SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For the fiscal year ended December 31, 2001.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES
EXCHANGE ACT OF 1934
for the transition period from to
COMMISSION FILE NUMBER 0-27412
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 No.)
44 MONTGOMERY STREET, SUITE 4050
SAN FRANCISCO, CALIFORNIA 94104
(Address of principal executive offices) (Zip Code)
(415) 439-6400
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
COMMON STOCK, $.01 PAR VALUE
----------------------------
(Title of class)
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $6,407,383 based on the closing price of $0.43 of
the registrant's Common Stock as reported on the OTC Bulletin Board on March 28,
2002.
The number of shares of the registrant Common Stock outstanding as of March 28,
2002 was 14,900,891.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART III
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Items 10, 11, 12 and 13 of the Form 10-K filed by the Company on March 29, 2002
are hereby amended as follows:
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Pursuant to the Company's Certificate of Incorporation and By-laws, the Board of
Directors is divided into three classes, Class I, Class II and Class III,
serving staggered three-year terms. One class of directors is elected at each
annual meeting of stockholders to serve for the following three years. Currently
there are two Class I directors whose terms will expire at the Annual Meeting,
two Class II directors whose terms expire in 2003 and one Class III director
whose term expires in 2004. The Company's Certificate of Incorporation provides
that the classes of directors shall be as nearly equal in number as possible.
Class I Directors
Edward E. Faber is 69 years old and is Vice Chairman of the Board of Directors
of the Company. Mr. Faber joined the Company as a director in March 1993 and
served as Chairman from August 1995 to April 1996. From 1990 through 1992, he
was Vice Chairman, President and Chief Executive Officer of Supercuts, Inc., a
company specializing in hairstyling. Mr. Faber was founding President and Chief
Executive Officer of Computerland Corporation ("Computerland"), a company
specializing in the sale of computer equipment and accessories, from 1976
through 1983. He retired from Computerland in 1983 and returned in 1985 as
Chairman of the Board and Chief Executive Officer, serving in that capacity
until 1987 when he again retired. Mr. Faber is a director of Outdoor
Broadcasting TV.com and is chairman of Gumtech International, Inc. Mr. Faber has
a Bachelor of Science degree from Cornell University and served as an officer in
the United States Marine Corps.
Daniel E. Jackson is 41 years old and is a director of the Company, as well as
its President and Chief Operating Officer. Mr. Jackson has served as a director
of the Company since September 1999. Mr. Jackson was promoted to the position of
Chief Operating Officer and President in July 2000. Mr. Jackson served as
Executive Vice President, Chief Financial Officer and Treasurer from June 1999
until July 2000. From September 1995 until June 1999, Mr. Jackson served in the
capacities of Executive Vice President, Corporate Development and General
Counsel. Mr. Jackson served as Secretary from September 1996 until September
1997 and as Chief Financial Officer from November 1996 until January 1998. From
1994 to 1995, Mr. Jackson served as Vice President and General Counsel of an
affiliate of Notre Venture Capital, Ltd., a partnership specializing in industry
consolidation transactions. Prior to that, he was Corporate Counsel and
Secretary of Sanifill, Inc., an environmental services company, from its
founding in 1990 through 1994. From 1986 until 1990, Mr. Jackson was an
associate at Morgan, Lewis & Bockius LLP in New York, where he practiced law in
the areas of securities and mergers and acquisitions. Mr. Jackson received a
Bachelor of Science degree in business administration from The Ohio State
University and a Juris Doctor degree from the University of Pennsylvania.
Class II Directors
James R. Lavelle is 51 years old and is the founder, Chairman of the Board and
Chief Executive Officer of the Company. Mr. Lavelle has served as Chief
Executive Officer since he founded the Company in 1993. From inception of the
Company until August 1995, Mr. Lavelle was also Chairman of the Board of the
Company, a position that he reassumed in April 1996. From 1985 to 1993, he was a
business consultant specializing in strategic marketing and organization
development. From 1983 to 1985, Mr. Lavelle was Senior Manager and Director of
Management Consulting Services for the San Francisco office of KPMG Main
Hurdman, an international accounting firm. Prior to that, he was Manager of
Management Consulting Services in the San Francisco office of Price Waterhouse
LLP, an international accounting firm. Mr. Lavelle has a bachelor's degree from
University of California at Santa Barbara and a Master of Business
Administration degree from Santa Clara University.
Debra J. Richardson is 47 years old, and joined the Company as a director on
August 8, 2001. Dr. Richardson joined the faculty at UC Irvine in 1987, where
she researches formal quality analysis and testing methods, has developed
leading edge tools, and worked with several companies in adopting technology to
improve the quality of critical software systems. She is currently director of
the Microelectronics Innovation and Computer Research Opportunities (MICRO), one
of the University of California's Industry-University Cooperative Research
Programs, and is a founding member of the UC Institute for Software Research.
Dr. Richardson holds the Ted and Janice Smith Family Foundation Endowed Chair.
Dr. Richardson earned a Doctorate of Philosophy and a Master of Science in
Computer and Information Science from the University of Massachusetts, Amherst,
and received a Bachelor of Arts degree in Mathematics from Revelle College of
the University of California, San Diego.
2
Class III Director
Anthony M. Frank is 70 years old and is a director of the Company. He joined the
Company in that capacity in March 1993. In September 1994, Mr. Frank became co-
founding General Partner and Chairman of Belvedere Capital Partners, the general
partner of the California Community Financial Institutions Fund, the primary
purpose of which is investing in California community banks. From 1992 to 1994,
Mr. Frank was an independent financial consultant and venture capitalist. From
March 1988 to March 1992, Mr. Frank served as the Postmaster General of the
United States. From 1971 until 1988, he served as Chairman and Chief Executive
Officer of First Nationwide Bank. Mr. Frank is a graduate of Dartmouth College
and the Tuck School of Business and was an overseer of the Tuck School of
Business. He is also a director of several companies, including The Charles
Schwab Corporation, Crescent Real Estate Equities Ltd., Temple Inland
Corporation and Bedford Properties Investors.
Other Executive Officers
Curtis J. Parker is 47 years old and is Executive Vice President, Chief
Financial Officer, Treasurer & Assistant Secretary of the Company. From November
1996 until December 2000, Mr. Parker served as Vice President and Chief
Accounting Officer. From January 1996 until March 1996, he served as a
consultant to the Company and was appointed Corporate Controller in March 1996.
From 1988 through 1995, Mr. Parker was employed by Burns Philp Food Inc., a
manufacturer of food products, where he rose to the position of Vice President -
Finance for the Industrial Products Division. Mr. Parker has a Bachelor of
Commerce degree from the University of British Columbia and is a Certified
Public Accountant.
Item 11 - Executive Compensation.
The following table sets forth certain information regarding the compensation
earned by or awarded to the Chief Executive Officer and remaining executive
officers of the Company for the fiscal year ended December 31, 2001, the twelve
month period ended December 31, 2000 and the fiscal year ended March 31, 2000.
SUMMARY COMPENSATION TABLE
Long Term
Compensation
Annual Compensation Awards
Fiscal Options/
Name and Principal Position YEAR Salary($) (2) Bonus($) Other($) SARS(#)
James R. Lavelle............................. 2001 361,166 0 18,000(3) 0
Chairman and Chief Executive Officer 2000(1) 450,000 0 18,000(3) 0
2000 450,000 0 18,000(3) 0
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Daniel E. Jackson............................ 2001 302,120 0 18,000(3) 0
President and Chief Operating Officer 2000(1) 375,000 0 5,470(4)
18,000(3) 0
2000 368,750 0 5,470(4)
18,000(3) 0
5,470(4)
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Curtis J. Parker............................. 2001 166,500 0 0 227,500
Executive Vice President, Chief Financial 2000(1) 175,000 100,000 0 25,000
Officer, Treasurer and Assistant Secretary 2000 160,000 0 0 0
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(1) In July 2000, the Company changed its fiscal year end from March 31 to
December 31. Accordingly, for each of the following persons identified,
compensation for the period January 1, 2000 - March 31, 2000 is included in
the twelve months ended December 31, 2000 and the fiscal year ended March
31, 2000: James R. Lavelle - $112,500, Daniel E. Jackson - $93,750, Curtis
J. Parker - $40,000.
(2) Base salary and commissions earned. Effective January 1, 2001, Mr. Lavelle
and Mr. Jackson each voluntarily took a 20% reduction in base salary to
help the Company during a difficult financial period.
(3) Represents payments made as an automobile allowance.
(4) Imputed interest on below market loans. See Item 13, "Certain
Relationships and Related Transactions."
3
STOCK OPTION GRANTS TABLE
The following table sets forth, as to the executive officers named in the
Summary Compensation Table, information related to the grant of stock options
pursuant to the Company's 1998 Long-Term Incentive Plan during the fiscal year
ended December 31, 2001.
OPTIONS GRANTED IN THE FISCAL YEAR ENDED DECEMBER 31, 2001
INDIVIDUAL GRANTS
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NUMBER OF PERCENTAGE OF TOTAL EXERCISE OR BASE POTENTIAL REALIZABLE VALUE
SECURITIES OPTIONS GRANTED TO PRICE PER SHARE AT ASSUMED ANNUAL RATES
UNDERLYING EMPLOYEES IN THE (S/SHARE)(1) OF STOCK PRICE APPRECIATION
NAME OPTIONS FISCAL YEAR ENDED FOR OPTION TERM ($) (2)
GRANTED DECEMBER 31, 2001
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5% 10%
--------- -----------
James R. Lavelle 0 0% 0 0 0
Daniel E. Jackson 0 0% 0 0 0
Curtis J. Parker 10,000 0% $0.88 5,534 14,025
17,500 0% $0.81 8,915 22,591
200,000 5.1% $0.17 21,382 54,187
(1) The exercise price per share for all options granted is equal to the market
price of the underlying Common Stock as of the date of grant.
(2) The potential realizable value has been determined using market price on
the date the options were granted, compounded annually over ten years, net
of exercise price. These values have been determined based upon assumed
rates of appreciation and are not intended to forecast the future value or
trading prices of the Company's Common Stock. There can be no assurance
that the amounts reflected in this table will be achieved.
STOCK OPTION EXERCISES AND YEAR END VALUES TABLE
The following table shows, as to the executive officers named in the Summary
Compensation Table, information with respect to the unexercised options to
purchase Common Stock granted under the 1995 and 1998 Long-Term Incentive Plans
and held as of December 31, 2001.
VALUE OF OPTIONS AT DECEMBER 31, 2001
NUMBER OF NUMBER OF SECURITIES UNDERLYING
SHARES VALUE UNEXERCISED OPTIONS HELD VALUE OF UNEXERCISED
ACQUIRED REALIZED AT DECEMBER 31, 2001 IN-THE-MONEY OPTIONS
ON EXERCISE ($) AT DECEMBER 31, 2001 ($) (1)
----------- --------- -------------------------------- ----------------------------
Name EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------------------------------------------------------------
James R. Lavelle 0 0 400,000 0 4,000 0
Daniel E. Jackson 0 0 250,000 0 2,500 0
Curtis J. Parker 0 0 78,125 221,875 463 18,013
(1) Options are "in-the-money" if the closing market price of the Company's
Common Stock exceeds the exercise price of the options. The value of the
unexercised options represents the difference between the exercise price of
such options and the closing market price ($0.26) of the Company's Common
Stock on the OTC Bulletin Board on December 31, 2001.
4
Item 12 - Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of April 24, 2002 information regarding the
beneficial ownership of the Common Stock of the Company by (i) each person known
to beneficially own more than 5% of the outstanding shares of Common Stock, (ii)
each of the Company's directors, (iii) each named executive officer and each
officer named in the Summary Compensation Table and (iv) all executive officers
and directors as a group. All persons listed have an address c/o the Company's
principal executive offices and have sole voting and investment power with
respect to their shares unless otherwise indicated.
Shares Beneficially Owned
-------------------------
Name Number Percent
-------------------------------------------------------------------------------------- ------------ --------
James R. Lavelle (1).................................................................. 1,305,308 8.1%
Daniel E. Jackson (2)................................................................. 1,099,473 6.9%
FMR Corp. (3)......................................................................... 1,000,000 6.7%
Anthony M. Frank (4).................................................................. 174,656 1.2%
Edward E. Faber (5)................................................................... 146,356 1.0%
Curtis J. Parker (6).................................................................. 84,117 *
Debra J. Richardson (7)............................................................... 5,000 *
All executive officers and directors as a group (6 persons) (8) 2,814,910 15.9%
*Less than 1%
(1) Includes 400,000 shares issuable upon exercise of options exercisable
within 60 days of April 24, 2002.
(2) Includes 250,000 shares issuable upon exercise of options exercisable
within 60 days of April 24, 2002.
(3) The address of the stockholder is 82 Devonshire Street, Boston,
Massachusetts, 02109. Data obtained from the stockholder's Schedule 13G,
filed with the Securities and Exchange Commission, on February 14, 2002.
(4) Includes 102,500 shares issuable upon exercise of options exercisable
within 60 days of April 24, 2002.
(5) Includes 102,500 shares issuable upon exercise of options exercisable
within 60 days of April 24, 2002.
(6) Includes 78,125 shares issuable upon exercise of options exercisable within
60 days of April 24, 2002.
(7) Includes 5,000 shares issuable upon exercise of options exercisable within
60 days of April 24, 2002.
(8) Includes 938,125 shares issuable upon exercise of options exercisable
within 60 days of April 24, 2002.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The following is information with respect to certain relationships and related
transactions between directors and officers, on the one hand, and the Company,
on the other hand.
EMPLOYMENT AGREEMENTS; COVENANTS-NOT-TO-COMPETE
Mr. James R. Lavelle, Cotelligent's Chairman and Chief Executive Officer, is a
party to a three-year employment agreement effective January 5, 2000 which,
unless terminated or not renewed by him, continues thereafter on a year-to-year
basis on the same terms and conditions. Mr. Lavelle's employment agreement
provides that, in the event of termination of employment by the Company without
cause, he shall be entitled to receive from the Company an amount equal to (i)
three times the minimum base salary, as defined in the employment agreement,
plus (ii) three times his most recent annual bonus (not including any payments
made under Cotelligent's Long-Range Bonus Incentive Plan), without regard to
whether he obtains subsequent employment. His employment agreement provides
that, in the event of a change in control of the Company where he has not
received at least five days' notice of such change in control, he will be deemed
to have been terminated without cause and shall be entitled to compensation as
respectively described in the preceding sentence. Additionally, in such event he
will not be bound by any non-compete terms in his employment agreement, as
discussed below. If given at least five days notice of such change in control,
he may elect to terminate his employment agreement and collect the respective
compensation provided above.
Mr. Daniel E. Jackson, Cotelligent's President and Chief Operating Officer, is a
party to a two-year employment agreement effective January 25, 2000 which,
unless terminated or not renewed by him, continues thereafter on a year-to-year
basis on the same terms and conditions. Mr. Jackson's employment agreement
provides that, in the event of termination of employment by the Company without
cause, he shall be entitled to receive from the Company an amount equal to (i)
two times the minimum base salary, as defined in the employment agreement, plus
(ii) two times his most recent annual bonus (not including any payments made
under Cotelligent's Long-Range Bonus Incentive Plan), without regard to whether
he obtains subsequent employment. His employment agreement provides
5
that, in the event of a change in control of the Company where he has not
received at least five days' notice of such change in control, he will be deemed
to have been terminated without cause and shall be entitled to compensation as
respectively described in the preceding sentence. Additionally, in such event he
will not be bound by any non-compete terms in his employment agreement, as
discussed below. If given at least five days notice of such change in control,
he may elect to terminate his employment agreement and collect the respective
compensation provided above.
In the event of a change in control, Mr. Lavelle and Mr. Jackson are entitled to
reimbursement for any excise taxes the employee incurs under Section 4999 of the
Internal Revenue Code, as well as any interest or penalties related to the
excise tax and any entitlements outside of the employment agreement that are
described in Section 280G(b)(2)(A)(i) of the Internal Revenue Code. In the
employment agreements of both, a "Change in Control" is deemed to occur if: (1)
any person or entity, other than the Company, a corporation owned directly or
indirectly by the stockholders of the Company in substantially the same
proportions as their ownership of the Common Stock of the Company, or an
employee benefit plan of Company or a subsidiary of Company, acquires directly
or indirectly Beneficial Ownership (as defined in Rule 13d-3 of the Exchange
Act) of any voting security of the Company and immediately after such
acquisition such person or entity is, directly or indirectly, the Beneficial
Owner of voting securities representing 30% or more of the total voting power of
all of the then-outstanding voting securities of the Company; (2) a change in
the composition of the individuals on the Board of Directors as a result of
which fewer than one-half of the incumbent directors are directors who either
(a) had been directors of Company on the date 24 months prior to the date of the
event that constitutes a change in control (the "original directors") or (b)
were elected, or nominated with the affirmative votes of at least a majority of
the aggregate of the original directors who were still in office at the time of
the election or nomination and the directors whose election or nomination was
previously so approved; (3) the consummation of a merger or consolidation of
Company with or into another entity or any other corporate reorganization, if
more than 50% of the combined voting power of the continuing or surviving
entity's securities outstanding immediately after such merger, consolidation or
other reorganization is owned by persons who were not stockholders of Company
immediately prior to such merger, consolidation or other reorganization; or (4)
the liquidation of the Company or the sale, transfer or other disposition of all
or substantially all of the Company's assets.
The employment agreements of Mr. Lavelle and Mr. Jackson contain a covenant-not-
to-compete with the Company for a period of two years immediately following the
termination of employment; or, in the case of a termination without cause, for a
period of one year following the termination of his employment; or, in the case
of a Change in Control in which he is not given at least five days' notice of
such Change in Control, the covenant not-to-compete does not apply for any
period of time. If any court of competent jurisdiction determines that the
scope, time or territorial restrictions contained in the covenant are
unreasonable, the covenant-not-to-compete shall be reduced to the maximum period
permitted by such court. The compensation to which Mr. Lavelle or Mr. Jackson is
entitled, as the case may be, shall nonetheless be paid to him.
Annual base salary paid to Mr. Lavelle for the fiscal year ended December 31,
2001 was $361,166. For the fiscal year ended December 31, 2001, he was eligible
for, but did not receive, a bonus based upon achieving certain performance
objectives and upon the operating results of the Company, which objectives and
results had been established by the Compensation Committee. Pursuant to the
Long-Range Bonus Incentive Plan, Mr. Lavelle is eligible for bonuses in fiscal
years 2003 and 2006 based upon the operating results of the Company.
Annual base salary paid to Daniel E. Jackson for the fiscal year ended December
31, 2001 was $302,120. For the fiscal year ended December 31, 2001, he was
eligible for, but did not receive, a bonus based upon achieving certain
performance objectives and upon the operating results of the Company, which
objectives and results had been established by the Compensation Committee.
Pursuant to the Long-Range Bonus Incentive Plan, Mr. Jackson is eligible for
bonuses in fiscal years 2003 and 2006 based upon the operating results of the
Company.
Mr. Curtis J. Parker, as Cotelligent's Executive Vice President, Chief Financial
Officer, Treasurer and Assistant Secretary, is a party to a one-year employment
agreement effective December 19, 2000 which was extended for a two-year period
as of December 19, 2001 and then, unless terminated by either party or not
renewed by him, continues thereafter on a year-to-year basis, in each case on
the same terms and conditions. Mr. Parker's employment agreement provides that,
in the event of termination of employment by the Company without cause, he shall
be entitled to receive from the Company an amount equal to (i) one times the
Market Based Salary, as defined in the employment agreement, plus (ii) one times
his most recent annual bonus, without regard to whether he obtains subsequent
employment. His employment agreement provides that, in the event of a Change in
Control of the Company where he has not received at least five days' notice of
such change in control, he will be deemed to have been terminated without cause
and shall be entitled to compensation as respectively described in the preceding
sentence. Additionally, in such event he will not be bound by any non-compete
terms in his employment agreement, as discussed below. If given at least five
days' notice of such change in control, he may elect to terminate his employment
agreement and collect the respective compensation provided above.
6
The employment agreement of Mr. Parker contains a covenant-not-to-compete with
the Company for a period of one year immediately following the termination of
employment; or, in the case of a termination without cause, for a period of six
months following the termination of his employment; or, in the case of a Change
in Control in which the he is not given at least five days' notice of such
Change in Control, the covenant not-to-compete does not apply for any period of
time. If any court of competent jurisdiction determines that the scope, time or
territorial restrictions contained in the covenant are unreasonable, the
covenant-not-to-compete shall be reduced to the maximum period permitted by such
court. The compensation to which Mr. Parker is entitled shall nonetheless be
paid to him.
Mr. Parker's employment agreement provides for a minimum base salary of $180,000
per year (subject to increase to $200,000 per year by the Chief Executive
Officer when he determines it appropriate in light of the Company's operating
performance and subject to any requisite approval by the Board of Directors or
the Compensation Committee) and the right to receive annually discretionary
incentive bonuses of up to fifty percent (50%) of the amount of his base salary
provided by the Compensation Committee. During 2001, Mr. Parker agreed to a
series of salary reductions and at the end of 2001 was earning a salary of
$141,525 and had received no bonus.
CERTAIN TRANSACTIONS
From May 1996 through early July 1996, the Company advanced to Daniel E.
Jackson, President and Chief Operating Officer, $250,000 to facilitate
relocation of his residence to Northern California. Of the amount due, there is
a remaining balance of $82,500. The remaining balance is evidenced by a demand
note. The note is non-interest bearing and the principal balance was originally
due July 15, 2001 or upon termination of employment if prior to the due date.
The note to cover relocation was extended by a vote of the Compensation
Committee of the Board of Directors on October 29, 2000 for three years to July
15, 2004. Since the beginning of the 2000 fiscal year, the Company has also
advanced to Mr. Jackson an aggregate amount of approximately $480,000, evidenced
by five separate unsecured demand promissory notes, three dated August 11, 1999,
one dated September 30, 1999, and one dated November 23, 1999. The purpose of
such advances was to cover margin calls made on brokerage accounts held by Mr.
Jackson. On May 5, 2000, Mr. Jackson repaid $68,270 of principal and $31,730 of
interest. The notes, although due on demand, were issued with original due dates
in 2001. These notes were also extended by a vote of the Compensation Committee
of the Board of Directors on October 29, 2001 for three years to October 29,
2004. The interest rates on these notes remained unchanged at rates between
7.75% and 8.75%. Payment of the notes is accelerated if the Company's Common
Stock reaches certain sustained target levels.
On March 31, 1996, the Company advanced to James R. Lavelle, Chairman of the
Board and Chief Executive Officer of the Company, $37,902, evidenced by an
unsecured demand promissory note bearing interest annually at a rate of 6%. The
entire amount of such advance remains outstanding. Since the beginning of the
2000 fiscal year, the Company has also advanced to Mr. Lavelle an aggregate
amount of $619,000, evidenced by seven separate unsecured demand promissory
notes. The purpose of such advances was to cover margin calls made on brokerage
accounts held by Mr. Lavelle. On May 1, 2000, Mr. Lavelle repaid $15,330 of
principal and $34,670 of interest. The notes, although due on demand, were
issued with original due dates in 2001. The notes were extended by a vote of the
Compensation Committee of the Board of Directors on October 29, 2001 for three
years to October 29, 2004. The interest rates on these notes remain unchanged at
rates between 7.75% and 8.25%. Payment of the notes is accelerated if the
Company's Common Stock reaches certain sustained target levels.
On September 8, 1999, the stockholders approved the Cotelligent, Inc. 1999
Leveraged Stock Purchase Plan (the "LSPP") which authorizes the purchase of
shares of Common Stock by eligible employees who are selected by the
Compensation Committee of the Board to participate in the LSPP on terms and
conditions determined by the Compensation Committee. Since the LSPP's inception
through March 31, 2000, Mr. Lavelle has been issued 750,000 shares of Common
Stock and Mr. Jackson has been issued 736,842 shares of Common Stock. Shares
issued under the LSPP resulted in notes receivable from Mr. Lavelle for
$2,671,875 at 5.93% interest, and from Mr. Jackson for $2,625,000 at 5.93%
interest. The total principal amount of the notes remains outstanding. The notes
(1) are secured by the pledge of Common Stock issued; (2) are full recourse as
to the employee, except that in the case of death, disability, termination by
the Company without cause or a change of control of the Company, recourse
against the employees is limited to the pledged stock; and (3) have a term of
five years from date of issuance, provided that if the stock is sold, the loan
shall be prepaid, and if the stock is not sold, the loan may not be prepaid. The
Common Stock issued under the LSPP is restricted from sale in the open market
for a period of two years from the date of issuance, provided, however, that in
the case of death, disability, termination by the Company without cause or
change of control of the Company, the Common Stock may be sold and the proceeds
used to repay the loan.
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of San
Francisco, State of California on the 30th day of April, 2002.
COTELLIGENT, INC.
By: /s/ James R. Lavelle
-------------------------
James R. Lavelle
Chief Executive Officer
8