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, 2002.
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.)
100 Theory, Suite 200
Irvine, California 92612
(Address of principal executive offices) (Zip Code)
(949) 823-1600
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: Common Stock ($.01
par value)
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. [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Exchange Act Rule 12b-2). YES NO X
----- -----
The aggregate market value of the voting stock held by non-affiliates of the
registrant was approximately $4,866,299 based on the closing price of $0.33 of
the registrant's Common Stock as reported on the OTC Bulletin Board on March 27,
2003.
The number of shares of the registrant Common Stock outstanding as of March 27,
2003 was 14,746,354.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PART III
Items 10, 11, 12 and 13 of the Form 10-K filed by the Company on March 31, 2003
are hereby amended as follows:
Item 10 - Directors and Executive Officers of the Registrant.
The number of directors on the Board of Directors is currently fixed at three.
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 is one Class I director whose term expires in 2005, one Class III director
whose term expires in 2004 and one Class II director whose term will expire at
the Annual Meeting.
Class I Director
Debra J. Richardson is 48 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-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.
Class II Director
James R. Lavelle is 52 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.
Class III Director
Anthony M. Frank is 71 years old and is a director of the Company. He joined the
Company in that capacity in March 1993. In September 1994, Mr. Frank became
co-founding General Partner and Chairman of Belvedere Capital Partners, the
general partner of the California Community Financial Institutions Fund, the
primary purpose of which is investing in California community banks. From 1992
to 1994, Mr. Frank was an independent financial consultant and venture
capitalist. From March 1988 to March 1992, Mr. Frank served as the Postmaster
General of the United States. From 1971 until 1988, he served as Chairman and
Chief Executive Officer of First Nationwide Bank. Mr. Frank is a graduate of
Dartmouth College and was an overseer of the Tuck School of Business. He is also
a director of several companies, including The Charles Schwab Corporation,
Crescent Real Estate Equities Ltd., General American Investors, Temple Inland
Corporation and Bedford Properties Investors.
Other Executive Officers
Daniel E. Jackson is 42 years old and is President and Chief Operating Officer
of the Company. Mr. Jackson served as a director of the Company from September
1999 until May 2002. 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
2
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.
Curtis J. Parker is 48 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 licensed in Washington State.
Compliance With Section 16(a) of The Exchange Act
Section 16(a) of the Exchange Act requires the Company's officers and directors,
and persons who own more than 10% of a registered class of the Company's equity
securities, to file initial reports of ownership and reports of changes in
ownership with the Securities and Exchange Commission (the "SEC"). Such persons
are required by SEC regulation to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on its review of the copies of such forms received by the Company
with respect to the fiscal year ended December 31, 2002, James R. Lavelle and
Daniel E. Jackson each filed a late Form 5 reporting a single transaction under
a Company stock option exchange program. Curtis J. Parker also filed late a Form
5 reporting six transactions: one related to the grant of common stock, four
related to the grant of stock options and one related to the exchange of stock
options. Edward E. Faber, formerly a director of the Company, filed late a Form
5 reporting three transactions: two related to the grant of stock options and
one related to the exchange of stock options. Anthony M. Frank filed late a Form
5 reporting four transactions: three related to the grant of stock options and
one related to the exchange of stock options. Debra J. Richardson also filed
late a Form 3 and a Form 5 reporting two transactions related to the grant of
stock options. Except for these late filings, to the best of the Company's
knowledge, all other Section 16(a) filing requirements have been satisfied.
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, 2002, the fiscal
year ended December 31, 2001 and the twelve month period ended December 31,
2000.
Summary Compensation Table
Long Term
Compensation
Annual Compensation Awards
Fiscal Options/
Name and Principal Position Year Salary($) (1) Bonus($) Other($) SARs(#)
------------------------------------------------------------------------------------------------------------------------------------
James R. Lavelle...................... 2002 353,207 0 1,700 (2) 0
Chairman and Chief Executive Officer 2001 379,166 0 1,700 (2) 400,000
2000 450,000 0 1,700 (2) 0
18,000 (3)
------------------------------------------------------------------------------------------------------------------------------------
Daniel E. Jackson..................... 2002 298,405 0 1,700 (2) 0
President and Chief Operating Officer 5,470 (4)
2001 320,120 0 1,700 (2) 250,000
5,470 (4)
2000 375,000 0 1,700 (2) 0
18,000 (3)
5,470 (4)
------------------------------------------------------------------------------------------------------------------------------------
Curtis J. Parker...................... 2002 142,489 0 1,425 (2) 0
Executive Vice President, Chief 2001 166,500 0 1,665 (2) 275,000
Financial Officer, Treasurer and 2000 175,000 100,000 1,600 (2) 25,000
Assistant Secretary
------------------------------------------------------------------------------------------------------------------------------------
(1) Base salary earned.
(2) Represents matching contributions by the Company under the Company's 401(k)
Plan.
(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, 2002.
OPTIONS GRANTED IN THE FISCAL YEAR ENDED DECEMBER 31, 2002
Individual Grants
----------------------------------------------------------------------------------------------
Number of Percentage of Total Exercise or Base Potential Realizable Value
Securities Options Granted to Price Per Share At Assumed Annual Rates of
Underlying Employees in the ($/Share) Stock Price Appreciation For
Name Options Granted fiscal year ended Option Term ($)
December 31, 2002
------------------------------------------------------------------------------------------------------------------------------------
5% 10%
-----------------------------
James R. Lavelle 0 0% 0 0 0
Daniel E. Jackson 0 0% 0 0 0
Curtis J. Parker 0 0% 0 0 0
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, 2002.
VALUE OF OPTIONS AT DECEMBER 31, 2002
Number of Number of Securities Underlying
Shares Value Unexercised Options Held Value of Unexercised
Acquired Realized at December 31, 2002 In-the-Money Options
On Exercise ($) at December 31, 2002 ($) (1)
----------------------------------------------------------------------------------------------------
Name Exercisable Unexercisable Exercisable Unexercisable
-------------------------------- ------------------------------------------------------------------------
James R. Lavelle 0 0 400,000 0 48,000 0
Daniel E. Jackson 0 0 250,000 0 30,000 0
Curtis J. Parker 0 0 129,375 170,625 15,700 30,000
(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 ($0.37) of the Company's Common
Stock on the OTC Bulletin Board on December 31, 2002.
4
Equity Compensation
The following table sets forth, as of December 31, 2002, outstanding awards and
shares remaining available for future issuance under the Company's compensation
plans under which equity securities are authorized for issuance (excluding
401(k) plans and similar tax-qualified plans).
(a) (b) (c)
Number of securities to Weighted-average Number of securities
be issued upon exercise exercise price of remaining available for
of outstanding options, outstanding options, future issuance under
Plan Category warrants and rights warrants and rights equity compensation plans
------------- ------------------- ------------------- -------------------------
Equity compensation plans approved by
security holders....... 1,201,028 $0.37 1,816,473 (1)
Equity compensation plans not
approved by security holders (2)... 3,257,498 $0.32 not determinable
---------
Total................................ 4,458,526 $0.33 not determinable
=========
-------------------------
(1) Includes 1,453,315 shares of Company Common Stock remaining available for
future issuance under the Company's 1998 Long-Term Incentive Plan. Under
the 1998 Long-Term Incentive Plan, an aggregate of 18% of the then
outstanding shares of the Company's Common Stock are available for awards
under such plan. The number of securities remaining available for future
issuance also includes 363,158 shares of Company Common Stock remaining
available for future issuance under the Company's 1999 Leveraged Stock
Purchase Plan.
(2) The 2000 Long-Term Incentive Plan (the "2000 Plan") was adopted by the
Company's Board of Directors on August 11, 2000, but was not approved by
stockholders. Awards under the 2000 Plan may be granted by the Compensation
Committee of the Board of Directors (or such other committee designated by
the Board of Directors to administer the 2000 Plan) and may include: (i)
non-qualified options to purchase shares of Common Stock; (ii) stock
appreciation rights ("SARs"), whether in conjunction with the grant of
stock options or independent of such grant, or stock appreciation rights
that are only exercisable in the event of a change in control of the
Company or upon other events; (iii) restricted stock, consisting of shares
that are subject to forfeiture based on the failure to satisfy
employment-related restrictions; (iv) deferred stock, representing the
right to receive shares of stock in the future; (v) bonus stock and awards
in lieu of cash compensation; (vi) dividend equivalents, consisting of a
right to receive cash, other awards, or other property equal in value to
dividends paid with respect to a specified number of shares of Common
Stock, or other periodic payments; or (vii) other awards not otherwise
provided for, the value of which are based in whole or in part upon the
value of the Common Stock. Unless otherwise determined by the Compensation
Committee, all outstanding awards under the 2000 Plan will generally become
fully exercisable or vested upon a "change in control" of the Company. The
Compensation Committee has the discretion to establish all of the terms and
conditions of awards under the 2000 Plan and to interpret the terms of the
2000 Plan. There is no limit on the maximum number of shares of Common
Stock that may be awarded under the 2000 Plan. The 2000 Plan may be
amended, altered, suspended, discontinued, or terminated by the Board of
Directors at any time.
Item 12 - Security Ownership of Certain Beneficial Owners and Management.
The following table sets forth as of May 30, 2003 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%
Anthony M. Frank (3) ........................................................... 182,156 1.2%
Curtis J. Parker (4) ........................................................... 142,242 1.0%
Debra J. Richardson (5) ........................................................ 10,000 *
Skiritai Capital LLC (6) ....................................................... 807,000 5.4%
All executive officers and directors as a group (5 persons) (7) ................ 2,739,179 15.7%
* Less than 1%
(1) Includes 400,000 shares issuable upon exercise of options exercisable
within 60 days of May 30, 2003.
(2) Includes 250,000 shares issuable upon exercise of options exercisable
within 60 days of May 30, 2003.
(3) Includes 110,000 shares issuable upon exercise of options exercisable
within 60 days of May 30, 2003.
(4) Includes 136,250 shares issuable upon exercise of options exercisable
within 60 days of May 30, 2003.
(5) Includes 10,000 shares issuable upon exercise of options exercisable within
60 days of May 30, 2003.
(6) The address of the stockholder is 655 Montgomery Street, Suite 1438, San
Francisco, California, 94111. Data obtained from the stockholder's Schedule
13D filed with the Securities and Exchange Commission on June 24, 2002.
(7) Includes 906,250 shares issuable upon exercise of options exercisable
within 60 days of May 30, 2003.
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
5
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
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. On October 2, 2002, the Compensation Committee
approved an increase in the amount of severance Mr. Jackson would be entitled to
receive under his employment agreement in the event of termination of employment
by the Company without cause to 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 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 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.
Mr. Lavelle's employment agreement calls for a minimum base salary of $450,000.
With Mr. Lavelle's consent, annual base salary paid for the fiscal year ended
December 31, 2002 was $353,207. For the fiscal year ended December 31, 2002, 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.
Mr. Jackson's employment agreement calls for a minimum base salary of $375,000.
With Mr. Jackson's consent, annual base salary paid for the fiscal year ended
December 31, 2002 was $298,405. For the fiscal year ended December 31, 2002, he
was eligible for, but
6
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 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.
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. With Mr. Parker's consent, annual base salary paid for the fiscal year
ended December 31, 2002 was $142,489. For the fiscal year ended December 31,
2002, he was eligible for, but did not receive, a discretionary bonus of up to
fifty percent (50%) of the amount of his base salary provided by the
Compensation Committee.
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
7
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.
8
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 Irvine,
State of California on the 30th day of April, 2003.
COTELLIGENT, INC.
By: /s/ James R. Lavelle
------------------------------
James R. Lavelle
Chief Executive Officer
9
Certifications Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, James R. Lavelle, certify that:
1. I have reviewed this annual report on Form 10-K/A of Cotelligent, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in the annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
4. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether of not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
5. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 30, 2003
/s/ James R. Lavelle
-------------------------------------------------
James R. Lavelle
Chairman of the Board and Chief Executive Officer
10
Certifications Pursuant to Section 302
of the Sarbanes-Oxley Act of 2002
I, Curtis J. Parker, certify that:
1. I have reviewed this annual report on Form 10-K/A of Cotelligent, Inc.;
2. Based on my knowledge, this annual report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to make
the statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this annual
report;
3. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined in
Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated subsidiaries,
is made known to us by others within those entities, particularly during the
period in which this annual report is being prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this annual
report (the "Evaluation Date"); and
c) presented in the annual report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of the
Evaluation Date;
4. The registrant's other certifying officers and I have disclosed, based on our
most recent evaluation, to the registrant's auditors and the audit committee of
registrant's board of directors (or persons performing the equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to record,
process, summarize and report financial data and have identified for the
registrant's auditors any material weaknesses in internal controls; and
b) any fraud, whether of not material, that involves management or other
employees who have a significant role in the registrant's internal controls; and
5. The registrant's other certifying officers and I have indicated in this
annual report whether or not there were significant changes in internal controls
or in other factors that could significantly affect internal controls subsequent
to the date of our most recent evaluation, including any corrective actions with
regard to significant deficiencies and material weaknesses.
Date: April 30, 2003
/s/ Curtis J. Parker
----------------------------------------------------
Curtis J. Parker
Executive Vice President and Chief Financial Officer
11