SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1997
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 No: 333-22637
H.T.E., INC.
(Exact name of registrant as specified in its charter)
FLORIDA 59-2133858
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
1000 BUSINESS CENTER DRIVE
LAKE MARY, FLORIDA 32746
(407) 304-3235
(Address, including zip code, and telephone number, including area code, of
Registrant's principal executive offices)
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 No X
-------- -------
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
CLASS OUTSTANDING AS OF AUGUST 1, 1997
----- ---------------------------------
Common stock
Par value $.01 per share 7,688,651
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(AMOUNTS IN THOUSANDS)
JUNE 30, DECEMBER 31,
1997 1996
---------------- --------------------
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 17,413 $ 740
Trade accounts receivable, net 17,543 16,767
Other current assets 2,261 1,183
---------------- --------------------
Total current assets 37,217 18,690
---------------- --------------------
COMPUTER EQUIPMENT, FURNITURE AND
FIXTURES, net 1,590 1,592
---------------- --------------------
OTHER ASSETS
Computer software development costs, net 3,635 3,657
Other assets 870 842
---------------- --------------------
4,505 4,499
---------------- --------------------
Total assets $ 43,312 $ 24,781
================ ====================
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities $ 5,558 $ 6,258
Line of credit - 2,306
Deferred revenue 12,141 10,378
Other current liabilities 85 158
----------------- --------------------
Total current liabilities 17,784 19,100
----------------- --------------------
LONG-TERM LIABILITIES:
Deferred income taxes 1,731 1,731
Other long-term liabilities 326 250
----------------- --------------------
Total long-term liabilities 2,057 1,981
----------------- --------------------
COMMITMENTS AND CONTINGENCIES (Note 2)
MANDATORILY REDEEMABLE PREFERRED STOCK - 4,303
MANDATORILY REDEEMABLE CLASS C COMMON - 119
STOCKHOLDERS' EQUITY (DEFICIT)
Class A common stock - 1
Common stock 73 -
Additional paid-in capital 24,403 229
Accumulated deficit (1,021) (947)
Cumulative translation adjustment 16 (5)
----------------- --------------------
Total stockholders' equity (deficit) 23,471 (722)
----------------- --------------------
Total liabilities and stockholders' equity $ 43,312 $ 24,781
================= ====================
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
2
<PAGE>
<TABLE>
<CAPTION>
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(AMOUNTS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
------------------------------- ---------------------------------
1997 1996 1997 1996
------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Software licenses $ 4,827 $ 1,036 $ 10,657 $ 5,635
Professional services 2,413 1,701 4,180 3,376
Hardware 2,638 2,300 4,258 3,669
Maintenance and other 2,995 2,051 5,725 3,935
------------- -------------- ------------- -------------
Total revenues 12,873 7,088 24,820 16,615
------------- -------------- ------------- -------------
EXPENSES:
Cost of software licenses 1,257 676 2,112 1,425
Cost of professional services 1,423 1,056 2,554 2,262
Cost of hardware 1,938 1,815 3,319 2,896
Cost of maintenance and other 1,302 636 2,567 1,437
Research and development 1,508 1,224 2,900 2,129
Sales and marketing 2,495 1,332 4,647 2,686
General and administrative 2,088 1,251 4,258 2,652
Provision for relocation of offices 300 - 300 -
------------- -------------- ------------- -------------
Total operating expenses 12,311 7,990 22,657 15,487
------------- -------------- ------------- -------------
INCOME (LOSS) FROM OPERATIONS 562 (902) 2,163 1,128
OTHER EXPENSES:
Interest 57 64 126 121
------------- -------------- ------------- -------------
INCOME (LOSS) BEFORE PROVISION
(BENEFIT) FOR INCOME TAXES 505 (966) 2,037 1,007
PROVISION (BENEFIT) FOR INCOME
TAXES 170 (397) 803 419
------------- -------------- ------------- -------------
NET INCOME (LOSS) 335 (569) 1,234 588
ACCRETION AND ACCRUAL OF
DIVIDENDS ON MANDATORILY REDEEMABLE
PREFERRED STOCK 326 (334) (1,308) (380)
------------- -------------- ------------- -------------
NET INCOME (LOSS) ATTRIBUTABLE TO
COMMON STOCKHOLDERS $ 661 $ (903) $ (74) $ 208
============= ============== ============= =============
PROFORMA NET INCOME (LOSS) PER
COMMON AND COMMON EQUIVALENT SHARE
$ 0.06 $ (0.10) $ 0.22 $ 0.11
============= ============== ============= =============
PROFORMA WEIGHTED AVERAGE
COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 5,821 5,435 5,629 5,435
============= ============== ============= =============
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
3
<PAGE>
<TABLE>
<CAPTION>
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
----------------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 1,234 $ 588
Adjustments to reconcile net income to net cash provided
by operating activities--
Depreciation and amortization 1,424 1,108
Accretion of mandatorily redeemable Class C common
stock charged to interest expense 19 -
Gain on forgiveness of accounts payable - (210)
Compensation due to sale of stock 65 -
Deferred income taxes (38) 145
Changes in operating assets and liabilities--
Decrease (increase) in assets--
Trade accounts receivable, net (776) (1,334)
Other current assets (1,040) (16)
Other assets (107) (21)
Increase (decrease) in liabilities--
Accounts payable and accrued liabilities (700) 1,830
Deferred revenue 1,763 (1,416)
Other liabilities 20 (86)
---------------- -----------------
Net cash provided by operating activities: 1,864 588
---------------- -----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (270) (314)
Computer software development costs (1,051) (1,037)
---------------- -----------------
Net cash used in investing activities: (1,321) (1,351)
---------------- -----------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
4
<PAGE>
<TABLE>
<CAPTION>
H.T.E., INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(AMOUNTS IN THOUSANDS) (CONTINUED)
(UNAUDITED)
SIX MONTHS ENDED JUNE 30,
----------------------------------------
1997 1996
---------------- ---------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from issuance of common stock 19,056 229
Net proceeds from issuance of preferred stock - 247
Net borrowing (repayment) under line of credit (2,306) 106
Borrowing of long-term debt - 81
Repayments of notes payable to related parties - (100)
Repayments under obligations of capital leases (17) (40)
Dividend payments on preferred stock (624) -
Advances on notes receivable from shareholders - (115)
---------------- ---------------
Net cash provided by financing activities: 16,109 408
---------------- ---------------
Effect of foreign currency exchange rate changes on cash
and cash equivalents 21 -
---------------- ---------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 16,673 (355)
CASH AND CASH EQUIVALENTS, beginning of period 740 355
================ ===============
CASH AND CASH EQUIVALENTS, end of period $ 17,413 $ -
================ ===============
SUPPLEMENTAL SCHEDULES OF CASH FLOW
INFORMATION:
Cash paid for interest $ 114 $ 120
Cash paid for income taxes 1,129 13
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
5
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS)
The condensed consolidated financial statements included herein have been
prepared by H.T.E., Inc., without audit, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the
financial statements for the year ended March 31, 1996, and the nine months
ended December 31, 1996 and the notes thereto, included in the Company's Form
S-1 Registration Statement (File No. 333-22637) filed with the Securities and
Exchange Commission.
The unaudited condensed consolidated financial statements included herein
include normal recurring adjustments and reflect all adjustments which are, in
the opinion of management, necessary for a fair presentation of such financial
statements. The Company's business is seasonal and, accordingly, interim results
are not indicative of results for a full year.
1. INITIAL PUBLIC OFFERING AND RECAPITALIZATION
On June 16, 1997, the Company successfully completed its initial public offering
of common stock. Of the 2,500,000 shares of common stock sold, 1,950,000 were
sold by H.T.E., Inc. and 550,000 were sold by certain selling shareholders. The
Company sold the 1,950,000 shares of common stock for $19,056 net of issuance
costs of $2,818.
Concurrent with the effectiveness of the Company's registration statement on
Form S-1, the Company completed a recapitalization pursuant to which all
outstanding shares of Redeemable Preferred Stock, Class A Common stock and Class
C Common Stock were split 53-for-one and exchanged simultaneously on a
one-for-one basis for shares of the Company's newly authorized Common Stock. As
part of the recapitalization, the Company paid $624 in accrued dividends on the
Redeemable Preferred Stock. The Redeemable Preferred Stock, Class A Common
Stock, Class B Common Stock and Class C Common stock were then canceled, retired
and eliminated from the shares the Company is authorized to issue.
Subsequent to June 30, 1997, the underwriters exercised their option to purchase
375,000 additional shares of common stock to cover over-allotments. The Company
received $3,836 from the transaction, net of additional issuance costs of $289.
2. LITIGATION
The Company is involved in various legal actions arising in the normal course of
business, as both a claimant and a defendant. While it is not possible to
determine with certainty the outcome of these matters, in the opinion of
management, the eventual resolution of these claims and actions outstanding will
not have a material adverse effect on the Company's financial position or
operating results.
3. EARNINGS PER SHARE
PRO FORMA NET INCOME (LOSS) PER COMMON SHARE. Pro forma net income (loss) per
common share is determined by dividing net income (loss), as adjusted for the
effects of the assumed conversion of the mandatorily redeemable Class C common
stock as of the date it was first issued, by the proforma weighted average
number of common and
6
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1996 AND 1997
(DOLLAR AMOUNTS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) (CONTINUED)
common equivalent shares outstanding during the period. Common share equivalents
are computed using the treasury stock method and consist of common stock which
may be issuable upon the exercise of outstanding common stock options, when
dilutive.
The pro forma weighted average number of common and common equivalent shares
outstanding during the period assumes the conversion of the mandatorily
redeemable preferred stock outstanding prior to the twelve-month period
preceding the initial filing date into Class A common stock as of the date such
preferred stock was first issued. Pursuant to Securities and Exchange Commission
Staff Accounting Bulletin No. 83, stock issued and common stock options granted
by the Company during the 12 months preceding the initial filing date have been
included in the calculation of pro forma weighted average common and common
equivalent shares outstanding, using the treasury stock method based on the
initial public offering price of $11.00, as if the stock and options were
outstanding for all periods presented.
All share and per share information in the financial statements have been
adjusted to give effect to the 53-to-1 common stock split and par value
restatement which became effective concurrent with the effectiveness of the
registration statement.
NEW ACCOUNTING STANDARDS. The Financial Accounting Standards Board recently
issued SFAS No. 128, "Earnings Per Share". SFAS No. 128 will require the
presentation of "basic" and "diluted" earnings per share ("EPS") and is
effective for periods ending after December 15, 1997. Generally, the Company
expects basic EPS, which is calculated based on the weighted-average number of
shares outstanding, to be slightly higher than primary EPS currently presented.
Diluted EPS, which would include the effects of dilutive potential common
shares, is expected to approximate primary EPS. The pro forma earnings per share
for the three months and six months ended June 30, 1997 and 1996, utilizing the
requirements of SFAS No. 128 are as follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------- -------------------------------
1997 1996 1997 1996
------------ ------------- ------------- --------------
<S> <C> <C> <C> <C>
Basic earnings per share $ 0.06 $ (0.11) $ 0.22 $ 0.11
Diluted earnings per share $ 0.06 $ (0.10) $ 0.22 $ 0.11
</TABLE>
4. NON-RECURRING CHARGES - OFFICE RELOCATION/MOVE EXPENSES
During the quarter ended June 30, 1997, the Company closed two of its Midwest
regional offices and a West Coast regional office and relocated its headquarters
20 miles north of its Orlando, FL location to Lake Mary, FL. As a result, the
Company incurred non-recurring relocation and move related expenses. The
provision for relocation of offices expense includes the costs for reimbursing
certain employees for real estate transactions, moving expenses and severance.
The provision for relocation expenses also includes move and dual building costs
related to the change in headquarters location. This charge decreased income
from operations by $300 ($180 or $0.03 per share after taxes) for the three and
six-month periods ended June 30, 1997. On a proforma basis without these
charges, earnings per share would have been $0.09 versus $0.06 for the
three-month period ended June 30, 1997.
5. EMPLOYEE STOCK PURCHASE PLAN
The Company adopted an Employee Stock Purchase Plan on July 23, 1997, subject to
shareholder approval at the next annual meeting. The plan shall be effective as
of September 1, 1997 and is designed to qualify as an employee stock purchase
plan under Section 423 of the Internal Revenue Code of 1986, as amended. Two
hundred thousand shares will be reserved for issuance over the term of the plan,
subject to periodic adjustment for changes in the outstanding common stock
occasioned by stock
7
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1997
splits, stock dividends, recapitalizations or other similar changes. The plan
qualifies as a non-compensatory plan under APB Opinion No. 25, therefore, the
plan is not expected to have any effect on the income statement.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
This section of the Report contains forward-looking statements within the
meaning of Section 21E of the Securities Exchange Act of 1934, as amended.
Discussion containing such forward-looking statements may be found in
Management's Discussion and Analysis of Financial Condition and Results of
Operations under the captions "Comparison of Three Months Ended June 30, 1997
and June 30, 1996," "Comparison of Six Months Ended June 30, 1997 and June 30,
1996" and "Liquidity and Capital Resources." Actual results for future periods
could differ materially from those discussed in this section as a result of the
various risks and uncertainties discussed herein. A comprehensive summary of
such risks and uncertainties can be found in the Company's registration
statement on Form S-1 (File No. 333-22637), which was declared effective on June
10, 1997.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage of
total revenues represented by certain revenue, expense and income items:
<TABLE>
<CAPTION>
THREE MONTHS ENDED JUNE 30, SIX MONTHS ENDED JUNE 30,
---------------------------------- ----------------------------------
1997 1996 1997 1996
-------------- ---------------- -------------- ----------------
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUES:
Software licenses 37.5 % 14.6 % 42.9 % 33.9
Professional services 18.7 24.0 16.8 20.3
Hardware 20.5 32.5 17.2 22.1
Maintenance and other 23.3 28.9 23.1 23.7
-------------- ---------------- -------------- ----------------
Total revenues 100.0 100.0 100.0 100.0
EXPENSES:
Cost of software licenses 9.8 9.5 8.5 8.6
Cost of professional services 11.1 14.9 10.3 13.6
Cost of hardware 15.1 25.6 13.4 17.4
Cost of maintenance and other 10.1 9.0 10.3 8.6
Research and development 11.7 17.3 11.7 12.8
Sales and marketing 19.4 18.8 18.7 16.2
General and administrative 16.2 17.6 17.2 16.0
Provision for relocation 2.3 - 1.2 -
-------------- ---------------- -------------- ----------------
Total operating expenses 95.7 112.7 91.3 93.2
-------------- ---------------- -------------- ----------------
Income (loss) from operations 4.3 (12.7) 8.7 6.8
Other expenses:
Interest 0.4 0.9 0.5 0.7
-------------- ---------------- -------------- ----------------
Income (loss) before provision for
income taxes 3.9 (13.6) 8.2 6.1
-------------- ---------------- -------------- ----------------
Provision (benefit) for income
taxes 1.3 (5.6) 3.2 2.5
-------------- ---------------- -------------- ----------------
Net income (loss) 2.6 % (8.0) % 5.0 % 3.6
============== ================ ============== ================
</TABLE>
8
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1997
COMPARISON OF THREE MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
REVENUES The Company's total revenues were $12,873 for the three months ended
June 30, 1997 compared to $7,088 for the three months ended June 30, 1996, an
increase of $5,785 or 81.6%. Revenues from software licenses were $4,827 for the
three months ended June 30, 1997 compared to $1,036 for the period ended June
30, 1996, an increase of $3,791 or 365.9%, as a result of an increased number of
applications available for sale and an increased investment in sales and
marketing. Revenues from professional services were $2,413 for the three months
ended June 30, 1997 compared to $1,701 for the three months ended June 30, 1996,
an increase of $712 or 41.9%, directly related to new software licenses and the
Company's increased number of service offerings. Hardware revenues were $2,638
for the three months ended June 30, 1997 compared to $2,300 for the three months
ended June 30, 1996, an increase of $338 or 14.7%, as the Company expanded its
third-party re-marketing sales through IBM. Revenues from maintenance and other
were $2,995 for the three months ended June 30, 1997 compared to $2,051 for the
three months ended June 30, 1996, an increase of $944 or 46.0%. This change was
a result of maintenance contracts associated with new software licenses,
customer system upgrades and price increases in the fees charged for annual
maintenance.
COST OF REVENUES Cost of software licenses, which include third-party
royalties and amortization of computer software development costs, was $1,257
for the three months ended June 30, 1997 compared to $676 for the three months
ended June 30, 1996, an increase of $581 or 85.9%, as a result of increased
number of software licenses, specifically, third party public safety products.
Cost of professional services, which consists primarily of personnel costs and
other costs related to the services business, was $1,423 for the three months
ended June 30, 1997 compared to $1,056 for the three months ended June 30, 1996,
an increase of $367 or 34.8%. This was directly related to increased
professional service revenues and expanded offerings of full service
professional services. Cost of hardware, which consists primarily of costs
payable to vendors for hardware, was $1,938 for the three months ended June 30,
1997 compared to $1,815 for the three months ended June 30, 1996, an increase of
$123 or 6.8%, which is directly related to the increased hardware sales. Cost of
maintenance and other for the three months ended June 30, 1997 was $1,302
compared to $636 for the three months ended June 30, 1996, an increase of $666
or 104.7%. This was due to investment in new customer support processes,
increased personnel to enhance products and additional computer equipment
required to handle GUI interfaces to the AS400.
RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses are
comprised primarily of salaries and a portion of the Company's overhead for its
in-house staff and amounts paid to outside consultants to supplement the product
development efforts of its in-house staff. Research and development expenses
were $1,508 for the three months ended June 30, 1997 compared to $1,224 for the
three months ended June 30, 1996, an increase of $284 or 23.2%. This was due to
increased staffing levels and expenses for additional software and hardware
required for the development of additional products and platforms.
SALES AND MARKETING EXPENSES Sales and marketing expenses consist primarily
of salaries, commissions, travel related benefits and administrative costs
allocated to the Company's sales and marketing personnel. Sales and marketing
expenses were $2,495 for the three months ended June 30, 1997 compared to $1,332
for the three months ended June 30, 1996, an increase of $1,163 or 87.3%. This
increase was attributable to the Company's continued expansion of its direct
sales force, increased marketing efforts, travel and other expenses related to
increased sales activity.
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses
include the costs of corporate operations, finance and accounting, human
resources and other general operations of the Company. General and
administrative expenses were $2,088 for the three months ended June 30, 1997
compared to $1,251 for the three months ended June 30, 1996, an increase of $837
or 66.9%. This increase was due to additional staffing, additional facility
related expenses and additional computer equipment and software required to
build the infrastructure to support the Company's growth.
9
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1997
PROVISION FOR RELOCATION OF OFFICES During the quarter ended June 30, 1997,
the Company closed two of its Midwest regional offices and a West Coast regional
office and relocated its headquarters 20 miles north of its Orlando, FL location
to Lake Mary, FL. As a result, the Company incurred non-recurring relocation and
move related expenses. The provision for relocation of offices expense includes
the costs for reimbursing certain employees for real estate transactions, moving
expenses and severance. The provision for relocation expenses also includes move
and dual building costs related to the change in headquarters location. This
charge decreased income from operations by $300 ($180 or $0.03 per share after
taxes) for the three months ended June 30, 1997. On a proforma basis without
these charges, earnings per share would have been $0.09 versus $0.06 for the
three-month period ended June 30, 1997.
COMPARISON OF SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
REVENUES The Company's total revenues were $24,820 for the six months ended
June 30, 1997 compared to $16,615 for the six months ended June 30, 1996, an
increase of $8,205 or 49.4%. Revenues from software licenses were $10,657 for
the six months ended June 30, 1997 compared to $5,635 for the period ended June
30, 1996, an increase of $5,022 or 89.1%, as a result of an increased number of
applications available for sale and an increased investment in sales and
marketing. Revenues from professional services were $4,180 for the six months
ended June 30, 1997 compared to $3,376 for the six months ended June 30, 1996,
an increase of $804 or 23.8%, as result of new software licenses and the
Company's increased number of service offerings. Hardware revenues were $4,258
for the six months ended June 30, 1997 compared to $3,669 for the six months
ended June 30, 1996, an increase of $589 or 16.1%, as the Company expanded its
third-party re-marketing sales through IBM. Revenues from maintenance and other
were $5,725 for the six months ended June 30, 1997 compared to $3,935 for the
six months ended June 30, 1996, an increase of $1,790 or 45.5%. This was a
result of maintenance contracts associated with new software licenses, customer
system upgrades and price increases in the fees charged for annual maintenance.
COST OF REVENUES Cost of software licenses, which include third-party
royalties and amortization of computer software development costs, was $2,112
for the six months ended June 30, 1997 compared to $1,425 for the six months
ended June 30, 1996, an increase of 687 or 48.2%, as a result of increased
number of software licenses, specifically, third party public safety products.
Cost of professional services, which consists primarily of personnel costs and
other costs related to the services business, was $2,554 for the six months
ended June 30, 1997 compared to $2,262 for the six months ended June 30, 1996,
an increase of $292 or 12.9%. This was directly related to increased
professional service revenues and expanded offerings of full service
professional services. Cost of hardware, which consists primarily of costs
payable to vendors for hardware, was $3,319 for the six months ended June 30,
1997 compared to $2,896 for the six months ended June 30, 1996, an increase of
$423 or 14.6%, which is directly related to the increased hardware sales. Cost
of maintenance and other for the six months ended June 30, 1997 was $2,567
compared to $1,437 for the six months ended June 30, 1996, an increase of $1,130
or 78.6%. This was due to investment in new customer support processes,
increased personnel to enhance products and additional computer equipment
required to handle GUI interfaces to the AS400.
RESEARCH AND DEVELOPMENT EXPENSES Research and development expenses are
comprised primarily of salaries and a portion of the Company's overhead for its
in-house staff and amounts paid to outside consultants to supplement the product
development efforts of its in-house staff. Research and development expenses
were $2,900 for the six months ended June 30, 1997 compared to $2,129 for the
six months ended June 30, 1996, an increase of $771 or 36.2%. This was due to
increased staffing levels and expenses related to additional software and
hardware required for the development of additional products and platforms.
SALES AND MARKETING EXPENSES Sales and marketing expenses consist primarily
of salaries, commissions, travel related benefits and administrative costs
allocated to the Company's sales and marketing personnel. Sales and marketing
expenses were $4,647 for the six months ended June 30, 1997 compared to $2,686
for the six months
10
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1997
ended June 30, 1996, an increase of $1,961 or 73.0%. This increase was
attributable to the Company's continued expansion of its direct sales force,
increased marketing efforts, travel and other expenses related to increased
sales activity.
GENERAL AND ADMINISTRATIVE EXPENSES General and administrative expenses
include the costs of corporate operations, finance and accounting, human
resources and other general operations of the Company. General and
administrative expenses were $4,258 for the six months ended June 30, 1997
compared to $2,652 for the six months ended June 30, 1996, an increase of $1,606
or 60.6%. This increase was due to additional staffing, additional facility
related expenses and additional computer equipment and software required to
build the infrastructure to support the Company's growth.
PROVISION FOR RELOCATION OF OFFICES During the quarter ended June 30, 1997,
the Company closed two of its Midwest regional offices and a West Coast regional
office and relocated its headquarters 20 miles north of its Orlando, FL location
to Lake Mary, FL. As a result, the Company incurred non-recurring relocation and
move related expenses. The provision for relocation of offices expense includes
the costs for reimbursing certain employees for real estate transactions, moving
expenses and severance. The provision for relocation expenses also includes move
and dual building costs related to the change in headquarters location. This
charge decreased income from operations by $300 ($180 or $0.03 per share after
taxes) for the six-month period ended June 30, 1997. On a proforma basis without
these charges, earnings per share would have been $0.25 versus $0.22 for the
six-month period ended June 30, 1997.
The Company's revenues and operating results are subject to quarterly and other
fluctuations resulting from a variety of factors, including the effect of
budgeting and purchasing practices of its customers, the length of the customer
evaluation process for the Company's solutions, the timing of customer system
conversions, and the Company's sales practices. Historically, the Company has
achieved its highest income in the fiscal quarter ended March 31 due to the
Company's sales practices. Recently, the Company implemented a new sales and
marketing program and changed its fiscal year end to December 31 which the
Company believes will moderate such fluctuations. Based on this change in sales
practices combined with the change in fiscal year end, the Company believes that
historical quarterly operating data should not be relied upon as an indicator of
future performance. However, the Company has often recognized a substantial
portion of its revenues during the last month of each quarter. Since a
significant portion of the Company's operating expenses is relatively fixed, the
Company may not be able to adjust or reduce spending in response to sales
shortfalls or delays. These factors can cause significant variations in
operating results from quarter to quarter. The Company believes that quarter to
quarter comparisons of its financial results are not necessarily meaningful and
should not be relied upon as an indication of future performance. To conform to
industry standards, the Company changed its fiscal year end from March 31 to
December 31, effective December 31, 1996.
LIQUIDITY AND CAPITAL RESOURCES
On June 16, 1997, the Company successfully completed its initial public offering
of common stock. Of the 2,500,000 shares of common stock sold, 1,950,000 were
sold by H.T.E., Inc. and 550,000 were sold by certain selling shareholders. The
Company sold the 1,950,000 shares of common stock for $19,056 net of issuance
costs of $2,818. Subsequent to June 30, 1997, the underwriters exercised their
option to purchase 375,000 additional shares of common stock to cover
over-allotments. The Company received $3,836 from the transaction, net of
additional issuance costs of $289. The Company has invested the net proceeds in
short-term, investment grade, interest-bearing securities.
11
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1997
Cash used in investing activities (capital expenditures, software development
investments and acquisitions) totaled $1,321 and $1,351 during the six months
ended June 30, 1997 and 1996, respectively. Capital expenditures were primarily
comprised of the Company's investments in equipment and related software
development costs. In addition, the Company made significant investments in
upgrading internal systems.
Net cash provided by financing activities was $16,109 in the six months ended
June 30, 1997, compared to $408 in the comparable 1996 period. The 1997 period
reflects net proceeds from the initial public offering of $19,056 partially
offset by the repayment of the Company's line of credit. Cash provided by
financing activities for the six months ended June 30, 1996 related primarily to
the issuance of common and preferred stock which raised $476 and net repayments
of $68.
The Company believes its cash balances, cash generated from operations and
borrowings available under its line of credit will satisfy the Company's working
capital and capital expenditure requirements for at least the next 12 months. In
the longer term, the Company may require additional sources of liquidity to fund
future growth. Such sources of liquidity may include additional equity offerings
or debt financings. In the normal course of business, the Company evaluates
acquisitions of businesses, products and technologies that complement the
Company's business. The Company has not executed any agreements with respect to
any such transaction.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
None
12
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
JUNE 30, 1997
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various legal actions arising in the normal course of
business, as both a claimant and a defendant. While it is not possible to
determine with certainty the outcome of these matters, in the opinion of
management, the eventual resolution of these claims and actions outstanding will
not have a material adverse effect on the Company's financial position or
operating results.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 14, 1997, at a special meeting of the shareholders of the Company, a
majority of the shareholders entitled to vote approved an amendment to the
articles of incorporation. The amendment provided that the vote of at least a
majority of the directors or the holders of at least 66 2/3% of the voting power
of the Company's voting stock is required to alter, amend or repeal certain
provisions of the Company's charter documents pertaining to annual and special
meetings of shareholders.
ITEM 5. OTHER INFORMATION
The Company's common stock is listed on the NASDAQ National Market under the
symbol "HTEI." Trading in the stock began on June 11, 1997.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
Number Name
-------- -------------------------------------------------------------
10.12 1997 Employee Stock Purchase Plan
27.0 Financial Data Schedule (submitted only in electronic format)
(B) REPORTS ON FORM 8-K
No reports on Form 8-K were filed by H.T.E., Inc. during the quarter ended June
30, 1997.
13
<PAGE>
H.T.E., INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
H.T.E., INC.
Date: August 14, 1997
/S/ DENNIS J. HARWARD
-----------------------------------------------
Dennis J. Harward
CHAIRMAN OF THE BOARD OF DIRECTORS,
PRESIDENT AND CHIEF EXECUTIVE OFFICER
AND DIRECTOR (PRINCIPAL EXECUTIVE OFFICER)
/S/ L.A. GORNTO, JR.
-----------------------------------------------
L.A. Gornto, Jr.
EXECUTIVE VICE PRESIDENT, CHIEF
FINANCIAL OFFICER (PRINCIPAL FINANCIAL
OFFICER)
/S/ SUSAN D. FALOTICO
-----------------------------------------------
Susan D. Falotico
VICE PRESIDENT, CONTROLLER AND
CHIEF ACCOUNTING OFFICER (CHIEF ACCOUNTING
OFFICER)
14
<PAGE>
EXHIBIT INDEX
Number Name
-------- -------------------------------------------------------------
10.12 1997 Employee Stock Purchase Plan
27.0 Financial Data Schedule (submitted only in electronic format)
15
H.T.E., INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
<PAGE>
<TABLE>
<CAPTION>
H.T.E., INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
<S> <C> <C>
1. Purpose................................................................................... 1
2. Definitions............................................................................... 1
3. Eligibility............................................................................... 3
4. Offering Periods.......................................................................... 3
5. Election to Participate................................................................... 4
6. Participant Contributions................................................................. 4
7. Grant of Option........................................................................... 5
8. Exercise Price............................................................................ 6
9. Exercise of Options....................................................................... 6
10. Delivery.................................................................................. 6
11. Withdrawal; Termination of Employment..................................................... 6
12. Stock..................................................................................... 7
13. Administration............................................................................ 7
14. Designation of Beneficiary................................................................ 8
15. Transferability........................................................................... 8
16. Participant Accounts...................................................................... 8
17. Adjustments Upon Changes in Capitalization; Corporate Transactions........................ 8
18. Amendment of Plan......................................................................... 9
19. Termination of the Plan................................................................... 9
20. Notices................................................................................... 10
21. Effective Date............................................................................ 10
22. Conditions Upon Issuance of Shares........................................................ 10
23. Expenses of the Plan...................................................................... 10
24. No Employment Rights...................................................................... 10
25. Applicable Law............................................................................ 10
26. Additional Restrictions of Rule 16b-3..................................................... 11
</TABLE>
<PAGE>
H.T.E., INC.
1997 EMPLOYEE STOCK PURCHASE PLAN
1. PURPOSE. The purpose of the Plan is to provide incentive for present
and future employees of the Company and any Designated Subsidiary to acquire a
proprietary interest (or increase an existing proprietary interest) in the
Company through the purchase of Common Stock. It is the Company's intention that
the Plan qualify as an "employee stock purchase plan" under Section 423 of the
Code. Accordingly, the provisions of the Plan shall be administered, interpreted
and construed in a manner consistent with the requirements of that section of
the Code.
2. DEFINITIONS.
(a) "APPLICABLE PERCENTAGE" means the percentage specified in Section
8, subject to adjustment by the Committee as provided in Section 8.
(b) "BOARD" means the Board of Directors of the Company.
(c) "CODE" means the Internal Revenue Code of 1986, as amended, and any
successor thereto.
(d) "COMMITTEE" means the committee appointed by the Board to
administer the Plan as described in Section 13 of the Plan or, if no such
Committee is appointed, the Board.
(e) "COMMON STOCK" means the Company's Common Stock, par value $.01 per
share.
(f) "COMPANY" means H.T.E., INC., a Florida corporation.
(g) "COMPENSATION" means, with respect to each Participant for each pay
period, the full base salary, overtime and other wages paid to such Participant
by the Company or a Designated Subsidiary. Except as otherwise determined by the
Committee, "Compensation" does not include: (i) commissions or bonuses; (ii) any
amounts contributed by the Company or a Designated Subsidiary to any pension
plan; (iii) any automobile or relocation allowances (or reimbursement for any
such expenses); (iv) any amounts paid as a starting bonus or finder's fee; (v)
any amounts realized from the exercise of any stock options or incentive awards;
(vi) any amounts paid by the Company or a Designated Subsidiary for other fringe
benefits, such as health and welfare, hospitalization and group life insurance
benefits, or perquisites, or paid in lieu of such benefits, or; (vii) other
similar forms of extraordinary compensation.
(h) "CONTINUOUS STATUS AS AN EMPLOYEE" means the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be
<PAGE>
considered interrupted in the case of a leave of absence agreed to in writing by
the Company or the Designated Subsidiary that employs the Employee, provided
that such leave is for a period of not more than 90 days or reemployment upon
the expiration of such leave is guaranteed by contract or statute.
(i) "DESIGNATED SUBSIDIARIES" means the Subsidiaries that have been
designated by the Board from time to time in its sole discretion as eligible to
participate in the Plan.
(j) "EMPLOYEE" means any person, including an Officer, whose customary
employment with the Company or one of its Designated Subsidiaries is at least
twenty (20) hours per week and more than five (5) months in any calendar year.
(k) "ENTRY DATE" means the first day of each Exercise Period.
(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
(m) "EXERCISE DATE" means the last business day ending on or before
December 31, 1997, and the last business day ending on or before each June 30
and December 31 thereafter.
(n) "EXERCISE PERIOD" means, for any Offering Period, each period
commencing on the Offering Date and on the day after each Exercise Date, and
terminating on the immediately following Exercise Date.
(o) "EXERCISE PRICE" means the price per share of Common Stock offered
in a given Offering Period determined as provided in Section 8.
(p) "FAIR MARKET VALUE" means, with respect to a share of Common Stock,
the Fair Market Value as determined under Section 7(b).
(q) "FIRST OFFERING DATE" means September 1, 1997.
(r) "OFFERING DATE" means the first business day of each Offering
Period; provided, that in the case of an individual who becomes eligible to
become a Participant under Section 3 after the first business day of an Offering
Period, the term "Offering Date" shall mean the first business day of the
Exercise Period coinciding with or next succeeding the day on which that
individual becomes eligible to become a Participant. Options granted after the
first day of an Offering Period will be subject to the same terms as the options
granted on the first business day of such Offering Period except that they will
have a different grant date (thus, potentially, a different exercise price) and,
because they expire at the same time as the options granted on the first
business day of such Offering Period, a shorter term.
(s) "OFFERING PERIOD" means (i) with respect to the first Offering
Period, the period beginning on the First Offering Date and ending on December
31, 1997, and (ii) with respect to each Offering Period thereafter, and subject
to adjustment as provided in Section 4, the period
2
<PAGE>
beginning on the first business day in January and ending on the last business
day in June, and the period beginning on the first business day in July and
ending on the last business day of December.
(t) "OFFICER" means a person who is an officer of the Company within
the meaning of Section 16 under the Exchange Act and the rules and regulations
promulgated thereunder.
(u) "PARTICIPANT" means an Employee who has elected to participate in
the Plan by filing an enrollment agreement with the Company as provided in
Section 5 of the Plan.
(v) "PLAN" shall mean this 1997 Employee Stock Purchase Plan.
(w) "PLAN CONTRIBUTIONS" means, with respect to each Participant, the
payroll deductions withheld from the Compensation of the Participant and
contributed to the Plan for the Participant as provided in Section 6 of the Plan
and any other amounts contributed to the Plan for the Participant in accordance
with the terms of the Plan.
(x) "SUBSIDIARY" shall mean any corporation, domestic or foreign, of
which the Company owns, directly or indirectly, 50% or more of the total
combined voting power of all classes of stock, and that otherwise qualifies as a
"subsidiary corporation" within the meaning of Section 424(f) of the Code.
3. ELIGIBILITY.
(a) Any Employee shall be eligible to become a Participant as of any
Entry Date coinciding with or following the date on which he becomes an
Employee, subject to the requirements of Section 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Notwithstanding any provision of the Plan to the contrary, no
Participant shall be granted an option under the Plan (i) if, immediately after
the grant, such Participant (or any other person whose stock would be attributed
to such Participant pursuant to Section 424(d) of the Code) would own stock
and/or hold outstanding options to purchase stock possessing 5% or more of the
total combined voting power or value of all classes of stock of the Company or
of any Subsidiary of the Company, or (ii) which permits such Participant's
rights to purchase stock under all employee stock purchase plans of the Company
and its Subsidiaries intended to qualify under Section 423 of the Code to accrue
at a rate which exceeds $25,000 of fair market value of stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. OFFERING PERIODS. The Plan shall be implemented by a series of
consecutive Offering Periods. The first Offering Period shall commence on the
First Offering Date, the second Offering Period shall commence on the first
business day in 1998, and succeeding Offering Periods shall commence on the
first business day of January and the first business day of July in each
succeeding calendar year (or at such other time or times as may be determined by
the Committee). The Committee shall have the power to change the duration and/or
the frequency of Offering Periods
3
<PAGE>
with respect to future offerings without stockholder approval if such change is
announced at least fifteen (15) days prior to the scheduled beginning of the
first Offering Period to be affected.
5. ELECTION TO PARTICIPATE.
(a) An eligible Employee may elect to participate in the Plan
commencing on any Entry Date by completing an enrollment agreement on the form
provided by the Company and filing the enrollment agreement with the Company on
or prior to such Entry Date, unless a later time for filing the enrollment
agreement is set by the Committee for all eligible Employees with respect to a
given offering. The enrollment agreement shall set forth the percentage of the
Participant's Compensation that is to be withheld by payroll deduction pursuant
to the Plan.
(b) Except as otherwise determined by the Committee under rules
applicable to all Participants, payroll deductions for a Participant shall
commence on the first payroll following the Entry Date on which the Participant
elects to participate in accordance with Section 5(a) and shall end on the last
payroll in the Offering Period, unless sooner terminated by the Participant as
provided in Section 11.
(c) Unless a Participant elects otherwise prior to the last Exercise
Date of an Offering Period, such Participant shall be deemed (i) to have elected
to participate in the immediately succeeding Offering Period (and, for purposes
of such Offering Period such Participant's "Entry Date" shall be deemed to be
the first day of such Offering Period) and (ii) to have authorized the same
payroll deduction for such immediately succeeding Offering Period as was in
effect for such Participant immediately prior to the commencement of such
succeeding Offering Period.
6. PARTICIPANT CONTRIBUTIONS.
(a) Except as otherwise authorized by the Committee pursuant to Section
6(d) below, all Participant contributions to the Plan shall be made only by
payroll deductions. At the time a Participant files the enrollment agreement
with respect to an Offering Period, the Participant may authorize payroll
deductions to be made on each payroll date during the portion of the Offering
Period that he or she is a Participant in an amount not less than 1% and not
more than 25% of the Participant's Compensation on each payroll date during the
portion of the Offering Period that he or she is a Participant (or subsequent
Offering Periods as provided in Section 5(c)). The amount of payroll deductions
shall be a whole percentage (i.e., 1%, 2%, 3%, etc.) of the Participant's
Compensation.
(b) A Participant may discontinue his or her participation in the Plan
as provided in Section 11, or may decrease or increase the rate or amount of his
or her payroll deductions during such Offering Period (within the limitations of
Section 6(a) above) by completing and filing with the Company a new enrollment
agreement authorizing a change in the rate or amount of payroll deductions;
PROVIDED, that a Participant may not change the rate or amount of his or her
payroll deductions more than once in any Exercise Period. The change in rate or
amount shall be effective
4
<PAGE>
with the first full payroll period following ten (10) business days after the
Company's receipt of the new enrollment agreement.
(c) Notwithstanding the foregoing, to the extent necessary to comply
with Section 423(b)(8) of the Code and Section 3(b) hereof, a Participant's
payroll deductions may be decreased to 0% at such time during any Exercise
Period which is scheduled to end during the current calendar year that the
aggregate of all payroll deductions accumulated with respect to such Exercise
Period and any other Exercise Period ending within the same calendar year are
equal to the product of $25,000 multiplied by the Applicable Percentage for the
calendar year. Payroll deductions shall recommence at the rate provided in the
Participant's enrollment agreement at the beginning of the following Exercise
Period which is scheduled to end in the following calendar year, unless
terminated by the Participant as provided in Section 11.
(d) Notwithstanding anything to the contrary in the foregoing, but
subject to the limitations set forth in Section 3(b), the Committee may permit
Participants to make additional contributions to the Plan subject to such terms
and conditions as the Committee may in its discretion determine. All such
additional contributions shall be made in a manner consistent with the
provisions of Section 423 of the Code or any successor thereto, and shall be
held in Participants' accounts and applied to the purchase of shares of Common
Stock pursuant to options granted under this Plan in the same manner as payroll
deductions contributed to the Plan as provided above.
(e) All Plan Contributions made for a Participant shall be deposited in
the Company's general corporate account and shall be credited the Participant's
account under the Plan. No interest shall accrue or be credited with respect to
a Participant's Plan Contributions. All Plan Contributions received or held by
the Company may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate or otherwise set apart such Plan
Contributions from any other corporate funds.
7. GRANT OF OPTION.
(a) On a Participant's Entry Date, subject to the limitations set forth
in Sections 3(b) and 12(a), the Participant shall be granted an option to
purchase on each subsequent Exercise Date during the Offering Period in which
such Entry Date occurs (at the Exercise Price determined as provided in Section
8 below) a number of shares of Common Stock determined by dividing such
Participant's Plan Contributions accumulated prior to such Exercise Date and
retained in the Participant's account as of such Exercise Date by the lower of
(i) the Applicable Percentage of the greater of (A) the Fair Market Value of a
share of Common Stock on the Offering Date or (B) the Fair Market Value of a
share of Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period, or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on such Exercise Date; PROVIDED,
that the maximum number of shares an Employee may purchase during any Exercise
Period shall be Five Hundred (500) shares. The Fair Market Value of a share of
Common Stock shall be determined as provided in Section 7(b).
(b) The Fair Market Value of a share of Common Stock on a given date
shall be determined by the Committee in its discretion; PROVIDED, that if there
is a public market for the
5
<PAGE>
Common Stock, the Fair Market Value per share shall be either (i) the closing
price of the Common Stock on such date (or, in the event that the Common Stock
is not traded on such date, on the immediately preceding trading date), as
reported by the National Association of Securities Dealers Automated Quotation
(Nasdaq) National Market System, (ii) if such price is not reported, the average
of the bid and asked prices for the Common Stock on such date (or, in the event
that the Common Stock is not traded on such date, on the immediately preceding
trading date), as reported by Nasdaq, (iii) in the event the Common Stock is
listed on a stock exchange, the closing price of the Common Stock on such
exchange on such date (or, in the event that the Common Stock is not traded on
such date, on the immediately preceding trading date), as reported in The Wall
Street Journal, or (iv) if no such quotations are available for a date within a
reasonable time prior to the valuation date, the value of the Common Stock as
determined by the Committee using any reasonable means. For purposes of the
First Offering Date, the Fair Market Value of a share of Common Stock shall be
the Price to Public as set forth in the final prospectus filed by the Company
with the Securities and Exchange Commission pursuant to Rule 424 under the
Securities Act of 1933, as amended.
8. EXERCISE PRICE. The Exercise Price per share of Common Stock offered to
each Participant in a given Offering Period shall be the lower of: (i) the
Applicable Percentage of the greater of (A) the Fair Market Value of a share of
Common Stock on the Offering Date or (B) the Fair Market Value of a share of
Common Stock on the Entry Date on which the Employee elects to become a
Participant within the Offering Period or (ii) the Applicable Percentage of the
Fair Market Value of a share of Common Stock on the Exercise Date. The
Applicable Percentage with respect to each Offering Period shall be 85%, unless
and until such Applicable Percentage is increased by the Committee, in its sole
discretion, provided that any such increase in the Applicable Percentage with
respect to a given Offering Period must be established not less than fifteen
(15) days prior to the Offering Date thereof.
9. EXERCISE OF OPTIONS. Unless the Participant withdraws from the Plan as
provided in Section 11, the Participant's option for the purchase of shares will
be exercised automatically on each Exercise Date, and the maximum number of full
shares subject to such option shall be purchased for the Participant at the
applicable Exercise Price with the accumulated Plan Contributions then credited
the Participant's account under the Plan. During a Participant's lifetime, a
Participant's option to purchase shares hereunder is exercisable only by the
Participant.
10. DELIVERY. As promptly as practicable after each Exercise Date, the
Company shall arrange for the delivery to each Participant (or the Participant's
beneficiary), as appropriate, or to a custodial account for the benefit of each
Participant (or the Participant's beneficiary) as appropriate, of a certificate
representing the shares purchased upon exercise of such Participant's option.
Any amount remaining to the credit of a Participant's account after the purchase
of shares by such Participant on an Exercise Date, or which is insufficient to
purchase a full share of Common Stock, shall be carried over to the next
Exercise Period if the Participant continues to participate in the Plan or, if
the Participant does not continue to participate, shall be returned to the
Participant.
11. WITHDRAWAL; TERMINATION OF EMPLOYMENT.
6
<PAGE>
(a) A Participant may withdraw from the Plan at any time by giving
written notice to the Company. All of the Plan Contributions credited to the
Participant's account and not yet invested in Common Stock will be paid to the
Participant as soon as administratively practicable after receipt of the
Participant's notice of withdrawal, the Participant's option to purchase shares
pursuant to the Plan automatically will be terminated, and no further payroll
deductions for the purchase of shares will be made for the Participant's
account. Payroll deductions will not resume on behalf of a Participant who has
withdrawn from the Plan (a "Former Participant") unless the Former Participant
enrolls in a subsequent Offering Period in accordance with Section 5(a).
(b) Upon termination of the Participant's Continuous Status as an
Employee prior to any Exercise Date for any reason, including retirement or
death, the Plan Contributions credited to the Participant's account and not yet
invested in Common Stock will be returned to the Participant or, in the case of
death, to the Participant's beneficiary as determined pursuant to Section 14,
and the Participant's option to purchase shares under the Plan will
automatically terminate.
(c) A Participant's withdrawal from an Offering Period will not have
any effect upon the Participant's eligibility to participate in succeeding
Offering Periods or in any similar plan which may hereafter be adopted by the
Company.
12. STOCK.
(a) The maximum number of shares of the Company's Common Stock that
shall be made available for sale under the Plan shall be Two Hundred Thousand
(200,000) shares, subject to adjustment as provided in Section 17. Shares of
Common Stock subject to the Plan may be newly issued shares or shares reacquired
in private transactions or open market purchases. If and to the extent that any
right to purchase reserved shares shall not be exercised by any Participant for
any reason or if such right to purchase shall terminate as provided herein,
shares that have not been so purchased hereunder shall again become available
for the purpose of the Plan unless the Plan shall have been terminated, but all
shares sold under the Plan, regardless of source, shall be counted against the
limitation set forth above.
(b) A Participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a Participant under the Plan will be
registered in the name of the Participant or in the name of the Participant and
his or her spouse, as requested by the Participant.
13. ADMINISTRATION.
(a) The Plan shall be administered by the Committee. The Committee
shall have the authority to interpret the Plan, to prescribe, amend and rescind
rules and regulations relating to the Plan, and to make all other determinations
necessary or advisable for the administration of the Plan. The administration,
interpretation, or application of the Plan by the Committee shall be final,
conclusive and binding upon all persons.
7
<PAGE>
(b) Notwithstanding the provisions of Subsection (a) of this Section
13, in the event that Rule 16b-3 promulgated under the Exchange Act or any
successor provision thereto ("Rule 16b-3") provides specific requirements for
the administrators of plans of this type, the Plan shall only be administered by
such body and in such a manner as shall comply with the applicable requirements
of Rule 16b-3. Unless permitted by Rule 16b-3, no discretion concerning
decisions regarding the Plan shall be afforded to any person that is not
"disinterested" as that term is used in Rule 16b-3.
14. DESIGNATION OF BENEFICIARY.
(a) A Participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the Participant's account under
the Plan in the event of the Participant's death subsequent to an Exercise Date
on which the Participant's option hereunder is exercised but prior to delivery
to the Participant of such shares and cash. In addition, a Participant may file
a written designation of a beneficiary who is to receive any cash from the
Participant's account under the Plan in the event of the Participant's death
prior to the exercise of the option.
(b) A Participant's beneficiary designation may be changed by the
Participant at any time by written notice. In the event of the death of a
Participant and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such Participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the Participant, or if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the Participant, or if no spouse, dependent or relative is known to
the Company, then to such other person as the Company may designate.
15. TRANSFERABILITY. Neither Plan Contributions credited to a
Participant's account nor any rights to exercise any option or receive shares of
Common Stock under the Plan may be assigned, transferred, pledged or otherwise
disposed of in any way (other than by will or the laws of descent and
distribution, or as provided in Section 14). Any attempted assignment, transfer,
pledge or other distribution shall be without effect, except that the Company
may treat such act as an election to withdraw funds in accordance with Section
11.
16. PARTICIPANT ACCOUNTS. Individual accounts will be maintained for each
Participant in the Plan to account for the balance of his Plan Contributions and
options issued and shares purchased under the Plan. Statements of account will
be given to Participants semi-annually in due course following each Exercise
Date, which statements will set forth the amounts of payroll deductions, the per
share purchase price, the number of shares purchased and the remaining cash
balance, if any.
17. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION; CORPORATE TRANSACTIONS.
(a) If the outstanding shares of Common Stock are increased or
decreased, or are changed into or are exchanged for a different number or kind
of shares, as a result of one or more reorganizations, restructurings,
recapitalizations, reclassifications, stock splits, reverse stock splits,
8
<PAGE>
stock dividends or the like, upon authorization of the Committee, appropriate
adjustments shall be made in the number and/or kind of shares, and the per-share
option price thereof, which may be issued in the aggregate and to any
Participant upon exercise of options granted under the Plan.
(b) In the event of the proposed dissolution or liquidation of the
Company, the Offering Period will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the
Committee. In the event of a proposed sale of all or substantially all of the
Company's assets, or the merger of the Company with or into another corporation
(each, a "Sale Transaction"), each option under the Plan shall be assumed or an
equivalent option shall be substituted by such successor corporation or a parent
or subsidiary of such successor corporation, unless the Committee determines, in
the exercise of its sole discretion and in lieu of such assumption or
substitution, to shorten the Exercise Period then in progress by setting a new
Exercise Date (the "New Exercise Date"). If the Committee shortens the Exercise
Period then in progress in lieu of assumption or substitution in the event of a
Sale Transaction, the Committee shall notify each Participant in writing, at
least ten (10) days prior to the New Exercise Date, that the exercise date for
such Participant's option has been changed to the New Exercise Date and that
such Participant's option will be exercised automatically on the New Exercise
Date, unless prior to such date the Participant has withdrawn from the Plan as
provided in Section 11. For purposes of this Section 17(b), an option granted
under the Plan shall be deemed to have been assumed if, following the Sale
Transaction, the option confers the right to purchase, for each share of option
stock subject to the option immediately prior to the Sale Transaction, the
consideration (whether stock, cash or other securities or property) received in
the Sale Transaction by holders of Common Stock for each share of Common Stock
held on the effective date of the Sale Transaction (and if such holders were
offered a choice of consideration, the type of consideration chosen by the
holders of a majority of the outstanding shares of Common Stock); PROVIDED, that
if the consideration received in the Sale Transaction was not solely common
stock of the successor corporation or its parent (as defined in Section 424(e)
of the Code), the Committee may, with the consent of the successor corporation
and the Participant, provide for the consideration to be received upon exercise
of the option to be solely common stock of the successor corporation or its
parent equal in fair market value to the per share consideration received by the
holders of Common Stock in the Sale Transaction.
(c) In all cases, the Committee shall have sole discretion to exercise
any of the powers and authority provided under this Section 17, and the
Committee's actions hereunder shall be final and binding on all Participants. No
fractional shares of stock shall be issued under the Plan pursuant to any
adjustment authorized under the provisions of this Section 17.
18. AMENDMENT OF THE PLAN. The Board or the Committee may at any time, or
from time to time, amend the Plan in any respect; PROVIDED, that (i) no such
amendment may make any change in any option theretofore granted which adversely
affects the rights of any Participant and (ii) the Plan may not be amended in
any way that will cause rights issued under the Plan to fail to meet the
requirements for employee stock purchase plans as defined in Section 423 of the
Code or any successor thereto. To the extent necessary to comply with Rule 16b-3
under the Exchange Act, Section 423 of the Code, or any other applicable law or
regulation), the Company shall obtain shareholder approval of any such
amendment.
9
<PAGE>
19. TERMINATION OF THE PLAN.
The Plan and all rights of Employees hereunder shall terminate on the
earliest of:
(a) the Exercise Date that Participants become entitled to purchase a
number of shares greater than the number of reserved shares remaining available
for purchase under the Plan;
(b) such date as is determined by the Board in its discretion; or
(c) the last Exercise Date immediately preceding the tenth (10th)
anniversary of the Plan's effective date.
In the event that the Plan terminates under circumstances described in
Section 19(a) above, reserved shares remaining as of the termination date shall
be sold to Participants on a PRO RATA basis.
20. NOTICES. All notices or other communications by a Participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. EFFECTIVE DATE. Subject to adoption of the Plan by the Board, the Plan
shall become effective on the First Exercise Date. The Board shall submit the
Plan to the shareholders of the Company for approval within twelve months after
the date the Plan is adopted by the Board. If such shareholder approval is not
obtained, the Plan and all rights of Participants under the Plan shall be null
and void and shall have no effect.
22. CONDITIONS UPON ISSUANCE OF SHARES.
(a) The Plan, the grant and exercise of options to purchase shares
under the Plan, and the Company's obligation to sell and deliver shares upon the
exercise of options to purchase shares shall be subject to compliance with all
applicable federal, state and foreign laws, rules and regulations and the
requirements of any stock exchange on which the shares may then be listed.
(b) The Company may make such provisions as it deems appropriate for
withholding by the Company pursuant to federal or state tax laws of such amounts
as the Company determines it is required to withhold in connection with the
purchase or sale by a Participant of any Common Stock acquired pursuant to the
Plan. The Company may require a Participant to satisfy any relevant tax
requirements before authorizing any issuance of Common Stock to such
Participant.
23. EXPENSES OF THE PLAN. All costs and expenses incurred in administering
the Plan shall be paid by the Company, except that any stamp duties or transfer
taxes applicable to participation in the Plan may be charged to the account of
such Participant by the Company.
24. NO EMPLOYMENT RIGHTS. The Plan does not, directly or indirectly,
create any right for the benefit of any employee or class of employees to
purchase any shares under the Plan, or
10
<PAGE>
create in any employee or class of employees any right with respect to
continuation of employment by the Company, and it shall not be deemed to
interfere in any way with the Company's right to terminate, or otherwise modify,
an employee's employment at any time.
25. APPLICABLE LAW. The laws of the State of Florida shall govern all
matter relating to this Plan except to the extent (if any) superseded by the
laws of the United States.
26. ADDITIONAL RESTRICTIONS OF RULE 16B-3. The terms and conditions of
options granted hereunder to, and the purchase of shares by, persons subject to
Section 16 of the Exchange Act shall comply with the applicable provisions of
Rule 16b-3. This Plan shall be deemed to contain, and such options shall
contain, and the shares issued upon exercise thereof shall be subject to, such
additional conditions and restrictions as may be required by Rule 16b-3 to
qualify for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF H.T.E., INC. FOR THE SIX MONTHS ENDED JUNE 30, 1997, AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 17,413
<SECURITIES> 0
<RECEIVABLES> 17,960
<ALLOWANCES> 417
<INVENTORY> 0
<CURRENT-ASSETS> 37,217
<PP&E> 3,907
<DEPRECIATION> 2,317
<TOTAL-ASSETS> 43,312
<CURRENT-LIABILITIES> 17,784
<BONDS> 0
0
0
<COMMON> 73
<OTHER-SE> 23,398
<TOTAL-LIABILITY-AND-EQUITY> 43,312
<SALES> 0
<TOTAL-REVENUES> 24,820
<CGS> 0
<TOTAL-COSTS> 22,657
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 126
<INCOME-PRETAX> 2,037
<INCOME-TAX> 803
<INCOME-CONTINUING> 1,234
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,234
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
