom it is unlawful to make such offer or solicitation.
_______________
TABLE OF CONTENTS
Risk Factors..................................................... 1
Where You Can Find More Information.............................. 7
Documents Incorporated By Reference.............................. 7
Forward-Looking Statements....................................... 8
Recent Developments.............................................. 8
Use Of Proceeds.................................................. 9
Selling Stockholder.............................................. 10
Plan Of Distribution............................................. 11
Legal Matters.................................................... 11
Experts.......................................................... 12
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The estimated expenses to be incurred in connection with the distribution
of the common stock covered by this Registration Statement, all of which will be
paid by Cotelligent, Inc. (the "Company") are as follows:
SEC Registration Fee $
---------
Printing and Engraving Costs *
Legal Fees and Expenses *
Accounting Fees and Expenses *
Miscellaneous --
---------
Total $ *
---------
______________
* To be filed by amendment.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company's By-laws provide that the Company shall, to the fullest extent
permitted by Section 145 of the General Corporation Law of the State of
Delaware, as amended from time to time, indemnify all persons whom it may
indemnify pursuant thereto.
Section 145 of the General Corporation Law of the State of Delaware permits
a corporation, under specified circumstances, to indemnify its directors,
officers, employees or agents against expenses (including attorney's fees),
judgments, fines and amounts paid in settlements actually and reasonably
incurred by them in connection with any action, suit or proceeding brought by
third parties by reason of the fact that they were or are directors, officers,
employees or agents of the corporation, if such directors, officers, employees
or agents acted in good faith and in a manner they reasonably believed to be in
or not opposed to the best interests of the corporation and, with respect to any
criminal action or proceeding, had no reason to believe their conduct was
unlawful. In a derivative action, i.e., one by or in the right of the
corporation, indemnification may be made only for expenses actually and
reasonably incurred by directors, officers, employees or agents in connection
with the defense or settlement of an action or suit, and only with respect to a
matter as to which they shall have acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made if such person shall
have been adjudged liable to the corporation, unless and only to the extent that
the court in which the action or suit was brought shall determine upon
application that the defendant directors, officers, employees or agents are
fairly and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
Article Seven of the Company's Certificate of Incorporation provides that
the Company's directors will not be personally liable to the Company or its
stockholders for monetary damages resulting from breaches of their fiduciary
duty as directors except (a) for any breach of the duty of loyalty to the
Company or its stockholders, (b) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (c) under
Section 174 of the General Corporation Law of the State of Delaware, which makes
directors liable for unlawful dividends or unlawful stock repurchases or
redemptions or (d) for transactions from which directors derive improper
personal benefit.
II-1
<PAGE>
The Company maintains liability insurance for the benefit of its directors
and officers.
ITEM 16. EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
-------- -----------
<S> <C>
3.1 Certificate of Incorporation of Cotelligent, Inc. (Exhibit 3.1 of the
Registration Statement on Form S-1 (File No. 33-80267) effective
February 16, 1996, is hereby incorporated by reference).
3.2 By-Laws of Cotelligent, Inc. (Exhibit 3.2 of the Registration
Statement on Form S-1 (File No. 33-80267) effective February 16, 1996, is
hereby incorporated by reference).
3.3 Certificate of Amendment of Certificate of Incorporation of Cotelligent,
Inc. (Exhibit 3.3 of the Annual Report on Form 10-K (File No. 00-25372)
filed with the SEC on June 29, 1999, is hereby incorporated by reference).
4 Form of certificate evidencing ownership of Common Stock of Cotelligent
(Exhibit 4.1 of the Registration Statement or Form S-1 (File No. 33-80267)
effective February 16, 1996, is hereby incorporated by reference).
5.1 Opinion of Morgan, Lewis & Bockius LLP.
10.1 Forbearance and Reinstatement of Noncompetes Agreement, dated as of May 2,
2000, among Cotelligent USA, Inc., Cotelligent, Inc., E.W. & Associates,
Inc., Thomas H. Edwards and Timothy M. Wooten.
10.2 Securities Issuance Agreement, dated as of May 2, 2000, between Cotelligent,
Inc. and E.W. & Associates, Inc. and/or its assigns.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1).
24 Powers of Attorney (included on page II-5 of this Registration Statement).
</TABLE>
II-2
<PAGE>
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which any offers or sales are being
made, a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent post-
effective amendment thereof) which, individually or in aggregate, represent a
fundamental change in the information set forth in the registration statement.
Notwithstanding the foregoing, any increase or decrease in volume of securities
offered (if the total dollar value of securities offered would not exceed that
which was registered) and any deviation from the low or high and of the
estimated maximum offering range may be reflected in the form of prospectus
filed with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of Registration
Fee" table in the effective registration statement; and
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or any
other material change to such information in the registration statement.
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the Registrant pursuant to Section 13 or Section 15(d) of the
Exchange Act that are incorporated by reference in this Registration Statement;
(2) That for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities being offered therein and the
offering of such securities at the time may be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities which are being registered which remain unsold at the
termination of the offering.
(4) That for purposes of determining any liability under the Securities
Act of 1933, each filing of the registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 that is
incorporated by reference in the registration statement shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(5) To deliver or cause to be delivered with the prospectus, to each
person to whom the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus and
furnished pursuant to and meeting the requirements of Rule 14a-3 or Rule 14c-3
under the Securities Exchange Act of 1934; and where interim financial
information required to be presented by Article 3 of Regulation S-X is not set
forth in the prospectus, to deliver, or caused to be delivered to each person to
whom the prospectus is sent or given, the latest quarterly report that is
specifically incorporated by reference in the prospectus to provide such interim
financial information.
(6) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and controlling
persons of the Company pursuant to the foregoing provisions, or otherwise, the
Company has been advised that in the opinion of the Commission such
indemnification is against public policy as expressed by the Securities Act of
1933 and is, therefore, unenforceable. In the event that a claim for
indemnification
II-3
<PAGE>
against such liabilities (other than the payment by the Company of expenses
incurred or paid by a director, officer or controlling person of the Company in
the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Company will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question of whether such indemnification by it is against
public policy as expressed in the Securities Act of 1933 and will be governed by
the final adjudication of such issue.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of San Francisco, State of California on May 22, 2000.
COTELLIGENT, INC.
By: /s/ DANIEL E. JACKSON
-------------------------------------
Daniel E. Jackson
Executive Vice President, Chief Financial
Officer and Treasurer
POWER OF ATTORNEY
Each person whose signature appears below hereby appoints James R. Lavelle
and Daniel E. Jackson, and each of them singly, as his true and lawful attorney-
in-fact and agent, with full power of substitution and resubstitution, for him
and in his name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) to this Registration Statement
and any other registration statement for the same offering filed pursuant to
Rule 462 under the Securities Act of 1933, and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing appropriate or
necessary to be done, as fully and for all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said attorney-in-
fact and agent or his substitute or substitutes may lawfully do or cause to be
done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the date or dates indicated.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
<S> <C> <C>
/s/ JAMES R. LAVELLE Chairman of the Board of Directors, Chief
- ---------------------------------- Executive Officer and President (Principal May 22, 2000
James R. Lavelle Executive Officer)
/s/ EDWARD E. FABER
- ---------------------------------- Vice Chairman of the Board of Directors May 22, 2000
Edward E. Faber
/s/ DANIEL E. JACKSON Executive Vice President, Chief Financial
- ---------------------------------- Officer, Treasurer and Director May 22, 2000
Daniel E. Jackson (Principal Financial Officer)
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
/s/ CURTIS J. PARKER
- ------------------------------------ Vice President, Chief Accounting Officer
Curtis J. Parker (Principal Accounting Officer) May 22, 2000
/s/ RALPH H. BAXTER, JR.
- ------------------------------------ Director May 22, 2000
Ralph H. Baxter, Jr.
/s/ JEFFREY J. BERNARDIS
- ------------------------------------ Director May 22, 2000
Jeffrey J. Bernardis
/s/ ANTHONY M. FRANK
- ------------------------------------ Director May 22, 2000
Anthony M. Frank
/s/ B. TOM GREEN
- ------------------------------------ Director May 22, 2000
B. Tom Green
/s/ HARVEY L. POPPEL
- ------------------------------------ Director May 22, 2000
Harvey L. Poppel
</TABLE>
II-6
<PAGE>
INDEX TO EXIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
------- -----------
<S> <C>
3.1 Certificate of Incorporation of Cotelligent, Inc. (Exhibit 3.1 of the
Registration Statement on Form S-1 (File No. 33-80267) effective February
16, 1996, is hereby incorporated by reference).
3.2 By-Laws of Cotelligent, Inc. (Exhibit 3.2 of the Registration
Statement on Form S-1 (File No. 33-80267) effective February 16, 1996, is
hereby incorporated by reference).
3.3 Certificate of Amendment of Certificate of Incorporation of Cotelligent,
Inc. (Exhibit 3.3 of the Annual Report on Form 10-K (File No. 00-25372)
filed with the SEC on June 29, 1999, is hereby incorporated by reference).
4 Form of certificate evidencing ownership of Common Stock of Cotelligent
(Exhibit 4.1 of the Registration Statement or Form S-1 (File No. 33-80267)
effective February 16, 1996, is hereby incorporated by reference).
5.1 Opinion of Morgan, Lewis & Bockius LLP.
10.1 Forbearance and Reinstatement of Noncompetes Agreement, dated as of May 2,
2000, among Cotelligent USA, Inc., Cotelligent, Inc., E.W. & Associates,
Inc., Thomas H. Edwards and Timothy M. Wooten.
10.2 Securities Issuance Agreement, dated as of May 2, 2000, between Cotelligent,
Inc. and E.W. & Associates, Inc. and/or its assigns.
23.1 Consent of Arthur Andersen LLP.
23.2 Consent of Morgan, Lewis & Bockius LLP (included in Exhibit 5.1).
24 Powers of Attorney (included on page II-5 of this Registration Statement).
</TABLE>
<PAGE>
EXHIBIT 5.1
May 22, 2000
Cotelligent, Inc.
101 California Street
Suite 2050
San Francisco, California 94111
Re: Issuance of Shares Pursuant to
Registration Statement on Form S-3
----------------------------------
Ladies and Gentlemen:
We have acted as counsel to Cotelligent, Inc., a Delaware corporation (the
"Company"), in connection with the preparation and filing with the Securities
and Exchange Commission under the Securities Act of 1933, as amended, of a
Registration Statement on Form S-3 (the "Registration Statement") relating to
the secondary offering by a selling stockholder of an aggregate of 100,000
shares (the "Shares") of the Company's Common Stock, $.01 par value per share.
In so acting, we have examined originals, or copies certified or otherwise
identified to our satisfaction, of the Certificate of Incorporation of the
Company, as amended, and the By-Laws of the Company and such other documents or
instruments as we have deemed necessary for purposes of the opinions expressed
below. We have assumed that the Shares have been issued against receipt of the
consideration approved by the Board of Directors of the Company or a committee
thereof, which was no less than the par value thereof, and were issued in
compliance with applicable federal and state securities laws.
Based on the foregoing, we are of the following opinion:
1. The Company is a corporation duly incorporated and validly existing
under the laws of the State of Delaware.
2. The Shares have been duly authorized and validly issued and are
fully paid and non-assessable.
We are expressing the opinions above as members of the Bar of the State of
New York and express no opinion as to any law other than the General Corporation
Law of the State of Delaware.
We consent to the use of this opinion as an exhibit to the Registration
Statement and to the use of our name under the caption "Legal Matters" in the
Registration Statement.
Very truly yours,
/s/ MORGAN LEWIS & BOCKIUS LLP
---------------------------------------
Morgan Lewis & Bockius LLP
<PAGE>
EXHIBIT 10.1
FORBEARANCE AND REINSTATEMENT
-----------------------------
OF NONCOMPETES
--------------
This Agreement is made and entered into as of this 2nd day of May , 2000,
by and between COTELLIGENT USA, INC., COTELLIGENT, INC., EW & ASSOCIATES, INC.,
THOMAS H. EDWARDS and TIMOTHY M. WOOTEN.
BACKGROUND INFORMATION
1. The parties to this Agreement are described as follows:
A. Cotelligent USA, Inc., whose address is 101 California Street,
Suite 2050, San Francisco, CA 94111, and whose Federal Employer Identification
No. is 94-3314671, is a California corporation and is the surviving corporation
by merger of Information Systems Resources, Inc., a Florida corporation,
formerly known as Cotell Florida Acquisition Corporation, and one or more
corporations. Cotelligent USA, Inc., is registered to do business in the State
of Florida.
B. Cotelligent, Inc., whose address is 101 California Street,
Suite 2050, San Francisco, CA 94111, and whose Federal Employer Identification
No. is 94-3173918, is a Delaware corporation formerly known as Cotelligent
Group, Inc.
C. Individually, Cotelligent USA, Inc., is referred to herein as
"Buyer." Individually Cotelligent, Inc., is referred to herein as "Guarantor."
D. Collectively, Cotelligent USA, Inc., and Cotelligent, Inc., are
referred to herein as "Debtors."
E. EW & Associates, Inc., is a Florida corporation. It was
formerly known as Information Systems Resources, Inc., but by change of name
became EW & Associates, Inc. It is referred to herein as "Creditor."
F. Thomas H. Edwards and Timothy M. Wooten are residents of
Tallahassee, Florida, and Destin, Florida, respectively. They are stockholders
in EW & Associates, Inc., and are referred to separately herein as "Stockholder
Edwards" and "Stockholder Wooten." Collectively, Stockholder Edwards and
Stockholder Wooten are referred to herein as "Stockholders."
2. Effective January 5, 1998, Buyer, Guarantor, Creditor, and Stockholders
entered into that certain Purchase and Sale of Assets Agreement (the "Purchase
Agreement"), a true and correct copy of which is attached to the Complaint
mentioned herein. The Purchase Agreement was amended by that certain Letter
Agreement dated April 15, 1999 (referred to as the "Amendment,") a true and
correct copy of which is attached to the Complaint mentioned herein. Unless
stated otherwise, the term Purchase Agreement shall include the Amendment.
<PAGE>
3. Debtors have defaulted under the Purchase Agreement by failing to pay
the full Earnout Amount (as defined in the Purchase Agreement) in the sum of
$8,143,237.00, which sum has been due and owing since February 5, 2000, and has
been accruing interest from and after February 6, 2000, at the rate of twelve
percent (12%) per annum.
4. The failure of Debtors to pay the Earnout Amount within thirty (30)
days after receipt of written notice from Creditor that such payment was due
would cause the Noncompetition Agreement set forth in Section 7 of the Purchase
Agreement to terminate. Creditor timely sent the required notice which was
received and accepted by Debtors. Due to Debtors' default under the Purchase
Agreement, the Noncompetition Agreement of Creditor and Stockholders as set
forth in Section 7 of the Purchase Agreement automatically terminated on March
12, 2000.
5. Dated January 5, 1998, but effective January 1, 1998, Debtors and
Stockholder Edwards entered into an Employment Agreement ( the "Employment
Agreement"), a true and correct copy of which is attached to the Complaint
mentioned herein. Pursuant to Section 3(g) of the Employment Agreement ,
Stockholder Edwards' Noncompetition Agreement automatically terminated on March
12, 2000.
6. Debtors recognize and agree that it is a valuable right to Creditor and
Stockholders to be able to compete in the marketplace against Debtors. Creditor
and Stockholders recognize and agree that it is a valuable right to Debtors for
Creditor and Stockholder Edwards to not be able to compete in the marketplace
against Debtors.
7. Creditor and Stockholders notified Debtors that they were prepared to
file a lawsuit on February 6, 2000, for failure of the Debtors to pay the
Earnout Amount. Debtors requested that Creditor and Stockholders not file a
lawsuit as the same would be detrimental to the Debtors' business and financial
plans and relationships. Debtors proposed that they would give Creditor
consideration for its forbearance in this regard. Stockholder Edwards informed
Debtors that so long as substantial progress was being made to resolve all
issues, Creditor planned to forbear, as the ultimate goal for all concerned was
for Creditor to be paid in full. All parties recognized that Creditor was taking
substantial risks by not immediately filing a lawsuit on February 6, 2000, to
begin further protecting its interest.
8. Based upon Debtors' representations, Creditor and Stockholders did
forebear at and after February 6, 2000, and continued to honor their respective
Noncompetiton Agreements.
9. By the time the foregoing Noncompetition Agreements expired, Creditor
and Stockholders were quite concerned that Creditor would not be paid. Debtors
have continued to assure Creditor and Stockholders that Creditor would be paid.
Realizing that the Noncompetition Agreements had expired, Debtors informed
Creditor and
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Stockholder Edwards that Debtors needed the Noncompetition Agreements to be
reinstated as provided herein.
10. Debtors have requested:
A. That Creditor continue to forebear from enforcing its rights
under the Purchase Agreement, including, but not necessarily limited to, the
right to bring suit and collect the monies now owed to it by Debtors; and
B. That Creditor and Stockholder Edwards reinstate the
Noncompetition Agreements.
11. Creditor and the Stockholders have agreed to the forbearance, and the
reinstatement of Creditor and Stockholder Edwards' Noncompetition Agreements,
but only on the terms and conditions set forth in this Agreement.
NOW THEREFORE, in consideration of the foregoing premises and mutual
covenants and agreements set forth below, and for other good and valuable
consideration, the receipt and adequacy of which is hereby acknowledged, the
parties agree as follows:
1. Incorporation of Background Information. The Background Information
given above is true and correct and is incorporated in and made a part of this
Agreement. Debtors are estopped to deny the obligations and matters described
therein.
2. Forbearance. Under the terms set forth in this Agreement, Creditor
agrees to extend the due date for payment of the Earnout Amount until June 30,
2000. Provided that Debtors pay the Earnout Amount plus interest in full as
stated herein on or before June 30, 2000, and otherwise timely meet each and
every other obligation herein, Creditor agrees not to file suit, take any other
action, or pursue any other remedies against Debtors by reason of their failure
to timely pay the Earnout Amount. The consideration for Creditor's forbearance
from February 6, 2000, and its continuing forbearance is 50,000 shares of
Guarantor's common stock, which stock shall be issued as provided in Section 9.
3. Earnout Amount and Adjustments. The full Earnout Amount due (after
payment of interest as set forth in Section 5 below) is comprised of
$8,143,237.00 in principal, plus interest at the daily rate of $2,677.23,
through and including the date of payment, less any partial payments. Regardless
of any provisions to the contrary in the Purchase Agreement, there shall be no
further adjustments to the determination of the Earnout Amount. Interest shall
only be due through the date payment is received.
4. Noncompetition Agreements.
A. The Noncompetition Agreement of Creditor under the Purchase
Agreement is hereby reinstated until June 30, 2000. The Noncompetition Agreement
of Stockholder Edwards under the Purchase Agreement and the Employment Agreement
are
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hereby reinstated until June 30, 2000. The Noncompetition Agreement of
Stockholder Wooten under the Purchase Agreement and under any employment
agreement with Debtors, whether oral or otherwise, was automatically terminated
effective March 12, 2000, and is not being reinstated.
B. Provided that Debtors fully and faithfully perform each and
every obligation under this Agreement, the Noncompetition Agreement of Creditor
shall remain in full force and effect from and after July 1, 2000, through its
stated term as mentioned in the Purchase Agreement. In the event Debtors do not
fully and faithfully perform each and every obligation under this Agreement,
such reinstated Noncompetition Agreement shall automatically expire at 11:59
p.m., June 30, 2000.
C. Provided that Debtors fully and faithfully comply with each and
every provision of this Agreement, effective July 1, 2000, Stockholder Edwards
shall continue to be bound by the Noncompetition Agreement set forth in his
Employment Agreement. In the event Debtors do not fully and faithfully perform
each and every obligation under this Agreement, such Noncompetition Agreement of
the Employment Agreement shall automatically expire at 11:59 p.m., June 30,
2000.
D. The consideration to Creditor for honoring its Noncompetition
Agreement from and after February 6, 2000, and for the reinstatement of the same
as provided herein is 50,000 shares of Guarantor's stock, which stock shall be
issued as provided in Section 9.
E. The consideration to Stockholder Edwards for reinstating his
Noncompetition Agreements are the 50,000 Edwards Option Shares as defined in and
to be issued as provided in Section 9.
5. Partial Payment of Interest. The parties recognize, acknowledge and
agree that n April 20, 2000, Debtors initiated a wire transfer to Creditor in
the sum of $50,000.00 in partial payment of accrued interest.
6. Attorney's Fees. On or before June 30, 2000, Debtor shall pay to
Creditor and Stockholders the sum of $50,000 in full satisfaction of their
legal fees and costs in this transaction.
7. Covenant Against Acquisitions. Until such time as the Earnout Amount
has been paid in full to Creditor, and Debtors have otherwise met each and every
one of their obligations herein, neither Debtors nor any of their subsidiaries
or affiliates shall acquire all or substantially all of the equity securities or
interests (no matter how characterized) or assets of another corporation,
partnership, joint venture, or business entity (no matter how characterized)
whether by merger, consolidation, purchase, joint venture, pooling of interests,
exchange or other business combination. Notwithstanding the foregoing, Debtors
shall not be prohibited from engaging in acquisitions or other transactions
which result in Debtors paying in full their monetary obligations hereunder to
Creditor upon or within one (1) day following closing of such transactions.
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<PAGE>
8. Payment with First Dollars. Debtors have represented to Creditor and
Stockholders that Creditor shall be paid in full with the first available
dollars and such representation has been a material inducement to Creditor and
Stockholders entering into this Agreement. Regardless of the June 30, 2000
deadline, Debtors shall be obligated to pay Creditor with first available
dollars. Debtors shall not borrow any amounts of money on any line of credit or
obtain any further extensions of credit or obtain any further financial
accommodations (no matter how characterized), except to pay their operating
expenses or to pay their obligations under this Agreement, until Creditor has
been paid in full hereunder. Debtors further covenant and agree that they will
not accept any secondary sources of financing, or obtain funds from any
secondary investor, including the Shoreline Group, or cause a diversion of any
funds intended for the use and benefit of Debtors, whether directly or
indirectly, without first paying Creditor all obligations hereunder or ensuring
that such obligations are paid at or within one (1) day after closing of such
transaction.
9. Issuance of Shares; Options. In consideration of the forbearance and
other agreements of the Creditor and Stockholders herein, and for the
reinstatement of the Noncompetition Agreements, Debtors and Creditor agree as
follows:
A. On or before May 9, 2000, Guarantor (Cotelligent, Inc.) shall (i)
issue to Creditor, One Hundred Thousand (100,000) fully paid and
nonassessable shares of Cotelligent, Inc. common stock (the "Shares"), (ii)
issue to Creditor a stock certificate evidencing the Shares and confirming
that the Shares are fully paid and nonassessable, (iii) cause Guarantor's
transfer agent to record Creditor's ownership of the Shares in Guarantor's
stock ownership records, and (iv) issue to Stockholder Edwards an option
(the "Edwards Option") under the Cotelligent Group, Inc. 1998 Long Term
Incentive Plan (the "Incentive Plan"), substantially in the form of Exhibit
"A," to purchase Fifty Thousand (50,000) shares of Cotelligent, Inc. common
stock (the "Edwards Option Shares") at an exercise price equal to the
closing price of Cotelligent, Inc. common stock on the New York Stock
Exchange ("NYSE") on the trading date next preceding the date of this
Agreement. Guarantor and Creditor have entered into a Securities Issuance
Agreement simultaneously with the execution of this Agreement, setting
forth certain terms, conditions, and representations with respect to the
issuance of the Shares contemplated by this Agreement, which Securities
Issuance Agreement is incorporated in and made a part hereof.
B. Guarantor represents, warrants, and covenants to Creditor that (i)
there are, and upon the issuance of the Edwards Option there shall continue
to be, a sufficient number of shares available under the Incentive Plan to
provide for the issuance of the Edwards Option and (upon exercise thereof)
the Edwards Option Shares, (ii) the Edwards Option and Edwards Option
Shares shall be duly issued pursuant to the terms of the Incentive Plan,
(iii) all necessary corporate action has been taken to authorize the
issuance of the Edwards Option under the Incentive Plan, (iv) the Edwards
Option Shares have been registered with the Securities and
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<PAGE>
Exchange Commission ("SEC") under a registration statement on Form S-8
filed November 18, 1998 (the "S-8"), and (v) the S-8 is current and shall
remain current for a period of 90 days after the vesting of the last shares
to vest under the Edwards Option.
C. Within twenty (20) days after the date of execution of this
Agreement, Guarantor shall prepare and file with the SEC, and thereafter
diligently seek the effectiveness of, a registration statement under the
Securities Act of 1933 (the "Registration Statement") covering the Shares
until (i) 180 days following the effective date of the Registration
Statement (which period shall be tolled for any period during which a
"blackout," suspension of trading, or stop sale order is in effect with
respect to the Company's shares, or other event is in effect that, under
any applicable securities laws or underwriting agreement, precludes
Creditor's sale of the Shares), or (ii) such shorter period as may be
required to permit the public offering and sale of the Shares by Creditor
(the "Registration Statement Period"). Guarantor may register the Shares on
Form S-3, provided that at all times through the completion of Creditor's
offer and sale of the Share(but in no event longer than the Registration
Statement period), Guarantor is eligible to use Form S-3 and remains
current with all of its filings under the Securities and Exchange Act of
1934; otherwise, Guarantor shall register the Shares on Form S-1. In
addition, Guarantor shall:
(i) file with any federal or state or other governmental authority,
such other instruments and documents as shall be necessary to permit
Creditor to offer and sell the Shares and Stockholder Edwards to offer and
sell the Edwards Option Shares under applicable federal, state, or other
governmental laws, rules, or regulations ("Supplemental Filings");
(ii) keep Creditor informed as to the initiation and progress of all
proceedings in connection with the Registration Statement and Supplemental
Filings, including all SEC comments concerning the Registration Statement
and all responses to such comments, and advise Creditor promptly when the
Registration Statement is declared effective;
(iii) keep the Registration Statement and Supplemental Filings
effective during the Registration Statement Period until the offer and sale
of the Shares are completed, by such action as may be necessary or
appropriate, including, but not limited to, the filing of post-effective
amendments and supplements to the Registration Statement and Supplemental
Filings or to any prospectus that is a part thereof, necessary to keep the
Registration Statement and Supplemental Filings current, as applicable;
(iv) keep the S-8 and related Supplemental Filings effective until the
end of the period of 90 days after the vesting of the last shares to vest
under the Edwards Option, by such action as may be necessary or
appropriate, including, but not limited to, the filing of post-effective
amendments and supplements to the
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<PAGE>
S-8 and such Supplemental Filings or to any prospectus that is a part
thereof, necessary to keep the S-8 and such Supplemental Filings current,
as applicable;
(v) furnish to Creditor and Stockholder Edwards such number of
prospectuses, offering circulars, and other documents incident to the
Registration Statement, S-8, or Supplemental Filings as Creditor or
Stockholder Edwards from time to time reasonably requests, and file with
each securities exchange on which any of Guarantor's common stock is traded
such number of prospectuses, offering circulars, and other documents as may
be required;
(vi) upon the effectiveness of the Registration Statement, issue
such instructions to Guarantor's transfer agent, as are necessary to remove
any restrictive legend that may appear on the stock certificates evidencing
the Shares, to remove any stop-transfer instructions that may appear with
respect to the Shares in Guarantor's stock transfer records, and otherwise
to facilitate the sale and transfer of the Shares by Creditor;
(vii) remain current in all of Guarantor's filings under the
Securities Exchange Act of 1934 at all times during the Registration
Statement Period; and
(vii) bear all costs and expenses incident to the foregoing. The
term, "costs and expenses," as used herein, includes (but is not limited
to): registration and filing fees; fees and disbursements of counsel to
Guarantor; the expenses of printing the Registration Statement, S-8, and
all necessary copies of the prospectus contained therein; all Blue Sky fees
and expenses applicable in states in which Creditor or Stockholder Edwards
may offer and sell the Shares or Edwards Option Shares; the cost of any
audits or special audits incident to or required by or in connection with a
Registration Statement, S-8, or Supplemental Filings and all costs and
expenses incident to the filing of any post-effective amendment or
amendments to the Registration Statement, S-8, or supplements to
Supplemental Filings required by this Agreement. Such costs and expenses
shall include the cost of premiums for insurance for the benefit of
Guarantor with respect to any liability it may have under the Securities
Act of 1933 or as a result of this Agreement in connection with the
Registration Statement, S-8, or any Supplemental Filings, but shall not
include any selling expenses incurred by Creditor or Stockholder Edwards or
any expenses of counsel or other advisors retained by them.
D. Guarantor shall indemnify Creditor, each of its officers and
directors, each of the Stockholders, and each underwriter (as defined in
the Securities Act of 1933) of the Shares, and each person, if any, who
controls (within the meaning of the Securities Act of 1933) Creditor or any
underwriter, against all claims, losses, damages, and liabilities (or
actions with respect thereto) arising out of or based on any untrue
statement of a material fact contained in the Registration Statement, S-
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8, or any Supplemental Filing and any amendments or supplements thereto or
prospectus, offering circular, or other document related thereto or any
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, or any violation
by Guarantor of any law, rule, or regulation applicable to Guarantor and
relating to action or inaction required by Guarantor in connection with the
Registration Statement, S-8, or any Supplemental Filing or related
prospectus, offering circular, or other document. Guarantor shall reimburse
Creditor, its directors and officers, each Stockholder, each underwriter,
and each person, if any, who controls Creditor or any such underwriter for
any legal or any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability, or
action. Notwithstanding the foregoing, Guarantor will not be liable under
this subsection to the extent that any such claim, loss, damage, or
liability of any such person arises out of or is based on any untrue
statement of a material fact contained in, or any material fact omitted
from, information furnished in writing to Guarantor by Creditor expressly
for use therein.
E. On the date of execution of this Agreement, and as a condition
precedent to the obligations of Creditor and the Stockholders under this
Agreement, Guarantor shall deliver to Creditor and Stockholder Edwards one
or more opinions of Guarantor's counsel that is experienced in corporate
and federal securities law matters substantially to the following effect
(such opinion or opinions to be in form and substance reasonably
satisfactory to Creditor):
(i) Each of Debtors is duly incorporated, validly existing, and in
good standing under the laws of their respective states of incorporation,
with the corporate power and authority to enter into the transactions and
perform the obligations contemplated by this Agreement.
(ii) The execution, delivery, and performance of this Agreement, the
Share Issuance Agreement, and the Edwards Option by each of Debtors have
been duly authorized by all necessary corporate action, and this Agreement,
the Share Issuance Agreement, and the Edwards Option have been duly
executed and delivered on behalf of Debtors.
(iii) This Agreement, the Share Issuance Agreement, and the Edwards
Option each constitutes the valid and binding agreement of Debtors,
enforceable against Debtors in accordance with its terms.
(iv) Guarantor is eligible to register its common stock, including
the Shares, on a registration statement on Form S-3. Upon the effectiveness
of the Registration Statement (as defined in this Agreement), Creditor may
offer and sell the Shares, free of any restrictions under the Securities
Act of 1933.
(v) The Edwards Option Shares are issuable under the Incentive Plan
and are registered under the S-8. Upon exercise of the Edwards Option,
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<PAGE>
Stockholder Edwards may sell the Edwards Option Shares free of any
restrictions under the Securities Act of 1933.
(vi) The execution and delivery of this Agreement, the Securities
Issuance Agreement, and the Edwards Option do not, and the consummation of
the transactions contemplated by this Agreement, the Securities Issuance
Agreement, and the Edwards Option will not, (a) violate the Certificate of
Incorporation or bylaws of Debtors or any law or regulation of the United
States or the States of Florida or New York applicable to Debtors, or (b)
result in a breach of, or constitute a default under, any judgment, decree
or order binding on Debtors or any of their properties, or any material
indenture, mortgage, contract or other instrument known to Debtor's counsel
to which Debtors are a party.
10. Debtors' Other Representations and Warranties. In addition to any
other representations and warranties herein, Debtors represent and warrant to
Creditor and the Stockholders as of the date of this Agreement that:
A. There are no defenses, offsets, claims or counterclaims against
Creditor or the Stockholders under the Purchase Agreement or Stockholder
Edwards' Employment Agreement, or any other agreement, oral or otherwise,
arising out of the foregoing;
B. There are no defaults by the Creditor or Stockholders under the
Purchase Agreement and specifically as to Stockholder Edwards, under his
Employment Agreement, or any other agreement, oral or otherwise, arising out of
the foregoing;
C. Debtors shall not collaterally attack the Final Judgment mentioned
below and contemplated by this Agreement, if such Final Judgment is rendered;
D. Debtors shall not appeal the Final Judgment mentioned below if
such Final Judgment is rendered, and to this extent, Debtors waive any and all
rights to appeal the same; and
E. Debtors shall not contest the domestication of any judgment
rendered as contemplated herein, in any state.
11. Release. Debtors, Creditor and Stockholders, unconditionally and
irrevocably release and forever discharge each other and their respective
successors, assigns, agents, directors, officers and employees from any and all
possible claims, demands, actions, costs, expenses, and liabilities whatsoever,
known or unknown, at law or in equity (the foregoing collectively referred to as
the "Claims"), originating in whole or in part on or before the date of this
Agreement, which any of them or any of their respective officers, agents, or
employees may now have or hereafter have against each other and irrespective of
whether any such Claims arise out of contract, tort, violation of laws or
regulations, or otherwise in connection with the Purchase Agreement and
Stockholder Edwards' Employment Agreement, or any other agreement, oral or
otherwise, arising out of the foregoing. The foregoing releases shall not apply
to the
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obligations of the respective parties hereunder, as set forth or incorporated
herein, or otherwise referred to herein.
12. Consent to Judgment. Counsel for Creditor and the Stockholders has
prepared a civil complaint (the "Complaint") for filing in the Circuit Court in
and for Leon County, Florida, a signed copy of which is attached hereto and
incorporated herein. The Complaint seeks a monetary judgment against Debtors
for the unpaid Earnout Amount and interest, a declaration that the Creditor's
Noncompetition Agreement has been terminated, a declaration that the
Stockholders' Noncompetition Agreement under the Purchase Agreement has been
terminated, and a declaration that Stockholder Edwards' Noncompetition Agreement
under his Employment Agreement has been terminated, together with costs and
reasonable attorney's fees. As provided above, Creditor and Stockholders have
agreed to forbear and not file the Complaint or any other actions arising out of
the transactions described therein unless Debtors fail to pay all obligations
hereunder on or before June 30, 2000, or otherwise fail to meet any and all of
their obligations herein. As a material inducement to Creditor and
Stockholders to forbear, the Debtors have prepared and executed a Verified
Answer and Stipulation and Consent to Final Judgment, the originals of which
have been placed in escrow with Robert D. Mendelson, counsel for Creditor and
the Stockholders. Signed copies of the Verified Answer and Stipulation and
Consent to Final Judgment are attached hereto and incorporated herein, together
with any exhibits mentioned therein.
It shall be Debtors' obligation to ensure that each and every payment made
by them is received by Creditor on or before the deadline date. In the event
Debtors fail to pay all obligations herein on or before June 30, 2000, or
otherwise fail to comply with each and every term of this Agreement, time being
of the essence, then Creditor and the Stockholders (in addition to and not in
limitation of any other remedies available to them) shall be entitled to take
the following action without further notice or hearing or consent to or from
Debtors, their agents, attorneys, or other legal representatives:
A. The Complaint may be filed in the Circuit Court in and for Leon
County, Florida.
B. The Verified Answer being held by Attorney Mendelson in escrow
shall automatically be released from escrow and Attorney Mendelson shall be
authorized to file the Verified Answer in the Circuit Court of the Second
Judicial Circuit.
C. The Stipulation and Consent to Final Judgment held by Attorney
Mendelson in escrow shall automatically be released from escrow and Attorney
Mendelson shall be authorized to file the Stipulation and Consent to Final
Judgment in the Circuit Court of the Second Judicial Circuit.
D. Creditor and the Stockholders or any one or more of them, shall
have the right to file an Affidavit with the Court stating the amount then due
from Debtors and thereupon, Creditor and the Stockholders shall be entitled to
receive final judgment in accordance with the form of the Final Judgment being
attached to the Stipulation and
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Consent to Final Judgment, all without further notice or hearing to the Debtors
or any one of them or their counsel. The form of the Final Judgment is hereby
approved in full by Debtors. The parties hereby contract that the rate of
interest on any monetary judgment obtained shall be eighteen percent (18%) per
annum.
E. Regardless of any provision herein to the contrary, nothing
herein, including but not limited to, the rendition of the above Final Judgment,
shall preclude Creditor and Stockholders, or any one of them from bringing a
separate action for breach of this Agreement for obligations not covered by such
Final Judgment, the intent being that there shall be no merger.
13. Maximum Rate of Interest. Nothing herein contained, nor in any
instrument or transaction related hereto, shall be construed or so operate as to
require the Debtors, to pay interest in an amount or at a rate greater than the
highest rate permissible under applicable law. Should any interest or other
charges or other consideration paid by the Debtors result in the computation or
earning or payment of interest in excess of the highest rate permissible under
applicable law, then any and all such excess shall be and the same is hereby
waived by the holder hereof, shall be automatically credited against and reduce
the balance of principal, and any portion of said excess which exceeds the
principal balance shall be paid by the holder hereof to the Debtors, it being
the intent of the parties hereto that under no circumstances shall the Debtors,
be required to pay interest in excess of the highest rate permissible under
applicable law. It is not the intention of the parties to violate the usury
laws in any manner or fashion.
14. Waiver of Defenses. Debtors hereby waive any and all defenses they
may have or may hereafter have to the Complaint, whether legal or equitable,
substantive or procedural, excepting solely the defense of actual payment of all
obligations hereunder on or before June 30, 2000.
15. Amendment. Except as otherwise provided in this Agreement, the
parties may amend, modify, or supplement this Agreement at any time, but only in
writing duly executed by each of the parties.
16. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto, both written and oral, and shall not be amended, altered or
otherwise modified except in writing signed by the parties hereto. The Exhibits
attached to this Agreement are made a part of this Agreement. All
representations and warranties contained in this Agreement shall survive the
closing of the transactions contemplated hereby.
17. Headings. The headings preceding the text of sections of this
Agreement are for convenience only and shall not be deemed a part hereof.
18. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of Florida as applied to
transactions between Florida residents occurring entirely within the State of
Florida. In any litigation
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arising out of or in connection with this Agreement or the transactions
contemplated hereby, venue shall lie exclusively in the Circuit Court of the
Second Judicial Circuit of Leon County, Florida, and the prevailing party shall
be entitled to recover its reasonable attorneys' fees, costs, and expenses.
Further, if Final Judgment is entered the judgment creditors shall be entitled
to recover any and all reasonable attorney's fees in enforcing, domesticating,
and collecting upon such Final Judgment. Debtors hereby consent to the
jurisdiction of the Circuit Court in and for the Second Judicial Circuit of Leon
County, Florida.
19. Successors and Assigns. All of the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto. There are no
intended third party beneficiaries of this Agreement.
20. Further Assurances. If at any time any further action by any of the
parties is necessary or desirable to carry out the purpose of this Agreement,
such party shall take all such necessary or desirable action or cause such
action to be taken.
21. Notices. Any notice required or permitted to be given hereunder
shall be in writing and deemed given when personally delivered, one day
following dispatch by nationally recognized overnight express delivery service,
or on the date signed for as received if sent by registered or certified U.S.
Mail. Any notice shall be sent to the addresses set forth below or to such
other address as any party shall have previously designated by such a notice.
If to Cotelligent, Inc., or Cotelligent, Inc.
Cotelligent USA, Inc. Cotelligent USA, Inc.
101 California Street
Suite 2050
San Francisco, CA 94111
Attn: Ms. Lorraine E. Vega
Copy to: McRae & Metcalf, P.A.
1677 Mahan Center Boulevard
Tallahassee, FL 32308
Attn: Mr. David J. Metcalf
If to EW & Associates, Inc.: EW & Associates, Inc.
1401 Oven Park Drive
Suite 201
Tallahassee, FL 32312
If to Edwards: Thomas H. Edwards
1401 Oven Park Drive
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Suite 201
Tallahassee, FL 32312
If to Wooten: Timothy M. Wooten
319 Stillwater Cove
Destin, FL 32541
If to EW, Edwards or Wooten
Then a Copy to: Novey, Mendelson & Adamson
851 East Park Avenue
Tallahassee, FL 32301
Attn: Mr. Robert D. Mendelson
22. Time. Time is of the essence in the performance of all obligations
under this Agreement.
23. Gender. The terms herein shall be deemed to include both the singular
and plural where appropriate, and where the masculine gender is used, it shall
include masculine, feminine or neuter, where appropriate.
24. Severability. If any provision or any part thereof contained in this
Agreement is in conflict with any statute or rule of law, then such provision or
part thereof shall be deemed null and void to the extent that it may be in
conflict therewith, but without invalidating the remaining provisions of this
Agreement.
25. Counterparts. This Agreement may be signed in counterpart, and all
such counterparts, taken together, constitute the entire Agreement.
Furthermore, any party hereto may sign any such counterpart. Each party shall
be entitled to conclusively rely for all purposes upon an executed copy hereof
received by facsimile.
26. Original Agreement. The original of this Agreement shall be retained
by Creditor, the Stockholders or their counsel. This Agreement or a copy
thereof, may be introduced into evidence without further notice or hearing to
Debtors in any court proceeding, including, but not necessarily limited to, the
court proceeding contemplated by the possible filing of the Complaint as
mentioned above.
27. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY IN ANY ACTION BROUGHT ON THIS AGREEMENT OR IN ANY TRANSACTION OR
CIRCUMSTANCE ARISING IN CONNECTION HEREWITH.
28. Approval by Guarantor's Board of Directors. This Agreement is
conditioned upon its approval by Guarantor's Board of Directors on or before May
9, 2000. If such approval is not timely received, then this Agreement shall be
null and void and Attorney Mendelson shall return the Verified Answer to Debtor
and Creditor shall
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retain all funds received which it may apply against sums owed by Debtor, and
receipt of such payments shall not be deemed a waiver of Debtors' default.
29. Form of Payment; Wire Instructions. Each and every payment to be made
to Creditor or Stockholders hereunder shall be made by wire transfer pursuant
to the following wire instructions
Wire to:
-------
Premier Bank, Tallahassee, Florida
ABA # 063114108
For Credit To: Acct. No. 210158511
Name of: EW & Associates, Inc.
Payment shall not be deemed received until it has been credited to
Creditor's account pursuant to the above wire instructions.
30. Remedies Cumulative. All rights, remedies, undertakings, obligations,
options, covenants, conditions and agreements contained in this Agreement or
provided by law shall be deemed cumulative and no one of them shall be exclusive
of any other right. A party may pursue any one or more of his rights, options
or remedies hereunder or may seek damages or specific performance in the event
of any other party's breach hereunder, or may pursue any other remedy by law or
equity, whether or not stated in this Agreement.
14
<PAGE>
IN WITNESS WHEREOF, the parties, each acting by and through the undersigned
duly authorized officer, have entered into this Agreement as of the date first
written above.
COTELLIGENT USA, INC.
By: /s/ Lorraine E. Vega
________________________
Print Name: Lorraine E. Vega
Title: Vice President, General Counsel &
Secretary
COTELLIGENT, INC.
By: /s/ Lorraine E. Vega
____________________________
Print Name: Lorraine E. Vega
Title: Vice President, General Counsel &
Secretary
EW & ASSOCIATES, INC.
By: /s/ Thomas H. Edwards
________________________
Print Name: Thomas H. Edwards
Title: President
THOMAS H. EDWARDS
/s/ Thomas H. Edwards
_________________________________
TIMOTHY M. WOOTEN
/s/ Timothy M. Wooten
_________________________________
15
<PAGE>
EXHIBIT 10.2
SECURITIES ISSUANCE AGREEMENT
This SECURITIES ISSUANCE AGREEMENT ("Agreement") is entered into as of May
2, 2000 by and between COTELLIGENT, INC., a Delaware corporation (the
"Company"), with headquarters located at 101 California Street, Suite 2050 San
Francisco, California 94111, and EW & Associates, Inc. ("EW") and/or its assigns
(each, an "EW Transferee") .
RECITALS
--------
A. The Company and EW have executed and delivered simultaneously herewith
a Forbearance Agreement, dated as of the date hereof (the "Forbearance
Agreement"), among the Company, Cotelligent USA, Inc. (formerly known as Cotell
Florida Acquisition Corp.), EW, Thomas H. Edwards ("Edwards") and Timmothy M.
Wooten ("Wooten"), whereby the Company agreed to issue to EW 100,000 shares of
the Company's Common Stock, par value $.01 per share (the "Common Stock"), in
consideration for extending the due date for the payment of the Earnout Amount
(as defined in the Purchase Agreement) pursuant to that certain Purchase and
Sale of Assets Agreement, dated on or about January 5, 1998, among the Company,
EW, Edwards, Wooten and Cotell Florida Acquisition Corp. (the "Purchase
Agreement").
B. The Company and EW are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("Regulation D"), as promulgated by the United States
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act").
C. The Company desires to issue, and EW desires to receive, upon the terms
and conditions stated in this Agreement and the Forbearance Agreement, One
Hundred Thousand (100,000) shares of Common Stock (the "Common Shares").
AGREEMENTS
----------
NOW, THEREFORE, in consideration of their respective promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and EW hereby agree as follows:
ARTICLE I
ISSUANCE OF COMMON SHARES
1.1 Issuance of Common Shares. Subject to the terms and conditions of this
Agreement, the Company shall issue to EW the Common Shares in consideration for
EW's entering into and being bound by the Forbearance Agreement (the "Closing").
1.2 Form of Consideration. On the Closing Date, EW shall deliver an
executed Forbearance Agreement to the Company for the Common Shares to be issued
to it at the Closing,
<PAGE>
and the Company shall deliver to EW a certificate registered in the name of EW
representing the Common Shares, upon satisfaction of the applicable Closing
conditions as of the Closing Date as set forth in Articles V and VI herein.
1.3 Closing. The Closing will take place at the offices of Morgan, Lewis &
Bockius LLP, 101 Park Avenue, New York, New York 10178, or at such other place
as the Company and EW mutually agree.
ARTICLE II
EW'S REPRESENTATIONS AND WARRANTIES
EW represents and warrants to the Company as of the date hereof solely with
respect to itself and its purchase hereunder, as set forth in this Article II:
1.4 Investment Purpose. EW is receiving the Common Shares for EW's own
account for investment only and not with a view toward or in connection with the
public sale or distribution thereof in violation of the applicable securities
laws. EW will not, directly or indirectly, offer, sell, pledge or otherwise
transfer the Common Shares or any interest therein except pursuant to
transactions that are exempt from the registration requirements of the
Securities Act and/or sales registered under the Securities Act, the rules and
regulations promulgated pursuant thereto and applicable state securities laws.
EW understands that it must bear the economic risk of this investment until the
Common Shares are registered as contemplated by the Forbearance Agreement
pursuant to the Securities Act and any applicable state securities laws or an
exemption from such registration is available.
1.5 Accredited Investor Status. EW is an "accredited investor" as that
term is defined in Rule 501(a) of Regulation D under the Securities Act.
1.6 Information. EW and its advisors, if any, have been furnished with all
materials relating to the business, finances and operations of the Company and
materials relating to the offer and sale of the Common Shares which have been
requested by EW, including all SEC Documents (as defined below). EW and its
advisors, if any, have been afforded the opportunity to review materials and to
ask questions of the Company. EW understands that its investment in the Common
Shares involves a high degree of risk including the risks and uncertainties
disclosed in the SEC Documents. EW has sought such accounting, legal and tax
advice as it has considered necessary to make an informed investment decision
with respect to its acquisition of the Common Shares.
1.7 Governmental Review. EW understands that no United States federal or
state agency or any other government or governmental agency has passed upon or
made any recommendation or endorsement of the Common Shares.
1.8 Transfer or Resale. EW understands that (i) except as provided in the
Forbearance Agreement, the Common Shares have not been and are not being
registered under the Securities Act or any state securities laws, and may not be
offered, sold, pledged or otherwise transferred unless
2
<PAGE>
subsequently registered thereunder or an exemption from such registration is
available (which exemption the Company expressly agrees may be established as
contemplated in clauses (b) and (c) of Section 5.1 hereof); (ii) any sale of
such Common Shares made in reliance on Rule 144 under the Securities Act (or a
successor rule) ("Rule 144") may be made only in accordance with the terms of
Rule 144 and further, if Rule 144 is not applicable, any resale of such Common
Shares without registration under the Securities Act under circumstances in
which the seller may be deemed to be an underwriter (as that term is defined in
the Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such Common Shares under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder (in each case,
other than pursuant to this Agreement or the Forbearance Agreement).
1.9 Legends. EW understands that, subject to Article IV hereof, the
certificates for the Common Shares, until such time as the Common Shares have
been registered under the Securities Act as contemplated by the Forbearance
Agreement or otherwise may be sold by EW pursuant to Rule 144 (subject to and in
accordance with the procedures specified in Article IV hereof), will bear a
restrictive legend (the "Legend") in substantially the following form:
THE SHARES OF COMMON STOCK EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. THE SHARES OF COMMON STOCK
REPRESENTED HEREBY MAY NOT BE OFFERED OR SOLD OTHERWISE TRANSFERRED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT RELATING TO SUCH SHARES OF
COMMON STOCK UNDER APPLICABLE SECURITIES LAWS OR UNLESS OFFERED, SOLD OR
TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THOSE LAWS OR THE COMPANY IS FURNISHED WITH AN OPINION OF
COUNSEL SATISFACTORY IN FORM AND SUBSTANCE TO IT THAT SUCH REGISTRATION IS
NOT REQUIRED.
1.10 Organization and Qualification. EW is a corporation duly organized
and existing in good standing under the laws of its jurisdiction of
incorporation, and has the requisite corporate power to own its properties and
to carry on its business as now being conducted. EW is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
where the failure so to qualify or be in good standing could have a material
adverse effect on the transactions contemplated hereby.
1.11 Authorization: Enforcement. (a) EW has the requisite corporate power
and authority to enter into and perform this Agreement and the Forbearance
Agreement and to perform its obligations hereunder and thereunder in accordance
with the terms hereof and thereof; (b) the execution, delivery and performance
of this Agreement and the Forbearance Agreement by EW and the consummation by it
of the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action and no further consent or authorization of the
Company,
3
<PAGE>
its board of directors, or its stockholders or any other person, body or agency,
and no filing with any person, body or agency, is required with respect to any
of the transactions contemplated hereby or thereby; (c) this Agreement and the
Forbearance Agreement have been duly executed and delivered by EW; and (d) this
Agreement and the Forbearance Agreement constitute legal, valid and binding
obligations of EW enforceable against it in accordance with their respective
terms, except to the extent that such validity or enforceability may be subject
to or affected by any bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally the enforcement
of, creditors' rights or remedies of creditors generally, or by other equitable
principles of general application.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to EW as of the date hereof, and as of
the date of each Closing, as set forth in this Article III.
1.12 Organization and Qualification. The Company is a corporation duly
organized and existing in good standing under the laws of Delaware, and has the
requisite corporate power to own its properties and to carry on its business as
now being conducted. The Company is duly qualified as a foreign corporation to
do business and is in good standing in every jurisdiction where the failure so
to qualify or be in good standing would have a Material Adverse Effect.
"Material Adverse Effect" means any effect which is (or could reasonably be
expected to be) materially adverse to the business, operations, properties,
financial condition or operating results of the Company, taken as a whole, or on
the transactions contemplated hereby.
1.13 Authorization: Enforcement. (a) The Company has the requisite
corporate power and authority to enter into and perform this Agreement and the
Forbearance Agreement and to issue and sell the Common Shares in accordance with
the terms hereof; (b) the execution, delivery and performance of this Agreement
and the Forbearance Agreement by the Company and the consummation by it of the
transactions contemplated hereby and thereby (including without limitation the
issuance of the Common Shares) have been duly authorized by all necessary
corporate action and no further consent or authorization of the Company, its
board of directors, or its stockholders or any other person, body or agency, and
no filing with any person, body or agency, is required with respect to any of
the transactions contemplated hereby or thereby; (c) this Agreement and the
Forbearance Agreement have been duly executed and delivered by the Company; and
(d) this Agreement and the Forbearance Agreement constitute legal, valid and
binding obligations of the Company enforceable against the Company in accordance
with their respective terms, except to the extent that such validity or
enforceability may be subject to or affected by any bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally the enforcement of, creditors' rights or remedies of
creditors generally, or by other equitable principles of general application.
1.14 Issuance of Shares. The Common Shares have been duly authorized and,
upon issuance and sale in accordance with the terms hereof, will be validly
issued, fully paid and non-
4
<PAGE>
assessable. The Common Shares shall be entitled to be traded on the same markets
as the other shares of Common Stock of the Company are traded, and will not be
subject to preemptive rights or other similar rights of stockholders of the
Company or of any other person or entity.
1.15 No General Solicitation. Neither the Company nor any distributor
participating on the Company's behalf in the transactions contemplated hereby
(if any) nor any person acting for the Company, or any such distributor, has
conducted any "general solicitation," as described in Rule 502(c) under
Regulation D, with respect to any of the Common Shares being offered hereby.
1.16 No Integrated Offering. Neither the Company, nor any person acting on
its or their behalf, has directly or indirectly made any offers or sales of any
security or solicited any offers to buy any security under circumstances that
would either require registration of any of the Common Shares under the Act or
prevent the parties hereto from consummating, or delay or interfere with the
consummation of, the transactions contemplated hereby pursuant to an exemption
from the registration under the Securities Act pursuant to the provisions of
Regulation D.
ARTICLE IV
LEGEND REMOVAL, TRANSFER, CERTAIN SALES, ADDITIONAL SHARES
1.17 Removal of Legend. The Legend shall be removed and the Company shall
issue, or shall cause to be issued, a certificate without such Legend to the
holder of Common Shares upon which it is stamped, if, (a) the resale of such
Common Shares is registered under the Securities Act or (b) such holder provides
the Company with an opinion of counsel, in form, substance and scope customary
for opinions of counsel in comparable transactions and reasonably satisfactory
to the Company and its counsel (the reasonable cost of which shall be borne by
EW) to the effect that a public sale or transfer of such Common Shares may be
made without registration under the Securities Act pursuant to an exemption from
such registration requirements. EW agrees to sell all registered Common Shares,
including those represented by a certificate(s) from which the Legend has been
removed, or which were originally issued without the Legend, pursuant to an
effective registration statement, in accordance with the manner of distribution
described in such registration statement and to deliver a prospectus in
connection with such sale or in compliance with an exemption from the
registration requirements of the Securities Act. In the event the Legend is
removed from any certificate evidencing Common Shares or any certificate
evidencing Common Shares is issued without the Legend and such Common Shares are
to be disposed of other than pursuant to the registration statement or pursuant
to Rule 144, then prior to, and as a condition to, such disposition, the
certificate evidencing such Common Shares shall be relegended as provided herein
in connection with any disposition if the subsequent transfer thereof would be
restricted under the Securities Act. Also, in the event the Legend is removed
from any certificate evidencing Common Shares or any certificate evidencing
Common Shares is issued without the Legend and thereafter the effectiveness of a
registration statement covering the resale of such Common Shares is suspended or
the Company determines that a supplement or amendment thereto is required by
applicable securities laws, then upon reasonable advance notice to EW holding
such Common Shares, the Company may require that the Legend be placed on any
such certificate evidencing Common Shares that cannot then be sold pursuant to
an effective registration statement or Rule 144
5
<PAGE>
or with respect to which the opinion referred to in clause (b) next above has
not been rendered, which Legend shall be removed when such Common Shares may be
sold pursuant to an effective registration statement or Rule 144 or such holder
provides the opinion with respect thereto described in clause (b) next above.
ARTICLE V
CONDITIONS TO THE COMPANY'S OBLIGATION TO ISSUE COMMON SHARES
1.18 The obligation of the Company hereunder to issue the Common Shares to
EW at the Closing is subject to the satisfaction as of the Closing Date of each
of the following conditions, provided that these conditions are for the
Company's sole benefit and may be waived by the Company at any time in its sole
discretion:
(1) EW shall have executed this Agreement and the Forbearance Agreement
and delivered the same to the Company.
(2) The representations and warranties of EW shall be true and correct in
all material respects as of the Closing Date (except for representations and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date), and EW shall have
performed, satisfied and complied in all material respects with the covenants,
agreements and conditions required by this Agreement to be performed, satisfied
or complied with by EW at or prior to the Closing.
ARTICLE VI
CONDITIONS TO EW'S OBLIGATION TO CLOSE
1.19 The obligations of EW hereunder is subject to the satisfaction as of
the Closing Date of each of the following conditions, provided that these
conditions are for EW's sole benefit and may be waived by EW at any time in EW's
sole discretion:
(1) The Company shall have executed this Agreement and the Forbearance
Agreement and delivered the same to EW.
(2) The Company shall have delivered to EW duly issued Common Shares at
the Closing.
(3) The representations and warranties of the Company shall be true and
correct in all material respects as of the Closing Date (except for
representations and warranties that speak as of a specific date, which
representations and warranties shall be true and correct as of such date) and
the Company shall have performed, satisfied and complied in all material
respects with the covenants, agreements and conditions required by this
Agreement to be performed, satisfied or complied with by the Company at or prior
to the Closing Date. EW shall have received a certificate,
6
<PAGE>
executed by the Chief Executive Officer or Chief Financial Officer of the
Company, dated as of the Closing Date, to the foregoing effect.
ARTICLE VII
GOVERNING LAW; MISCELLANEOUS
1.20 Governing Law: Jurisdiction. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida. The parties
hereto irrevocably consent to the jurisdiction of the United States federal
courts and state courts located in the State of Florida in any suit or
proceeding based on or arising under this Agreement or the transactions
contemplated hereby and irrevocably agree that all claims in respect of such
suit or proceeding may be determined in such courts.
1.21 Counterparts. This Agreement may be executed in two or more
counterparts, including, without limitation, by facsimile transmission, all of
which counterparts shall be considered one and the same agreement and shall
become effective when counterparts have been signed by each party and delivered
to the other party.
1.22 Headings. The headings of this Agreement are for convenience of
reference and shall not form part of, or affect the interpretation of, this
Agreement.
1.23 Severability. If any provision of this Agreement shall be invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall not
affect the validity or enforceability of the remainder of this Agreement or the
validity or enforceability of this Agreement in any other jurisdiction.
1.24 Entire Agreement: Amendments. This Agreement and the instruments
referenced herein contain the entire understanding of the parties with respect
to the matters covered herein and therein and, except as specifically set forth
herein or therein, neither the Company nor EW makes any representation,
warranty, covenant or undertaking with respect to such matters. No provision of
this Agreement may be waived other than by an instrument in writing signed by
the party to be charged with enforcement and no provision of this Agreement may
be amended other than by an instrument in writing signed by the Company and EW.
1.25 Notice. Any notice herein required or permitted to be given shall be
in writing and may be personally served or delivered by nationally-recognized
overnight courier or by facsimile machine confirmed telecopy, and shall be
deemed delivered at the time and date of receipt (which shall include telephone
line facsimile transmission). The addresses for such communications shall be:
If to the Company:
-----------------
Cotelligent, Inc.
101 California Street, Suite 2050
San Francisco, CA 94111
7
<PAGE>
Attn: Lorraine E. Vega
Telephone: (415) 439-6413
Telecopy: (415) 439-6808
with a copy to each of:
McRae & Metcalf, P.A.
1677 Mahan Center Boulevard
Tallahassee, Florida 32308
Attn: David J. Metcalf, Esq.
Telephone: (850) 386-8000
Telecopy: (850) 386-8342
Morgan, Lewis & Bockius LLP
101 Park Avenue, 45th Floor
New York, NY 10178-0060
Attn: David W. Pollak, Esq.
Telephone: (212) 309-6058
Telecopy: (212) 309-6273
If to EW:
--------
1311-A Paul Russel Road
Tallahassee, Florida 32308
Attn: Mr. Thomas H. Edwards
Telephone:
Telecopy:
Each party shall provide notice to the other party of any change in address.
1.26 Successors and Assigns. This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and assigns. Neither
the Company nor EW shall assign this Agreement or any rights or obligations
hereunder without the prior written consent of the other. Notwithstanding the
foregoing, EW may assign all or part of its rights and obligations hereunder to
any of its "affiliates," as that term is defined under the Securities Act,
without the consent of the Company so long as such affiliate is an accredited
investor (within the meaning of Regulation D under the Securities Act) and
agrees in writing to be bound by this Agreement. This provision shall not limit
EW's right to transfer the Common Shares pursuant to the terms of this Agreement
or to assign EW's rights hereunder to any such transferee pursuant to the terms
of this Agreement.
1.27 Third Party Beneficiaries. This Agreement is intended for the benefit
of the parties hereto and their respective permitted successors and assigns and
is not for the benefit of, nor may any provision hereof be enforced by, any
other person.
8
<PAGE>
1.28 Survival. The representations and warranties of the Company and EW
and the agreements and covenants set forth herein shall survive for one (1) year
after the Closing hereunder.
1.29 Further Assurances. Each party shall do and perform, or cause to be
done and performed, all such further acts and things, and shall execute and
deliver all such other agreements, certificates, instruments and documents, as
the other party may reasonably request in order to carry out the intent and
accomplish the purposes of this Agreement and the consummation of the
transactions contemplated hereby.
9
<PAGE>
IN WITNESS WHEREOF, the undersigned EW and the Company have caused this
Agreement to be duly executed as of the date first above written.
EW & ASSOCIATES, INC.
By: /s/ Thomas H. Edwards
---------------------------------
Name: Thomas H. Edwards
Title: President
COTELLIGENT, INC.
By: /s/ Lorraine E. Vega
---------------------------------
Name: Lorraine E. Vega
Title: Vice President, General Counsel & Secretary
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANT
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation by
reference in this Registration Statement on Form S-3 of our report dated April
26, 1999 included in the Annual Report on Form 10-K of Cotelligent, Inc., for
the year ended March 31, 1999 and to all references to our Firm included in this
Registration Statement
/s/ Arthur Andersen LLP
- -----------------------
Arthur Andersen LLP
San Francisco, California
May 22, 2000
