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PROSPECTUS FILED PURSUANT TO RULE 424(b)(3)
REGISTRATION STATEMENT NO. 333-39490
1,123,855 SHARES
COSTAR GROUP, INC.
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COMMON STOCK
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This prospectus relates to the public offering of up to 1,123,855 shares of
common stock by some of our existing stockholders, some of whom received these
shares in connection with acquisitions by CoStar Group, Inc.
The selling stockholders may sell shares from time to time in:
- privately negotiated transactions
- transactions on the Nasdaq Stock Market or other markets on which we may
list our common stock
- underwritten offerings
- a combination of these methods
The prices at which the stockholders may sell their shares will be
determined by the prevailing market price for the shares or in negotiated
transactions. The proceeds to the selling stockholders from the sale of the
common stock will be the selling price of the common stock sold less agents'
commissions and underwriters' discounts, if any.
We are not offering any shares of our common stock for sale under this
prospectus and will not receive any of the proceeds from the sale of the shares.
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CoStar Group, Inc.'s common stock is listed on the Nasdaq Stock Market
under the symbol "CSGP." The last reported sale price of the common stock on
August 9, 2000 on the Nasdaq Stock Market was $26.75 per share.
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INVESTING IN THE COMMON STOCK INVOLVES RISKS. SEE "RISK FACTORS" ON PAGE 5.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is a
criminal offense.
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The date of this prospectus is August 10, 2000
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TABLE OF CONTENTS
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PAGE
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Incorporation by Reference.................................. 2
Cautionary Notice Regarding Forward-Looking Statements...... 3
CoStar Group................................................ 4
Risk Factors................................................ 5
Use of Proceeds............................................. 9
Selling Stockholders........................................ 10
Plan of Distribution........................................ 12
Legal Matters............................................... 14
Experts..................................................... 14
Where You Can Find More Information......................... 14
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INCORPORATION BY REFERENCE
The SEC allows us to "incorporate by reference" information into this
document. This means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is considered to be a part of this prospectus. In
addition, information that we file with the SEC in the future will automatically
update and supersede information contained in this prospectus and any prospectus
supplement. We are incorporating by reference:
- our Annual Report on Form 10-K for the year ended December 31, 1999
- our Quarterly Report on Form 10-Q for the quarter ended March 31, 2000
- our Form 8-A filed on June 25, 1998 with respect to our common stock
- the portions of our Proxy Statement for the Annual Meeting of
Stockholders held on June 21, 2000 that have been incorporated by
reference into our Form 10-K
- our Current Reports on Form 8-K dated February 25, 2000 and August 2,
2000.
In addition, we incorporate by reference any filings we make under Section
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 after the date
of the registration statement of which this prospectus is a part but before it
becomes effective and from the date of effectiveness until the selling
stockholders sell all of the shares which are the subject of this prospectus.
You can obtain any of the documents incorporated by reference in this
document from the SEC through the SEC's web site at www.sec.gov or from us.
Documents incorporated by reference are available from us without charge,
excluding any exhibits to those documents unless the exhibit is specifically
incorporated by reference as an exhibit in this document. You can obtain these
documents by requesting them in writing at the following address:
CoStar Group, Inc.
2 Bethesda Metro Center
Bethesda, MD 20814
Attention: Vice President, Investor and Public Relations
Telephone: (301) 215-8300
You should rely only on the information contained in or incorporated into
this prospectus or any prospectus supplement. We have not authorized anyone to
provide you with different information. This prospectus and any prospectus
supplement is not an offer to sell common stock and is not soliciting an offer
to buy common stock in any state where the offer or sale is not permitted. You
should not assume that the information contained in or incorporated by reference
into this document is accurate as of any date other than the date of this
document or the document which is being incorporated by reference.
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CAUTIONARY NOTICE REGARDING FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this prospectus and the
documents incorporated herein that are subject to risks and uncertainties.
Forward-looking statements include information that is not purely historic fact,
including statements concerning the financial outlook for 2000 and estimates for
the future, our possible or assumed future results of operations generally, new
products and services that we expect to release, and other statements and
information more specifically regarding assumptions about our earnings per
share, capital and other expenditures, financing plans, cash flow, capital
structure, pending legal proceedings and claims, future economic performance,
operating income, management's plans, goals and objectives for future operations
and growth and markets for stock. The sections of this prospectus and the
documents incorporated herein, which contain forward-looking statements, include
"CoStar Group, Inc.," "Business," "Properties," "Legal Proceedings" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Our forward-looking statements are identified by words such as "believes,"
"expects," "anticipates," "intends," "estimates" or similar expressions. You
should understand that these forward-looking statements are necessarily
estimates reflecting our judgment, not guarantees of future performance. They
are subject to a number of assumptions, risks and uncertainties that could cause
actual results to differ materially from those expressed or implied in the
forward-looking statements. You should understand that the following important
factors, in addition to those discussed in "Risk Factors" included herein and
incorporated by reference, could affect our future results and could cause those
results or other outcomes to differ materially from those expressed or implied
in our forward-looking statements: competition and technological innovation by
competitors; sensitivity to general economic conditions and events that affect
commercial real estate in particular; business combinations and strategic
alliances by other industry participants; growth in commerce conducted over the
Internet; changes in relationships with real estate brokers and other strategic
partners; and legal and regulatory issues.
You should not place undue reliance on forward-looking statements, which
speak only as of the date of this prospectus or the date of the document
incorporated herein by reference. All subsequent written and oral
forward-looking statements attributable to us or any person acting on our behalf
are expressly qualified in their entirety by the cautionary statements contained
or referred to in this section. We do not undertake any obligation to release
publicly any revisions to these forward-looking statements to reflect events or
circumstances after the date of this prospectus or the date of the document
incorporated herein by reference or to reflect the occurrence of unanticipated
events.
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COSTAR GROUP
In this prospectus, the words "we," "our," "us," "CoStar" or "our company"
refer to CoStar Group, Inc. and its subsidiaries. This prospectus may also refer
to our Web site, but information contained on that site is not part of this
prospectus.
CoStar Group, Inc., a Delaware corporation incorporated in 1998 to succeed
its predecessor companies, is the nation's largest provider of information
services to the commercial real estate industry. Through internal development,
extensive research and strategic acquisitions over 13 years, CoStar has compiled
a comprehensive proprietary database that, as of June 1, 2000, covered 54
markets and tracked leasing and sales transactions for over 18 billion square
feet of commercial real estate and approximately 1,000,000 tenants. CoStar
delivers its content to customers through eight distinct products and services.
Our wide array of digital service offerings includes a leasing marketplace, a
selling marketplace, sales comparable information, decision support, contact
management, tenant information, property marketing, and industry news. In 1999,
we made significant progress in moving our business model to the Internet.
Substantially all of our current services are digitally delivered and most of
our clients receive information over the Internet. The Internet allows us to
integrate data from distinct product areas, deliver it more quickly to customers
and allows our clients to increase their efficiencies, decrease costs of
conducting business and ultimately, increase transaction values. Today, we are
creating a digital marketplace where the commercial real estate industry and
related businesses can continuously interact and easily facilitate transactions
over the Internet due to efficient exchange of accurate and standardized
information supplied by us.
Our principal executive offices are located at 2 Bethesda Metro Center,
Bethesda, Maryland 20814 and our telephone number is (301) 215-8300.
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RISK FACTORS
Investing in our common stock involves a high degree of risk. You should
consider the following risk factors, as well as the risk factors contained in
our Form 10-K for the fiscal year ended December 31, 1999, before deciding to
purchase any shares of our common stock.
Future sales of our common stock by existing stockholders could depress our
stock price. As of August 1, 2000, we had 15,402,500 shares of common stock
outstanding, and approximately 1,629,666 additional shares of common stock were
reserved for issuance in connection with outstanding stock options, of which
643,261 were exercisable. We are registering 1,123,855 shares of common stock on
the registration statement of which this prospectus is a part, all of which may
be sold in the public market. In addition to these shares, a significant number
of our shareholders who hold restricted securities became eligible to resell
these securities under Rule 144(k) without any volume limitations in July 2000.
In addition, approximately 1,013,308 shares, which include 1,003,855 of the
shares offered hereby, were subject to lock-up agreements that expired in July
2000.
Sales of a substantial number of shares of our common stock in the public
market, or the perception that substantial sales might occur, could cause the
market price of our stock to decrease significantly. This could also make it
more difficult for us to raise capital by selling stock or use our stock as
currency in acquisitions.
Our future profitability is uncertain due to our continuing operating
losses. We have never recorded an overall operating profit because the
investment required for geographic expansion and new services has exceeded the
profits generated in our established markets. We may invest in expansion and new
services and could therefore sustain substantial losses for the next eighteen
months. Our ability to earn a profit will largely depend on our ability to
generate profits from services that exceed our investment in geographic
expansion and new services. We may not be able to generate revenues sufficient
to earn a profit, to maintain profits on a quarterly or annual basis, or to
sustain or increase our future revenue growth.
Our operating results may fluctuate significantly. Our revenues and
operating results may fluctuate with general economic conditions and also for
many other reasons, such as: our investments in geographic expansion; the timing
of new service introductions and enhancements; the success of new products; the
timing of investing the net proceeds from our offerings; acquisitions of other
companies or assets; sales and marketing promotional activities; loss of clients
or revenues due to consolidation in the real estate industry or other factors;
changes in client budgets; or our investments in other corporate resources.
We may not be able to successfully introduce new products, including our
CoStar Exchange product. Our future business and financial success will depend
on our ability to continue to introduce new products into the marketplace.
Developing new products, such as CoStar Exchange, imposes heavy burdens on our
systems development department, product managers, management and researchers. In
addition, successfully launching and selling a new product, such as CoStar
Exchange, puts pressure on our sales and marketing resources. If we are unable
to develop new products, then our customers may choose a competitive service
over ours and our business may be adversely affected. In addition, if we incur
significant costs in developing new products, such as CoStar Exchange, or are
not successful in marketing and selling these new products, it could have a
material adverse effect on our results of operations, including on our ability
to sell CoStar Exchange and our other products.
We may not be able to complete successfully our planned expansion. Our
future business and financial success will depend on our ability to continue to
expand our services and the areas where we do business. These expansion efforts
must occur while information technology is rapidly changing. These efforts
impose additional burdens on our research, systems development, sales and
marketing, and general managerial resources. We may not be able to manage this
growth successfully. The continued expansion effort on which our future growth
depends has inherent risks, such as the following: any new or enhanced services
we develop might not meet the increasingly sophisticated needs of our current or
potential clients; we might not succeed in developing new or enhanced services;
and we might not succeed in entering new geographical markets.
If we are unable to maintain the integrity and reliability of our data, our
business could be harmed. Our success depends on our clients' confidence in the
comprehensiveness, accuracy, and reliability of the data we provide. We believe
that we take adequate precautions to safeguard the completeness and accuracy of
our data
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and that the information is generally current, comprehensive, and accurate. But
the task of establishing and maintaining this quality while we grow is
challenging. We cannot guarantee that we can sustain those efforts. If we cannot
maintain the quality of our data, we could experience reduced demand for our
services and could be exposed to lawsuits claiming damages resulting from
inaccurate data.
We may not be able to adapt to the rapid technological changes to the
Internet and Internet products. To be successful, we must adapt to the rapid
technological changes to the Internet and Internet products by continually
enhancing our Web site and introducing and integrating new services and products
to capitalize on the technological advances in the Internet. Although in the
next 12 months we expect to migrate all of our information products to a
web-based platform, this process is costly and we cannot assure you that we will
be able to successfully integrate our services and products with the Internet's
technological advances. The collection, storage, management and dissemination of
commercial real estate information from a centralized database on the Internet
is a recent and evolving development. Our market is characterized by rapidly
changing technologies, evolving industry standards, increasingly sophisticated
customer needs and frequent new product introductions. These factors are
exacerbated by the rapid technological change experienced in the computer and
software industries. We could incur substantial costs if we need to modify our
services or infrastructure in order to adapt to these changes. If we incurred
significant costs without adequate results or we are unable to adapt to rapid
technological changes, it could have a material adverse effect on our business.
Our increasing use of the Internet and the World Wide Web exposes us to
regulatory and other uncertainties. Most of our clients currently receive their
CoStar data via the Internet. We are in the process of making substantially all
our services accessible through a standard Web-browser format. This exposes us
to various uncertainties arising from the future course of development of the
Internet and the World Wide Web. Governments in the United States and abroad
might adopt laws or regulations applicable to Internet commerce that could harm
our business by, for example, regulating our transmissions over the Internet or
exposing our business to new taxes in various jurisdictions. User concerns about
the privacy and security of Internet-distributed communications might impede the
growth of our business. We may need to expend substantial resources to protect
against security breaches on our Web site or in our Internet communications.
We cannot assure you that our Internet products will achieve market
acceptance. We intend to continue to increase our reliance on the Internet for
delivery of our services and products. As a result, our future profitability
will increasingly rely upon the use of our information services and transaction
support products on the Internet. Our ability to obtain market acceptance for
our Internet products will depend on the following factors: our ability to
transition our customers from the use of our services and products on CD-ROM to
the use of these services and products on the Internet in a timely and efficient
manner; our customers acceptance of, and their ability to adapt to the use of,
our existing and future services and products on the Internet; and our ability
to anticipate and adapt to the changing Internet market. If our Internet-based
information services or transaction support products are not received favorably
by our current customers, their use of our other products may be negatively
affected or cause new customers to choose a competitive service over ours.
Unsatisfactory Internet performance, interruption or failure could have an
adverse effect on our business. Our business increasingly depends upon the
satisfactory performance, reliability and availability of our Web site, the
Internet and the World Wide Web. Problems with the Internet or Web may impede
the development of our business for a number of reasons. If the number of
Internet users or their use of Internet resources continues to grow, we may
overwhelm the existing Internet infrastructure. Growth in Internet usage that is
not matched by comparable growth of the infrastructure supporting the Internet
could result in slower response time, cause outright failure of the Internet, or
otherwise adversely affect usage.
We may be subject to legal liability for displaying or distributing
information on the Internet. Because the content in our database is distributed
to others, we may be subject to claims for defamation, negligence or copyright
or trademark infringement or claims based on other theories. These types of
claims have been brought, sometimes successfully, against Internet services in
the past. We could also be subject to claims based upon the content that is
accessible from our Web site through links to other Web sites or information on
our Web site supplied by third parties. Our insurance may not adequately protect
us against these types of claims. Even to the extent these claims do not result
in liability to us, we could incur significant costs in
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investigating and defending against any claims. Our potential liability for
information distributed by us to others could require us to implement measures
to reduce our exposure to liability, which may require the expenditure of
substantial resources and limit the attractiveness of our service to users.
Temporary or permanent outages of our computers and software or
telecommunications equipment could have an adverse effect on our business. Our
operations depend on our ability to protect our database, computers and
software, telecommunications equipment and facilities against damage from
potential dangers such as fire, power loss, security breaches, and
telecommunications failures. Any temporary or permanent loss of one or more of
these systems or facilities from an accident, equipment malfunction or some
other cause could harm our business. Our core computer services and networking
equipment are located in a climate controlled, fire and security-protected
central location. We keep off-site backup copies of all data contained in our
database, maintain a back-up power supply and equipment, and stockpile spare
parts. These measures may not, however, adequately protect our business.
We may be unable to enforce or defend our ownership and use of intellectual
property. The success of our business depends in large part on the intellectual
property involved in our methodologies, database and software. We rely on a
combination of trade secret and copyright laws, nondisclosure and noncompetition
provisions, license agreements and other contractual provisions and technical
measures to protect our intellectual property rights. We cannot guarantee that
we will always succeed in this effort. Our business could be significantly
harmed if we do not succeed in protecting our intellectual property. The same
would be true if a court should find that our services infringe other persons'
intellectual property rights. Any intellectual property lawsuits in which we
might become involved, either as a plaintiff, or as a defendant, could cost us
much time and money.
International expansion may result in new business risks. If we expand
internationally, this expansion could subject us to new business risks,
including: adapting to the differing business practices and laws in foreign
commercial real estate markets; difficulties in managing foreign operations;
limited protection for intellectual property rights in some countries;
difficulty in accounts receivable collection and longer collection periods; cost
of enforcement of contractual obligations; impact of recessions in economies
outside the United States; currency exchange rate fluctuations; and potentially
adverse tax consequences.
Our business depends on retaining and attracting highly capable management
and operating personnel. Our success depends in large part on our ability to
retain and attract management and operating personnel, including our President
and Chief Executive Officer, Andrew C. Florance. Our business requires highly
skilled technical, sales, management, Web-development, marketing and research
personnel, who are in high demand and are often subject to competing offers.
Because we are expanding rapidly, we continue to need an increased number of
management and support personnel. To retain and attract key personnel, we use
various measures, including multi-year employment agreements containing
confidentiality and non-competition agreements, a stock option plan, and
incentive bonuses for key executive officers. We are the beneficiary of a key
person life insurance policy on Mr. Florance. These measures may not be enough
to retain and attract the personnel we needs or to offset the impact on our
business of a loss of Mr. Florance or other key employees.
If we are unable to continue to develop our sales force, it could have a
material adverse effect on our business. In order to support our growth, we need
to continue to increase the size of our direct sales force. Our ability to
increase our direct sales force involves a number of risks, including: the
competition we face from other companies in hiring and retaining sales
personnel; our ability to integrate and motivate additional sales and sales
support personnel; our ability to manage a multi-location sales organization;
and the length of time it takes new sales personnel to become productive.
Competition could render our services uncompetitive. The market for
information systems and services in general is highly competitive and rapidly
changing. We believe our proprietary database and content compete favorably with
our competitors. However, many of our existing competitors, as well as a number
of potential new competitors, may have longer operating histories in the
Internet market, greater name recognition, larger customer bases, lower prices,
greater user traffic or greater financial, technical and marketing resources
than us. Our competitors may be able to undertake more extensive marketing
campaigns, adopt more aggressive pricing policies, make more attractive offers
to potential employees, subscribers, distribution partners and
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content providers and may be able to respond more quickly to new or emerging
technologies and changes in Internet user requirements. Increased competition
could result in lower revenues and higher expenses, which would reduce our
profitability.
Cyclical downturns and consolidation in the commercial real estate industry
could have an adverse effect on our business. Our business depends on conditions
in the commercial real estate industry, including businesses that supply or
invest in that industry. Changes in the commercial real estate market may affect
demand for our services. The traditional economic downturns in the commercial
real estate industry could harm our business. These changes could decrease
renewal rates, which could have a material adverse impact on our operating
results. Also, companies in this industry are consolidating, often in order to
reduce expenses. Consolidation could reduce the number of our existing clients,
reduce the size of our target market and increase our clients' bargaining power.
Any of these factors could adversely affect our business.
If we do not generate sufficient cash flows from operations, we may need
additional capital. To date, we have financed our operations through cash from
profitable operations in our established markets, the sale of our stock and
borrowing money. If we do not generate enough cash from operations to finance
our business in the future, we will need to raise additional funds through
public or private financing. Selling additional stock could dilute the equity
interests of our stockholders. If we borrow money, we will have to pay interest
and agree to restrictions that may limit our operating flexibility. We may not
be able to obtain funds needed to finance our operations at all or may be able
to obtain them only on unattractive terms.
Problems with our software could impair the use of our services. The
software underlying our services is complex and may contain undetected errors.
We have previously discovered errors in our proprietary software. Despite
testing, we cannot be certain that errors will not be found in current versions,
new versions or enhancements of that software. Any errors could result in
adverse publicity, impaired use of our services, loss of revenues, cost
increases and legal claims by customers. All these factors could seriously
damage our business, operating results and financial condition.
Market volatility may have an adverse effect on our stock price. The
trading price of our common stock has fluctuated widely in the past and, like
most stocks, it will continue to fluctuate in the future. The price could
fluctuate widely based on numerous factors, including: quarter-to-quarter
variations in our operating results; changes in analysts' estimates of our
earnings; announcements by us or our competitors of technological innovations or
new services; general conditions in the commercial real estate industry;
developments or disputes concerning copyrights or proprietary rights; regulatory
developments; and economic or other factors. In addition, in recent years, the
stock market in general, and the shares of Internet-related and other technology
companies in particular, have experienced extreme price fluctuations. This
volatility has had a substantial effect on the market prices of securities
issued by many companies for reasons unrelated to the operating performance of
the specific companies.
Stock ownership by executive officers and directors provides substantial
influence over matters requiring a vote of stockholders. Our executive officers
and directors, and entities affiliated with them, beneficially own a sufficient
number of our outstanding common stock to exercise substantial influence over
the election of directors and other matters requiring a vote of stockholders.
This concentrated ownership might delay or prevent a change in control and may
impede or prevent transactions in which stockholders might otherwise receive a
premium for their shares.
Our charter documents contain provisions that could impede third party
acquisitions. Our governing corporate documents contain provisions that could
discourage potential takeover attempts and make attempts by our stockholders to
change management more difficult. These provisions include: a requirement that
stockholders give us advance notice of certain nominations for our board of
directors and of new business for any stockholder meeting; a prohibition on
stockholders' calling special meetings; and a prohibition on stockholder action
by written consent. Our certificate of incorporation also allows our board of
directors to issue up to two million shares of preferred stock and to fix the
rights of those shares without a vote by the stockholders. The rights of holders
of common stock may be harmed by the rights of the holders of this "blank check"
preferred stock. If we issue any preferred stock, an outside party may find it
more difficult to acquire a majority of our outstanding voting stock. In
addition, we are subject to the anti-takeover provisions of
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Section 203 of the Delaware General Corporation Law. Applying these provisions
could delay or prevent a change in control, which could adversely affect the
market price of our common stock.
USE OF PROCEEDS
We will not receive any proceeds from the offering. The selling
stockholders will receive the proceeds from the offering.
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SELLING STOCKHOLDERS
The shares of common stock to be sold by the selling stockholders under
this prospectus represent shares issued to them prior to our initial public
offering or in connection with our acquisitions of Jamison Research, Inc. and
LeaseTrend, Inc. in January 1999. The selling stockholders are under no
obligation to sell all or any portion of the shares under this prospectus.
The table below sets forth the number of shares of our common stock
beneficially owned by each selling stockholder as of August 1, 2000, the number
of shares being offered and the percentage of the common stock owned by each
selling stockholder. As of August 1, 2000, we had 15,402,500 shares of common
stock outstanding.
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SHARES BENEFICIALLY NUMBER OF SHARES BENEFICIALLY
OWNED BEFORE THE SHARES BEING OWNED AFTER THE
OFFERING OFFERED OFFERING(1)
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NAME NUMBER PERCENT NUMBER PERCENT
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Michael R. Klein(2).......................... 1,814,895 11.8% 100,000 1,714,895 11.1%
Andrew C. Florance(3)........................ 553,012 3.5% 20,000 533,012 3.4%
Blue Chip Capital Fund Limited
Partnership(4)............................. 316,238 2.1% 316,238 0 0
Henry D. Jamison IV(5)....................... 259,705 1.7% 245,915 13,790 *
Heitzman Business Trust(6)................... 174,503 1.1% 174,503 0 0
Leslie L. Jamison(7)......................... 149,319 * 149,319 0 0
Benkert Business Trust(8).................... 66,477 * 66,477 0 0
Church of the Apostles of Atlanta(9)......... 44,803 * 44,803 0 0
David P. Evemy(10)........................... 6,600 * 6,600 0 0
</TABLE>
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* Less than 1%.
(1) Assumes that all the shares being offered are sold in the offering.
(2) Includes 14,496 shares held in trust by Mr. Klein and his spouse for his
nieces, for which Mr. Klein and his spouse share voting and dispositive
power, and 14,496 shares held by another as trustee for Mr. Klein's
children, for which Mr. Klein may be deemed to share voting and dispositive
power. Mr. Klein disclaims beneficial ownership of these shares. Mr. Klein
is Chairman of the Board of Directors of CoStar.
(3) Includes 316,854 shares issuable upon options exercisable within 60 days of
August 1, 2000. Mr. Florance is Chief Executive Officer, President and a
Director of CoStar.
(4) Blue Chip Capital Fund Limited Partnership was a stockholder of LeaseTrend,
Inc., which was acquired by CoStar in January 1999. Z. David Patterson and
John H. Wyant, managing directors of Blue Chip Venture Company, Ltd., the
general partner of Blue Chip Capital Fund Limited Partnership, were
directors of LeaseTrend until the acquisition by CoStar. Blue Chip received
consideration in connection with the acquisition.
(5) Includes 13,790 shares issuable upon options exercisable within 60 days of
August 1, 2000. Mr. Jamison was a stockholder, an officer and a director of
Jamison Research, Inc., which was acquired by CoStar in January 1999. Mr.
Jamison received consideration in connection with the acquisition.
Following the acquisition, Mr. Jamison continued as President of Jamison
Research, and currently is a Regional Vice President for CoStar. Mr.
Jamison is married to Leslie L. Jamison, and he may be deemed to share
beneficial ownership of the 149,319 shares owned by Leslie L. Jamison.
(6) Heitzman Business Trust was a stockholder of LeaseTrend, Inc., which was
acquired by CoStar in January 1999. Fred A. Heitzman III, trustee of
Heitzman Business Trust, was President and a director of LeaseTrend until
the acquisition by CoStar. Mr. Heitzman is currently a Senior Vice
President of CoStar. Heitzman Business Trust received consideration in
connection with the acquisition.
(7) Leslie Jamison was a stockholder, an officer and a director of Jamison
Research, Inc., which was acquired by CoStar in January 1999. Ms. Jamison
received consideration in connection with the
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acquisition. Ms. Jamison is married to Henry Jamison IV, and she may be
deemed to share beneficial ownership of the 259,705 shares owned by Henry
Jamison IV.
(8) Benkert Business Trust was a stockholder of LeaseTrend, Inc., which was
acquired by CoStar in January 1999. Gregory A. Benkert, trustee of Benkert
Business Trust, was Vice President and a director of LeaseTrend, and is
currently a Vice President of CoStar. Benkert Business Trust received
consideration in connection with the acquisition.
(9) The Church of the Apostles of Atlanta was a stockholder of Jamison Research
Inc., which was acquired by CoStar in January 1999. The Church received
consideration in connection with the acquisition.
(10) David Evemy was the President of Jamison Research, which was acquired by
CoStar in January 1999. Mr. Evemy received consideration in the
acquisition. Mr. Evemy was also an employee of CoStar until March 15, 2000.
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PLAN OF DISTRIBUTION
The selling stockholders and any of their pledgees, donees, assignees,
transferees or successors-in-interest selling shares received from a named
selling shareholder as a gift, partnership distribution or other non-sale
related transfer after the date of this Prospectus (collectively, the "selling
stockholders") may, from time to time, sell any or all of the shares of common
stock offered hereby on the Nasdaq Stock Market or any stock exchange, market or
trading facility on which the shares are traded, or in private transactions.
These sales may be made at market prices prevailing at the time of the sale or
at negotiated or fixed prices. The selling stockholders will act independently
of CoStar in making decisions with respect to the timing, manner and size of
each sale. The selling stockholders may use any one or more of the following
methods when selling shares:
- ordinary brokerage transactions and transactions in which the
broker-dealer solicits purchasers;
- block trades in which the broker-dealer will attempt to sell the shares
as agent but may position and resell a portion of the block as principal
to facilitate the transaction;
- purchases by a broker-dealer as principal and resale by the broker-dealer
for its account;
- an exchange distribution in accordance with the rules of the applicable
exchange;
- privately negotiated transactions;
- underwritten offerings;
- short sales;
- agreements by the broker-dealer and the selling stockholders to sell a
specified number of such shares at a stipulated price per share;
- a combination of any such methods of sale; and
- any other method permitted by applicable law.
The selling stockholders may also sell shares under Rule 144 under the
Securities Act, if available, or pursuant to Section 4(1) of the Securities Act,
rather than under this prospectus.
Unless otherwise prohibited, the selling stockholders may enter into
hedging transactions with broker-dealers or other financial institutions in
connection with distributions of the shares or otherwise. In such transactions,
broker-dealers or financial institutions may engage in short sales of the shares
in the course of hedging the position they assume with the selling stockholders.
The selling stockholders may also engage in short sales, puts and calls,
forward-exchange contracts, collars and other transactions in our securities or
derivatives of our securities and may sell or deliver shares in connection with
these trades. If the selling stockholders sell shares short, they may redeliver
the shares to close out such short positions. The selling stockholders may also
enter into option or other transactions with broker-dealers or financial
institutions which require the delivery to the broker-dealer or the financial
institution of the shares. The broker-dealer or financial institution may then
resell or otherwise transfer such shares pursuant to this prospectus. In
addition, the selling stockholders may loan their shares to broker-dealers or
financial institutions who are counterparties to hedging transactions and the
broker-dealers, financial institutions or counterparties may sell the borrowed
shares into the public market. The selling stockholders may also pledge their
shares to their brokers or financial institutions and under the margin loan the
broker or financial institution may, from time to time, offer and sell the
pledged shares. The selling stockholders have advised us that they expect to
sell some or all of their shares in an underwritten offering led by Donaldson,
Lufkin & Jenrette. The terms of any underwriting arrangements, once finalized,
would be disclosed in a prospectus supplement filed with the SEC under Rule
424(b) of the Securities Act.
The shares will be sold only through registered or licensed brokers or
dealers if required under applicable state securities laws. In addition, in
certain states the shares may not be sold unless they have been registered or
qualified for sale in the applicable state or an exemption from the registration
or qualification requirement is available and complied with.
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<PAGE> 13
CoStar will file a supplement to this prospectus, if required, pursuant to
Rule 424(b) under the Securities Act upon being notified by a selling
stockholder that any material arrangement has been entered into with a
broker-dealer or financial institution for the sale of shares through a block
trade, special or underwritten offering, exchange distribution or secondary
distribution or a purchase by a broker, dealer or financial institution. Such
supplement will disclose:
- the name of each selling stockholder and of the participating
broker-dealer(s) or financial institution(s);
- the number of shares involved;
- the price at which such shares were sold;
- the commissions paid or discounts or concessions allowed to such
broker-dealer(s) or financial institution(s), where applicable;
- that such broker-dealer(s) or financial institution(s) did not conduct
any investigation to verify the information set out or incorporated by
reference in this prospectus; and
- other facts material to the transaction.
In addition, upon being notified by a selling stockholder that a donee or
pledgee intends to sell more than 500 shares, CoStar will file a supplement to
this prospectus.
The terms of our acquisition agreement with Jamison Research, Inc. and its
former stockholders require us to keep this registration statement effective for
a period of four months. The selling stockholders may only sell shares under
this prospectus during the period for which the registration statement is
effective.
We will pay substantially all of the expenses in connection with the
registration of the shares by the selling stockholders, other than any agents'
commissions and underwriting discounts. We will not receive any proceeds from
this offering. The selling stockholders and the Company may agree to indemnify
any broker-dealer, underwriter or agent that participates in transactions
involving sales of the shares against certain liabilities in connection with the
offering of the shares arising under the Securities Act.
The selling stockholders and any underwriters, brokers, dealers, financial
institutions or agents that participate in the distribution of the common stock
may be deemed to be "underwriters" under the Securities Act, and any profit on
the sale of the common stock by them and any discounts, commissions or
concessions received by any such underwriters, dealers, financial institutions
or agents might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933.
The selling stockholders and any other person participating in the
distribution will be subject to the applicable provisions of the Securities
Exchange Act of 1934 and the rules and regulations under the Exchange Act. The
Exchange Act rules include, without limitation, Regulation M, which may limit
the timing of any other person participating in the distribution. In addition,
Regulation M of the Exchange Act may restrict the ability of any person engaged
in the distribution of the common stock and engaged in market-making activities
with respect to the particular shares of common stock being distributed for a
period of up to five business days prior to the commencement of the
distribution. This may affect the marketability of the shares of common stock
and the ability of any person or entity to engage in market-making activities
with respect to the shares of common stock.
Josiah O. Low III is a managing director of Donaldson, Lufkin & Jenrette
and is one of our directors.
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LEGAL MATTERS
The validity of the common stock being offered by this prospectus is being
passed upon for CoStar Group, Inc. by Fried, Frank, Harris, Shriver & Jacobson
(a partnership including professional corporations).
EXPERTS
Ernst & Young LLP, independent auditors, have audited our consolidated
financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 1999, as set forth in their report, which is incorporated by
reference in this prospectus and elsewhere in the registration statement. Our
financial statements are incorporated by reference in reliance on Ernst & Young
LLP's report, given on their authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We have filed a registration statement on Form S-3 with the SEC, of which
this prospectus is a part, under the Securities Act with respect to the shares
of common stock offered hereby. This prospectus does not contain all of the
information included in the registration statement, and statements contained in
this prospectus concerning the provisions of any document are not necessarily
complete. For further information about CoStar and the common stock offered
under this prospectus, you should read the registration statement, including its
exhibits and the documents incorporated by reference.
We file annual, quarterly and current reports, proxy statements and other
information with the SEC under the Securities Exchange Act of 1934. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
You may read and copy this information at the following locations of the SEC:
<TABLE>
<S> <C> <C>
Public Reference Room New York Regional Office Chicago Regional Office
450 Fifth Street, N.W. 7 World Trade Center 500 West Madison Street
Room 1024 Suite 1300 Suite 1400
Washington, D.C. 20549 New York, NY 10048 Chicago, IL 60661-2511
</TABLE>
You may also obtain copies of this information by mail from the Public
Reference Section of the SEC, 450 Fifth Street, N.W., Room 1024, Washington,
D.C. 20549, or on the SEC's web site, http:\\www.sec.gov.
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