Schedule 14A Information
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[X] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
COTELLIGENT, INC.
...............................................
(Name of Registrant as Specified In Its Charter)
.......................................................................
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
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to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
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[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
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*Released to security holders on May 24, 2002
44 MONTGOMERY STREET SUITE 4050 SAN FRANCISCO, CA 94104
TEL 415.439.6400 FAX 415.439.6888 WWW.COTELLIGENT.COM
[LOGO]
May 24, 2002
Dear Stockholder:
I am writing to you today to ask you to vote your shares for Cotelligent's
nominee to our Board of Directors at this year's annual meeting on Tuesday,
June 11, 2002. Dr. Debra Richardson, Chair and Dean of the School of Computer
Science at the University of California, Irvine, is standing for election.
Dr. Richardson joined the board last August. We believe Dr. Richardson's
knowledge of all facets of information systems and technology, along with her
expertise in our specific business, distinguishes her as the right director to
serve the stockholders' interest and Cotelligent's Board today and in the
future.
Unfortunately, it now appears that Russell Silvestri and his private investment
firm, Skiritai Capital LLC, are going to wage a blitzkrieg proxy fight to elect
Mr. Silvestri to replace Dr. Richardson on your Board of Directors. WE REGRET
THAT MR. SILVESTRI HAS CHOSEN TO RESORT TO THIS HOSTILE ATTACK ON YOUR COMPANY
AND ITS MANAGEMENT TEAM. We met with Mr. Silvestri three times and discussed
with him our views of the Company, its prospects and the reasons why we thought
a liquidation of Cotelligent would not maximize value for all stockholders. All
the while he continued to accumulate his nearly 5% block and secretly plot his
attack.
WE STRONGLY RECOMMEND THAT YOU REJECT HIS BID FOR YOUR VOTE BY SIGNING, DATING
AND MAILING YOUR WHITE PROXY IN THE ENVELOPE PROVIDED. You may also be able to
vote by telephone or internet if you vote promptly and if your shares are
maintained in street name (i.e. held by your brokerage firm or bank).
I'd now like to take a moment to provide you with an update on how your company
is doing. As you know, following the divestiture of the majority of our IT
staffing business, we emerged with a clean balance sheet and the operating
capital we required to move ahead. We began the process of reorganizing our
company from a decentralized business model to a fully integrated centralized
business model. This represented quite a challenge, yet we knew that by
integrating all areas of our company, we would operate more efficiently and
manage our business activities more effectively.
Concurrently, we have been developing and executing on a strategic plan that is
centered on moving Cotelligent's services and solutions up the value chain in
order to drive more gross margin and, therefore, more operating profit. This
plan called for repositioning, re-branding and generally transforming ourselves.
At the same time this was in progress,
unfortunately, we had to deal with a weakening economy and substantially
diminished spending on IT services and solutions.
IN THIS ENVIRONMENT, MANY OF THE COMPANIES WE USED TO COMPETE WITH VIRTUALLY
DISAPPEARED. NEVERTHELESS, WE HAVE NOT ONLY SURVIVED, BUT WE HAVE ALSO
CONSIDERABLY INCREASED GROSS MARGIN, DRAMATICALLY REDUCED OUR CASH BURN YEAR
OVER YEAR, AND BROUGHT TOGETHER A WORKFORCE THAT ENJOYS WHAT THEY DO AND ARE
PROUD OF THEIR COMPANY. Today, we have a lean operating infrastructure as a
result of substantial headcount reductions and expense initiatives, and a
reinvigorated sales force committed to driving revenue to higher levels in this
tough market.
Our strategy is clearly defined and takes advantage of leveraging our long term
expertise to address the constantly evolving technology environment which now
offers us our greatest opportunity in providing mobile business solutions and
web services.
We provide sales force automation solutions to industry leaders, including Kraft
Foods, Hershey Company, Handleman Corporation, US Tobacco and Procter and
Gamble's Dental Division. In total, these solutions are used by over 6,000 sales
people. We are proud that these clients have chosen our FastTrack mobile
business solution and JASware middleware and have given us high customer
satisfaction ratings. We just completed upgrading JASware to version 5.0, which
has received high marks for its XML and IBM Websphere platform. This is an
extremely exciting market for Cotelligent. ACCORDING TO GARTNER, A MARKET
RESEARCH FIRM, THE MARKET FOR SALES FORCE AND FIELD FORCE AUTOMATION SOLUTIONS
IS EXPECTED TO UNDERGO DYNAMIC GROWTH BETWEEN 2002 AND 2005.
Similarly, we address the needs of clients like Prudential, The Bluebook
International, Kinder Morgan, BMW, Toyota, Lexus and Classified Ventures in
integrating their complex business systems across a variety of platforms. Our
strong technology background and expertise enabled us to be selected by
MicroSoft and IBM as one of the 'early adoptors' of their .NET and Websphere
Everyplace web service technologies, respectively. We intend to take advantage
of these partnerships. ACCORDING TO IDC, A MARKET RESEARCH FIRM, SPENDING IN WEB
SERVICES IS ALSO EXPECTED TO GROW DYNAMICALLY WITH EXPECTATIONS EXCEEDING 100%
COMPOUND ANNUAL GROWTH BETWEEN 2002 AND 2004.
In summary, Cotelligent has positioned itself well for the future. As we have
turned our Company around over the past two years, all of our actions and goals
have aimed at being able to better position the Company. We are seeking to drive
stockholder value by improving the way we conduct business and by achieving
sound profitability through providing the right solutions for our clients. OUR
BOARD OF DIRECTORS HAS ALWAYS BEEN COMMITTED TO DOING WHAT IS IN THE BEST
INTERESTS OF ALL OF OUR INVESTORS.
We strongly believe that by electing Dr. Debra Richardson on your WHITE proxy
card, you are helping Cotelligent continue on a path to achieving these
important goals and realizing our full potential.
We thank you for your continued support and faith in our ability to move
Cotelligent forward to benefit all stockholders.
Sincerely,
/s/ James R. Lavelle
James R. Lavelle
Chairman and Chief Executive Officer
--------------------------------------------
If you have any questions, please contact:
[Logo]
105 Madison Avenue
New York, New York 10016
proxy@mackenziepartners.com
(800) 322-2885 (TOLL-FREE)
(212) 929-5500 (call collect)
--------------------------------------------
SAFE HARBOR STATEMENT
Except for historical information contained herein, the information contained in
this letter includes forward-looking statements that involve certain risks and
uncertainties that could cause actual results to differ materially from such
statements. All forward-looking statements included in this letter are based
upon information available to Cotelligent as of the date hereof, and Cotelligent
assumes no obligation to update any such forward-looking statements. Please
refer to the discussion of risk factors and other factors included in
Cotelligent's most recent Report on Form 10-Q, Report on Form 10-K for the year
ended December 31, 2001, and other filings made with the Securities and Exchange
Commission.
ADDITIONAL INFORMATION
ELECTION OF DIRECTOR
Skiritai Capital LLC ('Skiritai') has recently filed solicitation materials with
the Securities and Exchange Commission (the 'SEC') indicating that it intends to
nominate an individual for election to the Company's Board of Directors. Your
Board of Directors believes that the election of the nominee of Skiritai would
be seriously detrimental to Cotelligent.
The persons named as Proxies in the enclosed WHITE proxy card intend to vote
such proxies in accordance with the instructions specified therein, or in the
absence of appropriate instructions, FOR the election of the Company's nominee
for director.
PROPOSAL TO TERMINATE RIGHTS AGREEMENT
Skiritai has recently filed solicitation materials with the SEC indicating that
it intends to present a proposal at the Company's Annual Meeting recommending
that the Company's Board of Directors redeem all Rights (as defined in the
Rights Agreement referred to below) issued and outstanding under the Rights
Agreement, dated September 24, 1997, between the Company and BankBoston, N.A.,
as rights agent (as amended, the 'Rights Agreement'). If the Rights Agreement
Proposal is properly brought before the Annual Meeting, the persons named as
Proxies in the enclosed WHITE proxy card intend to vote for or against such
proposal as the votes represented by such proxies so instruct. If no
instructions are given, the named Proxies intend to vote the proxies AGAINST the
Rights Agreement Proposal.
We believe that the persons named as Proxies in original proxy cards distributed
to you with the Company's proxy statement (the 'Proxy Statement'), as filed with
the Securities and Exchange Commission on May 10, 2002 and first mailed to the
Company's stockholders on or about May 14, 2002, have the discretionary
authority to vote those proxies with respect to the Rights Agreement Proposal.
Such persons intend to vote those proxies AGAINST the Rights Agreement Proposal,
unless those proxies are revoked by the execution by you of a new proxy card.
Since we do not know whether the Staff of the SEC will concur with our view that
these persons may exercise discretionary authority with respect to the Rights
Agreement Proposal, IT IS VERY IMPORTANT THAT YOU DATE, SIGN AND PROMPTLY RETURN
THE ENCLOSED WHITE PROXY CARD, FOR WHICH A RETURN STAMPED ENVELOPE IS PROVIDED.
To be approved, the Rights Agreement Proposal must receive a majority of votes
cast at the Annual Meeting and entitled to vote. Abstentions and broker
non-votes, if any, will not be counted either 'for' or 'against' the proposal.
The Rights Agreement is a fundamental negotiating tool and is substantially
identical to the rights plans employed by hundreds, if not thousands, of public
companies. The Rights Agreement inhibits abusive conduct and is designed to
protect stockholders against practices which do not treat all stockholders
fairly and equally (unsolicited takeover attempts which utilize abusive tactics
include, for example, a gradual accumulation of shares in the open market, a
partial or two-tier tender offer that does not treat all stockholders equally,
or a squeeze-out merger that squeezes out certain stockholders.) The Rights
Agreement strengthens the Company's negotiating power and positions the Board of
Directors to negotiate the best price for stockholders where a sale of the
Company is in the best interests of the stockholders. The Board believes that
keeping the Rights Agreement in place allows the Company to improve its
financial performance, while, if necessary, using the Rights Agreement to either
deter short term speculators and/or to negotiate a higher offer price should the
Company receive a fair acquisition proposal.
While the Rights Agreement has certain anti-takeover effects, the Rights
Agreement does not affect any takeover proposal which the Board of Directors
determines, in the exercise of its fiduciary duties, adequately reflects the
value of the Company and is in the best interests of the Company's stockholders.
Under the terms of the Rights Agreement, the Board of Directors, acting in the
best interests of the Company and the stockholders, may redeem the rights issued
pursuant to the Rights Agreement to permit a fair, equitable and noncoercive
acquisition.
In adopting the Rights Agreement originally, the Board considered carefully the
Rights Agreement's limited purposes and benefits. The Board believes, although
it cannot be certain, that the continued application of the Rights Agreement
will result in a higher premium paid to stockholders for the sale of their
interests in the Company. The Board also believes that the presence of the
Rights Agreement does not and will not deter potential bidders or acquirers from
acquiring the Company through a tender offer or other takeover type transaction.
The continuation of the Rights Agreement will not impede any vote to replace the
Board or to propose and elect alternate nominees for the directors to be
elected.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE 'AGAINST' THE ADOPTION OF THE PROPOSAL
TO TERMINATE THE RIGHTS AGREEMENT.
Unless otherwise directed, the persons named in the enclosed WHITE proxy will
vote the stock represented by all proxies received prior to the Annual Meeting,
and not properly revoked, excluding broker non-votes, against the Rights
Agreement Proposal.
STOCK OPTION EXCHANGE PROGRAM
On March 9, 2001, the Company notified all option holders under its 1998
Long-Term Incentive Plan of a stock option exchange program. The exchange
program was developed as a way to bring the option exercise prices back in line
with the market price for the Company's common stock. The program allowed the
option holder to exchange existing stock option grants for a new option grant of
the same number of options at an exercise price equal to the fair value of the
Company's common stock as of the date of grant, September 21, 2001. The vesting
schedule was not interrupted as a result of the exchange program. At the time
the stock option exchange program was approved, the Board of Directors was
concerned that the purposes of the Company's 1998 Long-Term Incentive Plan were
not being achieved and that the Company's options were not creating a meaningful
long-term performance incentive for the executive officers and other employees
to maximize stockholder value. The Board of Directors believed that the stock
option exchange program was essential in order to provide this incentive and to
motivate and retain the Company's executive officers and other employees.
The following table presents information relating to the participation of the
Company's named executive officers in the stock option exchange program:
OPTION EXCHANGE PROGRAM
MARKET EXERCISE LENGTH OF
SECURITIES PRICE OF PRICE OF ORIGINAL OPTION
UNDERLYING STOCK AT STOCK AT TERM REMAINING
NUMBER OF TIME OF TIME OF NEW AT DATE OF
OPTIONS OPTION OPTION EXERCISE OPTION EXCHANGE
NAME DATE EXCHANGED EXCHANGE EXCHANGE PRICE (YEARS)
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James R. Lavelle 9/21/01 200,000 $0.25 $19.00 $0.25 5.33
9/21/01 200,000 $0.25 $12.75 $0.25 7.00
Daniel E. Jackson 9/21/01 100,000 $0.25 $19.00 $0.25 5.33
9/21/01 150,000 $0.25 $12.75 $0.25 7.00
Curtis J. Parker 9/21/01 40,000 $0.25 $ 9.75 $0.25 4.50
9/21/01 2,500 $0.25 $ 9.00 $0.25 5.50
9/21/01 5,000 $0.25 $20.75 $0.25 6.75
PARTICIPANT INFORMATION
Each of the Company's directors is deemed to be a participant in the Company's
solicitation of proxies discussed above. Information regarding the interest of
each of these persons in the Company's solicitation of proxies is contained
under the headings 'Security Ownership of Certain Beneficial Owners and
Management', 'Director Compensation', 'Executive Compensation' and 'Certain
Transactions' in the Company's Proxy Statement.
Except as set forth below and elsewhere in this letter, none of the participants
described above has engaged in any purchases or sales of the Company's
securities during the past two years:
Anthony M. Frank engaged in the following transactions in the Company's
common stock: on May 4, 2000, acquired 10,000 shares at $6.00 per share; on
August 8, 2000, acquired 7,000 shares at $3.875 per share and acquired 3,000
shares at $3.625 per share; and on November 17, 2000, acquired 10,000 shares
at $2.00 per share.
The Company's directors and executive officers beneficially own 2,668,554
shares, or approximately 17.9%, of the Company's common stock (which includes
835,625 shares issuable upon exercise of stock options). Information regarding
the beneficial ownership of the Company's common stock by the Company's
directors and executive officers is contained under the heading 'Security
Ownership of Certain Beneficial Owners and Management' in the Company's Proxy
Statement. Except as disclosed in the Company's Proxy Statement, to the
knowledge of the Company, none of the participants described above has
'associates,' as that term is defined in Rule 14a-1 promulgated by the SEC under
the Securities Exchange Act of 1934, as amended, who beneficially own any
securities of the Company.
Except as disclosed in this letter or in the Company's Proxy Statement, to the
knowledge of the Company, none of the participants described above: (i) owns of
record any securities of the Company that are not also beneficially owned by
them; (ii) is, or was within the past year, a party to any contract, arrangement
or understanding with any person with respect to the securities of the Company,
including, but not limited to, joint ventures, loan or option arrangements, puts
or calls, guarantees against loss or guarantees of profit, division of losses or
profit, or the giving or withholding of proxies; (iii) has any substantial
interest, direct or indirect, by security holdings or otherwise, in any matter
to be acted upon at the Annual Meeting; or (iv) beneficially owns any securities
of any parent or subsidiary of the Company. Except as disclosed in this letter
or in the Company's Proxy Statement, to the knowledge of the Company, none of
the participants described above or any of their associates has any arrangement
or understanding with any person with respect to future employment by the
Company or its affiliates or with respect to any future transactions to which
the Company or any of its affiliates will or may be a party, nor any material
interest, direct or indirect, in any transaction which has occurred since
January 1, 2001 or any currently proposed transaction, or series of similar
transactions, to which the Company or any of its affiliates was or is to be a
party and in which the amount involved exceeds $60,000.
COST AND METHOD OF SOLICITATION
This solicitation is being made by the Company. The cost of soliciting proxies
will be borne by the Company. In addition to solicitations by mail, a number of
directors, officers and other employees of the Company and of its subsidiaries
may (without additional compensation) solicit proxies in person or by telephone,
telegraph, telex, facsimile, e-mail and postings on the Company's Web site. The
Company has also retained MacKenzie Partners, Inc., for a fee not-to-exceed
$75,000, and reimbursement of out-of-pocket expenses, to aid in the solicitation
of proxies. MacKenzie Partners, Inc. will be indemnified against certain
liabilities and expenses, including certain liabilities under the federal
securities law. MacKenzie Partners, Inc. will solicit proxies from individuals,
brokers, banks, bank nominees and other institutional holders. The Company has
requested banks, brokerage houses and other custodians, nominees and fiduciaries
to forward all solicitation materials to the beneficial owners of the shares
they hold of record. The Company will reimburse these record holders for their
reasonable out-of-pocket expenses in so doing. It is anticipated that MacKenzie
Partners, Inc. will employ approximately 35 persons to solicit the Company's
stockholders for the Annual Meeting.
The Company currently estimates that the total amount which it will spend in
connection with this solicitation of proxies to be approximately $175,000. The
Company also estimates that, through the date hereof, its total expenditures to
date in connection with this proxy solicitation are approximately $30,000. This
amount excludes (i) the salaries and fees of officers, directors and employees
of the Company and (ii) the normal expenses of an uncontested election.
COTELLIGENT, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF
COTELLIGENT, INC.
The undersigned hereby appoints James R. Lavelle and Curtis J. Parker, and
each of them, proxies, with full power of substitution in each of them, for and
on behalf of the undersigned to vote as proxies, as directed and permitted
herein to vote your shares of Cotelligent, Inc. Common Stock at the Annual
Meeting of Stockholders of Cotelligent, Inc. to be held on Tuesday, June 11,
2002, at 9:00 a.m., Pacific Daylight Saving Time at the Grand Hyatt Hotel, San
Francisco, California, and at any adjournments thereof upon matters set forth in
the Proxy Statement and, in their judgment and discretion, upon such other
business as may properly come before the meeting.
This proxy when properly executed will be voted in the manner directed on
the reverse hereof by the Stockholder. IF NO DIRECTION IS MADE ON EITHER
MATTER, THIS PROXY WILL BE VOTED FOR THE NOMINEE LISTED AND AGAINST ITEM 2.
(CONTINUED AND TO BE DATED AND SIGNED ON THE REVERSE SIDE.)
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[x] PLEASE MARK VOTES AS IN THIS EXAMPLE
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DIRECTOR AND AGAINST
ITEM 2.
1. ELECTION OF DIRECTOR
NOMINEE: (01) DEBRA J. RICHARDSON (THREE-YEAR TERM) [ ] FOR NOMINEE [ ] WITHHELD FROM NOMINEE
2. IF PROPERLY BROUGHT BEFORE THE 2002 ANNUAL MEETING, NON BINDING STOCKHOLDER
PROPOSAL RECOMMENDING THAT THE BOARD OF DIRECTORS REDEEM THE RIGHTS ISSUED
AND OUTSTANDING UNDER THE COMPANY'S SHAREHOLDER RIGHTS PLAN
[ ] FOR [ ] AGAINST [ ] ABSTAIN
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DATE
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SIGNATURE
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TITLE
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SIGNATURE(S)
(IF HELD JOINTLY)
PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE
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