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As filed with the Securities and Exchange Commission on December 22, 1999
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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DEMANDSTAR.COM, INC.
(Exact Name of Registrant as Specified in its Charter)
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FLORIDA 7374 59-3464781
(State or Other Jurisdiction of (Primary Standard (I.R.S. Employer
Incorporation or Organization) Classification Code) Identification Number)
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1551 SANDSPUR ROAD, SUITE B
MAITLAND, FLORIDA 32751
(407) 975-0000
(Address, Including Zip Code and Telephone Number,
Including Area Code, of Registrant's Principal Executive Offices)
O. F. RAMOS
CHIEF EXECUTIVE OFFICER
1551 SANDSPUR ROAD, SUITE B
MAITLAND, FLORIDA 32751
(407) 975-0000
(Name, Address, Including Zip Code and Telephone Number,
Including Area Code, of Agent for Service)
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COPIES TO:
RANDOLPH H. FIELDS, ESQ.
GREENBERG TRAURIG, P.A.
111 NORTH ORANGE AVENUE, 20TH FLOOR
ORLANDO, FLORIDA 32801
TELEPHONE NO. (407) 420-1000
FACSIMILE NO. (407) 420-5909
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APPROXIMATE DATE OF COMMENCEMENT DATE OF PROPOSED SALE TO THE PUBLIC: As
soon as practicable after this Registration Statement becomes effective.
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If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule
462(d)under the Securities Act, check the following box and list the Securities
Act registration statement number of the earlier effective registration
statement for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
OF SECURITIES TO BE AMOUNT TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
REGISTERED REGISTERED SHARE PRICE FEE
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Rights to purchase shares of common
stock, par value $.0001 per share(1)... 19,225,883 -- -- --(2)
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Common stock, par value $.0001 per
share, to be issued pursuant to
exercise of the rights............... 19,225,883(3) $1.00 $19,225,883 $5,076(4)
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(1) DemandStar.com, Inc. is granting, at no cost, non-transferable
subscription rights to subscribe for and purchase shares of common stock
of DemandStar.com, Inc.
(2) Pursuant to Rule 457(g), no separate registration fee is required for
the rights since they are being registered in the same registration
statement as the common stock of DemandStar.com, Inc. underlying the
rights.
(3) Represents shares of common stock of DemandStar.com, Inc. issuable
pursuant to the exercise of the rights.
(4) The registration fee is calculated pursuant to Rule 457(i).
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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THE INFORMATION IN THIS PROSPECTUS IS NOT COMPLETE AND MAY BE CHANGED. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH
THE SECURITIES AND EXCHANGE COMMISSION. WE MAY NOT SELL OR DISTRIBUTE
THESE SECURITIES UNTIL THE REGISTRATION STATEMENT IS EFFECTIVE. THIS
PROSPECTUS IS NOT AN OFFER TO SELL THE SECURITIES AND IS NOT SOLICITING AN
OFFER TO BUY THESE SECURITIES IN ANY STATE WHERE THE OFFER OR SALE IS NOT
PERMITTED.
SUBJECT TO COMPLETION, DATED , 2000
PROSPECTUS
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[LOGO]
DEMANDSTAR.COM, INC.
(19,225,883 RIGHTS TO PURCHASE COMMON STOCK)
19,225,883 SHARES OF COMMON STOCK
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DemandStar.com, Inc. ("DSI") is an early-stage company that provides
Internet-based procurement systems for governmental agencies. We are a
wholly-owned subsidiary of H.T.E., Inc. ("HTE"). HTE's common stock is traded on
the Nasdaq National Market System as "HTEI". We are providing this prospectus
to: persons who owned shares of HTE common stock on , 2000 (the
record date which will be determined in 2000), persons who held HTE stock
options on December 16, 1999 and who are also employees or directors of HTE (or
a wholly-owned subsidiary) as of five days prior to the effective date of this
prospectus, and persons who are employees of HTE (or a wholly-owned subsidiary)
as of five days prior to the effective date of this prospectus. The prospectus
relates to the following securities:
- subscription rights to purchase at a cash price of $1.00 per share up to
an aggregate of 19,225,883 shares of DSI common stock; and
- the 19,225,883 shares of DSI common stock that are purchasable pursuant to
the exercise of the subscription rights.
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ESTIMATED SOLICITING MAXIMUM PROCEEDS
PRICE TO THE PUBLIC AGENT AND DEALER FEES(1) BEFORE OFFERING EXPENSES
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Subscription Price...... $ 1.00 $ .05 $ .95
Total Minimum........... $ 1,201,223(2) -0-(3) $ 1,201,223
Total Maximum........... $19,225,883 $901,233 $18,324,650
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(1) DSI may engage the services of a qualified licensed dealer to act as a
soliciting/selling agent and, in such case, will pay such soliciting agent
up to 5% of the aggregate subscription price of any shares sold by such
soliciting agent.
(2) This minimum amount represents the shares our officers and directors have
committed to acquire based on (a) their ownership of HTE shares and options,
and (b) 300,000 additional DSI shares they have committed to acquire from
unsubscribed rights available at the closing of the rights offering.
(3) No soliciting agent or dealer fees will be paid on shares purchased by
directors and executive officers of HTE.
Prior to the rights offering, neither the rights nor our common stock has
been listed on any stock exchange or Nasdaq. We intend to apply for quotation of
our common stock on the Nasdaq SmallCap Market under a symbol to be determined.
The rights are only transferable to immediate family members (spouses and lineal
descendants only) of the rights holder and, therefore, will not be listed on the
Nasdaq SmallCap Market or a national securities exchange.
The rights will expire at 5:00 p.m., Eastern Standard Time, on ,
2000, unless extended or terminated by us in our sole discretion. In no event
shall we extend the rights offering past , 2000. All proceeds from
exercised rights will be held in escrow by Continental Stock Transfer & Trust
Company pending the termination or closing of the rights offering.
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 5.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this prospectus is , 2000.
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TABLE OF CONTENTS
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Prospectus Summary.................... 1
Risk Factors.......................... 6
Forward-Looking Statements............ 22
The Offering.......................... 23
Use of Proceeds....................... 31
Dividend Policy....................... 32
Dilution.............................. 33
Capitalization........................ 34
Selected Financial Data............... 35
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 36
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Business.............................. 40
Management............................ 52
Executive Compensation................ 55
Certain Relationships and Related
Party Transactions.................. 63
Security Ownership of DSI............. 67
Description of Securities............. 67
Shares Eligible for Future Sale....... 77
Federal Income Tax Consequences....... 78
Legal Matters......................... 81
Available Information................. 81
Index To Financial Statements......... F-1
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Our principal executive offices are located at 1551 Sandspur Road, Suite B,
Maitland, Florida 32751, and our telephone number is (407) 975-0000. Our World
Wide Web site is www.demandstar.com. The information in the Web site is not
incorporated by reference into this prospectus.
You should rely only on the information contained in this prospectus, the
related registration statement and any documents incorporated by reference into
the registration statement. DSI has not authorized any dealer, broker,
salesperson any other individual to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it as having been authorized by DSI. The information in this prospectus
is accurate only as of the date of this prospectus, regardless of the time of
delivery of this prospectus. DSI is not making an offer to sell these
securities, or soliciting an offer to buy, in any jurisdiction where the offer
or sale is not permitted.
You should assume that the information appearing in this prospectus is
accurate as of the date on the front cover of the prospectus.
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PROSPECTUS SUMMARY
You should read the following summary together with the more detailed
information appearing elsewhere in this prospectus. Except as otherwise noted,
all information in this prospectus reflects: (1) the adoption and filing by DSI
of the Amended and Restated Articles of Incorporation and the Amended and
Restated By-Laws described in this prospectus; and (2) a 1,250-for-one share
split of DSI common stock effected in December 1999.
BUSINESS OF DSI
DSI is a provider of Internet-based procurement systems for governmental
agencies. Our procurement systems enable governments to purchase goods and
services more efficiently and at lower administrative costs while at the same
time providing valuable services to businesses selling to government agencies.
OUR BUSINESS MODEL
Our services are provided at no cost to participating governmental
agencies. Businesses that provide goods and services to agencies enrolled in our
program are provided the opportunity to register with us as registered vendors
for an annual fee. Our services currently include:
- Vendor database consolidation and management
- Notification, by e-mail and/or fax, of bid/RFP opportunities to
registered vendors
- Web site development, maintenance and hosting
- Web-enabled database of all procurement information from participating
agencies
- Document production and distribution services
Our Internet-based products and services offer governmental agencies and
their vendors the opportunity to more efficiently and seamlessly communicate
information regarding bids, goods and services. By using our Internet-based
solutions, government agencies are able to save administrative costs in bid
notification and follow-up. Governmental agencies are also able to "piggy-back"
on other agency's contracts more easily since they are able to search our sites
for information about other existing contracts for similar goods and services.
Further, DSI is able to provide governmental agencies with a larger vendor
database from which to comparison shop and order goods and services for which
they are not required to obtain bids. Similarly, vendors are able to save time
and expense by registering with DSI only once for multiple agencies. Registered
vendors receive "real time" bid notifications and are able to immediately
download the bid request or request for proposal (RFP), at any time of day.
Marketing efforts have been primarily focused in Florida and to date have over
two dozen contracts with agencies representing various cities, counties, school
districts, utility districts and aviation authorities primarily in Florida. We
are currently negotiating contracts with agencies in other states.
OUR GROWTH STRATEGY
Many governmental agencies have recognized the need to develop a presence
on the Internet but have not had the resources to do so due to budgetary
constraints. Our solution
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addresses those budgetary concerns and is successfully serving the procurement
systems needs of over two dozen agencies. In order to take advantage of our
market opportunity, we plan to use proceeds from initial funding from HTE and
the investors who exercise their rights under this offering to expand our
marketing and sales efforts to other geographical locations throughout the
United States.
CORPORATE INFORMATION
We were formed as "HTE-IOD, Inc.," a Florida corporation, on June 1, 1999.
On June 18, 1999, we acquired the business and certain net assets of Information
On Demand, Inc., a Florida corporation formed in June 1997 (the "Predecessor").
In connection with that acquisition, we changed our name to "Information On
Demand, Inc." On December 21, 1999, we changed our name to "DemandStar.com,
Inc." Our executive offices are located at 1551 Sandspur Road, Suite B,
Maitland, Florida 32751, and our telephone number is (407) 975-0000. Our World
Wide Web site is located at http://www.demandstar.com. Information contained in
our web site shall not be deemed to be part of this prospectus.
In this prospectus, the terms "DSI," "we," "us," and "our" refer to
DemandStar.com, Inc.
RISK FACTORS
We are operating in a new industry and our business and this offering
involves a high degree of risk. You should consider the risks of investing in
our common stock, as more fully described under "Risk Factors."
RELATIONSHIP BETWEEN HTE AND DSI
Prior to the closing of the rights offering, HTE will contribute $1,000,000
to DSI to fund the costs of this rights offering, anticipated DSI operating
losses and for general corporate purposes. In exchange for this investment, DSI
will issue to HTE 500,000 shares of Series A preferred stock and an option to
purchase an additional 250,000 shares of Series A preferred stock at an
aggregate purchase price of $500,000.
Immediately following the closing of the rights offering, HTE will likely
maintain effective control over our management and policies and substantially
all matters submitted to our shareholders for consideration, including the
election of directors and all proposals for merger, liquidation, sale of
substantially all of our assets and charter amendments. The terms of the Series
A preferred stock held by HTE most likely will allow HTE to continue to
effectively control the vote on almost all shareholder votes for the foreseeable
future, without taking into account any shares of common stock which HTE may
hold.
Certain officers of HTE are officers of DSI. In addition, the boards of
directors of DSI and HTE are identical, with the exception of one HTE board
member, Joseph Loughry, who does not serve on the DSI board.
CONTRACTUAL ARRANGEMENTS
Prior to the closing of the rights offering, we will enter into a services
agreement with HTE under which HTE will provide us with general management and
administrative services and we will provide HTE with certain technical, creative
and administrative
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services. The services agreement will also provide that each party will bill the
other one for services based on an estimated cost basis. The services agreement
will permit termination upon 120 days notice from either party. Prior to the
closing of the rights offering, we will also enter into a tax sharing and
indemnity agreement with HTE. On December 21, 1999, DSI and HTE entered into an
investment and distribution agreement with respect to HTE's $1,000,000 capital
contribution to DSI in exchange for Series A preferred stock, and a registration
rights agreement providing HTE certain demand and piggy-back registration rights
with respect to the DSI common stock. In addition, on December 21, 1999, DSI,
HTE and certain officers and directors of DSI entered into a Conditional Series
B Stock Purchase Agreement whereby HTE and certain officers and directors of DSI
agreed, under certain conditions, to contribute $2,000,000 to DSI in exchange
for Series B preferred stock.
THE OFFERING
Description of the Rights
Offering..................... Each holder of shares of HTE common stock on
, 2000 (the record date which will
be determined in 2000) will receive one right
for every share of HTE common stock owned on
that date. In addition, each person who held HTE
stock options as of December 16, 1999 (pursuant
to an HTE stock option agreement), and who is
also an employee or director of HTE (or a
wholly-owned subsidiary) as of five days prior
to the effective date of this prospectus, will
receive (i) one right for each share that he has
such a vested option to acquire, and (ii) with
respect to each share that he has such an
unvested option to acquire, three-quarters of a
right and an option to purchase one-quarter of a
share of DSI common stock, which DSI option
shall have the same terms and shall vest on the
same schedule as set forth in his HTE stock
option agreement. Further, each person who is an
employee of HTE (or a wholly-owned subsidiary)
as of five days prior to the effective date of
this prospectus will receive 200 rights. Each
right carries a basic subscription privilege
which entitles the holder to purchase one share
of DSI common stock. We will be offering up to
19,225,883 shares in the aggregate. The right
must be exercised as to whole shares. No
fractional rights or shares will be issued.
Subscription Price........... The subscription price per share of DSI common
stock will be $1.00 per share.
Exercise Period.............. The rights will only be exercisable, in whole or
in part, from the period beginning on
, 2000 and ending on , 2000, at 5:00
p.m., Eastern Standard Time, unless extended by
us in our sole discretion. In no event will we
extend the exercise period beyond 5:00 p.m.,
Eastern Standard Time, , 2000.
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How Rights Will be
Evidenced.................... Each holder will receive a certificate
representing his rights.
Minimum Offering............. Certain officers and directors of DSI have
committed to subscribe for an aggregate of
901,223 shares, representing the number of
rights to which they are entitled under this
rights offering and to subscribe for a maximum
aggregate of 300,000 additional shares from the
pool of unsubscribed rights available, if any,
on the closing of the rights offering. See "The
Offering."
Purchase of Unsubscribed
Shares....................... In the event that not all of the rights are
exercised during the rights offering, we will
offer, for a period of up to 90 days from the
closing of the rights offering, the balance of
the unsubscribed shares to persons selected by
us who may or may not have a relationship with
DSI or HTE. In addition, any soliciting agent we
engage may offer all other unsubscribed shares
to persons selected by DSI. These offers may
only be made during the rights offering and
accepted by us if shares are available as of the
close of the rights offering. All offers of
unsubscribed shares during the offering will be
made at a price of $1.00 per share.
Number of Shares of Common
Stock to be Outstanding After
the Offering................. Immediately following this offering, depending
on the number of shares purchased, we will have
outstanding between 2,451,223 and 20,475,883
shares of common stock. Immediately prior to the
closing of the rights offering, we will also
have reserved 4,000,000 shares of common stock
for the grant of options and other awards under
our 1999 Employee Incentive Compensation Plan,
of which we will have outstanding options for
the purchase of 1,650,000 shares in the
aggregate at an exercise price of $1.00 per
share. Immediately prior to the closing of the
rights offering, we will also have 1,000,000
shares of common stock reserved for issuance
upon the exercise of warrants with an exercise
price of $2.00 per share and 750,000 shares of
common stock reserved for issuance upon the
conversion of the Series A preferred stock (and
the conversion of the Series A preferred stock
which HTE has an option to acquire).
Use of Proceeds.............. Fund anticipated operating losses and for other
general corporate purposes.
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HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary financial data should be read in conjunction with
DSI's financial statements and the Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. The financial information as of October 31, 1999,
and for the period from June 18, 1999, to October 31, 1999, reflects the
financial position and results of operations of DSI. The financial information
for the year ended December 31, 1998, and for the period from January 1, 1999,
to June 17, 1999, reflects the financial position and results of operations of
the Predecessor. The pro forma financial information is derived from the October
31, 1999, audited balance sheet of DSI, as adjusted for HTE's $1,500,000
investment (assuming exercise of its option to purchase an additional 250,000
shares of Series A preferred stock) and as further adjusted for either (1) the
minimum purchase of shares by certain DSI officers and directors for a total of
1,201,223 purchased shares and the purchase of the Series B preferred stock or
(2) the maximum purchase of 19,225,883 shares. The following summary financial
information below has been derived from and are qualified by reference to DSI's
and the Predecessor's financial statements audited by Arthur Andersen LLP,
independent certified public accountants, included elsewhere herein.
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INFORMATION ON DEMAND, INC.
(PREDECESSOR) DEMANDSTAR.COM, INC.
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FOR THE YEAR FOR THE PERIOD FROM FOR THE PERIOD FROM
ENDED DECEMBER 31, JANUARY 1, 1999 TO JUNE 18, 1999 TO
1998 JUNE 17, 1999 OCTOBER 31, 1999
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STATEMENT OF OPERATIONS
DATA:
Revenue.................... $ 33,718 $ 132,135 $ 128,583
Operating loss............. (274,383) (266,140) (571,567)
Net loss................... (274,383) (266,140) (585,667)
Net loss per share......... $ (0.47)
Weighted average number of
common shares
outstanding.............. 1,250,000
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OCTOBER 31, 1999
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PRO FORMA
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AS ADJUSTED AS ADJUSTED
ACTUAL MINIMUM(1) MAXIMUM(1)
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BALANCE SHEET DATA:
Cash........................................ $ 41,253 $4,742,476 $ 20,767,136
Working capital (deficit)................... (370,429) 4,330,794 20,355,454
Total assets................................ 1,169,805 5,871,028 21,895,688
Note payable to HTE......................... 737,075 737,075 737,075
Series B preferred stock.................... -- 2,000,000 --
Total shareholders' equity.................. 214,333 2,915,556 20,940,216
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(1) Excludes the impact of solicitation fees and other offering expenses.
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RISK FACTORS
You should carefully consider the following risk factors and all other
information contained in this prospectus before purchasing our common stock.
Investing in our common stock involves a high degree of risk. Any of the
following risks could materially harm our business, operating results and
financial condition and could result in a complete loss of your investment.
RISKS PARTICULAR TO DEMANDSTAR.COM, INC.
WE ANTICIPATE INCURRING SIGNIFICANT LOSSES FOR THE FORESEEABLE FUTURE. OUR
AUDITORS HAVE QUALIFIED THEIR REPORT ON OUR FINANCIAL STATEMENTS WITH RESPECT TO
OUR ABILITY TO CONTINUE AS A GOING CONCERN.
As noted in the Report of Independent Certified Public Accountants, we have
experienced significant operating losses and an accumulated deficit which raise
substantial doubt about our ability to continue as a going concern. Our
financial statements do not include any adjustments that might result from this
uncertainty. To date, we have not been profitable. We may never be profitable
or, if we become profitable, we may be unable to sustain profitability. We have
incurred significant losses since inception. Together with our Predecessor, we
reported a total net loss of $851,807 for the ten months ended October 31, 1999.
We expect to continue to incur significant losses for the foreseeable future. As
of October 31, 1999, our accumulated deficit was $585,667. Our limited operating
history makes predicting our future operating results, including operating
expenses, difficult. Our revenues may not grow or may not even continue at their
current level. We are conducting this offering to raise the cash to fund current
and anticipated losses in the future. To the extent we are unable to raise
sufficient cash from this offering, our business, operations and financial
condition will be materially adversely affected. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations" and our financial
statements and the related notes.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT MAY BE DIFFICULT TO EVALUATE OUR
EVOLVING BUSINESS.
We only have a limited operating history on which to base an evaluation of
our business and prospects. You must consider our business in the light of the
risks, expenses and problems frequently encountered by companies like us.
Currently, our revenues are primarily generated from the sales of subscriptions
to vendors seeking procurement data from governments. We anticipate expanding
the number of governments and vendors using our system. There is no assurance
that we can successfully administer or attain profitability in this expansion
process. Also our revenue model is evolving. In the future we intend to generate
additional revenues by administrating commerce between vendors using our
governmental networks. We may not be able to expand our revenues. If we do not,
our business, financial condition and operating results will be materially
adversely affected.
WE EXPECT OUR OPERATING EXPENSES TO INCREASE.
Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. If our revenues do not increase, we may
not be able to compensate by reducing expenses in a timely manner. In addition,
we plan to increase significantly our operating expenses to:
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- increase our sales and marketing operations;
- broaden our customer support capabilities; and
- develop new and enhanced products and services.
Expenses may also increase due to the potential impact of goodwill and other
charges resulting from completed and future acquisitions.
Additionally, leading Web sites, browser providers and other Internet
distribution channels may begin to charge us to provide access to our products
and services. If any of these expenses are not accompanied by increased
revenues, our business, financial condition and operating results would be
materially adversely affected.
WE MAY BE UNABLE TO MANAGE OUR GROWTH EFFECTIVELY WHICH COULD CAUSE OUR BUSINESS
AND OPERATING RESULTS TO SUFFER.
Our growth rate may increase rapidly in response to the acceptance of our
products and services under new or existing government contracts. This growth
will place a substantial strain on our limited management, operational and
financial resources and systems. To integrate our operations and to manage the
growth of our operations will require the development and implementation of our
operational and financial systems, procedures and controls and training,
managing and expansion of our employee base. Our management will also be
required to establish and maintain relationships with customers and strategic
partners and to maintain control over our strategic direction in a rapidly
changing environment. We cannot provide any assurance that we will be able to
effectively manage the expansion of our operations or that the systems we
develop and implement or procedures or controls that we adopt will be adequate
to support the rapid execution necessary to exploit fully the market opportunity
we have identified. If we do not manage our growth effectively, our business and
operating results will suffer.
BECAUSE WE HAVE SERVICE CONTRACTS WITH A LIMITED NUMBER OF GOVERNMENTAL BODIES,
THE TERMINATION OF ANY OF THESE CONTRACTS MAY HARM OUR BUSINESS.
Currently, we have contracts with over two dozen governmental entities.
These contracts have terms ranging from one to three years. Contracts are
cancelable by either party upon 30 days' notice. The decision by one or more
governments not to renew an existing contract or any termination of one or more
of these contracts will result in significant revenue shortfalls. If these
revenue shortfalls occur, our business and financial condition would be harmed.
We cannot be certain if, when or to what extent governments might fail to renew
or terminate any or all of their contracts with us.
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WE MAY BE UNABLE TO OBTAIN FUTURE CONTRACTS THROUGH THE REQUEST FOR PROPOSAL
PROCESS.
Once a government decides to utilize our services it often involves a
selection process that operates under special rules that apply to government
purchasing. These rules typically require open bidding by possible service
providers like us against a list of requirements established by governments
under existing or specially-created procedures. To respond successfully to these
requests for proposals, commonly known as RFPs, we must estimate the time and
costs required to establish operations for the proposed client and the likely
terms of any other proposals submitted. We also must assemble and submit a large
volume of information within the strict time schedule mandated by an RFP.
Whether or not we are able to respond successfully to RFPs in the future will
significantly impact our business. We cannot guarantee that we will win any bids
in the future through the RFP process, or that any winning bids will ultimately
result in contracts. Our business, financial condition and operating results
would be harmed if we fail to obtain profitable future contracts through the RFP
process.
IF DEMAND FOR OUR SINGLE CORE SERVICE WERE TO WEAKEN, OUR BUSINESS AND FINANCIAL
CONDITION WOULD BE HARMED.
We obtain substantially all of our revenues from a single core service.
Subscription-based fees charged for access to governmental procurement
information accounted for approximately 84% of our revenues for the ten months
ended October 31, 1999, and are expected to continue to account for a
significant portion of our revenue in the near future. Regulatory changes or the
development of alternative information sources could materially reduce our
revenues from this core service.
BECAUSE WE RELY ON A CONTRACTUAL BIDDING PROCESS WHOSE PARAMETERS ARE
ESTABLISHED BY GOVERNMENTS, THE LENGTH OF OUR SALES CYCLES IS UNCERTAIN AND CAN
LEAD TO REVENUE SHORTFALLS.
Our having reliance on a bidding process to initiate new projects, the
parameters of which are established by governments, results in uncertainty in
our sales cycles because the duration and the procedures for each bidding
process vary significantly according to each government entity's policies and
procedures. The time between the date of initial contact with a government for a
bid and the award of the bid may range from as little as 30 days to up to 180
days. The bidding process is subject to factors over which we have little or no
control, including:
- political acceptance of the concept of government agencies contracting
with third parties to distribute public information, which has been
offered traditionally only by the government agencies often without
charge;
- the internal review process by the government agencies for bid
acceptance;
- the need to reach a political accommodation among various interest
groups;
- changes to the bidding procedure by the government agencies;
- changes to state legislation authorizing government's contracting with
third parties to distribute public information;
- changes in government administrations;
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- the budgetary restrictions of government entities;
- the competition generated by the bidding process; and
- the possibility of cancellation or delay by the government entities.
Any delay in the bidding process, changes to the bidding practices and
policies, the failure to receive the bid or the failure to execute a contract
may disrupt our financial results for a particular period and harm our business
and financial condition.
OUR CONTRACTS WITH GOVERNMENTAL ENTITIES COULD BE VOIDED.
Our competitors or other third parties could bring lawsuits, seek
legislation or in other ways attempt to have our contracts voided, which would
harm our business, results of operations and financial condition.
ENTRANCE OF POTENTIAL COMPETITORS INTO THE MARKETPLACE COULD HARM OUR ABILITY TO
MAINTAIN OR IMPROVE OUR POSITION IN THE MARKET.
The market for online information services is rapidly evolving and
intensely competitive, with few barriers to entry. Many companies exist that
provide one or more parts of the products and services we offer. Companies that
have expertise in marketing and providing technical services to government
entities may begin to compete, or may intensify their current competition, with
us by further developing their services and increasing their focus on this piece
of their business and market share. In addition, companies specializing in
business-to-business purchasing services may enter the government market and
companies providing general Internet business solutions to businesses may also
target governments in order to enable such governments to eliminate or reduce
the need to outsource their purchasing requirements. Examples of our current and
potential competitors are as follows:
- System integrators and enterprise resource planning companies, including
American Management Systems, SAP, Oracle and PeopleSoft;
- Traditional government software solution providers (who also compete with
HTE), including J.D. Edwards, SCT and Tyler;
- Traditional and Internet consulting companies, including Andersen
Consulting, IBM, USWeb, Razorfish, eForce, Viant, AppNet and Sapient;
- Internet companies specializing in maintenance, repair and operations and
catalog purchasing, including Trilogy, Procurenet, Agentics, MRO.com,
Concur, Commerce One, PurchasePro, Ariba and Buysense.com (a joint
venture of Ariba and AMS, Inc.);
- Companies that set up Internet community sites and exchanges, including
VerticalNet, Tradex and fastxchange;
- Companies that publish catalogs and bids, including Thomas Publishing,
Ziff-Davis and F.W. Dodge Division of McGraw-Hill;
- Companies that set up specialized and generalized RFP/RFQ sites,
including InternetRFP, Governmentbids.com, RapidRegistration, Govcon.com,
BidSite, Bidnet, Compnet, Worldbid, RFQdata, Wiznet and Powersourcing;
and
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- Smaller and regional software and/or consulting companies that may have
existing relationships with local governments.
Many of our existing and potential competitors are national or
international in scope, may have greater resources, and may devote a
significantly greater amount of resources to development of their products and
services than we do. These resources could enable our competitors to initiate
price cuts or take other measures in an effort to gain market share.
Additionally, in some geographic areas, we may face competition from smaller
consulting firms with established reputations and political relationships with
potential government clients. There can be no assurances that we will be able to
successfully compete with new or existing competitors. If we do not compete
effectively or if we experience any pricing pressures, reduced margins or loss
of market share resulting from increased competition, our business and financial
condition may be harmed.
THE UNPREDICTABILITY OF OUR QUARTER-TO-QUARTER RESULTS MAY HARM THE TRADING
PRICE OF OUR COMMON STOCK.
Our future revenues and operating results may vary significantly from
quarter to quarter due to a number of factors, many of which are outside of our
control, and any of which may harm our business. These factors include:
- the commencement, completion or termination of contracts during any
particular quarter;
- the introduction of new electronic government products and services by us
or our competitors;
- technical difficulties or system downtime affecting the Internet
generally or the operation of our electronic government products and
services; and
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our business operations and infrastructure.
Due to the factors noted above, our revenues in a particular quarter may be
lower than we anticipate and if we are unable to reduce spending in that
quarter, our operating results for that quarter may be harmed. You should not
rely on quarter-to-quarter comparisons of our results of operations as an
indication of future performance. It is possible that in some future periods our
results of operations may be below the expectations of public market analysts
and investors. If this occurs, the price of our common stock may decline.
WE MAY LOSE THE RIGHT TO THE CONTENT DISTRIBUTED BY US, WHICH IS PROVIDED TO US
ENTIRELY BY GOVERNMENT ENTITIES.
We do not own or create the governmental content distributed to our
vendors. We depend on the governments with which we contract to supply
information and data feeds to us on a timely basis to allow businesses and
citizens to complete transactions and obtain government information. We cannot
assure you that these data sources will continue to be available in the future.
Government entities could terminate their contracts to provide data. Moreover,
our data sources may not always be subject to exclusive agreements, so that data
included in our products and services also may be included in those of our
potential competitors. In addition, we are dependent upon the accuracy and
reliability of government computer systems and data collection for the content
of our systems. The loss or the unavailability of our data sources in the
future, or the loss of our exclusive right to
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distribute some of the data sources, would harm our business, operating results
and financial condition.
WE MAY BE UNABLE TO HIRE, INTEGRATE OR RETAIN QUALIFIED PERSONNEL.
The recent growth in our business has resulted in an increase in the
responsibilities for both existing and new management personnel. The loss of any
of our executives, particularly O. F. Ramos, our Chief Executive Officer and
President, would likely harm our business.
In addition, we expect that we will need to hire additional personnel in
all areas in 2000. Competition for personnel in the Internet industry is
intense. We may not be able to retain our current key employees or attract,
integrate or retain other qualified employees in the future. If we do not
succeed in attracting new personnel or integrating, retaining and motivating our
current personnel, our business could be harmed. In addition, new employees
generally require substantial training in the presentation, policies and
positioning of our products and services. This training will require substantial
resources and management attention.
TO BE SUCCESSFUL, WE MUST DEVELOP AND MARKET COMPREHENSIVE, EFFICIENT, COST-
EFFECTIVE AND SECURE ELECTRONIC ACCESS TO PUBLIC INFORMATION AND NEW PRODUCTS
AND SERVICES.
Our success depends in part upon our ability to rapidly establish our own
goods and services in all the principal governmental bodies in the United
States. In order to increase revenues in the future, we must continue to develop
products and services that businesses and citizens will find valuable, and there
is no guarantee that we will be able to do so. If we are unable to develop
products and services that allow us to attract, retain and expand our current
user base, our revenues and future operating results may be harmed. We cannot
assure you that the products and services we offer will appeal to a sufficient
number of Internet users to generate continued revenue growth.
DEFICIENCIES IN OUR PERFORMANCE UNDER A GOVERNMENT CONTRACT COULD RESULT IN
CONTRACT TERMINATION, REPUTATIONAL DAMAGE AND FINANCIAL LIABILITY.
Each government entity with which we contract has the authority to review
our performance. We cannot assure you that a future review will not find any
material performance deficiencies that would lead to contract termination and
possible liability for subscription refunds. Moreover, the consequent negative
publicity could harm our reputation among other governments with which we would
like to contract. All of these factors could harm our business, results of
operations and financial condition.
WE MAY BE UNABLE TO PROTECT OUR INTELLECTUAL PROPERTY RIGHTS.
We rely on a combination of nondisclosure and other contractual
arrangements with governments, our employees and third parties, and privacy and
trade secret laws to protect and limit the distribution of the proprietary
applications, documentation and processes we have developed in connection with
the electronic government products and services we offer. If we fail to
adequately protect our intellectual property rights and proprietary information
or if we become involved in litigation relating to our intellectual property
rights and proprietary technology, our business could be harmed. Any actions we
take may not be
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adequate to protect our proprietary rights and other companies may develop
technologies that are similar or superior to our proprietary technology.
Additionally, it is possible that in the future we could become subject to
claims alleging infringement of third party intellectual property rights. Any
claims could subject us to costly litigation, and may require us to pay damages
and develop non-infringing intellectual property or acquire licenses to the
intellectual property that is the subject of the alleged infringement.
Additionally, licenses may not be available on acceptable terms or at all.
WE WILL REQUIRE MORE WORKING CAPITAL TO EXPAND OUR BUSINESS.
We anticipate that our current cash resources, combined with the net
proceeds from this offering and the sale of Series A preferred stock (and the
sale of Series B preferred stock if 5,000,000 shares have not been subscribed
for by the closing of the rights offering), will be sufficient to meet our
present working capital and capital expenditure requirements for the next twelve
months following the date of this prospectus. However, we may need to raise
additional capital before this period ends to do the following:
- support our expansion into other states, cities, municipalities, federal
agencies and internationally;
- respond to competitive pressures; and
- acquire complementary businesses or technologies.
Our future liquidity and capital requirements will depend upon numerous
factors, including the success of our existing and new product and service
offerings and potentially competing technological and market developments. We
may be required to raise additional funds through public or private financing,
strategic relationships or other arrangements. We cannot assure you that such
additional funding, if needed, will be available on terms acceptable to us, or
at all. If adequate funds are not available on acceptable terms, our ability to
develop or enhance our products and services, take advantage of future
opportunities or respond to competitive pressures would be significantly
limited. This limitation could harm our business, operating results and
financial condition.
WE ARE DEPENDENT ON THIRD PARTY TECHNOLOGY AND SERVICE PROVIDERS THAT WE DO NOT
CONTROL.
Our products and services are made possible by computer software, the
Internet and telephony services provided by third parties. Our loss of, or
inability to maintain or obtain upgrades to the technology licenses or hardware
solutions deployed in our operating infrastructure by us or third parties could
result in delays, which would adversely effect our ability to operate our
business. This would cause our business and operating results to suffer until
equivalent technology solutions could be identified and implemented. If we are
unable to maintain satisfactory relationships with third parties who provide
services or products necessary to operate our network on acceptable commercial
terms, or the quality of products and services provided by these third parties
falls below a satisfactory standard, we could experience a disruption in the
delivery of products and services, which could have a negative impact on our
business and, hence, our business and operating results.
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WE MAY BE UNABLE TO INTEGRATE NEW TECHNOLOGIES AND INDUSTRY STANDARDS
EFFECTIVELY.
Our future success will depend on our ability to enhance and improve the
responsiveness, functionality and features of our products and services in
accordance with industry standards and to address the increasingly sophisticated
technological needs of our customers on a cost-effective and timely basis. Our
ability to remain competitive will depend, in part, on our ability to:
- enhance and improve the responsiveness, functionality and other features
of the products and services we offer;
- continue to develop our technical expertise;
- develop and introduce new services, applications and technology to meet
changing customer needs and preferences; and
- influence and respond to emerging industry standards and other
technological changes in a timely and cost-effective manner.
We cannot assure you that we will be successful in responding to the above
technological and industry challenges in a timely and cost-effective manner. If
we are unable to integrate new technologies and industry standards effectively,
our results of operations could be harmed.
WE MAY HAVE DIFFICULTY INTEGRATING BUSINESSES INVOLVING OR GENERATING ACCEPTABLE
RETURNS FROM FUTURE ACQUISITIONS OR INVESTMENTS.
We may in the future make selective acquisitions or strategic investments
in complementary businesses, products, services or technologies. If we buy a
company, we could have difficulty in integrating and assimilating that company's
operations, technologies, products and personnel. In addition, the key personnel
of the acquired company may decide not to work for us, leaving us without any
experience in a new market. These difficulties could disrupt our ongoing
business and distract our management and employees. We may not successfully
overcome these and other problems encountered in connection with potential
acquisitions or strategic investments. In addition, an acquisition could
materially impair our operating results by diluting our shareholders' equity,
causing us to incur additional debt or requiring us to amortize acquisition
expenses and acquired assets.
RISKS TYPICAL OF THE INTERNET INDUSTRY
IF THE INTERNET INFRASTRUCTURE FAILS TO DEVELOP OR BE ADEQUATELY MAINTAINED, OUR
BUSINESS WOULD BE HARMED BECAUSE USERS MAY NOT BE ABLE TO ACCESS OUR GOVERNMENT
PORTALS.
Our success depends on the increase in Internet usage generally and in
particular as a means to access public information electronically. This in part
requires the development and maintenance of the Internet infrastructure. If this
infrastructure fails to develop or be adequately maintained, our business would
be harmed because users may not be able to access our systems. Among other
things, this development and maintenance will require a reliable network
backbone with the necessary speed, data capacity, security and timely
development of complementary products for providing reliable Internet access and
services.
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The Internet has experienced, and is expected to continue to experience,
significant growth in the number of users and amount of traffic. If the Web
continues to experience increased numbers of users, frequency of use or
increased bandwidth requirements, the Internet infrastructure may not be able to
support these increased demands or perform reliably. The Internet has
experienced a variety of outages and other delays as a result of damage to
portions of its infrastructure, and could face such outages and delays in the
future. These outages and delays could reduce the level of Internet usage and
traffic on our systems. In addition, the Internet could lose its viability due
to delays in the development or adoption of new standards and protocols to
handle increased levels of activity or due to increased governmental regulation.
If the Internet infrastructure is not adequately developed or maintained, use of
our products and services may be reduced.
WE MAY BE HELD LIABLE FOR CONTENT THAT WE OBTAIN FROM GOVERNMENT AGENCIES.
Because we aggregate and distribute sometimes private and sensitive public
information over the Internet, we may face potential liability for defamation,
negligence, invasion of privacy and other claims based on the nature and content
of the material that is published on our network. Most of the agreements through
which we obtain consent to disseminate this information do not contain indemnity
provisions in our favor. These types of claims have been brought, sometimes
successfully, against online services and Web sites in the past. We cannot
assure you that general liability insurance we have will be adequate to
indemnify us for all liability that may be imposed. Any liability that is not
covered by our insurance or is in excess of our insurance coverage could
severely harm our business operations and financial condition.
CONCERNS OVER TRANSACTIONAL SECURITY MAY HINDER THE GROWTH OF OUR BUSINESS.
A significant barrier to electronic commerce is the secure transmission of
confidential information over public networks. Any breach in our security could
expose us to a risk of loss or litigation and possible liability. We rely on
encryption and authentication technology licensed from third parties to provide
secure transmission of confidential information. As a result of advances in
computer capabilities, new discoveries in the field of cryptography or other
developments, a compromise or breach of the algorithms we use to protect
customer transaction data may occur. Because we provide information released
from various government entities, we may represent an attractive target for
security breaches.
A compromise of our security or a perceived compromise of our security
could severely harm our business. A party who is able to circumvent our security
measures could misappropriate proprietary information, including customer credit
card information, or cause interruptions or incur direct damage to our business.
Also, should hackers obtain sensitive data and information, or create bugs or
viruses in an attempt to sabotage the functionality of our products and
services, we may receive negative publicity, incur liability to our customers or
lose the confidence of the governments with which we contract, any of which may
cause the termination or modification of our government contracts.
We may be required to expend significant capital and other resources to
protect against the threat of security breaches or to alleviate problems caused
by these breaches. However, protection may not be available at a reasonable
price or at all.
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GOVERNMENTAL REGULATION OF THE INTERNET MAY RESTRICT THE OPERATION AND GROWTH OF
OUR BUSINESS.
There are currently few laws or regulations that specifically regulate
communications or commerce on the Internet. Laws and regulations may be adopted
in the future, however, that address these issues including user privacy,
pricing, and the characteristics and quality of products and services. An
increase in regulation or the application of existing laws to the Internet could
significantly increase our cost of operations and harm our business. For
example, the Federal Communications Commission may, in the future, reconsider
its ruling that Internet access service is not "telecommunications" and may
decide that Internet service providers must pay a percentage of their gross
revenues as a "universal service contribution." If the Federal Communications
Commission were to require universal service contributions from providers of
Internet access or Internet backbone services, our costs of doing business may
increase, and we may not be able to recover these costs from our customers. As a
result, our business and financial condition could be harmed.
OUR BUSINESS MAY BE AFFECTED NEGATIVELY BY YEAR 2000 ISSUES.
We cannot assure you that the software systems that we use for systems
management, network monitoring, quality assurance, applications and information
and transaction processing do not contain undetected errors or defects
associated with Year 2000 data functions. Further, we cannot assure you that our
network systems acquired from third parties do not contain undetected errors or
defects. If any such errors or defects do exist, we may incur material costs to
resolve them.
Because our products and services depend significantly on information
provided by and transactions conducted with our government clients, our ability
to deliver services and transactions properly to our customers depends on these
government clients being Year 2000 ready. We cannot assure you that our
government clients are Year 2000 ready. If they are not, their information
systems may be disrupted and our ability to provide services and transactions
curtailed. Our business, results of operations and financial condition would be
harmed as a result.
In addition, the software and systems of financial institutions, utility
companies, Internet access companies, third-party service providers and others
outside of our control may not be Year 2000 ready. If these entities are not
Year 2000 ready, a systemic failure beyond our control could result, including a
prolonged Internet, telecommunications or general electrical failure. This type
of failure would make it difficult or impossible to use the Internet or access
our network. If a prolonged failure of this type occurs, our business and
financial condition would be harmed.
OUR SYSTEMS MAY FAIL OR LIMIT USER TRAFFIC.
We cannot assure you that during the occurrence of fire, floods,
earthquakes, power loss, telecommunications failures, break-ins and similar
events that the modem banks and direct dial-up connections we have to serve as
back-up systems will not prevent damage to our systems or cause interruptions to
our services. Computer viruses, electronic break-ins or other similar disruptive
problems could cause users to stop visiting our network and could cause our
clients to terminate agreements with us. If any of these circumstances occurred,
our business could be harmed. Our insurance policies may not adequately
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compensate us for any losses that may occur due to any failures of or
interruptions in our systems.
Our systems must accommodate a high volume of traffic and deliver
frequently updated information. These systems may experience interruptions due
to any failure or delay by government agencies in the transmission or receipt of
this information. In addition, our users depend on Internet service providers,
online service providers and other Web site operators for access to our systems.
Many of these providers and operators have experienced significant outages in
the past due to system failures unrelated to our systems, holidays and heavy
user traffic, and could experience the same outages, delays and other
difficulties in the future. Any of these system failures could harm our
business, results of operations and financial condition.
RISKS PARTICULAR TO THIS OFFERING
THE EXERCISE OF YOUR RIGHTS IS IRREVOCABLE.
Once you exercise your rights, you may not revoke the exercise. You will
not receive interest on your subscription funds delivered to our subscription
agent upon the exercise of your rights pending delivery of certificates for your
shares and the return of any funds not applied to the purchase of such shares.
THE SUBSCRIPTION PRICE FOR THE RIGHTS IS NOT NECESSARILY INDICATIVE OF TRADING
PRICE.
The subscription price for the rights was determined by our board of
directors based on, among other considerations, an independent valuation of our
business, our assets and other recognized criteria of investment value, such as
book value, cash flow, losses and financial condition. Notwithstanding the
independent calculation which can be considered speculative given DSI's limited
operating history, the subscription price does not necessarily indicate that our
common stock has a value or can be resold. Further, we cannot assure you that if
a trading market develops in our common stock, that the stock will trade at
prices in excess of the subscription price at any time after the date of this
prospectus. See "The Offering -- Determination of Subscription Price."
HTE'S CONTROL AND THE PRESENCE OF INTERLOCKING DIRECTORS AND OFFICERS AFTER THIS
OFFERING WILL CREATE POTENTIAL CONFLICTS OF INTEREST AND COULD PREVENT A CHANGE
OF CONTROL.
Our Series A preferred stock and common stock generally vote as one class
on all matters presented to shareholders for consideration. On each shareholder
vote, our common stock is entitled to one vote and our Series A preferred stock
is entitled to vote a percentage of our votes generally ranging from 19.9
percent to 50 percent. Prior to the closing of the rights offering, all
outstanding shares of our Series A preferred stock will be issued to HTE. Since
it is not definite that all HTE shareholders will exercise all of their
subscription rights, it is very likely that HTE will maintain effective voting
control of DSI. As a result, HTE's directors and officers will be able to
control the outcome of substantially all matters submitted to the shareholders
for approval, including the election of directors and any proposed merger,
liquidation, transfer or encumbrance of a substantial portion of its assets, or
amendment to our charter to change our authorized capitalization or otherwise.
This concentration of voting power may also have the effect of delaying or
preventing a change in control of DSI even if it would be beneficial to our
shareholders. See "Security Ownership of DSI."
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In addition, some or our directors and officers also are directors,
officers or employees of HTE and, in most cases, either own, or hold an option
to purchase, equity securities of HTE. As a result, these executive officers
have inherent conflicts of interest when making decisions related to
transactions between us and HTE. HTE's ability to control matters listed above
together with the potential conflicts of interest of its directors and executive
officers who also serve as directors and executive officers of DSI could
adversely affect the trading price and liquidity of our common stock. These
factors could limit the price that investors might be willing to pay for our
common stock in the future.
In addition, certain persons serving as both our officers and key employees
and those of HTE have committed to devote a certain amount of their business
time to us. The competing claims upon each officer's time and energies could
divert his attention from our affairs, placing additional demands on our
resources. The efforts of all or any of these individuals may be insufficient to
meet both our needs and those of HTE. If we were deprived of access to certain
key members of our management team, or other personnel, or lose access to such
services altogether, our business, prospects, results of operations and
financial condition could be materially adversely affected.
In contemplation of the rights offering, we will be entering into certain
agreements with HTE, including the tax sharing and indemnity agreement, the
services agreement and the registration rights agreement for the purpose of
defining our on-going relationship with HTE following the rights offering. We
cannot assure you that the terms of these agreements, or the related
transactions, will be effected on terms at least as favorable to us as could
have been obtained from unaffiliated third parties. See "Certain Relationships
and Related Party Transactions."
WE MAY HAVE LIABILITIES IF WE ARE DEEMED A MEMBER OF HTE'S CONSOLIDATED TAX
GROUP.
If the rights offering is not fully subscribed, we may be deemed a member
of HTE's consolidated tax group under federal income tax law until the DSI
securities held by HTE do not constitute either 80% of the voting power or the
market value of DSI's outstanding stock. Each member of a consolidated group for
federal income tax purposes is severally liable for the federal income tax
liability of each other member of the consolidated group. Similar rules may
apply under state income tax laws. Although we intend to enter into a tax
sharing and indemnity agreement with HTE prior to the consummation of the rights
offering, if HTE or members of its consolidated tax group (other than us and our
subsidiaries) fail to pay tax liabilities arising prior to the time that we are
no longer a member of HTE's consolidated tax group, we could be required to make
payments in respect of these tax liabilities and such payments could materially
adversely affect our financial condition. See "Certain Relationships and Related
Transactions -- Tax Sharing and Indemnity Agreement."
INVESTORS DO NOT KNOW THE IDENTITY OF A MAJORITY OF THE PERSONS WHO WILL SERVE
AS DIRECTORS.
We currently have four directors, who are also officers and/or directors of
HTE. DSI expects to propose the expansion of the board to add additional
persons, some of whom will be unaffiliated with HTE. Therefore, investors do not
know the identity of all the persons who will serve on our board and be
responsible for our affairs.
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The interests of HTE may conflict with the interests of other shareholders,
and the actions it takes or approves may be contrary to those desired by the
other shareholders. This concentration of ownership may also have the effect of
delaying, preventing or deterring an acquisition of our company by a third
party.
OUR MANAGEMENT WILL RETAIN BROAD DISCRETION IN THE USE OF PROCEEDS FROM THIS
OFFERING AND MAY USE THE PROCEEDS IN WAYS THAT MAY NOT INCREASE OUR OPERATING
RESULTS OR MARKET VALUE.
We intend to use all of the net proceeds from this offering to fund
anticipated operating losses, to develop new products and services, to expand
into new geographic markets, to further develop our infrastructure and
technology, and for working capital and other general corporate purposes. We
have not designated any specific use for any specific portion of the net
proceeds. Therefore, our management will retain significant flexibility in
applying the net proceeds of this offering and may use the proceeds in ways in
which you do not agree. Until the proceeds are needed, we plan to invest them in
investment-grade, interest-bearing securities. The failure of our management to
apply such funds effectively could harm our business.
BECAUSE WE DO NOT INTEND TO PAY ANY CASH DIVIDENDS ON OUR COMMON STOCK, HOLDERS
OF OUR COMMON STOCK WILL NOT BE ABLE TO RECEIVE A RETURN ON THEIR SHARES UNLESS
THEY SELL THEIR SHARES.
We have paid no dividends on our common stock and we cannot assure you that
we will achieve sufficient earnings to pay cash dividends on our common stock in
the near future. Further, we intend to retain any future earnings to fund the
development and expansion of our operations. Therefore, we do not anticipate
paying any cash dividends on our common stock in the foreseeable future. Unless
we pay dividends, holders of our common stock will not be able to receive a
return on their shares unless they sell them. See "Dividend Policy."
A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK WILL BE ELIGIBLE FOR SALE INTO THE
MARKET IN THE FUTURE, AND THIS COULD DEPRESS OUR STOCK PRICE.
Sales of a substantial number of shares of our common stock after the
rights offering could cause the market price of our common stock to decline.
After the rights offering, we will have between 2,451,223 and 20,475,883 shares
of our common stock outstanding. In addition, 4,000,000 shares of our common
stock are reserved for issuance under our 1999 Employee Incentive Compensation
Plan. All of the shares of common stock to be sold in the rights offering will
be freely tradable without restriction or further registration under the federal
securities laws unless acquired by our "affiliates," as that term is defined in
Rule 144 under the Securities Act of 1933. All of the shares acquired by
"affiliates" will be "restricted securities" under the Securities Act with
restrictions on timing, manner and volume of sales of such shares.
Following consummation of the rights offering, HTE will hold 1,250,000
shares of DSI stock. In addition, HTE has the right to acquire an additional
1,250,000 shares of DSI stock pursuant to the conversion of its Series A
preferred stock and the exercise of its warrants. These shares will be available
for resale under Rule 144 following the expiration of a one year contractual
restriction on transfers. In addition, DSI has entered into a registration
rights agreement with HTE which grants to HTE registration rights with
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respect to shares of DSI common stock that it holds. These registration rights
effectively allow HTE to sell all of its shares of common stock approximately
one year after the closing of the rights offering and to participate as a
selling shareholder in future public offerings by DSI.
Also, following the consummation of the rights offering, we intend to file
a registration statement on Form S-8 under the Securities Act covering the
shares reserved for issuance under the 1999 Employee Incentive Compensation
Plan. This registration statement will automatically become effective upon
filing.
We are also likely to issue large amounts of additional common stock in the
future in connection with our plans to raise additional capital and in
connection with possible acquisitions. These shares will become available for
resale at various dates in the future. The availability or sale of these shares
could adversely affect the price of our stock. Please see "Shares Eligible for
Future Sale" for more detailed information.
IT IS DIFFICULT TO PREDICT WHETHER A MARKET FOR OUR STOCK WILL DEVELOP, AND THE
MARKET PRICE OF OUR STOCK WILL LIKELY BE VOLATILE.
Prior to the closing of the rights offering you could not purchase DSI
common stock publicly. We intend to apply for quotation of the DSI common stock
on the Nasdaq SmallCap Market. We cannot assure you, however, that this listing
will be obtained. If our common stock is not approved for quotation on the
Nasdaq SmallCap Market following the closing of the rights offering, trading of
our common stock will be conducted on an electronic bulletin board established
for securities that do not meet the Nasdaq listing requirements or in what is
commonly referred to as the "pink sheets." If this occurs, an investor may find
it more difficult to dispose of, or obtain accurate quotations as to the price
of our common stock.
We cannot assure you that investors will develop an interest in our common
stock so that a trading market develops or, if a trading market does develop,
how active that trading market will be or whether it will be sustained. A number
of specific factors that may affect the price and liquidity of our securities,
include:
- actual or anticipated fluctuations in our quarterly operating results;
- announcements of new contracts or applications;
- operating results that vary from expectations as to our future financial
performance or changes in financial estimates for us by securities
analysts and investors;
- announcements of technological innovations or new services by us or our
competitors;
- announcements by us or our competitors of significant contracts,
acquisitions, strategic relationships, joint ventures, capital
commitments, the results of the rights offering and the status size of
our network;
- announcements by third parties of significant claims or proceedings
against us;
- future sales or issuances of equity by us;
- change in the status of our intellectual property rights; and
- the operating and stock price performance of other comparable companies.
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In addition, our common stock may not be followed by any market analysts
and there may be few institutions acting as market makers for our securities.
Either of these factors could adversely affect the liquidity and trading price
of our stock. Also, the stock market in general has experienced extreme price
and volume volatility that has especially affected the market prices of
securities of many Internet-related companies. Stock prices for Internet-related
companies are often influenced by rapidly changing perceptions about the future
of the Internet or the results of other Internet or technology companies, rather
than specific developments relating to the issuer of that particular stock. If
our stock price is volatile, a securities class action may be brought against
us. Class action litigation could result in substantial costs and divert our
management's attention and resources.
IT MAY BE DIFFICULT FOR INVESTORS TO SELL OUR COMMON STOCK IF OUR COMMON STOCK
IS NOT LISTED ON THE NASDAQ SMALLCAP MARKET.
Prior to the rights offering, there has been no established trading market
for our common stock and there is no assurance that a trading market will
develop after the completion of this rights offering. If a trading market does
in fact develop for our common stock, there can be no assurance that it will be
sustained. We intend to file an application to Nasdaq for quotation of our
common stock on the Nasdaq SmallCap Market. If our application is approved, the
continued trading of our common stock on the Nasdaq SmallCap Market will be
conditioned upon DSI meeting certain criteria. The NASD, which administers
Nasdaq, requires that, in order for a company's securities to be listed for
quotation on the Nasdaq SmallCap Market, the company must have at least
$4,000,000 in net tangible assets, a public float of 1,000,000 shares, a market
value of the public float of not less than $5,000,000 and a minimum bid price of
$4.00. Continued inclusion on the Nasdaq SmallCap Market requires a minimum bid
price of $1.00 per share, a market value of the public float of at least
$1,000,000 and a public float of at least 500,000 shares. If the Company fails
to meet any of these criteria, or once listed for quotation it fails to maintain
the minimum criteria, the common stock will be traded on the NASD OTC Electronic
Bulletin Board or in what is currently referred to as the "pink sheets." As a
result, an investor may find it more difficult to dispose of, or to obtain
accurate quotations as to the market value of our common stock.
Our common stock is being offered to rights holders at $1.00 per share. If
the trading market for the common stock that subsequently develops is below
$5.00 per share, and the common stock is not quoted on the Nasdaq system, the
common stock will be subject to the penny stock rules and purchasers of shares
may find it more difficult to sell their shares. Securities deemed "penny
stocks" are subject to additional informational requirements in connection with
any trades made in the penny stock. The Commission has adopted rules that
regulate broker-dealer practices in connection with transactions in penny
stocks. Penny stocks generally are equity securities with a price of less than
$5.00 (other than securities registered on certain national securities exchanges
or quoted on the Nasdaq system, provided that current price and volume
information with respect to transactions in such securities is provided by the
exchange or system). The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from those rules, to deliver a
standardized risk disclosure document prepared by the Commission, which
specifies information about penny stocks and the nature and significance of
risks of the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition,
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the penny stock rules require that prior to a transaction in a penny stock not
otherwise exempt from those rules the broker-dealer must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction. These
disclosure requirements may have the effect of reducing the trading activity in
the secondary market for a stock that becomes subject to the penny stock rules.
INVESTORS WILL EXPERIENCE IMMEDIATE AND SUBSTANTIAL DILUTION AND WILL EXPERIENCE
FURTHER DILUTION WITH FUTURE STOCK ISSUANCES.
The rights offering price is substantially higher than the pro forma net
tangible book value of each outstanding share of common stock. Accordingly,
purchasers of common stock in the rights offering will suffer immediate and
substantial dilution. After giving effect to the rights offering on a minimum
offering (assuming rights are exercised for 1,201,223 shares) and maximum
offering basis (assuming rights are exercised for 19,225,883 shares), the
dilution in the pro forma net tangible book value of the common stock from the
rights offering price will be $0.84 per share and $0.10 per share, respectively.
See "Dilution."
We currently intend to finance a significant amount of the growth in the
DSI network with shares of our common stock or other securities, cash or a
combination of these items. We currently have 100,000,000 authorized shares of
common stock. Upon the conclusion of the rights offering, we will have between
2,451,223 and 20,475,883 shares of common stock outstanding. In addition,
immediately prior to the closing of the rights offering, we will initially have
4,000,000 shares of common stock reserved for options awarded or to be awarded
under DSI's 1999 Employee Incentive Compensation Plan. In addition, we will have
1,000,000 shares reserved for the exercise of warrants issued to HTE and certain
officers and directors and 750,000 shares reserved for issuance upon the
conversion of the Series A preferred stock (and the conversion of the Series A
preferred stock which HTE has an option to acquire). Accordingly, immediately
following the closing of the rights offering, we will have between 91,798,777
and 73,774,117 authorized but unissued and unreserved shares of common stock.
Consequently, we will be able to finance our growth or acquisitions by issuing
significant amounts of additional shares of common stock without obtaining
shareholder approval of such issuances provided we comply with any applicable
Nasdaq rules and regulations. To the extent we use common stock for all or a
portion of the consideration to be paid for future acquisitions, dilution may be
experienced by existing shareholders, including the purchasers of common stock
in the rights offering and the recipients of common stock in the stock
distribution if it is made. See "Dilution."
The Series A preferred stock held by HTE may in the future also result in
additional dilution to the common shareholders. If at the time of a common stock
dividend the shares of DSI common stock owned by HTE have been diluted below 35%
of DSI's total outstanding shares of common stock as of the record date for the
dividend, then so long as all of our Series A preferred stock is owned by HTE,
HTE will be entitled to receive a dividend amount, which, when added to the
dividends to be received by HTE with respect to its common stock, will equal 35%
of the total dividend amount paid to all holders of DSI Series A preferred stock
and common stock. In the event of a liquidation, if the shares of common stock
held by HTE are diluted below 35% of DSI's total outstanding shares of common
stock, then so long as all of our Series A preferred stock is owned by HTE, HTE
will be entitled to receive liquidating distributions which, when added to the
liquidating distribution to be received by HTE with respect to its common stock,
will
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constitute 35% of the total net assets distributed to all holders of DSI Series
A preferred stock and common stock. The 35% figure will be proportionately
adjusted if at anytime following the closing of the rights offering HTE sells
common stock which reduces its DSI common shareholdings below 35% of DSI's
outstanding common stock. See "Description of Securities -- Series A Preferred
Stock."
THE ANTI-TAKEOVER PROVISIONS IN OUR CORPORATE DOCUMENTS MAY HAVE AN ADVERSE
EFFECT ON THE MARKET PRICE OF OUR COMMON STOCK.
If HTE were ever to lose voting control over us, provisions within our
charter and by-laws could make it more difficult for a third party to gain
control of us, even if a change in control might be beneficial to our
shareholders. This could adversely affect the market price of our common stock.
These provisions include, without limitation:
- the elimination of the right to act by written consent by shareholders
other than HTE so long as it holds a controlling interest in us;
- the elimination of the right to call special meetings of the shareholders
by shareholders other than holders of not less than 50 percent of the
votes entitled to be cast at a special meeting;
- the creation of a staggered board of directors; and
- the ability of the board of directors to designate and issue preferred
stock without Shareholder consent.
See "Description of Securities -- Anti-takeover Effects of Florida Law and
Charter."
FORWARD-LOOKING STATEMENTS
This prospectus contains forward-looking statements that involve risks and
uncertainties, which may include statements about our:
- business strategy;
- plans for hiring additional personnel;
- plans for the introduction of new government products and services;
- anticipated sources of funds, including the proceeds from this offering,
to fund our operations for the twelve months following the date of this
prospectus; and
- plans, objectives, expectations and intentions contained in this
prospectus that are not historical facts.
Such statements can be identified by the use of forward-looking terminology
such as "may," "will," "expect," "anticipate," "estimate," "plan," "intend,"
"continue" or other similar or comparable terminology. These statements discuss
future expectations and predictions and other forward-looking information.
Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot assure you that our expectations will be
correct. These statements involve known and unknown risks, uncertainties and
other factors that may cause our actual results, levels of activity,
performance, or achievements to be materially different from any future results,
levels of activity, performance, or achievements expressed or implied by such
forward-looking
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statements. Such factors include, among other things, those listed under "Risk
Factors" and elsewhere in this prospectus. When considering such forward-looking
statements, you should keep in mind these risk factors and other cautionary
statements in this prospectus. Neither we nor any other person assumes
responsibility for the accuracy and completeness of such statements. We are
under no duty to update any of the forward-looking statements after the date of
this prospectus.
THE OFFERING
DSI is distributing rights, at no cost, to:
- holders of outstanding shares of HTE common stock on , 2000;
- persons entitled to HTE stock options as of December 16, 1999 and who are
also employees or directors of HTE (or a wholly-owned subsidiary) as of
five days prior to the effective date of this prospectus; and
- persons who are employees of HTE (or a wholly-owned subsidiary) as of
five days prior to the effective date of this prospectus.
Each holder of shares of HTE common stock on , 2000 (the record
date which will be determined in 2000) will receive one right for every share of
HTE common stock owned on that date. Each person who held HTE stock options as
of December 16, 1999 (pursuant to an HTE stock option agreement), who is also an
employee or director of HTE (or a wholly-owned subsidiary) as of five days prior
to the effective date of this prospectus, will receive (i) one right for each
share that he has such a vested option to acquire, and (ii) with respect to each
share that he has such an unvested option to acquire, three-quarters of a right
and an option to purchase one-quarter of a share of DSI common stock, which DSI
option shall have the same terms and shall vest on the same schedule as set
forth in his HTE stock option agreement. Each person who is an employee of HTE
(or a wholly-owned subsidiary) as of five days prior to the date of this
prospectus will receive 200 rights. Each right will carry a basic subscription
privilege which entitles the holder to purchase one share of DSI common stock.
No fractional rights or shares will be issued. We will be offering up to
19,225,883 shares in the aggregate.
PURPOSE OF THE OFFERING
The rights offering is essentially DSI's initial public offering. The
rights offering is different than a traditional offering in that it is initially
directed only to HTE's shareholders, option holders and employees, and
thereafter, for a period of up to 90 days from the closing of the rights
offering, to other persons selected by us for the then balance of unsubscribed
shares. The primary purpose of the offering is to obtain additional capital,
create an initial public market for our common stock and facilitate future
access to public markets. DSI believes that the rights offering has an advantage
over a traditional initial public offering because it gives DSI the opportunity
to offer its common stock to persons who already have an initial interest in
DSI.
The rights offering should benefit HTE shareholders by:
- allowing our Internet business, with its own unique market opportunity
and risk/reward profile, to be evaluated by investors independently of
HTE's other
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traditional businesses, which should increase our financial flexibility
in the capital markets;
- enabling HTE shareholders to increase or decrease their level of direct
investment in us by acquiring our common stock initially in the rights
offering and, thereafter, in the open market and/or selling any of our
common stock distributed to them;
- allowing HTE and us to pursue different operating strategies, given our
different business environments and competitive market conditions; and
- permitting HTE to benefit from increases, if any, in the market value of
its retained equity interest in us.
In addition, the rights offering should provide HTE benefits by rewarding
HTE employees and option holders.
EXPIRATION DATE
The rights will expire at 5:00 p.m., EST, on , 2000 unless
extended by us. In no case will we extend the rights past , 2000.
After expiration, unexercised rights will be null and void and no longer
exercisable by the holder. We will not be obligated to honor any purported
exercise of rights received by the subscription agent after the expiration time,
regardless of when the documents relating to such exercise were sent, except
when you have timely transmitted the documents under the guaranteed delivery
procedures described below. Notice of any extension of the expiration time will
be made through a press release issued by DSI.
SUBSCRIPTION PRIVILEGES
Each right grants to each HTE shareholder as of , 2000 a
subscription privilege which entitles him to purchase one share of DSI common
stock. In addition, each person who held HTE stock options as of December 16,
1999 (pursuant to an HTE stock option agreement); and who is also an employee or
director of HTE (or a wholly-owned subsidiary) as of five days prior to the
effective date of this prospectus, will receive (i) one right for each share
that he has such a vested option to acquire, and (ii) with respect to each share
that he has an unvested option to acquire, three-quarters of a right and an
option to purchase one-quarter of a share of DSI common stock. Furthermore, each
person who is an employee of HTE (or a wholly-owned subsidiary) as of five days
prior to the effective date of this prospectus will receive 200 rights. We will
send you certificates representing shares that you purchase with your basic
subscription privilege as soon as practicable after the rights offering closes.
DETERMINATION OF SUBSCRIPTION PRICE
Prior to the rights offering, there has been no public market for DSI's
common stock. Our board determined the subscription price based upon, among
other considerations, an independent valuation of our business or assets.
Together with the independent valuation conducted, our board considered our
business potential and prospects and the fact that we are an early stage
company. We believe, however, that any valuation of our business, given its
limited history, is highly speculative. Accordingly, the actual value or resale
value of our common stock may be significantly higher or lower than the
subscription price for the rights.
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SALES OF SHARES SUBSEQUENT TO THE RIGHTS OFFERING
We may, by means of a post-effective amendment to the registration
statement of which this prospectus is a part, offer and sell any
unsubscribed-for shares to banks, insurance companies, pension funds and other
institutional investors and to certain individuals in any state in which the
offer and sale to such persons may be made consistent with applicable law. DSI
may solicit and accept subscriptions from any additional offerees for any shares
offered by this prospectus which were not validly subscribed for by eligible HTE
shareholders, option holders and employees. It is anticipated that, in general,
offers and sales to additional offerees, if any, will be made on substantially
the same terms as those described above for offers and sales made pursuant to
the offer, although the price of shares sold to additional offerees is expected
to differ based on then-prevailing market conditions. Any material differences
in the terms of sales to additional offerees from those made pursuant to the
rights offering would be described in a supplement to this prospectus.
PLAN OF DISTRIBUTION -- SUBSCRIPTION AGENT, SOLICITING AGENT AND INFORMATION
AGENT
DSI is initially making this rights offering directly to eligible HTE
shareholders, option holders, employees and directors. DSI may appoint a
soliciting agent for the rights offering prior to the commencement of, or during
the rights offering to solicit purchases during the rights offering from rights
holders and from other persons DSI selects for any of the shares remaining
unpurchased as of the close of the rights offering. DSI will negotiate the fees
that the soliciting agent will receive but in no event will these fees exceed 5%
of the gross proceeds of the aggregate subscription price of shares sold by such
soliciting agent, other than proceeds received from HTE or from officers and
directors of DSI who have committed to exercise their rights. See "-- Minimum
Subscription Amount." Soliciting fees will not be paid on any undesignated
exercise rights.
DSI also expects to reimburse any soliciting agent for its accountable
expenses up to an agreed upon amount. DSI may also indemnify any soliciting
agents or dealers against specified liabilities, including liabilities under the
Securities Act, which it may incur in connection with services rendered by it.
Where shares are held indirectly through a broker, bank or other institution DSI
will reimburse the institutions' reasonable out-of-pocket costs in distributing
this prospectus and other materials to beneficial owners of the stock.
DSI has appointed its transfer agent, Continental Stock Transfer & Trust
Company, to assist with the rights offering in the role of subscription agent.
You should deliver your subscription certificate, payment of the subscription
price and notice of guaranteed delivery, if applicable, to the subscription
agent. The address to which these documents and payment should be delivered is:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, NY 10004
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
The subscription agent will hold all subscriptions and subscription
proceeds in escrow until the earlier of the termination or close of the rights
offering and the acceptance or rejection of the subscription by DSI. The
subscription agent will be responsible for
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delivering stock certificates and refunds to rights holders if the rights
offering is terminated or if a subscription certificate is rejected.
Subscription proceeds held in the escrow account will be invested in bank
money-market accounts. Subscribers may not withdraw funds from the escrow
account. During any period in which subscription proceeds are held in escrow,
interest earned thereon will be retained by DSI. Escrowed proceeds will be
released to DSI on the date that the applicable subscription certificate is
accepted by DSI. DSI will pay the fees and expenses of the subscription agent in
connection with the rights offering.
DSI may also engage the services of an information agent to assist DSI in
the provision of information related to the offering to prospective investors.
In exchange for services provided by any such information agent, DSI would
expect to pay a customary fee and reimbursement of reasonable expenses incurred.
If you have questions or need assistance concerning the procedure for
exercising the rights, or if you would like additional copies of this
prospectus, the Instructions or the Notice of Guaranteed Delivery, you should
contact us, whereupon we may direct you to our information agent if we have
retained one.
EXERCISE OF RIGHTS
You may exercise your rights, in whole or in part, by delivering to the
subscription agent, at or prior to 5:00 p.m., EST, on , 2000, or such
later date as to which DSI may extend the rights offering:
- Your properly completed and duly executed subscription certificate; and
- Any required signature guarantees or other supplemental documentation;
and
- Your payment in full of $1.00 per share of DSI common stock subscribed
for under the subscription privilege.
DSI may reject any subscription documents the subscription agent receives
after 5:00 p.m., EST, on , 2000, regardless of when the documents
were originally mailed.
METHOD OF PAYMENT
Payments for the shares must be made in U.S. dollars for the full number of
shares you have subscribed for either by (a) check or bank draft drawn upon a
U.S. bank payable to Continental Stock Transfer & Trust Company, as subscription
agent, or (b) wire transfer of immediately available funds to the subscription
agent at , ABA No. , for the credit to the account of
Continental Stock Transfer & Trust Company, as escrow agent for DSI, Account No.
. Any wire transfer of funds should clearly indicate the identity of the
rights holder who is paying the subscription price by the wire transfer. The
subscription price will be deemed to have been received by the subscription
agent only upon (1) clearance of any uncertified check, (2) receipt by the
subscription agent of any certified check or bank draft drawn upon a U.S. bank
or (3) receipt of good funds in the subscription agent's account designated
above.
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IF PAYING BY UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS PAID IN
THIS MANNER MAY TAKE UP TO FIVE BUSINESS DAYS TO CLEAR. ACCORDINGLY, HOLDERS OF
RIGHTS WHO WISH TO PAY THE SUBSCRIPTION PRICE BY MEANS OF UNCERTIFIED PERSONAL
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CHECK ARE URGED TO MAKE PAYMENT SUFFICIENTLY IN ADVANCE OF THE DATE ON WHICH THE
RIGHTS EXPIRE TO ENSURE THAT SUCH PAYMENT IS RECEIVED AND CLEARED BY SUCH DATE
AND ARE URGED TO CONSIDER PAYMENT BY MEANS OF CERTIFIED OR CASHIER'S CHECK,
MONEY ORDER OR WIRE TRANSFER OF FUNDS.
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GUARANTEED DELIVERY PROCEDURES
If you want to exercise your rights, whether in whole or in part, but time
will not permit your subscription certificate to reach the subscription agent on
or prior to 5:00 p.m., EST, on , 2000, you may exercise your rights
if you satisfy the following guaranteed delivery procedures:
- You send, and the subscription agent receives, payment in full for each
share of common stock being purchased through the subscription privilege
in the method described above under "The Offering -- Method of Payment,"
on or prior to 5:00 p.m., EST, on , 2000;
- You send, and the subscription agent receives, on or prior to 5:00 p.m.,
EST, on , 2000, a notice of guaranteed delivery,
substantially in the form provided with the attached instructions, from a
member firm of a registered national securities exchange or a member of
the National Association of Securities Dealers, Inc. or a commercial bank
or trust company having an office or correspondent in the United States.
The notice of guaranteed delivery must state your name, the number of
rights that you hold, the number of shares of common stock that you wish
to purchase under the subscription privilege. The notice of guaranteed
delivery must guarantee the delivery of your subscription certificate to
the subscription agent within three business days following the date of
the notice of guaranteed delivery; and
- You send, and the subscription agent receives, your properly completed
and duly executed subscription certificate and the related nominee holder
certification, if applicable, including any required guarantees, within
three business days following the date of your notice of guaranteed
delivery. The notice of guaranteed delivery may be delivered to the
subscription agent in the same manner as your subscription certificate at
the addresses set forth above under "The Offering -- Plan of
Distribution -- Subscription Agent, Soliciting Agent and Information
Agent" or may be transmitted to the subscription agent by facsimile
transmission, to facsimile number (212) 509-5150. You can obtain
additional copies of the form of notice of guaranteed delivery by
requesting it from the subscription agent at the same address.
SIGNATURE GUARANTEES
Your signature on each subscription certificate must be guaranteed by an
Eligible Guarantor Institution, as defined in Rule 17Ad-15 of the Securities
Exchange Act of 1934, and required under the standards and procedures adopted by
the subscription agent.
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Eligible Guarantor Institutions include banks, brokers, dealers, credit unions,
national securities exchanges and savings associations.
Signatures on the subscription certificate do not need to be guaranteed if:
- the subscription certificate provides that the shares of common stock to
be purchased are to be delivered directly to the record owner of such
rights; or
- the subscription certificate is submitted for the account of a member
firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc., or a commercial bank or
trust company having an office or correspondent in the United States.
SHARES HELD FOR OTHERS
If you hold shares of HTE common stock for others on , 2000, you
should provide a copy of this prospectus to the respective beneficial owners of
those shares as soon as possible, ascertain such beneficial owners' intentions
and obtain instructions with respect to the rights, as set forth in the
instructions we have provided to you for your distribution to the beneficial
owners. If the beneficial owner so instructs, you should complete subscription
certificates and submit them to the subscription agent with the proper payment.
If you hold shares of HTE common stock for the account(s) of more than one
beneficial owner, you may exercise the number of rights to which all such
beneficial owners in the aggregate otherwise would have been entitled had they
been direct record holders of HTE common stock on the record date for the rights
offering, provided that, you, as a nominee record holder, make a proper showing
to the subscription agent by submitting the form entitled "Nominee Holder
Certification" which we will provide to you with your rights offering materials.
If you are a beneficial owner of HTE common stock or you will receive your
rights through a broker, custodian bank or other nominee, we will ask your
broker, custodian bank or other nominee to notify you of this rights offering.
If you wish to exercise your rights, you will need to contact your broker,
custodian bank or nominee and request it to effect the transaction in accordance
with your instructions. To indicate your decision with respect to your rights,
you should complete and return to your broker, custodian bank or other nominee
the form entitled "Beneficial Owners Election Form." You should receive this
form from your broker, custodian bank or other nominee with the other rights
offering materials. If you wish to obtain a separate rights certificate, you
should contact the nominee as soon as possible and request that a separate
rights certificate be issued to you. You should be aware that nominee record
holders may establish deadlines for receiving instructions from beneficial
holders significantly in advance of the expiration date for the rights.
AMBIGUITIES IN EXERCISE OF THE RIGHTS
If you do not specify the number of rights being exercised on your
subscription certificate, or if your payment is not sufficient to pay the total
subscription price for all of the shares that you indicate you wish to purchase,
you will be deemed to have exercised the maximum number of rights that could be
exercised for the amount of the payment that the subscription agent receives
from you.
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If your payment exceeds the total subscription price for all of the rights
shown on your subscription certificate, your payment will be applied in the
following order:
- to subscribe for the number of shares, if any, that you indicated on the
subscription certificate(s) that you wished to purchase through your
basic subscription privilege; and
- to subscribe for shares of common stock until your basic subscription
privilege has been fully exercised.
Any excess payment remaining after the foregoing allocation will be returned to
you as soon as practicable following the closing of the rights offering by mail,
without interest or deduction.
OUR DECISIONS ARE BINDING
All questions concerning the timeliness, validity, form and eligibility of
any exercise of rights will be determined by us and our determinations will be
final and binding. We reserve the right, in our sole discretion, to waive any
defect or irregularity, or permit a defect or irregularity to be corrected
within such time as we may determine, or reject the purported exercise of any
right. Subscriptions will not be deemed to have been received or accepted until
all irregularities have been waived or cured within such time as we determine in
our sole discretion. We reserve the right, in our sole discretion, to reject any
purchases not properly submitted or the acceptance of which would, in the
opinion of our counsel, be unlawful. Neither HTE, DSI, the information agent, if
any, the soliciting agent, if any, nor the subscription agent will be under any
duty to give notification of any defect or irregularity in connection with the
submission of subscription certificates or incur any liability for failure to
give such notification.
Any questions or requests for assistance concerning the method of
exercising rights or requests for additional copies of this prospectus should be
directed to DSI at (407) 975-0000, whereupon we may direct you to our
subscription agent or our information agent, if we have retained one.
RIGHT TO TERMINATE OR MODIFY RIGHTS OFFERING
We may withdraw the rights and terminate the rights offering at any time
prior to the expiration of the rights, for any reason. If we withdraw the rights
and terminate the rights offering, any funds received from rights holders will
be promptly refunded by the subscription agent without interest or penalty. The
DSI board of directors, in its sole discretion, may amend the terms and
conditions of the rights and the offering at any time prior to the expiration of
the rights.
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THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION CERTIFICATE SHOULD BE READ
CAREFULLY AND FOLLOWED IN DETAIL. DO NOT SEND SUBSCRIPTION CERTIFICATES TO HTE
OR TO DSI. THE METHOD OF DELIVERY OF SUBSCRIPTION CERTIFICATES AND PAYMENT OF
THE SUBSCRIPTION PRICE TO THE SUBSCRIPTION AGENT WILL BE AT THE ELECTION AND
RISK OF THE RIGHTS HOLDERS, BUT IF SENT BY MAIL, IT IS RECOMMENDED THAT SUCH
CERTIFICATES AND PAYMENTS
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<PAGE> 33
BE SENT BY REGISTERED MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, AND
THAT A SUFFICIENT NUMBER OF DAYS BE ALLOWED TO ENSURE DELIVERY TO THE
SUBSCRIPTION AGENT AND CLEARANCE OF PAYMENT AT OR PRIOR TO 5:00 P.M., EST, ON
, 2000.
- --------------------------------------------------------------------------------
RESTRICTIONS ON TRANSFERABILITY OF RIGHTS
The subscription rights may be exercised, in whole or in part, by the
persons to whom the rights are granted. You may, however, transfer your rights
to immediate family members (spouses and lineal descendants only). Otherwise,
your subscription rights are not transferable.
PROCEDURES FOR DEPOSITORY TRUST COMPANY PARTICIPANTS
We expect that you will be able to exercise your subscription privilege
through the facilities of the Depository Trust Company. If your rights are held
of record through the Depository Trust Company, you may exercise your basic
subscription privilege by instructing the Depository Trust Company to transfer
your rights from your account to the account of the subscription agent, together
with certification as to the aggregate number of rights you are exercising and
the number of shares of our common stock you are subscribing for under your
subscription privilege and your subscription price payment for each share you
subscribed for under your subscription privilege.
MINIMUM SUBSCRIPTION AMOUNT
We are conducting the rights offering on a best efforts basis. Thus, we
cannot guarantee that any of our shares will be sold other than to directors and
officers of DSI to the extent they carry out their stated intentions to
subscribe for 1,201,223 shares in the aggregate. The rights offering is not
conditioned upon DSI's receipt of subscriptions for any minimum number of shares
of DSI common stock. However, we may cancel the rights offering at any time
prior to its completion, in which case all subscription payments will be
returned without interest or penalty.
NO REVOCATION
Once you exercise your subscription privilege, you may not revoke that
exercise. Rights not exercised prior to their expiration will be null and void
as of and after such time.
NO BOARD RECOMMENDATION
An investment in DSI common stock must be made in accordance with each
investor's evaluation of his or its best interest. Neither the board of
directors of HTE nor the board of directors of DSI makes any recommendation
regarding whether rights holders should exercise their rights.
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<PAGE> 34
NO FRACTIONAL SHARES
If you are an HTE option holder subscribing for a fraction of a share, the
number of shares you will be entitled to receive will be rounded up to the
nearest whole number.
STATE AND FOREIGN SECURITIES LAW
The rights may not be exercised by any person, and neither this prospectus,
nor the subscription certificate shall constitute an offer to sell or a
solicitation of an offer to purchase any shares of DSI common stock in any
jurisdiction in which such transactions would be unlawful.
No action has been taken in any jurisdiction outside the United States to
permit offers and sales of the rights or the offer, sale or distribution of the
shares of DSI common stock. Consequently, DSI may reject subscriptions that
relate to the exercise of rights by any holder of rights outside the United
States, and DSI may also reject subscriptions from holders in jurisdictions
within the United States and DSI may refuse to distribute rights to any eligible
subscriber if DSI or HTE should determine that it may not lawfully issue
securities to such subscribers. DSI and HTE may do so even if it could qualify
the securities for sale or distribution by taking other actions or modifying the
terms of the offering or the distribution in such jurisdictions which either
corporation may decline to do in its sole discretion. In such event, rights
holders who are residents of these jurisdictions will not be eligible to
participate in the rights offering.
Subscription certificates will not be mailed to eligible subscribers whose
addresses are outside the United States or who have an APO or FPO address, but
will be held by the subscription agent for their account. To exercise such
rights, these subscribers must notify the subscription agent by the expiration
date and must establish to the satisfaction of the subscription agent that such
exercise is permitted under applicable law.
USE OF PROCEEDS
The primary purposes of this offering are to obtain additional capital,
create a public market for the common stock and facilitate future access to
public markets. The gross proceeds to be received by DSI from the rights
offering depends on the number of shares purchased. Accordingly, gross proceeds
to DSI from the rights offering and the HTE investment of $1,000,000 in Series A
preferred stock and $2,000,000 in Series B preferred stock ranges from
approximately $4,200,000, if no shares are purchased other than by the DSI
officers and directors, to approximately $19,300,000, net of estimated maximum
solicitation fees (but excluding the impact of offering expenses), if all of the
rights are exercised (which amount includes HTE's investment of $1,000,000 in
Series A preferred stock). Except for the rights which DSI directors and
officers plan to exercise, no assurance can be given as to the actual number of
shares that will be purchased. Regardless of the number of shares purchased, DSI
has estimated that the expenses for the offering will be approximately $372,780.
DSI intends to use the net proceeds that it receives from the offering and
HTE's investment as follows:
- to fund anticipated operating losses, including sales and marketing
expenses and payments due under strategic relationships and intercompany
agreements with HTE;
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<PAGE> 35
- to provide the working capital required to enable us to fulfill existing
demand for products and services;
- to provide working capital to enable us to expand into new geographic
markets;
- to create new products and services; and
- to further develop technology, common infrastructure and operating
platforms.
We expect to use the remaining net proceeds from this offering for general
working capital and other general corporate purposes. In addition, in the
ordinary course of business we evaluate potential acquisitions of businesses and
technologies. Although we have no current commitments or agreements with respect
to any acquisition, we might in the future use a portion of the proceeds to pay
for acquisitions.
Pending these uses, the net proceeds of this offering will be invested in
short-term, investment-grade, interest-bearing investments or accounts.
The amounts we actually spend for these purposes may vary significantly and
will depend on a number of factors, including the number of rights exercised,
our future revenue and cash generated by operations and the other factors
described under "Risk Factors." Therefore, we will have broad discretion in the
way we use the net proceeds. For more information, see "Risk Factors -- Our
management will retain broad discretion in the use of proceeds from this
offering and may use the proceeds in ways that may not increase our operating
results or market value."
DIVIDEND POLICY
DSI has not declared or paid any cash dividends on its common stock since
its inception and does not expect to pay any cash dividends on its common stock
in the foreseeable future. DSI currently intends to retain future earnings, if
any, to finance the expansion of its business.
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<PAGE> 36
DILUTION
As of October 31, 1999, DSI had a negative net tangible book value
available to common shareholders of approximately $(815,300), or approximately
$(0.65) per share of common stock. Net tangible book value per share of common
stock represents the amount of DSI's tangible assets less total liabilities and
preferred stock liquidation value, divided by 1,250,000 shares. After giving
effect to the sale of the minimum and maximum number of shares offered hereby at
the subscription offering price of $1.00 per share, and the application by DSI
of the estimated gross proceeds, the pro forma net tangible book value as of
October 31, 1999, would have been $385,923 and $18,410,583 or $0.16 per share
and $0.90 per share, respectively. This represents an immediate increase in net
tangible book value of $0.81 and $1.55 per share, respectively, to HTE as the
sole existing shareholder and an immediate dilution of $0.84 to $0.10 per share,
respectively, to new investors purchasing shares in the minimum and maximum
offering. The following table illustrates the per share dilution in net tangible
book value per share to new investors in the minimum and maximum offering.
<TABLE>
<CAPTION>
MINIMUM OFFERING MAXIMUM OFFERING
---------------- ----------------
<S> <C> <C>
Offering price per share...................... $ 1.00 $ 1.00
------ ------
Net tangible book value per common share as
of October 31, 1999, prior to the
offering................................. (0.65) (0.65)
Increase in net tangible book value per
common share resulting from the
offering................................. 0.81 1.55
------ ------
Pro Forma net tangible book value per common
share as of October 31, 1999, after the
offering.................................... $ 0.16 $ 0.90
====== ======
Dilution to new DSI common shareholders....... $ 0.84 $ 0.10
====== ======
</TABLE>
33
<PAGE> 37
CAPITALIZATION
The following table sets forth the capitalization of DSI as of October 31,
1999, on a pro forma basis to give effect to HTE's $1,500,000 investment
(assuming exercise of its option to purchase an additional 250,000 shares of
Series A preferred stock), and as adjusted to give effect to (1) the purchase of
shares only by certain DSI officers and directors for a total of 1,201,223
purchased shares and the purchase of the Series B preferred stock, and (2) the
maximum purchase of 19,225,883 shares. The data set forth below should be read
in conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operation" and the financial statements and the notes thereto
included elsewhere in this prospectus.
<TABLE>
<CAPTION>
OCTOBER 31, 1999
-------------------------------------
PRO FORMA
-------------------------
AS ADJUSTED AS ADJUSTED
ACTUAL MINIMUM(4) MAXIMUM(4)
--------- ----------- -----------
<S> <C> <C> <C>
Note payable to HTE............................. $ 737,075 $ 737,075 $ 737,075
--------- ---------- -----------
Series B preferred stock(1)..................... -- 2,000,000 --
--------- ---------- -----------
Shareholders' equity:
Series A preferred stock(2)................... -- 1,500,000 1,500,000
Common stock(3)............................... 125 245 2,048
Additional paid-in capital.................... 799,875 2,000,978 20,023,835
Accumulated deficit........................... (585,667) (585,667) (585,667)
--------- ---------- -----------
Total shareholders' equity................. 214,333 2,915,556 20,940,216
--------- ---------- -----------
Total capitalization....................... $ 951,408 $5,652,631 $21,677,291
========= ========== ===========
</TABLE>
- -------------------------
(1) See "Description of Securities -- Series B Preferred Stock" for information
regarding the terms of this security.
(2) See "Description of Securities -- Series A Preferred Stock" for information
regarding the terms of this security. See also "Certain Relationships and
Related Party Transactions -- Investment and Distribution Agreement."
(3) DSI will have between 2,451,223 and 20,475,883 shares of common stock
outstanding upon the closing of the offering.
(4) Excludes the impact of solicitation fees and other offering expenses.
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<PAGE> 38
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
DSI's financial statements and the Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included
elsewhere in this prospectus. The financial information as of October 31, 1999,
and for the period from June 18, 1999, to October 31, 1999, reflects the
financial position and results of operations of DSI. The financial information
as of December 31, 1998, and for the year ended December 31, 1998, and for the
period from January 1, 1999, to June 17, 1999, reflects the financial position
and results of operations of the Predecessor. The following selected financial
information below has been derived from and is qualified by reference to DSI's
and the Predecessor's financial statements audited by Arthur Andersen LLP,
independent certified public accountants, included elsewhere herein.
<TABLE>
<CAPTION>
INFORMATION ON DEMAND, INC.
(PREDECESSOR) DEMANDSTAR.COM, INC.
----------------------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
FOR THE YEAR JANUARY 1, 1999 JUNE 18, 1999
ENDED TO TO
DECEMBER 31, 1998 JUNE 17, 1999 OCTOBER 31, 1999
----------------- --------------- --------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ 33,718 $ 132,135 $ 128,583
Operating expenses:
Marketing and advertising... 12,350 15,866 181,186
Research and development.... 125,010 136,279 82,401
General and
administrative........... 170,741 246,130 289,903
Depreciation and
amortization............. -- -- 146,660
--------- --------- ---------
Total operating
expenses............... 308,101 398,275 700,150
--------- --------- ---------
Operating loss................ (274,383) (266,140) (571,567)
Interest expense.............. -- -- 14,100
--------- --------- ---------
Loss before income tax
benefit..................... (274,383) (266,140) (585,667)
Income tax benefit............ -- -- --
--------- --------- ---------
Net loss................. $(274,383) $(266,140) $(585,667)
========= ========= =========
Basic and diluted net loss per
common share................ $ (0.47)
=========
Weighted average number of
common shares outstanding... 1,250,000
=========
</TABLE>
<TABLE>
<CAPTION>
INFORMATION ON
DEMAND, INC.
(PREDECESSOR)
----------------- DEMANDSTAR.COM, INC.
DECEMBER 31, 1998 OCTOBER 31, 1999
----------------- --------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash........................................................ $ 17,564 $ 41,253
Working deficit............................................. (208,613) (370,429)
Total assets................................................ 19,255 1,169,805
Note payable to HTE......................................... -- 737,075
Total shareholder's equity (deficit)........................ (208,613) 214,333
</TABLE>
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<PAGE> 39
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Financial Data" and our Financial Statements, including the Notes
thereto, appearing elsewhere in this prospectus. This description contains
certain forward-looking statements that involve risks and uncertainties. Our
actual results could differ significantly from the results discussed in the
forward-looking statements as a result of certain of the factors set forth under
"Risk Factors" and elsewhere in this prospectus.
GENERAL
DSI is a provider of Internet-based procurement systems for government
agencies. DSI's procurement systems enable governments to purchase goods and
services more efficiently and at lower administrative costs while at the same
time providing valuable services to businesses selling to government agencies.
HTE has financed our operations since our inception. These cash flows are not
indicative of the cash flows that would have resulted had DSI been operating as
a separate stand-alone company during the periods presented.
DSI intends to enhance the features of its Internet business. We believe
that our operating expenses will significantly increase as a result of the
financial commitments related to the development of marketing channels, future
strategic relationships and other capital expenditures. We expect to incur
losses and generate negative cash flow from operations for the foreseeable
future. In view of the rapidly changing nature of our business and our limited
operating history, we believe that our historical operating results are not
necessarily meaningful and should not be relied upon as an indication of future
performance.
The year ended December 31, 1998, was primarily a year of startup
operations. Our Predecessor focused on research, development and initialization
of the Predecessor's concept. There were minimal sales and marketing efforts
during this year. The purchase of the business and net assets of Information On
Demand, Inc. by DSI in June of 1999 enabled DSI to accelerate the growth and
development of ideas, as well as increase sales and marketing efforts.
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<PAGE> 40
RESULTS OF OPERATIONS
The following table shows certain statement of operations data expressed as
a percentage of revenue:
<TABLE>
<CAPTION>
THE PREDECESSOR THE COMPANY
----------------------------------- ----------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
JANUARY 1, 1999 JUNE 18, 1999
YEAR ENDED TO TO
DECEMBER 31, 1998 JUNE 17, 1999 OCTOBER 31, 1999
----------------- --------------- ----------------
<S> <C> <C> <C>
Revenue........................... 100.0% 100.0% 100.0%
Operating expenses:
Marketing and advertising....... 36.6 12.0 140.9
Research and development........ 370.8 103.1 64.1
General and administrative...... 506.4 186.3 225.5
Depreciation and amortization... -- 0.0 114.0
------ ------ ------
Total operating expenses..... 913.8 301.4 544.5
------ ------ ------
Operating loss.................... (813.8) (201.4) (444.5)
Interest expense.................. -- -- 11.0
------ ------ ------
Loss before benefit for income
taxes........................... (813.8) (201.4) (455.5)
Benefit for income taxes.......... -- -- --
------ ------ ------
Net loss..................... (813.8)% (201.4)% (455.5)%
====== ====== ======
</TABLE>
REVENUES
Revenues include amounts received from vendors for registration fees and
bid document mailings. Total revenues increased by 673% to $260,718 for the ten
months ended October 31, 1999, from $33,718 for the year ended December 31,
1998. The increase in revenues is due primarily to the increased marketing
effort in 1999 compared to the 1998 focus on research and development.
OPERATING EXPENSES
MARKETING AND ADVERTISING EXPENSES. Marketing and advertising expenses
increased 1496% to $197,052 for the ten months ended October 31, 1999, from
$12,350 for the year ended December 31, 1998. The increase in marketing and
advertising expenses is directly related to the increase in revenues and
primarily resulted from an increased marketing strategy to promote DSI.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased 75% to $218,680 for the ten months ended October 31, 1999, from
$125,010 for the year ended December 31, 1998. In 1998, research and development
was focused on product development. During the ten months ended October 31,
1999, the focus was on expanding our products' features and functionality and
improving the stability and scalability of DSI's systems to support the growth
that is anticipated.
GENERAL AND ADMINISTRATIVE EXPENSES. General and administrative expenses,
which include the costs of corporate operations, finance and accounting, human
resources and other general operations, increased 214% to $536,033 for the ten
months ended October 31, 1999, from $170,741 for the year ended December 31,
1998. The increase in general and administrative expenses is directly related to
the growth in the volume of
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<PAGE> 41
revenues and expenses. This growth was necessary to support the general
operations and infrastructure of DSI.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization of $146,660
resulted from the acquisition of the Predecessor by DSI and the purchase of
miscellaneous equipment and leasehold improvements during the ten months ended
October 31, 1999. There were no comparable expenses in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the purchase of the Predecessor by DSI in June 1999, the
operations were funded primarily through cash generated from operations and
capital contributed from the sole shareholder of the Predecessor.
In conjunction with the purchase of the Predecessor, HTE purchased
1,250,000 shares of DSI's common stock for $800,000. In addition to the stock
purchase, HTE also loaned DSI $200,000 to purchase the business and certain net
assets of the Predecessor and $537,075 to fund operations under an informal
lending arrangement. As of October 31, 1999, the balance under the informal
lending arrangement was $737,075 and was transferred into the Note Payable to
HTE. (See "Certain Relationships and Related Party Transactions -- HTE Loan.")
To address the funding needs of DSI, in December 1999, our board of directors
authorized management to (i) file a registration statement with the U.S.
Securities and Exchange Commission on Form S-1 to pursue a rights offering of
our common stock, (ii) execute an investment and distribution agreement with
HTE, and (iii) execute a Conditional Series B Stock Purchase Agreement with HTE
and certain DSI employees and directors. Management believes that the funds
generated by the transactions noted above will be sufficient to fund operations
for at least the next twelve months. Net cash used in operating activities
totaled $48,206 and $465,162 for the year ended December 31, 1998, and the ten
months ended October 31, 1999, respectively. The increase in the net cash used
primarily resulted from the increased operations and loss experienced in the
1999 period.
Net cash used in investing activities (capital expenditures, cash paid for
acquisitions) totaled $1,089,661 in the ten months ended October 31, 1999. There
were no comparable cash flows for the year ended December 31, 1998. The cash
used in 1999 was primarily related to the acquisition of the Predecessor by DSI.
Net cash provided by financing activities totaled $65,770 and $1,583,297
for the year ended December 31, 1998, and the ten months ended October 31, 1999,
respectively. The 1998 period reflects the capital contributed by the sole
shareholder of the Predecessor. The 1999 period includes contributions of the
sole shareholder of the Predecessor, along with the purchase of common stock by
HTE and funding under an informal lending arrangement with HTE.
YEAR 2000 READINESS
The Year 2000 issue results from computer systems using two digits rather
than four to represent the year so that a date using "00" is recognized as the
year 1900 rather than the year 2000. In addition, the Year 2000 is a leap year,
and some computer programs may not properly provide for February 29, 2000. This
situation may disrupt the operation of both our and third party's computer
systems.
We have run tests of our proprietary software and systems for Year 2000
rollover and believe that our proprietary software and systems are Year 2000
compliant. Based on the
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<PAGE> 42
foregoing, it is not expected that our internally developed software and systems
will be adversely affected by date changes in the year 2000. In addition to
tests we have previously conducted, we currently plan to run additional tests
the first Monday after January 1, 2000 to make sure all systems flow properly.
Although we do not expect any Year 2000 issues to arise during that testing
based on the results of previous tests, there can be no assurance that such
issues will not occur. To the extent that functionality issues pertaining to the
Year 2000 rollover arise during that testing, we will address them at that time.
We do not believe that the costs involved in any such remediation efforts at
that time will be material.
Because our products and services depend significantly on information
provided by and transactions conducted with our government clients, our ability
to deliver services and transactions properly to our customers depends on these
government clients being Year 2000 ready. We cannot assure you that our
government clients are Year 2000 ready. If they are not, their information
systems may be disrupted and our ability to provide services and transactions
curtailed. Our business, results of operations and financial condition would be
harmed as a result.
In addition, the software and systems of financial institutions, utility
companies, Internet access companies, third-party service providers and others
outside of our control may not be Year 2000 ready. If these entities are not
Year 2000 ready, a systemic failure beyond our control could result, including a
prolonged Internet, telecommunications or general electrical failure. This type
of failure would make it difficult or impossible to use the Internet or access
our network. If a prolonged failure of this type occurs, our business and
financial condition would be harmed. We do not have a contingency plan as such
in the event of third party Year 2000 failures. However, we believe we should be
able to identify alternative vendors if the need arises.
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<PAGE> 43
BUSINESS
OVERVIEW
We are a provider of Internet-based procurement systems for governmental
agencies. Our procurement systems enable government agencies to purchase goods
and services more efficiently and at lower administrative costs while at the
same time providing valuable services to businesses selling to government
agencies. Our services are provided at no cost to participating governmental
agencies. Businesses that provide goods and services to agencies enrolled in our
program are provided the opportunity to register with us as registered vendors
for an annual fee. Our services currently include:
- Vendor database consolidation and management
- Notification, by e-mail and/or fax, of bid/RFP opportunities to
registered vendors
- Web site development, maintenance and hosting
- Fax-on-demand services for participating agencies
- Web-enabled database of all procurement information from participating
agencies
- Document production and distribution services
DSI began offering services to Florida governmental agencies in May 1998.
DSI now serves over two dozen governmental agencies and over four thousand
vendors, primarily in Florida where we chose to concentrate our initial
marketing efforts. Our contracts with our government clients have one to five
year terms, of which three-year terms are the most typical. We intend to
increase our revenues by selling our existing products and services throughout
the United States to governmental agencies at the federal, state and local
levels. We are also developing and intend to deliver new products and services
to our constituent governmental agencies and vendors.
INDUSTRY BACKGROUND
THE GOVERNMENT PROCUREMENT MARKET
Our primary market focuses are local and state government procurement
agencies. According to the U.S. Census Bureau (as cited by VAR Business, a trade
magazine), there are approximately 85,000 local government "business units"
consisting of approximately 3,043 counties, 19,279 municipalities, 16,656
townships and towns, 14,422 school districts and 31,555 special districts.
Government procurement practices are highly regulated and have not substantially
changed in the past twenty years. Because government agencies are spending
public dollars to procure goods and services, the process requires several steps
and restrictions that do not apply to the private procurement industry. It is
these extra steps that can lead to inefficiencies and additional expense.
Although electronic procurement systems are available, they are typically legacy
systems which are viewed as expensive to obtain and maintain and do not connect
different procurement agencies. The inability to connect with other agencies
leads to the duplication of efforts which is time consuming and costly. DSI was
developed in cooperation with several forward thinking procurement agencies in
order to address the deficiencies in their current practices.
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<PAGE> 44
TRADITIONAL GOVERNMENT PROCUREMENT PRACTICES
Historically, vendors who wish to sell goods or services to a particular
governmental agency are required to submit an application to that agency in
order to be placed on the agency's vendor list. Vendors usually describe what
goods or services they provide or wish to provide to the agency by means of
commodity codes. Although there are several national coding systems, i.e., NIGP
and SIC, many agencies have adopted their own proprietary coding systems. This
has sometimes developed from past practices or
may be dictated by their existing or previous legacy accounting and general
finance computer systems. This has led to frustration on the part of the vendor
because there is no universally accepted form or coding system. Many smaller
businesses simply do not have the time or human resources to apply to agencies
outside their immediate service areas, thereby limiting their potential sales
reach. To date, very few agencies have charged vendors to be on their vendor
list. Because of resource limitations, most agencies rarely attempt to update
their vendor databases. Historically vendors rarely notify agencies when they go
out of business or change location. This leads to a large amount of incorrect or
inaccurate data in the agency's system.
When an agency determines it has a need for a particular good or service in
excess of the agency's "bid threshold" (i.e., the dollar threshold over which
the agency must ask for bids), it develops a written bid or request for proposal
(RFP). The agency then advertises the bid/RFP opportunity in several ways:
- Notifying vendors on their vendor list by sending them a postcard or
letter or in some cases sending the entire bid package;
- Advertising in the legal section of local newspapers, usually at an
average cost of $100-$200 per ad per day;
- Posting bid requests on bulletin boards in the agency's building; or
- Selectively distributing the bid request to other bid reporting services
such as the Dodge Report.
Vendors who are interested in reviewing the bid/RFP opportunity and who
have not received the entire package with the first notification are then
required to request a copy of the bid package from the agency. Most agencies
have provided the duplication and mailing of the package to the vendor at no
cost. Many agencies preprint the packages and sometimes experience substantial
waste if demand is less than anticipated.
Vendors wishing to submit a bid must fill out the forms included in the bid
package and return them (usually with multiple copies) to the agency by a
predetermined date and time. The bids are opened publicly and the results are
tabulated and posted for public inspection. After appropriate review of the
vendor by agency staff, awards are made. During the interval between
announcement of the bid and the award, agencies may field multiple requests for
information from vendors and other sources for a listing of vendors requesting
bid packages as well as award information. Since this is public information in
most states, this places an additional clerical burden on procurement staffs.
Regulations permit governmental agencies to use other agencies' contracts
instead of writing their own, a process known as "piggybacking." Traditionally,
there has not been a good way for agency personnel to learn of other existing
contracts for similar goods and services. Regional purchasing cooperatives and
other initiatives have proven to be limited
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<PAGE> 45
in scope and geographic reach. Many agencies rely on simply calling their peers
in neighboring agencies, a time consuming and often inefficient practice.
Needs for goods and services below the bid thresholds are typically
solicited by telephone or fax in what is called a phone or fax quote. Because of
staffing limitations, agencies typically are only required to solicit three
phone or fax quotes for any given item.
THE LIMITS OF TRADITIONAL GOVERNMENT TRANSACTION METHODS
Traditionally, government agencies have transacted, and in many cases
continue to transact, with businesses and citizens using processes that are
inconvenient and labor-intensive, require extensive paperwork and use large
amounts of scarce staff resources. Transactions and information requests are
often made in person or by mail and are processed manually, increasing the
potential for errors and the need for numerous revisions and follow-up. Even
newer methods, including telephone response systems, tape exchanges and dial-up
computer networks, rely on multiple systems and potentially incompatible data
formats, and require significant expertise and expenditures to introduce and
maintain. As a result, businesses and citizens often have no choice but to face
costly delays to complete essential tasks. These delays include waiting in line
at a government agency, waiting for answers by telephone or waiting for
responses by mail. Businesses and citizens encounter further inconvenience and
delay because they usually can work with government agencies only during normal
business hours. Even when electronic alternatives are available, they often
require a cumbersome process of multiple contacts with different government
agencies. Increases in the level of economic activity and in the population have
exacerbated these problems and increased the demand for new services.
GROWTH OF THE INTERNET AND ELECTRONIC COMMERCE
The Internet has emerged as a global medium, enabling millions of people
worldwide to share information, communicate and conduct business electronically.
Continued future growth in Internet usage is expected to be driven by the large
and growing number of personal computers (PCs) installed in homes and offices;
the decreasing cost of PCs; easier, faster and cheaper access to the Internet;
improvements in network infrastructure; the proliferation of Internet content;
and, the increasing familiarity with and acceptance of the Internet by
governments, businesses and consumers. In addition, the volume of electronic
commerce has grown in parallel with the Internet itself. Forrester Research, a
market research firm, estimates that business-to-business electronic commerce
will reach $1.3 trillion by 2003, and The Yankee Group, a Boston-based Internet
research firm, estimates that business-to-business electronic commerce will
reach $541 billion in 2003.(1)
EMERGENCE OF THE INTERNET AS A MEDIUM FOR ELECTRONIC GOVERNMENT
The growing acceptance of the Internet and electronic commerce presents a
significant opportunity for the development of electronic government, in which
government agencies conduct transactions and distribute information over the
Internet. By using the Internet, government agencies can increase the number and
efficiency of interactions with constituents without increasing expenditures or
demands on current personnel. In addition, regardless of physical distance,
businesses and citizens can obtain government information
- ---------------
1eBusiness News, "Business-to-Business E-Commerce: The True Future of the
'Net?," June 3, 1999 at ebusiness.dci.com/Articles/9906031.htm.
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quickly and easily over the Internet. This Internet-based interaction reduces
costs for both government and users and decreases response times compared to
providing the same data by mail or special purpose dial-up computer connections.
CHALLENGES TO THE IMPLEMENTATION OF ELECTRONIC GOVERNMENT SERVICES
Despite the potential benefits of electronic government, barriers to
creating successful Internet-based services often preclude governments from
implementing them. Some of these barriers are similar to those the private
sector encounters, including:
- the high cost of implementing and maintaining Internet technology in a
budget-constrained environment;
- the financial, operational and technology risks of moving from older,
established technologies to rapidly evolving Internet technologies;
- the need to quickly assess the requirements of potential customers and
cost-effectively design and implement electronic government services that
are tailored to meet these requirements; and
- the intense competition for qualified technical personnel.
Governments also face some unique challenges that exacerbate the difficulty
of advancing to Internet-based services, including:
- lengthy and political appropriations processes that make it difficult for
governments to acquire resources and to develop Internet services
quickly;
- a diverse and substantially autonomous group of government agencies that
have adopted varying and fragmented approaches to providing information
and transactions over the Internet;
- a lack of a marketing function that assures that services are designed to
meet the needs of businesses and citizens and that they are aware of
their availability; and
- security and privacy concerns that are amplified by the confidential
nature of the information and transactions available from and conducted
with governments and the view that government information is part of the
public trust.
THE DSI SOLUTION
In cooperation with leading, forward-thinking public procurement officials,
DSI has developed a number of services that address their current problems while
positioning the agencies to harness the power of e-commerce. Many procurement
officials have expressed a desire to exploit the Internet but have not had the
resources to develop these solutions. Our Internet-based innovative products and
services, coupled with our policy of providing these services free of charge to
governmental agencies, has led to a rapidly spreading knowledge of DSI in its
markets, and an acceptance of DSI as an industry leader in governmental
purchasing, enabling us to enter into contracts with over two dozen governmental
agencies. It has also led to the development of strategic alliances with state
and national purchasing organizations such as the Florida Association of Public
Purchasing Officials (FAPPO) and the National Institute of Government Purchasing
(NIGP).
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Our Internet-based products and services offer governmental agencies and
their vendors the opportunity to more efficiently and seamlessly communicate
regarding bids, goods and services. By using our Internet-based solutions,
government agencies are able to save administrative costs in bid notification
and follow-up. Governmental agencies are also able to "piggy-back" on other
agency's contracts more easily since they are able to search our sites for
information about other existing contracts for similar goods and services.
Further, DSI is able to provide governmental agencies with a larger vendor
database from which to comparison shop and order goods and services for which
they are not required to obtain bids. Similarly, vendors are able to save time
and expense by registering with DSI only once for multiple agencies. Registered
vendors receive "real time" bid notifications and are able to immediately
download the bid request or RFP at any time of day. We have initially focused
our marketing efforts primarily in Florida and to date have over two dozen
contracts with agencies representing various cities, counties, school districts,
utility districts and aviation authorities throughout Florida. We are also
currently negotiating contracts with agencies in other states.
VENDOR DATABASE CONSOLIDATION AND MANAGEMENT
When DSI signs a contract for services with a participating public
procurement agency, the governmental agency provides DSI with its vendor lists
from which DSI solicits vendor registrations and develops its vendor database.
This eliminates the agency's cost of producing and mailing out vendor
registration applications. It also eliminates the data entry expense associated
with this list. It frees up internal computer resources by allowing the agency
to enter into its system only those vendors that have been awarded a bid.
When DSI contracts with an agency, vendors on the agency's current vendor
list are given the opportunity to register with DSI for purposes of receiving
automatic announcement of future bid opportunities. Vendors who choose not to
register with DSI may still request bid packages and may still submit bids to
the agency, but they will not receive automatic notification via the Internet.
Although it is difficult to judge the response rate of vendors because of the
varying accuracy of the agency's existing vendor database, vendor registration
rates have ranged from 50% to 85%. Vendors pay a subscription fee to receive
information from all participating agencies within a geographic area. The
subscription fee paid is dependent on the method of notification, i.e., fax
versus e-mail. There are substantial discounts for vendors who choose electronic
notification versus fax notification.
To date approximately 20% of DSI's registered vendors elect to subscribe to
all counties offered. This is significant in that as the total vendor database
grows, DSI becomes more attractive to agencies that have small vendor databases.
Agencies generally desire to have a large vendor database because they believe
the greater number of vendors notified, the more competitive bids they will
receive.
Cost savings to an agency vary depending on the size of the agency and the
number of vendors.
VENDOR NOTIFICATION
Agencies contracting with DSI are required to enter all bids above their
bid threshold into the system. Vendors are assured they will receive
announcement for virtually all of the opportunities that match their goods and
services.
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When a participating agency enters a bid into the DSI system, a query is
performed to select out those vendors who match at least one of the commodity
codes chosen by the agency and who have registered to receive information from
that governmental agency. The bid announcement is then sent to the matching
vendors either by fax or e-mail. The fax announcement includes an order form for
those wishing a hard copy of the bid. Vendors receiving electronic notification
receive an e-mail announcing the bid and an accompanying hyperlink which when
clicked on, logs the vendor onto DSI's website and takes the vendor directly to
the subject bid information. Vendors registered with DSI can download bid
documents at no charge from DSI's website. Vendors requesting hardcopies of the
bid pay a per page duplication cost plus shipping and handling.
WEB SITE DEVELOPMENT, MAINTENANCE AND HOSTING
Many agencies have recognized the need to develop a presence on the
Internet but because of budgetary constraints have not had the resources to do
so. DSI offers to develop, maintain and host the procurement portion of the
agency's web site. Typical information includes a home page, personnel section,
policies and procedures and a dynamic bids information page. The bids
information page, which is a dynamically generated page, is created by a query
to DSI's web-enabled database. This results in up-to-date bid information with
no day-to-day intervention by DSI staff. Informational technology staff from the
agency are relieved of the task of developing and maintaining such a site and
because the links are directed to DSI's servers, they feel comfortable with the
fact that there is no penetration of the existing firewall.
FAX ON DEMAND SERVICES
Several years ago agencies starting exploring fax on demand (FOD)
technology as a way to automate their information processes. Several agencies
invested in the technology while others found the cost prohibitive. Several
agencies have abandoned the system because of the demand on human and telephone
resources. A typical FOD installation cost between $12,000 and $50,000 and
requires dedicated incoming telephone lines. The learning curve can be steep and
the system usually requires a system administrator and daily maintenance. It is
generally accepted among agencies that while FOD is desirable, the Internet is
rapidly surpassing it.
DSI maintains a large-scale FOD system in its office. The system allows DSI
to offer an individual FOD telephone number for every participating agency.
Because the scripting is identical for every agency, development and
implementation time is minimal. DSI has developed a unique document numbering
scheme used by all participating agencies that allows vendors quick access to
standard information. Because some small or disadvantaged businesses may have
access to a fax machine but not the Internet, this allows the agency another
means of communicating with these smaller yet often politically vocal vendors.
By offering the FOD as well as Internet access to the information, agencies can
assure the governing bodies that they are not excluding the smaller businesses
from participating in the bid process.
Because routine bid information such as plan holder's lists and award
information are available on both the Internet and the FOD, agencies have
directed vendors to these sources thereby freeing them of the burden of fielding
large volumes of incoming telephone calls, eliminating clerical responsibilities
and allowing the agency more time for bid development and analysis.
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WEB-ENABLED DATABASE OF PROCUREMENT INFORMATION
Agency personnel enter all bid information into DSI's web-enabled database
and therefore are responsible for the accuracy of the information. Since agency
personnel have the responsibility for information input and update, the number
of personnel needed by DSI to handle the large volume of bid information is
minimized.
All agencies enter information into a common database using common codes,
which has several advantages. First, it allows agencies to search for similar
bids without the necessity of calling other agencies. Second, it allows all this
information to be shared without requiring any changes to an agency's internal
systems. Because it is more convenient for vendors to register in one place, the
agencies are enjoying a larger and more accurate vendor list. Many agencies have
experienced an appreciable increase in the number of vendors responding to bid
opportunities because a larger number of vendors are being notified.
Our system has comprehensive reporting capabilities that allow agencies to
fulfill their departmental policies with a minimum of effort. Soon to be
released minority vendor reporting functions will further enable the agencies to
meet strict minority and disadvantaged business reporting requirements. Vendor
search and reporting functions will enable vendors to see how much activity they
have had using DSI as well as searching for new potential markets for their
goods and services.
Because the information displayed on both the agencies' and DSI's site is
derived from this web-enabled database, DSI can provide the vendor with the most
current and accurate bid information with little or no intervention from DSI
personnel. This will enable DSI to service a large number of client agencies
without an equally large number of DSI personnel.
DOCUMENT PRODUCTION AND DISTRIBUTION SERVICES
Historically, most agencies have shouldered the cost of producing,
duplicating and mailing bid packages to those vendors who request copies. Some
agencies even pay for overnight services when a vendor requests such. Depending
on the size of the agency and the volume of documents requested, these costs can
easily be in the tens of thousands of dollars per year. In addition to the
production and postage costs, it also takes a significant amount of staff time
to produce and distribute these packages. Many agencies simply make an educated
guess as to the number of copies they will need for a particular project and
contract the work to either an internal or external print shop. Too large an
estimate can lead to wasted copies while too few can lead to vendors having to
wait for their packages. Since most bids are time-sensitive, this latter
scenario is unacceptable to most vendors.
DSI offers document production and distribution services to its client
agencies. DSI has the equipment necessary to reproduce everything from standard
letter sized black and white to full size blueprint and architectural drawings.
Requests for packages by vendors are produced and shipped within 24 hours of
receipt. Vendors are charged a per page fee based on the size of the page and
whether it is black and white or color. A handling fee and postage is added to
the cost and an invoice is sent with the package.
Agencies are encouraged to send DSI an electronic copy of the bid package.
DSI then posts the bid package to both the agency's and DSI's web sites. Vendors
may view and download the bid package, but they are unable to alter its content.
Vendors are rapidly realizing the time and cost savings of downloading the
package versus requesting and
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paying for hard copies. Registered vendors can download the packages at no cost.
Non-registered vendors pay a download fee. An internal audit done by DSI
revealed that the percentage of packages downloaded versus hardcopies has been
increasing. DSI expects this trend to accelerate and is carefully balancing its
acquisition of new duplication equipment with estimated future demand. DSI plans
to post blueprints on the website. This will allow vendors to view and download
these prints at no charge. Downloading construction documents will permit
vendors to incorporate these documents into estimating and planning software
packages they currently utilize.
VENDOR SERVICES
Vendor information can be entered either by the vendor himself through the
website or by DSI staff in the case of a hard copy registration. In either case,
a confirmation notice is sent to the registering vendor either by e-mail or
regular mail. This confirmation letter issues a username and password and lists
the various commodity codes in a file. Vendors are reminded that they are
responsible for maintaining the accuracy of their information should any changes
in their business occur, e.g., new phone or fax number or new e-mail address.
Vendors can modify any portion of their file through the DSI website.
Vendors are advised via their services agreement that DSI does not
guarantee 100% notification of bid opportunities. Multiple attempts are made to
notify matching vendors until at least 90% of matching vendors are reached. As
time and staff permits, additional efforts are made to those vendors that were
unable to be notified by the standard methods.
Current vendors are notified automatically when new agencies, counties or
states are added, allowing them the opportunity to add them to their profile.
DSI customer service representatives are available to answer vendor questions
through e-mail or toll-free telephone numbers.
DSI has developed programs directed at smaller or less technologically
sophisticated vendors. A program announcement is mailed to such vendors inviting
them to attend the free DSI-sponsored program. Vendors who attend are taught how
to use the DSI system and are given a resource kit containing local Internet
access information, rates as well any current promotions by computer companies.
The purpose of the seminar is to alleviate such vendors' apprehension that this
technology might exclude them from the bidding process.
NEW PRODUCTS AND SERVICES
DSI continues to develop enhancements to its existing products and
services. Feedback from vendors and current and potential client agencies is
relayed to DSI's development team. We have recently completed an electronic
pre-qualification process for major road construction projects. This process
eliminates several labor-intensive steps in the process of pre-qualifying
contractors for major construction projects. The technology is also being
utilized in the development of an electronic minority vendor registration and
certification. This process is applicable to any agency that has a minority
certification process.
INSTALLATION, TRAINING AND IMPLEMENTATION
It takes approximately 90 days from the initial signing of a contract with
an agency to the date of full implementation of our Internet-based procurement
solution. Included in
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that time-frame are approximately four hours of training per agency. This is a
substantially shorter time-frame than the customary 12 to 18 month ranges for
installation, training and implementation that providers of customized software
solutions generally face.
CURRENT CONTRACTS
We have initially focused our marketing efforts primarily in Florida and
have entered into over two dozen contracts with agencies representing various
cities, counties, school districts, airport authorities and utility districts
through out Florida. We are currently negotiating contracts with agencies in
other states.
Each of these agencies operates under a separate contract, which provides,
among other things, that DSI will be responsible for notifying vendors of the
agency's solicitation of bids, and that DSI will charge vendors for the
notification service. Most contracts generally have a term of three years with
options to renew at one year increments. Contracts are cancelable by either
party upon 30 days' notice.
SALES AND MARKETING
Our overall marketing strategy is to offer a complete procurement solution
that both vendors and governmental procurement agencies will consider an
outstanding value. Contracting with a greater number of agencies not only serves
to attract more vendors and hence more revenue, but it also increases the size
of the bid library available to the agencies through the connectivity of DSI's
website.
To date, our marketing efforts have focused primarily on individualized
presentations to agencies and presentations at regional and state meetings of
governmental purchasing agencies and procurement departments. Our sales and
marketing staff consisted of our former President, Ronald Brown, until July
1999, when two additional sales and marketing personnel were hired. With the
funding we receive from HTE and this rights offering, we plan to hire additional
sales and marketing personnel for rolling out our products and services to
governmental agencies throughout the United States. Further, we plan to expand
our product presentations to trade shows and other meeting venues of
governmental procurement departments and purchasing agencies, in addition to
continuing to make individualized agency presentations.
COMPETITION
We believe that the principal factors upon which we compete are:
- understanding of government needs;
- the quality, reliability and fit of electronic government services;
- the speed and responsiveness to the needs of businesses and citizens; and
- cost-effectiveness.
Although the market for online information services is rapidly evolving and
intensity competitive, we believe we compete favorably with respect to the
above-listed factors. In order to be successful in the future, we must continue
to respond promptly and effectively to the challenges of technological change
and our competitors' innovations. In most cases, the principal substitute for
our services is a government-designed and managed service that integrates other
vendors' technologies, products and services. Companies that have
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expertise in marketing and providing technical electronic services to government
entities may begin to compete, or may intensify their current competition, with
us by further developing their services and increasing their focus on this piece
of their business and market share. In addition, companies specializing in
business-to-business purchasing services may enter the government market and
companies providing general Internet business solutions to businesses may also
target governments in order to enable such governments to eliminate or reduce
the need to outsource their purchasing requirements. Examples of our current and
potential competitors are as follows:
- System integrators and enterprise resource planning companies, including
American Management Systems, SAP, Oracle and PeopleSoft;
- Traditional government software solution providers (who also compete with
HTE), including J.D. Edwards, SCT and Tyler;
- Traditional and Internet consulting companies, including Andersen
Consulting, IBM, USWeb, Razorfish, eForce, Viant, AppNet and Sapient;
- Internet companies specializing in maintenance, repair and operations and
catalog purchasing, including Trilogy, Procurenet, Agentics, MRO.com,
Concur, Commerce One, PurchasePro, Ariba and Buysense.com (a joint
venture of Ariba and AMS, Inc.);
- Companies that set up Internet community sites and exchanges, including
VerticalNet, Tradex and fastxchange;
- Companies that publish catalogs and bids, including Thomas Publishing,
Ziff-Davis and F.W. Dodge Division of McGraw-Hill;
- Companies that set up specialized and generalized RFP/RFQ sites,
including InternetRFP, Governmentbids.com, RapidRegistration, Govcon.com,
BidSite, Bidnet, Compnet, Worldbid, RFQdata, Wiznet and Powersourcing;
and
- Smaller and regional software and/or consulting companies that may have
existing relationships with local governments
Many of our existing and potential competitors are national or
international in scope, may have greater resources, and may devote a
significantly greater amount of resources to development of their products and
services than we do. These resources could enable our competitors to initiate
severe price cuts or take other measures in an effort to gain market share.
Additionally, in some geographic areas, we may face competition from smaller
consulting firms with established reputations and political relationships with
potential government clients. There can be no assurances that we will be able to
successfully compete with new or existing competitors. If we do not compete
effectively, or if we experience any pricing pressures, reduced margins or loss
of market share resulting from increased competition, our business and financial
condition may be materially adversely affected.
INTELLECTUAL PROPERTY AND PROPRIETARY RIGHTS
We rely on a combination of nondisclosure and other contractual
arrangements with governments, our employees and third parties, and privacy and
trade secret laws to protect and limit the distribution of the proprietary
software, documentation and processes we have developed in connection with the
electronic government products and services we offer. If
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we fail to adequately protect our intellectual property rights and proprietary
information or if we become involved in litigation relating to our intellectual
property rights and proprietary technology, our business could be harmed. Any
actions we take may not be adequate to protect our proprietary rights and other
companies may develop technologies that are similar or superior to our
proprietary technology.
Although we believe that our products and services do not infringe on the
intellectual property rights of others and that we have all rights needed to use
the intellectual property employed in our business, it is possible that we could
in the future become subject to claims alleging infringement of third party
intellectual property rights. Any claims could subject us to costly litigation,
and may require us to pay damages and develop non-infringing intellectual
property or acquire licenses to the intellectual property that is the subject of
the alleged infringement.
TECHNOLOGY AND OPERATIONS
DSI operates a combination of fax on demand (FOD) and Internet services.
While we anticipate having to maintain some FOD services for the foreseeable
future, the primary emphasis of development will be on Internet-related products
and services. All applications are proprietary and are developed and reside on
redundant servers located on our site. Other than an Internet connection, there
are no other local hardware or software requirements for our client agencies and
vendors. Agencies and vendors access the system via any standard web browser
using DSI-issued user name and passwords. Having all software centrally located
eliminates the need for on site installation and/or service.
DSI uses enterprise application servers that have redundant hard drives and
processors and the information is backed up to tape daily and the tapes stored
off site. The system is scaleable and DSI does not anticipate any significant
hardware capacity issues. Additional servers and hard disc storage space can be
added without significant disruption of service. Multiple T1 telephone lines
serve the telephone and web servers.
Multiple layers of security including secure socket layers, proxy servers
and hardware and software firewalls were installed to protect against
unauthorized access to either the data or system hardware. The servers are
locked in an access-controlled room. Access to varying levels of data is
restricted by multiple levels of user access codes. All servers and local
machines are protected by anti-virus software.
A fundamental requirement to conduct business via the Internet is the
secure transmission of information over public networks. If our agency and
vendor clients are not confident in the security of e-commerce, they may not
renew their contracts or registrations which would severely harm our business.
We cannot be certain that advances in computer capabilities, new discoveries in
the field of cryptography, or other developments will not result in the
compromise or breach of the algorithms we use to protect content and
transactions on our websites or proprietary information in our databases. Anyone
who is able to circumvent our security measures could misappropriate
proprietary, confidential information or cause interruptions in our operations.
We may be required to incur significant costs to protect against security
breaches or to alleviate problems caused by breaches. Further, a well-publicized
compromise of security could deter people from using the Internet to conduct
transactions that involve transmitting confidential information. Our failure to
prevent security breaches, or well-publicized security breaches affecting the
Internet in general could adversely affect our business.
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FACILITIES
Currently, all of DSI's operations are housed in 5200 square feet of office
space in Maitland, Florida. Approximately 1100 square feet are used for document
fulfillment operations while the remainder is used for administration,
development and support. Our current facility has adequate capacity for
approximately 15 to 20 more employees. Additional employees could be housed in
the space if multiple shifts in certain work areas are established. The facility
has adequate telephone and power and is located near major transportation
arteries. Although there is no additional space for expansion in the current
facility, there is adequate additional office space at comparable rates nearby.
EMPLOYEES
As of December 15, 1999, DSI had 17 full-time and three part-time
employees. Of these, 5 are in development, 6 are in operations, 4 are in sales
and marketing, and 5 are in administration. None are represented by labor unions
and we consider relationships with our employees to be excellent. We envision
hiring additional staff in all areas as our service area grows. Contracting with
agencies in different time zones will necessitate extending our current hours of
operation.
SOURCES OF REVENUE
Currently DSI has two sources of revenue. The majority of revenues come
from vendor subscriptions. Vendors pay an annual fee that depends on the number
of counties or states they wish to register for and the mode of notification,
i.e., fax versus e-mail. The other source of revenue is from document
fulfillment services. We intend to expand our sources of revenue to include
business-to-business commerce fees, advertising, and other transactional fees
associated with electronic catalog orders placed by agencies or vendors.
DSI is investigating various pricing models for existing and future
services. It is our plan to further cultivate existing markets while developing
new markets for current and future products.
LEGAL PROCEEDINGS
We may from time to time become a party to various legal proceedings
arising in the ordinary course of our business. However, we are not currently
subject to any material legal proceedings.
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MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The executive officers and directors of DSI are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
O. F. Ramos......................... 41 Chief Executive Officer, President
and Director -- Class I
Bernard B. Markey................... 35 Chairman of the Board and
Director -- Class I
L. A. Gornto, Jr.................... 57 Chief Financial Officer, Executive
Vice President, Secretary and
Director -- Class III
Edward S. Jordan.................... 38 Chief Operating Officer and Vice
President
William Knox North.................. 43 Chief Technology Officer and Vice
President
Edward A. Moses..................... 57 Director -- Class II
</TABLE>
Mr. O. F. Ramos was appointed as Chief Executive Officer, President and a
director of DSI in November 1999. Mr. Ramos joined HTE in June 1998 and was
appointed to the HTE board of directors in August 1998. He served as Executive
Vice President of HTE and President of HTE-UCS, Inc., a wholly-owned subsidiary
of HTE, from June 1998 through November 1999. From 1986 to 1998, Mr. Ramos
served as the President and Chief Executive Officer of UCS, Inc. As the
co-founder of UCS, Inc., he was responsible for the corporate direction and
financial development of that company and for overseeing operations. Prior to
1986, Mr. Ramos served in various engineering and management capacities at
Motorola, Inc., where he was responsible for the development and manufacturing
of diverse software and hardware products.
Mr. Bernard B. Markey was appointed as a director and Chairman of the Board
in November 1999. Mr. Markey has been a director of HTE since 1995. Mr. Markey
is a Managing Partner of Advest New Century Capital, a private equity firm which
he joined in September 1999. Mr. Markey was a general partner of Meridian
Venture Partners, a privately-held venture capital fund, from 1995 through
September 1999.
Mr. L. A. Gornto, Jr. was appointed as Chief Financial Officer, Executive
Vice President, Secretary, director and General Counsel of DSI in November 1999.
Mr. Gornto joined HTE in January 1997 and serves as a director of HTE and as
HTE's Executive Vice President, Secretary and General Counsel. From January 1997
until November 1997, he served as HTE's Chief Financial Officer. Since 1988, Mr.
Gornto has been engaged in the private practice of law in Central Florida and
provides legal services to HTE as General Counsel. From 1985 to 1987, Mr. Gornto
served as Senior Vice President -- Finance and Chief Financial Officer of
Jerrico, Inc., formerly a publicly-traded company and holding company of Long
John Silvers, a seafood restaurant chain. From 1977 to 1985, he was engaged in
the private practice of law and also served as a management consultant. From
1968 to 1977, he served as Executive Vice President and Chief Financial
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Officer and a director of Red Lobster Restaurants, a seafood restaurant chain
and formerly a subsidiary of General Mills, Inc.
Mr. Edward S. Jordan was appointed Chief Operating Officer and a Vice
President of DSI in December 1999. From November 1995 to December 1999, Mr.
Jordan served as Chief Executive Officer (Americas) of Mosaic Software, Inc., a
software company. There, his responsibilities included establishing corporate
offices in the United States, establishing strategic corporate partnerships,
creating direct and re-seller channels in North America, Latin America and the
Caribbean, and introducing a new software product for electronic funds transfer
into North and South America. From February 1994 to October 1995,
he served as Group Manager and Engineering Manager for UCS, Inc., responsible
for three divisions developing distributed applications.
Mr. William Knox North was appointed Chief Technology Officer and a Vice
President of DSI in December 1999. From 1986 to 1999, Mr. North served as the
Vice President of Engineering of UCS, Inc., a privately held Florida corporation
that was acquired by HTE in June 1998. As the co-founder of UCS, Inc., he was
responsible for the technical direction and oversaw project management of that
company. Prior to 1986, Mr. North served in various engineering and management
capacities at Motorola, Inc., where he was responsible for the various software
and hardware projects for several portable radios and paging terminals.
Mr. Edward A. Moses was appointed as a director of DSI in November 1999 and
serves as a part-time consultant to DSI. Mr. Moses was appointed as a member of
HTE's board of directors in December 1998. Mr. Moses has served as dean of the
Roy E. Crummer Graduate School of Business at Rollins College since 1994, and as
a professor and NationsBank professor of finance since 1989. From 1985 to 1989,
he served as dean and professor of finance at the University of North Florida.
He has also served in academic and administrative positions at the University of
Tulsa, Georgia State University and the University of Central Florida, and
currently serves as a faculty member in the Graduate School of Banking of the
South. Mr. Moses also serves as a director of CNL Health Care Properties, Inc.,
a publicly-held real estate holding company.
STAGGERED BOARD OF DIRECTORS
Our articles of incorporation and bylaws provide that our board of
directors are divided into three classes of directors, with the classes to be as
nearly equal in number as possible. Mr. Markey and Mr. Ramos serve as Class I
directors, whose terms expire at the 2000 annual shareholders' meeting. Mr.
Moses serves as a Class II director, whose term expires at the 2001 annual
shareholders' meeting. Mr. Gornto serves as a Class III director, whose term
expires at the 2002 annual shareholders' meeting.
COMMITTEES OF THE BOARD
We do not currently have a Compensation Committee, but intend to appoint
one following the closing of the rights offering. All decisions concerning
compensation were made by the board of directors. Mr. Ramos, DSI's Chief
Executive Officer, participates in all discussions and decisions regarding
salaries and incentive compensation for all employees and consultants of DSI,
except that he is excluded from discussions regarding his own salary and
incentive compensation.
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Within 120 days from the date of this prospectus, DSI's board of directors
plans to establish an Audit Committee, which will consist of at least two
independent directors, to meet periodically with management and DSI's
independent auditors and to review the results and scope of the audit and other
services provided by DSI's independent auditors, DSI's accounting procedures and
the adequacy of DSI's internal controls.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Markey, Chairman of the Board of DSI, serves on HTE's Compensation
Committee. In addition, Mr. Moses, a director of DSI, also serves on HTE's
Compensation Committee. Accordingly, an interlocking relationship exists between
Messrs. Markey and Moses, as board members of DSI, and the members of HTE's
Compensation Committee. Other than Messrs. Markey and Moses, none of our
executive officers or directors presently serve, or in the past served, on the
compensation committee of another company whose directors or executive officers
served on our board of directors. In addition, members of our board of directors
own capital stock of DSI and have interests in certain transactions of DSI as
described in "Certain Relationships and Related Party
Transactions -- Transactions with Management and Others."
COMPENSATION OF DIRECTORS
DSI has not paid compensation to any of its directors for acting in such
capacity. DSI is currently reviewing its policy on compensation of outside
directors in the future. The Company reimburses all directors for the expenses
incurred in attending meetings of the board of directors. Directors who are
officers of DSI receive no additional compensation for service as directors.
Directors who are not full-time employees receive $1,000 per board or committee
meeting attended and all directors are eligible for option grants under DSI's
1999 Employee Incentive Compensation Plan. During fiscal year 1999, DSI granted
each of the four directors an option to acquire 10,000 shares of DSI common
stock. The option has an exercise price of $1.00 per share and vests in equal
thirds over a three-year period. We plan to appoint at least one additional
director who is not affiliated with DSI. Each such independent director so
elected will receive options to purchase 10,000 shares of DSI common stock at
$1.00 per share.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by the Predecessor or
DSI to its President for services performed on the Predecessor or DSI's behalf
during the year ended December 31, 1998, the period from January 1, 1999, to
June 17, 1999, and the period from June 18, 1999, to October 31, 1999 (the
"Named Executive Officer"). The Named Executive Officer was the sole executive
officer of DSI during such periods. The Named Executive Officer no longer serves
as an officer of DSI.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
----------------------------------- ----------------------------
NAME AND PRINCIPAL OTHER RESTRICTED OPTIONS ALL OTHER
POSITION PERIOD SALARY BONUS COMPENSATION(2) STOCK AWDS. SARS(#) LTIP COMPENSATION
- ------------------ ----------------- ------- ------- --------------- ----------- ------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Ronald Brown......... 01/01/98-12/31/98 $39,770 $ -0- $ -0- -0- -0- -0- $ -0-
President
01/01/99-06/17/99 42,000 -0- -0- -0- -0- -0- -0-
06/18/99-10/31/99 55,160 -0- 34,805 -0- -0- -0- 34,805
</TABLE>
- -------------------------
(1) The amounts reflected in the above table do not include any amounts for
perquisites and other personal benefits extended to the Named Executive
Officer. The aggregate amount of such compensation for the Named Executive
Officer is less than 10% of the total annual salary and bonus.
(2) Represents additional compensation received by Mr. Brown for a vehicle that
was purchased by the company.
STOCK OPTION INFORMATION
DSI did not grant any options during the year ended 1998, the period from
January 1, 1999, to June 17, 1999, and the period from June 18, 1999, to October
31, 1999. See "-- Employment Agreements," "-- Consulting Agreements" and
"-- 1999 Employee Incentive Compensation Plan" below with respect to stock
options granted subsequent to October 31, 1999.
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT WITH O. F. RAMOS. Effective November 1, 1999, DSI
entered into an employment agreement with O. F. Ramos, under which Mr. Ramos
serves as DSI's chief executive officer for an initial period ending on December
31, 2002. The agreement provides for an annual salary of $160,000 and incentive
compensation payments based on performance. The agreement also provides that,
upon the termination of the executive's employment or death, DSI will pay to the
executive's estate any unpaid base salary and any accrued but unpaid incentive
compensation through the date of termination. In the event an executive is
terminated without Cause (as defined), DSI will pay to such executive any unpaid
base salary, any accrued but unpaid incentive compensation through the date of
termination, and in certain cases, additional payment of salary, incentive
compensation and benefits for up to twelve months after the date of termination.
Pursuant to the employment agreement, Mr. Ramos has been granted qualified
and non-qualified options under DSI's 1999 Employee Incentive Compensation Plan
to
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purchase an aggregate of 990,000 shares of DSI common stock at $1.00 per share,
comprised of (i) 400,000 qualified options which vest in equal amounts of
100,000 on December 1, 1999 and on November 1 of each of the next three years
thereafter, (ii) 90,000 non-qualified options which vest in equal amounts of
22,500 on December 1, 1999 and on November 1 of each of the next three years
thereafter, (iii) 250,000 non-qualified options which vest in nearly equal
amounts on each of the first three anniversaries of the agreement based upon and
subject to the trading price of DSI's common stock achieving certain levels, and
(iv) 250,000 non-qualified options which vest in nearly equal amounts at the end
of consecutive six-month periods based upon DSI achieving certain performance
criteria as determined by the board. These options expire ten years from the
date of grant, provided, however, that if Mr. Ramos' employment is terminated
during the initial term without cause, he can exercise all vested non-qualified
options within one year from the date of such termination. In the event of a
change of control as defined in the agreement, certain options will vest based
upon the value of the transaction causing the change of control and certain
options will convert to a more favorable vesting schedule.
The agreement contains confidentiality provisions and also prohibits the
executive from competing with DSI during the term of the agreement and for two
years thereafter. Upon resignation, DSI shall pay Mr. Ramos any unpaid base
salary and any accrued but unpaid incentive compensation through the date of
resignation.
PART-TIME EMPLOYMENT AGREEMENTS WITH MESSRS. MARKEY AND GORNTO. Effective
December 15, 1999, DSI entered into part-time employment agreements with Bernard
B. Markey and L. A. Gornto, Jr. with initial periods ending on December 31,
2002, under which Mr. Markey serves as a financial assistant to DSI's principal
executive officers and Mr. Gornto serves as Chief Financial Officer, Executive
Vice President, Secretary and General Counsel. Each agreement provides for an
annual salary of $12,000 for up to 200 hours of each such executive's time per
year. If either executive is required to devote more than 16 hours of time in
any particular month, then he will be paid $1,000 per day in addition to his
base salary. Further, Mr. Gornto's agreement provides for a mutually agreed
higher compensation amount if he devotes more than 40 hours in any calendar
month. Pursuant to the employment agreements, each executive has been granted,
pursuant to DSI's 1999 Employee Incentive Compensation Plan, qualified options
to purchase an aggregate of 90,000 shares of DSI common stock at $1.00 per
share, with 22,500 vesting on December 15, 1999 and the remaining 67,500 vesting
in equal thirds on November 1, 2000, November 1, 2001 and November 1, 2002. The
agreements contain confidentiality provisions and also prohibit the executives
from competing with DSI during the term of the agreement and for two years
thereafter.
EMPLOYMENT AGREEMENTS WITH MESSRS. JORDAN AND NORTH. In December 1999, DSI
entered into employment agreements with each of Edward Jordan, who serves as
Chief Operating Officer and a Vice President, and William Knox North, who serves
as Chief Technology Officer and a Vice President. Each agreement provides for an
annual salary of $120,000 and incentive compensation payments based on
performance. Mr. Jordan's agreement provides for the grant of qualified options
under DSI's 1999 Employee Incentive Compensation Plan to purchase an aggregate
of 100,000 shares of DSI common stock for $1.00 per share, which options vest in
equal amounts of 25,000 over four years. Mr. North's agreement provides for the
grant of qualified options to purchase an aggregate of 100,000 shares of DSI
common stock at $1.00 per share, which options vest in equal thirds over the
next three years.
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CONSULTING AGREEMENTS
CONSULTING AGREEMENT WITH EDWARD MOSES. Prior to the consummation of the
rights offering, DSI will enter into a three-year consulting Agreement with
Edward Moses, a director of DSI, pursuant to which Mr. Moses will provide
consulting services with respect to strategic planning, operations matters,
growth and development matters and other areas as requested by DSI. In exchange
for these services, DSI will grant Mr. Moses options to purchase an aggregate of
90,000 shares of DSI common stock at $1.00 per share, with 22,500 vesting upon
the execution of the agreement and the remaining 67,500 vesting in equal thirds
on each anniversary of the effective date of the consulting agreement.
CONSULTING AGREEMENT WITH RONALD BROWN. On December 7, 1999, DSI entered
into a one year consulting agreement with its founder, Ronald D. Brown and his
company, Ibis Information Services, Inc., for consulting services to be provided
from time to time with respect to corporate, business, marketing, e-commerce and
other general business matters. Although Mr. Brown is not required to devote any
particular amount of time under the agreement, he agreed to participate in up to
six business trips between December 7, 1999 and March 31, 2000 in connection
with existing and prospective customers; devote up to 40 hours in attendance at
meetings until March 31, 2000, and devote up to 10 hours per month of telephone
consulting with DSI's Chief Executive Officer and other DSI personnel designated
by the Chief Executive Officer. Under the consulting agreement, Mr. Brown will
be paid a total of $150,000, payable in 24 equal semi-monthly payments of $6,250
each. Further, DSI agreed to pay Mr. Brown the premium cost of his family health
insurance coverage under his COBRA election, in addition to reimbursing Mr.
Brown reasonable business expenses he incurs in rendering services under the
consulting agreement.
ANNUAL INCENTIVE COMPENSATION BONUSES
The Company may adopt an incentive compensation bonus program for its
executive officers pursuant to which distributions may be made annually based on
the Company's earnings and on each participating officer's contributions to the
Company's profits and other corporate goals. Distributions will be made from a
pool, the amount of which is to be established by DSI's board of directors.
Individual distributions from the pool are determined by DSI's Compensation
Committee and will be generally based on a percentage of the participating
officer's base salary.
1999 EMPLOYEE INCENTIVE COMPENSATION PLAN
The following is a summary of certain features of DSI's 1999 Employee
Incentive Compensation Plan (the "Plan").
SHARES AVAILABLE FOR AWARDS; ANNUAL PER-PERSON LIMITATIONS. Under the
Plan, the total number of shares of Common Stock that may be subject to the
granting of Awards under the Plan at any time during the term of the Plan shall
be equal to 4,000,000 shares, plus the number of shares with respect to which
Awards previously granted under the Plan that terminate without being exercised,
and the number of shares that are surrendered in payment of any Awards or any
tax withholding requirements. The Plan limits the number of shares which may be
issued pursuant to incentive stock options to 4,000,000 shares.
In addition, the Plan imposes individual limitations on the amount of
certain Awards in part to comply with Code Section 162(m). Under these
limitations, during any fiscal
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year the number of options, SARs, restricted shares of Common Stock, deferred
shares of Common Stock, shares as a bonus or in lieu of other DSI obligations,
and other stock-based Awards granted to any one participant may not exceed 2,500
for each type of such Award, subject to adjustment in certain circumstances. The
maximum amount that may be paid out as an annual incentive Award or other cash
Award in any fiscal year to any one participant is $1,000,000, and the maximum
amount that may be earned as a performance Award or other cash Award in respect
of a performance period by any one participant is $2,000,000.
The Committee is authorized to adjust the limitations described in the two
preceding paragraphs and is authorized to adjust outstanding Awards (including
adjustments to exercise prices of options and other affected terms of Awards) in
the event that a dividend or other distribution (whether in cash, shares of
Common Stock or other property), recapitalization, forward or reverse split,
reorganization, merger, consolidation, spin-off, combination, repurchase, share
exchange or other similar corporate transaction or event affects the Common
Stock so that an adjustment is appropriate in order to prevent dilution or
enlargement of the rights of participants. The Committee is also authorized to
adjust performance conditions and other terms of Awards in response to these
kinds of events or in response to changes in applicable laws, regulations or
accounting principles.
ELIGIBILITY. The persons eligible to receive Awards under the Plan are the
officers, directors, employees and independent contractors of DSI and its
subsidiaries. No independent contractor will be eligible to receive any Awards
other than stock options. An employee on leave of absence may be considered as
still in the employ of DSI or a subsidiary for purposes of eligibility for
participation in the Plan. As of December 15, 1999, all executive officers,
directors, and employees of DSI were eligible to participate in the Plan, and 22
persons had options granted under the Plan.
ADMINISTRATION. The Plan is to be administered by a committee designated
by the Board of Directors consisting of not less than three directors (the
"Committee"), each member of which must be a "non-employee director" as defined
under Rule 16b-3 under the Exchange Act and an "outside director" for purposes
of Section 162(m) of the Code. However, except as otherwise required to comply
with Rule 16b-3 of the Exchange Act, or Section 162(m) of the Code, the Board
may exercise any power or authority granted to the Committee. Subject to the
terms of the Plan, the Committee or the Board is authorized to select eligible
persons to receive Awards, determine the type and number of Awards to be granted
and the number of shares of Common Stock to which Awards will relate, specify
times at which Awards will be exercisable or settleable (including performance
conditions that may be required as a condition thereof), set other terms and
conditions of Awards, prescribe forms of Award agreements, interpret and specify
rules and regulations relating to the Plan, and make all other determinations
that may be necessary or advisable for the administration of the Plan.
STOCK OPTIONS AND SARS. The Committee or the Board is authorized to grant
stock options, including both incentive stock options ("ISOs"), which can result
in potentially favorable tax treatment to the participant, and non-qualified
stock options, and SARs entitling the participant to receive the amount by which
the fair market value of a share of Common Stock on the date of exercise (or
defined "change in control price" following a change in control) exceeds the
grant price of the SAR. The exercise price per share subject to an option and
the grant price of an SAR are determined by the Committee, but in the case of an
ISO must not be less than the fair market value of a share of Common Stock on
the date of grant. For purposes of the Plan, the term "fair market value" means
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the fair market value of Common Stock, Awards or other property as determined by
the Committee or the Board or under procedures established by the Committee or
the Board. Unless otherwise determined by the Committee or the Board, the fair
market value of Common Stock as of any given date shall be the closing sales
price per share of Common Stock as reported on the principal stock exchange or
market on which Common Stock is traded on the date as of which such value is
being determined or, if there is no sale on that date, then on the last previous
day on which a sale was reported. The maximum term of each option or SAR, the
times at which each option or SAR will be exercisable, and provisions requiring
forfeiture of unexercised options or SARs at or following termination of
employment generally are fixed by the Committee or the Board, except that no
option or SAR may have a term exceeding ten years. Options may be exercised by
payment of the exercise price in cash, shares that have been held for at least 6
months, outstanding Awards or other property having a fair market value equal to
the exercise price, as the Committee or the Board may determine from time to
time. Methods of exercise and settlement and other terms of the SARs are
determined by the Committee or the Board. SARs granted under the Plan may
include "limited SARs" exercisable for a stated period of time following a
change in control of DSI, as discussed below.
RESTRICTED AND DEFERRED STOCK. The Committee or the Board is authorized to
grant restricted stock and deferred stock. Restricted stock is a grant of shares
of Common Stock which may not be sold or disposed of, and which may be forfeited
in the event of certain terminations of employment, prior to the end of a
restricted period specified by the Committee or the Board. A participant granted
restricted stock generally has all of the rights of a stockholder of DSI, unless
otherwise determined by the Committee or the Board. An Award of deferred stock
confers upon a participant the right to receive shares of Common Stock at the
end of a specified deferral period, subject to possible forfeiture of the Award
in the event of certain terminations of employment prior to the end of a
specified restricted period. Prior to settlement, an Award of deferred stock
carries no voting or dividend rights or other rights associated with share
ownership, although dividend equivalents may be granted, as discussed below.
DIVIDEND EQUIVALENTS. The Committee or the Board is authorized to grant
dividend equivalents conferring on participants the right to receive, currently
or on a deferred basis, cash, shares of Common Stock, other Awards or other
property equal in value to dividends paid on a specific number of shares of
Common Stock or other periodic payments. Dividend equivalents may be granted
alone or in connection with another Award, may be paid currently or on a
deferred basis and, if deferred, may be deemed to have been reinvested in
additional shares of Common Stock, Awards or otherwise as specified by the
Committee or the Board.
BONUS STOCK AND AWARDS IN LIEU OF CASH OBLIGATIONS. The Committee or the
Board is authorized to grant shares of Common Stock as a bonus free of
restrictions, or to grant shares of Common Stock or other Awards in lieu of DSI
obligations to pay cash under the Plan or other plans or compensatory
arrangements, subject to such terms as the Committee or the Board may specify.
OTHER STOCK-BASED AWARDS. The Committee or the Board is authorized to
grant Awards that are denominated or payable in, valued by reference to, or
otherwise based on or related to shares of Common Stock. Such Awards might
include convertible or exchangeable debt securities, other rights convertible or
exchangeable into shares of Common Stock, purchase rights for shares of Common
Stock, Awards with value and payment contingent upon performance of DSI or any
other factors designated by the
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Committee or the Board, and Awards valued by reference to the book value of
shares of Common Stock or the value of securities of or the performance of
specified subsidiaries or business units. The Committee or the Board determines
the terms and conditions of such Awards.
PERFORMANCE AWARDS, INCLUDING ANNUAL INCENTIVE AWARDS. The right of a
participant to exercise or receive a grant or settlement of an Award, and the
timing thereof, may be subject to such performance conditions (including
subjective individual goals) as may be specified by the Committee or the Board.
In addition, the Plan authorizes specific annual incentive Awards, which
represent a conditional right to receive cash, shares of Common Stock or other
Awards upon achievement of certain pre-established performance goals and
subjective individual goals during a specified fiscal year. Performance Awards
and annual incentive Awards granted to persons whom the Committee expects will,
for the year in which a deduction arises, be "covered employees" (as defined
below) will, if and to the extent intended by the Committee, be subject to
provisions that should qualify such Awards as "performance-based compensation"
not subject to the limitation on tax deductibility by DSI under Code Section
162(m). For purposes of Section 162(m), the term "covered employee" means DSI's
chief executive officer and each other person whose compensation is required to
be disclosed in DSI's filings with the SEC by reason of that person being among
the four highest compensated officers of DSI as of the end of a taxable year. If
and to the extent required under Section 162(m) of the Code, any power or
authority relating to a performance Award or annual incentive Award intended to
qualify under Section 162(m) of the Code is to be exercised by the Committee and
not the Board.
Subject to the requirements of the Plan, the Committee or the Board will
determine performance Award and annual incentive Award terms, including the
required levels of performance with respect to specified business criteria, the
corresponding amounts payable upon achievement of such levels of performance,
termination and forfeiture provisions and the form of settlement. In granting
annual incentive or performance Awards, the Committee or the Board may establish
unfunded award "pools," the amounts of which will be based upon the achievement
of a performance goal or goals based on one or more of certain business criteria
described in the Plan (including, for example, total stockholder return, net
income, pretax earnings, EBITDA, earnings per share, and return on investment).
During the first 90 days of a fiscal year or performance period, the Committee
or the Board will determine who will potentially receive annual incentive or
performance Awards for that fiscal year or performance period, either out of the
pool or otherwise.
After the end of each fiscal year or performance period, the Committee or
the Board will determine (i) the amount of any pools and the maximum amount of
potential annual incentive or performance Awards payable to each participant in
the pools and (ii) the amount of any other potential annual incentive or
performance Awards payable to participants in the Plan. The Committee or the
Board may, in its discretion, determine that the amount payable as an annual
incentive or performance Award will be reduced from the amount of any potential
Award.
OTHER TERMS OF AWARDS. Awards may be settled in the form of cash, shares
of Common Stock, other Awards or other property, in the discretion of the
Committee or the Board. The Committee or the Board may require or permit
participants to defer the settlement of all or part of an Award in accordance
with such terms and conditions as the Committee or the Board may establish,
including payment or crediting of interest or
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dividend equivalents on deferred amounts, and the crediting of earnings, gains
and losses based on deemed investment of deferred amounts in specified
investment vehicles. The Committee or the Board is authorized to place cash,
shares of Common Stock or other property in trusts or make other arrangements to
provide for payment of DSI's obligations under the Plan. The Committee or the
Board may condition any payment relating to an Award on the withholding of taxes
and may provide that a portion of any shares of Common Stock or other property
to be distributed will be withheld (or previously acquired shares of Common
Stock or other property be surrendered by the participant) to satisfy
withholding and other tax obligations. Awards granted under the Plan generally
may not be pledged or otherwise encumbered and are not transferable except by
will or by the laws of descent and distribution, or to a designated beneficiary
upon the participant's death, except that the Committee or the Board may, in its
discretion, permit transfers for estate planning or other purposes subject to
any applicable restrictions under Rule 16b-3.
Awards under the Plan are generally granted without a requirement that the
participant pay consideration in the form of cash or property for the grant (as
distinguished from the exercise), except to the extent required by law. The
Committee or the Board may, however, grant Awards in exchange for other Awards
under the Plan, awards under other DSI plans, or other rights to payment from
DSI, and may grant Awards in addition to and in tandem with such other Awards,
rights or other awards.
ACCELERATION OF VESTING; CHANGE IN CONTROL. The Committee or the Board
may, in its discretion, accelerate the exercisability, the lapsing of
restrictions or the expiration of deferral or vesting periods of any Award, and
such accelerated exercisability, lapse, expiration and if so provided in the
Award agreement, vesting shall occur automatically in the case of a "change in
control" of DSI, as defined in the Plan (including the cash settlement of SARs
and "limited SARs" which may be exercisable in the event of a change in
control). In addition, the Committee or the Board may provide in an Award
agreement that the performance goals relating to any performance based Award
will be deemed to have been met upon the occurrence of any "change in control."
Upon the occurrence of a change in control, if so provided in the Award
agreement, stock options and limited SARs (and other SARs which so provide) may
be cashed out based on a defined "change in control price," which will be the
higher of (i) the cash and fair market value of property that is the highest
price per share paid (including extraordinary dividends) in any reorganization,
merger, consolidation, liquidation, dissolution or sale of substantially all
assets of DSI, or (ii) the highest fair market value per share (generally based
on market prices) at any time during the 60 days before and 60 days after a
change in control. For purposes of the Plan, the term "change in control"
generally means (a) approval by shareholders of any reorganization, merger or
consolidation or other transaction or series of transactions if persons who were
shareholders immediately prior to such reorganization, merger or consolidation
or other transaction do not, immediately thereafter, own more than 50% of the
combined voting power of the reorganized, merged or consolidated company's then
outstanding, voting securities, or a liquidation or dissolution of DSI or the
sale of all or substantially all of the assets of DSI (unless the
reorganization, merger, consolidation or other corporate transaction,
liquidation, dissolution or sale is subsequently abandoned), or (b) a change in
the composition of the Board such that the persons constituting the Board on the
date the Award is granted (the "Incumbent Board"), and subsequent directors
approved by the Incumbent Board (or approved by such subsequent directors),
cease to constitute at least a majority of the Board, or (c) the acquisition by
any person, entity or "group", within the meaning of Section 13(d)(3) or
14(d)(2) of the Securities Exchange Act, of more than 30% of either the then
outstanding
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shares of DSI's Common Stock or the combined voting power of DSI's then
outstanding voting securities entitled to vote generally in the election of
directors (hereinafter referred to as the ownership of a "Controlling Interest")
excluding, for this purpose, any acquisitions by (1) DSI or its Subsidiaries,
(2) any person, entity or "group" that as of the date on which the Award is
granted owns beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Securities Exchange Act) of a Controlling Interest or (3) any employee
benefit plan of DSI or its Subsidiaries.
AMENDMENT AND TERMINATION. The Board of Directors may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to grant
Awards without further stockholder approval, except stockholder approval must be
obtained for any amendment or alteration if such approval is required by law or
regulation or under the rules of any stock exchange or quotation system on which
shares of Common Stock are then listed or quoted. Thus, stockholder approval may
not necessarily be required for every amendment to the Plan which might increase
the cost of the Plan or alter the eligibility of persons to receive Awards.
Stockholder approval will not be deemed to be required under laws or
regulations, such as those relating to ISOs, that condition favorable treatment
of participants on such approval, although the Board may, in its discretion,
seek stockholder approval in any circumstance in which it deems such approval
advisable. Unless earlier terminated by the Board, the Plan will terminate at
such time as no shares of Common Stock remain available for issuance under the
Plan and DSI has no further rights or obligations with respect to outstanding
Awards under the Plan.
OUTSTANDING OPTIONS. As of the date of this prospectus, DSI has granted
options to purchase a total of 1,650,000 shares of common stock under the Plan,
including (i) options to purchase 1,000,000 shares granted to Mr. Ramos, (ii)
options to purchase 100,000 shares granted to each of Messrs. Markey, Gornto,
Moses, Jordan, and North, and (iii) options to purchase an aggregate of 150,000
shares granted to 16 employees of DSI. The exercise price of these options is
equal to $1.00 per share. Upon consummation of the rights offering, DSI will
grant additional options to purchase an aggregate of up to 300,000 shares of DSI
common stock to all holders of unvested HTE stock options as of December 16,
1999. See "The Offering." All options expire ten years from the date of grant.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
CERTAIN TRANSACTIONS INVOLVING MANAGEMENT
LEGAL SERVICES. L. A. Gornto, Jr., DSI's General Counsel, has performed
certain legal services for DSI through his law firm, L. A. Gornto, Jr., P.A.,
for which DSI paid approximately $3,800 from DSI's inception through October
1999, and from which office rent, secretarial and certain other expenses
incurred by Mr. Gornto in providing such services were paid. DSI has not yet
been billed for Mr. Gornto's legal services from November 1, 1999 to date.
CONDITIONAL PURCHASE OF SERIES B PREFERRED STOCK. HTE and Messrs. Gornto,
Markey, Moses and Ramos, officers and directors of DSI, have agreed, pursuant to
the terms of a Conditional Series B Stock Purchase Agreement, to purchase in the
aggregate 2,000,000 shares of DSI's Series B preferred stock for an aggregate
purchase price of $2,000,000 only in the event that less than $5,000,000 in
rights are exercised in the aggregate. HTE will purchase 1,000,000 shares of
Series B preferred stock and each of Messrs. Gornto, Markey, Moses and Ramos
will each purchase 250,000 shares of Series B preferred stock. For a description
of the Series B preferred stock, see "Description of Securities -- Series B
Preferred Stock." In conjunction with, and as an inducement to HTE and the
individuals to commit to the conditional purchase of Series B preferred stock,
DSI will issue HTE and such individuals warrants entitling them to purchase an
aggregate of 1,000,000 shares of DSI common stock at an exercise price of $2.00
per share. HTE will receive warrants to purchase 500,000 shares of DSI common
stock and each individual will receive warrants to purchase 125,000 shares of
DSI common stock. Such warrants will be exercisable upon consummation of the
rights offering and will expire two years thereafter. The exercise price and
number of shares of common stock issuable upon the exercise of each of the
warrants may be adjusted upon the occurrence of certain events, including stock
splits, stock dividends, reorganization, recapitalization, merger or sale of all
or substantially all of DSI's assets. See "Description of
Securities -- Warrants."
EMPLOYMENT AND CONSULTING AGREEMENTS WITH OFFICERS AND DIRECTORS. DSI has
entered into employment agreements with each of Messrs. Ramos, Gornto, Markey,
Jordan and North. In addition, DSI has entered into consulting agreements with
each of Messrs. Moses and Brown. See "Executive Compensation -- Employment
Agreements" and "-- Consulting Agreements."
AGREEMENT OF COMMITMENT TO EXERCISE RIGHTS. Messrs. Ramos, Markey, Gornto,
North and Moses, executive officers and/or directors of DSI, have entered into
an agreement with DSI to subscribe for an aggregate of (a) 901,223 shares of
common stock, which amount reflects the total number of rights to which they
will be entitled, and (b) an amount representing the lesser of (i) an aggregate
of 300,000 shares of common stock or (ii) the number of shares of unsubscribed
common stock available on the closing date of the rights offering.
HTE
HTE has provided DSI with administrative and management services, including
payroll, consulting and legal. HTE provided DSI these services to its
wholly-owned subsidiary on a no-charge basis.
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HTE and DSI have entered into, or prior to the consummation of the rights
offering will have entered into a number of agreements for the purpose of
defining their continuing relationship. These agreements are summarized below.
Each of these agreements have been negotiated in the context of a
parent-subsidiary relationship and, therefore, will not be the result of
negotiations between independent parties with separate representation. Thus we
cannot guarantee you that each of these agreements or the related transactions
will be on as favorable terms as could have been obtained from unaffiliated
third parties.
INVESTMENT AND DISTRIBUTION AGREEMENT. Under the investment and
distribution agreement executed by HTE and DSI, HTE is obligated to contribute
to DSI $1,000,000 in cash in exchange for 500,000 shares of Series A preferred
stock, with an option to purchase an additional 250,000 shares for $500,000 to
expire on June 30, 2000. The agreement requires that simultaneously with the
closing of the rights offering DSI will reimburse HTE for expenses that it has
funded from inception through such date. Under the agreement HTE, must reserve
from its authorized and unissued shares of common stock the number of shares of
common stock into which the Series A preferred stock is convertible from time to
time.
The investment and distribution agreement provides that HTE and DSI will
indemnify each other with respect to any future losses that might arise from the
rights offering as a result of any untrue statement or alleged untrue statement
in any rights offering or the omission or alleged omission to state a material
fact in any rights offering (1) in DSI's case except to the extent the statement
was based on information provided by HTE and (2) in HTE's case, only to the
extent the loss relates to information supplied by HTE.
SERVICES AGREEMENT. The services agreement will provide that HTE will
provide to DSI management and administrative services. The administrative
services to be provided by HTE, through its employees, will include financial
reporting, accounting, auditing, tax, office services, payroll and human
resources as well as the management consulting services. Each party will pay the
other party for these services at the estimated cost of providing such services.
The services agreement shall continue until terminated by either party upon 120
days' notice.
TAX SHARING AND INDEMNITY AGREEMENT. The tax sharing and indemnity
agreement, which is conditioned upon HTE and DSI being deemed part of a
consolidated group, will define the parties' rights and obligations with respect
to the filing of returns, payments, deficiencies and refunds of federal, state
and other income, franchise or certain other taxes relating to DSI's business
for periods prior to and including the date on which DSI ceases to be a member
of HTE's consolidated tax group and with respect to certain tax attributes of
DSI after is no longer a member of HTE's consolidated tax group. For periods
ending on or before the last day of the taxable year in which DSI ceases to be a
part of HTE's consolidated tax group, HTE will be responsible for:
- filing both consolidated federal tax returns for the HTE affiliated group
and combined or consolidated state tax returns for any group that
includes a member of the HTE affiliated group, including, in each case,
DSI for the relevant periods of time that DSI was a member of the
applicable group, and
- paying the taxes relating to those returns (including any subsequent
adjustments resulting from the redetermination of those tax liabilities
by the applicable taxing authorities). DSI is responsible for reimbursing
HTE for its share of those taxes, if
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any. DSI is also responsible for filing returns and paying taxes relating
to it for periods that begin before and end after DSI ceases to be a part
of HTE's consolidated tax group. This agreement is intended to allocate
the tax liability between HTE and DSI as if they were separate taxable
entities. HTE and DSI have also agreed to cooperate with each other and
to share information in preparing those tax returns and in dealing with
other tax matters.
REGISTRATION RIGHTS AGREEMENT. The registration rights agreement which DSI
and HTE have entered into provides for DSI's grant of rights to HTE with respect
to the registration under the Securities Act of the shares of DSI common stock
owned by HTE at the closing of the rights offering. The registration rights
agreement entitles HTE to demand DSI, not more than once in any 365 day period
commencing on the first anniversary of the closing of the rights offering and on
not more than three occasions after HTE no longer owns a majority of the voting
power of the outstanding capital stock of DSI, to file a registration statement
under the Securities Act covering the registration of DSI common stock held by
HTE, including in connection with an offering by HTE of its securities that are
exchangeable for its common stock. HTE's demand registration rights contain
various limitations, including that the registration cover a number of shares of
DSI common stock held by HTE having a fair market value of at least $3,000,000
million at the time of the request for registration and that DSI may be able to
temporarily defer a demand registration to the extent it conflicts with another
public offering of securities by DSI or would require DSI to disclose material
non-public information. HTE is also able to require DSI to include DSI common
stock held by HTE in a registration by DSI of its securities so long as
specified conditions are satisfied. The underwriters for the offering, however,
may limit or exclude from the offering DSI common stock held by HTE.
DSI and HTE will share equally the out-of-pocket fees and expenses of a
demand registration and HTE will pay its pro rata share of underwriting
discounts, commissions and related selling expenses. DSI will pay all expenses
associated with a piggyback registration, except that HTE will pay its pro rata
share of the selling expenses. The registration rights agreement contains
indemnification and contribution provisions:
- by HTE for the benefit of DSI and related persons, as well as any
potential underwriter; and
- by DSI for the benefit of HTE and related persons, as well as any
potential underwriter.
HTE's demand registration rights will terminate on the date that HTE owns,
on a fully converted or exercised basis with respect to the securities held by
HTE, common stock representing less than 10% of the then issued and outstanding
voting stock of DSI. HTE's piggyback registration rights will terminate when it
is able to sell all of its DSI common stock, including all common stock
available upon exercise of all conversion and subscription privileges, under
Rule 144 within a three month period. HTE may transfer its registration rights
to any transferee of common stock that represents, on a fully converted or
exercised basis, at least 20% of the then issued and outstanding voting stock of
DSI at the time of transfer; provided, however, that the transferee will be
limited to:
- two demand registrations if the transfer conveys less than a majority but
more than 30%, and
- one demand registration if the transfer conveys 30% or less of the then
issued and outstanding voting stock of DSI.
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HTE LOAN. From DSI's inception through October 31, 1999, HTE has advanced
the Predecessor an aggregate of $737,075, which has been utilized primarily to
acquire the business and certain net assets from the Predecessor and to finance
DSI's operating losses. DSI's obligation to repay such advances are evidenced by
a five-year unsecured term note, effective as of October 31, 1999, bearing
interest at a rate of 8% per annum. The total principal amount of the note is
$1,750,000, $737,075 of which represents the advances previously made by HTE to
DSI and $1,012,925 of which represents the available amount remaining under the
facility in the event DSI requires additional financing. To the extent the
entire amount available under this facility is drawn down, principal and accrued
interest thereon shall be due and payable annually for the term in principal
installments of $200,000 at the end of the first year, $250,000 at the end of
the second year, $350,000 at the end of the third year, $450,000 at the end of
the fourth year and the balance of $500,000 at maturity of the note. Otherwise,
to the extent the total amount available under this facility is not drawn down,
the annual payments shall be proportionately adjusted. Notwithstanding the
foregoing, at the earlier of (i) the maturity date of the note, or (ii) the date
of effectiveness of a secondary public offering of DSI common stock yielding
gross proceeds of at least $10,000,000, the entire outstanding balance of the
note shall be due and payable.
EARN-OUT OBLIGATIONS. On June 18, 1999, DSI acquired the business and
certain net assets from the Predecessor for $1,000,000 in cash. DSI agreed to
pay up to an additional $2,000,000 over a three-year period beginning June 18,
1999, if DSI meets certain operating profit targets ($476,771 for year ended
June 30, 2000; $5,719,412 for year ended June 30, 2001; and $10,144,111 for year
ended June 30, 2002).
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SECURITY OWNERSHIP OF DSI
The following table sets forth information known to DSI regarding
beneficial ownership of DSI common stock as of October 31, 1999, and as adjusted
to reflect the sale of common stock at a minimum and maximum number of shares
for (1) each executive officer and director of DSI who beneficially owns shares;
(2) each shareholder known to DSI to beneficially own 5% or more of DSI's
outstanding securities; and (3) all executive officers and directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL BEFORE AFTER MINIMUM AFTER MAXIMUM
NAME OF BENEFICIAL OWNER OWNERSHIP OFFERING OFFERING(1)(3) OFFERING(2)(3)
- ------------------------ -------------------- -------- -------------- --------------
<S> <C> <C> <C> <C>
H.T.E., Inc............. 1,250,000 100% 51.0% 6.1%
1000 Business Center
Dr
Lake Mary, FL 32746
All executive officers
and -0- -0- 49.0 4.4
directors as a group....
</TABLE>
- -------------------------
(1) Gives effect to the commitment of certain officers and directors of HTE to
subscribe for 901,223 shares in the rights offering, plus an aggregate of a
maximum of 300,000 additional shares from the pool of unsubscribed rights
available, if any, on the closing of the rights offering.
(2) After giving effect to the issuance of 19,225,883 shares of common stock
upon the closing of the rights offering.
(3) Does not reflect the percentage of HTE's beneficial ownership upon full
conversion of the Series A preferred stock held by HTE and full exercise of
the warrants issued to HTE. Assuming (i) full conversion of the 750,000
shares of Series A preferred stock (assuming exercise of HTE's option to
purchase additional shares), and (ii) full exercise of the warrants granted
to HTE to purchase 500,000 shares of DSI common stock, HTE would
beneficially own 2,500,000 shares of outstanding DSI common stock. Assuming
the HTE conversions/exercises discussed above plus (i) the full exercise of
the warrants granted to DSI employees and directors to purchase 500,000
shares of DSI common stock and (ii) the full exercise of the vested options
to purchase 190,000 shares of DSI common stock, total DSI common stock
outstanding for the minimum and maximum rights offering would be 4,391,223
and 22,415,883, respectively. Accordingly, (i) the percentage of HTE's
beneficial ownership of DSI common stock outstanding after the minimum
offering would be 56.9%, and (ii) the percentage of HTE's beneficial
ownership of DSI common stock outstanding after the maximum offering would
be 11.2%.
DESCRIPTION OF SECURITIES
AUTHORIZED CAPITAL STOCK
Immediately following the consummation of the rights offering, DSI's
authorized capital stock will consist of 100,000,000 shares of DSI common stock,
par value $.0001 per share, and 10,000,000 shares of preferred stock, par value
$.01 per share, of which 2,000,000 shares are designated as Series A preferred
stock, 4,000,000 shares are designated Series B preferred stock, and 4,000,000
shares are undesignated. Upon closing
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of the rights offering, DSI will have outstanding 500,000 shares of Series A
preferred stock, 2,000,000 shares of Series B preferred stock (only in the event
that less than $5,000,000 in rights are exercised), and between 2,451,223 and
20,475,883 shares of common stock. The following summary description of DSI's
capital stock and other securities is qualified in its entirety by reference to
DSI's amended and restated articles of incorporation and amended and restated
bylaws, each of which is filed as an exhibit to the registration statement of
which this prospectus forms a part and to the applicable provisions of the
Florida Business Corporation Act.
COMMON STOCK
The holders of the outstanding common stock are entitled to receive and
share ratably dividends if, as and when declared by the board of directors out
of funds legally available with respect to DSI's outstanding common stock. See
"Dividend Policy." In addition, in the event of a liquidation, dissolution or
winding-up of DSI, the holders of common stock are entitled to share equally and
ratably in the net assets of DSI, if any, remaining after paying all debts and
liabilities of DSI and payment of all liquidation preferences of any outstanding
shares of preferred stock, including the Series A and Series B preferred stock.
In specified circumstances, as described below, the holders of common stock may
be required to share dividend's or distribution of net assets on dissolution,
liquidation or winding-up of DSI with HTE as the holder of the Series A
preferred stock. See "-- Series A Preferred Stock" and "-- Series B Preferred
Stock."
The holders of common stock are entitled to one vote for each share held of
record on all matters submitted to a vote of shareholders and do not have
cumulative voting rights. Holders of common stock vote together with the holders
of the Series A preferred stock as a single class on almost all matters
presented to shareholders for a vote. See " -- Series A Preferred Stock."
No common stock is subject to redemption or has preemptive rights to
purchase additional shares of common stock. Each outstanding share of common
stock is, and all shares of common stock to be outstanding upon completion of
the rights offering will be fully paid and nonassessable. The rights,
preferences, and privileges of the holders of common stock are subject to, and
may be adversely affected by the rights of holders of DSI's Series A preferred
stock and the holders of Series B preferred stock, and shares of any class or
series of preferred stock which DSI may designate and issue in the future.
PREFERRED STOCK
The DSI board has the authority, without further shareholder approval, to
issue up to 10,000,000 shares of preferred stock in one or more series and to
fix the number of shares constituting the series and the preferences,
limitations and relative rights, including dividend rights, dividend rate,
voting rights, terms of redemption, redemption price or prices, conversion
rights and liquidation preferences of the shares constituting any series,
without any further vote or action by the DSI shareholders. The issuance of
preferred stock by the DSI board could adversely affect the rights of holders of
common stock. As of the date of this prospectus, except for the Series A
preferred stock, there are no shares of preferred stock designated or
outstanding.
The potential issuance of preferred stock may have the effect of delaying,
deferring or preventing a change in control of DSI and may discourage bids for
DSI common stock at a premium over its market price and may adversely affect the
market price of, and the
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voting and other rights of the holders of, the DSI common stock. DSI has no
current plans to issue any shares of preferred stock other than the Series A
preferred stock other than pursuant to the Conditional Series B Stock Purchase
Agreement. See "Certain Relationships and Related Party
Transactions -- Conditional Purchase of Series B Preferred Stock."
SERIES A PREFERRED STOCK
The DSI board of directors designated 2,000,000 shares of preferred stock
as Series A preferred stock, $0.01 par value per share. The following is a
summary of the terms of the Series A preferred stock.
Prior to the closing of the rights offering, HTE, as the sole shareholder
of the Series A preferred stock, will be issued 500,000 shares of Series A
preferred stock for $1,000,000 and receive an option to acquire 250,000
additional Series A preferred shares for $500,000. So long as HTE remains the
sole shareholder of the Series A preferred stock, HTE upon the liquidation of
DSI, generally shall be entitled to receive $2.00 per share (such price being
subject to adjustment) or a total liquidation preference of $1,000,000 prior to
any distribution of net assets to the holders of common stock or other equity
securities ranking junior to the Series A preferred stock. If HTE exercises its
option to purchase an additional 250,000 shares of Series A preferred stock, HTE
will be entitled to receive a total liquidation preference of $1,500,000.
However, HTE, as the holder of the Series A preferred stock, shall not be
entitled to any dividends or additional distributions, whether upon dissolution,
liquidation or winding up of DSI, unless at the time the dividend or
distribution is declared, the percentage of the outstanding DSI common stock
held by HTE ("HTE Actual Percentage") is less than 35% ("HTE Minimum
Percentage") of DSI's total outstanding shares of common stock as a result of
disposition of DSI common stock by HTE. If the HTE Actual Percentage is below
the HTE Minimum Percentage, then HTE, as the holder of Series A preferred stock,
will be entitled to receive a percentage of the dividend or distribution amount
declared which is equal to the difference between the HTE Minimum Percentage and
the HTE Actual Percentage as of the applicable record date and the holders of
the common stock (including HTE with respect to its DSI common stock) are
entitled to receive the balance of the dividend or distribution amount. The
holders of both the Series A preferred stock and the holders of the DSI common
stock are entitled to receive such amounts on an equal priority basis. For
example, if on the date of DSI's liquidation, HTE's DSI common stock holdings
have been diluted to 20% of the outstanding common stock, and $20,000,000 is
available for distribution after the satisfaction of all liabilities and payment
of all liquidation preferences of any outstanding shares of preferred stock,
including the Series A preferred stock and any other preferred stock issued and
outstanding with senior liquidation preferences to the DSI common stock, then
DSI would distribute $3,000,000 with respect to the Series A preferred stock and
$17,000,000 with respect to the common stock. The $3,000,000 distributed with
respect to the Series A preferred stock represents 15% of the amount distributed
or the difference between the HTE Minimum Percentage (i.e., 35%) and the HTE
Actual Percentage (i.e., 20%).
If at any time the HTE Actual Percentage is less than the HTE Minimum
Percentage and HTE transfers or otherwise disposes of any DSI common stock, then
the HTE Minimum Percentage will be reduced to the percentage equal to the amount
that HTE's remaining DSI common stock constitutes of all of DSI's outstanding
common stock.
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Each share of the Series A preferred stock shall be convertible into one
share of fully paid non-assessable DSI common stock, on a one-for-one basis,
(subject to adjustments in certain events) (the "Conversion Rate") at either the
election of the holder of the Series A preferred stock or, automatically upon
either the sale of substantially all of DSI's assets or a merger of DSI in which
DSI does not survive such merger. The conversion price for such conversion shall
be $2.00 per each share of DSI common stock received as a result of such
conversion (the "Conversion Price").
The Conversion Rate is subject positive and negative adjustments from time
to time in the event of the following ("Adjustment Events"): (i) the issuance of
DSI common stock as a dividend or distribution; (ii) the combination,
subdivision or reclassification of DSI common stock; (iii) the sale of DSI
common stock at a price, or the issuance of options, warrants or convertible
securities with an exercise or conversion price per share, less than the lower
of the Conversion Price or the then current market price of the DSI common stock
(except upon the issuance of options granted to employees, officers, directors,
stockholders or consultants pursuant to existing stock option plans and future
stock option plans approved by the DSI stockholders); or (iv) the distribution
to all holders of DSI common stock of evidences of DSI's indebtedness or assets
(including securities, but excluding cash dividends or distributions paid out of
net income).
No fractional shares of DSI common stock are issuable upon the conversion
of Series A preferred stock surrendered for conversion. Any shares of Series A
preferred stock converted resulting in fractional shares of DSI common stock
shall be redeemed at the then effective Conversion Price per share, which shall
be paid as promptly as possible when funds are available for such payment.
In almost all matters presented to shareholders for a vote (including the
election of directors or any merger, liquidation, sale of assets or charter
amendment proposals), the holders of the Series A preferred stock and the common
stock vote as a single class. As a class, the holders of Series A preferred
stock shall be entitled to vote a number of shares equal to 19.9% of all of
DSI's voting capital stock, less the number of shares of DSI voting stock (other
than the number of shares of Series A preferred stock owned by HTE) held by HTE
on the applicable record date (the "Ordinary Amount"). In the event any
shareholder group of DSI, as a group, (other than HTE and its affiliated
entities) own greater than 10% of DSI's outstanding common stock, then the
holders of Series A preferred stock, as a group, shall have a number of votes
equal to the greater of: (i) the Ordinary Amount; or (ii) 10,000 votes plus that
number of votes possessed by any person or group owning in excess of 10% of the
DSI outstanding common stock. Notwithstanding the preceding, the total voting
rights of the Series A preferred stock when combined with HTE's entire amount of
voting rights (whether pursuant to DSI Series A preferred stock or DSI common
stock) shall not exceed 50% of all the DSI voting stock.
Cumulative voting for the election of directors is not provided for in
DSI's articles of incorporation, which means that the holders of the Series A
preferred stock will control all shareholder votes. Each share of common stock
is entitled to one vote in all matters presented to shareholders. The common
stock is not entitled to preemptive rights and may not be redeemed.
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SERIES B PREFERRED STOCK
The DSI board of directors designated 4,000,000 shares of preferred stock
as Series B preferred stock, $.01 par value per share. The following is a
summary of the terms of the Series B preferred stock.
HTE and Messrs. Gornto, Markey, Moses and Ramos, officers and directors of
DSI, have agreed, pursuant to the terms of a Conditional Series B Stock Purchase
Agreement, to purchase in the aggregate 2,000,000 shares of DSI's Series B
preferred stock for an aggregate purchase price of $2,000,000 only in the event
that less than $5,000,000 in rights are exercised in the aggregate. HTE will
purchase 1,000,000 shares of Series B preferred stock and each of Messrs.
Gornto, Markey, Moses and Ramos will each purchase 250,000 shares of Series B
preferred stock. For a description of the Series B preferred stock, see
"Description of Securities -- Series B Preferred Stock." In conjunction with,
and as an inducement to HTE and the individuals to commit to the conditional
purchase of Series B preferred stock, DSI will issue HTE and such individuals
warrants entitling them to purchase an aggregate of 1,000,000 shares of DSI
common stock at an exercise price of $2.00 per share. HTE will receive warrants
to purchase 500,000 shares of DSI common stock and each individual will receive
warrants to purchase 125,000 shares of DSI common stock. Such warrants will be
exercisable upon consummation of the rights offering and will expire two years
thereafter. The exercise price and number of shares of common stock issuable
upon the exercise of each of the warrants may be adjusted upon the occurrence of
certain events, including stock splits, stock dividends, reorganization,
recapitalization, merger or sale of all or substantially all of DSI's assets.
See "Description of Securities -- Warrants."
With respect to dividend rights and rights upon dissolution, liquidation or
winding-up of DSI, the Series B preferred stock ranks senior to the common stock
and junior to the Series A preferred stock. Upon the occurrence of such an
event, the proceeds remaining after the satisfaction of all liabilities and
payment of and all other preferred stock preference amounts superior to the
Series B preferred stock, the holders of the Series B preferred stock, will be
entitled to the original issue price of $1.00 per share together with accretions
as discussed below and all accumulated and unpaid dividends prior to any
distribution of net assets to the holders of any equity securities ranking
junior to the Series B Preferred Stock, including the common stock.
The Series B preferred stock will accrue dividends on the liquidation
amount of the stock at the rate of 6% per annum. The dividends are cumulative,
but shall not be payable unless and until declared by the board of directors.
The dividends are payable through accretion of the liquidation preference or
additional shares of Series B Preferred Stock until June 15, 2002 at which time
dividends will be payable in cash. Securities that rank junior or on parity with
the Series B preferred stock may not be repurchased and no dividends may be
declared with respect to such securities if DSI is in default with respect to
the Series B preferred dividends or the repurchase of Series B preferred stock.
Following the second anniversary of the later of (i) the closing date of
the rights offering or (ii) June 30, 2000, DSI may be required to mandatorily
redeem all or a portion of the Series B preferred stock at the election of the
holders of the Series B preferred stock. The redemption price will equal the
liquidation value of the shares being redeemed plus all accrued and unpaid cash
dividends.
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RIGHTS
DSI is granting on the date hereof rights to holders of HTE common stock on
, 2000, to holders of HTE stock options on December 16, 1999 who are
also employees or directors of HTE (or a wholly-owned subsidiary) as of five
days prior to the effective date of this prospectus, and to persons who are
employees of HTE (or a wholly-owned subsidiary) as of five days prior to the
effective date of this prospectus. The rights are each exercisable for one share
of DSI common stock at an exercise price of $1.00 per share. Rights may not be
transferred, in whole or in part, except to immediate family members (spouses
and lineal descendants only) of the rights holder. Unless extended, the rights
expire on , 2000. For more information about the rights and the rights
offering, see "The Offering."
WARRANTS
Upon consummation of the rights offering, there will be 1,000,000 warrants
outstanding. Each warrant entitles its holder to purchase one share of DSI
common stock at an exercise price of $2.00 per share, subject to adjustment in
certain circumstances, for a period of two years commencing on the date of the
closing of the rights offering.
Each warrant may be exercised by surrendering the warrant certificate, with
the form of election to purchase on the reverse side of the warrant certificate
properly completed and executed, together with payment of the exercise price to
the subscription agent. The warrants may be exercised in whole or from time to
time in part. If less than all of the warrants evidenced by a warrant
certificate are exercised, a new warrant certificate will be issued for the
remaining number of warrants.
Holders of the warrants are protected against dilution of the equity
interest represented by the underlying shares of common stock upon the
occurrence of certain events, including, but not limited to, stock splits and
the issuance of stock dividends. If DSI merges, reorganizes, recapitalizes or is
acquired in such a way as to terminate the warrants, the warrants may be
exercised immediately prior to such action. In the event of DSI's liquidation,
dissolution or winding up, holders of warrants are not entitled to participate
in the distribution of assets. For the life of the warrants, the holders are
given the opportunity to profit from a rise in the market price of our common
stock. The exercise of the warrants will result in the dilution of the then book
value of the common stock held by other investors and would result in a dilution
of their percentage ownership of DSI's common stock.
Holders of the warrants are entitled to certain piggy-back registration
rights with respect to the common stock underlying the warrants. The holders are
entitled, subject to certain limitations, to require DSI to include their
registrable securities in future registration statements DSI files under the
Securities Act.
ANTI-TAKEOVER EFFECTS OF FLORIDA LAW AND CHARTER
GENERAL
Certain provisions of DSI's articles and bylaws may be deemed to have an
anti-takeover effect and may delay, defer or prevent a tender offer or takeover
attempt.
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BOARD OF DIRECTORS
DSI's amended and restated articles provide that, except as otherwise fixed
by the provisions of a certificate of designation containing the rights of the
holders of any class or series of preferred stock, the number of the directors
of DSI will be fixed from time to time exclusively through a resolution adopted
by a majority of the total number of directors which DSI would have if there
were no vacancies. The articles divide our board of directors into three
classes, with regular three-year terms and initial terms of one year for the
Class I directors, two years for the Class II directors and three years for the
Class III directors.
The articles provide that except as otherwise provided for or fixed by a
certificate of designation containing the rights of the holders of any class or
series of preferred stock, newly created directorships resulting from any
increase in the number of directors and any vacancies on the DSI board resulting
from death, resignation, disqualification, removal or other cause will be filled
by the affirmative vote of a majority of the remaining directors then in office,
even though less than a quorum of DSI's board, and not by the shareholders. Any
director elected in accordance with the preceding sentence will hold office for
the remainder of the full term of the class of directors in which the new
directorship was created or the vacancy occurred and until the director's
successor shall have been duly elected and qualified. No decrease in the number
of directors constituting the DSI board will shorten the term of any incumbent
director. Subject to the rights of holders of preferred stock, any director may
be removed from office only for cause by the affirmative vote of the holders of
at least 66 2/3% of the voting power of all voting stock then outstanding,
voting together as a single class.
These provisions preclude a third party from removing incumbent directors
and simultaneously gaining control of the DSI board by filling the vacancies
created by removal with its own nominees. Under the classified board provisions
described above, it would take at least two elections of directors for any
individual or group to gain control of the DSI board. Accordingly, these
provisions could discourage a third party from initiating a proxy contest,
making a tender offer or otherwise attempting to gain control of DSI.
SPECIAL MEETINGS OF SHAREHOLDERS
DSI's articles provide that a special meeting of shareholders can be called
only by the chairman of the board of directors, a majority of the members of the
board of directors, or the holders of not less than 50% of all votes entitled to
be cast on any issue proposed to be considered at such meeting. So long as HTE
continues to hold 50% or more of the voting power of all classes of outstanding
capital stock of DSI, a special meeting may be called by HTE, the chairman of
the board, the chief executive officer, the president or a majority of the
members of the board. This provisions would make it more difficult for
shareholders to take actions opposed by the board of directors.
WRITTEN CONSENT
Under DSI's articles, the shareholders of DSI may not take action in
writing without a meeting of the shareholders after the date on which HTE no
longer beneficially owns at least 50% of the voting power of all classes of
outstanding capital stock.
73
<PAGE> 77
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
DSI's articles require that timely notice in writing be provided by
shareholders seeking to bring business before, or to nominate candidates for
election as directors at, the annual meeting of shareholders. To be timely, a
shareholder's notice must be delivered to or mailed and received at the
principal executive offices of DSI not less than 120 days nor more than 180 days
prior to the first anniversary of the date of DSI's notice of annual meeting
provided with respect to the previous year's annual meeting of shareholders. If
no annual meeting of shareholders was held in the previous year or the date of
the annual meeting of shareholders has been changed to be more than 30 days
earlier than the date contemplated by the previous year's notice of annual
meeting, such notice by the shareholder must be delivered or received not later
than the close of business on the 5th day following the date on which notice of
the date of the annual meeting is given to shareholders or made public,
whichever first occurs. To be timely with respect to a special meeting, a
shareholder's notice must be delivered to or mailed and received at DSI's
principal office not later than the close of business on the fifth day following
the date on which notice of a special meeting is given to shareholders or the
public, whichever occurs first.
DSI's articles also specify requirements as to the form and content of a
shareholder's notice. These provisions may preclude shareholders from timely
bringing matters before, or from nominations for directors at, an annual meeting
of shareholders.
AUTHORIZED BUT UNISSUED SHARES
Upon consummation of this offering, DSI will be authorized to issue
additional common stock and up to 4,000,000 shares of preferred stock in one or
more series, having terms fixed by the board of directors without shareholder
approval, including voting, dividend or liquidation rights that could be greater
than or senior to the rights of holders of common stock. The existence of
authorized but unissued and unreserved shares of common stock and preferred
stock may enable the board of directors to issue shares to persons friendly to
current management which would render more difficult or discourage an attempt to
obtain control of the DSI by means of a proxy contest, tender offer, merger or
otherwise, and thereby protect the continuity of DSI's management. Issuance of
shares of common stock or preferred stock could also be used as an anti-takeover
device.
AMENDMENTS
The articles provide that the affirmative vote of the holders of at least
66 2/3% of DSI's voting stock, voting together as a single class, is required to
amend provisions of the articles relating to shareholder action without a
meeting; the calling of special meetings; the number, election and term of the
DSI directors; the filling of vacancies; and the removal of directors. The
articles further provide that the related by-laws described above (including the
shareholder notice procedure) may be amended only by the DSI board or by the
affirmative vote of the holders of at least 66 2/3% of the voting power of the
outstanding shares of voting stock, voting together as a single class.
74
<PAGE> 78
FLORIDA LAW
DSI will be subject to several anti-takeover provisions that apply to a
public corporation organized under Florida law, unless the corporation elects to
opt out of those provisions in its articles or bylaws. DSI will not elect to opt
out of those provisions. Florida law prohibits the voting of shares in a
publicly-held Florida corporation that are acquired in a control share
acquisition unless the holders of a majority of the corporation's voting shares,
exclusive of shares held by officers of the corporation, inside directors or the
acquiring party approve the granting of voting rights as to the shares acquired
in the control share acquisition.
A control share acquisition is defined as an acquisition that immediately
thereafter entitles the acquiring party to 20% or more of the total voting power
in an election of directors. Florida law contains an "affiliated transaction"
provision that prohibits a publicly-held Florida corporation from engaging in a
broad range of business combinations or other extraordinary corporate
transactions with an "interested shareholder" unless:
- the transaction is approved by a majority of disinterested directors
before the person becomes an interested shareholder;
- the interested shareholder has owned at least 80% of the corporation's
outstanding voting shares for at least five years; or
- the transaction is approved by the holders of two-thirds of the
corporation's voting shares other than those owned by the interested
shareholder.
An interested shareholder is defined as a person who together with
affiliates and associates beneficially owns more than 10% of the corporation's
outstanding voting shares. This may include takeover attempts that might result
in a premium over the market price for the shares held by shareholders.
LIABILITY OF DIRECTORS; INDEMNIFICATION
DSI's articles provide that DSI may indemnify its executive officers and
directors to the fullest extent permitted by law whether now or hereafter. The
provisions of the Florida Business Corporation Act that authorize
indemnification do not eliminate the duty of care of a director, and in
appropriate circumstances equitable remedies such as injunctive or other forms
of nonmonetary relief will remain available under Florida law. In addition, each
director will continue to be subject to liability for (a) violations of the
criminal law, unless the director had reasonable cause to believe his conduct
was lawful or had no reasonable cause to believe his conduct was unlawful; (b)
deriving an improper personal benefit from a transaction; (c) voting for or
assenting to an unlawful distribution; and (d) willful misconduct or a conscious
disregard for the best interests of DSI in a proceeding by or in the right of
DSI to procure a judgment in its favor or in a proceeding by or in the right of
a shareholder. The statute does not affect a director's responsibilities under
any other law, such as the federal securities laws or state or federal
environmental laws.
Prior to the consummation of the rights offering, DSI intends to enter into
indemnification agreements with its officers and directors containing provisions
which may require DSI to, among other things, indemnify its officers and
directors against certain liabilities that may arise by reason of their status
or service as officers or directors (other than liabilities arising from willful
misconduct of a culpable nature) and to advance their
75
<PAGE> 79
expenses incurred as a result of any proceeding against them as to which they
could be indemnified. DSI also intends to obtain, prior to the completion of the
rights offering, officer and director liability insurance with respect to
liabilities arising out of certain matters, including matters arising under the
Securities Act.
At present there is no pending litigation or proceeding involving a
director, officer, associate or other agent of DSI for which indemnification is
being sought. DSI is also not aware of any threatened litigation that may result
in claims for indemnification.
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for DSI common stock is Continental Stock
Transfer & Trust Company.
76
<PAGE> 80
SHARES ELIGIBLE FOR FUTURE SALE
Prior to the rights offering, there has been no market for the DSI common
stock, and there can be no assurance that a significant public market for the
DSI common stock will develop or be sustained after this offering. Future sales
of substantial amounts of DSI common stock, including shares issued upon
exercise of outstanding options and warrants, in the public market after this
offering could adversely affect market prices prevailing from time to time and
could impair DSI's ability to raise capital through the sale of its equity
securities.
Upon completion of the rights offering, DSI will have outstanding 500,000
shares of Series A preferred stock (750,000 shares if HTE exercises its option
to purchase an additional 250,000 shares of Series A preferred stock), 2,000,000
shares of Series B preferred stock (only in the event that less than $5,000,000
in rights are exercised), and between 2,451,223 and 20,475,883 shares of common
stock. Immediately prior to the closing of the rights offering, DSI will also
have reserved 4,000,000 shares for options awarded or to be awarded under the
1999 Employee Incentive Compensation Plan. In addition, DSI will also have
reserved 750,000 shares of common stock for issuance upon conversion of the
Series A preferred stock (and the conversion of the Series A preferred stock
which HTE has an option to acquire) and 1,000,000 shares for issuance upon
exercise of the warrants.
The shares of common stock issued in the rights offering will be freely
tradable without restriction or further registration under the Securities Act,
except that any shares purchased by an "affiliate" of DSI, as that term is
defined in Rule 144, may generally be sold only in compliance with Rule 144, as
described below. All of the outstanding shares of common stock owned by HTE and
any entity controlled by it will be "restricted securities" as that term is
defined in Rule 144, and may be sold only if registered under the Securities Act
or in accordance with an applicable exemption from such registration, such as
Rule 144.
In general, under Rule 144 as currently in effect, beginning 90 days after
the date of this prospectus, a shareholder who has beneficially owned for at
least one year shares privately acquired directly or indirectly from DSI or from
an affiliate of DSI, and persons who are affiliates of DSI who have acquired the
shares in registered transactions, will be entitled to sell within any
three-month period a number of shares that does not exceed the greater of:
- 1% of the number of outstanding shares of common stock (or between 23,723
and 205,395 shares immediately after completion of the rights offering);
or
- the average weekly trading volume of the common stock during the four
calendar weeks preceding the filing of a Form 144 with respect to such
sale. Sales under Rule 144 must also meet requirements relating to the
manner and notice of sale and the availability of current public
information about DSI. Under Rule 144(k), a person who is not deemed to
have been an affiliate of DSI at any time during the three months
preceding a sale, and who has beneficially owned the shares proposed to
be sold for at least one year, including the holding period of any prior
owner except an affiliate, is entitled to sell such shares without
complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144.
DSI intends to enter into a registration rights agreement with HTE under
which HTE will have demand and piggyback registration rights. See "Certain
Relationships and
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<PAGE> 81
Related Party Transactions -- Registration Rights Agreement." HTE can exercise
these privileges any time one year after the closing of the rights offering to
sell all of the common stock it holds until its beneficial ownership falls below
10% of DSI's outstanding common stock.
Holders of the warrants are entitled to certain piggy-back registration
rights with respect to the common stock underlying the warrants. The holders are
entitled, subject to certain limitations, to require DSI to include their
registrable securities in future registration statements DSI files under the
Securities Act.
DSI also anticipates that following the closing of the rights offering it
will file registration statements on Form S-8 covering the common stock that may
be issued upon the exercise of options granted under the 1999 Employee Incentive
Compensation Plan. Shares of common stock that are acquired and offered under
these registration statements generally may be resold in the public market
without restriction or limitation, except in the case of affiliates of DSI, whom
generally may only resell these shares in accordance with each provision of Rule
144, other than the holding period requirement.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material Federal income tax
consequences of the acquisition, ownership and disposition of a right and of the
common stock that may be acquired on its exercise. This discussion is based on
the current provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), existing and proposed Treasury regulations thereunder and current
administrative rulings and court decisions, all of which are subject to change.
Any change, which may or may not be retroactive, could alter the tax
consequences described herein. This discussion is addressed to a person that
holds DSI common stock acquired on exercise of a right or option as a capital
asset and that, for Federal income tax persons, is a U.S. citizen or resident or
a domestic corporation, partnership, trust or estate. This summary does not
purport to deal with all aspects of taxation that may be relevant to a
particular person in light of his particular circumstances or to certain types
of taxpayers subject to special treatment under the Federal income tax law,
including financial institutions, broker-dealers, foreign persons or persons
holding rights or DSI stock as part of a straddle, "synthetic security" or other
integrated investment (including a "conversion transaction").
Neither HTE nor DSI has obtained, or will obtain, a private letter ruling
from the Internal Revenue Service or an opinion of tax counsel with respect to
any Federal income tax consequences of the rights distribution. HTE believes
that the relevant material Federal income tax consequences should be as
described below. However, no assurance can be provided that positions contrary
to those described below will not be taken by the Internal Revenue Service or by
a court.
RIGHTS TRANSFERRED TO HOLDERS OF SHARES OF HTE COMMON STOCK
A transfer of rights to a holder of shares of HTE common stock in respect
of that stock (an "Investor Optionee") should be treated as a distribution of
property by HTE to the shareholder in an amount equal to the fair market value
on the date of the distribution of the rights distributed. That distribution
should be taxable, first, as a dividend to the extent of the current and/or
accumulated earnings and profits, if any, of HTE as of the end of the taxable
year in which the distribution takes place which are attributable to the
78
<PAGE> 82
shares of HTE common stock owned by that shareholder; second, as a non-taxable
reduction of the shareholder's basis in his shares of HTE common stock, on a
share-by-share basis, to the extent thereof; and third, as gain from the sale or
exchange of property. HTE does not anticipate having any accumulated earnings
and profits through December 31, 1999; however, HTE cannot predict whether it
will have current profits thereafter. An Investor Optionee's basis in a right
will be equal to its fair market value on the date of distribution, and his
holding period in a right will begin on the day after the date of distribution.
The portion of a distribution constituting a dividend will be eligible for
the dividends received deduction otherwise generally available to a corporate
holder of HTE common stock. In the case of any corporate shareholder that has
not held a share of HTE common stock for more than two years on the distribution
announcement date (unless that corporate holder has held its HTE stock during
the entire period HTE has been in existence), the portion, if any, of the
distribution taxable as a dividend will be subject to the provisions of section
1059 applicable to "extraordinary dividends" if the amount taxable as a dividend
is at least ten percent of the holder's basis in the share of HTE common stock.
In certain cases, section 1059 aggregates dividends paid within specified time
periods. If section 1059 applies to a corporate holder, the untaxed portion of
the dividend, if any, would reduce the corporate holder's tax basis in its HTE
common stock, on a share-by-share basis, but not below zero, and any excess
generally would be taxable as capital gain.
Holders of rights should be aware that, upon certain corporate transactions
that change the capital structure of DSI (including, for example,
recapitalizations and stock dividends), a change in the exercise price of the
rights or a failure of the rights to adjust the exercise price in the manner
required, could give rise to a constructive distribution on the rights, and such
a distribution would be taxable as a dividend to the holders of rights to the
extent of DSI's current and accumulated earnings and profits.
An Investor Optionee will not recognize any gain or loss on exercise of the
right. The Investor Optionee's tax basis in the DSI common stock acquired on
exercise will be equal to the sum of the price paid for the DSI common stock on
exercise of the right and the Investor Optionee's tax basis in the right
exercised. An Investor Optionee's holding period for the DSI common stock
acquired on exercise of a right will begin on the date of exercise.
Upon a sale, exchange or other taxable disposition of a right, an Investor
Optionee will recognize capital gain or loss equal to the difference between the
amount realized for the right and the Investor Optionee's tax basis in the
right. That gain or loss will be capital gain or loss and, because the rights
cannot be held for more than one year, will be short-term capital gain or loss.
If an Investor Optionee fails to exercise a right and it lapses
unexercised, the Investor Optionee will recognize a short-term capital loss, on
the date the right expires, in an amount equal to the Investor Optionee's tax
basis in the right.
The foregoing discussion assumes that the rights, and the DSI stock that
may be acquired on their exercise, will be capital assets in the hands of the
Investor Optionee. The foregoing discussion also assumes, in the case of an HTE
shareholder that also holds HTE stock options or is an employee of HTE (or a
subsidiary thereof), that the rules of the Code applicable to investment
warrants would apply to the rights that person acquires as a
79
<PAGE> 83
distribution on his HTE common stock. Although HTE believes it should be the
better view that those rules would apply to those rights, it nevertheless is
possible, in the case of those types of recipients of rights, that the rules set
forth below in " -- Rights Transferred to Holders of HTE Options and HTE
Directors and Employees" would apply to the rights they receive in respect of
their HTE common stock.
RIGHTS TRANSFERRED TO HOLDERS OF HTE OPTIONS AND HTE DIRECTORS AND EMPLOYEES
The taxation of a right transferred to a holder of an HTE option, an HTE
director or an HTE employee (each, a "Compensation Optionee") should be subject
to the provisions of section 83 of the Code, which apply to a transfer of
property in connection with the performance of services. Those provisions also
would apply to each option to purchase one-quarter of a share of DSI common
stock that is transferred to a person holding HTE stock options in respect of
unvested options, and the following discussion, in referring to the tax
consequences associated with rights, is equally applicable to those options.
Pursuant to the rules of section 83 of the Code, a Compensation Optionee
should not be taxable on the receipt of a right. On exercise of a right, the
Compensation Optionee will recognize ordinary income equal to the excess, if
any, of (1) the fair market value, on the date of exercise of the right, of the
shares of DSI common stock acquired on exercise of the right over (2) the
exercise price for the right. If the Compensation Optionee is an employee of HTE
(or a subsidiary), that income will be subject to the withholding of Federal
income tax. A Compensation Optionee's tax basis in the DSI common stock will be
equal to its fair market value on the date of exercise of the right, and his
holding period for that stock will begin on that date. DSI will be entitled to a
deduction for Federal income tax purposes equal to the amount of ordinary income
taxable to a Compensation Optionee, provided that amount constitutes an ordinary
and necessary business expense for DSI and is reasonable in amount, and either
the employee includes that amount in income or DSI timely satisfies its
reporting requirements with respect to that amount.
DSI COMMON STOCK
The Federal income tax rules generally applicable to common stock will
apply to the DSI common stock issued on exercise of a right. Holders of that
stock should be aware that, upon certain corporate transactions that change the
capital structure of DSI (including, for example, recapitalizations and stock
dividends), a change in the exercise price of the rights or a failure of the
rights to adjust the exercise price in the manner required, could give rise to a
constructive distribution on the DSI common stock, and such a distribution would
be taxable as a dividend to the holders of DSI common stock to the extent of
DSI's current and accumulated earnings and profits.
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting by HTE and DSI to the Internal Revenue Service, and
the rules regarding backup withholding at a rate of 31 percent, will apply in
respect of rights distributed to Investor Optionees and in respect of DSI common
stock.
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<PAGE> 84
LEGAL MATTERS
The validity of the DSI common stock offered hereby will be passed upon by
Greenberg Traurig, P.A., Orlando, Florida.
AVAILABLE INFORMATION
We have filed with the SEC a registration statement on Form S-1 with
respect to the common stock offered hereby. This prospectus which constitutes a
part of the registration statement, does not contain all of the information set
forth in the registration statement or the exhibits an schedules which are part
of the registration statement. For further information with respect to DSI and
the common stock, reference is made to the registration statement and the
exhibits and schedules thereto. You may read and copy any document we file at
the SEC's public reference room in Washington, DC. Please call the SEC at
1-800-SEC-0330 for further information on the public reference room. Our SEC
filings are also available to the public from the SEC's website at
http://www.sec.gov.
Upon completion of this offering, DSI will become subject to the
information and periodic reporting requirements of the Securities Exchange Act
and, in accordance therewith, will file periodic reports, proxy statements and
other information with the SEC. Such periodic reports, proxy statements and
other information will be available for inspection and copying at the SEC's
public reference rooms, DSI's website and the website of the SEC referred to
above. Information on our website does not constitute a part of this prospectus.
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<PAGE> 85
DEMANDSTAR.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Certified Public Accountants.......... F-2
Balance Sheets.............................................. F-3
Statements of Operations.................................... F-4
Statements of Shareholder's Equity (Deficit)................ F-5
Statements of Cash Flows.................................... F-6
Notes to Financial Statements............................... F-7
</TABLE>
F-1
<PAGE> 86
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholder of DemandStar.com, Inc.:
We have audited the accompanying balance sheet of Information On Demand,
Inc. (the Predecessor, a Florida corporation) as of December 31, 1998, and the
related statements of operations, shareholder's equity (deficit) and cash flows
for the year then ended, and for the period from January 1, 1999, to June 17,
1999, and the accompanying balance sheet of DemandStar.com, Inc., a Florida
corporation (the Company), as of October 31, 1999, and the related statements of
operations, shareholder's equity and cash flows for the period from June 18,
1999, to October 31, 1999. These financial statements are the responsibility of
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of the Predecessor as of
December 31, 1998, and the results of its operations and its cash flows for the
year then ended, and for the period from January 1, 1999, to June 17, 1999, and
the financial position of the Company as of October 31, 1999, and the results of
its operations and its cash flows for the period from June 18, 1999, to October
31, 1999, in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has suffered recurring losses from operations
and has a net capital deficiency that raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 1. The financial statements do not include any
adjustments relating to the recoverability and classification of asset carrying
amounts or the amount and classification of liabilities that might result should
the Company be unable to continue as a going concern.
Arthur Andersen LLP
Orlando, Florida,
December 21, 1999
F-2
<PAGE> 87
THE PURCHASE METHOD OF ACCOUNTING WAS USED TO RECORD ASSETS ACQUIRED AND
LIABILITIES ASSUMED BY THE COMPANY. SUCH ACCOUNTING GENERALLY RESULTS IN
INCREASED AMORTIZATION AND DEPRECIATION REPORTED IN FUTURE PERIODS. ACCORDINGLY,
THE ACCOMPANYING FINANCIAL STATEMENTS OF THE PREDECESSOR AND THE COMPANY ARE NOT
COMPARABLE IN ALL MATERIAL RESPECTS SINCE THOSE FINANCIAL STATEMENTS REPORT
FINANCIAL POSITION, RESULTS OF OPERATIONS, AND CASH FLOWS OF THESE TWO SEPARATE
ENTITIES.
DEMANDSTAR.COM, INC.
BALANCE SHEETS
<TABLE>
<CAPTION>
INFORMATION ON
DEMAND, INC.
(PREDECESSOR) DEMANDSTAR.COM, INC.
DECEMBER 31, 1998 OCTOBER 31, 1999
----------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash....................................... $ 17,564 $ 41,253
Accounts receivable........................ 1,691 6,715
--------- ----------
Total current assets..................... 19,255 47,968
--------- ----------
PROPERTY AND EQUIPMENT, NET (NOTE 2)....... -- 83,304
--------- ----------
OTHER ASSETS:
Deposits................................... -- 8,900
Goodwill and other intangibles, net (Note
3)....................................... -- 1,029,633
--------- ----------
Total other assets....................... -- 1,038,533
--------- ----------
Total assets............................. $ 19,255 $1,169,805
========= ==========
LIABILITIES AND SHAREHOLDER'S EQUITY (DEFICIT)
CURRENT LIABILITIES:
Accounts payable and accrued liabilities... $ 123,399 $ 98,313
Current portion of note payable (Note 5)... -- 200,000
Deferred revenue........................... 104,469 120,084
--------- ----------
Total current liabilities................ 227,868 418,397
--------- ----------
NOTE PAYABLE, LESS CURRENT PORTION (NOTE
5)....................................... -- 537,075
--------- ----------
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND
6)
SHAREHOLDER'S EQUITY (DEFICIT):
Common stock: $ .0001 par value,
100,000,000 shares authorized and
1,250,000 shares issued and outstanding
as of October 31, 1999................... -- 125
Additional paid-in capital................. -- 799,875
Shareholder's capital...................... 65,770 --
Accumulated deficit........................ (274,383) (585,667)
--------- ----------
Total shareholder's equity (deficit)..... (208,613) 214,333
--------- ----------
Total liabilities and shareholder's
equity (deficit)...................... $ 19,255 $1,169,805
========= ==========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 88
THE PURCHASE METHOD OF ACCOUNTING WAS USED TO RECORD ASSETS ACQUIRED AND
LIABILITIES ASSUMED BY THE COMPANY. SUCH ACCOUNTING GENERALLY RESULTS IN
INCREASED AMORTIZATION AND DEPRECIATION REPORTED IN FUTURE PERIODS. ACCORDINGLY,
THE ACCOMPANYING FINANCIAL STATEMENTS OF THE PREDECESSOR AND THE COMPANY ARE NOT
COMPARABLE IN ALL MATERIAL RESPECTS SINCE THOSE FINANCIAL STATEMENTS REPORT
FINANCIAL POSITION, RESULTS OF OPERATIONS, AND CASH FLOWS OF THESE TWO SEPARATE
ENTITIES.
DEMANDSTAR.COM, INC.
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
INFORMATION ON DEMAND, INC.
(PREDECESSOR) DEMANDSTAR.COM, INC.
----------------------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
FOR THE YEAR JANUARY 1, 1999 JUNE 18, 1999
ENDED TO TO
DECEMBER 31, 1998 JUNE 17, 1999 OCTOBER 31, 1999
----------------- --------------- --------------------
<S> <C> <C> <C>
Revenue.......................... $ 33,718 $ 132,135 $ 128,583
Operating Expenses:
Marketing and advertising........ 12,350 15,866 181,186
Research and development......... 125,010 136,279 82,401
General and administrative....... 170,741 246,130 289,903
Depreciation and amortization.... -- -- 146,660
--------- --------- ---------
Total operating expenses....... 308,101 398,275 700,150
--------- --------- ---------
Operating loss................... (274,383) (266,140) (571,567)
Interest expense................. -- -- 14,100
--------- --------- ---------
Loss before income tax benefit... (274,383) (266,140) (585,667)
--------- --------- ---------
Income tax benefit (Note 4)...... -- -- --
--------- --------- ---------
Net loss....................... $(274,383) $(266,140) $(585,667)
========= ========= =========
Basic and diluted loss per common
share.......................... $ (0.47)
=========
Weighted average number of common
shares outstanding............. 1,250,000
=========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 89
DEMANDSTAR.COM, INC.
STATEMENTS OF SHAREHOLDER'S EQUITY (DEFICIT)
<TABLE>
<CAPTION>
SHAREHOLDER'S ACCUMULATED
INFORMATION ON DEMAND, INC. (THE PREDECESSOR) CAPITAL DEFICIT TOTAL
- --------------------------------------------- ------------- ----------- ---------
<S> <C> <C> <C>
BALANCE, JANUARY 1, 1998.................... $ -- $ -- $ --
Issuance of common stock.................. 65,770 -- 65,770
Net loss.................................. -- (274,383) (274,383)
-------- --------- ---------
BALANCE, DECEMBER 31, 1998.................. 65,770 (274,383) (208,613)
Issuance of common stock.................. 46,222 -- 46,222
Net loss.................................. -- (266,140) (266,140)
-------- --------- ---------
BALANCE, JUNE 17, 1999...................... $111,992 $(540,523) $(428,531)
======== ========= =========
</TABLE>
<TABLE>
<CAPTION>
COMMON STOCK ADDITIONAL
DEMANDSTAR.COM, INC. --------------------- PAID-IN ACCUMULATED
(THE COMPANY) SHARES AMOUNT CAPITAL DEFICIT TOTAL
- -------------------- ------------ ------ ---------- ----------- ---------
<S> <C> <C> <C> <C> <C>
ISSUANCE OF COMMON STOCK
AT INCEPTION............. 1,250,000 $125 $799,875 $ -- $ 800,000
Net loss............... -- -- -- (585,667) (585,667)
--------- ---- -------- --------- ---------
BALANCE, OCTOBER 31,
1999................... 1,250,000 $125 $799,875 $(585,667) $ 214,333
========= ==== ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 90
THE PURCHASE METHOD OF ACCOUNTING WAS USED TO RECORD ASSETS ACQUIRED AND
LIABILITIES ASSUMED BY THE COMPANY. SUCH ACCOUNTING GENERALLY RESULTS IN
INCREASED AMORTIZATION AND DEPRECIATION REPORTED IN FUTURE PERIODS. ACCORDINGLY,
THE ACCOMPANYING FINANCIAL STATEMENTS OF THE PREDECESSOR AND THE COMPANY ARE NOT
COMPARABLE IN ALL MATERIAL RESPECTS SINCE THOSE FINANCIAL STATEMENTS REPORT
FINANCIAL POSITION, RESULTS OF OPERATIONS, AND CASH FLOWS OF THESE TWO SEPARATE
ENTITIES.
DEMANDSTAR.COM, INC.
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
INFORMATION ON DEMAND, INC.
(PREDECESSOR) DEMANDSTAR.COM, INC.
----------------------------------- --------------------
FOR THE PERIOD FOR THE PERIOD
FROM FROM
FOR THE YEAR JANUARY 1, 1999 JUNE 18, 1999
ENDED TO TO
DECEMBER 31, 1998 JUNE 17, 1999 OCTOBER 31, 1999
----------------- --------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................. $(274,383) $(266,140) $ (585,667)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... -- -- 146,660
Changes in operating assets and
liabilities, net of effects from
acquisition:
Increase in accounts receivable... (1,691) (2,663) (6,715)
Increase in deposits.............. -- -- (8,900)
Increase in accounts payable and
accrued liabilities............ 123,399 146,634 98,313
Increase (decrease) in deferred
revenue........................ 104,469 66,232 (52,916)
--------- --------- -----------
Net cash used in operating
activities................... (48,206) (55,937) (409,225)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition............. -- -- (1,000,000)
Capital expenditures.................. -- (3,064) (86,597)
--------- --------- -----------
Net cash used in investing
activities................... -- (3,064) (1,086,597)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions of capital.............. 65,770 46,222 --
Proceeds from issuance of common
stock............................... -- -- 800,000
Borrowings under note payable......... -- -- 737,075
--------- --------- -----------
Net cash provided by financing
activities................... 65,770 46,222 1,537,075
--------- --------- -----------
Net (decrease) increase in cash....... 17,564 (12,779) 41,253
Cash, beginning of period............. -- 17,564 --
--------- --------- -----------
Cash, end of period................... $ 17,564 $ 4,785 $ 41,253
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 91
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 1999, AND DECEMBER 31, 1998
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION AND FUNDING
Information On Demand, Inc. (the Predecessor) was formed as a Florida
corporation in June 1997 and commenced operations in January 1998. The
Predecessor was an S corporation. On June 1, 1999, H.T.E., Inc. (HTE), formed a
wholly-owned subsidiary, HTE-IOD, Inc., by purchasing 1,250,000 shares for
$800,000 and advancing $200,000 of cash. On June 18, 1999, HTE-IOD, Inc.
purchased the business and certain net assets of the Predecessor. See Note 3. On
August 23, 1999, HTE-IOD, Inc. changed its name to Information On Demand, Inc.
and on December 21, 1999, its name was changed to DemandStar.com, Inc. (the
Company).
The Company is a provider of Internet-based procurement systems for
governmental agencies, which operates primarily in Florida. Businesses that
provide goods and services to agencies enrolled in the Company's program are
provided the opportunity to register with the Company as registered vendors for
an annual fee. The Company operates as a single business unit.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
BASIS OF PRESENTATION
The accompanying financial statements as of October 31, 1999, and for the
period from June 18, 1999, to October 31, 1999, reflect the financial position
and results of operations and cash flows of the Company. The accompanying
financial statements as of December 31, 1998, and for the year ended December
31, 1998, and for the period from January 1, 1999, to June 17, 1999, reflect the
financial position and results of operations and cash flows of the Predecessor.
The accompanying financial statements of the Predecessor are not necessarily
comparable to the accompanying financial statements of the Company, due to the
1999 acquisition. See Note 3.
On December 17, 1999, the Company's board of directors approved a
1,250-to-1 stock split for the Company's common stock, effective December 21,
1999. All share and per share information contained herein have been adjusted to
reflect the split.
LIQUIDITY/GOING CONCERN
The accompanying financial statements have been prepared assuming the
Company will continue as a going concern. Accordingly, the financial statements
do not include any adjustments that might result from the Company's inability to
continue as a going concern.
The Predecessor and the Company have generated losses since inception and
have relied on capital contributions and loans from shareholders to fund
operations. Management expects to continue to generate losses during the next
twelve months and, based on the current operating budget, does not anticipate
having sufficient cash on hand or available through current lending arrangements
to fund operations. To address this funding need, in December 1999, the
Company's board of directors authorized management to
F-7
<PAGE> 92
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
(i) file a registration statement with the U.S. Securities and Exchange
Commission on Form S-1 to pursue a rights offering of the Company's common
stock, (ii) execute an investment and distribution agreement with HTE covering
HTE's purchase of Series A preferred stock (See Note 7), and (iii) execute a
Conditional Series B Stock Purchase Agreement with HTE and certain Company
employees and directors (See Note 7). Management believes that the funds
generated by the transactions noted above will be sufficient to fund operations
for at least the next twelve months. In the event all the funding is not
received, management believes it can revise its operating plan to reduce costs
to such a level that the Company will be able to fund operations for the next
twelve months.
PROPERTY AND EQUIPMENT
Property and equipment are recorded at cost. Depreciation and amortization
are recorded for financial statement purposes on a straight-line basis over the
estimated useful lives of the assets. Repair and maintenance costs, which do not
extend the useful lives of the related assets are expensed as incurred.
The estimated useful lives of property and equipment are as follows:
<TABLE>
<CAPTION>
YEARS
-----
<S> <C>
Equipment................................................... 3-5
Leasehold improvements...................................... 2
</TABLE>
Depreciation and amortization expense related to property and equipment of
approximately $3,300 is included in general and administrative expenses in the
accompanying statement of operations for the period from June 18, 1999, to
October 31, 1999, of the Company. No depreciation expense was incurred by the
Predecessor in 1998 and 1999.
GOODWILL AND OTHER INTANGIBLES
Goodwill and other intangibles represents identifiable assets, such as
customer lists, vendor database and developed technology, along with amounts
paid in excess of the fair market value of net assets purchased in the
acquisition of $1,173,000 and is being amortized using the straight-line method
over a period of 36 months. Amortization expense related to goodwill and other
intangibles of approximately $143,400 is included in depreciation and
amortization expense in the accompanying statement of operations for period from
June 18, 1999, to October 31, 1999, of the Company. No amortization expense was
incurred by the Predecessor in 1998 and 1999.
DEFERRED REVENUE AND REVENUE RECOGNITION
DemandStar.com, Inc. earns revenues primarily by providing notification of
agency bid proposals to vendors of governmental agencies. Revenue for such
notification is deferred and recognized ratably over the terms of agreements
with these vendors, as services are typically billed at the beginning of the
agreement term. The typical term for these agreements is one year.
F-8
<PAGE> 93
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
INCOME TAXES
The Predecessor elected to be taxed as an S corporation for both federal
and state income tax reporting purposes. Accordingly, the losses related to
periods presented for the Predecessor are includable in the personal income tax
returns of the Predecessor's shareholder.
The operating results of the Company are included in the consolidated
federal and state income tax returns of HTE. The Company's income tax provision
is computed as if it were filing separate federal and state tax returns.
The Company accounts for income taxes using an asset and liability approach
that requires the recognition of deferred tax assets and liabilities for the
expected future tax consequences of events that have been recognized in the
Company's financial statements or tax returns. In estimating future tax
consequences, the Company generally considers all expected future events other
than enactments of changes in the tax laws or rates. Changes in tax laws or
rates will be recognized in the future years in which they occur.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying values of cash, accounts receivable, accounts payable and
accrued liabilities, approximate fair value due to the short-term maturities of
these assets and liabilities.
NET LOSS PER SHARE
The Company's basic and diluted net loss per share are found in the
accompanying statements of operations. Basic and diluted per share information
are the same as the Company generated a net loss and had no outstanding
potential common stock instruments. Earnings per share information for the
Predecessor has not been presented as this information is not meaningful given
the Predecessor's capital structure.
RESEARCH AND DEVELOPMENT
Research and development expense includes expenses incurred by the Company
or Predecessor for research, design and development of proprietary technology.
Research and development costs are expensed as incurred. Software development
costs are required to be capitalized when a product's technological feasibility
has been established by completion of a working model of the product and ending
when a product is available for general release to customers. To date,
completion of a working model of the Company's product and general release have
substantially coincided. As a result, the Company and Predecessor have not
capitalized any software development costs because such costs have not been
significant.
F-9
<PAGE> 94
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
LONG-LIVED ASSETS
The Company reviews its long-lived assets for impairment whenever
circumstances indicate that the carrying amount of an asset may not be
recoverable. There has been no material impairment reflected in the accompanying
financial statements.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
COMPREHENSIVE INCOME
Comprehensive income is equal to net loss presented in the accompanying
financial statements.
2. PROPERTY AND EQUIPMENT
Property and equipment as of October 31, 1999, consisted of the following:
<TABLE>
<S> <C>
Computer equipment.......................................... $80,566
Leasehold improvements...................................... 6,031
-------
86,597
Less -- Accumulated depreciation............................ (3,293)
-------
$83,304
=======
</TABLE>
3. BUSINESS COMBINATION
On June 18, 1999, the Company purchased the business and certain net assets
of the Predecessor for $1 million in cash. The Company could pay up to an
additional $2,000,000 over a three-year period from the purchase date for the
purchase if certain financial targets set forth in the Agreement for Sale and
Purchase of Assets are attained. The net assets acquired consisted of $1,173,000
of goodwill and other intangibles and $173,000 of deferred revenue for vendor
agreements. The purchase was accounted for using the purchase method of
accounting and, accordingly, the operating results from June 18, 1999, to
October 31, 1999, of the purchased business have been included in the
accompanying statement of operations of the Company for the same period.
4. INCOME TAXES
No provision for income taxes has been recorded in the accompanying
financial statements for the Predecessor, as the taxable losses related to the
periods presented are includable in the personal income tax returns of the
Predecessor's shareholder.
F-10
<PAGE> 95
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
The provision for income taxes for the period from June 18, 1999, to
October 31, 1999, differs from the amount computed by applying the U.S. federal
corporate tax rate of 34 percent to income before provision for income taxes as
follows:
<TABLE>
<S> <C>
U.S. federal income tax rate................................ 34.0%
Valuation allowance....................................... (34.0)
-----
Effective tax rate.......................................... 0.0%
=====
</TABLE>
Deferred income taxes consisted of the following as of October 31, 1999:
<TABLE>
<CAPTION>
CURRENT NONCURRENT TOTAL
-------- ---------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenues............................. $ 25,162 $ -- $ 25,162
Net operating loss (NOL) carryforwards........ -- 221,907 221,907
-------- --------- ---------
Total assets............................... 25,162 221,907 247,069
-------- --------- ---------
Deferred tax liabilities:
Goodwill and other intangibles................ -- 20,885 20,885
-------- --------- ---------
Net deferred tax assets......................... 25,162 201,022 226,184
Less -- Valuation allowance..................... (25,162) (201,022) (226,184)
-------- --------- ---------
Net deferred tax assets.................... $ -- $ -- $ --
======== ========= =========
</TABLE>
The Company had NOL carryforwards as of October 31, 1999, of approximately
$575,000 available to offset future taxable income. The NOL carryforwards expire
in 2019. Utilization of the NOL is dependent on generating sufficient future
taxable income. Due to uncertainties regarding the Company's ability to realize
the benefits of its deferred tax assets through future operations, a valuation
allowance has been established that completely offsets the NOL as of October 31,
1999.
5. RELATED PARTY TRANSACTIONS
The Predecessor used office space owned by the shareholder for which no
rent was paid.
During the period from June 18, 1999, to October 31, 1999, the Company paid
approximately $3,800 to a member of the board of directors for legal services
provided by the member to the Company, which are included in general and
administrative expense in the accompanying statements of operations of the
Company.
HTE charges the Company a management fee for finance, accounting,
management and basic processing services based on a percentage of total
expenses. The total of these charges was $30,000 for the period from June 18,
1999, to October 31, 1999, which are included in general and administrative
expense in the accompanying statements of operations of the Company.
F-11
<PAGE> 96
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
Certain payroll and other administrative costs of HTE were allocated to the
Company based on actual time and expenses incurred on the Company's behalf.
These costs totaled approximately $40,300 for the period from June 18, 1999, to
October 31, 1999.
During 1999, the Company borrowed money from HTE to acquire the business
and certain net assets of the Predecessor and fund its operations under an
informal lending arrangement. Under this arrangement HTE advanced the Company
$737,075, with an average outstanding balance of approximately $470,000 during
the period from June 18, 1999, to October 31, 1999. Interest at a rate of 8
percent, which totaled $14,100, was charged by HTE. On October 31, 1999, this
balance was transferred to the formal loan between HTE and the Company discussed
below.
On October 31, 1999, the Company entered into an unsecured loan agreement
which has a principal amount of $1,750,000 (the Loan) with HTE. Borrowings
outstanding under the Loan bear interest at eight percent per annum. The unpaid
principal balance is due at the earlier of the following maturity schedule which
is payable on the anniversary of the note through 2004 or the date of the
effectiveness of a secondary public offering of the Company's common stock
yielding gross proceeds of at least $10,000,000.
Scheduled principal reductions of the Loan, by year, were as follows as of
October 31, 1999:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 31, AMOUNT
- ----------------------- --------
<S> <C>
2000................................. $200,000
2001................................. 250,000
2002................................. 287,075
--------
$737,075
========
</TABLE>
6. COMMITMENTS AND CONTINGENCIES
OPERATING LEASES
The Company leases office space and equipment under certain long-term non-
cancelable operating lease agreements with varying terms and conditions.
Future aggregate minimum rental payments under these agreements are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING OCTOBER 31, AMOUNT
----------------------- --------
<S> <C>
2000........................................................ $180,914
2001........................................................ 151,337
2002........................................................ 38,045
2003........................................................ 10,697
2004........................................................ 3,766
--------
$384,759
========
</TABLE>
Rent expense under operating leases totaled approximately $23,500 and
$20,200 for the Predecessor for the year ended December 31, 1998, and the period
from January 1, 1999, to June 17, 1999, respectively. The Company had rent
expense under operating
F-12
<PAGE> 97
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
leases totaling approximately $42,300 for the period from June 18, 1999, to
October 31, 1999, which is included in general and administrative expense in the
accompanying statements of operations of the Company.
EMPLOYMENT AGREEMENTS
In December 1999, the former sole shareholder of the Predecessor
voluntarily resigned and concurrently entered into a one-year consulting
arrangement whereby the Company is obligated to pay him $150,000.
7. SUBSEQUENT EVENTS
As discussed in Note 1, the Company is contemplating a rights offering to
HTE shareholders and employees and the sale of Series A and Series B preferred
stock. Immediately following the consummation of the rights offering, the
Company's authorized preferred stock will consist of 10,000,000 shares with a
par value $.01 per share, of which 2,000,000 shares are designated as Series A
preferred stock, 4,000,000 shares are designated as Series B preferred stock,
and 4,000,000 shares which are undesignated. As of October 31, 1999, no
preferred stock was issued or outstanding.
Under the terms of the rights offering, the Company intends to distribute
rights to the shareholders and employees of HTE that will entitle each holder to
purchase shares of common stock at $1 per share.
Concurrent with the closing of the rights offering, HTE will purchase
500,000 shares of Series A Preferred Stock for $1,000,000. HTE will also receive
options to purchase 250,000 shares of Series A Preferred Stock for $500,000.
These options expire on June 30, 1999. Each share of Series A Preferred Stock
shall be convertible into one share of fully paid common stock at either the
election of the holder of the Series A Preferred Stock or automatically upon the
sale of substantially all of the Company's assets or a merger of the Company.
The Company also intends to enter into an agreement for the conditional
purchase of Series B Preferred Stock with HTE and certain employees and
directors of the Company (collectively the Buyers). Under the terms of this
agreement, in the event the rights offering raises less than $5,000,000, the
Buyers will agree to purchase 2,000,000 shares of Series B Preferred Stock for
$2,000,000.
The Series B Preferred Stock will accrue dividends on the liquidation
amount of the stock at the rate of 6% per annum. The dividends are cumulative,
but shall not be payable unless and until declared by the board of directors.
The dividends are payable through accretion of the liquidation preference or
additional shares of Series B Preferred Stock until June 15, 2002 at which time
dividends will be payable in cash. Following the second anniversary of the later
of (i) the closing date of the rights offering or (ii) June 30, 2000, the
Company may be required to mandatorily redeem all or a portion of the Series B
Preferred Stock at the election of the holders of the Series B Preferred Stock.
The redemption price will equal the liquidation value of the shares being
redeemed plus all accrued and unpaid cash dividends.
F-13
<PAGE> 98
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
In order to induce the Buyers to enter into the conditional Series B
Preferred Stock purchase agreement, the Company intends to issue warrants
entitling the Buyers to purchase an aggregate of 1,000,000 shares of the
Company's common stock at an exercise price of $2.00 per share.
In December 1999, the Company's board of directors approved the 1999
Employee Incentive Compensation Plan (the Plan). The Plan provides that awards
may be granted to the Company's key officers, employees, consultants, advisors
and directors or others designated by the board of directors at the fair market
value at the date of grant. Awards under the Plan may take the form of stock
options, share appreciation rights or restricted stock. The Company has granted
options to purchase a total of 1,650,000 shares of common stock under the plan
with an exercise price of $1.00 per share. Of the outstanding options, 190,000
options vest immediately, with the remaining options vesting over 3-5 years.
Upon consummation of the rights offering, the Company will grant additional
options to purchase an aggregate of up to 300,000 shares of the Company's common
stock to all holders of unvested HTE stock options as of December 16, 1999.
F-14
<PAGE> 99
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and distribution of
the securities being registered hereby are itemized below.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 5,280*
Nasdaq listing fee.......................................... 7,500*
Accounting fees and expenses................................ 45,000*
Legal fees and expenses..................................... 200,000*
Printing and engraving expenses............................. 60,000*
Subscription Agent, Transfer Agent and Registrar fees and
expenses.................................................. 45,000*
Miscellaneous............................................... 10,000*
--------
Total..................................................... $372,780*
========
</TABLE>
- -------------------------
* Estimated.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The articles of incorporation and bylaws provide that DSI indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed proceeding by reason of the fact that he is or
was a director or officer of DSI or any other person designated by the board of
directors which may include any person serving at the request of DSI as a
director, officer, employee, agent, fiduciary or trustee of another corporation,
partnership, joint venture, trust, employee benefit plan or other entity or
enterprise, in each case, against certain liabilities including damages,
judgments, amounts paid in settlement, fines, penalties and expenses including
attorneys' fees and disbursements, except where such indemnification is
expressly prohibited by applicable law, where such person has engaged in willful
misconduct or recklessness or where such indemnification has been determined to
be unlawful. Such indemnification as to expenses is mandatory to the extent the
individual is successful on the merits of the matter. Florida law permits DSI to
provide similar indemnification to employees and agents who are not directors or
officers. The determination of whether an individual meets the applicable
standard of conduct may be made by the disinterested directors, independent
legal counsel or the shareholders. Florida law also permits indemnification in
connection with a proceeding brought by or in the right of DSI to procure a
judgment in its favor. Insofar as indemnification for liabilities arising under
the SEC may be permitted to directors, officers, or persons controlling DSI
pursuant to the foregoing provisions, DSI has been informed that in the opinion
of the SEC such indemnification is against public policy as expressed in the
Securities Act of 1933 and is therefore unenforceable.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In June 1999, DSI issued 1,000 shares of common stock to HTE. In December
1999, DSI effected a 1,250-for-1 share stock split. These securities were issued
pursuant to an exemption provided by Section 4(2) of the Securities Act.
II-1
<PAGE> 100
Prior to the closing of the rights offering, DSI will issue to HTE 500,000
shares of Series A preferred stock. These securities will be issued pursuant to
an exemption from registration provided by Section 4(2) of the Securities Act.
In December 1999, DSI issued stock options to current and future officers
and employees of DSI to purchase an aggregate of 1,650,000 shares of common
stock at an exercise price of $1.00 per share. This issuance was exempt from
registration under the Securities Act in reliance on Rule 701 promulgated under
the Securities Act as offers and sales of securities pursuant to certain
compensatory benefit plans and contracts relating to compensation in compliance
with Rule 701.
Immediately prior to the closing of the rights offering, DSI will issue
warrants to HTE and certain of its executive officers and directors to purchase
up to 1,000,000 shares of common stock at an exercise price of $2.00 per share.
These securities will be issued pursuant to an exemption from registration
provided by Section 4(2) of the Securities Act.
No underwriters, brokers or other agents were or will be involved in any of
the above described transactions.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENTS
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Amended and Restated Articles of Incorporation of DSI
3.2 -- Amended and Restated By-laws of DSI
4.1 -- Form of Specimen Stock Certificate for Common Stock
4.2 -- Form of Subscription Certificate for the Rights
4.3 -- Form of Warrant
4.4 -- Subscription Agent Agreement between DSI and Continental
Stock Transfer & Trust Company, as Transfer Agent
5.1 -- Opinion of Greenberg Traurig, P.A.
10.1 -- 1999 Employee Incentive Compensation Plan
10.2 -- Investment and Distribution Agreement between DSI and HTE
10.3 -- Form of Services Agreement between DSI and HTE
10.4 -- Form of Tax Sharing and Indemnity Agreement between DSI and
HTE
10.5 -- Registration Rights Agreement between DSI and HTE
10.6 -- Employment Agreement of O. F. Ramos
10.7 -- Employment Agreement of Bernard B. Markey
10.8 -- Employment Agreement of L. A. Gornto, Jr.
10.9 -- Employment Agreement of Edward Jordan
10.10 -- Employment Agreement of William Knox North
10.11 -- Consulting Agreement between DSI and Edward Moses
10.12 -- Consulting Agreement between DSI and Ronald Brown
10.13 -- Form of Indemnification Agreement between DSI and each
Executive Officer and Director
10.14 -- $1,750,000 Promissory Note issued by Information On Demand,
Inc. in favor of HTE
10.15 -- Conditional Series B Preferred Stock Purchase Agreement
</TABLE>
II-2
<PAGE> 101
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
10.16 -- Agreement for Sale and Purchase of Assets among Information
on Demand, Inc., HTE-IOD, Inc. and Ronald B. Brown
10.17 -- Commitment to Purchase Rights between DSI and Messrs. Ramos,
Markey, Gornto, Moses, Jordan and North
23.1 -- Consent of Independent Certified Public Accountants
23.2 -- Consent of Greenberg Traurig, P.A. (contained in Exhibit
5.1)
24.1 -- Power of Attorney (included on signature page to this
Registration Statement)
27.1 -- Financial Data Schedule (for SEC use only)
99.1 -- Form of Letter to HTE Shareholders, Optionholders and
Employees
99.2 -- Form of Instructions to HTE Shareholders, Optionholders and
Employees as to use of Subscription Certificates
99.3 -- Form of Notice of Guaranteed Delivery For Subscription
Certificates
99.4 -- Form of Letter to Securities Dealers, Commercial Banks,
Brokers, Trust Companies and Other Nominees
99.5 -- Form of Broker Letter to Clients
99.6 -- Form of Special Notice to Eligible HTE Shareholders or
Optionholders Whose Addresses are Outside the United States
99.7 -- Form of Nominee Holder Certification Form
</TABLE>
(b) No Financial Statements Schedules are filed a part of this registration
statement, other than Exhibit 27, the Financial Data Schedule.
ITEM 17. UNDERTAKINGS
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this registration statement:
(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high and of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than 20 percent change in the maximum aggregate
offering price set forth in "Calculation of Registration Fee" table in the
effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or any
material change to such information in the registration statement; and
(iv) To reflect the results of this offering.
II-3
<PAGE> 102
(2) That, for the purpose of determining any liability under the Securities
Act, each such post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned registrant hereby undertakes that insofar as
indemnification for liabilities arising under the Securities Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the registrant of expenses
incurred or paid by a director, officer or controlling person of the
registration in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act and will be governed by
the final adjudication of such issue.
If the registrant relies on Rule 430A under the Securities Act, the
registrant will:
(1) For purposes of determining any liability under the Securities
Act, treat the information omitted from the form of prospectus filed as
part of this registration statement in reliance upon Rule 430A and
contained in a form of prospectus filed by the registrant pursuant to Rule
424(b)(1) or (4) or 497(h) under the Securities Act as part of this
registration statement as of the time the Securities and Exchange
Commission declared it effective.
(2) For the purpose of determining any liability under the Securities
Act, treat each post-effective amendment that contains a form of prospectus
as a new registration statement for the securities offered therein and that
offering of such securities at that time as the initial bona fide offering
thereof.
II-4
<PAGE> 103
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in Maitland, Florida, on
December 22, 1999.
DEMANDSTAR.COM, INC.
By: /s/ O. F. RAMOS
-----------------------------------
O. F. Ramos
Chief Executive Officer,
President and Director
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS IN
THE CAPACITIES AND ON THE DATES INDICATED.
Each person in so signing also makes, constitutes and appoints O. F. Ramos
and L. A. Gornto, Jr., and each of them acting alone, his true and lawful
attorney-in-fact, with full power of substitution, to execute and cause to be
filed with the Securities and Exchange Commission pursuant to the requirements
of the Securities Act of 1933, as amended, any and all amendments and
post-effective amendments to this Registration Statement, and including any
Registration Statement for the same offering that is to be effective upon filing
pursuant to Rule 462(b) under the Securities Act, with exhibits thereto and
other documents in connection therewith, and hereby ratifies and confirms all
that said attorney-in-fact or his substitute or substitutes may do or cause to
be done by virtue hereof.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ O. F. RAMOS Chief Executive December 22, 1999
- --------------------------------------------------- Officer,
O. F. Ramos President and
Director
(Principal
Executive
Officer)
/s/ L. A. GORNTO, JR. Chief Financial December 22, 1999
- --------------------------------------------------- Officer
L. A. Gornto, Jr. (Principal
Financial and
Accounting
Officer),
Executive Vice
President,
Secretary and
Director
</TABLE>
II-5
<PAGE> 104
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ BERNARD B. MARKEY Chairman of the December 22, 1999
- --------------------------------------------------- Board
Bernard B. Markey
/s/ EDWARD A. MOSES Director December 22, 1999
- ---------------------------------------------------
Edward A. Moses
</TABLE>
II-6
<PAGE> 105
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Amended and Restated Articles of Incorporation of DSI
3.2 -- Amended and Restated By-laws of DSI
4.1 -- Form of Specimen Stock Certificate for Common Stock
4.2 -- Form of Subscription Certificate for the Rights
4.3 -- Form of Warrant
4.4 -- Subscription Agent Agreement between DSI and Continental
Stock Transfer & Trust Company, as Transfer Agent
5.1 -- Opinion of Greenberg Traurig, P.A.
10.1 -- 1999 Employee Incentive Compensation Plan
10.2 -- Investment and Distribution Agreement between DSI and HTE
10.3 -- Form of Services Agreement between DSI and HTE
10.4 -- Form of Tax Sharing and Indemnity Agreement between DSI and
HTE
10.5 -- Registration Rights Agreement between DSI and HTE
10.6 -- Employment Agreement of O. F. Ramos
10.7 -- Employment Agreement of Bernard B. Markey
10.8 -- Employment Agreement of L. A. Gornto, Jr.
10.9 -- Employment Agreement of Edward Jordan
10.10 -- Employment Agreement of William Knox North
10.11 -- Consulting Agreement between DSI and Edward Moses
10.12 -- Consulting Agreement between DSI and Ronald Brown
10.13 -- Form of Indemnification Agreement between DSI and each
Executive Officer and Director
10.14 -- $1,750,000 Promissory Note issued by Information On Demand,
Inc. in favor of HTE
10.15 -- Conditional Series B Preferred Stock Purchase Agreement
10.16 -- Agreement for Sale and Purchase of Assets among Information
on Demand, Inc., HTE-IOD, Inc. and Ronald D. Brown
10.17 -- Commitment to Purchase Rights between DSI and Messrs. Ramos,
Markey, Gornto, Moses, North and Jordan
23.1 -- Consent of Independent Certified Public Accountants
23.2 -- Consent of Greenberg Traurig, P.A. (contained in Exhibit
5.1)
24.1 -- Power of Attorney (included on signature page to this
Registration Statement)
27.1 -- Financial Data Schedule (for SEC use only)
99.1 -- Form of Letter to HTE Shareholders, Optionholders and
Employees
99.2 -- Form of Instructions to HTE Shareholders, Optionholders and
Employees as to use of Subscription Certificates
99.3 -- Form of Notice of Guaranteed Delivery For Subscription
Certificates
99.4 -- Form of Letter to Securities Dealers, Commercial Banks,
Brokers, Trust Companies and Other Nominees
99.5 -- Form of Broker Letter to Clients
99.6 -- Form of Special Notice to Eligible HTE Shareholders or
Optionholders Whose Addresses are Outside the United States
99.7 -- Form of Nominee Holder Certification Form
</TABLE>
II-7
<PAGE> 1
EXHIBIT 3.1
FIRST
AMENDED AND RESTATED
ARTICLES OF INCORPORATION
OF
INFORMATION ON DEMAND, INC.
(HEREIN AMENDING ITS NAME TO: DEMANDSTAR.COM, INC.)
O. F. Ramos, being the President of Information on Demand, Inc., a
Florida corporation, hereby certifies that:
1. The name of the corporation is Information on Demand, Inc. The
corporation was incorporated as HTE-IOD, Inc. in the State of Florida on June
2, 1999.
2. An amendment to the corporation's Articles of Incorporation
was filed on August 23, 1999, changing the corporation's name to Information on
Demand, Inc.
3. Pursuant to Sections 607.0704, 607.1003 and 607.1007 of the
Florida Business Corporation Act, the text of the Articles of Incorporation of
the corporation is hereby amended and restated to read in its entirety as
follows:
"ARTICLE I
The name of the corporation is DemandStar.com, Inc. (hereinafter
called the "Corporation" or "DSI").
ARTICLE II
The purpose for which the Corporation is organized is to engage in the
transaction of any lawful business for which corporations may be incorporated
under the laws of the State of Florida.
ARTICLE III
A. Authorized Capital Stock. The aggregate number of shares of
all classes of stock which the Corporation shall have authority to issue is One
Hundred Ten Million (110,000,000) shares, consisting of:
(i) One Hundred Million (100,000,000) shares of common stock, par
value $.0001 per share (the "Common Stock"); and
(ii) Ten Million (10,000,000) shares of preferred stock, par value
$0.01 per share (the "Preferred Stock").
<PAGE> 2
No shareholder of any stock of the Corporation shall have
preemptive rights. There shall be no cumulative voting by the shareholders of
the Corporation.
B. Provisions Relating to the Common Stock.
1. Dividends, Voting, etc. The common stock shall be
subject to the express terms of the Preferred Stock and any class or series
thereof. Subject to the preferential dividend rights applicable to shares of
any series of Preferred Stock, the holders of shares of Common Stock shall be
entitled to receive when, as and if declared by the Board of Directors (the
"Board"), out of funds legally available therefor, dividends and other
distributions payable in cash, property, stock (including shares of any class
or series of the Corporation, whether or not shares of such class or series are
already outstanding) or otherwise. In the event of any voluntary or involuntary
liquidation, dissolution or winding up of the Corporation, after distribution
in full of the preferential amounts to be distributed to the holders of shares
of the Preferred Stock, the holders of shares of the Common Stock shall be
entitled to receive all of the remaining assets of the Corporation available
for distribution to its shareholders, ratably in proportion to the number of
shares of the Common Stock held by them. Each share of Common Stock shall have
one (1) vote on all matters that are submitted to shareholders for vote.
Shares of Common Stock may be issued by the Corporation for
such consideration, having a value of not less than the par value thereof, as
is determined by the Board of Directors.
2. Mergers and Consolidations. In the event of a
merger, consolidation or combination of the Corporation with another entity
(whether or not the Corporation is the surviving entity), the holders of Common
Stock shall be entitled to receive their respective pro rata share of the
consideration received in respect of that transaction.
3. Liquidating Distributions. Upon any liquidation,
dissolution or winding-up of the Corporation, whether voluntary or involuntary,
and after the holders of the Preferred Stock shall have been paid in full the
amounts to which they shall be entitled, if any, or a sum sufficient for such
payment in full shall have been set aside, the remaining net assets of the
Corporation, if any, shall be divided among and paid ratably to the holders of
Common Stock.
4. Sales and Repurchases. The Board shall have the
power to cause the Corporation to issue and sell shares of Common Stock to such
individuals, partnerships, joint ventures, limited liability companies,
associations, corporations, trusts or other legal entities (collectively,
"persons") and for such consideration as the Board shall from time to time in
its discretion determine, and as otherwise permitted by law. The Board shall
have the power to cause the Corporation to purchase, out of funds legally
available therefor, shares of Common Stock from such persons and for such
consideration as the Board shall from time to time in its discretion determine,
and as otherwise permitted by law.
C. Provisions relating to Preferred Stock.
1. General. The Preferred Stock may be issued from
time to time in one or more classes or series, the shares of each class or
series to have such designations and powers, preferences and rights, and
qualifications, limitations and restrictions thereof as are stated and
expressed herein and in the resolution or resolutions providing for the issue
of such class or series adopted by the Board as hereinafter prescribed.
2
<PAGE> 3
2. Preferences. Authority is hereby expressly granted
to and vested in the Board to authorize the issuance of the Preferred Stock
from time to time in one or more classes or series, to determine and take
necessary proceedings fully to effect the issuance and redemption of any such
Preferred Stock and, with respect to each class or series of the Preferred
Stock, to fix and state, by resolution or resolutions from time to time adopted
providing for the issuance thereof, the following:
(a) whether or not the class or series is to have
voting rights, full or limited, or is to be without voting rights;
(b) the number of shares to constitute the class or
series and the designations thereof;
(c) the preferences and relative, participating,
optional or other special rights, if any, and the qualifications, limitations
or restrictions thereof, if any, with respect to any class or series;
(d) whether or not the shares of any class or
series shall be redeemable and if redeemable the redemption price or prices,
and the time or times at which and the terms and conditions upon which, such
shares shall be redeemable and the manner of redemption;
(e) whether or not the shares of a class or series
shall be subject to the operation of retirement or sinking funds to be applied
to the purchase or redemption of such shares for retirement, and if such
retirement or sinking fund or funds be established, the annual amount thereof
and the terms and provisions relative to the operation thereof;
(f) the dividend rate, whether dividends are
payable in cash, stock of the Corporation or other property, the conditions
upon which and the times when such dividends are payable, the preference to or
the relation to the payment of the dividends payable on any other class or
classes or series of stock, whether or not such dividend shall be cumulative or
noncumulative, and, if cumulative, the date or dates from which such dividends
shall accumulate;
(g) the preferences, if any, and the amounts
thereof that the holders of any class or series thereof shall be entitled to
receive upon the voluntary or involuntary dissolution of, or upon any
distribution of the assets of, the Corporation;
(h) whether or not the shares of any class or
series shall be convertible into, or exchangeable for, the shares of any other
class or classes or of any other series of the same or any other class or
classes of the Corporation and the conversion price or prices or ratio or
ratios or the rate or rates at which such conversion or exchange may be made,
with such adjustments, if any, as shall be stated and expressed or provided for
in such resolution or resolutions; and
(i) such other special rights and protective
provisions with respect to any class or series as the Board may deem advisable.
The shares of each class or series of the Preferred Stock may vary
from the shares of any other class or series thereof in any or all of the
foregoing respects. The Board may increase the number of shares of Preferred
Stock designated for any existing class or series by a resolution adding to
such class or series authorized and unissued shares of the Preferred Stock not
designated for any other class or series. The Board may decrease the number of
shares of the Preferred Stock designated for any existing class or series by a
resolution, subtracting from such series unissued shares of the Preferred
3
<PAGE> 4
Stock designated for such class or series, and the shares so subtracted shall
become authorized, unissued and undesignated shares of the Preferred Stock.
D. Designation of Series A Preferred Stock. Two Million
(2,000,000) shares of Preferred Stock have been designated Series A Preferred
Stock (the "Series A Preferred Stock"). The Series A Preferred Stock shall have
the following relative powers, preferences and rights, and qualifications,
limitations and restrictions thereof:
(a) Ranking. The Series A Preferred Stock shall rank
senior to the Common Stock (except as otherwise expressly provided below) and
to all other classes and series of equity securities of the Corporation
hereafter created, the terms of which provide that such class shall rank junior
to the Series A Preferred Stock with respect to dividend rights and rights of
redemption and rights on liquidation, dissolution and winding up. The Series A
Preferred Stock shall rank senior to the Series B Preferred Stock with respect
to rights of redemption and rights on liquidation, dissolution or winding-up.
All equity securities of the Corporation with which the Series A Preferred
Stock ranks on a parity with respect only to liquidation, dissolution or
winding-up are collectively referred to herein as the "Series A Preferred
Parity Securities." The definition of Series A Preferred Parity Securities
shall also include any rights or options exercisable for, securities
convertible into or exchangeable for, any of the Series A Preferred Parity
Securities.
(b) Dividends and Other Distributions.
(i) So long as H.T.E., Inc., a Florida
corporation ("HTE"), is the holder of all of the outstanding shares of Series A
Preferred Stock, HTE as the holder of the Series A Preferred Stock shall at any
time that the HTE Actual Percentage (defined below) is less than the HTE
Minimum Percentage (defined below) be entitled, not in preference to the
holders of Common Stock, but in parity therewith, to receive and participate in
all dividends or other distributions (including liquidating distributions),
when, as and if declared by the Board of Directors out of funds legally
available therefor with respect to the Common Stock. In such event the dividend
or distribution shall be in an amount (rounded to the nearest cent) equal to
the aggregate per share amount of all cash dividends and distributions, and the
aggregate per share amount (payable in kind) of all non-cash dividends or
distributions other than a dividend payable in shares of Common Stock or a
subdivision of the outstanding shares of Common Stock (by reclassification or
otherwise), declared on or payable with respect to the Common Stock multiplied
by the difference between the HTE Minimum Percentage and the HTE Actual
Percentage. All payments of dividends or other distributions to the holders of
the Common Stock and the Series A Preferred Stock shall be paid or made at or
about the same time.
As used herein, the following definitions shall apply:
"HTE Actual Percentage" shall mean the percentage of
outstanding Common Stock that HTE owns as of the date that a record is taken
for the dividend or other distribution with respect to which the calculation is
being made.
"HTE Minimum Percentage" shall mean thirty-five percent (35%)
unless at any time after the date on which these Amended and Restated Articles
of Incorporation are filed with the Florida Secretary of State, the Common
Stock held by HTE has decreased to less than thirty-five percent (35%) of all
outstanding shares of Common Stock as a result of transfers, conveyances or
other dispositions by HTE of its Common Stock. In such circumstances, the HTE
Minimum Percentage shall be automatically reduced to the amount that the shares
of Common Stock held by HTE following such transfer, conveyance or disposition
constitutes of all the outstanding shares of Common Stock as of the date that a
record is taken for the dividend or other distribution with respect to which
the calculation is being made.
4
<PAGE> 5
(ii) If HTE, as the holder of the Series A
Preferred Stock, is at any time entitled to receive a portion of the dividend
or distribution as the result of the declaration of dividends or distributions
with respect to the Common Stock, then the Corporation shall declare a dividend
or distribution on the Series A Preferred Stock as provided in subsection
(b)(i) immediately after it declares a dividend or distribution on the Common
Stock (other than a dividend payable in shares of Common Stock) in the amount
required under this subsection (b).
(iii) Except as otherwise provided in this Article
IV, the Corporation shall not pay any dividends or other distributions with
respect to the Series A Preferred Stock.
(c) Liquidation, Dissolution or Winding-Up. Upon any
liquidation, dissolution or winding-up of the Corporation, whether voluntary or
involuntary, before any payment or distribution shall be made to or set apart
for the holders of Common Stock or any shares of other stock ranking junior
(upon liquidation, dissolution or winding-up) to the Series A Preferred Stock
unless, holders of shares of Series A Preferred Stock shall have first received
$2.00 per share. If upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or the proceeds thereof,
distributable among the holders or the shares of Series A Preferred Stock shall
be insufficient to pay in full the preferential amount aforesaid and
liquidating payments on any Series A Preferred Parity Securities, then such
assets, or the proceeds thereof, shall be distributed ratably in accordance
with the respective amounts that would be payable on the Series A Preferred
Stock and the Series A Preferred Parity Stock upon such liquidation,
dissolution or winding-up. Further, if as of the record date for the
distribution of the Corporation's remaining net assets to holders of Common
Stock the HTE Actual Percentage is less than the HTE Minimum Percentage, then
HTE, as holder of all the outstanding shares of Series A Preferred Stock,
shall, not in preference to the holders of Common Stock, but in parity
therewith, be entitled to receive the distribution which is provided for under
subsection (b). Except as provided in this subsection (c), holders of shares of
Series A Preferred Stock shall not be entitled to any distribution in the event
of liquidation, dissolution or winding up of the affairs of the Corporation.
For purposes of subsection (c), (A) a consolidation or merger of the
Corporation with one or more corporations, or (B) a sale or transfer of all or
substantially all of the Corporation's assets shall not be deemed to be a
liquidation, dissolution or winding up of the Corporation.
(d) Conversion.
(i) Each share of the Series A preferred stock
shall be convertible into one (1) share of fully paid non-assessable Common
Stock, on a one-for-one basis, (subject to adjustments in certain events as
provided for in this Subsection (d)) (the "Conversion Rate") at either the
election of the holder of the Series A preferred stock or, automatically upon
either the sale of substantially all of the Corporation's assets or a merger of
DSI in which DSI does not survive such merger.
(ii) The conversion price for such conversion
shall be two U.S. dollars ($2.00) per each share of Series A converted into
Common Stock subject to any adjustments provided for in this Subsection (d)
(the "Conversion Price").
(iii) The Conversion Rate shall be subject to
positive and negative adjustments from time to time in the event of any
Adjustment Event, as such term is defined to include any event described in
subparagraphs A-D of this subparagraph (the "Adjustment Event"):
A. the issuance of Common Stock as a
dividend or distribution; or
B. the combination, subdivision or
reclassification of Common Stock or Common Stock Equivalents (defined below);
or
C. the sale of Common Stock at a price,
or the issuance of options, warrants or convertible securities with an exercise
or conversion price per share, less than the lower of the
5
<PAGE> 6
Conversion Price or the then current market price of the Common Stock (except
upon the issuance of options granted to employees, officers, directors,
shareholders or consultants pursuant to existing stock option plans and future
stock option plans approved by the DSI shareholders) ("Diluting Issues"); or
D. the distribution to all holders of
Common Stock of evidences of the Corporation's indebtedness or assets
(including securities, but excluding cash dividends or distributions paid out
of net income).
(iv) Prior to the occurrence of any Adjustment
Event the Conversion Rate shall be adjusted as follows in order to insure that
after the occurrence of such Adjustment Event, the holders of Series A
Preferred Stock, in the aggregate retain the same proportionate interest in the
Common Stock as prior to the Adjustment Event. Such adjustments to the
Conversation Rate shall be computed as follows.
A. Adjustments for Issuance of Common
Stock, or Common Stock Equivalents as a dividend or distribution. In the event
the Corporation at any time completes a transaction described in subsection
(d)(iii)A. without a proportionate and corresponding dividend or other
distribution to holders of Series A Preferred Stock, then in each such event
the Conversion Rate shall be increased as of the time of such issuance by
multiplying the Conversion Rate by a fraction computed as follows; (i) the
numerator shall be the total number of shares of Common Stock ("x") issued and
outstanding (not including any shares described in clause (y) immediately
below), immediately prior to the time of such issuance, plus ("y") the number
of shares of Common Stock issuable in payment of such dividend or distribution
or upon conversion or exercise of such Common Stock Equivalents; and (ii) the
denominator shall be the total number of shares of Common Stock issued and
outstanding or deemed to be issued and outstanding immediately prior to the
time of such issuance.
However, (i) if such Common Stock
Equivalents provide, with the passage of time or otherwise, for any decrease in
the number of shares of Common Stock issuable upon conversion or exercise
thereof, the Conversion Rate computed upon the original issue thereof and any
subsequent adjustments based thereon shall, upon any such decrease becoming
effective, be recomputed to reflect such decrease insofar as it affects the
rights of conversion or exercise of the Common Stock Equivalents then
outstanding; or (ii) upon the expiration of any rights of conversion or
exercise under any unexercised Common Stock Equivalents, the Conversion Rate
computed upon the original issue thereof, and any subsequent adjustments based
thereon, shall, upon such expiration, be recomputed as if the only additional
shares of Common Stock issued were the shares of such stock, if any, actually
issued upon the conversion or exercise of such Common Stock Equivalents; or
(iii) in the event of issuance of Common Stock Equivalents which expire by
their terms not more than sixty (60) days after the date of issuance thereof,
no adjustments of the Conversion Rate shall be made until the expiration or
exercise of all such Common Stock Equivalents, whereupon such adjustment shall
be made in the manner provided in this Subsection (d)(iv)A.
B. Adjustments for Subdivisions,
Combinations, Reclassifications of Common Stock or the Sale or Distribution of
All or Substantially All of the Corporation's Assets. In the event the
Corporation at any time enters into a transaction more fully described in
subsection (d)(iii)B or D. above, then and in each such event the Conversation
Rate shall be increased or decreased by the same percentage change (increase or
decrease) of the value of each share of Common Stock resulting from such
Conversion Event. Such percentage change shall be measured on a per share basis
by taking the Corporation's net assets prior to such Conversion Event described
in this subparagraph and dividing such number by the number of shares of Common
Stock outstanding immediately prior to such Conversion Event ("x"). This
percentage shall be compared to a percentage calculated by the same method as
the calculation of "x" but measured immediately after such Conversion Event,
("y"). The difference between x and y, whether negative or positive shall
constitute the change to the Conversion Rate.
6
<PAGE> 7
C. Adjustments of Conversion Rate for
Diluting Issues. In the event the Corporation sells or issues any Common Stock
or Common Stock Equivalents, at a per share consideration (as defined below)
less than the Conversion Price then in effect for the Preferred Stock or enters
into any transaction more fully described in subsection (d)(iii)C. above, then
the Conversion Rate and Conversion Price then in effect shall be adjusted as
provided in subparagraphs 1 through 5 of this Subsection (d)(iv)C. For the
purposes of the foregoing, the per share consideration with respect to the sale
or issuance of Common Stock shall be the price per share received by the
Corporation, prior to the payment of any expenses, commissions, discounts and
other applicable costs.
With respect to the sale or issuance
of Common Stock Equivalents which are convertible into or exchangeable for
Common Stock without further consideration, the per share consideration shall
be determined by dividing the maximum number of shares (as set forth in the
instrument relating thereto with regard to any provisions contained therein for
subsequent adjustment of such number) of Common Stock issuable with respect to
such Common Stock Equivalents into the aggregate consideration received by the
Corporation upon the sale or issuance of such Common Stock Equivalents.
With respect to the issuance of
other Common Stock Equivalents, the per share consideration shall be determined
by dividing the maximum number of shares (as set forth in the instrument
relating thereto without regard to any provisions contained therein for
subsequent adjustment of such number) of Common Stock issuable with respect to
such Common Stock Equivalents into the aggregate consideration received by the
Corporation upon the sale or issuance of such Common Stock Equivalents plus the
total consideration receivable by the Corporation upon the conversion or
exercise of such Common Stock Equivalents.
The issuance of Common Stock or
Common Stock Equivalents for no consideration shall be deemed to be an issuance
at a per share consideration of $.0001. In connection with the sale or issuance
of Common Stock and/or Common Stock Equivalents for non-cash consideration, the
amount of consideration shall be determined by the Board of Directors of the
Corporation
As used in this subsection
(d)(iv)C., "Additional Shares of Common Stock" shall mean either shares of
Common Stock issued subsequent to the original issue date of the issuance of
such stock or, with respect to the issuance of Common Stock Equivalents, the
maximum number of shares (as set forth in the instrument relating thereto
without regard to any provisions contained therein for subsequent adjustment of
such number) of Common Stock issuable in exchange for, upon conversion of, or
upon exercise of such Common Stock Equivalents.
Adjustments to the Conversion Rate
and/or the Conversion Price under this Subsection (d)(iv)C shall be computed as
follows:
1. Upon each issuance of
Common Stock for per share consideration less than the Conversion Price in
effect on the date of such issuance, the Conversion Rate of the Series A
Preferred Stock in effect on such date will be adjusted by multiplying it by a
fraction to be computed as follows: the denominator of such fraction ("x")
shall be the number of shares of Common Stock outstanding immediately prior to
the issuance of such Additional Shares of Common Stock plus the number of
shares of Common Stock which the aggregate net consideration received by the
Corporation for the total number of such Additional Shares of Common Stock so
issued would purchase at the Conversion Price then in effect, and the numerator
of which ("y") shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock,
plus the number of such Additional Shares of Common Stock so issued.
2. Upon each issuance of
Common Stock Equivalents, exchangeable without further consideration into
Common Stock, for a per share
7
<PAGE> 8
consideration less than the Conversion Price in effect on the date of such
issuance, the Conversion Rate of the Series A Preferred Stock in effect on such
date will be adjusted as in subparagraph 1 of this Subsection (d)(iv)C on the
basis that the related Additional Shares of Common Stock are to be treated as
having been issued on the date of issuance of the Common Stock Equivalents, and
the aggregate consideration received by the Corporation for such Common Stock
Equivalents shall be deemed to have been received for such Additional Shares of
Common Stock.
3. Upon each issuance of
Common Stock Equivalents, other than those described in subparagraph 2, of this
Subsection (d)(iv)C, for a per share consideration less than the Conversion
Price in effect on the date of such issuance, the Conversion Rate of the Series
A preferred stock in effect on such date will be adjusted as in subparagraph 1
of this Subsection (d)(iv)C on the basis that the related Additional Shares of
Common Stock are to be treated as having been issued on the date of issuance of
such Common Stock Equivalents, and the aggregate consideration received and
that receivable by the Corporation on conversion or exercise of such Common
Stock Equivalents shall be deemed to have been received for such Additional
Shares of Common Stock.
4. Once any Additional Shares
of Common Stock have been treated as having been issued for the purpose of this
Subsection (d)(iv)C, they shall be treated as issued and outstanding shares of
Common Stock whenever any subsequent calculations must be made pursuant hereto;
provided that on the expiration of any options, warrants or rights to purchase
Additional Shares of Common Stock, the termination of any rights to convert or
exchange for Additional Shares of Common Stock, or the expiration of any
options or rights related to such convertible or exchangeable securities on
account of which an adjustment in the Conversion Rate has been made previously
pursuant to this Subsection (d)(iv)C, the Conversion Rate shall forthwith be
readjusted to such Conversion Rate as would have obtained had the adjustment
made upon the issuance of such options, warrants, rights, securities or options
or rights related to such securities been made upon the basis of the issuance
of only the number of shares of Common Stock actually issued upon the exercise
of such options, warrants or rights, upon the conversion or exchange of such
securities or upon the exercise of the options or rights related to such
securities. Any adjustment of the Conversion Rate shall also cause an
appropriate adjustment of the Conversion Price, calculated by dividing the
adjusted Conversion Rate into the initial Conversion Price.
5. The foregoing
notwithstanding, no adjustment of the Conversion Rate and Conversion Price
shall be made as a result of the issuance of any shares of Common Stock
pursuant to which the Conversion Rate and/or Conversion Price are adjusted
under Subsection A or B of this subsection (d)(iv).
(v) No fractional shares of Common Stock shall
be issued upon the conversion of Series A preferred stock surrendered for
conversion. Any shares of Series A preferred stock converted resulting in
fractional shares of Common Stock shall be redeemed at the then effective
Conversion Price per share, which shall be paid as promptly as possible when
funds are available for such payment.
(vi) Before any holder of Series A preferred
stock shall be entitled to convert the Series A preferred stock into shares of
Common Stock, such holder shall surrender the duly endorsed certificate or
certificates representing such shares, and shall give written notice to the
Corporation of the name or names in which such holder wishes the certificate or
certificates of the shares of Common Stock to be issued. The Corporation shall,
as soon as is practicable thereafter, issue and deliver to such holder of
Series A preferred stock, or to the nominee or nominees of such holder, a
certificate or certificates for the number of shares of Common Stock to which
the holder of the Series A preferred stock shall be entitled. Such conversion
shall be deemed to have been made immediately prior to the close of the
business day on the date of such surrender of the shares of the Series A
preferred stock to be converted, and the person, or persons, entitled to
receive the shares of the Common Stock issuable upon such
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conversion shall be treated for all purposes as the record holder, or holders,
of such shares of Common Stock at such date.
(vii) Upon conversion of any Series A Preferred
Stock, each such share shall be canceled, shall be subject to subsection (e)
below and not subject to reissuance as Series A Preferred Stock.
(viii) As used in this Subsection (d), "Common
Stock Equivalents" shall mean equity or debt securities convertible,
exchangeable or exercisable for Common Stock.
(e) Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(i) Subject to the provision for adjustment
hereinafter set forth, the holders of Series A Preferred Stock as a group shall
be entitled on all matters submitted to a vote of the shareholders of the
Corporation to that number of votes as equals the "Ordinary Voting Amount".
Notwithstanding the forgoing provisions of this subsection (e)(i) if any
Shareholder Group (defined below) or Shareholder Groups own in excess of ten
percent (10%) of the outstanding common stock then the holders of the Series A
Preferred Stock as a group shall have that number of votes as equals the
"Extraordinary Voting Amount".
(ii) Notwithstanding the foregoing provision of
subsection (e)(i), if (A) at any time (the "Operative Time") the Corporation's
outstanding Common Stock has an aggregate Fair Market Value of in excess of
$100,000,000 on any date following an underwritten public offering of common
stock by the Corporation, and (B) if at the Operative Time no Shareholder Group
or Shareholder Groups then holds greater than fifteen percent (15%) of the
outstanding common stock of the Corporation, then at all times following the
Operative Time each share of Series A Preferred Stock shall have 2 votes per
share.
(iii) Notwithstanding the foregoing provisions of
subsection (e)(i) and (ii) at no time shall the Series A Preferred have voting
rights in the aggregate greater than that number, which when added to all of
the votes to which HTE is then entitled by virtue of its holdings of common
stock, equals fifty percent (50%) of all the votes to which the voting stock of
the Corporation is entitled.
(iv) The votes which the Series A Preferred
holders are entitled to as a group shall be assigned and divided among the
Series A Preferred shares on a pro rata basis.
(v) In the event the Corporation shall at any
time after the date hereof declare or pay any dividend on Common Stock payable
in shares of Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by reclassification or
otherwise) into a greater or lesser number of shares of Common Stock, then in
each such case, the number of votes per share to which holders of Series A
Preferred Stock were entitled immediately prior to such event shall be adjusted
automatically by multiplying such number by a fraction, the numerator of which
is the number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common Stock that
were outstanding immediately prior to such event.
(vi) Except as otherwise provided herein or by
law, the holders of shares of Series A Preferred Stock and the holders of
shares of Common Stock and any other capital stock of the Company having
general voting rights shall vote together as one voting group on all matters
submitted to a vote of the shareholders of the Corporation.
(vii) Except as otherwise provided herein or by
law, holders of Series A Preferred Stock shall have no special voting rights
and their consent shall not be required (except to the
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<PAGE> 10
extent they are entitled to vote with holders of Common Stock and any other
capital stock of the Corporation having general voting rights as set forth
herein) for taking any corporate action.
As used herein this Subsection (e), the following definitions shall
apply:
"Affiliate" shall mean, with respect to any person, any other person
who, directly or indirectly, is in control of, is controlled by or is under
common control with the former person; and "control" (including the terms
"controlling," "controlled by," and "under common control with") means the
possession, direct or indirect, of the power to direct or cause the direction
of the management and policies of a person, whether through the ownership of
voting securities, by contract or otherwise.
"Extraordinary Voting Amount" shall mean that number which equals the
greater of: (i) the Ordinary Voting Amount, or (ii) that number which equals
10,000 plus the total number of shares of voting stock of the Corporation owned
by all Shareholder Groups owning in excess of ten percent (10%) of the
outstanding Common Stock of the Corporation.
"Fair Market Value" shall mean, with respect to any security, (i) if
the security is listed on a national securities exchange or authorized for
quotation on a national market quotation system, the closing price, regular
way, of the security on such exchange or quotation system, as the case may be,
or if no such reported sale of the security shall have occurred on such date,
on the next preceding date on which there was such a reported sale, or (ii) if
the security is not listed for trading on a national securities exchange or
authorized for quotation on a national market quotation system, the average of
the closing bid and asked prices as reported by the National Association of
Securities Dealers Automated Quotation System or such other reputable entity or
system engaged in the regular reporting of securities prices and on which such
prices for such security are reported or, if no such prices shall have been
reported for such date, on the next preceding date for which such prices were
so reported, or (iii) if the security is not publicly traded, the fair market
value of such security as determined by a nationally recognized investment
banking or appraisal firm mutually acceptable to the Company and the Holders,
the fair market value of whose Registrable Securities is to be determined.
"Ordinary Voting Amount" shall mean that number which equals: (i) 19.9
percent (subject to adjustment as provided in the next sentence) of all voting
stock of the Corporation, minus (ii) a number which equals the number of shares
of voting stock (other than the Series A Preferred Stock) owned by HTE as of
the record date for the matter voted upon; provided, however, that the Ordinary
Voting Amount shall not be less than 2 times the number of Series A Preferred
Stock outstanding. The 19.9 percentage referenced in the preceding sentence
shall be reduced by multiplying the percentage by a fraction having as a
numerator the number of shares of Series A Preferred Stock outstanding and a
denominator equal to 750,000. If the fraction referenced in the preceding
sentence is one (1) or greater no such adjustment shall be made in the 19.9
percentage. Notwithstanding the foregoing HTE may consent in writing to lower
number of votes to appertain to its Series A Preferred Stock.
"Shareholder Group" or "Shareholder Groups" shall mean the group
composed of any holder of the Corporation's voting stock and any of his
Affiliates and any other person who is a member of a group (as defined in
Section 3 of the Securities Exchange Act of 1934) composed of the shareholder
and/or his Affiliates. Notwithstanding the foregoing HTE is not a Shareholder
Group. A Shareholder Group may be comprised of one person or entity.
(f) Reacquired Shares. Any shares of Series A Preferred
Stock converted into Common Stock purchased or otherwise acquired by the
Corporation in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall, upon their cancellation,
become authorized but unissued shares of Preferred Stock and may be reissued as
part of a new series of Preferred Stock to be created by resolution or
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein.
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(g) Consolidation, Merger, Etc. In case the Corporation
shall enter into any consolidation, merger, combination or other transaction in
which the shares of Common Stock are exchanged for or changed into other stock
or securities, cash and/or any other property, then in any such case, the
shares of Series A Preferred Stock shall at the same time be similarly
exchanged or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to the aggregate amount of stock,
securities, cash and/or any other property (payable in kind), as the case may
be, into which or for which each share of Common Stock is changed or exchanged
as if the Series A Preferred Stock had been converted immediately prior to such
transaction.
(h) No Redemption. The shares of Series A Preferred
Stock shall not be redeemable.
(i) Amendment. These Restated Articles of Incorporation
shall not be amended in any manner that would materially alter or change the
powers, preferences or special rights of the Series A Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of two-thirds
of the outstanding shares of Series A Preferred Stock, voting together as a
single class.
E. Designation of Series B Preferred Stock. Four Million
(4,000,000) shares of Preferred Stock have been designated Series B Preferred
Stock (the "Series B Preferred Stock"). The Series B Preferred Stock shall have
the following relative powers, preferences and rights, and qualifications,
limitations and restrictions thereof:
(a) Ranking. The Series B Preferred Stock shall with
respect to dividend rights, rights of redemption and rights on liquidation,
dissolution and winding up rank senior to all Common Stock and to each other
class of capital stock of the Corporation, the terms of which provide that such
class shall rank junior to the Series B Preferred Stock with respect to rights
of redemption or rights on liquidation dissolution and winding up (the "JUNIOR
PREFERRED STOCK") or the terms of which do not specify any rank relative to the
Series B Preferred Stock. The Series A Preferred Stock shall rank senior to the
Series B Preferred Stock with respect to rights of redemption and rights on
liquidation, dissolution or winding-up. All equity securities of the
Corporation to which the Series B Preferred Stock ranks prior (whether with
respect to dividends or upon liquidation, dissolution, winding up or
otherwise), including the Common Stock and Junior Preferred Stock, are
collectively referred to herein as the "Junior Securities" All equity
securities of the Corporation with which the Series B Preferred Stock ranks on
a parity (whether with respect to dividends or upon liquidation, dissolution,
winding up or otherwise) are collectively referred to herein as the "Series B
Preferred Parity Securities." The respective definitions of Junior Securities
and Series B Preferred Parity Securities shall also include any rights or
options exercisable for, or securities convertible into or exchangeable for,
any of the Junior Securities and Series B Preferred Parity Securities, as the
case may be.
(b) Dividends. (i) The holders of shares of Series B
Preferred Stock shall be entitled to receive, when, as and if declared by the
Board of Directors, out of funds legally available for the payment of
dividends, dividends (subject to subsection (b)(i)(B) below) at the rate of 6%
per annum (computed on the basis of a 360 day year of twelve 30-day months)
(the "Series B Preferred Dividend Rate") on the Series B Preferred Liquidation
Value (as defined below) of each share of Series B Preferred Stock on and as of
the most recent Series B Preferred Dividend Payment Date (as defined below).
Such dividends shall be payable in the manner set forth below in subsections
(b)(i)(A) and (B) quarterly on March 15, June 15, September 15, and December 15
of each year (unless such day is not a Business Day, in which event on the next
succeeding business day) (each of such dates being a "Series B Preferred
Dividend Payment Date" and each such quarterly Period being a "Series B
Preferred Dividend Period"). Such dividends shall be cumulative from the date
of issue, whether or not in any Series B Preferred Dividend Periods or Periods
there shall be profits, surplus or other funds of the Corporation legally
available for the payment of such dividends. "Business Day" means any day
except a Saturday, Sunday or other day on which the New York Stock Exchange is
closed.
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A. Each such dividend shall be payable in cash
on the Series B Preferred Liquidation Value per share of the Series B Preferred
Stock, in equal quarterly amounts, to the holders of record of shares of the
Series B Preferred Stock, as they appear on the stock records of the
Corporation at the close of business on such record dates, not more than 60
days or less than 10 days preceding the payment dates thereof, as shall be
fixed by the Board of Directors. Accrued and unpaid dividends for any past
Series B Preferred Dividend Periods may be declared and paid at any time,
without reference to any Series B Preferred Dividend Payment Date, to holders
of record on such date, not more than 45 days preceding the payment date
thereof, as may be fixed by the Board of Directors.
B. Holders of shares of Series B Preferred
Stock shall not be entitled to any dividends, whether payable in cash, property
or stock, in excess of the cumulative dividends, as herein provided, on the
Series B Preferred Stock. Except as expressly provided in this subsection (b),
no interest, or sum of money in lieu of interest, shall be payable in respect
of any dividend payment or payments on the Series B Preferred Stock that may be
in arrears.
(ii) So long as any shares of the Series B Preferred Stock are
outstanding, no dividends, except as described in the next succeeding sentence,
shall be declared or paid or set apart for payment or other distribution
declared or made upon Series B Preferred Parity Securities or upon any Junior
Securities for any Period unless full cumulative dividends have been or
contemporaneously are declared and paid, or declared and a sum sufficient for
the payment thereof set apart for such payment, on the Series B Preferred Stock
for all dividend Periods terminating on or prior to the date of payment of the
dividend on such class or series of Series B Preferred Parity Securities or
Junior Securities. When dividends are not paid in full, or a sum sufficient for
such payment is not set apart, as aforesaid, all dividends declared upon shares
of the Series B Preferred Stock and all dividends declared upon any other class
or series of Series B Preferred Parity Securities shall be declared ratably in
proportion to the respective amounts of dividends accumulated and unpaid on the
Series B Preferred Stock and accumulated and unpaid on such Series B Preferred
Parity Securities. In no event will cash dividends be paid on Series B
Preferred Parity Securities when dividends are not payable in cash on the
Series B Preferred Stock. In addition, so long as any shares of the Series B
Preferred Stock are outstanding, no Series B Preferred Parity Securities or
Junior Securities shall be redeemed, purchased or otherwise acquired for any
consideration (and no moneys shall be paid to or made available for a sinking
fund for the purchase or redemption of any shares of any such stock) by the
Corporation, directly or indirectly, except as described in the next succeeding
sentence, unless the Series B Preferred Stock required or eligible for
redemption as of such date has been redeemed, purchased, or otherwise acquired
(or money paid to or made available for a sinking fund for such redemption,
purchase or acquisition) contemporaneously or a sum sufficient for the
redemption, purchase or acquisition thereof set apart for such redemption,
purchase or acquisition of the Series B Preferred Stock. When the shares of
Series B Preferred Stock are not redeemed, purchased, or otherwise acquired in
full or a sum sufficient for such redemption, purchase or acquisition is not
set apart, as aforesaid, all redemptions, purchases or acquisitions of shares
of the Series B Preferred Stock and all redemptions, purchases or acquisitions
of any other class or series of Series B Preferred Parity Securities shall be
effected, ratably in accordance with the respective amounts that would be
payable on such shares of Series B Preferred Stock and any such Series B
Preferred Parity Securities if all amounts payable thereon were paid in full.
(c) Liquidation, Dissolution and Winding-Up. (i) In the
event of any liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, before any payment or distribution shall be made to
or set apart for the holders of Junior Securities, holders of shares of Series
B Preferred Stock shall have first received an amount equal to the Series B
Preferred Liquidation Value of such share plus any accrued and unpaid cash
dividends to the date of distribution. "Series B Preferred Liquidation Value"
on any date means, with respect to (x) any share of Series B Preferred Stock
the sum of $1.00. If, upon any liquidation, dissolution or winding up of the
Corporation, the assets of the Corporation, or proceeds thereof, distributable
among the holders of the shares of Series B Preferred Stock shall be
insufficient to pay in full the preferential amount aforesaid and liquidating
payments on any
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Series B Preferred Parity Securities, then such assets, or the proceeds
thereof, shall be distributed among the holders of shares of Series B Preferred
Stock and any such other Series B Preferred Parity Securities ratably in
accordance with the respective amounts that would be payable on such shares of
Series B Preferred Stock and any such Series B Preferred Parity Securities if
all amounts payable thereon were paid in full. Except as provided in this
subsection (c), holders of shares of Series B Preferred Stock shall not be
entitled to any distribution in the event of liquidation, dissolution or
winding up of the affairs of the Corporation. For the purposes of this
subsection (c)(i),(A) a consolidation or merger of the Corporation with one or
more corporations, or (B) a sale or transfer of all or substantially all of the
Corporation's assets, shall not be deemed to be a liquidation, dissolution or
winding up, voluntary or involuntary, of the Corporation.
(ii) Subject to the rights of the holders of any
Series B Preferred Parity Securities, after payment shall have been made in
full to the holders of the Series B Preferred Stock, as provided in this
subsection (c), any other series or class or classes of Junior Securities
shall, subject to the respective terms and provisions (if any) applying
thereto, be entitled to receive any and all assets remaining to be paid or
distributed, and the holders of the Series B Preferred Stock shall not be
entitled to share therein.
(d) Mandatory Redemption. Subject to the Corporation
having funds legally available for such purpose, following the second
anniversary of the earlier of: (i) the expiration date of the Corporation's
2000 rights offering, or (ii) June 30, 2000, the Corporation, upon election of
any holder of Series B Preferred Stock, shall redeem all or a portion of such
holder's Series B Preferred Stock. The redemption price for any Series B
Preferred Stock repurchased pursuant to this subsection (d) shall equal the
Series B Preferred Applicable Liquidation Amount together with any accumulated
and unpaid dividends through the date of repurchase.
(i) At least thirty (30) days prior to such mandatory
redemption date, any holder electing to have the Corporation redeem any or all
of his shares of Series B Preferred Stock shall mail a notice to the
Corporation stating such election to redeem.
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The Corporation shall then promptly mail to such holder instructions,
determined by the Corporation, that such holder of Series B Preferred Stock
must follow in order to have its Series B Preferred Stock purchased. Holders of
Series B Preferred Stock electing to have shares of Series B Preferred Stock
purchased shall be required to surrender Series B Preferred Stock, together
with all necessary endorsements and appropriate forms duly completed, to the
Corporation at the address specified in the notice at least three business days
prior to the purchase date. Holders of Series B Preferred Stock shall be
entitled to withdraw their election if the Corporation receives not later than
two business days prior to the purchase date a facsimile transmission or letter
setting forth the name of the holder of the Series B Preferred Stock and a
statement that such holder of Series B Preferred Stock is withdrawing his
election to have such Series B Preferred Stock purchased.
(ii) On the repurchase date, all shares of redeemed
Series B Preferred Stock purchased by the Corporation under this subsection
(d) shall be retired by the Corporation, and the Corporation shall pay the
redemption purchase.
(iii) Unless the Corporation defaults in the payment for
the shares of Series B Preferred Stock tendered pursuant to this Section
4.05(d), dividends shall cease to accrue with respect to the shares of Series B
Preferred Stock tendered and all rights of Holders of such tendered shares
shall terminate, except for the right to receive payment therefor, on the
repurchase purchase date.
(iv) If the funds of the Corporation legally available
for redemption of shares of the Series B Preferred Stock on any mandatory
redemption date are insufficient to pay accumulated and unpaid dividends with
respect to the shares being redeemed and to redeem the number of shares
required to be redeemed on that date, those funds that are legally available
shall be used first to pay such dividends and then to redeem the maximum
possible number of such shares, ratably on the basis of the number of shares
that would be redeemed on such date if the funds of the Corporation legally
available therefor had been sufficient to redeem all shares required to be
redeemed on that date. At any time thereafter, when additional funds of the
Corporation become legally available for the redemption of shares, such funds
shall be used, at the end of the next succeeding fiscal quarter, to pay any
remaining accumulated and unpaid dividends with respect to such shares that the
Corporation was theretofore obligated to redeem and then to redeem the balance
of such shares, ratably on the basis set forth in the preceding sentence.
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(e) These Restated Articles of Incorporation shall not be
amended in any manner that would materially alter or change the powers, the
preferences or special rights of the Series B Preferred Stock so as to affect
them adversely without the affirmative vote of the holders of two-thirds of the
outstanding shares of Series B Preferred Stock, voting together as a single
class.
ARTICLE IV
The Corporation shall exist perpetually unless sooner dissolved
according to law.
ARTICLE V
The Corporation's mailing address and the address of the Corporation's
principal office is 1551 Sandspur Road, Suite B, Maitland, Florida 32751.
ARTICLE VI
A. Number and Term of Directors. The Corporation's Board shall
consist of not less than three (3) nor more than nine (9) members, with the
exact number to be fixed from time to time by resolution of the Board. No
decrease in the number of directors shall have the effect of shortening the
term of any incumbent director. The Board shall be divided into three classes,
Class I, Class II and Class III with the directors of each class to be elected
for a staggered term of three years and initial terms as set forth in Section D
below, and to serve until their successors are duly elected and qualified or
until their earlier resignation, death or removal from office. The number of
directors elected to each class shall be as nearly equal in number as possible.
The Board shall apportion any increase or decrease in the number of
directorships among the classes so as to make the number of directors in each
class as nearly equal as possible.
B. Director Vacancies; Removal. Except as may be otherwise
provided pursuant to the terms of any series of Preferred Stock, whenever any
vacancy on the Board shall occur due to death, resignation, retirement,
disqualification, removal, increase in the number of directors or otherwise, a
majority of directors in office, although less than a quorum of the entire
Board, may fill the vacancy or vacancies for the balance of the unexpired term
or terms, at which time a successor or successors shall be duly elected by the
shareholders and qualified. Except as may be otherwise provided pursuant to the
terms of any series of Preferred Stock, only the remaining directors of the
Corporation shall have the authority, in accordance with the procedure stated
above, to fill any vacancy that exists on the Board for the balance of the
unexpired term or terms. Except as may be otherwise provided pursuant to the
terms of any series of Preferred Stock, the Company's shareholders shall not,
and shall have no power to, fill any vacancy on the Board. Any director, other
than a director elected by holders of Preferred Stock voting as a class, may be
removed from office at any time but only upon the affirmative vote of the
holders of at
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least 66 2/3% of the voting power of all voting capital stock of the
Corporation, voting together as a single class. Directors elected by holders of
Preferred Stock may be removed from office as provided in Section D of Article
III hereof or at any time upon the affirmative vote of the holders of at least
66 2/3% of the voting power of the shares of Preferred Stock entitled to elect
the director.
C. Shareholder Nominations of Director Candidates. Only persons
who are nominated in accordance with the following procedures shall be eligible
for election as directors of the Corporation. Nominations of persons for
election to the Board at an annual or special meeting of shareholders may be
made by or at the direction of the Board by any nominating committee or person
appointed by the Board or by any shareholder of the Corporation entitled to
vote for the election of directors at such meeting who complies with the
procedures set forth in this Section C; provided, however, that nominations of
persons for election to the Board at a special meeting may be made only if the
election of directors is one of the purposes described in the special meeting
notice required by Section 607.0705 of the Florida Business Corporation Act.
Nominations of persons for election at a special meeting, other than
nominations made by or at the direction of the Board, shall be made pursuant to
notice in writing delivered to or mailed and received at the principal
executive offices of the Corporation not later than the close of business on
the fifth (5th) day following the date on which notice of such meeting is given
to shareholders or made public, whichever first occurs. Nominations of persons
for election at an annual meeting, other than nominations made by or at the
direction of the Board, shall be made pursuant to timely notice in writing to
the Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation not less than one hundred twenty (120) days nor more than one
hundred eighty (180) days prior to the first anniversary of the date of the
Corporation's notice of annual meeting provided with respect to the previous
year's annual meeting; provided, however, that if no annual meeting was held in
the previous year or the date of the annual meeting has been changed to be more
than thirty (30) calendar days earlier than the date contemplated by the
previous year's notice of annual meeting, such notice by the shareholder to be
timely must be so delivered or received not later than the close of business on
the fifth (5th) day following the date on which notice of the date of the
annual meeting is given to shareholders or made public, whichever first occurs.
Such shareholder's notice to the Secretary shall set forth the following
information: (a) as to each person whom the shareholder proposes to nominate
for election or re-election as a director at the annual meeting, (i) the name,
age, business address and residence address of the proposed nominee, (ii) the
principal occupation or employment of the proposed nominee, (iii) the class and
number of shares of capital stock of the Corporation which are beneficially
owned by the proposed nominee, and (iv) any other information relating to the
proposed nominee that is required to be disclosed in solicitations for proxies
for election of directors pursuant to Rule 14a under the Securities Exchange
Act of 1934, as amended; and (b) as to the shareholder giving the notice of
nominees for election at the annual meeting, (i) the name and record address of
the shareholder, and (ii) the class and number of shares of capital stock of
the Corporation which are beneficially owned by the shareholder. The
Corporation may require any proposed nominee for election at an annual or
special meeting of shareholders to furnish such other information as may
reasonably be required by the Corporation to determine the eligibility of such
proposed nominee to serve as a director of the Corporation. No person shall be
eligible for election as a director of the Corporation unless nominated in
accordance with the procedures set forth herein. The Chairman of the meeting
shall, if the facts warrant, determine and declare to the meeting that a
nomination was not made in accordance with the requirements of this Section C,
and if he should so determine, he shall so declare to the meeting and the
defective nomination shall be disregarded. The affirmative vote of at least a
majority of the directors or the holders of at least 66-2/3% of the voting
power of the Corporation's voting stock is required to alter, amend or repeal,
or adopt any provision inconsistent with, the provisions described in this
paragraph.
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D. Board Classification. Commencing November 15, 1999, the
classes of the Board of Directors shall consist of the following members of the
Board of Directors with terms expiring at the annual meeting of shareholders in
the year indicated:
Term Expiring
-------------
Class I Directors
-----------------
O. F. Ramos 2000
Bernard B. Markey 2000
Class II Director
-----------------
Edward A. Moses 2001
Class III Director
------------------
L. A. Gornto, Jr. 2002
ARTICLE VII
The Corporation shall, to the fullest extent permitted by the laws of
Florida, including, but not limited to Section 607.0850 of the Florida Business
Corporation Act, as the same may be amended and supplemented from time to time,
indemnify any and all directors and officers of the Corporation and may, in the
discretion of the Board, indemnify any and all other persons whom it shall have
power to indemnify under said Section or otherwise under Florida law, from and
against any and all of the liabilities, expenses or other matters referred to
or covered by said Section. The indemnification provisions contained in the
Florida Business Corporation Act shall not be deemed exclusive of any other
rights of which those indemnified may be entitled under any bylaw, agreement,
resolution of shareholders or disinterested directors, or otherwise. No
provision of these Amended and Restated Articles of Incorporation is intended
by the Corporation to be construed as limiting, prohibiting, denying or
abrogating any of the general or specific powers or rights conferred under the
Florida Business Corporation Act upon the Corporation, upon its shareholders,
bondholders and security holders, or upon its directors, officers and other
corporate personnel, including, in particular, the power of the Corporation to
furnish indemnification to directors, officers, employees and agents (and their
heirs, executors and administrators) in the capacities defined and prescribed
by the Florida Business Corporation Act and the defined and prescribed rights
of said persons to indemnification as the same are conferred under the Florida
Business Corporation Act.
ARTICLE VIII
A. Call of Special Shareholders Meeting. Except as otherwise
required by law, the Corporation shall not be required to hold a special
meeting of shareholders of the Corporation unless (in addition to any other
requirements of law) (i) the holders of not less than fifty (50) percent of all
the votes entitled to be cast on any issue proposed to be considered at the
proposed special meeting sign (the "Voting Stock Majority"), date and deliver
to the Corporation's Secretary one or more written demands for the meeting
describing the purpose or purposes for which it is to be held; (ii) the meeting
is called by the Board pursuant to a resolution approved by a majority of the
entire Board; or (iii) the meeting is called by the Chairman of the Board of
Directors. At anytime during which H.T.E., Inc. ("HTE") and its affiliates own
at least a Voting Stock Majority, special meetings of the shareholders may be
called by the Chairman of the Board, the Chief Executive Officer, the
President, a majority of the Board of Directors, or upon the request of HTE or
any of HTE's affiliates. Only business within the purpose or purposes described
in the special meeting notice required by Section 607.0705 of the Florida
Business Corporation Act may be conducted at a special shareholders' meeting.
The affirmative vote of at least a majority of the directors or
17
<PAGE> 18
the holders of at least 66-2/3% of the voting power of the Corporation's voting
stock is required to alter, amend or repeal, or adopt any provision
inconsistent with, the provisions described in this paragraph.
B. Advance Notice of Shareholder-Proposed Business for Annual
Meeting. At an annual meeting of the shareholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be
properly brought before an annual meeting, business must be either (a)
specified in the notice of meeting (or any supplement thereto) given by or at
the direction of the Board, (b) otherwise properly brought before the meeting
by or at the direction of the Board, or (c) otherwise properly brought before
the meeting by a shareholder. In addition to any other applicable requirements,
for business to be properly brought before an annual meeting by a shareholder,
the shareholder must have given timely notice thereof in writing to the
Secretary of the Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal executive offices of the
Corporation, not less than one hundred twenty (120) days nor more than one
hundred eighty (180) days prior to the first anniversary of the date of the
Corporation's notice of annual meeting provided with respect to the previous
year's annual meeting; provided, however, that if no annual meeting was held in
the previous year or the date of the annual meeting has been changed to be more
than thirty (30) calendar days earlier than the date contemplated by the
previous year's notice of annual meeting, such notice by the shareholder to be
timely must be so delivered or received not later than the close of business on
the fifth (5th) day following the date on which notice of the date of the
annual meeting is given to shareholders or made public, whichever first occurs.
Such shareholder's notice to the Secretary shall set forth as to each matter
the shareholder proposes to bring before the annual meeting (i) a brief
description of the business desired to be brought before the annual meeting and
the reasons for conducting such business at the annual meeting, (ii) the name
and record address of the shareholder proposing such business, (iii) the class
and number of shares of capital stock of the Corporation which are beneficially
owned by the shareholder, and (iv) any material interest of the shareholder in
such business. The Chairman of an annual meeting shall, if the facts warrant,
determine and declare to the meeting that business was not properly brought
before the meeting in accordance with the requirements of this Section B, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted. The
affirmative vote of at least a majority of the directors or the holders of at
least 66-2/3% of the voting power of the Corporation's voting stock is required
to alter, amend or repeal, or adopt any provision inconsistent with, the
provisions described in this paragraph.
ARTICLE IX
The Corporation reserves the right to amend or repeal any provision in
these Articles of Incorporation, or any amendment hereto, and any right
conferred upon the shareholders is subject to this reservation.
ARTICLE X
The Bylaws of the Corporation may be altered, amended or repealed or
new Bylaws may be adopted at any meeting of the Board of Directors at which a
quorum is present, by the affirmative vote of a majority of the directors
present at such meeting; provided, however, that, notwithstanding the
foregoing, the affirmative vote of at least a majority of the directors or the
holders of at least 66-2/3% of the voting power of the Corporation's voting
stock is required to alter, amend or repeal, or adopt any provision
inconsistent with, the Bylaw provisions described in Article Two, Sections 3,
4, 7, 9 and 15 thereof and Article III, Sections 1 and 7 thereof."
18
<PAGE> 19
4. The foregoing Amended and Restated Articles of Incorporation
of this Corporation were duly approved by the Board of Directors and Sole
Shareholder at a meeting held on December 17, 1999. The total number of
outstanding shares of this Corporation is 1,000 shares of Common Stock.
IN WITNESS WHEREOF, the undersigned, for the purpose of amending and
restating the Corporation's Articles of Incorporation pursuant to the laws of
the State of Florida, has executed these Amended and Restated Articles of
Incorporation as of December 21, 1999.
INFORMATION ON DEMAND, INC.
By: /s/ O. F. Ramos
-------------------------------------
Name: O. F. Ramos
Title: President and Chief
Executive Officer
19
<PAGE> 1
EXHIBIT 3.2
AMENDED AND RESTATED BYLAWS
OF
DEMANDSTAR.COM, INC.
(A FLORIDA CORPORATION)
DATED DECEMBER 21, 1999
<PAGE> 2
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C> <C>
ARTICLE ONE - OFFICES................................................................1
1. Registered Office........................................................1
2. Other Offices............................................................1
ARTICLE TWO - MEETINGS OF SHAREHOLDERS...............................................1
1. Place....................................................................1
2. Time of Annual Meeting...................................................1
3. Call of Special Meetings.................................................1
4. Consent by Shareholders..................................................1
5. Conduct of Meetings......................................................1
6. Notice and Waiver of Notice..............................................2
7. Business and Nominations for Annual and Special Meetings.................2
8. Quorum...................................................................2
9. Voting Rights Per Share..................................................2
10. Voting of Shares........................................................3
11. Proxies.................................................................3
12. Shareholder List........................................................4
13. Fixing Record Date......................................................4
14. Inspectors and Judges...................................................4
15. Voting for Directors....................................................4
ARTICLE THREE - DIRECTORS............................................................5
1. Number; Term; Election; Qualification....................................5
2. Resignation; Vacancies; Removal..........................................5
3. Powers...................................................................5
4. Place of Meetings........................................................5
5. Annual Meetings..........................................................5
6. Regular Meetings.........................................................5
7. Special Meetings and Notice..............................................5
8. Quorum and Required Vote.................................................6
9. Action Without Meeting...................................................6
10. Conference Telephone or Similar Communications Equipment Meetings.......6
11. Committees..............................................................6
12. Compensation of Directors...............................................7
ARTICLE FOUR - OFFICERS..............................................................7
1. Positions................................................................7
2. Election of Specified Officers by Board..................................7
3. Election or Appointment of Other Officers................................7
4. Compensation.............................................................7
5. Term; Resignation; Removal; Vacancies....................................7
6. Chairman of the Board....................................................8
7. Chief Executive Officer..................................................8
8. President................................................................8
9. Vice Presidents..........................................................8
10. Secretary...............................................................8
11. Chief Financial Officer.................................................9
12. Treasurer...............................................................9
13. Other Officers; Employees and Agents....................................9
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE FIVE - CERTIFICATES FOR SHARES............................................................................9
1. Issue of Certificates.................................................................................9
2. Legends for Preferences and Restrictions on Transfer..................................................9
3. Facsimile Signatures.................................................................................10
4. Lost Certificates....................................................................................10
5. Transfer of Shares...................................................................................10
6. Registered Shareholders..............................................................................10
7. Redemption of Control Shares.........................................................................10
ARTICLE SIX - GENERAL PROVISIONS.................................................................................11
1. Dividends............................................................................................11
2. Reserves.............................................................................................11
3. Checks...............................................................................................11
4. Fiscal Year..........................................................................................11
5. Seal.................................................................................................11
6. Gender...............................................................................................11
ARTICLE SEVEN - AMENDMENT OF BYLAWS..............................................................................11
</TABLE>
(ii)
<PAGE> 4
DEMANDSTAR.COM, INC.
AMENDED AND RESTATED BYLAWS
ARTICLE ONE
OFFICES
Section 1. Registered Office. The registered office of
DEMANDSTAR.COM, INC., a Florida corporation (the "Corporation"), shall be
located at 1201 Hays Street, Tallahassee, Florida 32301-2607, unless otherwise
determined by the Board of Directors of the Corporation (the "Board of
Directors") in accordance with applicable law.
Section 2. Other Offices. The Corporation may also have offices
at such other places, either within or without the State of Florida, as the
Board of Directors may from time to time determine or as the business of the
Corporation may require.
ARTICLE TWO
MEETINGS OF SHAREHOLDERS
Section 1. Place. All annual meetings of shareholders shall be
held at such place, within or without the State of Florida, as may be
designated by the Board of Directors and stated in the notice of the meeting or
in a duly executed waiver of notice thereof. Special meetings of shareholders
may be held at such place, within or without the State of Florida, and at such
time as shall be stated in the notice of the meeting or in a duly executed
waiver of notice thereof.
Section 2. Time of Annual Meeting. Annual meetings of
shareholders shall be held on such date and at such time fixed, from time to
time, by the Board of Directors, provided, that there shall be an annual
meeting held every calendar year at which the shareholders shall elect a board
of directors and transact such other business as may properly be brought before
the meeting.
Section 3. Call of Special Meetings. Special meetings of the
shareholders shall be held if called in accordance with the procedures set
forth in the Corporation's articles of incorporation, as amended (the "Articles
of Incorporation") for the call of a special meeting of shareholders.
Section 4. Consent by Shareholders. As of the time at which
H.T.E., Inc. ("HTE") and its affiliates cease to be the beneficial owners of at
least fifty (50%) percent of the voting power of then outstanding capital stock
of the Corporation (the "Voting Stock Majority"), no action required or
permitted to be taken at a meeting of the shareholders shall be taken by
written consent. However, at any time during which HTE and its affiliates are
the beneficial owners of an aggregate of at least a Voting Stock Majority, any
action required or permitted to be taken at a meeting of the shareholders if
the Corporation may be taken without a meeting by the written consent of
shareholders entitled to vote on such action holding at least a majority of the
voting power.
Section 5. Conduct of Meetings. The Chief Executive Officer or
the Chairman of the Board, or such other designee of either officer, shall
preside at the annual and special meetings of shareholders and shall be given
full discretion in establishing the rules and procedures to be followed in
conducting the meetings, except as otherwise provided by law or in these
Bylaws.
<PAGE> 5
Section 6. Notice and Waiver of Notice. Except as otherwise
provided by law, written or printed notice stating the place, date and time of
the meeting and, in the case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) nor more
than sixty (60) days before the date of the meeting, either personally or by
first-class mail or other legally sufficient means, by or at the direction of
the Chairman of the Board, President, the Secretary, or the officer or person
calling the meeting, to each shareholder of record entitled to vote at such
meeting. If the notice is mailed at least thirty (30) days before the date of
the meeting, it may be done by a class of United States mail other than first
class. If mailed, such notice shall be deemed to be delivered when deposited in
the United States mail addressed to the shareholder at his address as it
appears on the stock transfer books of the Corporation, with postage thereon
prepaid. If a meeting is adjourned to another time and/or place, and if an
announcement of the adjourned time and/or place is made at the meeting, it
shall not be necessary to give notice of the adjourned meeting unless the Board
of Directors, after adjournment, fixes a new record date for the adjourned
meeting. Whenever any notice is required to be given to any shareholder, a
waiver thereof in writing signed by the person or persons entitled to such
notice, whether signed before, during or after the time of the meeting stated
therein, and delivered to the Corporation for inclusion in the minutes or
filing with the corporate records, shall constitute an effective waiver of such
notice. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the shareholders need be specified in any written
waiver of notice. Attendance of a person at a meeting shall constitute a waiver
of (a) lack of or defective notice of such meeting, unless the person objects
at the beginning to the holding of the meeting or the transacting of any
business at the meeting, or (b) lack of or defective notice of a particular
matter at a meeting that is not within the purpose or purposes described in the
meeting notice, unless the person objects to considering such matter when it is
presented.
Section 7. Business and Nominations for Annual and Special
Meetings. Business transacted at any special meeting shall be confined to the
purposes stated in the notice thereof. At any annual meeting of shareholders,
only such business shall be conducted as shall have been properly brought
before the meeting in accordance with the requirements and procedures set forth
in the Articles of Incorporation. Only such persons who are nominated for
election as directors of the Corporation in accordance with the requirements
and procedures set forth in the Articles of Incorporation shall be eligible for
election as directors of the Corporation.
Section 8. Quorum. Shares entitled to vote as a separate voting
group may take action on a matter at a meeting only if a quorum of those shares
exists with respect to that matter. Except as otherwise provided in the
Articles of Incorporation or applicable law, shares representing a majority of
the votes pertaining to outstanding shares which are entitled to be cast on the
matter by the voting group constitute a quorum of that voting group for action
on that matter. If less than a quorum of shares are represented at a meeting,
the holders of a majority of the shares so represented may adjourn the meeting
from time to time. After a quorum has been established at any shareholders'
meeting, the subsequent withdrawal of shareholders, so as to reduce the number
of shares entitled to vote at the meeting below the number required for a
quorum, shall not affect the validity of any action taken at the meeting or any
adjournment thereof. Once a share is represented for any purpose at a meeting,
it is deemed present for quorum purposes for the remainder of the meeting and
for any adjournment of that meeting unless a new record date is or must be set
for that adjourned meeting.
Section 9. Voting Rights Per Share. Except as otherwise
provided by law or by the Amended and Restated Articles of Incorporation of the
Corporation, and any amendment thereto, (a) every holder of record of common
stock, par value $.0001 per share (the "Common Stock"), is entitled to vote at
each meeting of the shareholders and is entitled to one vote for each share of
stock standing in the shareholder's name on the books of the Corporation, and
(b) every holder of the Corporation's Series A
-2-
<PAGE> 6
Preferred Stock is entitled to vote at each meeting of the shareholders and
with respect to the Series A Preferred Stock standing in the shareholder's name
on the books of the Corporation, is entitled to that number of votes per share
as is provided for in the Corporation's Articles of Incorporation, as the same
may be amended. Except as otherwise provided by law, by the Amended and
Restated Articles of Incorporation or by any Certificate of Designation filed
in the office of the Secretary of State of the State of Florida, if a quorum is
present, the vote of the holders of a majority of votes cast on a particular
matter is binding upon all shareholders of the Corporation.
Section 10. Voting of Shares. A shareholder may vote at any
meeting of shareholders of the Corporation, either in person or by proxy.
Shares standing in the name of another corporation, domestic or foreign, may be
voted by the officer, agent or proxy designated by the bylaws of such corporate
shareholder or, in the absence of any applicable bylaw, by such person or
persons as the board of directors of the corporate shareholder may designate.
In the absence of any such designation, or, in case of conflicting designation
by the corporate shareholder, the chairman of the board, the president, any
vice president, the secretary and the treasurer of the corporate shareholder,
in that order, shall be presumed to be fully authorized to vote such shares.
Shares held by an administrator, executor, guardian, personal representative,
or conservator may be voted by him, either in person or by proxy, without a
transfer of such shares into his name. Shares standing in the name of a trustee
may be voted by him, either in person or by proxy, but no trustee shall be
entitled to vote shares held by him without a transfer of such shares into his
name or the name of his nominee. Shares held by or under the control of a
receiver, a trustee in bankruptcy proceedings, or an assignee for the benefit
of creditors may be voted by such person without the transfer thereof into his
name. If shares stand of record in the names of two or more persons, whether
fiduciaries, members of a partnership, joint tenants, tenants in common,
tenants by the entirety or otherwise, or if two or more persons have the same
fiduciary relationship respecting the same shares, unless the Secretary of the
Corporation is given notice to the contrary and is furnished with a copy of the
instrument or order appointing them or creating the relationship wherein it is
so provided, then acts with respect to voting shall have the following effect:
(a) if only one votes, in person or by proxy, his act binds all; (b) if more
than one vote, in person or by proxy, the act of the majority so voting binds
all; (c) if more than one vote, in person or by proxy, but the vote is evenly
split on any particular matter, each faction is entitled to vote the share or
shares in question proportionally; or (d) if the instrument or order so filed
shows that any such tenancy is held in unequal interest, a majority or a vote
evenly split for purposes hereof shall be a majority or a vote evenly split in
interest. The principles of this paragraph shall apply, insofar as possible, to
execution of proxies, waivers, consents, or objections and for the purpose of
ascertaining the presence of a quorum.
Section 11. Proxies. Any shareholder of the Corporation, other
person entitled to vote on behalf of a shareholder pursuant to law, or
attorney-in-fact for such persons may vote the shareholder's shares in person
or by proxy. Any shareholder of the Corporation may appoint a proxy to vote or
otherwise act for him by signing an appointment form, either personally or by
his attorney-in-fact. An executed telegram or cablegram appearing to have been
transmitted by such person, or a photographic, photostatic, or equivalent
reproduction of an appointment form, shall be deemed a sufficient appointment
form. An appointment of a proxy is effective when received by the Secretary of
the Corporation (the "Secretary") or such other officer or agent which is
authorized to tabulate votes, and shall be valid for up to eleven (11) months,
unless a longer period is expressly provided in the appointment form. The death
or incapacity of the shareholder appointing a proxy does not affect the right
of the Corporation to accept the proxy's authority unless notice of the death
or incapacity is received by the Secretary or other officer or agent authorized
to tabulate votes before the proxy exercises his authority under the
appointment. An appointment of a proxy is revocable by the shareholder unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest.
-3-
<PAGE> 7
Section 12. Shareholder List. After fixing a record date for a
meeting of shareholders, the Corporation shall prepare an alphabetical list of
the names of all its shareholders who are entitled to notice of the meeting,
arranged by voting group with the address of, and the number and class and
series, if any, of shares held by each. The shareholders' list must be
available for inspection by any shareholder for a period of ten (10) days prior
to the meeting or such shorter time as exists between the record date and the
meeting and continuing through the meeting at the Corporation's principal
office, at a place identified in the meeting notice in the city where the
meeting will be held, or at the office of the Corporation's transfer agent or
registrar. Any shareholder of the Corporation or his agent or attorney is
entitled on written demand to inspect the shareholders' list (subject to the
requirements of law), during regular business hours and at his expense, during
the period it is available for inspection. The Corporation shall make the
shareholders' list available at the meeting of shareholders, and any
shareholder or his agent or attorney is entitled to inspect the list at any
time during the meeting or any adjournment. The shareholders' list is prima
facie evidence of the identity of shareholders entitled to examine the
shareholders' list or to vote at a meeting of shareholders.
Section 13. Fixing Record Date. For the purpose of determining
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or entitled to receive payment of any dividend, or in
order to make a determination of shareholders for any other proper purposes,
the Board of Directors may fix in advance a date as the record date for any
such determination of shareholders, such date in any case to be not more than
seventy (70) days, and, in case of a meeting of shareholders, not less than ten
(10) days, before the meeting or action requiring such determination of
shareholders. If no record date is fixed for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders or the
determination of shareholders entitled to receive payment of a dividend, the
date before the day on which the first notice of the meeting is mailed or the
date on which the resolutions of the Board of Directors declaring such dividend
is adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof, except where the Board of
Directors fixes a new record date for the adjourned meeting.
Section 14. Inspectors and Judges. The Board of Directors in
advance of any meeting may, but need not, appoint one or more inspectors of
election or judges of the vote, as the case may be, to act at the meeting or
any adjournment thereof. If any inspector or inspectors, or judge or judges,
are not appointed, the person presiding at the meeting may, but need not,
appoint one or more inspectors or judges. In case any person who may be
appointed as an inspector or judge fails to appear or act, the vacancy may be
filled by the Board of Directors in advance of the meeting, or at the meeting
by the person presiding thereat. The inspectors or judges, if any, shall
determine the number of shares of stock outstanding and the voting power of
each, the shares of stock represented at the meeting, the existence of a
quorum, the validity and effect of proxies, and shall receive votes, ballots
and consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate votes, ballots and
consents, determine the result, and do such acts as are proper to conduct the
election or vote with fairness to all shareholders. On request of the person
presiding at the meeting, the inspector or inspectors or judge or judges, if
any, shall make a report in writing of any challenge, question or matter
determined by him or them, and execute a certificate of any fact found by him
or them.
Section 15. Voting for Directors. Unless otherwise provided in
the Articles of Incorporation, directors shall be elected by a plurality of the
votes cast by the shares entitled to vote in the election at a meeting at which
a quorum is present.
-4-
<PAGE> 8
ARTICLE THREE
DIRECTORS
Section 1. Number; Term; Election; Qualification. The number of
directors of the Corporation shall be fixed from time to time, within the
limits specified by the Articles of Incorporation, by resolution of the Board
of Directors. Directors shall be elected in the manner and hold office for the
term as prescribed in the Articles of Incorporation. Directors must be natural
persons who are 18 years of age or older but need not be residents of the State
of Florida, shareholders of the Corporation or citizens of the United States;
provided, however, that at all times at least one (1) director shall be a
resident of the State of Florida and a citizen of the United States.
Section 2. Resignation; Vacancies; Removal. A director may
resign at any time by giving written notice to the Board of Directors or the
Chairman of the Board. Such resignation shall take effect at the date of
receipt of such notice or at any later time specified therein; and, unless
otherwise specified therein, the acceptance of such resignation shall not be
necessary to make it effective. In the event the notice of resignation
specifies a later effective date, the Board of Directors may fill the pending
vacancy (subject to the provisions of the Corporation's Articles of
Incorporation) before the effective date if they provide that the successor
does not take office until the effective date. Director vacancies shall be
filled, and directors may be removed, in the manner prescribed in the
Corporation's Articles of Incorporation.
Section 3. Powers. The business and affairs of the Corporation
shall be managed by its Board of Directors, which may exercise all such powers
of the Corporation and do all such lawful acts and things as are not by statute
or by the Articles of Incorporation or by these Bylaws directed or required to
be exercised and done by the shareholders.
Section 4. Place of Meetings. Meetings of the Board of
Directors, regular or special, may be held either within or without the State
of Florida.
Section 5. Annual Meetings. Unless scheduled for another time
by the Board of Directors, the first meeting of each newly elected Board of
Directors shall be held, without call or notice, immediately following each
annual meeting of shareholders.
Section 6. Regular Meetings. Regular meetings of the Board of
Directors may also be held without notice at such time and at such place as
shall from time to time be determined by the Board of Directors.
Section 7. Special Meetings and Notice. During any period of
time when HTE holds a Voting Stock Majority, only the Chairman of the Board,
the Board of Directors and HTE shall be entitled to call a special meeting of
the Board of Directors. During any period of time when HTE does not hold a
Voting Stock Majority, subject to the rights of holders of any class or series
of stock having a preference over the holders of Common Stock as to dividends
or upon liquidation, special meetings of the Board of Directors may only be
called by the Chairman of the Board or by the Board of Directors pursuant to a
resolution adopted by a majority of the total number of authorized directors.
At least forty-eight (48) hours' prior written notice of the date, time and
place of special meetings of the Board of Directors shall be given to each
director. Except as required by law, neither the business to be transacted at,
nor the purpose of, any regular or special meeting of the Board of Directors
need be specified in the notice or waiver of notice of such meeting. Notices to
directors shall be in writing and delivered to the directors at their addresses
appearing on the books of the Corporation by personal delivery, mail or other
legally sufficient means.
-5-
<PAGE> 9
Notice by mail shall be deemed to be given at the time when the same shall be
received. Notice to directors may also be given by telegram, teletype or other
form of electronic communication. Whenever any notice is required to be given
to any director, a waiver thereof in writing signed by the person or persons
entitled to such notice, whether before, during or after the meeting, shall
constitute an effective waiver of such notice. Attendance of a director at a
meeting shall constitute a waiver of notice of such meeting and a waiver of any
and all objections to the place of the meeting, the time of the meeting and the
manner in which it has been called or convened, except when a director states,
at the beginning of the meeting or promptly upon arrival at the meeting, any
objection to the transaction of business because the meeting is not lawfully
called or convened.
Section 8. Quorum and Required Vote. A majority of the
prescribed number of directors determined as provided in the Articles of
Incorporation shall constitute a quorum for the transaction of business and the
act of the majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors, unless a greater number is
required by the Articles of Incorporation. Whenever, for any reason, a vacancy
occurs in the Board of Directors, a quorum shall consist of a majority of the
remaining directors until the vacancy has been filled. If a quorum shall not be
present at any meeting of the Board of Directors, a majority of the directors
present thereat may adjourn the meeting to another time and place, without
notice other than announcement at the time of adjournment. At such adjourned
meeting at which a quorum shall be present, any business may be transacted that
might have been transacted at the meeting as originally notified and called.
Section 9. Action Without Meeting. Any action required or
permitted to be taken at a meeting of the Board of Directors or committee
thereof may be taken without a meeting if a consent in writing, setting forth
the action taken, is signed by all of the members of the Board of Directors or
the committee, as the case may be, and such consent shall have the same force
and effect as a unanimous vote at a meeting. Action taken under this Section 9
is effective when the last director signs the consent, unless the consent
specifies a different effective date. A consent signed under this Section 9
shall have the effect of a meeting vote and may be described as such in any
document.
Section 10. Conference Telephone or Similar Communications
Equipment Meetings. Directors and committee members may participate in and hold
a meeting by means of conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation in such a meeting shall constitute presence in person at the
meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground the
meeting is not lawfully called or convened.
Section 11. Committees. The Board of Directors, by resolution
adopted by a majority of the whole Board of Directors, may designate from among
its members an executive committee and one or more other committees, each of
which, to the extent provided in such resolution, shall have and may exercise
all of the authority of the Board of Directors in the business and affairs of
the Corporation except where the action of the full Board of Directors is
required by statute. Each committee must have two or more members who serve at
the pleasure of the Board of Directors. The Board of Directors, by resolution
adopted in accordance with this Article Three, may designate one or more
directors as alternate members of any committee, who may act in the place and
stead of any absent member or members at any meeting of such committee.
Vacancies in the membership of a committee may be filled only by the Board of
Directors at a regular or special meeting of the Board of Directors. The
executive committee shall keep regular minutes of its proceedings and report
the same to the Board of Directors when required. The designation of any such
committee and the delegation thereto of authority shall not operate to relieve
the Board of Directors, or any member thereof, of any responsibility imposed
upon it or him by law.
-6-
<PAGE> 10
Section 12. Compensation of Directors. The directors may be paid
their expenses, if any, of attendance at each meeting of the Board of Directors
and may be paid a fixed sum for attendance at each meeting of the Board of
Directors or a stated salary as director. No such payment shall preclude any
director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be allowed
like compensation for attending committee meetings. Directors may receive such
other compensation as may be approved by the Board of Directors.
ARTICLE FOUR
OFFICERS
Section 1. Positions. The officers of the Corporation shall
consist of a Chairman of the Board, a Chief Executive Officer, a President, one
or more Vice Presidents (any one or more of whom may be given the additional
designation of rank of Executive Vice President or Senior Vice President), a
Secretary, a Chief Financial Officer and a Treasurer. Any two or more offices
may be held by the same person. Officers other than the Chairman of the Board
need not be members of the Board of Directors. The Chairman of the Board must
be a member of the Board of Directors.
Section 2. Election of Specified Officers by Board. The Board
of Directors at its first meeting after each annual meeting of shareholders
shall elect a Chairman of the Board, a Chief Executive Officer, President, one
or more Vice Presidents (including any Senior or Executive Vice Presidents), a
Secretary, a Chief Financial Officer and a Treasurer.
Section 3. Election or Appointment of Other Officers. Such
other officers and assistant officers and agents as may be deemed necessary may
be elected or appointed by the Board of Directors, or, unless otherwise
specified herein, appointed by the Chairman of the Board. The Board of
Directors shall be advised of appointments by the Chairman of the Board at or
before the next scheduled Board of Directors meeting.
Section 4. Compensation. The salaries, bonuses and other
compensation of the Chairman of the Board and all officers of the Corporation
to be elected by the Board of Directors pursuant to Section 2 of this Article
Four shall be fixed from time to time by the Board of Directors or pursuant to
its direction. The salaries of all other elected or appointed officers of the
Corporation shall be fixed from time to time by the Chairman of the Board or
pursuant to his direction.
Section 5. Term; Resignation; Removal; Vacancies. The officers
of the Corporation shall hold office until their successors are chosen and
qualified. Any officer or agent elected or appointed by the Board of Directors
or the Chairman of the Board may be removed, with or without cause, by the
Board of Directors, but such removal shall be without prejudice to the contract
rights, if any, of the person so removed. Any officer or agent appointed by the
Chairman of the Board pursuant to Section 3 of this Article Four may also be
removed from such office or position by the Board of Directors or the Chairman
of the Board, with or without cause. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors, or, in the case of an officer appointed by the Chairman of
the Board, by the Chairman of the Board or the Board of Directors. Any officer
of the Corporation may resign from his respective office or position by
delivering notice to the Corporation. Such resignation shall be effective when
delivered unless the notice specifies a later effective date. If a resignation
is made effective at a later date and the Corporation accepts the future
-7-
<PAGE> 11
effective date, the Board of Directors may fill the pending vacancy before the
effective date if the Board provides that the successor does not take office
until such effective date.
Section 6. Chairman of the Board. The Chairman of the Board of
Directors shall, if present, preside at all meetings of the Board of Directors
and exercise and perform such other powers and duties as may be from time to
time assigned to him by the Board of Directors or prescribed by these Bylaws.
The Chairman of the Board or the Chief Executive Officer shall preside at the
annual and special meetings of the shareholders.
Section 7. Chief Executive Officer. The Chief Executive Officer
("CEO") shall be the principal executive officer of the Corporation. Subject to
the direction and control of the Board of Directors, the CEO shall be in charge
of the business of the Corporation; shall see that the resolutions and
directions of the Board of Directors are carried into effect except in those
instances in which that responsibility is specifically assigned to some other
person by the Board of Directors; and, in general, the CEO shall discharge all
duties incident to the office of the Chief Executive Officer and such other
duties as may be prescribed by the Board of Directors from time to time. The
CEO or the Chairman of the Board shall preside at all meetings of the
shareholders and, in the absence of a Chairman of the Board, of the Board of
Directors. Except in those instances in which the authority to execute is
expressly delegated to another officer or agent of the Corporation or a
different mode of execution is expressly prescribed by the Board of Directors
or these Bylaws, the CEO may execute for the Corporation certificates for its
shares, and any contracts, deeds, mortgages, bonds or other instruments which
the Board of Directors has authorized to be executed, and the CEO may
accomplish such execution either under or without the seal of the Corporation
and either individually or with the Secretary, any Assistant Secretary, or any
other officer thereunto authorized by the Board of Directors, according to the
requirements of the form of the instrument. In the absence of the CEO or
his/her inability or refusal to act, the Board of Directors shall designate an
officer to act as CEO during such absence.
Section 8. President. The President, if such an officer be
elected, who may also be the Chief Executive Officer of the Corporation, shall
be in charge of the management of the Corporation's day to day operations under
the direction and control of the Chief Executive Officer and the Board of
Directors. The President shall have general charge of the business affairs and
control over its officers, agents and employees; and shall see that all orders
and resolutions of the Board of Directors are carried into effect. The
President shall have such other powers and perform such other duties as may be
prescribed by the Chief Executive Officer and the Board of Directors.
Section 9. Vice Presidents. The Vice Presidents, in the order
of their seniority, unless otherwise determined by the Board of Directors,
shall, in the absence or disability of the President (or if a President has not
been elected, the Chief Executive Officer), perform the duties and exercise the
powers of such officer. They shall perform such other duties and have such
other powers as the Board of Directors or Chairman of the Board shall prescribe
or as the Chief Executive Officer may from time to time delegate. Executive
Vice Presidents shall be senior to Senior Vice Presidents, and Senior Vice
Presidents shall be senior to all other Vice Presidents.
Section 10. Secretary. The Secretary shall attend all meetings
of the shareholders and all meetings of the Board of Directors and record all
the proceedings of the meetings of the shareholders and of the Board of
Directors in a book to be kept for that purpose and shall perform like duties
for the standing committees when required. He shall give, or cause to be given,
notice of all meetings of the shareholders and special meetings of the Board of
Directors and shall keep in safe custody the seal of the Corporation and, when
authorized by the Board of Directors, affix the same to any instrument
requiring it. He shall perform such other duties as may be prescribed by the
Board of Directors, the Chairman of the Board or the Chief Executive Officer.
-8-
<PAGE> 12
Section 11. Chief Financial Officer. The Chief Financial Officer
shall be responsible for maintaining the financial integrity of the
Corporation, shall prepare the financial plans for the Corporation and shall
monitor the financial performance of the Corporation and its subsidiaries, as
well as performing such other duties as may be prescribed by the Board of
Directors, the Chairman of the Board or the Chief Executive Officer.
Section 12. Treasurer. The Treasurer shall have the custody of
corporate funds and securities and shall keep full and accurate accounts of
receipts and disbursements in books belonging to the Corporation and shall
deposit all moneys and other valuable effects in the name and to the credit of
the Corporation in such depositories as may be designated by the Board of
Directors. He shall disburse the funds of the Corporation as may be ordered by
the Board of Directors, taking proper vouchers for such disbursements, and
shall render to the Chairman of the Board and the Board of Directors at its
regular meetings or when the Board of Directors so requires an account of all
his transactions as Treasurer and of the financial condition of the
Corporation. The Treasurer shall perform such other duties as may be prescribed
by the Board of Directors, the Chairman of the Board or the Chief Executive
Officer.
Section 13. Other Officers; Employees and Agents. Each and every
other officer, employee and agent of the Corporation shall possess, and may
exercise, such power and authority, and shall perform such duties, as may from
time to time be assigned to him by the Board of Directors, the officer so
appointing him or such officer or officers who may from time to time be
designated by the Board of Directors to exercise such supervisory authority.
ARTICLE FIVE
CERTIFICATES FOR SHARES
Section 1. Issue of Certificates. The shares of the Corporation
shall be represented by certificates, provided that the Board of Directors of
the Corporation may provide by resolution or resolutions that some or all of
any or all classes or series of its stock shall be uncertificated shares. Any
such resolution shall not apply to shares represented by a certificate until
such certificate is surrendered to the Corporation. Notwithstanding the
adoption of such a resolution by the Board of Directors, every holder of stock
represented by certificates (and upon request every holder of uncertificated
shares) shall be entitled to have a certificate signed by or in the name of the
Corporation by the Chairman of the Board or a Vice Chairman of the Board, or
the President or Vice President, and by the Treasurer or an Assistant
Treasurer, or the Secretary or an Assistant Secretary of the Corporation,
representing the number of shares registered in certificate form.
Section 2. Legends for Preferences and Restrictions on Transfer.
The designations, relative rights, preferences and limitations applicable to
each class of shares and the variations in rights, preferences and limitations
determined for each series within a class (and the authority of the Board of
Directors to determine variations for future series) shall be summarized on the
front or back of each certificate. Alternatively, each certificate may state
conspicuously on its front or back that the Corporation will furnish the
shareholder a full statement of this information on request and without charge.
Every certificate representing shares that are restricted as to the sale,
disposition, or transfer of such shares shall also indicate that such shares
are restricted as to transfer, and there shall be set forth or fairly
summarized upon the certificate, or the certificate shall indicate that the
Corporation will furnish to any shareholder upon request and without charge, a
full statement of such restrictions. If the Corporation issues any shares that
are not registered under the Securities Act of 1933, as amended, or not
registered
-9-
<PAGE> 13
or qualified under the applicable state securities laws, the transfer of any
such shares shall be restricted substantially in accordance with the following
legend:
"THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR UNDER ANY APPLICABLE STATE LAW. THEY MAY NOT
BE OFFERED FOR SALE, SOLD, TRANSFERRED OR PLEDGED WITHOUT (1)
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE LAW, OR (2) AT HOLDER'S EXPENSE, AN OPINION
(SATISFACTORY TO THE CORPORATION) OF COUNSEL (SATISFACTORY TO
THE CORPORATION) THAT REGISTRATION IS NOT REQUIRED"
Section 3. Facsimile Signatures. Any and all signatures on the
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon such
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
Section 4. Lost Certificates. The Board of Directors may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost or
destroyed, upon the making of an affidavit of that fact by the person claiming
the certificate of stock to be lost or destroyed. When authorizing such issue
of a new certificate or certificates, the Corporation may, in its discretion
and as a condition precedent to the issuance thereof, require the owner of such
lost or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and/or to give the
Corporation a bond in such sum as it may direct as indemnity against any claim
that may be made against the Corporation with respect to the certificate
alleged to have been lost or destroyed.
Section 5. Transfer of Shares. Upon surrender to the
Corporation or the transfer agent of the Corporation of a certificate for
shares duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, it shall be the duty of the Corporation to
issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
Section 6. Registered Shareholders. The Corporation shall be
entitled to recognize the exclusive rights of a person registered on its books
as the owner of shares to receive dividends, and to vote as such owner, and
shall not be bound to recognize any equitable or other claim to or interest in
such share or shares on the part of any other person, whether or not it shall
have express or other notice thereof, except as otherwise provided by the laws
of the State of Florida.
Section 7. Redemption of Control Shares. As provided by the
Florida Business Corporation Act, if a person acquiring control shares of the
Corporation does not file an acquiring person statement with the Corporation,
the Corporation may, at the discretion of the Board of Directors, redeem the
control shares at the fair value thereof at any time during the 60-day period
after the last acquisition of such control shares. If a person acquiring
control shares of the Corporation files an acquiring person statement with the
Corporation, the control shares may be redeemed by the Corporation, at the
discretion of the Board of Directors, only if such shares are not accorded full
voting rights by the shareholders as provided by law.
-10-
<PAGE> 14
ARTICLE SIX
GENERAL PROVISIONS
Section 1. Dividends. The Board of Directors may from time to
time declare, and the Corporation may pay, dividends on its outstanding shares
in cash, property, stock (including its own shares) or otherwise pursuant to
law and subject to the provisions of the Articles of Incorporation.
Section 2. Reserves. The Board of Directors may by resolution
create a reserve or reserves out of earned surplus for any proper purpose or
purposes, and may abolish any such reserve in the same manner.
Section 3. Checks. All checks or demands for money and notes of
the Corporation shall be signed by such officer or officers or such other
person or persons as the Board of Directors may from time to time designate.
Section 4. Fiscal Year. The fiscal year of the Corporation
shall end on December 31 of each year, unless otherwise fixed by resolution of
the Board of Directors.
Section 5. Seal. The corporate seal shall have inscribed
thereon the name and state of incorporation of the Corporation. The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or in any
other manner reproduced.
Section 6. Gender. All words used in these Bylaws in the
masculine gender shall extend to and shall include the feminine and neuter
genders.
ARTICLE SEVEN
AMENDMENT OF BYLAWS
These Bylaws may be altered, amended or repealed or new Bylaws may be
adopted at any meeting of the Board of Directors at which a quorum is present,
by the affirmative vote of a majority of the directors present at such meeting;
provided, however, that, notwithstanding the foregoing, the affirmative 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, or adopt any provision inconsistent with, the Bylaw provisions
described in Article Two, Sections 3, 4, 7, 9 and 15, and Article Three,
Sections 1 and 7.
* * *
-11-
<PAGE> 1
EXHIBIT 4.1
FORM OF SPECIMEN STOCK CERTIFICATE
TEMPORARY CERTIFICATE -- EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE
WHEN READY FOR DELIVERY.
NUMBER________ [LOGO] SHARES__________
DEMANDSTAR.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
THIS CERTIFICATE IS TRANSFERABLE IN NEW YORK, NEW YORK
COMMON STOCK
SEE REVERSE FOR CERTAIN COMMON STOCK DEFINITIONS
AND RESTRICTIVE LEGEND CUSIP NO.
THIS CERTIFIES THAT
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF THE PAR VALUE, $.0001 PER SHARE OF THE
COMMON STOCK OF
DEMANDSTAR.COM, INC.
(hereinafter called the "Corporation") transferable on the books of the
Corporation by said holder in person or by duly authorized attorney upon
surrender of this certificate properly endorsed. This certificate and the
shares represented hereby are issued and shall be held subject to all the
provisions of the Corporation's Amended and Restated Articles of Incorporation
and the Corporation's Amended and Restated By-Laws and all amendments thereto,
copies of which are on file at the office of the Transfer Agent, and the holder
hereof, by acceptance of this certificate, consents to and agrees to be bound
by all of said provisions. This certificate is not valid until countersigned by
the Transfer Agent and registered by the Registrar.
In Witness Whereof, the Corporation has caused this certificate to be
signed by the facsimile signatures of its duly authorized officers and to be
sealed with the facsimile seal of the Corporation.
DATED
[Signature] [SEAL] [Signature]
SECRETARY PRESIDENT AND CHIEF EXECUTIVE OFFICER
COUNTERSIGNED AND REGISTERED:
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
(NEW YORK, NY) TRANSFER AGENT AND REGISTRAR
AUTHORIZED SIGNATURE
<PAGE> 2
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties (Cust) (Minor)
JT TEN - as joint tenants with right of survivorship and not as
tenants
UNIF GIFT MIN ACT - Custodian under Uniform Gifts to Minors in common
Act ___________________ (State)
Additional abbreviations may also be used though not in the above list.
FOR VALUE RECEIVED, ______________________ HEREBY SELL, ASSIGN AND TRANSFER UNTO
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE:
- --------------------------------------------------------------------------------
(PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS, INCLUDING ZIP CODE, OF ASSIGNEE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SHARES OF THE CAPITAL STOCK REPRESENTED BY THE WITHIN CERTIFICATE, AND DO HEREBY
IRREVOCABLY CONSTITUTE AND APPOINT
TO TRANSFER THE SAID STOCK ON THE BOOKS OF THE WITHIN NAMED CORPORATION WITH
FULL POWER OF SUBSTITUTION IN THE PREMISES.
DATED ___________________________________
X___________________________
NOTICE: THE SIGNATURE TO
THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
X___________________________
NOTICE: THE SIGNATURE TO
THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE
CERTIFICATE IN EVERY
PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT OR
ANY CHANGE WHATEVER.
- 2 -
<PAGE> 3
DEMANDSTAR.COM, INC.
READ CAREFULLY
DEMANDSTAR.COM, INC. (the "Corporation") will furnish to any stockholder, upon
request and without charge, a full statement of the designation, relative
rights, preferences and limitations of the shares of each class of stock
authorized to be issued and the designation, relative rights, preferences and
limitations of each series of Preferred Stock so far as the same have been
fixed, and the authority of the Board of Directors to designate and fix the
relative rights, preferences and limitations of other series. Any such request
may be addressed to the Corporation or to the Transfer Agent.
KEEP THIS CERTIFICATE IN A SAFE PLACE. IF IT IS LOST, STOLEN, MUTILATED OR
DESTROYED THE CORPORATION WILL REQUIRE A BOND OF INDEMNITY AS A CONDITION TO
THE ISSUANCE OF A REPLACEMENT CERTIFICATE.
- 3 -
<PAGE> 1
EXHIBIT 4.2
FORM OF SUBSCRIPTION CERTIFICATE FOR THE RIGHTS
THE TERMS AND CONDITIONS OF THE RIGHTS OFFERING ARE
SET FORTH IN DEMANDSTAR.COM, INC.'S PROSPECTUS, DATED
_______, 2000 (THE "PROSPECTUS"), AND ARE INCORPORATED
HEREIN BY REFERENCE. COPIES OF THE PROSPECTUS ARE
AVAILABLE UPON REQUEST FROM
[____________________________________________, AS
INFORMATION AGENT].
CERTIFICATE NUMBER________
CERTIFICATE FOR_____ RIGHTS
DEMANDSTAR.COM, INC.
INCORPORATED UNDER THE LAWS OF THE STATE OF FLORIDA
SUBSCRIPTION CERTIFICATE
EVIDENCING RIGHTS TO PURCHASE ONE SHARE
OF $.0001 PAR VALUE COMMON STOCK FOR EACH RIGHT ISSUED
VOID IF NOT EXERCISED AT OR BEFORE
5:00 P.M. (EASTERN STANDARD TIME) ON
THE EXPIRATION DATE OF _______, 2000 OR SUCH LATER
DATE AS MAY BE ESTABLISHED BY DEMANDSTAR.COM, INC.
EXPIRATION DATE:______, 2000 SUBSCRIPTION PRICE: U.S. $1.00 PER COMMON SHARE
REGISTERED OWNER:
THIS CERTIFIES THAT THE REGISTERED OWNER OF THIS SUBSCRIPTION CERTIFICATE,
WHOSE NAME IS INSCRIBED ABOVE, OR A PERMITTED ASSIGNEE INDICATED ON THE REVERSE
SIDE, IS THE OWNER OF THE NUMBER OF RIGHTS SET FORTH ABOVE, EACH OF WHICH
ENTITLES THE OWNER TO SUBSCRIBE FOR COMMON STOCK, PAR VALUE $.0001 PER SHARE,
OF DEMANDSTAR.COM, INC., A FLORIDA CORPORATION, SHOWN ABOVE, IN THE RATIO OF
ONE SHARE OF COMMON STOCK FOR EACH ONE RIGHT, PURSUANT TO THE TERMS AND
CONDITIONS AND AT THE PRICE FOR EACH SHARE OF COMMON STOCK SPECIFIED IN THE
PROSPECTUS AND THE INSTRUCTIONS RELATING HERETO. THE RIGHTS REPRESENTED BY THIS
SUBSCRIPTION CERTIFICATE MAY BE EXERCISED BY DULY COMPLETING SECTION 1 ON THE
REVERSE SIDE HEREOF.
SPECIAL DELIVERY INSTRUCTIONS MAY BE SPECIFIED BY COMPLETING SECTION 2 ON THE
REVERSE SIDE HEREOF. THE RIGHTS EVIDENCED BY THIS SUBSCRIPTION CERTIFICATE MAY
ONLY BE TRANSFERRED TO IMMEDIATE FAMILY MEMBERS (SPOUSES AND LINEAL
DESCENDANTS ONLY) OF THE REGISTERED OWNER BY THE REGISTERED HOLDER ENDORSING
WHERE INDICATED IN SECTION 3 ON THE REVERSE SIDE OF THIS SUBSCRIPTION
CERTIFICATE AND OTHERWISE FOLLOWING THE ACCOMPANYING INSTRUCTIONS.
<PAGE> 2
IMPORTANT: Complete appropriate form on reverse.
DATE: __________, 2000
[LOGO] CORPORATE SEAL DEMANDSTAR.COM, INC.
-------------------------------
Chief Executive Officer
SECTION 1 - EXERCISE AND SUBSCRIPTION
TO: Continental Stock Transfer & Trust Company Expiration Date: _______, 2000
Subscription Agent
2 Broadway, 19th Floor
New York, New York
TEL: (212) 509-4000
FAX: (212) 509-5150
The undersigned hereby irrevocably subscribes for the number of whole shares of
Common Stock indicated below upon the terms and conditions specified in the
Prospectus related hereto, receipt of which is acknowledged.
A. Subscription Privilege _________________ X $1.00 = $___________
(No. of Shares) (Subscription Price)
B. Transfer ____________ Rights to ______________________________________,
as transferee
Please indicate the nature of your relationship to the transferee:
_______________________________________________________________________
If the transferee is an entity with equity ownership, please state the
names of the equity holders and the percentage of equity held by such
person and if the entity is a trust, please indicated the names of the
trustees:
_______________________________________________________________________
_______________________________________________________________________
C. Name of Soliciting Dealer, if any:_____________________________________
METHOD OF PAYMENT (CHECK ONE)
[ ] Uncertified personal check. Please note that funds paid by uncertified
personal check may take at least five business days to clear.
Accordingly, Rights holders who wish to pay the subscription price by
means of an uncertified personal check are urged to make payment
sufficiently in advance of the Expiration Date to ensure that such
payment is received and clears by such time, and are urged to consider
payment by means of certified or bank check, money order or wire
transfer of immediately available funds.
[ ] Certified check or bank check drawn on a U.S. bank, or money order,
payable to Continental Stock Transfer & Trust Company, as Subscription
Agent.
- 2 -
<PAGE> 3
[ ] Wire transfer directed to the account maintained by Continental Stock
Transfer & Trust Company at [BANK], Account No. _________ - ABA No.
___________.
If the amount enclosed or transmitted is not sufficient to pay the Subscription
Price for all shares that are stated to be subscribed for, or if the number of
shares being subscribed for is not specified, the number of shares subscribed
for will be assumed to be the maximum number that could be subscribed for upon
payment of such amount. If the amount enclosed or transmitted exceeds the
Subscription Price for all shares that the undersigned has the right to
purchase pursuant to the Subscription Privilege (such excess amount, the
"Subscription Excess"), the Subscription Agent shall return the Subscription
Excess to the subscribed without interest or penalty.
SECTION 2 - SPECIAL DELIVERY INSTRUCTIONS
Name and/or address for mailing of any securities or Subscription Excess, if
other than as shown on the reverse hereof:
Name:__________________________________________________________________________
Address:_______________________________________________________________________
If permanent change of address, check here [ ]
Please give your telephone number: ( ) _____________________________________
SECTION 3 - TRANSFER TO PERMITTED TRANSFEREE
TO TRANSFER TO A PERMITTED TRANSFEREE: If I have checked the box on
line B in Section 1, I authorize the transfer of the indicated number of Rights
to the transferee by Continental Stock Transfer & Trust Company according to
the procedures described in the Prospectus and represent and warrant that the
information contained in under line B in Section 1 is true and correct.
_______________________________________
Signature of Subscriber(s)
IMPORTANT - THE SIGNATURE MUST CORRESPOND IN EVERY PARTICULAR, WITHOUT
ALTERATION, WITH THE NAME(S) AS PRINTED ON THE SUBSCRIPTION CERTIFICATE
Your signature must be guaranteed by an Eligible Guarantor Institution which is
a participant in a recognized securities guarantee program and in accordance
with the Medallion Signature Guarantee Program.
Signature____________________________________________________________
(Name of Bank or Firm)
Guaranteed
By___________________________________________________________________
(Signature of Officer and Title)
- 3 -
<PAGE> 4
SUBSTITUTE FORM W-9
__________________________________ Date: _________________________
(Signature of Holder)
__________________________________
(Print Name of Holder)
Tax I.D. Number or Social Security Number: _________________
(Complete Substitute Form W-9)
(Must be signed by the Rights holder(s) exactly as name(s) appears on the
reverse side of this Subscription Certificate. If signature is by trustee,
executor, administrator, guardian, attorney-in-fact, agent, officer or a
corporation or another acting in a fiduciary or representative capacity, please
provide the following information. See instructions accompanying this
Subscription Certificate).
<TABLE>
<CAPTION>
<S> <C>
Name:_________________________________________ Taxpayer Identification or Social Security
Number:__________________________________________
(Please Print) (Complete Substitute Form W-9)
Capacity:_____________________________________ Home Telephone Number: ( )_____________________
Address: _____________________________________ Business Telephone Number: ( )_________________
______________________________________________
</TABLE>
- 4 -
<PAGE> 1
EXHIBIT 4.3
FORM OF
WARRANT AGREEMENT
To Purchase _________ Shares of Common Stock
Dated as of December 21, 1999
DEMANDSTAR.COM, INC.
a Florida Corporation
Issue Date: December 21, 1999
THIS CERTIFIES THAT, [NAME OF HOLDER] ("Warrant Holder"), with an
address at _____________________________________, is entitled, upon the terms
and subject to the conditions of this Warrant Agreement (the "Warrant
Agreement"), to warrants granting the right to subscribe for and purchase
fully-paid and non-assessable shares of common stock, par value $.0001 per
share (the "Common Stock"), of DemandStar.com, Inc., a Florida corporation (the
"Company").
1. ISSUANCE OF WARRANTS. On the Issue Date, the Company will issue
to the Warrant Holder warrants (the "Warrants") to acquire __________ shares of
the Common Stock (the " Warrant Shares") on the terms and conditions set forth
herein.
2. EXERCISE PRICE. The Warrants shall have an exercise price of
$2.00 per share of Common Stock, as adjusted pursuant to the provisions of
Section 8 of this Warrant Agreement (the "Exercise Price").
3. VESTING AND TERM.
(a) Vesting. Except as otherwise provided for herein, the term of
the Warrants and the right to purchase Warrant Shares as granted herein shall
automatically vest on the Issue Date.
(b) Term. Warrants may be exercised at any time and from time to
time up to 5:00 p.m., Eastern Standard Time, on the second anniversary of the
Issue Date (the "Expiration Date").
4. EXERCISE OF WARRANTS.
(a) Exercise. The Warrants and the purchase rights represented
thereby are exercisable by the Warrant Holder, in whole or in part, at any time
after they vest until 5:00 p.m., Eastern Standard Time, on the Expiration Date
in accordance with the procedures set forth in Section 4(b) below. Upon receipt
of the items required under Section 4(b) and the Warrant Holder's fulfillment
of the other terms of Section 4(b), the Company shall issue to the Warrant
Holder a certificate for the number of shares of Common Stock purchased. The
Warrant Holder, upon exercise of the Warrants, shall be deemed to have become
the holder of the Warrant Shares represented thereby (and such Warrant Shares
shall be deemed to have been issued) immediately prior to the close of business
on the date or dates upon which the Warrants are exercised. In the event of any
exercise of the rights represented by the Warrants, certificates for the
Warrant Shares so purchased shall be delivered to the Warrant Holder as soon as
practical and in any event within ten (10) business days after receipt of such
notice and, unless the Warrants have been fully exercised or expired, new
Warrants representing the remaining portion of the Warrants and the underlying
Warrant Shares, if any, with respect to which this Warrant Agreement shall not
then have been exercised shall also be issued to the Warrant Holder as soon as
possible and in any event within such ten (10) day period.
(b) Method of Exercise. The Warrants may be exercised, at the
election of the Warrant Holder, by the tender of the Notice of Exercise in the
form attached hereto as Exhibit A (the "Notice of Exercise")
<PAGE> 2
and the surrender of the Warrants at the principal office of the Company and by
the payment to the Company, by check, cancellation of indebtedness or other
form of payment acceptable to the Company, of an amount equal to the then
applicable Exercise Price per share multiplied by the number of Warrant Shares
then being purchased. Notwithstanding any provisions herein to the contrary, if
the fair market value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
the Warrants for cash, the Warrant Holder may elect to receive Warrant Shares
equal to the value (as determined below) of the Warrants (or portion thereof
being canceled) by surrender of the Warrants at the principal office of the
Company together with the duly executed Notice of Exercise in which event the
Company shall issue to the Warrant Holder a number of shares of the Common
Stock computed using the following formula:
X= Y (A-B)
-------
A
WHERE X= the number of shares of Common Stock to be issued to the
Warrant Holder;
Y= the number of shares of the Common Stock purchasable under the
Warrants or, if only a portion of the Warrants is being
exercised, the portion of the Warrants being canceled (at the
date of such calculation);
A= the fair market value of one share of the Company's Common
Stock (at the date of such calculation); and
B= Exercise Price (at the date of such calculation).
For purposes of this Section 4(b), fair market value means, with respect to
Common Stock, awards or other property, as of a particular date, (i) if the
Common Stock is listed on a national securities exchange, the closing sales
price per share of Common Stock on the consolidated transaction reporting
system for the principal such national securities exchange on that date, or, if
there shall have been no such sale so reported on that date, on the last
preceding date on which such a sale was so reported, (ii) if the Common Stock
is not so listed, but is quoted in the Nasdaq National Market System, the
closing sales price per share of Common Stock on the Nasdaq National Market
System on that date, or, if there shall have been no such sale so reported on
that date, on the last preceding date on which such a sale was so reported,
(iii) if the Common Stock is not so listed or quoted, the mean between the
closing bid and asked price on that date, or, if there are no quotations
available for such date, on the last preceding date on which such quotations
shall be available, as reported by Nasdaq, or, if not reported by Nasdaq, by
the National Quotation Bureau, Inc., (iv) if the date on which shares of Common
Stock are first issued and sold pursuant to a registration statement filed with
and declared effective by the Securities and Exchange Commission, the initial
public offering price of the shares so issued and sold, as set forth in the
first final prospectus used in such offering and (v) if such date is prior to
the date of the initial public offering, the price shall be as determined by
the Board to be the fair market value.
5. RESERVATION OF WARRANT SHARES. The Company will at all times have
authorized and reserved a sufficient number of shares of Common Stock to
provide for the exercise of the rights to purchase the Warrant Shares
represented by the Warrants as provided in this Warrant Agreement. All of the
Warrant Shares shall be duly authorized and, when issued upon such exercise,
shall be validly issued, fully paid and nonassessable, and free and clear of
all preemptive rights.
6. NO FRACTIONAL WARRANT SHARES. No fractional shares or scrip
representing fractional shares shall be issued upon the exercise of a Warrant.
7. NO RIGHTS AS SHAREHOLDER. Neither the Warrants nor this Warrant
Agreement shall entitle the Warrant Holder to any voting rights or other rights
as a shareholder of the Company prior to the exercise of the Warrant.
- 2 -
<PAGE> 3
8. ADJUSTMENT RIGHTS. The Exercise Price and the number of shares of
Common Stock purchasable under the Warrants issued hereunder are subject to
adjustment from time to time, as follows:
(a) Merger. If at any time there shall be a merger or
consolidation of the Company with or into another corporation when the Company
is not the surviving corporation, then, as part of such merger or
consolidation, lawful provision shall be made so that the Warrant Holder shall
thereafter be entitled to receive upon exercise of the Warrants, during the
period specified herein and upon payment of the aggregate Exercise Price due
therefor, the number of shares of stock or other securities or property of the
successor corporation resulting from such merger or consolidation, to which a
holder of the stock deliverable upon exercise of the Warrants issued pursuant
to this Warrant Agreement would have been entitled in such merger or
consolidation if such Warrants had been exercised immediately before such
merger or consolidation. In any such case, appropriate adjustment shall be made
in the application of the provisions of this Warrant Agreement with respect to
the rights and interests of the Warrant Holder after the merger or
consolidation. The Company will not effect any such merger or consolidation
unless, prior to the consummation thereof, the successor corporation shall
assume, by written instrument reasonably satisfactory in form and substance to
the Warrant Holder, the obligations of the Company under the Warrants and this
Warrant Agreement.
(b) Reclassification, Etc. If the Company at any time shall, by
subdivision, combination or reclassification of securities or otherwise, change
any of the securities which may then be purchased under the Warrants into the
same or a different number of securities of any other class or classes, then
the Warrants shall thereafter represent the right to acquire such number and
kind of securities as would have been issuable as the result of such change
with respect to the securities which were subject to the Warrants immediately
prior to such subdivision, combination, reclassification or other change.
(c) Split, Subdivision or Combination of Warrant Shares. If the
Company at any time shall split or subdivide its Common Stock, the Exercise
Price shall be proportionately decreased and the number of Warrant Shares
issuable pursuant to the Warrants shall be proportionately increased. If the
Company at any time shall combine or reverse split its Common Stock, the
Exercise Price shall be proportionately increased and the number of Warrant
Shares issuable pursuant to the Warrants shall be proportionately decreased.
The adjustment shall be such as will give the Warrant Holder upon exercise for
the same aggregate Exercise Price the total number, class and kind of shares as
the Warrant Holder would have owned had the Warrants been exercised prior to
the event and had the Warrant Holder continued to hold such shares until after
the event requiring adjustment under this Section 8(c).
(d) Stock Dividends. If the Company at any time shall pay a
dividend payable in Common Stock, then the Exercise Price shall be adjusted,
from and after the date of determination of shareholders entitled to receive
such dividend, to that price determined by multiplying the Exercise Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of shares of Common Stock
outstanding immediately prior to such dividend and (ii) the denominator of
which shall be the total number of shares of Common Stock outstanding
immediately after such dividend. The Warrants shall thereafter entitle their
respective holders to purchase, at the Exercise Price resulting from such
adjustment, the number of shares of Common Stock (calculated to the nearest
whole share) obtained by multiplying (x) the Exercise Price in effect
immediately prior to such adjustment by (y) the number of shares of Common
Stock issuable upon the exercise hereof immediately prior to such adjustment
and dividing the product thereof by the Exercise Price resulting from such
adjustment.
(e) Other Changes. If any change in the outstanding Common Stock
or any other event occurs as to which the other provisions of this Section 8
are not strictly applicable or if strictly applicable, would not fairly protect
the purchase rights of the Warrant Holder in accordance with such provisions,
then the Board of Directors of the Company shall make an adjustment in the
number of and class of shares available under the Warrants, the Exercise Price
or the application of such provisions, so all adjustments shall be made so that
the holders of the Warrant shall not be adversely affected by such transaction.
The adjustment shall be such as will give the Warrant Holder upon exercise for
the same aggregate Exercise Price the total number, class and kind of shares
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<PAGE> 4
as the Warrant Holder would have owned had the Warrants been exercised prior to
the event and had the Warrant Holder continued to hold such shares until after
the event requiring adjustment.
(f) Notice of Adjustments; Notices. Whenever the Exercise Price
or number or kind of securities purchasable under the Warrants shall be
adjusted pursuant to Section 8 hereof, the Company shall issue a certificate
signed by its Chief Executive Officer President or Chief Financial Officer
setting forth, in reasonable detail, the event requiring the adjustment, the
amount of the adjustment, the method by which such adjustment was calculated
and the Exercise Price and the kind and number of securities purchasable
hereunder after giving effect to such adjustment, and shall cause a copy of
such certificate to be mailed (by first class mail, postage prepaid) to the
Warrant Holder. The Company shall give written notice to the Warrant Holder at
least ten (10) business days prior to the date on which the Company closes its
books or takes a record for determining rights to receive any dividends or
distributions. The Company shall also give written notice to the Warrant Holder
at least thirty (30) business days prior to the date on which a merger or
consolidation of the Company with or into another corporation when the Company
is not the surviving corporation shall take place.
(g) No Change of Warrant Necessary. Irrespective of any
adjustment in the Exercise Price or in the number or kind of securities
issuable upon exercise of the Warrants, unless the Warrant Holder otherwise
requests, the Warrants and this Warrant Agreement may continue to express the
same price and number and kind of shares of Common Stock as are stated in this
Warrant Agreement as initially executed.
9. REDEMPTION. The Warrants represented by this Warrant Agreement are
not redeemable by the Company at any time.
10. COMPLIANCE WITH SECURITIES ACT; TRANSFERABILITY OF WARRANT AND
WARRANT SHARES.
(a) Compliance with Securities Act. The Warrant Holder, by
acceptance hereof, agrees that the Warrants, and the securities to be issued
upon exercise of the Warrants, are being acquired for investment and that such
Warrant Holder will not offer, sell or otherwise dispose of the Warrants or any
securities to be issued upon exercise of the Warrants except under
circumstances which will not result in a violation of the Securities Act of
1933, as amended (the "Securities Act"), or any applicable state securities
laws. The Warrants and all securities issued upon exercise of the Warrants
(unless registered under) the Securities Act and any applicable state
securities laws) shall be stamped or imprinted with a legend in substantially
the following form:
"THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW AND MAY NOT
BE SOLD OR OFFERED FOR SALE, PLEDGED, HYPOTHECATED OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
RELATED THERETO UNDER SAID ACT AND APPLICABLE STATE SECURITIES
LAWS OR UNLESS SUCH REGISTRATION IS NOT REQUIRED TO EFFECTUATE
SUCH TRANSACTION, AND IF REASONABLY REQUESTED BY THE COMPANY, THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL TO THAT EFFECT."
(b) Transfer. Subject to the provisions of the Securities Act and
any applicable state securities laws, the Warrants and any related rights
hereunder may be sold, transferred, pledged or otherwise disposed of, in whole
or in part, to any person. Any transfer or sale or attempted transfer or sale
of rights under this Warrant Agreement or any of the Warrants in violation of
any provision of this Agreement shall be void, and the Company shall not record
such transfer on its books or treat any purported transferee of the Warrant as
the owner of the Warrant or any other rights related to this Agreement for any
purpose.
(c) Exchange, Transfer, Assignment or Loss of Warrants. The
Warrants cannot be exchanged, transferred or assigned otherwise than in
accordance with the provisions of this Agreement. If the provisions of this
Agreement are complied with, upon surrender of the Warrants to the Company with
the Assignment Form annexed hereto as Exhibit B duly executed, and funds
sufficient to pay any transfer tax, the
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<PAGE> 5
Company shall, without charge, execute and issue a new Warrant in the name of
the heir, devisee or assignee named in such instrument of assignment and the
assigned Warrant shall promptly be canceled.
11. RESTRICTED SECURITIES. The Warrant Holder understands that the
Warrants hereunder are exempt pursuant to Section 4(2) of the Securities Act
based on the representations of the Warrant Holder set forth herein. The
Warrant Holder also understands that if the securities issued pursuant to the
exercise of Warrants have not been registered under the Securities Act as of
their issue, they will be issued pursuant to the same exemption. The Warrant
Holder represents that it is experienced in evaluating companies such as the
Company, has such knowledge and experience in financial and business matters as
to be capable of evaluating the merits and risks of its investment and has the
ability to suffer the total loss of the investment. The Warrant Holder further
represents that it has had the opportunity to ask questions of and receive
answers from the Company concerning the terms and conditions of this Agreement,
the Warrants the shares, the business of the Company, and to obtain additional
information to such Warrant Holder's satisfaction. The Warrant Holder is an
"Accredited Investor" within the meaning of Rule 501 of Regulation D under the
Securities Act, as presently in effect.
12. REGISTRATION RIGHTS.
(a) Certain Definitions. As used in this Section 12, the
following terms shall have the following respective meanings:
(i) "Commission" shall mean the Securities and Exchange
Commission or any other federal agency at the time administering the Securities
Act.
(ii) "Holder" shall mean any holder of outstanding
Registrable Securities.
(iii) The terms "Register", "Registered" and "Registration"
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act ("Registration Statement"), and
the declaration or ordering by the Commission of the effectiveness of such
Registration Statement.
(iv) "Registrable Securities" shall mean the Warrant
Shares so long as certificates representing the same are required to bear the
restrictive legend set forth in Section 10.
(v) "Registration Expenses" shall mean all expenses
incurred by the Company in complying with Section 12, including, without
limitation, all federal and state registration, qualification and filing fees,
printing expenses, fees and disbursements of counsel for the Company, blue sky
fees and expenses, and the expense of any special audits incident to or
required by any such Registration.
(vi) "Restriction Termination Date' shall mean, with
respect to any Registrable Securities, the earliest of (A) the date that such
Registrable Securities shall have been registered and sold or otherwise
disposed of in accordance with the intended method of distribution by the
seller or sellers thereof set forth in the registration statement covering such
Registrable Securities or transferred in compliance with Rule 144, (B) the date
that an opinion of counsel to the Company (reasonably satisfactory in both form
and substance to the Company) containing reasonable assumptions shall have been
rendered to the effect that neither the legend nor the restrictions on transfer
contained in this agreement are required to insure compliance with the
Securities Act and, based upon such opinion, the legend referred to in Section
10 shall have been removed and (C) the date as of which the Company shall have
notified the Holder of such Registrable Securities in writing that it has
determined that such Registrable Securities may be sold pursuant to Rule 144
(or any successor provision) without restriction under Rule 144(e) thereof,
and, based upon such determination, the legend shall have been removed.
(vii) "Selling Expenses" shall mean all underwriting
discounts and selling commissions applicable to the sale of Registrable
Securities pursuant to this Agreement.
(b) Company Registration. If (but without any obligation to do
so) the Company proposes to Register at any time prior to the Restriction
Termination Date (including for this purpose a Registration effected by
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<PAGE> 6
the Company for shareholders other than the Holder) any of its stock or other
securities under the Securities Act in connection with the underwritten public
offering of such securities solely for cash (other than a Registration of
securities in connection with mergers, acquisitions, exchange offers,
distributions to the Company's shareholders, or stock option or other employee
benefit plans or a Registration in any form which does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities), the
Company shall, at each such time, promptly give Holder written notice of such
Registration. Upon the written request of Holder given within fifteen (15) days
after mailing of such notice by the Company, the Company shall, subject to the
following provisions, use all reasonable efforts to cause to be included in
such Registration all of the Registrable Securities that Holder has requested
to be included.
The Company shall not be required under this Subsection 12(b) to
include any of the Holder's securities in an underwritten offering of the
Company's securities unless such Holder accepts the terms of the underwriting
as agreed upon between the Company and the underwriters selected by it, and
then only in such quantity as will not, in the opinion of the managing
underwriters, interfere with the successful marketing of the offering by the
Company.
(c) Blue Sky. In the event of any Registration pursuant to this
Section 12, the Company will exercise its best efforts to Register and qualify
the Registrable Securities covered by the Registration Statement under such
other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders for the distribution of such securities; provided,
however, that the Company shall not be required to qualify to do business, to
file a general consent to service of process or to subject itself to taxation
in any state or jurisdiction in which it is not now qualified. The Company will
furnish to the Holder written advice of its counsel with respect to
registration or exemption of such Registrable Securities in such jurisdictions.
(d) Expenses of Registration. All Registration Expenses incurred
in connection with a Registration pursuant to Subsection 12(b) shall be borne
by the Company. All Selling Expenses associated with the sale of Registrable
Securities attributable to Holder shall be borne by the Holder.
(e) Registration Procedures.
(i) Advice by Company. The Company will keep the Holder
advised as to the initiation and completion of such Registration. At its
expense the Company will (A) use its best efforts to keep such Registration
effective until the earlier of the date on which the Holder has completed the
distribution described in the Registration Statement or the Restriction
Termination Date with respect to such Securities; and (B) furnish such number
of prospectuses (including preliminary prospectuses) and other documents as the
Holder from time to time may reasonably request.
(ii) Amendments. The Company will promptly prepare and file
with the Commission such amendments and prospectus supplements, including
post-effective amendments, to the Registration Statement as the Company
determines may be necessary or appropriate, and use its best efforts to have
such post-effective amendments declared effective as promptly as practicable;
cause the related prospectus to be supplemented by any prospectus supplement,
and as so supplemented, to be filed with the Commission; and notify the Holder
of any securities included in such Registration Statement and the underwriter
thereof, if any, promptly when a prospectus, any prospectus supplement or
post-effective amendment must be filed or has been filed and, with respect to
any post-effective amendment, when the same has become effective.
(iii) Underwritten Offerings. At the request of the Holder
requesting Registration of Registrable Securities pursuant to this Section 12,
on the date that such Registrable Securities are delivered to the underwriters
for sale pursuant to such Registration in an underwritten offering pursuant to
Subsection 12(b), the Company will (A) furnish (i) an opinion, dated as of such
date, of the independent counsel representing the Company for the purposes of
such Registration, addressed to the underwriter, in a customary form and
covering matters of the type customarily covered in such legal opinions; and
(ii) a comfort letter dated as of such date, from the independent certified
public accountants of the Company addressed to the underwriter in a customary
form and covering matters of the type customarily covered by such comfort
letters; such opinion of counsel shall additionally
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<PAGE> 7
cover such other legal matters with respect to the Registration in respect of
which such opinion is being given as such underwriter may reasonably request
and such letter from the independent certified public accountants shall
additionally cover such other financial matters (including information as to
the period ending not more than five (5) business days prior to the date of
such letter) with respect to the Registration in respect of which such letter
is being given as such underwriter may reasonably request; and (B) with such
Holder, enter into customary agreements (including an underwriting agreement in
customary form) and take such other actions as are reasonably required in order
to expedite or facilitate the disposition of such Registrable Securities.
(f) Information Furnished by Holder. It shall be a condition
precedent to the Company's obligations under this Agreement that the Holder
furnish to the Company in writing such information regarding such Holder and
the distribution proposed by such Holder as the Company may reasonably request.
(g) Holders' Indemnification of Company. Holder will, if
Registrable Securities held by Holder are included in the Securities as to
which a Registration is being effected pursuant to this Agreement, indemnify
the Company, each of its directors and officers, each underwriter, if any, of
the Company's securities covered by such a Registration Statement, each person
who controls the Company or such underwriter within the meaning of the
Securities Act, against all claims, losses, damages and liabilities (or actions
in respect thereof) arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any such Registration
Statement or related prospectus, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading; and will reimburse the Company, such
directors, officers, partners, persons, underwriters or control persons for any
legal and any other expenses reasonably incurred in connection with
investigating or defending any such claim, loss, damage, liability or action,
in each case to the extent, but only to the extent, that such untrue statement
(or alleged untrue statement) or omission (or alleged omission) is made in such
Registration Statement or prospectus in reliance upon and in conformity with
written information furnished to the Company by Holder and stated to be
specifically for use in connection with the offering of Securities of the
Company.
(h) Transfer of Rights. As defined herein, the term Transfer
shall mean any sale, hypothecation, transfer or other disposition of
Registrable Securities or any interest therein other than a sale registered
under a Registration Statement. The right to cause the Company to Register
Registrable Securities granted by the Company to Holder under this Section 12
may not be assigned by Holder to any transferee of the Warrants or the Warrant
Shares.
13. MISCELLANEOUS.
(a) No Consequential Damages. No party hereto shall be entitled
to consequential damages as a result of any breach of a covenant,
representation or warranty contained herein.
(b) Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
(i) if to the Company, to:
DemandStar.com, Inc.
1551 Sandspur Road
Suite B
Maitland, Florida 32751
(ii) if to the Warrant Holder, to:
____________________________________
____________________________________
____________________________________
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<PAGE> 8
All such notices and communications shall be deemed to have been
duly given when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial courier service; five (5) business days
after being deposited in the mail, postage prepaid, if mailed; and when receipt
is mechanically acknowledged, if telecopied.
(c) Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the Warrant Holder
and the Company and their respective successors and permitted assigns. No
person, other than the Warrant Holder and the Company and their respective
successors and permitted assigns, is intended to be a beneficiary of this
Agreement.
(d) Amendment and Waiver.
(i) No failure or delay on the part of the Company, or the
Warrant Holder in exercising any right, power or remedy hereunder shall operate
as a waiver thereof, nor shall any single or partial exercise of any such
right, power or remedy preclude any other or further exercise thereof or the
exercise of any other right, power or remedy. The remedies provided for herein
are cumulative and are not exclusive of any remedies that may be available to
the Company and the Warrant Holder at law, in equity or otherwise.
(ii) Any amendment, supplement or modification of or to any
provision of this Warrant Agreement, any waiver of any provision of this
Warrant Agreement, and any consent to any departure by the Company or the
Warrant Holder from the terms of any provision of this Agreement, shall be
effective only if it is made or given in writing and signed by the Company and
the Warrant Holder.
(e) Counterparts. This Warrant Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement.
(f) Headings. The headings in this Warrant Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) Governing Law. This Warrant Agreement shall be governed by
and construed in accordance with the laws of the State of Florida, without
regard to the principles of conflicts of law of any jurisdiction.
(h) Venue. Any action or proceeding involving the parties hereto
shall be adjudicated in a court located in Orange County, Florida. The parties
hereto hereby irrevocably consent to the jurisdiction and venue of such courts.
(i) Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired, unless the
provisions held invalid, illegal or unenforceable shall substantially impair
the benefits of the remaining provisions hereof.
(j) Entire Agreement. This Warrant Agreement and the Warrants and
exhibits and schedules hereto is intended by the parties as a final expression
of their agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of he subject
matter contained herein. This Warrant Agreement and the Warrants, together with
the exhibits and schedules hereto, supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
(k) Charges; Taxes and Expenses. Issuance of certificates for
securities upon the exercise of the Warrants shall be made without charge to
the Warrant Holder for any issue or transfer tax or other incidental
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<PAGE> 9
expense in respect of the issuance of such certificates, all of which taxes and
expenses shall be paid by the Company.
(l) Saturdays, Sundays, Holidays, Etc. If the last or appointed
day for the taking of any action or the expiration of any right required or
granted herein shall be a Saturday, Sunday or a legal holiday, then such action
may be taken or such right may be exercised on the next succeeding day not a
Saturday, Sunday or a legal holiday.
(m) Lost Warrants. The Company covenants to the Warrant Holder
that, upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of this Warrant Agreement and, in the
case of any such loss, theft or destruction, upon receipt of an indemnity
reasonably satisfactory to the Company, or in the case of any such mutilation,
upon surrender and cancellation of the last Warrant on this Warrant Agreement,
the Company will make and deliver a new Warrant or Warrant Agreement, as
applicable, of like tenor, in lieu of the lost, stolen, destroyed or mutilated
document.
(n) Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any governmental authority
or any other person, and otherwise fulfilling, or causing the fulfillment of,
the various obligations made herein, as may be reasonably required or desirable
to carry out or to perform the provisions of this Warrant Agreement and to
consummate and make effective as promptly as possible the transactions
contemplated by this Warrant Agreement.
IN WITNESS WHEREOF, this Warrant Agreement has been duly executed and
delivered by the authorized individuals of each of the undersigned.
DEMANDSTAR.COM, INC.
By:
-----------------------------------------
Name: O. F. Ramos
Title: President and Chief Executive Officer
[NAME OF WARRANT HOLDER]
By:
-----------------------------------------
Name:
Title:
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<PAGE> 10
EXHIBIT A
NOTICE OF EXERCISE
To: DemandStar.com, Inc.
1. The undersigned hereby elects to purchase __________ shares of the
Common Stock of DemandStar.com, Inc. in accordance with the Warrants issued
pursuant to the Warrant Agreement, dated as of December 21, 1999, by and
between DemandStar.com, Inc. and the undersigned, and tenders herewith payment
of the purchase price of such shares in full.
2. Please issue a certificate or certificates representing said shares
in the name of the undersigned.
By:
-------------------------------
(Print Name of Signatory)
Date:
A-1
<PAGE> 11
EXHIBIT B
ASSIGNMENT FORM
TO: DemandStar.com, Inc.
The undersigned hereby assigns and transfers unto _____________________
of ______________________________ (please typewrite or print in block letters)
the right to purchase ____________ shares of the common stock of
DemandStar.com, Inc. subject to the Warrant Agreement, dated as of December 21,
1999, by and between DemandStar.com, Inc. and the undersigned (the "Warrant
Agreement").
This assignment complies with the provisions of Section 10(c) of the
Warrant Agreement and is accompanied by funds sufficient to pay all applicable
transfer taxes.
By:
-------------------------------
(Print Name of Signatory)
Date:
B-1
<PAGE> 1
EXHIBIT 4.4
SUBSCRIPTION AGENT AGREEMENT
THIS AGREEMENT is entered into as of _________, 2000 by and between
DemandStar.com, Inc., a Florida corporation (the "Company") and Continental
Stock Transfer and Trust Company (the "Subscription Agent").
WHEREAS, the Company is a wholly-owned subsidiary of H.T.E., Inc., a
Florida corporation ("HTE");
WHEREAS, the Company intends to issue (the "Rights Offering") to (i)
holders of HTE's common stock as of _________, 2000 ("Eligible HTE
Shareholders"), (ii) holders of HTE stock options as of December 16, 1999 who
are also employees or directors of HTE (or a wholly-owned subsidiary) as of
____________, 2000 ("Eligible HTE Optionholders"), and (iii) employees of HTE
(or a wholly-owned subsidiary) as of ___________, 2000 ("Eligible HTE
Employees" and, collectively with (i) and (ii) above, the "Eligible Rights
Holders"), rights ("Rights") to purchase one share of common stock, par value
$.0001 per share, of the Company (the "Common Shares") for each Right held; and
WHEREAS, the Company desires the Subscription Agent to act on the
Company's behalf, and the Subscription Agent is willing so to act, in
connection with the issuance, and distribution of the Rights, collection of
funds from Rights holders exercising Rights, and issuance and delivery of
Common Shares upon the exercise of the Rights.
NOW THEREFORE, in consideration of the promises and mutual covenants
set forth herein, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms
have the following meanings:
(a) "Basic Subscription" means the right of Eligible Rights
Holders to subscribe for and purchase Common Shares through the
exercise of Rights at the rate of one Common Share for each Right
held.
(b) "Common Shares" means the shares of common stock, par
value $.0001 per share, of the Company.
(c) "Company" means DemandStar.com, Inc., a Florida
corporation.
(d) "Eligible HTE Employees" means all employees of HTE (or a
wholly-owned subsidiary) as of ______________, 2000.
(e) "Eligible HTE Optionholders" means all persons holding
options to purchase common stock of HTE as of December 16, 1999 who
are also employees or directors of HTE (or a wholly-owned subsidiary)
as of ______________, 2000.
(f) "Eligible HTE Shareholders" means all shareholders of HTE
as of ____________, 2000.
(g) "Eligible Rights Holders" means, collectively, all
Eligible HTE Employees, all Eligible HTE Optionholders and all
Eligible HTE Shareholders.
(h) "Foreign Holder" means an Eligible Shareholder or an
Eligible HTE Optionholder having an address outside of the United
States of America (including the District of Columbia, territories
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and possessions) or having an A.P.O. or F.P.O. address, as shown on
the stock transfer books maintained by the Subscription Agent in its
capacity as the Transfer Agent and Registrar of the HTE common stock.
(i) "Expiration Time" means 5:00 p.m., Eastern Standard Time,
on __________, 2000 or on such other date as the Company may
determine.
(j) "Offering Period" means the period commencing on
_________, 2000 and ending at the Expiration Time.
(k) "Prospectus" means the Company's prospectus dated
_________, 2000 pertaining to the Rights Offering including the
documents incorporated by reference therein, as the same may from time
to time be supplemented or amended.
(l) "Rights" means the subscription rights issued by the
Company, each of which entitles Eligible Rights Holders to subscribe
for and purchase one Common Share for Right held, at a Subscription
Price of $____ per share.
(m) "Subscription Agent" means Continental Stock Transfer and
Trust Company.
(n) "Subscription Certificate" means the certificate
evidencing the Rights.
(o) "Subscription Price" means $1.00 per share.
2. Form of Subscription Certificates. The Subscription
Certificates shall be substantially in the form attached to this Agreement as
Appendix A. Each Subscription Certificate shall be signed by duly authorized
officers of the Company, dated the date of issue (whether upon original
issuance or in lieu of transferred, exchanged, mutilated, destroyed, lost or
stolen Subscription Certificates) and countersigned by the Subscription Agent.
All signatures may be facsimile signatures.
3. Issuance of Subscription Certificates. The Subscription Agent
shall issue and deliver (by first class United States mail, postage prepaid) to
each Eligible Rights Holder (other than Foreign Holders) a Subscription
Certificate evidencing his Rights as follows: (i) each Eligible HTE Shareholder
shall receive one Right for each share of HTE common stock held; (ii) each
Eligible HTE Optionholder shall receive (A) one Right for each share of HTE
common stock he has a vested option to acquire, and (B) with respect to each
share of HTE common stock he has an unvested option to acquire, 3/4 of a Right
and an option to purchase 1/4 of a Common Share; and (iii) each Eligible HTE
Employee shall receive 200 Rights. The Subscription Agent shall not issue
fractional Rights; the number of Rights issued shall be rounded up or down to
the nearest whole number. No Subscription Certificates shall be issued before
or after the Offering Period. All Subscription Certificates surrendered to the
Subscription Agent upon exercise shall be canceled by the Subscription Agent
and thereafter shall be retained by the Subscription Agent for a period of not
less than six years or such shorter period of time as the Company may permit.
Upon expiration of the retention period, the canceled Subscription Certificates
shall be delivered to the Company or destroyed by the Subscription Agent, as
directed by the Company.
4. Foreign Holders. The Subscription Agent shall refrain from
delivering Subscription Certificates to Foreign Holders, and shall hold such
Subscription Certificates for the account of Foreign Holders subject to such
Stockholder making satisfactory arrangements with the Subscription Agent for
the exercise or other disposition of the Rights evidenced thereby, and shall
follow the instructions of such Stockholder for the exercise of such Rights if
such instructions are received prior to the Expiration Time.
5. Delivery of Prospectus and Other Documents. The Subscription
Agent shall deliver to each Eligible Rights Holder, along with originally
issued Subscription Certificates (except as provided in Section 4), (i) a
letter from the Chief Executive Officer or President of HTE to all Eligible
Rights Holders, (ii) a Prospectus, (iii) Instructions as to Use of the
Subscription Certificates, (iv) a return envelope addressed to the Subscription
Agent, and (vi) such other documents and information as the Company may
provide. The Subscription Agent shall also
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provide copies of the Prospectus and other documents prepared by the Company to
Eligible Rights Holders, and other persons upon request.
(a) The Company will provide the Subscription Agent with a
sufficient number of Prospectuses as the Subscription Agent may
require.
(b) The Subscription Agent shall provide a sufficient number
of Subscription Certificates as required to distribute to Eligible
Rights Holders and to replace lost, destroyed, mutilated or stolen
Subscription Certificates.
(c) The Company has provided to the Subscription Agent a form
of letter to Foreign Holders, which shall be delivered only to Foreign
Holders, along with the Prospectus.
(d) The Company has provided to the Subscription Agent the
following documents that the Subscription Agent shall deliver to
brokers, dealers, commercial banks, trust companies and other nominee
holders of Subscription Certificates: (i) a letter to Brokers,
Dealers, Commercial Banks, Trust Companies and Other Nominees; (ii) a
letter to the clients of nominee holders described in clause (i);
(iii) a letter to Foreign Holders; (iv) a Notice of Guaranteed
Delivery; and (v) a Nominee Holder Certification.
6. Exercise. Rights may be exercised at any time during the
Offering Period upon the terms and conditions set forth in the Prospectus and
in this Agreement.
(a) Rights may be exercised by completing and executing the
exercise portion of the Subscription Certificate and delivering it to
the Subscription Agent along with payment of the Subscription Price
for the aggregate number of Common Shares subscribed for prior to the
Expiration Time.
(b) A subscription will be accepted by the Subscription Agent
if, prior to the Expiration Time, the Subscription Agent has received
(i) payment of the full Subscription Price for the Common Shares
subscribed for in the Basic Subscription, and (ii) a Notice of
Guaranteed Delivery by facsimile (telecopy) or otherwise from a bank,
trust company, New York Stock Exchange member or member of another
national securities exchange guaranteeing delivery of a properly
completed and executed Subscription Certificate. The Subscription
Agent will not honor a Notice of Guaranteed Delivery unless a properly
completed and executed Subscription Certificate is received by the
Subscription Agent by the close of business on the third New York
Stock Exchange trading day after the Expiration Time.
(c) The Subscription Price shall be paid in United States
dollars, by (i) check or draft drawn on a United States bank, or an
postal, telegraphic or express money order payable to the Subscription
Agent, or (ii) by wire transfer of same day funds to an account
maintained by the Subscription Agent for the purpose of accepting
subscriptions the __________ Bank, Account No. ________
(DemandStar.com, Inc.), ABA No. ______________, in accordance with the
Wire instructions attached to this Agreement as Appendix B.
(d) Once an Eligible Rights Holder has exercised Rights, such
exercise may not be revoked or rescinded.
(e) If an Eligible Rights Holder does not indicate the number
of Rights being exercised in the Basic Subscription, or does not
deliver full payment of the Subscription Price for the number of
shares indicated as being subscribed through the exercise of Rights in
the Basic Subscription, then such Eligible Rights Holder will be
deemed to have exercised Rights to purchase the maximum number of
Common Shares determined by dividing the total Subscription Price paid
by the Subscription Price per share, but not in excess of the number
of Common Shares such holder may purchase through the exercise of
Rights in the Basic Subscription.
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(f) If an Eligible Rights Holder does not indicate the number
of Rights being exercised, but submits payment for more shares than
may be purchased through the exercise of such Eligible Rights Holder's
Rights in the Basic Subscription, the excess payment received from
such Eligible Rights Holder will be returned to such Eligible Rights
Holder without interest or deduction.
7. Power of Attorney. The Company hereby constitutes and
appoints the Subscription Agent as the Company's true and lawful attorney
in-fact, with full power in such capacity to endorse, deposit, negotiate, and
invest on behalf and for the account of the Company, in accordance with the
written instructions provided by the Company, checks, drafts, money orders,
wire transfers or other payments received by the Subscription Agent as a
payment of the Subscription Price upon the exercise of Rights in the Basic
Subscription.
8. Escrow and Investment of Funds. The Subscription Agent shall:
(a) Maintain a record of the date, amount of each payment of
the Subscription Price received upon the exercise of Rights in the
Basic Subscription, and the name and address of the Eligible Rights
Holder by whom or on whose behalf payment was made.
(b) Aggregate all payments received upon the exercise of
Rights in the Basic Subscription and deposit such payments in one or
more bank accounts, or invest such payments in Treasury bills or other
investments designated in writing by the Company, as soon as
practicable after receipt of such payments.
(c) Maintain a record of the number of Rights issued to each
Foreign Holder.
(d) Keep all funds deposited and invested in accounts in the
name of the Company for the benefit of the Company.
(e) Return as promptly as practicable to the Eligible Rights
Holder who made such payment, any payment of the Subscription Price in
the Basic Subscription not accepted by the Company for any reason.
9. Payment of Funds to the Company. Funds representing payment
of the Subscription Price in the Basic Subscription (including interest earned
thereon) shall be paid to the Company by wire transfer to such account and
according to such instructions as the Company may deliver to the Subscription
Agent in writing. Unless changed by subsequent written instructions, the
Subscription Agent shall follow the wiring instructions attached to this
Agreement as Appendix B. Such wire transfer of funds to the Company shall be
made promptly following the Expiration Time, at which time all funds received
by the Subscription Agent from Rights holders shall be paid (together with
interest thereon) to the Company.
10. Reports. The Subscription Agent shall deliver daily to the
Company a written report showing the following: (i) the number of Rights
exercised in the Basic Subscription on such day, and the aggregate number of
Rights exercised in the Basic Subscription through such date; and (ii) the
amount of funds received on such day in payment of the Subscription Price in
the Basic Subscription, and the aggregate amount of funds on deposit or
invested for the account of the Company from payment of the Subscription Price
in the Basic Subscription through such date.
11. Issuance of Common Shares. Promptly after the receipt and
acceptance of properly exercised Subscription Certificates and receipt of
payment of the Subscription Price for Common Shares in the Basic Subscription,
the Subscription Agent shall issue and deliver to the Eligible Rights Holder so
exercising Rights a stock certificate evidencing the aggregate of the number of
Common Shares purchased in the Basic Subscription.
12. Validity and Form of Subscriptions. All questions concerning
the timeliness, validity, form and eligibility of any exercise of Rights in the
Basic Subscription will be determined by the Company, whose
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determination will be final and binding. The Subscription Agent shall examine
the Subscription Certificates it receives to ascertain whether they appear to
have been completed and executed in accordance with the Prospectus and the
Instructions. In the event that the Subscription Agent determines that the
Subscription Certificate does not appear to have been properly completed or
executed, or where the Subscription Certificates do not appear to be in proper
form for subscription, or any other irregularity in connection with the
subscription appears to exist, the Subscription Agent will follow its regular
procedures to attempt to cause such irregularity to be corrected. The
Subscription Agent is not authorized to waive any irregularity in connection
with the subscription, unless it has received from the Company notification,
duly dated and signed by an authorized officer of the Company, indicating that
any irregularity in the Subscription Certificate has been cured or waived and
that such Subscription Certificate has been accepted by the Company. The
Subscription Agent will promptly notify the Company in writing of all defects
in the exercise of any Rights in the Basic Subscription. Subscription
Certificates and funds received by the Subscription Agent that are not properly
executed or submitted, and as to which all irregularities have not been timely
waived or cured, shall be returned by the Subscription Agent to the Eligible
Rights Holder who submitted such Subscription Certificate and/or payment. Such
return shall be made by either first class mail under a blanket surety bond or
insurance protecting the Subscription Agent and the Company from losses or
liabilities arising out of the non-receipt or nondelivery of Subscription
Certificates or by registered mail insured separately for the value of such
Subscription Certificates, and if determined to be required by the Company,
shall include a letter of notice to be furnished by the Company explaining the
reasons for the return of the Subscription Certificates and other documents.
13. Amendment, Extension or Termination of the Rights Offer. The
Company reserves the right, in its sole discretion, to: (a) terminate the offer
of Common Shares through the Rights prior to delivery of the Common Shares for
which Eligible Rights Holders have subscribed pursuant to the exercise of
Rights in the Basic Subscription; (b) extend the Expiration Time to a later
date and time; or (c) amend or modify the terms of the Rights. If the Company
amends the terms of the Rights, an amended Prospectus will be distributed to
holders of record of Rights and to holders of Rights who have previously
exercised Rights. All holders of Rights who exercised their Rights prior to
such amendment or within four business days after the mailing of the amended
Prospectus will be given the opportunity to confirm the exercise of their
Rights by executing and delivering a consent form.
14. Loss or Mutilation. Upon receipt by the Company and the
Subscription Agent of evidence, satisfactory to them, of the ownership and
loss, theft, destruction or mutilation of any Subscription Certificate, and in
the case of loss, theft or destruction, receipt of indemnity satisfactory to
the Company and the Subscription Agent, and in the case of mutilation upon
surrender and cancellation of the mutilated Subscription Certificate, the
Subscription Agent shall deliver in place of such lost, stolen, destroyed or
mutilated Subscription Certificate a new Subscription Certificate representing
an equal aggregate number of Rights. Eligible Rights Holders requesting such
substitute Subscription Certificates shall also comply with such other
reasonable regulations, requirements or requests, and shall pay such reasonable
charges, as the Company or the Subscription Agent may prescribe.
15. Liability of Subscription Agent. The Subscription Agent shall
not, by issuing and delivering Subscription Certificates or stock certificates
evidencing Common Shares, or receiving or holding funds for the benefit of the
Company, or by any other act under this Agreement, be deemed to make any
representations as to the validity or value or authorization of the
Subscription Certificates or the Rights represented thereby or the Common
Shares issued upon the exercise of Rights, or whether the Common Shares issued
upon the exercise of Rights are fully paid and nonassessable. The Subscription
Agent shall not be (i) liable for any statement of fact made or contained in
this Agreement or in the Prospectus or in any documents prepared by the Company
in connection with the offer of Common Shares through the Rights, (ii) liable
for any action taken, suffered, or omitted by it in reliance upon any
Subscription Certificate or other document or instrument believed by it in good
faith to be genuine and to have been signed or presented by the proper party or
parties, (iii) responsible for any failure on the part of the Company to comply
with any of its covenants and obligations contained in this Agreement or in the
Subscription Certificates, or (iv) liable for any act or omission in connection
with the performance of its duties, obligations, covenants and agreements under
this Agreement, except for the Subscription Agent's own negligence, willful
breach or misconduct.
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16. Indemnification. The Company agrees to indemnify and hold
harmless the Subscription Agent from and against any and all losses, expenses,
and liabilities, including judgments, costs and reasonable attorneys' fees,
arising out of any act or omission of the Subscription Agent in the execution
or performance of its duties, obligations, covenants and agreements under this
Agreement, except for the Subscription Agent's own negligence, willful breach
or misconduct.
17. Compensation for Services. The Company agrees to pay the
Subscription Agent a fee of $______ for all services rendered by the
Subscription Agent under this Agreement, and to reimburse the Subscription
Agent for all reasonable out-of-pocket expenses incurred in performing its
duties under this Agreement.
18. Amendment; Modification; Waiver. This Agreement may be
amended, waived, discharged, or terminated in whole or in part only by a
written instrument signed by the party against whom enforcement of such
amendment, waiver, discharge, or termination is sought. Notwithstanding the
immediately preceding sentence, the parties shall supplement or amend this
Agreement to conform to any amendments or changes that the Company may make to
the terms and conditions of the Rights and the offer of the Common Shares
through the Rights.
19. Notices. All notices under this Agreement shall be in writing
and shall be sent by telecopier with a confirming copy sent by United States
mail, first class postage prepaid, or by air courier, delivery charges prepaid,
to an Eligible Rights Holder at the address shown on the registry books
maintained by the Subscription Agent, or to the parties at the following
telecopier numbers and addresses:
To the Company: DemandStar.com, Inc.
1551 Sandspur Road, Suite B
Maitland, Florida 32751
Telecopier: (407) 599-0008
Attention: Chief Executive Officer
To the Subscription Agent: Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, New York 10004
Telecopier: (212) 509-5150
Attention: ____________ Department
A notice sent by mail shall be deemed delivered on the fourth day after deposit
in the United States mail, postage prepaid, and addressed as aforesaid. Any
party may change its address or telecopier number for notice by giving notice
to the other party in the manner provided in this Section.
20. Delays or Omissions. No delay or omission to exercise any
right, power, or remedy accruing to any party to this Agreement, upon any
breach or default of any other party under this Agreement, shall impair any
such right, power, or remedy; nor shall it be construed to be a waiver of, or
an acquiescence in any such breach or default or any similar breach or default
thereafter occurring; nor shall any waiver of any single breach or default be
deemed a waiver of any other breach or default theretofore or thereafter
occurring. Any waiver, permit, consent or approval of any kind or character, on
the part of any party, of any breach or default under this Agreement, or any
waiver, on the part of any party, of any provisions or conditions of this
Agreement, must be made in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement or by law and otherwise afforded to any party, shall be cumulative
and not alternative.
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21. Unenforceable Provisions. If all or part of any one or more
of the provisions contained in this Agreement is for any reason held to be
invalid, illegal, or unenforceable in any respect, the invalidity, illegality,
or unenforceability shall not affect any other provisions, and this Agreement
shall be equitably construed as if it did not contain the invalid, illegal, or
unenforceable provision.
22. Gender. Whenever appropriate in this Agreement, terms in the
singular form shall include the plural (and vice versa) and any gender form
shall include all others.
23. Section Headings. Section headings are for the convenience of
the parties and do not form a part of this Agreement.
24. Binding Effect; Parties. This Agreement shall be binding on
the Company, the Subscription Agent and their respective successors and
assigns; and nothing in this Agreement shall confer upon any other person or
entity any right, remedy, or claim, or impose upon any other person any duty,
liability, or obligation.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
DEMANDSTAR.COM, INC.
By:
-------------------------------------
O.F. Ramos, Chief Executive Officer
CONTINENTAL STOCK TRANSFER & TRUST COMPANY
By:
-------------------------------------
[Name and Title]
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EXHIBIT 4.4.
APPENDIX A
FORM OF SUBSCRIPTION CERTIFICATE
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APPENDIX B
WIRE INSTRUCTIONS
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EXHIBIT 5.1
OPINION AND CONSENT OF GREENBERG TRAURIG, P.A.
December 22, 1999
DemandStar.com, Inc.
1551 Sandspur Road, Suite B
Maitland, Florida 32751
Gentlemen:
You have requested our opinion in connection with the Registration
Statement on Form S-1 (the "Registration Statement") of DemandStar.com, Inc., a
Florida corporation (the "Company"), relating to the issuance and distribution
of up to 19,225,883 subscription rights (the "Rights"), with each Right
entitling the holder thereof to purchase one share of IOD common stock, par
value $.0001 per share (the "Common Stock"). Pursuant to the Registration
Statement, IOD is registering a total of 19,225,883 Rights and 19,225,883
shares of Common Stock (the "Shares") to be issued upon exercise of the Rights.
We have made such examination of the corporate records and proceedings
of the Company and have taken such further action as we deemed necessary or
appropriate to the rendering of our opinion herein.
Based on the foregoing, we are of the opinion that, when the
Registration Statement becomes effective under the Securities Act of 1933, as
amended (the "Securities Act"), (i) the issuance of the Rights and the issuance
and sale of the Shares will have been duly authorized, and (ii) the subscribed
Shares will be validly issued, fully paid and non-assessable.
We hereby consent to the filing of this opinion with the Securities and
Exchange Commission as an exhibit to the Registration Statement and to the
reference to our firm under the heading "Legal Matters" therein. In giving such
consent, we do not admit that we come within the category of persons whose
consent is required by Section 7 of the Securities Act or the rules and
regulations promulgated thereunder.
Sincerely,
/s/ GREENBERG TRAURIG, P.A.
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EXHIBIT 10.1
INFORMATION ON DEMAND, INC.
1999 EMPLOYEE INCENTIVE COMPENSATION PLAN
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INFORMATION ON DEMAND, INC.
1999 EMPLOYEE INCENTIVE COMPENSATION PLAN
<TABLE>
<CAPTION>
<S> <C> <C>
1. Purpose 1
2. Definitions 1
3. Administration 4
(a) Authority of the Committee 4
(b) Manner of Exercise of Committee Authority 5
(c) Limitation of Liability 5
4. Stock Subject to Plan 5
(a) Limitation on Overall Number of Shares Subject to Awards 5
(b) Application of Limitations 5
5. Eligibility; Per-Person Award Limitations 6
6. Specific Terms of Awards 6
(a) General 6
(b) Options 6
(c) Stock Appreciation Rights 8
(d) Restricted Stock 8
(e) Deferred Stock 9
(f) Bonus Stock and Awards in Lieu of Obligations 10
(g) Dividend Equivalents 10
(h) Other Stock-Based Awards 11
7. Certain Provisions Applicable to Awards 11
(a) Stand-Alone, Additional, Tandem, and Substitute Awards 11
(b) Term of Awards 12
(c) Form and Timing of Payment Under Awards; Deferrals 12
(d) Exemptions from Section 16(b) Liability 12
8. Performance and Annual Incentive Awards 12
(a) Performance Conditions 12
(b) Performance Awards Granted to Designated Covered Employees 14
(c) Annual Incentive Awards Granted to Designated Covered Employees 14
(d) Written Determinations 15
(e) Status of Section 8(b) and Section 8(c) Awards Under
Code Section 162(m) 15
</TABLE>
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<TABLE>
<CAPTION>
<S> <C> <C>
9. Change in Control 16
(a) Effect of "Change in Control" 16
(b) Definition of "Change in Control" 16
(c) Definition of "Change in Control Price" 18
10. General Provisions 18
(a) Compliance With Legal and Other Requirements 18
(b) Limits on Transferability; Beneficiaries 19
(c) Adjustments 19
(d) Taxes 20
(e) Changes to the Plan and Awards 20
(f) Limitation on Rights Conferred Under Plan 21
(g) Unfunded Status of Awards; Creation of Trusts 21
(h) Nonexclusivity of the Plan 21
(i) Payments in the Event of Forfeitures; Fractional Shares 21
(j) Governing Law 22
(k) Plan Effective Date and Stockholder Approval; Termination of Plan 22
</TABLE>
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INFORMATION ON DEMAND, INC.
1999 EMPLOYEE INCENTIVE COMPENSATION PLAN
1. Purpose. The purpose of this 1999 Employee Incentive Compensation
Plan (the "Plan") is to assist Information on Demand, Inc. (the "Company") and
its subsidiaries in attracting, motivating, retaining and rewarding
high-quality executives and other employees, officers, Directors and
independent contractors enabling such persons to acquire or increase a
proprietary interest in the Company in order to strengthen the mutuality of
interests between such persons and the Company's stockholders, and providing
such persons with annual and long term performance incentives to expend their
maximum efforts in the creation of shareholder value. The Plan is also intended
to qualify certain compensation awarded under the Plan for tax deductibility
under Section 162(m) of the Code (as hereafter defined) to the extent deemed
appropriate by the Committee (or any successor committee) of the Board of
Directors of the Company.
2. Definitions. For purposes of the Plan, the following terms shall be
defined as set forth below, in addition to such terms defined in Section 1
hereof.
(a) "Annual Incentive Award" means a conditional right granted to a
Participant under Section 8(c) hereof to receive a cash payment, Stock or other
Award, unless otherwise determined by the Committee, after the end of a
specified fiscal year.
(b) "Award" means any Option, SAR (including Limited SAR),
Restricted Stock, Deferred Stock, Stock granted as a bonus or in lieu of
another award, Dividend Equivalent, Other Stock-Based Award, Performance Award
or Annual Incentive Award, together with any other right or interest granted to
a Participant under the Plan.
(c) "Beneficiary" means the person, persons, trust or trusts which
have been designated by a Participant in his or her most recent written
beneficiary designation filed with the Committee to receive the benefits
specified under the Plan upon such Participant's death or to which Awards or
other rights are transferred if and to the extent permitted under Section 10(b)
hereof. If, upon a Participant's death, there is no designated Beneficiary or
surviving designated Beneficiary, then the term Beneficiary means the person,
persons, trust or trusts entitled by will or the laws of descent and
distribution to receive such benefits.
(d) "Beneficial Owner", "Beneficially Owning" and "Beneficial
Ownership" shall have the meanings ascribed to such terms in Rule 13d-3 under
the Exchange Act and any successor to such Rule.
(e) "Board" means the Company's Board of Directors.
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(f) "Change in Control" means Change in Control as defined with
related terms in Section 9 of the Plan.
(g) "Change in Control Price" means the amount calculated in
accordance with Section 9(c) of the Plan.
(h) "Code" means the Internal Revenue Code of 1986, as amended from
time to time, including regulations thereunder and successor provisions and
regulations thereto.
(i) "Committee" means a committee designated by the Board to
administer the Plan; provided, however, that the Committee shall consist solely
of at least two directors, each of whom shall be (i) a "non-employee director"
within the meaning of Rule 16b-3 under the Exchange Act, unless administration
of the Plan by "non-employee directors" is not then required in order for
exemptions under Rule 16b-3 to apply to transactions under the Plan, and (ii)
an "outside director" as defined under Section 162(m) of the Code, unless
administration of the Plan by "outside directors" is not then required in order
to qualify for tax deductibility under Section 162(m) of the Code.
(j) "Corporate Transaction" means a transaction as defined in
Section 9(b) of the Plan.
(k) "Covered Employee" means an Eligible Person who is a Covered
Employee as specified in Section 8(e) of the Plan.
(l) "Deferred Stock" means a right, granted to a Participant under
Section 6(e) hereof, to receive Stock, cash or a combination thereof at the end
of a specified deferral period.
(m) "Director" means a member of the Board.
(n) "Disability" means a permanent and total disability (within the
meaning of Section 22(e) of the Code), as determined by a medical doctor
satisfactory to the Committee.
(o) "Dividend Equivalent" means a right, granted to a Participant
under Section 6(g) hereof, to receive cash, Stock, other Awards or other
property equal in value to dividends paid with respect to a specified number of
shares of Stock, or other periodic payments.
(p) "Effective Date" means the effective date of the Plan, which
shall be November 30, 1999.
(q) "Eligible Person" means each executive officer of the Company
(as
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<PAGE> 6
defined under the Exchange Act) and other officers, Directors and employees of
the Company or of any subsidiary, and independent contractors with the Company
or any subsidiary. The foregoing notwithstanding, no independent contractor
shall be an Eligible Person for purposes of receiving any Awards other than
Options under Section 6(b) of the Plan. An employee on leave of absence may be
considered as still in the employ of the Company or a subsidiary for purposes
of eligibility for participation in the Plan.
(r) "Exchange Act" means the Securities Exchange Act of 1934, as
amended from time to time, including rules thereunder and successor provisions
and rules thereto.
(s) "Executive Officer" means an executive officer of the Company as
defined under the Exchange Act.
(t) "Fair Market Value" means the fair market value of Stock, Awards
or other property as determined by the Committee or under procedures
established by the Committee. Unless otherwise determined by the Committee, the
Fair Market Value of Stock as of any given date shall be the closing sale price
per share reported on a consolidated basis for stock listed on the principal
stock exchange or market on which Stock is traded on the date as of which such
value is being determined or, if there is no sale on that date, then on the
last previous day on which a sale was reported.
(u) "Incentive Stock Option" or "ISO" means any Option intended to
be designated as an incentive stock option within the meaning of Section 422 of
the Code or any successor provision thereto.
(v) "Incumbent Board" means the Board as defined in Section 9(b) of
the Plan.
(w) "Limited SAR" means a right granted to a Participant under
Section 6(c) hereof.
(x) "Option" means a right granted to a Participant under Section
6(b) hereof, to purchase Stock or other Awards at a specified price during
specified time periods.
(y) "Other Stock-Based Awards" means Awards granted to a Participant
under Section 6(h) hereof.
(z) "Parent Corporation" means any corporation (other than the
Company) in an unbroken chain of corporations ending with the Company, if each
of the corporations in the chain (other than the Company) owns stock possessing
50% or more of the combined voting power of all classes of stock in one of the
other corporations in the chain.
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(aa) "Participant" means a person who has been granted an Award
under the Plan which remains outstanding, including a person who is no longer
an Eligible Person.
(bb) "Performance Award" means a right, granted to a Eligible Person
under Section 8 hereof, to receive Awards based upon performance criteria
specified by the Committee.
(cc) "Person" shall have the meaning ascribed to such term in
Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d)
thereof, and shall include a "group" as defined in Section 13(d) thereof.
(dd) "Restricted Stock" means Stock granted to a Participant under
Section 6(d) hereof, that is subject to certain restrictions and to a risk of
forfeiture.
(ee) "Rule 16b-3" and "Rule 16a-1(c)(3)" means Rule 16b-3 and Rule
16a-1(c)(3), as from time to time in effect and applicable to the Plan and
Participants, promulgated by the Securities and Exchange Commission under
Section 16 of the Exchange Act.
(ff) "Stock" means the Company's Common Stock, and such other
securities as may be substituted (or resubstituted) for Stock pursuant to
Section 10(c) hereof.
(gg) "Stock Appreciation Rights" or "SAR" means a right granted to a
Participant under Section 6(c) hereof.
(hh) "Subsidiary" means any corporation or other entity in which the
Company has a direct or indirect ownership interest of 50% or more of the total
combined voting power of the then outstanding securities or interests of such
corporation or other entity entitled to vote generally in the election of
directors or in which the Company has the right to receive 50% or more of the
distribution of profits or 50% or more of the assets on liquidation or
dissolution.
3. Administration.
(a) Authority of the Committee. The Plan shall be administered by
the Committee. The Committee shall have full and final authority, in each case
subject to and consistent with the provisions of the Plan, to select Eligible
Persons to become Participants, grant Awards, determine the type, number and
other terms and conditions of, and all other matters relating to, Awards,
prescribe Award agreements (which need not be identical for each Participant)
and rules and regulations for the administration of the Plan, construe and
interpret the Plan and Award agreements and correct defects, supply omissions
or reconcile inconsistencies therein, and to make all other decisions and
determinations as the Committee may deem necessary or advisable for the
administration of the Plan. In exercising any discretion granted to the
Committee under the Plan or pursuant to any Award, the Committee shall not be
required to follow past practices, act in a manner consistent with past
practices, or
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<PAGE> 8
treat any Eligible Person in a manner consistent with the treatment of other
Eligible Persons.
(b) Manner of Exercise of Committee Authority. The Committee shall
exercise sole and exclusive discretion on any matter relating to a Participant
then subject to Section 16 of the Exchange Act with respect to the Company to
the extent necessary in order that transactions by such Participant shall be
exempt under Rule 16b-3 under the Exchange Act. Any action of the Committee
shall be final, conclusive and binding on all persons, including the Company,
its subsidiaries, Participants, Beneficiaries, transferees under Section 10(b)
hereof or other persons claiming rights from or through a Participant, and
stockholders. The express grant of any specific power to the Committee, and the
taking of any action by the Committee, shall not be construed as limiting any
power or authority of the Committee. The Committee may delegate to officers or
managers of the Company or any subsidiary, or committees thereof, the
authority, subject to such terms as the Committee shall determine, (i) to
perform administrative functions, (ii) with respect to Participants not subject
to Section 16 of the Exchange Act, to perform such other functions as the
Committee may determine, and (iii) with respect to Participants subject to
Section 16, to perform such other functions of the Committee as the Committee
may determine to the extent performance of such functions will not result in
the loss of an exemption under Rule 16b-3 otherwise available for transactions
by such persons, in each case to the extent permitted under applicable law and
subject to the requirements set forth in Section 8(d). The Committee may
appoint agents to assist it in administering the Plan.
(c) Limitation of Liability. The Committee and each member thereof
shall be entitled to, in good faith, rely or act upon any report or other
information furnished to him or her by any executive officer, other officer or
employee of the Company or a subsidiary, the Company's independent auditors,
consultants or any other agents assisting in the administration of the Plan.
Members of the Committee and any officer or employee of the Company or a
subsidiary acting at the direction or on behalf of the Committee shall not be
personally liable for any action or determination taken or made in good faith
with respect to the Plan, and shall, to the extent permitted by law, be fully
indemnified and protected by the Company with respect to any such action or
determination.
4. Stock Subject to Plan.
(a) Limitation on Overall Number of Shares Subject to Awards.
Subject to adjustment as provided in Section 10(c) hereof, the total number of
shares of Stock reserved and available for delivery in connection with Awards
under the Plan shall be the sum of (i) 4,000,000 plus (ii) the number of shares
with respect to Awards previously granted under the Plan that terminate without
being exercised, expire, are forfeited or canceled, and the number of shares of
Stock that are surrendered in payment of any Awards or any tax withholding with
regard thereto. Any shares of Stock delivered under the Plan may consist, in
whole or in part, of authorized and unissued shares or treasury shares. Subject
to adjustment as provided in Section 10(c) hereof, in no event shall the
aggregate number of shares of Stock which may be
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<PAGE> 9
issued pursuant to ISOs exceed 4,000,000 shares.
(b) Application of Limitations. The limitation contained in Section
4(a) shall apply not only to Awards that are settleable by the delivery of
shares of Stock but also to Awards relating to shares of Stock but settleable
only in cash (such as cash-only SARs). The Committee may adopt reasonable
counting procedures to ensure appropriate counting, avoid double counting (as,
for example, in the case of tandem or substitute awards) and make adjustments
if the number of shares of Stock actually delivered differs from the number of
shares previously counted in connection with an Award.
5. Eligibility; Per-Person Award Limitations. Awards may be granted
under the Plan only to Eligible Persons. In each fiscal year during any part of
which the Plan is in effect, an Eligible Person may not be granted Awards
relating to more than 1,000,000 shares of Stock, subject to adjustment as
provided in Section 10(c), under each of Sections 6(b), 6(c), 6(d), 6(e), 6(f),
6(g), 6(h), 8(b) and 8(c). In addition, the maximum amount that may be earned as
an Annual Incentive Award or other cash Award in any fiscal year by any one
Participant shall be $1,000,000, and the maximum amount that may be earned as a
Performance Award or other cash Award in respect of a performance period by any
one Participant shall be $2,000,000.
6. Specific Terms of Awards.
(a) General. Awards may be granted on the terms and conditions set
forth in this Section 6. In addition, the Committee may impose on any Award or
the exercise thereof, at the date of grant or thereafter (subject to Section
10(e)), such additional terms and conditions, not inconsistent with the
provisions of the Plan, as the Committee shall determine, including terms
requiring forfeiture of Awards in the event of termination of employment by the
Participant and terms permitting a Participant to make elections relating to
his or her Award. The Committee shall retain full power and discretion to
accelerate, waive or modify, at any time, any term or condition of an Award
that is not mandatory under the Plan. Except in cases in which the Committee is
authorized to require other forms of consideration under the Plan, or to the
extent other forms of consideration must be paid to satisfy the requirements of
Florida law, no consideration other than services may be required for the grant
(but not the exercise) of any Award.
(b) Options. The Committee is authorized to grant Options to
Participants on the following terms and conditions:
(i) Exercise Price. The exercise price per share of Stock
purchasable under an Option shall be determined by the Committee,
provided that such exercise price shall not, in the case of Incentive
Stock Options, be less than 100% of the Fair Market Value of the Stock
on the date of grant of the Option and shall not, in any event, be less
than the par value of a share of Stock on the date of grant of such
6
<PAGE> 10
Option. If an employee owns or is deemed to own (by reason of the
attribution rules applicable under Section 424(d) of the Code) more
than 10% of the combined voting power of all classes of stock of the
Company or any Parent Corporation and an Incentive Stock Option is
granted to such employee, the option price of such Incentive Stock
Option (to the extent required by the Code at the time of grant) shall
be no less than 110% of the Fair Market Value of the Stock on the date
such Incentive Stock Option is granted.
(ii) Time and Method of Exercise. The Committee shall determine
the time or times at which or the circumstances under which an Option
may be exercised in whole or in part (including based on achievement of
performance goals and/or future service requirements), the time or
times at which Options shall cease to be or become exercisable
following termination of employment or upon other conditions, the
methods by which such exercise price may be paid or deemed to be paid
(including in the discretion of the Committee a cashless exercise
procedure), the form of such payment, including, without limitation,
cash, Stock, other Awards or awards granted under other plans of the
Company or any subsidiary, or other property (including notes or other
contractual obligations of Participants to make payment on a deferred
basis), and the methods by or forms in which Stock will be delivered or
deemed to be delivered to Participants.
(iii) ISOs. The terms of any ISO granted under the Plan shall
comply in all respects with the provisions of Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no term of the
Plan relating to ISOs (including any SAR in tandem therewith) shall be
interpreted, amended or altered, nor shall any discretion or authority
granted under the Plan be exercised, so as to disqualify either the
Plan or any ISO under Section 422 of the Code, unless the Participant
has first requested the change that will result in such
disqualification. Thus, if and to the extent required to comply with
Section 422 of the Code, Options granted as Incentive Stock Options
shall be subject to the following special terms and conditions:
(A) the Option shall not be exercisable more than ten
years after the date such Incentive Stock Option is granted;
provided, however, that if a Participant owns or is deemed to
own (by reason of the attribution rules of Section 424(d) of the
Code) more than 10% of the combined voting power of all classes
of stock of the Company or any Parent Corporation and the
Incentive Stock Option is granted to such Participant, the term
of the Incentive Stock Option shall be for no more than five
years from the date of grant; and
(B) The aggregate Fair Market Value (determined as of the
date the Incentive Stock Option is granted) of the shares of
stock with respect to which Incentive Stock Options granted
under the Plan and all other option plans of the Company or its
Parent Corporation during any calendar year exercisable
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<PAGE> 11
for the first time by the Participant during any calendar year
shall not exceed $100,000.
(c) Stock Appreciation Rights. The Committee is authorized to grant
SAR's to Participants on the following terms and conditions:
(i) Right to Payment. A SAR shall confer on the Participant to
whom it is granted a right to receive, upon exercise thereof, the
excess of (A) the Fair Market Value of one share of stock on the date
of exercise (or, in the case of a "Limited SAR", the Fair Market Value
determined by reference to the Change in Control Price, as defined
under Section 9(c) hereof), over (B) the grant price of the SAR as
determined by the Committee. The grant price of an SAR shall not be
less than the Fair Market Value of a share of Stock on the date of
grant except as provided under Section 7(a) hereof.
(ii) Other Terms. The Committee shall determine at the date of
grant or thereafter, the time or times at which and the circumstances
under which a SAR may be exercised in whole or in part (including based
on achievement of performance goals and/or future service
requirements), the time or times at which SARs shall cease to be or
become exercisable following termination of employment or upon other
conditions, the method of exercise, method of settlement, form of
consideration payable in settlement, method by or forms in which Stock
will be delivered or deemed to be delivered to Participants, whether or
not a SAR shall be in tandem or in combination with any other Award,
and any other terms and conditions of any SAR. Limited SARs that may
only be exercised in connection with a Change in Control or other event
as specified by the Committee may be granted on such terms, not
inconsistent with this Section 6(c), as the Committee may determine.
SARs and Limited SARs may be either freestanding or in tandem with
other Awards.
(d) Restricted Stock. The Committee is authorized to grant
Restricted Stock to Participants on the following terms and conditions:
(i) Grant and Restrictions. Restricted Stock shall be subject
to such restrictions on transferability, risk of forfeiture and other
restrictions, if any, as the Committee may impose, which restrictions
may lapse separately or in combination at such times, under such
circumstances (including based on achievement of performance goals
and/or future service requirements), in such installments or otherwise,
as the Committee may determine at the date of grant or thereafter.
Except to the extent restricted under the terms of the Plan and any
Award agreement relating to the Restricted Stock, a Participant granted
Restricted Stock shall have all of the rights of a stockholder,
including the right to vote the Restricted Stock and the right to
receive dividends thereon (subject to any mandatory reinvestment or
other requirement imposed by the Committee). During the restricted
period applicable to the Restricted
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<PAGE> 12
Stock, subject to Section 10(b) below, the Restricted Stock may not be
sold, transferred, pledged, hypothecated, margined or otherwise
encumbered by the Participant.
(ii) Forfeiture. Except as otherwise determined by the Committee
at the time of the Award, upon termination of a Participant's
employment during the applicable restriction period, the Participant's
Restricted Stock that is at that time subject to restrictions shall be
forfeited and reacquired by the Company; provided that the Committee
may provide, by rule or regulation or in any Award agreement, or may
determine in any individual case, that restrictions or forfeiture
conditions relating to Restricted Stock shall be waived in whole or in
part in the event of terminations resulting from specified causes, and
the Committee may in other cases waive in whole or in part the
forfeiture of Restricted Stock, and the Committee may in other cases
waive in whole or in part the forfeiture of Restricted Stock.
(iii) Certificates for Stock. Restricted Stock granted under the
Plan may be evidenced in such manner as the Committee shall determine.
If certificates representing Restricted Stock are registered in the
name of the Participant, the Committee may require that such
certificates bear an appropriate legend referring to the terms,
conditions and restrictions applicable to such Restricted Stock, that
the Company retain physical possession of the certificates, and that
the Participant deliver a stock power to the Company, endorsed in
blank, relating to the Restricted Stock.
(iv) Dividends and Splits. As a condition to the grant of an
Award of Restricted Stock, the Committee may require that any cash
dividends paid on a share of Restricted Stock be automatically
reinvested in additional shares of Restricted Stock or applied to the
purchase of additional Awards under the Plan. Unless otherwise
determined by the Committee, Stock distributed in connection with a
Stock split or Stock dividend, and other property distributed as a
dividend, shall be subject to restrictions and a risk of forfeiture to
the same extent as the Restricted Stock with respect to which such
Stock or other property has been distributed.
(e) Deferred Stock. The Committee is authorized to grant Deferred
Stock to Participants, which are rights to receive Stock, cash, or a
combination thereof at the end of a specified deferral period, subject to the
following terms and conditions:
(i) Award and Restrictions. Satisfaction of an Award of
Deferred Stock shall occur upon expiration of the deferral period
specified for such Deferred Stock by the Committee (or, if permitted by
the Committee, as elected by the Participant). In addition, Deferred
Stock shall be subject to such restrictions (which may include a risk
of forfeiture) as the Committee may impose, if any, which restrictions
may lapse at the expiration of the deferral period or at earlier
specified times (including based on achievement of performance goals
and/or future service
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<PAGE> 13
requirements), separately or in combination, in installments or
otherwise, as the Committee may determine. Deferred Stock may be
satisfied by delivery of Stock, cash equal to the Fair Market Value of
the specified number of shares of Stock covered by the Deferred Stock,
or a combination thereof, as determined by the Committee at the date of
grant or thereafter. Prior to satisfaction of an Award of Deferred
Stock, an Award of Deferred Stock carries no voting or dividend or
other rights associated with share ownership.
(ii) Forfeiture. Except as otherwise determined by the
Committee, upon termination of a Participant's employment during the
applicable deferral period thereof to which forfeiture conditions apply
(as provided in the Award agreement evidencing the Deferred Stock), the
Participant's Deferred Stock that is at that time subject to deferral
(other than a deferral at the election of the Participant) shall be
forfeited; provided that the Committee may provide, by rule or
regulation or in any Award agreement, or may determine in any
individual case, that restrictions or forfeiture conditions relating to
Deferred Stock shall be waived in whole or in part in the event of
terminations resulting from specified causes, and the Committee may in
other cases waive in whole or in part the forfeiture of Deferred Stock.
(iii) Dividend Equivalents. Unless otherwise determined by the
Committee at date of grant, Dividend Equivalents on the specified
number of shares of Stock covered by an Award of Deferred Stock shall
be either (A) paid with respect to such Deferred Stock at the dividend
payment date in cash or in shares of unrestricted Stock having a Fair
Market Value equal to the amount of such dividends, or (B) deferred
with respect to such Deferred Stock and the amount or value thereof
automatically deemed reinvested in additional Deferred Stock, other
Awards or other investment vehicles, as the Committee shall determine
or permit the Participant to elect.
(f) Bonus Stock and Awards in Lieu of Obligations. The Committee is
authorized to grant Stock as a bonus, or to grant Stock or other Awards in lieu
of Company obligations to pay cash or deliver other property under the Plan or
under other plans or compensatory arrangements, provided that, in the case of
Participants subject to Section 16 of the Exchange Act, the amount of such
grants remains within the discretion of the Committee to the extent necessary
to ensure that acquisitions of Stock or other Awards are exempt from liability
under Section 16(b) of the Exchange Act. Stock or Awards granted hereunder
shall be subject to such other terms as shall be determined by the Committee.
(g) Dividend Equivalents. The Committee is authorized to grant
Dividend Equivalents to a Participant entitling the Participant to receive
cash, Stock, other Awards, or other property equal in value to dividends paid
with respect to a specified number of shares of Stock, or other periodic
payments. Dividend Equivalents may be awarded on a free-standing basis or in
connection with another Award. The Committee may provide that Dividend
Equivalents shall be paid or distributed when accrued or shall be deemed to
have been
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reinvested in additional Stock, Awards, or other investment vehicles, and
subject to such restrictions on transferability and risks of forfeiture, as the
Committee may specify.
(h) Other Stock-Based Awards. The Committee is authorized, subject
to limitations under applicable law, to grant to Participants such other Awards
that may be denominated or payable in, valued in whole or in part by reference
to, or otherwise based on, or related to, Stock, as deemed by the Committee to
be consistent with the purposes of the Plan, including, without limitation,
convertible or exchangeable debt securities, other rights convertible or
exchangeable into Stock, purchase rights for Stock, Awards with value and
payment contingent upon performance of the Company or any other factors
designated by the Committee, and Awards valued by reference to the book value
of Stock or the value of securities of or the performance of specified
subsidiaries or business units. The Committee shall determine the terms and
conditions of such Awards. Stock delivered pursuant to an Award in the nature
of a purchase right granted under this Section 6(h) shall be purchased for such
consideration, paid for at such times, by such methods, and in such forms,
including, without limitation, cash, Stock, other Awards or other property, as
the Committee shall determine. Cash awards, as an element of or supplement to
any other Award under the Plan, may also be granted pursuant to this Section
6(h).
7. Certain Provisions Applicable to Awards.
(a) Stand-Alone, Additional, Tandem, and Substitute Awards. Awards
granted under the Plan may, in the discretion of the Committee, be granted
either alone or in addition to, in tandem with, or in substitution or exchange
for, any other Award or any award granted under another plan of the Company,
any subsidiary, or any business entity to be acquired by the Company or a
subsidiary, or any other right of a Participant to receive payment from the
Company or any subsidiary. Such additional, tandem, and substitute or exchange
Awards may be granted at any time. If an Award is granted in substitution or
exchange for another Award or award, the Committee shall require the surrender
of such other Award or award in consideration for the grant of the new Award.
In addition, Awards may be granted in lieu of cash compensation, including in
lieu of cash amounts payable under other plans of the Company or any
subsidiary, in which the value of Stock subject to the Award is equivalent in
value to the cash compensation (for example, Deferred Stock or Restricted
Stock), or in which the exercise price, grant price or purchase price of the
Award in the nature of a right that may be exercised is equal to the Fair
Market Value of the underlying Stock minus the value of the cash compensation
surrendered (for example, Options granted with an exercise price "discounted"
by the amount of the cash compensation surrendered).
(b) Term of Awards. The term of each Award shall be for such period
as may be determined by the Committee; provided that in no event shall the term
of any Option or SAR exceed a period of ten years (or such shorter term as may
be required in respect of an ISO under Section 422 of the Code).
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(c) Form and Timing of Payment Under Awards; Deferrals. Subject to
the terms of the Plan and any applicable Award agreement, payments to be made
by the Company or a subsidiary upon the exercise of an Option or other Award or
settlement of an Award may be made in such forms as the Committee shall
determine, including, without limitation, cash, Stock, other Awards or other
property, and may be made in a single payment or transfer, in installments, or
on a deferred basis. The settlement of any Award may be accelerated, and cash
paid in lieu of Stock in connection with such settlement, in the discretion of
the Committee or upon occurrence of one or more specified events (in addition
to a Change in Control). Installment or deferred payments may be required by
the Committee (subject to Section 10(e) of the Plan) or permitted at the
election of the Participant on terms and conditions established by the
Committee. Payments may include, without limitation, provisions for the payment
or crediting of a reasonable interest rate on installment or deferred payments
or the grant or crediting of Dividend Equivalents or other amounts in respect
of installment or deferred payments denominated in Stock.
(d) Exemptions from Section 16(b) Liability. It is the intent of the
Company that this Plan comply in all respects with applicable provisions of
Rule 16b-3 or Rule 16a-1(c)(3) to the extent necessary to ensure that neither
the grant of any Awards to nor other transaction by a Participant who is
subject to Section 16 of the Exchange Act is subject to liability under Section
16(b) thereof (except for transactions acknowledged in writing to be non-exempt
by such Participant). Accordingly, if any provision of this Plan or any Award
agreement does not comply with the requirements of Rule 16b-3 or Rule
16a-1(c)(3) as then applicable to any such transaction, such provision will be
construed or deemed amended to the extent necessary to conform to the
applicable requirements of Rule 16b-3 or Rule 16a-1(c)(3) so that such
Participant shall avoid liability under Section 16(b). In addition, the
purchase price of any Award conferring a right to purchase Stock shall be not
less than any specified percentage of the Fair Market Value of Stock at the
date of grant of the Award then required in order to comply with Rule 16b-3.
8. Performance and Annual Incentive Awards.
(a) Performance Conditions. The right of a Participant to exercise
or receive a grant or settlement of any Award, and the timing thereof, may be
subject to such performance conditions as may be specified by the Committee.
The Committee may use such business criteria and other measures of performance
as it may deem appropriate in establishing any performance conditions, and may
exercise its discretion to reduce the amounts payable under any Award subject
to performance conditions, except as limited under Sections 8(b) and 8(c)
hereof in the case of a Performance Award or Annual Incentive Award intended to
qualify under Code Section 162(m).
(b) Performance Awards Granted to Designated Covered Employees. If
and to the extent that the Committee determines that a Performance Award to be
granted to an Eligible Person who is designated by the Committee as likely to
be a Covered Employee
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<PAGE> 16
should qualify as "performance-based compensation" for purposes of Code Section
162(m), the grant, exercise and/or settlement of such Performance Award shall
be contingent upon achievement of preestablished performance goals and other
terms set forth in this Section 8(b).
(i) Performance Goals Generally. The performance goals for such
Performance Awards shall consist of one or more business criteria and a
targeted level or levels of performance with respect to each of such
criteria, as specified by the Committee consistent with this Section
8(b). Performance goals shall be objective and shall otherwise meet the
requirements of Code Section 162(m) and regulations thereunder
including the requirement that the level or levels of performance
targeted by the Committee result in the achievement of performance
goals being "substantially uncertain." The Committee may determine that
such Performance Awards shall be granted, exercised and/or settled upon
achievement of any one performance goal or that two or more of the
performance goals must be achieved as a condition to grant, exercise
and/or settlement of such Performance Awards. Performance goals may
differ for Performance Awards granted to any one Participant or to
different Participants.
(ii) Business Criteria. One or more of the following business
criteria for the Company, on a consolidated basis, and/or specified
subsidiaries or business units of the Company (except with respect to
the total stockholder return and earnings per share criteria), shall be
used exclusively by the Committee in establishing performance goals for
such Performance Awards: (1) total stockholder return; (2) such total
stockholder return as compared to total return (on a comparable basis)
of a publicly available index such as, but not limited to, the Standard
& Poor's 500 Stock Index or the S&P Specialty Retailer Index; (3) net
income; (4) pretax earnings; (5) earnings before interest expense,
taxes, depreciation and amortization; (6) pretax operating earnings
after interest expense and before bonuses, service fees, and
extraordinary or special items; (7) operating margin; (8) earnings per
share; (9) return on equity; (10) return on capital; (11) return on
investment; (12) operating earnings; (13) working capital or inventory;
and (14) ratio of debt to stockholders' equity. One or more of the
foregoing business criteria shall also be exclusively used in
establishing performance goals for Annual Incentive Awards granted to a
Covered Employee under Section 8(c) hereof.
(iii) Performance Period; Timing For Establishing Performance
Goals. Achievement of performance goals in respect of such Performance
Awards shall be measured over a performance period of up to ten years,
as specified by the Committee. Performance goals shall be established
not later than 90 days after the beginning of any performance period
applicable to such Performance Awards, or at such other date as may be
required or permitted for "performance-based compensation" under Code
Section 162(m).
(iv) Performance Award Pool. The Committee may establish a
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<PAGE> 17
Performance Award pool, which shall be an unfunded pool, for purposes
of measuring Company performance in connection with Performance Awards.
The amount of such Performance Award pool shall be based upon the
achievement of a performance goal or goals based on one or more of the
business criteria set forth in Section 8(b)(ii) hereof during the given
performance period, as specified by the Committee in accordance with
Section 8(b)(iii) hereof. The Committee may specify the amount of the
Performance Award pool as a percentage of any of such business
criteria, a percentage thereof in excess of a threshold amount, or as
another amount which need not bear a strictly mathematical relationship
to such business criteria.
(v) Settlement of Performance Awards; Other Terms. Settlement
of such Performance Awards shall be in cash, Stock, other Awards or
other property, in the discretion of the Committee. The Committee may,
in its discretion, reduce the amount of a settlement otherwise to be
made in connection with such Performance Awards. The Committee shall
specify the circumstances in which such Performance Awards shall be
paid or forfeited in the event of termination of employment by the
Participant prior to the end of a performance period or settlement of
Performance Awards.
(c) Annual Incentive Awards Granted to Designated Covered Employees.
If and to the extent that the Committee determines that an Annual Incentive
Award to be granted to an Eligible Person who is designated by the Committee as
likely to be a Covered Employee should qualify as "performance-based
compensation" for purposes of Code Section 162(m), the grant, exercise and/or
settlement of such Annual Incentive Award shall be contingent upon achievement
of preestablished performance goals and other terms set forth in this Section
8(c).
(i) Annual Incentive Award Pool. The Committee may establish an
Annual Incentive Award pool, which shall be an unfunded pool, for
purposes of measuring Company performance in connection with Annual
Incentive Awards. The amount of such Annual Incentive Award pool shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof during the given performance period, as specified by the
Committee in accordance with Section 8(b)(iii) hereof. The Committee
may specify the amount of the Annual Incentive Award pool as a
percentage of any such business criteria, a percentage thereof in
excess of a threshold amount, or as another amount which need not bear
a strictly mathematical relationship to such business criteria.
(ii) Potential Annual Incentive Awards. Not later than the end
of the 90th day of each fiscal year, or at such other date as may be
required or permitted in the case of Awards intended to be
"performance-based compensation" under Code Section 162(m), the
Committee shall determine the Eligible Persons who will potentially
receive Annual Incentive Awards, and the amounts potentially payable
thereunder, for that fiscal year, either out of an Annual Incentive
Award pool established by such date under Section 8(c)(i) hereof or as
individual Annual Incentive
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Awards. In the case of individual Annual Incentive Awards intended to
qualify under Code Section 162(m), the amount potentially payable shall
be based upon the achievement of a performance goal or goals based on
one or more of the business criteria set forth in Section 8(b)(ii)
hereof in the given performance year, as specified by the Committee; in
other cases, such amount shall be based on such criteria as shall be
established by the Committee. In all cases, the maximum Annual
Incentive Award of any Participant shall be subject to the limitation
set forth in Section 5 hereof.
(iii) Payout of Annual Incentive Awards. After the end of each
fiscal year, the Committee shall determine the amount, if any, of (A)
the Annual Incentive Award pool, and the maximum amount of potential
Annual Incentive Award payable to each Participant in the Annual
Incentive Award pool, or (B) the amount of potential Annual Incentive
Award otherwise payable to each Participant. The Committee may, in its
discretion, determine that the amount payable to any Participant as a
final Annual Incentive Award shall be reduced from the amount of his or
her potential Annual Incentive Award, including a determination to make
no final Award whatsoever. The Committee shall specify the
circumstances in which an Annual Incentive Award shall be paid or
forfeited in the event of termination of employment by the Participant
prior to the end of a fiscal year or settlement of such Annual
Incentive Award.
(d) Written Determinations. All determinations by the Committee as
to the establishment of performance goals, the amount of any Performance Award
pool or potential individual Performance Awards and as to the achievement of
performance goals relating to Performance Awards under Section 8(b), and the
amount of any Annual Incentive Award pool or potential individual Annual
Incentive Awards and the amount of final Annual Incentive Awards under Section
8(c), shall be made in writing in the case of any Award intended to qualify
under Code Section 162(m). The Committee may not delegate any responsibility
relating to such Performance Awards or Annual Incentive Awards.
(e) Status of Section 8(b) and Section 8(c) Awards Under Code
Section 162(m). It is the intent of the Company that Performance Awards and
Annual Incentive Awards under Section 8(b) and 8(c) hereof granted to persons
who are designated by the Committee as likely to be Covered Employees within
the meaning of Code Section 162(m) and regulations thereunder shall, if so
designated by the Committee, constitute "qualified performance-based
compensation" within the meaning of Code Section 162(m) and regulations
thereunder. Accordingly, the terms of Sections 8(b), (c), (d) and (e),
including the definitions of Covered Employee and other terms used therein,
shall be interpreted in a manner consistent with Code Section 162(m) and
regulations thereunder. The foregoing notwithstanding, because the Committee
cannot determine with certainty whether a given Participant will be a Covered
Employee with respect to a fiscal year that has not yet been completed, the
term Covered Employee as used herein shall mean only a person designated by the
Committee, at the time of grant of Performance Awards or an Annual Incentive
Award, as likely to be a Covered Employee with respect to that fiscal year. If
any provision of the Plan or any
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<PAGE> 19
agreement relating to such Performance Awards or Annual Incentive Awards does
not comply or is inconsistent with the requirements of Code Section 162(m) or
regulations thereunder, such provision shall be construed or deemed amended to
the extent necessary to conform to such requirements.
9. Change in Control.
(a) Effect of "Change in Control." If and to the extent provided in
the Award, in the event of a "Change in Control," as defined in Section 9(b),
the following provisions shall apply:
(i) Any Award carrying a right to exercise that was not
previously exercisable and vested shall become fully exercisable and
vested as of the time of the Change in Control, subject only to
applicable restrictions set forth in Section 10(a) hereof;
(ii) Limited SARs (and other SARs if so provided by their terms)
shall become exercisable for amounts, in cash, determined by reference
to the Change in Control Price.
(iii) The restrictions, deferral of settlement, and forfeiture
conditions applicable to any other Award granted under the Plan shall
lapse and such Awards shall be deemed fully vested as of the time of
the Change in Control, except to the extent of any waiver by the
Participant and subject to applicable restrictions set forth in Section
10(a) hereof; and
(iv) With respect to any such outstanding Award subject to
achievement of performance goals and conditions under the Plan, such
performance goals and other conditions will be deemed to be met if and
to the extent so provided by the Committee in the Award agreement
relating to such Award.
(b) Definition of "Change in Control. A "Change in Control" shall be
deemed to have occurred upon:
(i) An acquisition by any Person of Beneficial Ownership of the
shares of Common Stock of the Company then outstanding (the "Company
Common Stock Outstanding") or the voting securities of the Company then
outstanding entitled to vote generally in the election of directors
(the "Company Voting Securities Outstanding") if such acquisition of
Beneficial Ownership results in the Person's Beneficially Owning 30% or
more of the Company Common Stock Outstanding or 30% or more of the
combined voting power of the Company Voting Securities Outstanding;
provided, however, that the event described in this paragraph (i) shall
not be deemed to be a Change in Control by virtue of any of the
following acquisitions:
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<PAGE> 20
(A) by the Company or any Parent Corporation or any Subsidiary, (B) by
any employee benefit plan sponsored or maintained by the Company or any
Parent Corporation or any Subsidiary, (C) by any underwriter
temporarily holding securities pursuant to an offering of such
securities, (D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph below), (E) pursuant to any acquisition by one or more
Participants (or any entity controlled by one or more Participants); or
(F) a transaction (other than one described in (ii) below) in which
Company Voting Securities Outstanding are acquired from the Company or
any other person, if a majority of the Incumbent Board (as defined in
(iii) below) approve a resolution providing expressly that the
acquisition pursuant to this clause (F) does not constitute a Change in
Control under this paragraph (i); or
(ii) The approval by the stockholders of the Company of a
reorganization, merger, consolidation, complete liquidation or
dissolution of the Company, sale or disposition of all or substantially
all of the assets of the Company, or similar corporate transaction (in
each case referred to in this Section 9(b) as a "Corporate
Transaction") or, if consummation of such Corporate Transaction is
subject, at the time of such approval by stockholders, to the consent
of any government or governmental agency, the obtaining of such consent
(either explicitly or implicitly); provided, however, that any merger,
consolidation, sale, disposition or other similar transaction to or
with one or more Participants or entities controlled by one or more
Participants shall not constitute a Corporate Transaction in respect of
such Participant(s); or
(iii) A change in the composition of the Board such that the
individuals who, as of the Effective Date, constitute the Board (such
Board shall be hereinafter referred to as the "Incumbent Board") cease
for any reason to constitute at least a majority of the Board;
provided, however, for purposes of this Section 9(b), that any
individual who becomes a member of the Board subsequent to the
Effective Date whose election, or nomination for election by the
Company's stockholders, was approved by a vote (either by specific vote
or by approval of the proxy statement of the Company in which such
person is named as a nominee for director, without objection to such
nomination) of at least a majority of those individuals who are members
of the Board and who were also members of the Incumbent Board (or
deemed to be such pursuant to this proviso) shall be considered as
though such individual were a member of the Incumbent Board; and,
provided, further, that any such individual whose initial assumption of
office occurs as a result of either an actual or threatened election
contest subject to Rule 14a-11 of Regulation 14A under the Exchange
Act, including any successor to such Rule, or other actual or
threatened solicitation of proxies or consents by or on behalf of a
Person other than the Board shall in no event be considered as a member
of the Incumbent Board.
Notwithstanding the provisions set forth in subparagraphs (i) and (ii) of this
Section 9(b), the
17
<PAGE> 21
following transactions ("Non-Qualifying Transactions") shall not constitute a
Change in Control for purposes of the Plan: (1) any acquisition by, or
consummation of a Corporate Transaction with, any entity that was a Parent
Corporation or a Subsidiary of the Company immediately prior to the transaction
or an employee benefit plan (or related trust) sponsored or maintained by the
Company or an entity that was a Parent Corporation or a Subsidiary of the
Company immediately prior to the transaction if, immediately after such
transaction (including consummation of all related transactions), the surviving
entity is controlled by no Person other than such Parent Corporation or
Subsidiary, employee benefit plan (or related trust) and/or other Persons who
controlled the Company immediately prior to such transaction; (2) any
acquisition or consummation of a Corporate Transaction following which more
than 50% of, respectively, the shares then outstanding of common stock of the
corporation resulting from such acquisition or Corporate Transaction and the
combined voting power of the voting securities then outstanding of such
corporation entitled to vote generally in the election of directors is then
Beneficially Owned, directly or indirectly, by all or substantially all of the
individuals and entities who were Beneficial Owners, respectively, of the
Company Common Stock Outstanding and Company Voting Securities Outstanding
immediately prior to such acquisition or Corporate Transaction in substantially
the same proportions as their ownership, immediately prior to such acquisition
or Corporate Transaction, of the Company Common Stock Outstanding and Company
Voting Securities Outstanding, as the case may be; or (3) any person acquires
Beneficial Ownership of 30% or more of the Company Common Stock Outstanding or
30% or more of the Company Voting Securities Outstanding as a result of the
acquisition by the Company of Company Common Stock Outstanding or Company
Voting Securities Outstanding which reduces the number of Company Common Stock
Outstanding or Company Voting Securities Outstanding.
(c) Definition of "Change in Control Price." The "Change in Control
Price" means an amount in cash equal to the higher of (i) the amount of cash
and fair market value of property that is the highest price per share paid
(including extraordinary dividends) in any Corporate Transaction triggering the
Change in Control under Section 9(b)(ii) hereof or any liquidation of shares
following a sale of substantially all assets of the Company, or (ii) the
highest Fair Market Value per share at any time during the 60-day period
preceding and 60-day period following the Change in Control.
10. General Provisions.
(a) Compliance With Legal and Other Requirements. The Company may,
to the extent deemed necessary or advisable by the Committee, postpone the
issuance or delivery of Stock or payment of other benefits under any Award
until completion of such registration or qualification of such Stock or other
required action under any federal or state law, rule or regulation, listing or
other required action with respect to any stock exchange or automated quotation
system upon which the Stock or other Company securities are listed or quoted,
or compliance with any other obligation of the Company, as the Committee may
consider appropriate, and may require any Participant to make such
representations, furnish such
18
<PAGE> 22
information and comply with or be subject to such other conditions as it may
consider appropriate in connection with the issuance or delivery of Stock or
payment of other benefits in compliance with applicable laws, rules, and
regulations, listing requirements, or other obligations. The foregoing
notwithstanding, in connection with a Change in Control, the Company shall take
or cause to be taken no action, and shall undertake or permit to arise no legal
or contractual obligation, that results or would result in any postponement of
the issuance or delivery of Stock or payment of benefits under any Award or the
imposition of any other conditions on such issuance, delivery or payment, to
the extent that such postponement or other condition would represent a greater
burden on a Participant than existed on the 90th day preceding the Change in
Control.
(b) Limits on Transferability; Beneficiaries. No Award or other
right or interest of a Participant under the Plan, including any Award or right
which constitutes a derivative security as generally defined in Rule 16a-1(c)
under the Exchange Act, shall be pledged, hypothecated or otherwise encumbered
or subject to any lien, obligation or liability of such Participant to any
party (other than the Company or a subsidiary), or assigned or transferred by
such Participant otherwise than by will or the laws of descent and distribution
or to a Beneficiary upon the death of a Participant, and such Awards or rights
that may be exercisable shall be exercised during the lifetime of the
Participant only by the Participant or his or her guardian or legal
representative, except that Awards and other rights (other than ISOs and SARs
in tandem therewith) may be transferred to one or more Beneficiaries or other
transferees during the lifetime of the Participant, and may be exercised by
such transferees in accordance with the terms of such Award, but only if and to
the extent such transfers and exercises are permitted by the Committee pursuant
to the express terms of an Award agreement (subject to any terms and conditions
which the Committee may impose thereon, and further subject to any prohibitions
or restrictions on such transfers pursuant to Rule 16b-3). A Beneficiary,
transferee, or other person claiming any rights under the Plan from or through
any Participant shall be subject to all terms and conditions of the Plan and
any Award agreement applicable to such Participant, except as otherwise
determined by the Committee, and to any additional terms and conditions deemed
necessary or appropriate by the Committee.
(c) Adjustments. In the event that any dividend or other
distribution (whether in the form of cash, Stock, or other property),
recapitalization, forward or reverse split, reorganization, merger,
consolidation, spin-off, combination, repurchase, share exchange, liquidation,
dissolution or other similar corporate transaction or event affects the Stock
such that a substitution or adjustment is determined by the Committee to be
appropriate in order to prevent dilution or enlargement of the rights of
Participants under the Plan, then the Committee shall, in such manner as it may
deem equitable, substitute or adjust any or all of (i) the number and kind of
shares of Stock which may be delivered in connection with Awards granted
thereafter, (ii) the number and kind of shares of Stock by which annual
per-person Award limitations are measured under Section 5 hereof, (iii) the
number and kind of shares of Stock subject to or deliverable in respect of
outstanding Awards and (iv) the exercise price, grant price or purchase price
relating to any Award and/or make provision for payment
19
<PAGE> 23
of cash or other property in respect of any outstanding Award. In addition, the
Committee is authorized to make adjustments in the terms and conditions of, and
the criteria included in, Awards (including Performance Awards and performance
goals, and Annual Incentive Awards and any Annual Incentive Award pool or
performance goals relating thereto) in recognition of unusual or nonrecurring
events (including, without limitation, events described in the preceding
sentence, as well as acquisitions and dispositions of businesses and assets)
affecting the Company, any subsidiary or any business unit, or the financial
statements of the Company or any subsidiary, or in response to changes in
applicable laws, regulations, accounting principles, tax rates and regulations
or business conditions or in view of the Committee's assessment of the business
strategy of the Company, any subsidiary or business unit thereof, performance
of comparable organizations, economic and business conditions, personal
performance of a Participant, and any other circumstances deemed relevant;
provided that no such adjustment shall be authorized or made if and to the
extent that such authority or the making of such adjustment would cause
Options, SARs, Performance Awards granted under Section 8(b) hereof or Annual
Incentive Awards granted under Section 8(c) hereof to Participants designated
by the Committee as Covered Employees and intended to qualify as
"performance-based compensation" under Code Section 162(m) and the regulations
thereunder to otherwise fail to qualify as "performance-based compensation"
under Code Section 162(m) and regulations thereunder.
(d) Taxes. The Company and any subsidiary is authorized to withhold
from any Award granted, any payment relating to an Award under the Plan,
including from a distribution of Stock, or any payroll or other payment to a
Participant, amounts of withholding and other taxes due or potentially payable
in connection with any transaction involving an Award, and to take such other
action as the Committee may deem advisable to enable the Company and
Participants to satisfy obligations for the payment of withholding taxes and
other tax obligations relating to any Award. This authority shall include
authority to withhold or receive Stock or other property and to make cash
payments in respect thereof in satisfaction of a Participant's tax obligations,
either on a mandatory or elective basis in the discretion of the Committee.
(e) Changes to the Plan and Awards. The Board may amend, alter,
suspend, discontinue or terminate the Plan or the Committee's authority to
grant Awards under the Plan without the consent of stockholders or
Participants, except that any amendment or alteration to the Plan shall be
subject to the approval of the Company's stockholders not later than the annual
meeting next following such Board action if such stockholder approval is
required by any federal or state law or regulation (including, without
limitation, Rule 16b-3 or Code Section 162(m)) or the rules of any stock
exchange or automated quotation system on which the Stock may then be listed or
quoted, and the Board may otherwise, in its discretion, determine to submit
other such changes to the Plan to stockholders for approval; provided that,
without the consent of an affected Participant, no such Board action may
materially and adversely affect the rights of such Participant under any
previously granted and outstanding Award. The Committee may waive any
conditions or rights under, or amend, alter, suspend,
20
<PAGE> 24
discontinue or terminate any Award theretofore granted and any Award agreement
relating thereto, except as otherwise provided in the Plan; provided that,
without the consent of an affected Participant, no such Committee action may
materially and adversely affect the rights of such Participant under such
Award. Notwithstanding anything in the Plan to the contrary, if any right under
this Plan would cause a transaction to be ineligible for pooling of interest
accounting that would, but for the right hereunder, be eligible for such
accounting treatment, the Committee may modify or adjust the right so that
pooling of interest accounting shall be available, including the substitution
of Stock having a Fair Market Value equal to the cash otherwise payable
hereunder for the right which caused the transaction to be ineligible for
pooling of interest accounting.
(f) Limitation on Rights Conferred Under Plan. Neither the Plan nor
any action taken hereunder shall be construed as (i) giving any Eligible Person
or Participant the right to continue as an Eligible Person or Participant or in
the employ of the Company or a subsidiary; (ii) interfering in any way with the
right of the Company or a subsidiary to terminate any Eligible Person's or
Participant's employment at any time, (iii) giving an Eligible Person or
Participant any claim to be granted any Award under the Plan or to be treated
uniformly with other Participants and employees, or (iv) conferring on a
Participant any of the rights of a stockholder of the Company unless and until
the Participant is duly issued or transferred shares of Stock in accordance
with the terms of an Award.
(g) Unfunded Status of Awards; Creation of Trusts. The Plan is
intended to constitute an "unfunded" plan for incentive and deferred
compensation. With respect to any payments not yet made to a Participant or
obligation to deliver Stock pursuant to an Award, nothing contained in the Plan
or any Award shall give any such Participant any rights that are greater than
those of a general creditor of the Company; provided that the Committee may
authorize the creation of trusts and deposit therein cash, Stock, other Awards
or other property, or make other arrangements to meet the Company's obligations
under the Plan. Such trusts or other arrangements shall be consistent with the
"unfunded" status of the Plan unless the Committee otherwise determines with
the consent of each affected Participant. The trustee of such trusts may be
authorized to dispose of trust assets and reinvest the proceeds in alternative
investments, subject to such terms and conditions as the Committee may specify
and in accordance with applicable law.
(h) Nonexclusivity of the Plan. Neither the adoption of the Plan by
the Board nor its submission to the stockholders of the Company for approval
shall be construed as creating any limitations on the power of the Board or a
committee thereof to adopt such other incentive arrangements as it may deem
desirable including incentive arrangements and awards which do not qualify
under Code Section 162(m).
(i) Payments in the Event of Forfeitures; Fractional Shares. Unless
otherwise determined by the Committee, in the event of a forfeiture of an Award
with respect to which a Participant paid cash or other consideration, the
Participant shall be repaid the
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<PAGE> 25
amount of such cash or other consideration. No fractional shares of Stock shall
be issued or delivered pursuant to the Plan or any Award. The Committee shall
determine whether cash, other Awards or other property shall be issued or paid
in lieu of such fractional shares or whether such fractional shares or any
rights thereto shall be forfeited or otherwise eliminated.
(j) Governing Law. The validity, construction and effect of the
Plan, any rules and regulations under the Plan, and any Award agreement shall
be determined in accordance with the laws of the State of Florida without
giving effect to principles of conflicts of laws, and applicable federal law.
(k) Plan Effective Date and Stockholder Approval; Termination of
Plan. The Plan shall become effective on the Effective Date, subject to
subsequent approval within 12 months of its adoption by the Board by
stockholders of the Company eligible to vote in the election of directors, by a
vote sufficient to meet the requirements of Code Section 162(m) and 422, Rule
16b-3 under the Exchange Act, applicable NASDAQ requirements, and other laws,
regulations, and obligations of the Company applicable to the Plan. Awards may
be granted subject to stockholder approval, but may not be exercised or
otherwise settled in the event stockholder approval is not obtained. The Plan
shall terminate at such time as no shares of Common Stock remain available for
issuance under the Plan and the Company has no further rights or obligations
with respect to outstanding Awards under the Plan.
22
<PAGE> 1
EXHIBIT 10.2
INVESTMENT AND DISTRIBUTION AGREEMENT
This INVESTMENT AND DISTRIBUTION AGREEMENT ("Agreement") is entered
into as of December 21, 1999, by and between H.T.E., INC., a Florida
corporation ("HTE"), and DemandStar.com, Inc., a Florida corporation ("DSI" or
the "Company").
R E C I T A L S:
A. HTE, a public company whose common shares are traded on the
Nasdaq National Market System, owns 1,250,000 shares of DSI's common stock,
$.0001 par value, constituting all of the issued and outstanding common stock
of DSI.
B. In addition to (i) the consideration contributed to DSI for
the DSI common stock owned by HTE, and (ii) the credit facility in the
principal amount of $1,750,000 made available by HTE to DSI, which has an
available borrowing balance of $1,012,952, HTE will on or before January 31,
2000 have invested an additional $1,000,000 in DSI to fund DSI's anticipated
operating losses and for general corporate purposes, provided that DSI first
recapitalizes by (a) increasing its authorized capital stock to 110,000,000
shares, consisting of 100,000,000 shares of $0.0001 par value common stock, and
10,000,000 shares of preferred stock (including 2,000,000 shares of Series A
Preferred Stock and 4,000,000 shares of Series B Stock), all as more
particularly set forth in the Restated Articles of Incorporation (the
"Articles") filed with the Secretary of State of the State of Florida on or
about the date hereof and (b) effecting a 1,250-for-one share stock split and
exchange which shall be accompanied by a $250.00 additional contribution of
capital to DSI by HTE.
C. In consideration for HTE's $1,000,000 investment, DSI will
issue to HTE 500,000 shares of Series A Preferred Stock prior to the closing of
a rights offering being conducted by its wholly-owned subsidiary, DSI, to
holders of record of HTE common stock as of a record date to be determined (the
"Rights Offering"), all as described in an DSI registration statement on Form
S-1 filed with the Securities and Exchange Commission in December 1999, as
amended (the "Registration Statement"). DSI will also issue HTE an option to
purchase an additional 250,000 shares of Series A Preferred Stock for an
aggregate of $500,000, such option to expire on June 30, 2000 (the "Option").
D. Each HTE stockholder shall receive, at no cost, one right
("Right) for each share of HTE common stock owned by such stockholder as of the
applicable record date.
E. Each holder of a vested stock option of HTE who held stock
options on December 16, 1999 (pursuant to an HTE stock option agreement) and
who is also an employee or director of HTE (or a wholly-owned subsidiary) as of
five days prior to the effective date of the Registration Statement shall
receive, at no cost, one Right for each share of HTE common stock which he has
a vested right to acquire (pursuant to an HTE stock option plan) as of the
applicable record date.
F. Each holder of an unvested stock option of HTE who held stock
options on December 16, 1999 (pursuant to an HTE stock option agreement) and
who is also an employee or director of HTE (or a wholly-owned subsidiary) as of
five days prior to the effective date of the Registration Statement shall
receive, at no cost, an option to acquire three-quarters of a share of DSI
common stock for each unvested right to acquire a share of HTE common stock
held by the option holder as of the applicable record date (all as described in
the Registration Statement).
G. Each holder of an unvested stock option of HTE who held stock
options on December 16, 1999 (pursuant to an HTE stock option agreement) and
who is also an employee or director of HTE (or a wholly-owned subsidiary) as of
five days prior to the effective date of the Registration Statement shall
receive, at no cost, an option to purchase one-quarter of a share of DSI common
stock ("DSI Option") (such option to vest if and when the underlying HTE stock
option vests) for each share of HTE common stock which he has an unvested right
to acquire (pursuant to an HTE stock option plan) as of the applicable record
date (all as described in the Registration Statement).
H. Each HTE employee who is an employee of HTE (or a
wholly-owned subsidiary) as of five days prior to the effective date of the
Registration Statement will receive, at no cost, 200 Rights (all as described
in the Registration Statement).
<PAGE> 2
I. The parties hereto have determined that it is necessary and
desirable to set forth certain agreements and undertakings between HTE and DSI
that will govern certain matters pertaining to and following the Rights
Offering and, if made, the Stock Distribution.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
1.1 GENERAL. As used in this Agreement, the following terms shall
have the following meanings (such meanings to be equally applicable to both the
singular and plural forms of the terms defined):
"AFFILIATE" means a DSI Affiliate or a HTE Affiliate, as the case may
be.
"AGENT" means Continental Stock Transfer & Trust Company, the
Subscription Agent appointed by DSI to distribute the Rights and the shares
purchased pursuant to the exercise of the Rights.
"BUSINESS DAY" means any day other than a Saturday, a Sunday or a day
on which banking institutions located in the State of New York are authorized
or obligated by law or executive order to close.
"CLOSING DATE" means the second business day after the Rights expire
and the Agent issues shares of DSI Common Stock pursuant to Rights that have
been exercised and paid for.
"CODE" means the Internal Revenue Code of 1986, as amended.
"COMMISSION" means the Securities and Exchange Commission.
"CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management and policies of a Person,
whether through ownership of voting securities, by contract or otherwise.
"DISTRIBUTION RECORD DATE" means the date established as the date for
taking a record of the Holders of HTE common stock entitled to participate in
the Rights Offering, which date will be established prior to the effective date
of the Rights Offering, subject to certain conditions.
"GROUP" means the HTE Group or the DSI Group.
"HOLDERS" means the holders of record of HTE common stock as of the
Distribution Record Date.
"HTE AFFILIATE" means a Person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled by HTE; provided,
however, that for purposes of this Agreement none of the following Persons
shall be considered HTE Affiliates: (i) DSI and any Subsidiary of DSI, (ii) any
corporation less than fifty-one percent (51%) of whose voting stock is directly
or indirectly owned by HTE and (iii) any partnership or joint venture less than
fifty-one percent (51%) of whose interests in profits and losses is directly or
indirectly owned by HTE.
"HTE GROUP" means, collectively, HTE and the HTE Affiliates, or any
one or more of such companies.
"INDEMNIFIABLE LOSSES" means all losses, liabilities, damages, claims,
demands, judgments or settlements of any nature or kind, known or unknown,
fixed,
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accrued, absolute or contingent, liquidated or unliquidated, including, without
limitation, all reasonable costs and expenses (including, without limitation,
attorneys' fees, and defense and accounting costs) as such costs are incurred
relating thereto, incurred or suffered by an Indemnitee.
"INDEMNIFYING PARTY" means a Person who or which is obligated under
this Agreement to provide indemnification to another Person under this
Agreement.
"INDEMNITEE" means a Person who or which is entitled to
indemnification under this Agreement.
"INDEMNITY PAYMENT" means an amount that an Indemnifying Party is
required to pay to an Indemnitee pursuant to Article 3.
"INSURANCE PROCEEDS" means those monies received by an insured from an
insurance carrier or paid by an insurance carrier on behalf of the insured, in
either case, to the extent mutually agreed upon by DSI and HTE acting
reasonably, net of any applicable premium adjustment.
"DSI AFFILIATE" means a Person that directly, or indirectly through
one or more intermediaries, Controls or is Controlled by DSI, provided,
however, that for purposes of this Agreement none of the following Persons
shall be considered DSI Affiliates: (i) HTE or any Subsidiary of HTE and (ii)
any corporation less than fifty-one percent (51%) of whose voting stock is
directly or indirectly owned by DSI and (iii) any partnership or joint venture
less than fifty-one percent (51%) of whose interests in profits and losses is
directly or indirectly owned by DSI.
"DSI GROUP" means, collectively, DSI and the DSI Affiliates, or any
one or more of such companies.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization or a government or any department or agency thereof.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement in the form of Exhibit A annexed hereto to be entered into by HTE and
DSI.
"REPRESENTATIVE" means with respect to any Person, any of such
Person's directors, officers, employees, agents, consultants, advisors,
accountants and attorneys.
"RIGHTS OFFERING" shall have the meaning set forth in the recitals to
this Agreement and is further described as the offering by DSI to HTE
stockholders to subscribe for and purchase shares of DSI common stock pursuant
to the exercise of Rights issued to such stockholders pursuant to the
Registration Statement after it has been declared effective under the
Securities Act.
"RIGHTS OFFERING DOCUMENTS" means collectively: (a) the Registration
Statement, including the Prospectus contained therein, (b) any Prospectus
subject to completion or any Prospectus filed with the SEC under Rule 424 under
the Securities Act or any Term Sheet first filed pursuant to Rule 424(b)(7)
under the Securities Act together with the preliminary Prospectus identified
therein which such Term Sheet supplements, used, in each case, in connection
with the offering of the Common Stock under the Registration Statement, (c) any
other filing made with the SEC by a member of the DSI Group in connection with
the Rights Offering or (d) any amendment or supplement to any of the documents
described in clauses (a) through (c) of this definition. For purposes hereof
"Rights Offering" also means and includes the offering of DSI Options as
described in recital G.
"SECURITIES ACT" means the Securities Act of 1933, as amended,
together with the rules and regulations promulgated thereunder.
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"SERVICES AGREEMENT" means the Services Agreement in the form of
Exhibit B annexed hereto to be entered into by HTE and DSI.
"SUBSIDIARY" means, with respect to any specified Person, any
corporation or other legal entity of which such Person or any of its
subsidiaries Controls or owns, directly or indirectly, more than fifty percent
(50%) of the stock or other equity interest entitled to vote on the election of
members to the board of directors or similar governing body; provided, however,
that for purposes of this Distribution Agreement, neither DSI nor any
Subsidiary of DSI shall be deemed to be a Subsidiary of HTE or of any
Subsidiary of HTE.
"TAX" means as defined in the Tax Sharing and Indemnification
Agreement.
"TAX SHARING AND INDEMNITY AGREEMENT" means the Tax Sharing and
Indemnification Agreement in the form of Exhibit C annexed hereto to be entered
into by HTE and DSI.
"THIRD-PARTY CLAIM" means any claim, suit, arbitration, inquiry,
proceeding or investigation by or before any court, any governmental or other
regulatory or administrative agency or commission or any arbitration tribunal
asserted by a Person who is not a member of the HTE Group or the DSI Group.
ARTICLE 2
HTE'S INVESTMENT
2.1 PRELIMINARY ACTION.
(a) Registration Statement and Prospectus. DSI has prepared
and will file the DSI Registration Statement with the Commission. Subject to
the conditions set forth herein, DSI shall use reasonable efforts to cause the
Registration Statement to become effective under the Securities Act. DSI has
prepared and shall cause to be mailed, the Prospectus to the Holders in
connection with the Rights Offering, provided that a supplement shall be added
to the Prospectus if necessary prior to the completion of the Rights Offering.
(b) Form 8-A. DSI will file with the Commission a Form 8-A
which includes or incorporates by reference relevant portions of the
Registration Statement. Subject to the conditions set forth herein, DSI shall
use reasonable efforts to cause the Form 8-A to become effective under the
Securities Exchange Act of 1934.
(c) Blue Sky. DSI shall take all such action as may be
necessary or appropriate under the securities or blue sky laws of states or
other political subdivisions of the United States in connection with the Rights
Offering and Stock Distribution to permit such transactions to effected as
described in the Prospectus.
(d) Listing. DSI intends to prepare and file an application
to effect the listing of the shares of common stock to be issued in connection
with the Rights Offering on the Nasdaq SmallCap Market. DSI shall use
reasonable efforts to cause the DSI shares to be so listed.
(e) No Representations or Warranties; Consents. Each party
hereto understands and agrees that no party hereto is, in this Agreement or in
any other agreement or document contemplated by this Agreement or otherwise,
representing or warranting in any way that the obtaining of any consents or
approvals, the execution and delivery of any agreements or the making of any
filings or applications contemplated by this Agreement will satisfy the
provisions of any or all applicable laws. Notwithstanding the foregoing, the
parties shall use reasonable efforts to obtain all consents and approvals, to
enter into all agreements and to make all filings and applications which may be
required for the consummation of the
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transactions contemplated by this Agreement, including, without limitation, all
applicable regulatory filings or consents under federal or state laws and all
necessary consents, approvals, agreements, filings and applications.
2.2 RECAPITALIZATION, AUTHORIZATION AND SALE OF SHARES AND RIGHTS.
(a) Recapitalization. The Company's Board of Directors and
sole stockholder has approved a plan of recapitalization pursuant to which (i)
DSI's authorized capital stock shall be increased to 110,000,000 shares,
consisting of 100,000,000 shares of common stock, par value $.0001, and
10,000,000 shares of preferred stock, par value $.01 per share (including
2,000,000 shares of Series A Preferred Stock and 4,000,000 Series B Preferred
Stock) and (ii) the company's 1,000 shares of common stock, which will be split
and exchanged for 1,250,000 shares of the Company's, par value $.0001, common
stock, provided that HTE first contributes to the Company $250 in order to meet
stated capital requirements under Florida law.
(b) Authorization. The Company has authorized the sale and
issuance to HTE of up to 750,000 shares of Series A preferred stock (which
includes shares subject to the Option) and 2,000,000 Series B Preferred Stock
(subject to certain conditions), each such series having the rights,
preferences, privileges and restrictions as set forth in the Articles. The
Company has also authorized the issuance of the Rights to holders of HTE Common
Stock as of the applicable record sale as well the issuance of up to: (i)
19,225,883 shares of common stock pursuant to exercised Rights, and (ii)
300,000 shares pursuant to the exercise of the DSI Options (as defined in
Recital G). Each Right entitles the holder to purchase one share of the
Company's common stock at a price of $1.00 per share.
(c) Sale and Issuance of Shares. On the terms and subject to
the conditions set forth herein, the Company will issue and sell to HTE, and
HTE will purchase from the Company, up to 750,000 Series A Preferred Shares
(which includes shares subject to the Option).
(d) Closings. The closing of the purchase and sale of the
Series A Preferred Shares (the "Closing") shall be held at the Company's
offices immediately prior to the closing of the rights offering. At the
Closing, the Company shall deliver to HTE certificates, registered in HTE's
name, evidencing all such securities and
ARTICLE 3
CERTAIN TRANSACTIONS IN CONNECTION WITH THE RIGHTS OFFERING
3.1 EXECUTION AND DELIVERY OF CERTAIN AGREEMENTS.
Contemporaneously with the closing of the Rights Offering, DSI and HTE shall
execute and deliver to one another the Tax Sharing and Indemnity Agreement, the
Registration Rights Agreement and the Services Agreement (collectively, the
"Other Agreements").
3.2 RIGHTS OFFERING. DSI shall be responsible for and shall pay
all of the expenses incurred by HTE and DSI to effect the Rights Offering
(including the fees of counsel and accountants) (the "Selling Expenses"), as
well as all of the costs of producing, printing, mailing and otherwise
distributing the Prospectus.
3.3 RESERVED SHARES. The Company shall reserve from its
authorized but unissued shares of common stock a sufficient number of shares of
common stock so that if HTE transfers its Series A preferred stock, there is
available a sufficient number of shares of common stock available for issuance
upon conversion of such stock into common stock.
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ARTICLE 4
SURVIVAL, ASSUMPTION AND INDEMNIFICATION
4.1 ASSUMPTION AND INDEMNIFICATION.
(a) Subject to Section 4.1(c), from and after the Closing
Date, HTE shall indemnify, defend and hold harmless each member of the DSI
Group, each of their Representatives and each of the heirs, executors,
successors and assigns of any of the foregoing from and against all
Indemnifiable Losses of any such member or Representative relating to, arising
out of or due to any untrue statement or alleged untrue statement of a material
fact contained in any Rights Offering Document or the omission or alleged
omission to state in any of the Rights Offering Documents a material fact
required to be stated therein or necessary to make the statements therein not
misleading, but only insofar as any such statement or omission was made with
respect to (i) a matter of historical fact relating to a member of the DSI
Group or (ii) the present or future intentions of DSI or any member of the DSI
Group, in reliance upon and in conformity with information furnished by DSI in
writing specifically for use in connection with the preparation of the Rights
Offering Documents and designated in such writing as having been so furnished.
(b) Subject to Section 4.1(c), from and after the Closing
Date, DSI shall indemnify, defend and hold harmless each member of the HTE
Group, each of their Representatives and each of the heirs, executors,
successors and assigns of any of the foregoing from and against all
Indemnifiable Losses of any such member or Representative relating to, arising
out of or due to any untrue statement or alleged untrue statement of a material
fact contained in any Rights Offering Document or the omission or alleged
omission to state in any of the Rights Offering Documents a material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided that DSI will not be liable in any such case to the extent
that any such loss, claim, damage or liability arises out of or is based upon
any such untrue statement or alleged untrue statement or omission or alleged
omission made with respect to (i) a matter of historical fact relating to a
member of the HTE Group or (ii) the present or future intentions of HTE or any
member of the HTE Group, in reliance upon and in conformity with information
furnished by HTE in writing specifically for use in connection with the
preparation of the Rights Offering Documents and designated in such writing as
having been so furnished.
(c) If an Indemnitee realizes a Tax benefit or detriment by
reason of having incurred an Indemnifiable Loss for which such Indemnitee
receives an Indemnity Payment from an Indemnifying Party or by reason of
receiving an Indemnity Payment, then such Indemnitee shall pay to such
Indemnifying Party an amount equal to the Tax benefit, or such Indemnifying
Party shall pay to such Indemnitee an additional amount equal to the Tax
detriment (taking into account any Tax detriment resulting from the receipt of
such additional amounts), as the case may be. If, in the opinion of counsel to
an Indemnifying Party reasonably satisfactory in form and substance to the
affected Indemnitee, there is a substantial likelihood that the Indemnitee will
be entitled to a Tax benefit by reason of an Indemnifiable Loss, the
Indemnifying Party promptly shall notify the Indemnitee and the Indemnitee
promptly shall take any steps (including the filing of such returns, amended
returns or claims for refunds consistent with the claiming of such Tax benefit)
that, in the reasonable judgment of the Indemnifying Party, are necessary and
appropriate to obtain any such Tax benefit. If, in the opinion of counsel to an
Indemnitee reasonably satisfactory in form and substance to the affected
Indemnifying Party, there is a substantial likelihood that the Indemnitee will
be subjected to a Tax detriment by reason of an Indemnification Payment, the
Indemnitee promptly shall notify the Indemnifying Party and the Indemnitee
promptly shall take any steps (including the filing of such returns or amended
returns or the payment of Tax underpayments consistent with the settlement of
any liability for Taxes arising from such Tax detriment) that, in the
reasonable judgment of the Indemnitee, are necessary and appropriate to settle
any liabilities for Taxes arising from such Tax detriment. If, following a
payment by an Indemnitee or an Indemnifying Party pursuant to this Section
3.1(c) in respect of a Tax benefit
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or detriment, there is an adjustment to the amount of such Tax benefit or
detriment, then each of HTE and DSI shall make appropriate payments to the
other, including the payment of interest thereon at the federal statutory rate
then in effect, to reflect such adjustment. This Section 3.1(c) shall govern
the matters discussed in this Section and shall control over any conflicting
language in the Tax Sharing and Indemnification Agreement.
(d) The amount which an Indemnifying Party is required to pay
to any Indemnitee pursuant to this Section 3.1 shall be reduced (including
retroactively) by any Insurance Proceeds and other amounts actually recovered
by such Indemnitee in reduction of the related Indemnifiable Loss. HTE and DSI
shall use their respective best efforts to collect any Insurance Proceeds or
other amounts to which they or any of their Subsidiaries are entitled, without
regard to whether they are the Indemnifying Party hereunder. If an Indemnitee
receives an Indemnity Payment in respect of an Indemnifiable Loss and
subsequently receives Insurance Proceeds or other amounts in respect of such
Indemnifiable Loss, then such Indemnitee shall pay to such Indemnifying Party
an amount equal to the difference between (i) the sum of the amount of such
Indemnity Payment and the amount of such Insurance Proceeds or other amounts
actually received and (ii) the amount of such Indemnifiable Loss, adjusted (at
such time as appropriate adjustment can be determined) in each case to reflect
any premium adjustment attributable to such claim.
4.2 PROCEDURE FOR INDEMNIFICATION.
(a) If any Indemnitee receives notice of the assertion of any
Third-Party Claim with respect to which an Indemnifying Party is obligated
under this Agreement to provide indemnification, such Indemnitee shall give
such Indemnifying Party notice thereof promptly after becoming aware of such
Third-Party Claim; provided, however, that the failure of any Indemnitee to
give notice as provided in this Section 4.2 shall not relieve any Indemnifying
Party of its obligations under this Article 4, except to the extent that such
Indemnifying Party is actually prejudiced by such failure to give notice. Such
notice shall describe such Third-Party Claim in reasonable detail.
(b) An Indemnifying Party, at such Indemnifying Party's own
expense and through counsel chosen by such Indemnifying Party (which counsel
shall be reasonably satisfactory to the Indemnitee), may elect to defend any
Third-Party Claim. If an Indemnifying Party elects to defend a Third-Party
Claim, then, within ten (10) Business Days after receiving notice of such
Third-Party Claim (or sooner, if the nature of such Third-Party Claim so
requires), such Indemnifying Party shall notify the Indemnitee of its intent to
do so, and such Indemnitee shall cooperate in the defense of such Third-Party
Claim. After notice from an Indemnifying Party to an Indemnitee of its election
to assume the defense of a Third-Party Claim, such Indemnifying Party shall not
be liable to such Indemnitee under this Article 4 for any legal or other
expenses subsequently incurred by such Indemnitee in connection with the
defense thereof; provided, however, that such Indemnitee shall have the right
to employ one law firm as counsel to represent such Indemnitee (which firm
shall be reasonably acceptable to the Indemnifying Party) if, in such
Indemnitee's reasonable judgment, either a conflict of interest between such
Indemnitee and such Indemnifying Party exists in respect of such claim or there
may be defenses available to such Indemnitee which are different from or in
addition to those available to such Indemnifying Party, and in that event (i)
the reasonable fees and expenses of such separate counsel shall be paid by such
Indemnifying Party (it being understood, however, that the Indemnifying Party
shall not be liable for the expenses of more than one separate counsel (in
addition to local counsel) with respect to any Third-Party Claim (even if
against multiple Indemnitees)) and (ii) each of such Indemnifying Party and
such Indemnitee shall have the right to conduct its own defense in respect of
such claim. If an Indemnifying Party elects not to defend against a Third-Party
Claim, or fails to notify an Indemnitee of its election as provided in this
Section 4.2 within the period of ten (10) Business Days described above, such
Indemnitee may defend, compromise and settle such Third-Party Claim;
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provided, however, that no such Indemnitee may compromise or settle any such
Third-Party Claim without the prior written consent of the Indemnifying Party,
which consent shall not be withheld unreasonably. Notwithstanding the
foregoing, the Indemnifying Party shall not, without the prior written consent
of the Indemnitee, (i) settle or compromise any Third-Party Claim or consent to
the entry of any judgment which does not include as an unconditional term
thereof the delivery by the claimant or plaintiff to the Indemnitee of a
written release from all liability, damage or claims of any nature or kind in
respect of such Third-Party Claim or (ii) settle or compromise any Third-Party
Claim in any manner that may adversely affect the Indemnitee.
4.3 REMEDIES CUMULATIVE. The remedies provided in this Article 4
shall be cumulative and shall not preclude assertion by any Indemnitee of any
other rights or the seeking of any other remedies against any Indemnifying
Party.
ARTICLE 5
ACCESS TO INFORMATION
5.1 PROVISION OF CORPORATE RECORDS. Prior to or as promptly as
practicable after the Closing Date, HTE shall use reasonable efforts to
accommodate DSI with respect to the delivery to DSI of all corporate books and
records of the DSI Group, including in each case copies of all active
agreements, active litigation files and government filings. From and after the
Closing Date, all books, records and copies so delivered shall be the property
of DSI.
5.2 ACCESS TO INFORMATION. From and after the Closing Date, each
of HTE and DSI shall afford to the other, and shall cause the members of their
respective Groups to so afford, reasonable access and duplicating rights during
normal business hours to all information within such party's possession
relating to such other party's businesses, assets or liabilities, insofar as
such access is reasonably required by such other party. Without limiting the
foregoing, information may be requested under this Section 5.2 for audit,
accounting, claims, litigation and Tax purposes, as well as for purposes of
fulfilling disclosure and reporting obligations, as DSI may reasonably request
and which are directly related to the DSI Business.
ARTICLE 6
MISCELLANEOUS
6.1 TERMINATION. Notwithstanding any other provision hereof, this
Agreement may be terminated if the Rights Offering is abandoned, which decision
can be made at any time by and in the sole discretion of the HTE Board of
Directors without the approval of DSI or by the DSI Board of Directors without
the approval of HTE.
6.2 COMPLETE AGREEMENT. This Agreement and the exhibits hereto
and the agreements (including the Other Agreements) and other documents
referred to herein and therein shall constitute the entire agreement between
the parties hereto with respect to the subject matter hereof and shall
supersede all previous negotiations, commitments and writings with respect to
such subject matter.
6.3 AUTHORITY. Each of the parties hereto represents to the other
that (a) it has the power and authority to execute, deliver and perform this
Agreement and the Other Agreements, (b) the execution, delivery and performance
of this Agreement and the Other Agreements by it has been duly authorized by
all necessary corporate action, (c) it has duly and validly executed the
Agreement, (d) this Agreement and the Other Agreements, when executed, will be
the valid and binding obligation of such party, enforceable against it in
accordance with its terms subject to applicable bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors' rights
generally and general equity principles.
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6.4 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Florida (other than the
laws regarding choice of laws and conflicts of laws) as to all matters,
including matters of validity, construction, effect, performance and remedies.
6.5 NOTICES. All notices, requests, claims, demands and other
communications hereunder (collectively, "Notices") shall be in writing and
shall be given (and shall be deemed to have been duly given upon receipt) by
delivery in person, by cable, telegram, telex, telecopy or other standard form
of telecommunications, or by registered or certified mail, postage prepaid,
return receipt requested, addressed as follows:
If to HTE:
H.T.E., Inc.
1000 Business Center Drive
Lake Mary, Florida 32746
Attn: L.A. Gornto, Jr., Executive Vice President
If to DSI:
DemandStar.com, Inc.
1551 Samdspur Road
Suite B
Maitland, Florida 32714
Attn: President
or to such other address as any party hereto may have furnished to the other
parties by a notice in writing in accordance with this Section 6.5.
6.6 AMENDMENT AND MODIFICATION. This Agreement may be amended or
modified in any material respect only by a written agreement signed by both of
the parties hereto.
6.7 SUCCESSORS AND ASSIGNS; NO THIRD PARTY BENEFICIARIES. This
Agreement and all of the provisions hereof shall be binding upon and inure to
the benefit of the parties hereto, their successors and permitted assigns, and
the members of their respective Groups, but neither this Agreement nor any of
the rights, interests and obligations hereunder shall be assigned by either
party hereto without the prior written consent of the other party (which
consent shall not be unreasonably withheld). Except for the provisions of
Sections 4.2 and 4.3 relating to Indemnities, which are also for the benefit of
the other Indemnitees, this Agreement is solely for the benefit of the parties
hereto and their Subsidiaries and Affiliates and is not intended to confer upon
any other Persons any rights or remedies hereunder.
6.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
6.9 NO WAIVER. No failure by either party to take any action or
assert any right hereunder shall be deemed to be a waiver of such right in the
event of the continuation or repetition of the circumstances giving rise to
such right, unless expressly waived in writing by the party against whom the
existence of such waiver is asserted.
6.10 HEADINGS. The Article and Section headings contained in this
Agreement are solely for the purpose of reference, are not part of the
agreement of the parties hereto and shall not in any way affect the meaning or
interpretation of this Agreement.
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6.11 ENFORCEABILITY. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof. Any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction. Each party acknowledges
that money damages would be an inadequate remedy for any breach of the
provisions of this Agreement and agrees that the obligations of the parties
hereunder shall be specifically enforceable.
6.12 SURVIVAL OF AGREEMENTS. All covenants and agreements of the
parties hereto contained in this Agreement shall survive the Closing Date.
IN WITNESS WHEREOF, the undersigned have exercised and delivered this
Agreement as of the date first set forth above.
H.T.E., Inc.
By: /s/ L.A. Gornto, Jr.
-----------------------------------------
Name: L.A. Gornto, Jr.
Title: Executive Vice President
DemandStar.com, Inc.
By: /s/ O.F. Ramos
-----------------------------------------
Name: O. F. Ramos
Title: President and Chief Executive Officer
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EXHIBIT 10.3
FORM OF SERVICES AGREEMENT
This SERVICES AGREEMENT ("Agreement") is entered into as of
__________, 2000 (the "Effective Date") by and between H.T.E., INC., a Florida
corporation ("HTE"), and DEMANDSTAR.COM, INC., a Florida corporation ("DSI").
R E C I T A L S:
A. Prior to execution of this Agreement, DSI was a wholly-owned
subsidiary of HTE.
B. HTE and DSI have commenced on this date a Rights Offering
and, as a result of the Rights Offering, DSI expects to become a publicly
traded company, with HTE as a significant stockholder. The Rights Offering is
more fully described in DSI's registration statement on Form S-1 (Registration
No. ) filed with the Securities and Exchange Commission (the "Rights
Offering").
C. During the period when DSI was a wholly owned subsidiary of
HTE, DSI relied on HTE for the provision of certain administrative services.
D. The parties have agreed that following the Rights Offering,
HTE will continue to provide certain management and administrative services to
DSI and DSI will provide certain technical and administrative services to HTE.
NOW, THEREFORE, for and in consideration of the mutual agreements
contained herein, the parties hereby agree as follows:
1. SERVICES. During the term of this Agreement, HTE will provide
the services described on Exhibit A to DSI and DSI will provide the services
described on Exhibit B and may, in its sole discretion, provide such other
services as HTE or DSI may request from each other from time to time (all such
services referred to herein as the "Services").
2. FEES AND EXPENSES.
(a) The requesting party (the "Requesting Party") will pay to
the other party fees ("Fees") for the Services provided by said party
("Performing Party") equal to such Performing Party's cost of providing such
Services, as reasonably determined by the Performing Party. Such Fees will
include an allocation of the Performing Parties general and administrative
overhead expense relating to such Services. The Performing Party may, but shall
not be obligated to, determine such cost using the same methods employed by the
Performing Party to allocate costs to the Requesting Party for such Services
prior to the Rights Offering.
(b) The Requesting Party will reimburse the Performing Party
for expenses any reasonable and necessary out-of-pocket expenses incurred in
connection with the provision of the Services, including any taxes or other
governmental impositions attributable to the provision of the Services (other
than income or other similar taxes assessed on the Fees), but not including any
general or administrative overhead expense of Requesting Party. Requesting
Party will not have any obligation to advance funds on behalf of Performing
Party.
(c) Performing Party will invoice Requesting Party for the
Fees and expenses due hereunder at the intervals determined by Performing Party
from time to time. All invoices will be due and payable within thirty (30)
calendar days after the date of the invoice.
3. INFORMATION AND RECORDS.
(a) The Parties will make available to each other on a timely
basis all information which is reasonably necessary for the parties to provide
the Services to each other.
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(b) The parties will maintain records with respect to the
Services which are substantially similar to those maintained with respect to
similar Services provided for its own account, and will provide those records
to each other upon termination of this Agreement.
4. LIABILITY.
(a) The parties make no express or implied warranties to each
other with respect to the Services.
(b) The Performing Party will be liable to the Requesting
Party for any Loss (hereinafter defined) suffered as a result of acts or
omissions of the Performing Party or any shareholder, director, officer or
employee of said party or any attorney, accountant, representative or agent
retained by the Performing Party ("Associates") in connection with the Services
provided only if and to the extent that (i) the acts or omissions constitute
gross negligence or willful misconduct or (ii) the acts or omissions would be
covered by the Performing Party's insurance coverage under crime, fidelity or
fiduciary insurance (if any). In any event, except to the extent covered by the
Performing Party's crime, fidelity or fiduciary insurance, (i) any claim for
damages from the Performing Party in connection with a Service provided will be
limited to the amount of Fees charged with respect to the Service, and (ii)
Performing Party will not be liable to Requesting Party for any incidental or
consequential damages, lost profits or opportunities, or exemplary or punitive
damages.
As used herein, "Loss" means any and all claims, liabilities,
obligations, losses, deficiencies and damages or judgments of any kind or
nature whatsoever arising from, asserted against, or associated with the
furnishing or failure to furnish the Services, regardless of by whom asserted
and regardless of whether or not any such loss is known or unknown, fixed or
contingent or asserted or unasserted, incurred by Performing Party in
connection with the provision of the Services.
5. INDEMNITY. Except as provided in Section 4(b), the Requesting
Party will indemnify the Performing Party and its Associates and hold
Performing Party and its Associates harmless from any and all Losses arising
from, asserted against or associated with the provision of Services by
Performing Party to Requesting Party.
6. AUTHORITY.
(a) In providing the Services, Performing Party may take such
actions, make such decisions and exercise such judgment on behalf of Requesting
Party as Performing Party has taken, made or exercised in providing the same or
similar services on behalf of Requesting Party prior to the closing of the
Rights Offering.
(b) Prior to taking action on behalf of Requesting Party,
Performing Party will use reasonable efforts to consult with appropriate
officers or employees of Requesting Party (i) in those circumstances under
which Performing Party would have consulted officers or employees of Requesting
Party prior to the Rights Offering, and (ii) in any other circumstances
required under such reasonable rules and procedures as Performing Party may
adopt, from time to time, after prior consultation with Requesting Party.
7. FORCE MAJEURE. The Performing Party will not be liable to the
Requesting Party for any failure to comply with this Agreement caused, directly
or indirectly, by of (a) a fire, flood, explosion, riot, rebellion, revolution,
labor trouble (whether or not due to the fault of such Party), requirements or
acts of any government authority or agency or subdivision thereof, loss of
source of supplies or other inability to obtain materials or suppliers, or (b)
any other cause, whether similar or dissimilar to the foregoing, beyond the
reasonable control of the parties hereto.
8. TERM. The parties' obligation to provide Services hereunder,
shall continue until either party gives one hundred twenty (120) days advance
written
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notice or upon written notice from a party if one of the parties materially
breaches this Agreement and fails to cure such breach within thirty (30) days
after receiving written notice thereof. One party may terminate another party's
obligation to provide it with services and still be obligated to provide the
other party with Services until the other party also terminates the other
party's obligation to provide Services [(and space if applicable)]. Any
outstanding Fees and expenses as well as a Requesting Party's obligation to
indemnify the Performing Party shall survive the termination of this Agreement
indefinitely.
9. NOTICES. All notices, demands, requests, or other
communications which may be or are required to be given, served, or sent by a
party pursuant to this Agreement will be in writing and will be (a) personally
delivered, (b) mailed by first class, registered or certified mail, return
receipt requested, postage prepaid, (c) sent by an internationally recognized
express delivery service or (d) transmitted by facsimile, address as follows:
if to HTE:
H.T.E., Inc.
1000 Business Center Drive
Lake Mary, Florida 32746
Attention: L.A. Gornto, Jr.,
Executive Vice President
if to DSI:
DemandStar.com, Inc.
1551 Sandspur Road, Suite B
Maitland, Florida 32751
Attention: O. F. Ramos,
President and CEO
Each party may designate by notice in writing a new address or
facsimile number to which any notice may be given, served or sent. Each notice
will be deemed sufficiently given, served, sent or received when it is
delivered to the addressee, with an affidavit of personal delivery, the return
receipt, the delivery receipt or when delivery is refused by the addressee.
Each notice or other communication sent by facsimile will be deemed
sufficiently given only if a copy of the notice or communication is immediately
sent by one of the methods specified in (a), (b) or (c) above.
10. MISCELLANEOUS.
(a) This Agreement sets forth the entire agreement of the
parties with respect to the Services and supersedes all previous agreements,
understandings or negotiations with respect to the Services.
(b) The rights and obligations set forth in this Agreement
may be amended, modified or supplemented only by a writing signed by each
party.
(c) A party may waive a right under this Agreement only by a
written waiver signed by the party. No failure to exercise or delay in
exercising a right under this Agreement will constitute a waiver of that right.
(d) If any provision of this Agreement is found invalid,
illegal or unenforceable, the provision will be ineffective only to the extent
of the invalidity, illegality or unenforceability, and the other provisions of
this Agreement will remain in full force and effect.
(e) A party may not assign its rights, and a party may not
delegate its obligations, under this Agreement unless it first obtains the
written consent of
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the other party, provided, however, that HTE may assign its rights and delegate
its obligations to any wholly-owned subsidiary of HTE without DSI's consent.
Any party, in its discretion, may withhold consent to any such assignment or
delegation.
(f) Except as permitted under Subsection (e), this Agreement
will not inure to the benefit of any Person other than the Parties.
(g) This Agreement will be governed by and construed and
enforced in accordance with the internal laws of the State of Florida.
(h) This Agreement may be executed in counterparts.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed on their behalf as of the date first above written.
H.T.E., INC.
By:
-------------------------------------
Name: L. A. Gornto, Jr.
Title: Executive Vice President
DEMANDSTAR.COM, INC.
By:
-------------------------------------
Name: O. F. Ramos
Title: President and
Chief Executive Officer
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EXHIBIT A
H.T.E., INC., AS PERFORMING PARTY
DESCRIPTION OF SERVICES
A. Accounting:
1. Maintain a general ledger.
2. Furnish general bank account checks and reconcile general
bank account.
3. Process vendor invoices and employee expense reports approved
by DSI for payment.
4. Input accounts receivable in accordance with instructions
from DSI personnel; post cash receipts; provide A/R aging as requested (not
more often than once per week).
5. Maintain fixed asset records (acquisition-disposal-
depreciation schedules).
6. Provide project profit and cost accounting schedules.
7. Provide quarterly financial information for use by DSI
personnel in preparing quarterly financial statements; bonus calculations;
trial balances; and financial statements.
8. Responsible for all SEC quarterly reporting requirements.
9. Coordinating all required audits and reviews for financial
reporting.
10. Coordinating and creating all press releases and corporate
communications.
11. General administrative support necessary to fulfill the DSI
requirements as a publicly held company.
B. Payroll:
1. Maintain employee data base and input payroll information
into the payroll database.
2. Distribute payroll checks.
3. Administer state and federal income tax withholdings.
C. Tax:
1. Prepare and file all state and federal income and sale/use
tax returns with a due date during the Term.
D. Benefits:
1. Coordinate participation of DSI employees in HTE's health and
medical insurance program.
2. Coordinate participation of DSI employees in HTE's 401(k)
Defined Contribution Benefit Plan.
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EXHIBIT B
DSI AS PERFORMING PARTY
DESCRIPTION OF SERVICES
All technical, creative and administrative services necessary for HTE
to operate its _________________________ in substantially the same fashion as
such ____________________ were operated prior to the date hereof.
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EXHIBIT 10.4
FORM OF TAX SHARING AND INDEMNITY AGREEMENT
This TAX SHARING AND INDEMNITY AGREEMENT (the "Agreement"), dated as
of this ___ day of ______, 2000, by and between H.T.E., INC. ("HTE"), a Florida
corporation, and DEMANDSTAR.COM, INC.("DSI"), a Florida corporation.
R E C I T A L S:
A. HTE, a public company, whose common shares are traded on the
Nasdaq SmallCap Market, owns 1,250,000 shares of DSI's common stock, par value
$.0001 per share, constituting 100% of the issued and outstanding common stock
of DSI and 500,000 shares of Series A Preferred Stock.
B. HTE is the parent of an affiliated group of corporations,
including DSI, that join in filing consolidated federal Tax Returns and certain
consolidated, combined or unitary state income Tax Returns;
C. HTE owns all of DSI'S Series A preferred stock and 100% of
DSI'S outstanding common stock; and
D. Pursuant to an Investment and Distribution Agreement on even
date herewith (the "Investment Agreement"), HTE and DSI have agreed to enter
into this Agreement to address certain tax issues involving HTE and DSI.
NOW, THEREFORE, in consideration of their mutual promises, HTE and DSI
agree as follows:
ARTICLE 1
DEFINITIONS
1.1 As used in this Agreement, the following terms shall have the
following meanings:
"Code" means the Internal Revenue Code of 1986, as amended,
or any successor thereto, as in effect for the taxable period in
question.
"Consolidated Group" means the group of corporations that
immediately prior to the Effective Date are members of the affiliated
group of corporations (within the meaning of Section 1504 of the Code)
of which HTE is the common parent.
"DSI Businesses" means the present and future subsidiaries,
divisions and business of DSI and any member of the DSI Post-Closing
Affiliates.
"DSI Post-Closing Affiliate" means any corporation,
partnership or other entity directly or indirectly controlled by DSI
after the Effective Date.
"DSI Pre-Closing Affiliate" means any corporation,
partnership or other entity directly or indirectly controlled by DSI
on or before the Effective Date.
"Effective Date" means the date upon which HTE ceases to own
eighty percent (80%) of the issued and outstanding shares of DSI.
"Final Determination" shall mean the final resolution of
liability for any Tax for a taxable period, including any related
interest or penalties, (a) by Internal Revenue Service Form 870 or
870-AD (or any successor forms
<PAGE> 2
thereto), on the date of acceptance by or on behalf of the Internal
Revenue Service ("IRS"), or by a comparable form under the laws of
other jurisdictions; except that a Form 870 or 870-AD or comparable
form that reserves (whether by its terms or by operation of law) the
right of the taxpayer to file a claim for refund and/or the right of
the Taxing Authority to assert a further deficiency shall not
constitute a Final Determination; (b) by a decision, judgment, decree,
or other order by a court of competent jurisdiction, which has become
final and unappealable; (c) by a closing agreement or accepted offer
in compromise under Section 7121 or 7122 of the Code, or comparable
agreements under the laws of other jurisdictions; (d) by any allowance
of a refund or credit in respect of an overpayment of Tax, but only
after the expiration of all periods during which such refund may be
recovered (including by way of offset) by the Tax imposing
jurisdiction; or (e) by any other final disposition, including by
reason of the expiration of the applicable statute of limitations.
"HTE Affiliate" means any corporation, partnership or other
entity directly or indirectly controlled by HTE, other than DSI or any
DSI Affiliate.
"HTE Businesses" means the present and future subsidiaries,
divisions and business of any member of the HTE Group, other than the
present and future subsidiaries, divisions and business of DSI or any
DSI Post-Closing Affiliates.
"HTE Group" means the group of corporations that immediately
after the Effective Date are members of the affiliated group of
corporations of which HTE is the common parent (within the meaning of
section 1504 of the Code).
"Representative" means with respect to any person or entity,
any of such person's or entity's directors, officers, employees,
agents, consultants, advisors, accountants, attorneys, and
representatives.
"Tax" or "Taxes" means (a) all forms of taxation, whenever
created or imposed, and whenever imposed by a national, municipal,
governmental, state, federal or other body, whether domestic or
foreign (a "Taxing Authority"), and without limiting the generality of
the foregoing, shall include net income, alternative or add-on minimum
tax, gross income, sales, use, ad valorem, gross receipts, value
added, franchise, profits, license, transfer, recording, withholding,
payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profit, custom duty, or other tax, governmental fee
or other like assessment or charge of any kind whatsoever, together
with any related interest, penalties, or other additions to tax, or
additional amounts imposed by any such Taxing Authority, (b) liability
for the payment of any amounts of the type described in (a) as a
result of being a member of an affiliated, consolidated, combined or
unitary group for any period, including any liability arising pursuant
to Treas. Reg. Section 1.1502-6, or as a result of being a party to
any agreement or arrangement whereby liability for payment of such
amounts was determined or taken into account with reference to the
liability of another party and (c) liability for the payment of any
amounts of the type described in (a) as a result of any express or
implied obligation to indemnify any other person.
"Taxable Period" or "Taxable Periods" means the tax year for
the "Consolidated Group" as defined in this Article 1.
"Taxing Authority" is defined under the term "Taxes."
"Tax Return" means any return, filing, questionnaire or other
document required to be filed, including requests for extensions of
time, filings made with estimated Tax payments, claims for refund and
amended returns that may be filed, for any taxable period with any
Taxing Authority in connection with any
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Tax (whether or not a payment is required to be made with respect to
such filing).
ARTICLE 2
PREPARATION AND FILING OF TAX RETURNS
2.1 INCOME INCLUDED. All Tax Returns required to be filed by the
Consolidated Group relating to Taxable Periods ending before or including the
Effective Date and filed after the date of this Agreement shall include the
income of DSI and DSI Pre-Closing Affiliates (as determined in this Section
2.1) attributable to such Taxable Periods (including, for Federal income Tax
purposes, any deferred income triggered into income by Treas. Reg. Section
1.1502-13 and any excess loss accounts taken into income under Treas. Reg.
Section 1.1502-19) required to be reported in the Consolidated Group's
consolidated Federal income Tax Returns (or under any similar rules applicable
to any state, local or other Tax Returns filed on a consolidated basis). The
income of DSI and DSI Pre-Closing Affiliates will be apportioned for the Tax
period commencing October 1, up to and including the Effective date and the
period after the Effective Date by closing the books of DSI and such DSI
Pre-Closing Affiliates as of the end of the Effective Date. The income of DSI
and any DSI Pre-Closing Affiliate shall not include any deferred income
triggered into income by Treas. Reg. Section 1.1502-13 and any excess loss
accounts taken into income under Treas. Reg. Section 1.1502-19, attributable to
any other member of the Consolidated Group.
2.2 TAX RETURNS FOR TAXABLE PERIODS ENDING BEFORE OR INCLUDING
THE EFFECTIVE DATE. Except as otherwise provided in Section 2.4, HTE shall
timely prepare and file, or cause to be timely prepared and filed, all Tax
Returns required to be filed by or on behalf of any member of the Consolidated
Group relating to Taxable Periods ending before or including the Effective
Date. DSI shall provide HTE any Tax-related information reasonably requested by
HTE relating to any Taxable Periods ending on or before the Effective Date.
2.3 TAX RETURNS FOR TAXABLE PERIODS BEGINNING AFTER THE EFFECTIVE
DATE. DSI shall prepare and file, or cause to be prepared and filed, all Tax
Returns for DSI and any DSI Post-Closing Affiliate for taxable periods of DSI
and any DSI Post-Closing Affiliate beginning after the Effective Date. HTE
shall prepare and file, or cause to be prepared and filed, all Tax Returns for
the HTE Group for Taxable Periods beginning after the Effective Date.
2.4 CARRY-OVER PERIOD RETURNS.
(a) DSI shall prepare and file on a timely basis any Tax
Returns (but not including any Federal income Tax Return or Tax
Returns under any similar rules applicable to any state or local, and
filed on a consolidated basis) of DSI and any DSI Pre-Closing
Affiliate for any Taxable Period beginning before and ending after the
Effective Date (a "Carry-Over Period").
(b) All other Tax Returns for a Carry-Over Period required to
be filed by any member of the Consolidated Group other than DSI or any
DSI Pre-Closing Affiliate shall be prepared and filed by HTE.
ARTICLE 3
PAYMENT OF TAXES
3.1 LIABILITY FOR TAXES WITH RESPECT TO TAXABLE PERIODS ENDING
BEFORE OR INCLUDING THE EFFECTIVE DATE. Except as otherwise provided in this
Agreement, HTE shall be responsible for paying and shall pay all Taxes relating
to any Tax Return filed by the Consolidated Group or any member thereof with
respect to any Taxable Period ending before and including the Effective Date,
including without limitation, any additional Taxes as a result of any audit,
amendment or other change in a Tax Return as filed by the Consolidated Group or
any member thereof. HTE shall be
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entitled to all Tax refunds received or receivable with respect to any and all
Taxes attributable to the Consolidated Group for all such taxable years and
periods ending before including the Effective Date.
3.2 PREPARATION OF DSI'S FINAL RETURNS; PAYMENT OF TAXES. On or
before the Effective Date HTE shall cause to be prepared (in a manner
consistent with practices followed in prior years) and delivered to DSI a
separate United States Federal Income Tax Return for DSI and each DSI
Pre-Closing Affiliate for the Tax period beginning October 1, and ending on the
Effective Date (the "DSI Final Returns"). The DSI Final Returns shall include
all items of income, gain, loss, deductions and credit of DSI and the DSI
Pre-Closing Affiliates realized during such period and determined and
apportioned in accordance with Section 2.1. HTE shall include in its
consolidated federal income tax for its first taxable year ending after the
Effective Date the items of income, gain, loss, deductions and credit shown on
the DSI Final Returns and shall pay all Taxes due with respect thereto as
provided in this Section 3.2 and Section 3.1.
3.3 SEPARATION PAYMENT WITH RESPECT TO FEDERAL INCOME TAXES. HTE
shall give DSI notice of the filing of HTE's consolidated federal income tax
returns for its first taxable year ending after the Effective Date ("Final
Return Notice"). If the DSI Final Returns show a tax liability, DSI shall pay
to HTE the amount thereof within thirty (30) days after receipt by DSI of the
Final Return Notice. HTE shall not withdraw any earnings or assets of DSI or
any DSI Pre-Closing Affiliates prior to the Effective Date. If the DSI Final
Returns show a net operating loss or other tax benefit that is utilized by HTE
or any member of the HTE Group and, therefore, is not allocated to the entity
incurring such tax benefit pursuant to Treas. Reg. Section 1.1502-79, HTE shall
pay to DSI (or the appropriate entity) the amount of any tax savings to be
realized thereby within thirty (30) days after receipt by DSI of the DSI Final
Returns.
3.4 ALLOCATION OF EARNINGS AND PROFITS FOR TAXABLE PERIODS ENDING
BEFORE OR INCLUDING THE EFFECTIVE DATE. All earnings and profits of the
Consolidated Group for all Taxable Periods ending before or including the
Effective Date shall be allocated pursuant to Section 1552 of the Code among
the members of the Consolidated Group in accordance with the ratio which that
portion of the consolidated taxable income attributable to each member of the
Consolidated Group having taxable income bears to the consolidated taxable
income of the Consolidated Group in accordance with Section 1552(a)(1) of the
Code and the Regulations thereunder.
3.5 UNUSED CARRY-FORWARD ATTRIBUTES. HTE and DSI agree that, for
purposes of all required returns and reports with respect to Taxes, the amount
of unused tax credits under the Code attributable to DSI and each of the DSI
Pre-Closing Affiliates that may be carried forward to Taxable Periods ending
after the Effective Date shall, unless otherwise required by law or
regulations, be determined in accordance with the principles of Treas. Reg.
Section 1.1502-79(c). Any other carry-forward attributes shall similarly be
determined in accordance with applicable regulations.
3.6 LIABILITY FOR TAXES WITH RESPECT TO POST-EFFECTIVE DATE
TAXABLE PERIODS. The HTE Group shall pay all Taxes of the HTE Group and shall
be entitled to receive and retain all refunds of Taxes of the HTE Group with
respect to Taxable Periods beginning after the Effective Date which are
attributable to the HTE Businesses. DSI shall pay all Taxes of DSI and any DSI
Post-Closing Affiliate and shall be entitled to receive and retain all refunds
of Taxes of DSI and any DSI Post-Closing Affiliate for all periods beginning
after the Effective Date which are attributable to the DSI Businesses.
3.7 CARRY-OVER PERIOD PAYMENTS. HTE shall be responsible for (and
shall pay) any Taxes shown to be due on a Tax Return for a Carry-Over Period
filed pursuant to Section 2.4(b) hereof by any member of the Consolidated Group
other than DSI or a DSI Pre-Closing Affiliate. DSI shall be
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responsible for (and shall pay) any Taxes shown to be due on a Tax Return for a
Carry-Over Period filed by DSI and any DSI Pre-Closing Affiliate pursuant to
Section 2.4(a) hereof.
3.8 CARRY-BACKS. DSI shall be entitled to any refund of any Tax
obtained by the Consolidated Group (or any member of the Consolidated Group),
including any refund obtained as a result of the carry-back of losses or
credits of DSI or any DSI Post-Closing Affiliate from any taxable period
beginning after the Effective Date to any Taxable Period ending before or
including the Effective Date. The application of any such carry-backs by DSI
and/or any other current or former member of the Consolidated Group shall be in
accordance with the Code and the Treasury Regulations promulgated thereunder.
Notwithstanding this Section 3.8, DSI and any DSI Post-Closing Affiliate shall
have the right, in its sole discretion, to make any election, including the
election under Section 172(b)(3) of the Code, which would eliminate or limit
the carry-back of any loss or credit to any Taxable Period ending before or
including the Effective Date.
3.9 POST-CLOSING ELECTIONS. At HTE's request, DSI and the DSI
Pre-Closing Affiliates shall make and/or join with HTE in making any Tax
elections reasonably requested by HTE after the Effective Date, if the making
of such election does not have a material adverse impact on DSI or any DSI
Pre-Closing Affiliate for any post-Effective Date Tax period.
3.10 REFUNDS. DSI and any DSI Pre-Closing Affiliate shall be
entitled to any refund of any Tax obtained by the Consolidated Group (or any
member of the Consolidated Group) as a result of any audit, amendment or other
change in the Tax Return as filed by the Consolidated Group or any member
thereof to the extent the refund is attributable to DSI and any DSI Pre-Closing
Affiliate for any Taxable Period of the Consolidated Group ending before or
including the Effective Date. HTE will cooperate with DSI and any DSI
Pre-Closing Affiliate in obtaining such refunds, including, but not limited to,
the filing of amended Tax Returns or refund claims. HTE will immediately pay to
DSI and any DSI Pre-Closing Affiliate any Tax refund described in this Section
3.10 when such refund is received by the HTE Group. With the exception of
Section 3.8, all other refunds arising from Tax Returns filed for the
Consolidated Group will belong to HTE.
ARTICLE 4
COOPERATION AND EXCHANGE OF INFORMATION
4.1 COOPERATION. DSI shall cooperate (and shall cause any DSI
Post-Closing Affiliate to cooperate) fully at such time and to the extent
reasonably requested by HTE in connection with the preparation and filing of
any Tax Return or the conduct of any audit, dispute, proceeding, suit or action
concerning any issues or any other matter contemplated hereunder relating to
any Taxable Period ending before or including the Effective Date. Such
cooperation shall include, without limitation, (a) the retention and provision
on demand of copies of books, records, documentation or other information
relating to any such Tax Return until the later of (i) the expiration of the
applicable statute of limitation (giving effect to any extension, waiver, or
mitigation thereof) and (ii) in the event any claim has been made under this
Agreement for which such information is relevant, until a Final Determination
with respect to such claim; (b) the execution of any document that may be
necessary or reasonably helpful in connection with the filing of any such Tax
Return, or in connection with any audit, proceeding, suit or action addressed
in the preceding sentence; and (c) the use of the parties' reasonable best
efforts to obtain any documentation from a governmental authority or a third
party that may be necessary or helpful in connection with the foregoing. Each
party shall make its employees and facilities available on a mutually
convenient basis to facilitate such cooperation.
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4.2 TAX RETURNS FOR TAXABLE PERIODS INCLUDING THE EFFECTIVE DATE.
HTE will provide DSI with the opportunity to review and comment upon any Tax
Returns to be filed after the date of this Agreement (including any amended
returns), and will provide DSI, promptly upon its request, with copies of such
Tax Returns (including any amended returns).
4.3 AUDITS. HTE will allow DSI and any DSI Pre-Closing Affiliate
and its counsel to participate (at the expense of DSI or its DSI Pre-Closing
Affiliate) in any audits of HTE's Consolidated Federal Income Tax Returns to
the extent that such returns relate to DSI and any DSI Pre-Closing Affiliate.
HTE will not settle any such audit in a manner which would adversely affect DSI
and any DSI Pre-Closing Affiliate without the prior written consent of DSI,
which consent shall not be unreasonably withheld.
4.4 CARRY-BACKS. HTE will immediately pay to DSI and any DSI
Pre-Closing Affiliate any Tax refund (or reduction in Tax liability) resulting
from a carry-back of a post-acquisition tax attribute of DSI and any DSI
Pre-Closing Affiliates into the HTE Consolidated Group Tax Return, when such
refund or reduction is realized by the HTE Group. HTE will cooperate with DSI
and any DSI Pre-Closing Affiliate in obtaining such refunds (or reduction in
Tax liability), including, but not limited to, the filing of amended Tax
Returns or refund claims.
4.5 CONTEST PROVISIONS. HTE shall have full responsibility and
discretion in the handling of any Tax controversy, including, without
limitation, an audit, a protest to the Appeals Division of the IRS, and
litigation in Tax Court or any other court of competent jurisdiction involving
a Tax Return of the Consolidated Group or the HTE Group.
ARTICLE 5
MISCELLANEOUS
5.1 TAX INDEMNIFICATION.
(a) HTE shall defend, indemnify and hold harmless DSI and
each DSI Pre-Closing Affiliate from and against any liability, cost or
expense, including, without limitation, any fine, penalty, interest,
charge or reasonable accountant's fee, for any Tax required under this
Agreement to be paid by HTE or any member of the Consolidated Group
other than DSI or a DSI Pre-Closing Affiliate.
(b) DSI shall indemnify and hold harmless HTE and each member
of the HTE Group from and against any liability, cost or expense,
including without limitation, any fine, penalty, interest, charge or
reasonable accountant's fee, for any Tax required under this Agreement
to be paid by DSI or any DSI Post-Closing Affiliate.
(c) The amount of any payment made with respect to this
Section 5.1 shall include any additional amount necessary to indemnify
the recipient of the payment against any Taxes imposed or incurred
(including any increase in liability or taxes resulting from a
reduction in the amount of the loss), and any reasonable professional
fees or other litigation costs incurred, in connection with such
payment, and (ii) be reduced by the amount of any tax benefit realized
or to be realized by the recipient as a result of its payment of the
Taxes being indemnified hereunder.
5.2 BREACH. HTE shall defend, indemnify and hold harmless DSI and
each DSI Pre-Closing Affiliate and DSI shall indemnify and hold harmless each
member of the HTE Group from and against any payment required
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to be made under this Agreement as a result of the breach by a member of the
HTE Group or by DSI or a DSI Pre-Closing Affiliate, as the case may be, of any
obligation under this Agreement.
5.3 RESOLUTION OF CERTAIN DISPUTES.
(a) Arbitration. Disagreements between HTE and DSI with
respect to amounts that either claims is owed by the other (or by an
Affiliate of the other) under this Agreement, or other matters under
this Agreement that are not resolved by mutual agreement, shall be
resolved by arbitration pursuant to this Section 5.3.
(b) Selection of the Arbitrator. Any arbitrator selected
pursuant to this Section 5.3(b) shall have at least ten (10) years of
experience in the field of corporate taxation, shall be an attorney
licensed to practice law in any state of the United States or a
certified public accountant licensed to practice in any state of the
United States and shall not be or have been employed by or affiliated
with either party. The parties shall first attempt to agree on a
mutually satisfactory arbitrator. If the parties are unable to agree
on a mutually satisfactory arbitrator within thirty (30) days after
either party notifies the other in writing of a disagreement requiring
arbitration pursuant to this Section 5.3 (15 days in the case of a
disagreement with respect to Section 4.1 through Section 4.5), each
party shall select an arbitrator. The two arbitrators thus selected
shall agree on and select a third arbitrator. If the two arbitrators
cannot agree on such third arbitrator within thirty (30) days (fifteen
(15) days in the case of a disagreement with respect to Section 4.1
through Section 4.5), the parties shall each select a different
arbitrator and renew the foregoing procedure. If the position of an
arbitrator is vacated, the person or persons who originally selected
the arbitrator to fill such position shall select a new arbitrator to
fill the position, unless the parties agree to continue the
arbitration with the remaining arbitrators. When used hereinafter, the
term "arbitrator" shall refer to the three arbitrators so selected
when appropriate and a decision of a majority of such arbitrators
shall constitute a decision by the arbitrator in the appropriate
context.
(c) Arbitration Procedures.
(i) The arbitration shall be conducted under the
auspices of the American Arbitration Association.
(ii) Each party within thirty (30) days after
engagement of the arbitrator (fifteen (15) days in the case
of a disagreement with respect to Section 4.1 through Section
4.5) shall submit to the arbitrator a written statement of
the party's position (including where relevant the total net
amount it asserts is owed by it or is due to it) regarding
the total amount in dispute.
(iii) The arbitrator shall base his decision on the
following standards. In the case of a factual dispute between
the parties, the arbitrator shall make a determination of the
correct facts. In the case of a dispute regarding a legal
issue, including the proper application of the Tax laws or
the proper interpretation of this Agreement, the arbitrator
shall make a determination in accordance with his best legal
judgment. Upon making determinations with respect to all
factual and legal issues in dispute, the arbitrator shall
determine the amount due by one party to the other or such
other matter with respect to the matter subject to the
arbitration. Where relevant, as to each matter in dispute,
the arbitrator shall find in favor of the party whose
statement submitted pursuant to paragraph (ii) above proposed
the amount closest to the amount so determined.
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(iv) The arbitrator shall render a written decision
stating only the result of such decision as soon as
practicable. The arbitrator shall also orally explain the
bases of such decision to both parties as soon as
practicable. If and only if both parties request, the
arbitrator shall state the bases of such decision in writing.
Where relevant, as to each matter in dispute, the
arbitrator's decision shall be in an amount equal to one of
the total amounts asserted by one of the parties in the
written statements submitted pursuant to paragraph (ii)
above. The arbitrator shall not, and is not authorized to,
render a decision in any other amount.
(v) The arbitrator's decision shall be final and
binding on the parties. No appeal to any court is
contemplated by this Agreement and each party, to the maximum
extent permissible by law, waives and relinquishes all rights
and entitlements to appeal such decision.
(vi) The arbitrator shall determine a fair
allocation of the costs of the arbitration proceeding
(including each party's legal fees) as between the parties.
5.4 NOTICES. Any notice, demand, claim or other communication
under this Agreement shall be in writing and shall be deemed given upon
delivery if delivered personally, upon mailing if sent by certified mail,
return receipt requested, postage prepaid, or upon completion of transmission
if sent by telecopy or facsimile, to the parties at the following address:
If to HTE:
H.T.E., Inc.
1000 Business Center Drive
Lake Mary, Florida 32746
Attn: L.A. Gornto, Jr., Executive Vice President
If to DSI:
DemandStar.com, Inc.
1551 Sandspur Road, Suite B
Maitland, Florida 32751
Attn: O.F. Ramos, President and Chief Executive Officer
5.5 ENTIRE AGREEMENT. This Agreement and the applicable
provisions of the Distribution Agreement constitute the entire agreement of the
parties concerning the subject matter hereof, and supersedes all other
agreements, whether or not written, in respect of any Tax between or among any
member or members of the HTE Group, on the one hand, and DSI and any DSI
Pre-Closing Affiliate, on the other hand. This Agreement may not be amended
except by an agreement in writing, signed by the parties hereto. In the event
and to the extent that there shall be a conflict between the provisions of this
Agreement and the Distribution Agreement, the provisions of this Agreement
shall control.
5.6 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with, the laws of the State of Florida.
5.7 SUCCESSORS AND ASSIGNS. A party's rights and obligations
under this Agreement may not be assigned without the prior written consent of
the other party. All of the provisions of this Agreement shall be binding upon
and inure to the benefit of the parties and their respective successors and
permitted assigns.
5.8 NO THIRD PARTY BENEFICIARIES. This Agreement is solely for
the benefit of the parties to this Agreement and their respective subsidiaries
and should not be
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deemed to confer upon third parties any remedy, claim, liability,
reimbursement, claim of action or other right in excess of those existing
without this Agreement.
5.9 LEGAL ENFORCEABILITY. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to that
jurisdiction, be ineffective to the extent of the prohibition or
unenforceability without invalidating the remaining provisions. Any prohibition
or unenforceability of any provision of this Agreement in any jurisdiction
shall not invalidate or render unenforceable the provision in any other
jurisdiction.
5.10 EXPENSES. Unless otherwise expressly provided in this
Agreement or in the Distribution Agreement, each party shall bear any and all
expenses that arise from their respective obligations under this Agreement. In
the event either party to this Agreement brings an action or proceeding for the
breach or enforcement of this Agreement, the prevailing party in such action or
proceeding, whether or not such action or proceeding proceeds to final
judgment, shall be entitled to recover as an element of its costs, and not as
damages, such reasonable attorneys' fees as may be awarded in the action or
proceeding in addition to whatever other relief to which the prevailing party
may be entitled.
5.11 CONFIDENTIALITY. Each party shall hold and cause its
Representatives to hold in strict confidence, unless compelled to disclose by
judicial or administrative process or, in the opinion of its counsel, by other
requirements of law, all information (other than any such information relating
solely to the business or affairs of such party) concerning the other parties
hereto furnished it by such other party or its Representatives pursuant to this
Agreement (except to the extent that such information can be shown to have been
(a) previously known by the party to which it was furnished, (b) in the public
domain through no fault of such party, or (c) later lawfully acquired from
other sources by the party to which it was furnished), and each party shall not
release or disclose such information to any other person, except its auditors,
attorneys, financial advisors, bankers and other consultants and advisors who
shall be advised of the provisions of this Section. Each party shall be deemed
to have satisfied its obligation to hold confidential information concerning or
supplied by the other party if it exercises the same care as it takes to
preserve confidentiality for its own similar information.
5.12 CONDITIONAL AGREEEMENT. This Agreement is conditioned upon
and only operable if DSI is deemed a member of HTE's Consolidated Group.
5.13 COUNTERPARTS. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signature thereto and hereto were upon the same instrument.
5.14 HEADINGS. Introductory headings used in this Agreement are
solely for the convenience of the parties and shall not be deemed to be
limitations upon or descriptive of the contents of the Section or sub-sections
concerned.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
DEMANDSTAR.COM, INC.
By:
-------------------------------------
Name: O.F. Ramos
Title: President and CEO
H.T.E., Inc.
By:
-------------------------------------
Name: L.A. Gornto, Jr.
Title: Executive Vice President
9
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EXHIBIT 10.5
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of
December 21, 1999, between H.T.E., INC., a Florida corporation ("HTE"), and
DEMANDSTAR.COM, INC., a Florida corporation (the "Company").
R E C I T A L S:
A. HTE is the record and beneficial owner of 1,250,000 shares of
the Company's common stock.
B. Pursuant to an Investment and Distribution Agreement of even
date herewith between HTE and the Company, HTE has acquired from the Company
500,000 shares of Series A preferred stock.
C. Under the Investment and Distribution Agreement the Company
is required to enter into this Agreement and to grant to HTE certain
registration rights applicable to Registrable Securities (as defined below)
held by HTE.
NOW, THEREFORE, upon the premises and based on the mutual promises
herein contained, and for other good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties agree as follows:
1. CERTAIN DEFINITIONS. As used in this Agreement, the following
initially capitalized terms shall have the following meanings:
(a) "AFFILIATE" means, with respect to any person, any other
person who, directly or indirectly, is in control of, is controlled by
or is under common control with the former person; and "control"
(including the terms "controlling," "controlled by," and "under common
control with") means the possession, direct or indirect, of the power
to direct or cause the direction of the management and policies of a
person, whether through the ownership of voting securities, by
contract or otherwise.
(b) "COMPANY SECURITIES" has the meaning set forth in Section
3 hereof.
(c) "EXCHANGEABLE SECURITIES" has the meaning set forth in
Section 6 of this Agreement.
(d) "FAIR MARKET VALUE" means, with respect to any security,
(i) if the security is listed on a national securities exchange or
authorized for quotation on a national market quotation system, the
closing price, regular way, of the security on such exchange or
quotation system, as the case may be, or if no such reported sale of
the security shall have occurred on such date, on the next preceding
date on which there was such a reported sale, or (ii) if the security
is not listed for trading on a national securities exchange or
authorized for quotation on a national market quotation system, the
average of the closing bid and asked prices as reported by the
National Association of Securities Dealers Automated Quotation System
or such other reputable entity or system engaged in the regular
reporting of securities prices and on which such prices for such
security are reported or, if no such prices shall have been reported
for such date, on the next preceding date for which such prices were
so reported, or (iii) if the security is not publicly traded, the fair
market value of such security as determined by a nationally recognized
investment banking or appraisal firm mutually acceptable to the
Company and the Holders, the fair market value of whose Registrable
Securities is to be determined.
(e) "HOLDER" means HTE or any Permitted Transferee.
(f) "INITIATING HOLDERS" has the meaning set forth in Section
3 of this Agreement.
<PAGE> 2
(g) "OTHER HOLDERS" has the meaning set forth in Section 3
hereof.
(h) "OTHER SECURITIES" has the meaning set forth in Section 3
hereof.
(i) "OTHER VOTING SECURITIES" means any options, rights,
warrants or other securities convertible into or exchangeable for
Voting Stock of the Company.
(j) "PERMITTED TRANSFEREE" has the meaning set forth in
Section 11 hereof.
(k) "PERSON" means any individual, partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association, joint venture, or other entity of whatever
nature.
(l) "REGISTRABLE AFTER-ACQUIRED SECURITIES" means any
securities of the Company acquired by HTE (or any Permitted
Transferee).
(m) "REGISTRABLE SECURITIES" means (i) all shares of Common
Stock (as presently constituted) owned on the date hereof by HTE, (ii)
all Registrable After-Acquired Securities, (iii) any stock or other
securities into which or for which such Common Stock or Registrable
After-Acquired Securities may hereafter be changed, converted or
exchanged, and (iv) any other securities issued to holders of such
Common Stock or Registrable After-Acquired Securities (or such stock
or other securities into which or for which such Common Stock or
Registrable After-Acquired Securities are so changed, converted or
exchanged) upon any reclassification, share combination, share
subdivision, share dividend, merger, consolidation or similar
transaction or event, provided that any such securities shall cease to
be Registrable Securities when such securities are sold in any manner
to a person who is not a Permitted Transferee.
(n) "REGISTRATION EXPENSES" means all out-of-pocket expenses
incurred in connection with any registration of Registrable Securities
pursuant to this Agreement including, without limitation, the
following; (i) SEC filing fees; (ii) the fees, disbursements and
expenses of the Company's counsel(s) and accountants in connection
with the registration of the Registrable Securities to be disposed of;
(iii) all expenses in connection with the preparation, printing and
filing of the registration statement, any preliminary prospectus or
final prospectus and amendments and supplements thereto and the
mailing and delivering of copies thereof to any Holders, underwriters
and dealers and all expenses incidental to delivery of the Registrable
Securities; (iv) the cost of printing or producing any underwriting
agreement, agreement among underwriters, agreement between syndicates,
selling agreement, blue sky or legal investment memorandum or other
document in connection with the offering, sale or delivery of the
Registrable Securities to be disposed of; (v) all expenses in
connection with the qualification of the Registrable Securities to be
disposed of for offering and sale under state securities laws,
including the fees and disbursements of counsel for the underwriters
in connection with such qualification and the preparation of any blue
sky and legal investments surveys; (vi) the filing fees incident to
securing any required review by the National Association of Securities
Dealers, Inc. of the terms of the sale of the Registrable Securities
to be disposed of; (vii) transfer agents', depositaries' and
registrars' fees and the fees of any other agent appointed in
connection with such offering; (viii) all security engraving and
security printing expenses, (ix) all fees and expenses payable in
connection with the listing of the Registrable Securities on any
securities exchange or inter-dealer quotation system; and (x) any
one-time payment for directors and officers insurance directly related
to such offering, provided the insurer provides a separate statement
for such payment.
(o) "RULE 144" means Rule 144 promulgated under the
Securities Act, or any successor rule to similar effect.
(p) "SEC" means the United States Securities and Exchange
Commission.
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(q) "SECURITIES ACT" means the Securities Act of 1933, as
amended, or any successor statute.
(r) "SELLING EXPENSES" means all underwriting discounts and
commissions, selling concessions and stock transfer taxes applicable
to the sale by the Holders of Registrable Securities pursuant to this
Agreement and all fees and disbursements of any legal counsel,
investment banker, accountant or other professional advisor retained
by a Holder.
(s) "SELLING HOLDER" has the meaning set forth in Section 5
hereof.
(t) "TRANSACTIONAL DEFERRAL" has the meaning set forth in
Section 2 of this Agreement.
(u) "VOTING STOCK" means shares of the Company's capital
stock having the power under ordinary circumstances (and not merely
upon the happening of a contingency) to vote in the election of
directors of the Company.
2. DEMAND REGISTRATION.
(a) At any time prior to such time as the rights under this
Section 2 terminate with respect to a Holder as provided in Section
2(e) hereof, upon written notice from such Holder in the manner set
forth herein requesting that the Company effect the registration under
the Securities Act of any or all of the Registrable Securities held by
such Holder, which notice shall specify the intended method or methods
of disposition of such Registrable Securities, the Company shall use
its best efforts to effect, in the manner set forth in Section 5, the
registration under the Securities Act of such Registrable Securities
for disposition in accordance with the intended method or methods of
disposition stated in such request (including in an offering on a
delayed or continuous basis under Rule 415 (or any successor rule to
similar effect) promulgated under the Securities Act, if (x) the
Company is then eligible to register such Registrable Securities on
Form S-3 (or a successor form) for such offering and (y) the Company
consents to such an offering (except that no consent of the Company
will be required if the contemplated offering on a delayed or
continuous basis under Rule 415 is the offering of Registrable
Securities upon the exercise, exchange or conversion of Exchangeable
Securities as contemplated by Section 6 hereof)), provided that:
(i) if, within 5 business days of receipt of a
registration request pursuant to this Section 2(a), the
Holder or Holders making such request are advised in writing
that the Company has in good faith commenced the preparation
of a registration statement for an underwritten public
offering prior to receipt of the notice requesting
registration pursuant to this Section 2(a) and the managing
underwriter of the proposed offering has determined that in
such firm's good faith opinion, a registration at the time
and on the terms requested would materially and adversely
affect the offering that is contemplated by the Company, the
Company shall not be required to effect a registration
pursuant to this Section 2(a) (a "Transactional Deferral")
until the earliest of (A) the abandonment of such offering by
the Company, (B) 60 days after receipt by the Holder or
Holders requesting registration of the managing underwriter's
written opinion referred to above in this clause (i), unless
the registration statement for such offering has become
effective and such offering has commenced on or prior to such
60th day, and (C) if the registration statement for such
offering has become effective and such offering has commenced
on or prior to such 60th day, the day on which the
restrictions on the Holders contained in Section 10 hereof
lapse, provided, however, that the Company shall not be
permitted to delay a requested registration in reliance on
this clause (i) more than once in any 12-month period;
(ii) if, while a registration request is pending
pursuant to this Section 2(a), the Company determines,
following consultation with and receiving advice from its
legal counsel, that the filing of a registration
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statement would require the disclosure of material
information that the Company has a bona fide business purpose
for preserving as confidential and the disclosure of which
the Company determines reasonably and in good faith would
have a material adverse effect on the Company, the Company
shall not be required to effect a registration pursuant to
this Section 2(a) until the earlier of (A) the date upon
which such material information is otherwise disclosed to the
public or ceases to be material and (B) 90 days after the
Company makes such determination;
(iii) the Company shall not be obligated to file a
registration statement relating to a registration request
pursuant to this Section 2: (A) prior to December 31, 2000,
(B) within a period of 365 calendar days after the effective
date of any other registration statement of the Company
demanded pursuant to this Section 2(a), or (C) if such
registration request is for a number of Registrable
Securities having a Fair Market Value on the business day
immediately preceding the date of such registration request
of less than $3,000,000; and
(iv) the Company shall not be obligated to file a
registration statement relating to a registration request
pursuant to this Section 2: (A) in the case of a registration
request by HTE or any Permitted Transferee that has acquired,
in the transaction in which it became a Permitted Transferee,
at least a majority of the then issued and outstanding Voting
Stock, on more than three occasions after such time as HTE or
such Permitted Transferee, as the case may be, owns less than
a majority of the voting power of the outstanding capital
stock of the Company (it being acknowledged that so long as
HTE or such Permitted Transferee owns a majority of the
voting power of the outstanding capital stock of the Company,
there shall be no limit to the number of occasions on which
HTE or such Permitted Transferee may exercise such rights
other than as expressly set forth herein), or (B) in the case
of a Holder other than HTE or a Permitted Transferee
described in clause (A) above, on more than the number of
occasions permitted such Holder in accordance with Section 11
hereof.
(b) Notwithstanding any other provision of this Agreement to
the contrary:
(i) a registration requested by a Holder pursuant
to this Section 2 shall not be deemed to have been effected
(and, therefore, not requested for purposes of Section 2(a)),
(A) unless the registration statement filed in connection
therewith has become effective, (B) if after such
registration statement has become effective, it becomes
subject to any stop order, or there is issued an injunction
or other order or decree of the SEC or other governmental
agency or court for any reason other than a misrepresentation
or an omission by such Holder, which injunction, order or
decree prohibits or otherwise materially and adversely
affects the offer and sale of the Registrable Securities so
registered prior to the completion of the distribution
thereof in accordance with the plan of distribution set forth
in the registration statement or (C) if the conditions to
closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration
are not satisfied by reason of some act, misrepresentation or
omission by the Company and are not waived by the purchasers
or underwriters; and
(ii) nothing herein shall modify a Holder's
obligation to pay Registration Expenses, in accordance with
Section 4 hereof, that are incurred in connection with any
withdrawn registration requested by such Holder.
(c) In the event that any registration pursuant to this
Section 2 shall involve, in whole or in part, an underwritten
offering, Holders owning at least 50.1% of the Fair Market Value of
the Registrable Securities to be registered in connection with such
offering shall have the right to designate an underwriter reasonably
satisfactory to the Company as the lead managing underwriter of such
underwritten offering, and the Company shall have the right to
designate one underwriter
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<PAGE> 5
reasonably satisfactory to such Holders as a co-manager of such
underwritten offering.
(d) The Company shall have the right to cause the
registration of additional securities for sale for the account of any
person (including the Company) in any registration of Registrable
Securities requested by any Holder pursuant to Section 2(a) only to
the extent the managing underwriter or other independent marketing
agent for such offering (if any) determines that, in its opinion, the
additional securities proposed to be sold will not materially and
adversely affect the offering and sale of the Registrable Securities
to be registered in accordance with the intended method or methods of
disposition then contemplated by such Holder. The rights of a Holder
to cause the registration of additional Registrable Securities held by
such Holder in any registration of Registrable Securities requested by
another Holder pursuant to Section 2(a) shall be governed by the
agreement of the Holders with respect thereto as provided in Section
11(a).
(e) The Company shall not be obligated to file a registration
statement relating to a registration request by a Holder pursuant to
this Section 2 from and after such time as such Holder first owns
Registrable Securities representing (assuming for this purpose the
conversion, exchange or exercise of all Registrable Securities then
owned by such Holder that are convertible into or exercisable or
exchangeable for Voting Stock of the Company) less than 10% of the
then issued and outstanding Voting Stock of the Company.
3. PIGGYBACK REGISTRATION. If the Company at any time proposes
to register any of its Common Stock or any other of its securities
(collectively, "Other Securities") under the Securities Act, whether or not for
sale for its own account, in a manner which would permit registration of
Registrable Securities for sale for cash to the public under the Securities
Act, it will at such time give prompt written notice to each Holder of its
intention to do so at least 10 business days prior to the anticipated filing
date of the registration statement relating to such registration. Such notice
shall offer each such Holder the opportunity to include in such registration
statement such number of Registrable Securities as each such Holder may
request. Upon the written request of any such Holder made within 5 business
days after the receipt of the Company's notice (which request shall specify the
number of Registrable Securities intended to be disposed of and the intended
method of disposition thereof), the Company shall effect, in the manner set
forth in Section 5, in connection with the registration of the Other
Securities, the registration under the Securities Act of all Registrable
Securities which the Company has been so requested to register, to the extent
required to permit the disposition (in accordance with such intended methods
thereof) of the Registrable Securities so requested to be registered, provided
that:
(a) if at any time after giving written notice of its
intention to register any securities and prior to the effective date
of such registration, the Company shall determine for any reason not
to register or to delay registration of such securities, the Company
may, at its election, give written notice of such determination to the
Holders and, thereupon, (A) in the case of a determination not to
register, the Company shall be relieved of its obligation to register
any Registrable Securities in connection with such registration and
(B) in the case of a determination to delay such registration, the
Company shall be permitted to delay registration of any Registrable
Securities requested to be included in such registration for the same
period as the delay in registering such other securities, but, in
either such case, without prejudice to the rights of the Holders under
Section 2;
(b) (i) if the registration referred to in the first sentence
of this Section 3 is to be a registration in connection with an
underwritten offering on behalf of either the Company or holders of
securities (other than Registrable Securities) of the Company ("Other
Holders"), and the managing underwriter for such offering advises the
Company in writing that, in such firm's opinion, such offering would
be materially and adversely affected by the inclusion therein of
Registrable Securities requested to be included therein because such
Registrable Securities are not of the same type, class or series as
the securities to be offered and sold in such offering on behalf of
the Company and/or the Other Holders, the Company may
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exclude all such Registrable Securities from such offering provided
that the Holder is permitted to substitute for the Registrable
Securities so excluded an equal number of Registrable Securities of
the same type, class or series as those being registered by the
Company or the Other Holders, if and to the extent such Holder owns
Registrable Securities of such type, class or series or can acquire
Registrable Securities of such type, class or series upon exercise or
conversion of other Registrable Securities; and
(ii) if the registration referred to in the first
sentence of this Section 3 is to be a registration in
connection with an underwritten primary offering on behalf
of the Company, and the managing underwriter for such
offering advises the Company in writing that, in such firm's
opinion, such offering would be materially and adversely
affected by the inclusion therein of the Registrable
Securities requested to be included therein because the
number or principal amount of such Registrable Securities,
considered together with the number or principal amount of
securities proposed to be offered by the Company, exceeds
the aggregate number or principal amount of securities
which, in such firm's opinion, can be sold in such offering
without materially and adversely affecting the offering, the
Company shall include in such registration: (1) first, all
securities the Company proposes to sell for its own account
("Company Securities") and (2) second, the number or
principal amount of Registrable Securities and securities,
if any, requested to be included therein by Other Holders in
excess of the number or principal amount of Company
Securities which, in the opinion of such underwriter, can be
so sold without materially and adversely affecting such
offering (allocated pro rata among the Holders and the Other
Holders on the basis of the number of securities (including
Registrable Securities) requested to be included therein by
each Holder and each such Other Holder); and
(iii) if the registration referred to in the first
sentence of this Section 3 is to be a registration in
connection with an underwritten secondary offering on behalf
of Other Holders made pursuant to demand registration rights
granted by the Company to such Other Holders (the
"Initiating Holders"), and the managing underwriter for such
offering advises the Company in writing that, in such firm's
opinion, such offering would be materially and adversely
affected by the inclusion therein of the Registrable
Securities requested to be included therein because the
number or principal amount of such Registrable Securities,
considered together with the number or principal amount of
securities proposed to be offered by the Initiating Holders,
exceeds the aggregate number or principal amount of
securities which, in such firm's opinion, can be sold in
such offering without materially and adversely affecting the
offering, the Company shall include in such registration;
(1) first, to the extent the registration rights granted to
an Initiating Holder permit it to exclude other securities
from its registration on substantially the same basis as
that set forth in the first sentence of Section 2(d) hereof,
all securities any such Initiating Holder proposes to sell
for its own account, and (2) second, the number or principal
amount of additional securities (including Registrable
Securities) that such managing underwriter advises can be
sold without materially and adversely affecting such
offering, allocated pro rata among any Other Holders to
which clause (1) does not apply and the Holders on the basis
of the number of securities (including Registrable
Securities) requested to be included therein by each Holder
and each such Other Holder,
(c) the Company shall not be required to effect any
registration of Registrable Securities under this Section 3 incidental
to the registration of any of its securities in connection with stock
option or other executive or employee benefit or compensation plans of
the Company;
(d) no registration of Registrable Securities effected under
this Section 3 shall relieve the Company of its obligation to effect
any registration of Registrable Securities required of the Company
pursuant to Section 2 hereof, except as expressly provided in Section
2; and
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(e) the Company shall not be required to effect any
registration of Registrable Securities under this Section for any
Holder from and after such time as such Holder is able to dispose of
all of its Registrable Securities within a three-month period pursuant
to Rule 144.
4. EXPENSES. The Holders, on the one hand, by accepting
Registrable Securities, and the Company, on the other hand, each agree to pay
one-half of all Registration Expenses with respect to a registration pursuant
to Section 2 hereof, provided that to the extent a registration pursuant to
Section 2 includes the registration of shares for the Company or another person
in connection therewith, the Company or such other person shall pay all
incremental expenses of including such additional shares in the registration.
The Holders' portion of any Registration Expenses shall be allocated among them
pro rata based on each Holder's number or principal amount of Registrable
Securities included in such offering. The Company agrees to pay all
Registration Expenses with respect to a registration pursuant to Section 3
hereof. All Registration Expenses to be paid by the Holder shall be paid within
3010 days of the delivery of a statement from the Company, such statements to
be delivered not more frequently than once every 6030 days. All internal
expenses of the Company or a Holder in connection with any offering pursuant to
this Agreement, including, without limitation, the salaries and expenses of
officers and employees, including in-house attorneys, shall be borne by the
party incurring them. All Selling Expenses of the Holders participating in any
registration pursuant to this Agreement shall be borne by such Holders pro rata
based on each Holder's number of Registrable Securities included in such
registration.
5. REGISTRATION AND QUALIFICATION. If and whenever the Company
is required to use its best efforts to effect the registration of any
Registrable Securities under the Securities Act as provided in Section 2 or 3
hereof, the Company, subject to Section 4 hereof, shall:
(a) prepare and file a registration statement under the
Securities Act relating to the Registrable Securities to be offered as
soon as practicable, but in no event later than 45 days (60 days if
the applicable registration form is other than Form S-3) after the
date notice is given, and use its best efforts to cause the same to
become effective within 90 days after the date notice is given (120
days if the applicable registration form is other than Form S-3);
(b) prepare and file with the SEC such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective with respect to the disposition of all Registrable
Securities until the earlier of (i) such time as all of such
Registrable Securities have been disposed of in accordance with the
intended methods of disposition set forth in such registration
statement and (ii) the expiration of nine months after such
registration statement becomes effective; provided, that such
nine-month period shall be extended for such number of days that
equals the number of days elapsing from (A) the date the written
notice contemplated by paragraph (f) below is given by the Company to
(B) the date on which the Company delivers to the Holders of
Registrable Securities the supplement or amendment contemplated by
paragraph (f) below; and provided further, that in the case of a
registration to permit the exercise or exchange of Exchangeable
Securities for, or the conversion of Exchangeable Securities into,
Registrable Securities, the time limitation contained in clause (ii)
above shall be disregarded to the extent that, in the written opinion
of HTE's counsel delivered to the Company, such Registrable Securities
are required to be covered by an effective registration statement
under the Securities Act at the time such Registrable Securities are
issued upon exercise, exchange or conversion of Registrable Securities
in order for such Registrable Securities to be freely tradeable by any
person who is not an Affiliate of the Company or HTE;
(c) furnish to the Holders and to any underwriter of such
Registrable Securities such number of conformed copies of such
registration statement and of each such amendment and supplement
thereto (in each case including all exhibits), such number of copies
of the prospectus included in such registration statement (including
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<PAGE> 8
each preliminary prospectus and any summary prospectus), in conformity
with the requirements of the Securities Act, and such other documents,
as the Holders or such underwriter may reasonably request in order to
facilitate the public sale of the Registrable Securities, and a copy
of any and all transmittal letters or other correspondence to, or
received from, the SEC or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any
domestic or foreign securities exchange) relating to such offering;
(d) use its best efforts to register or qualify all
Registrable Securities covered by such registration statement under
the securities or blue sky laws of such jurisdictions (domestic or
foreign) as the Holders or any underwriter of such Registrable
Securities shall request, and use its best efforts to obtain all
appropriate registrations, permits and consents required in connection
therewith, and do any and all other acts and things which may be
necessary or advisable to enable the Holders or any such underwriter
to consummate the disposition in such jurisdictions of its Registrable
Securities covered by such registration statement; provided that the
Company shall not for any such purpose be required to register or
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified, or to subject itself to
taxation in any such jurisdiction, or to consent to general service of
process in any such jurisdiction;
(e) (i) use its best efforts to furnish an opinion of counsel
for the Company addressed to the underwriters and dated the date of
the closing under the underwriting agreement (if any) (or if such
offering is not underwritten, dated the effective date of the
registration statement), and (ii) use its best efforts to furnish a
"cold comfort" letter addressed to the underwriters, if permissible
under applicable accounting practices, and signed by the independent
public accountants who have audited the Company's financial statements
included in such registration statement, in each such case covering
substantially the same matters with respect to such registration
statement (and the prospectus included therein) as are customarily
covered in opinions of issuer's counsel and in accountants' letters
delivered to underwriters in underwritten public offerings of
securities and, in the case of such accountants' letter, with respect
to events subsequent to the date of such financial statements;
(f) immediately notify each Holder of Registrable Securities
included in such registration (each a "Selling Holder") in writing (i)
at any time when a prospectus relating to a registration pursuant to
Section 2 or 3 hereof is required to be delivered under the Securities
Act of the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, and (ii) if any request by the SEC or any other regulatory
body or other body having jurisdiction for any amendment of or
supplement to any registration statement or other document relating to
such offering, and in either such case (i) or (ii) at the request of
the Selling Holders, subject to Section 4 hereof, prepare and furnish
to the Selling Holders a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such Registrable Securities,
such prospectus shall not include an untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading;
(g) use its best efforts to list all such Registrable
Securities covered by such registration on each securities exchange
and inter-dealer quotation system on which the Common Stock is then
listed, with expenses in connection therewith (not including any
future periodic assessments or fees for such additional listing, which
shall be paid by the Company) to be paid in accordance with Section 4
hereof;
(h) use its best efforts to list all Registrable Securities
covered by such registration statement on any securities exchange or
inter-dealer quotation system (in each case, domestic or foreign) not
described in paragraph (g) above as the
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<PAGE> 9
Selling Holders or any underwriter of such Registrable Securities
shall request, and use its best efforts to obtain all appropriate
registrations, permits and consents required in connection therewith,
and to do any and all other acts and things which may be necessary or
advisable to effect such listing; provided, however, that, (i)
notwithstanding Section 4, the Holders of the Registrable Securities
to be so listed shall pay all costs and expenses incurred by the
Company in connection with such listing and (ii) the Company shall
have no obligation to use its best efforts to so list Registrable
Securities if in the good faith opinion of counsel for the Company
such listing shall impose on the Company an ongoing material
compliance obligation;
(i) to the extent reasonably requested by the lead or
managing underwriters in connection with any underwritten offering,
send appropriate officers of the Company to attend any "road shows"
scheduled in connection with any such registration; and
(j) furnish for delivery in connection with the closing of
any offering of Registrable Securities unlegended certificates
representing ownership of the Registrable Securities being sold in
such denominations as shall be requested by the Selling Holders or the
underwriters.
6. EXCHANGEABLE SECURITIES. HTE shall be entitled, if it intends
to offer any options, rights, warrants or other securities issued or to be
issued by it or any other person that are exercisable or exchangeable for or
convertible into any Registrable Securities ("Exchangeable Securities"), to
register the Registrable Securities underlying such options, rights, warrants
or other securities pursuant to (and subject to the limitations contained in)
Section 2 of this Agreement.
7. UNDERWRITING; DUE DILIGENCE.
(a) If requested by the underwriters for any underwritten
offering of Registrable Securities pursuant to a registration
requested under this Agreement, the Company shall enter into an
underwriting agreement, with such underwriters for such offering, such
agreement to contain such representations and warranties by the
Company and such other terms and provisions as are customarily
contained in underwriting agreements with respect to secondary
distributions, including, without limitation, indemnities and
contribution substantially to the effect and to the extent provided in
Section 8 hereof and the provision of opinions of counsel and
accountants' letters to the effect and to the extent provided in
Section 5(e) hereof. The Selling Holders on whose behalf the
Registrable Securities are to be distributed by such underwriters
shall be parties to any such underwriting agreement. Such underwriting
agreement shall also contain such representations and warranties by
the Selling Holders on whose behalf the Registrable Securities are to
be distributed as are customarily contained in underwriting agreements
with respect to secondary distributions. The Selling Holders may
require that any additional securities included in an offering
proposed by a Holder be included on the same terms and conditions as
the Registrable Securities that are included therein.
(b) In the event that any registration pursuant to Section 3
shall involve, in whole or in part, an underwritten offering, the
Company may require the Registrable Securities requested to be
registered pursuant to Section 3 to be included in such underwritten
offering on the same terms and conditions as shall be applicable to
the other securities being sold through underwriters under such
registration. If requested by the underwriters for such underwritten
offering, the Selling Holders on whose behalf the Registrable
Securities are to be distributed shall enter into an underwriting
agreement with such underwriters, such agreement to contain such
representations and warranties by the Selling Holders and such other
terms and provisions as are customarily contained in underwriting
agreements with respect to secondary distributions, including, without
limitation, indemnities and contribution substantially to the effect
and to the extent provided in Section 8 hereof. Such underwriting
agreement shall also contain such representations and warranties by
the Company and such other person or entity for whose account
securities are being sold in such offering as are customarily
contained in underwriting agreements with respect to secondary
distributions.
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<PAGE> 10
(c) In connection with the preparation and filing of each
registration statement registering Registrable Securities under the
Securities Act, the Company shall give the Holders of such Registrable
Securities and the Underwriters, if any, and their respective counsel
and accountants, such reasonable and customary access to its banks and
records and such opportunities to discuss the business of the Company
with its officers and the independent public accountants who have
certified the Company's financial statements as shall be necessary, in
the opinion of such Holders and such underwriters or their respective
counsel, to conduct a reasonable investigation within the meaning of
the Securities Act.
8. INDEMNIFICATION AND CONTRIBUTION.
(a) In the case of each offering of Registrable Securities
made pursuant to this Agreement, the Company agrees to indemnify and
hold harmless each Holder, its officers and directors, each
underwriter of Registrable Securities so offered and each person, if
any, who controls any of the foregoing persons within the meaning of
the Securities Act, from and against any and all claims, liabilities,
losses, damages, expenses and judgments, joint or several, to which
they or any of them may become subject, under the Securities Act or
otherwise, including any amount paid in settlement of any litigation
commenced or threatened which is approved by the indemnifying party as
provided below, and shall promptly reimburse them, as and when
incurred, for any reasonable legal or other expenses incurred by them
in connection with investigating any claims and defending any actions,
insofar as such losses, claims, damages, liabilities or actions shall
arise out of, or shall be based upon, any untrue statement or alleged
untrue statement of a material fact contained in the registration
statement (or in any preliminary or final prospectus included therein)
or any amendment thereof or supplement thereto, or in any document
incorporated by reference therein, or any omission or alleged omission
to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading; provided,
however, that the Company shall not be liable to a particular Holder
in any such case to the extent that any such loss, claim, damage,
liability or action arises out of, or is based upon, any untrue
statement or alleged untrue statement, or any omission, if such
statement or omission shall have been made in reliance upon and in
conformity with information relating to such Holder furnished to the
Company in writing by or on behalf of such Holder specifically for use
in the preparation of the registration statement (or in any
preliminary or final prospectus included therein) or any amendment
thereof or supplement thereto. Such indemnity shall remain in full
force and affect regardless of any investigation made by or on behalf
of a Holder and shall survive the transfer of such securities. The
foregoing indemnity agreement is in addition to any liability which
the Company may otherwise have to each Holder, any of such Holder's
directors or officers, underwriters of the Registrable Securities or
any controlling person of the foregoing; provided, further, that this
indemnity does not apply in favor of any underwriter or person
controlling an underwriter (or if a Selling Holder offers Registrable
Securities directly without an underwriter, the Selling Holder) with
respect to any loss, liability, claim, damage or expense arising out
of or based upon any untrue statement or alleged untrue statement or
omission or alleged omission in any preliminary prospectus if a copy
of a final prospectus was not sent or given by or on behalf of an
underwriter (or the Selling Holder, if the Selling Holder offered the
Registrable Securities directly without an underwriter) to the person
asserting such loss, claim, damage, liability or action at or prior to
the written confirmation of the sale of the Registrable Securities as
required by the Securities Act and such untrue statement or omission
had been corrected in such final prospectus.
(b) In the case of each offering made pursuant to this
Agreement, each Holder of Registrable Securities included in such
offering, by exercising its registration rights hereunder, agrees to
indemnify and hold harmless the Company, its officers and directors
and each person, if any, who controls any of the foregoing within the
meaning of the Securities Act (and if requested by the underwriters,
each underwriter who participates in the offering and each person, if
any, who controls any such underwriter within the meaning of the
Securities Act), from and against any and all claims, liabilities,
losses, damages, expenses and judgments, joint or
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<PAGE> 11
several, to which they or any of them may become subject, under the
Securities Act or otherwise, including any amount paid in settlement
of any litigation commenced or threatened which is approved by the
indemnifying party as provided below, and shall promptly reimburse
them, as and when incurred, for any legal or other expenses incurred
by them in connection with investigating any claim and defending any
actions, insofar as any such losses, claims, damages, liabilities or
actions shall arise out of, or shall be based upon, any untrue
statement or alleged untrue statement of a material fact contained in
the registration statement (or in any preliminary or final prospectus
included therein) or any amendment thereof or supplement thereto, or
any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein not misleading, but in each case only to the extent that such
untrue statement of a material fact is contained in, or such material
fact is omitted from, information relating to such Holder furnished in
writing to the Company by or on behalf of such Holder specifically for
use in the preparation of such registration statement (or in any
preliminary or final prospectus included therein). The foregoing
indemnity is in addition to any liability which such Holder may
otherwise have to the Company, any of its directors or officers,
underwriters of the Registrable Securities or any controlling person
of the foregoing; provided, however, that this indemnity does not
apply in favor of any underwriter or person controlling an underwriter
(or if the Company offers Registrable Securities directly without an
underwriter, the Company) with respect to any loss, liability, claim,
damage or expense arising out of or based upon any untrue statement or
alleged untrue statement or omission or alleged omission in any
preliminary prospectus if a copy of a final prospectus was not sent or
given by or on behalf of an underwriter (or the Company, if the
Company offered the Registrable Securities directly without an
underwriter) to the person asserting such loss, claim, damage,
liability or action at or prior to the written confirmation of the
sale of the Registrable Securities as required by the Securities Act
and such untrue statement or omission had been corrected in such final
prospectus.
(c) Each party indemnified under Paragraph (a) or (b) of this
Section 8 shall, promptly after receipt of notice of any claim or the
commencement of any action against such indemnified party in respect
of which indemnity may be sought, notify the indemnifying party in
writing of the claim or the commencement thereof; provided that the
failure to notify the indemnifying party shall not relieve it from any
liability which it may have to an indemnified party on account of the
indemnity agreement contained in paragraph (a) or (b) of this Section
8, except to the extent the indemnifying party was prejudiced by such
failure, and in no event shall relieve the indemnifying party from any
other liability which it may have to such indemnified party. If any
such claim or action shall be brought against an indemnified party,
and it shall notify the indemnifying party thereof, the indemnifying
party shall be entitled to participate therein, and, to the extent
that it wishes, jointly with any other similarly notified indemnifying
party, to assume the defense thereof with counsel reasonably
satisfactory to the indemnified party. After notice from the
indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not
be liable to the indemnified party under this Section 8 for any legal
or other expenses subsequently incurred by the indemnified party in
connection with the defense thereof; provided that each indemnified
party, its officers and directors, if any, and each person, if any,
who controls such indemnified party within the meaning of the
Securities Act, shall have the right to employ separate counsel
reasonably approved by the indemnifying party to represent them if the
named parties to any action (including any impleaded parties) include
both such indemnified party and an indemnifying party or an Affiliate
of an indemnifying party, and such indemnified party shall have been
advised by counsel either (i) that there may be one or more legal
defenses available to such indemnifying party that are different from
or additional to those available to such indemnified party or such
Affiliate or (ii) a conflict may exist between such indemnified party
and such indemnifying party or such Affiliate, and in that event the
fees and expenses of one such separate counsel for all such
indemnified parties shall be paid by the indemnifying party. An
indemnified party will not settle any claim or action for which he or
it is being indemnified hereunder unless it is first approved in
writing by the indemnifying party, such approval not to be
unreasonably withheld. The indemnifying party may not agree to any
settlement of any such claim or
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<PAGE> 12
action which provides for any remedy or relief other than monetary
damages for which the indemnifying party shall be responsible
hereunder, without the prior written consent of the indemnified party,
which consent shall not be unreasonably withheld. In any action
hereunder as to which the indemnifying party has assumed the defense
thereof with counsel reasonably satisfactory to the indemnified party,
the indemnified party shall continue to be entitled to participate in
the defense thereof, with counsel of its own choice, but, except as
set forth above, the indemnifying party shall not be obligated
hereunder to reimburse the indemnified party for the costs thereof. In
all instances, the indemnified party shall cooperate fully with the
indemnifying party or its counsel in the defense of such claim or
action.
(d) If the indemnification provided for in this Section 8
shall for any reason be unavailable to or insufficient to hold
harmless an indemnified party in respect of any loss, claim, damage or
liability, or any action in respect thereof, referred to herein, then
each indemnifying party shall, in lieu of indemnifying such
indemnified party, contribute to the amount paid or payable by such
indemnified party as a result of such loss, claim, damage or
liability, or action in respect thereof, in such proportion as shall
be appropriate to reflect the relative fault of the indemnifying party
on the one hand and the indemnified party on the other with respect to
the statements or omissions which resulted in such loss, claim, damage
or liability, or action in respect thereof, as well as any other
relevant equitable considerations. The relative fault shall be
determined by reference to whether the untrue or alleged untrue
statement of a material fact or omission or alleged omission to state
a material fact relates to information supplied by the indemnifying
party on the one hand or the indemnified party on the other, the
intent of the parties and their relative knowledge, access to
information and opportunity to correct or prevent such statement or
omission, but not by reference to any indemnified party's stock
ownership in the Company. In no event, however, shall a Holder be
required to contribute in excess of the amount of the net proceeds
received by such Holder in connection with the sale of Registrable
Securities in the offering which is the subject of such loss, claim,
damage or liability. The amount paid or payable by an indemnified
party as a result of the loss, claim, damage or liability, or action
in respect thereof, referred to above in this paragraph shall be
deemed to include, for purposes of this paragraph, any legal or other
expenses reasonably incurred by such indemnifying party in connection
with investigating or defending any such action or claim. No person
guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
9. RULE 144. The Company shall take such measures and file such
information, documents and reports as shall be required by the SEC as a
condition to the availability of Rule 144 (or any successor provision). The
Company shall use its best efforts to cause all conditions to the availability
of Form S-3 (or any successor form thereto) under the Securities Act for the
filing of registration statements under this Agreement to be met as soon as
possible after the completion of the Public Offering.
10. HOLDBACK.
(a) Each Holder agrees by the acquisition of Registrable
Securities, if so required by the managing underwriter of any offering
of equity securities by the Company, not to sell, make any short sale
of, loan, grant any option for the purchase of, effect any public sale
or distribution of or otherwise dispose of any Registrable Securities
owned by such Holder, during the 30 days prior to and the 90 days
after the registration statement relating to such offering has become
effective (or such shorter period as may be required by the
underwriter), except as part of such underwritten offering.
Notwithstanding the foregoing sentence, each Holder subject to the
foregoing sentence shall be entitled to sell during the foregoing
period any securities of the Company owned by it in a private sale.
The Company may legend and may impose stop transfer instructions on
any certificate evidencing Registrable Securities relating to the
restrictions provided for in this Section 10.
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<PAGE> 13
(b) The Company agrees, if so required by the managing
underwriter of any offering of Registrable Securities, not to sell,
make any short sale of, loan, grant any option for the purchase of
(other than pursuant to employee benefit plans), effect any public
sale or distribution of or otherwise dispose of any of its equity
securities during the 30 days prior to and the 90 days after any
underwritten registration pursuant to Section 2 or 3 hereof has become
effective, except as part of such underwritten registration and except
pursuant to registrations on Form S-4, S-8 or any successor or similar
forms thereto.
11. TRANSFER OF REGISTRATION RIGHTS.
(a) A Holder may transfer all or any portion of its rights
under this Agreement to any transferee of Registrable Securities that
represent (assuming the conversion, exchange or exercise of all
Registrable Securities so transferred that are convertible into or
exercisable or exchangeable for the Company's Voting Stock) at least
20% of the then issued and outstanding Voting Stock of the Company
(each, a "Permitted Transferee"); provided, however, that (i) with
respect to any transferee of less than a majority but more than 30% of
the then issued and outstanding Voting Stock, the Company shall not be
obligated to file a registration statement pursuant to a registration
request made by such transferee pursuant to Section 2 hereof on more
than two occasions, and (ii) with respect to any transferee of 30% or
less of the then issued and outstanding Voting Stock, the Company
shall not be obligated to file a registration statement pursuant to a
registration request made by such transferee pursuant to Section 2
hereof on more than one occasion. No transfer of registration rights
pursuant to this Section shall be effective unless the Company has
received written notice from the Holder of an intention to transfer at
least 20 days prior to the Holder's entering into a binding agreement
to transfer Registrable Securities (10 days in the event of an
unsolicited offer). Such notice need not contain proposed terms or
name a proposed Permitted Transferee. On or before the time of the
transfer, the Company shall receive a written notice stating the name
and address of any Permitted Transferee and identifying the number
and/or aggregate principal amount of Registrable Securities with
respect to which the rights under this Agreement are being transferred
and the scope of the rights so transferred. In connection with any
such transfer, the term HTE as used in this Agreement (other than in
Section 2(a)(iv)) shall, where appropriate to assign the rights and
obligations hereunder to such Permitted Transferee, be deemed to refer
to the Permitted Transferee of such Registrable Securities. HTE and
any Permitted Transferees may exercise the registration rights
hereunder in such priority, as among themselves, as they shall agree
among themselves, and the Company shall observe any such agreements of
which it shall have notice as provided above.
(b) After any such transfer, the transferring Holder shall
retain its rights under this Agreement with respect to all other
Registrable Securities owned by such transferring Holder.
(c) Upon the request of the transferring Holder, the Company
shall execute an agreement with a Permitted Transferee substantially
similar to this Agreement.
12. MISCELLANEOUS.
(a) INJUNCTIONS. Each party acknowledges and agrees that
irreparable damage would occur in the event that any of the provisions
of this Agreement was not performed in accordance with its specific
terms or was otherwise breached. Therefore, each party shall be
entitled to an injunction or injunctions to prevent breaches of the
provisions of this Agreement and to enforce specifically the terms and
provisions hereof in any court having jurisdiction, such remedy being
in addition to any other remedy to which such party may be entitled at
law or in equity.
(b) SEVERABILITY. If any term or provision of this Agreement
is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms and provisions set forth
herein shall remain in full force and effect and shall in no way be
affected, impaired or invalidated, and each of the parties
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<PAGE> 14
shall use its best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated
by such term or provision.
(c) FURTHER ASSURANCES. Subject to the specific terms of this
Agreement, each of the parties hereto shall make, execute, acknowledge
and deliver such other instruments and documents, and take all such
other actions, as may be reasonably required in order to effectuate
the purposes of this Agreement and to consummate the transactions
contemplated hereby.
(d) WAIVERS, ETC. Except as otherwise expressly set forth in
this Agreement, no failure or delay on the part of either party in
exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or
power, or any abandonment or discontinuance of steps to enforce such a
right or power, preclude any other or further exercise thereof or the
exercise of any other right or power. Except as otherwise expressly
set forth in this Agreement, no modification or waiver of any
provision of this Agreement nor consent to any departure therefrom
shall in any event be effective unless the same shall be in writing
and signed by an authorized officer of each of the parties, and then
such waiver or consent shall be effective only in the specific
instance and for the purpose for which given.
(e) ENTIRE AGREEMENT. This Agreement contains the final and
complete understanding of the parties with respect to its subject
matter. This Agreement supersedes all prior agreements and
understandings between the parties, whether written or oral, with
respect to the subject matter hereof. The paragraph headings contained
in this Agreement are for reference purposes only, and shall not
affect in any manner the meaning or interpretation of this Agreement.
(f) COUNTERPARTS. For the convenience of the parties, this
Agreement may be executed in any number of counterparts, each of which
shall be deemed to be an original but all of which together shall be
one and the same instrument.
(g) AMENDMENT. This Agreement may be amended only by a
written instrument duly executed by an authorized officer of each of
the parties.
(h) NOTICES. Unless expressly provided herein, all notices,
claims, certificates, requests, demands and other communications
hereunder shall be in writing and shall be deemed to be duly given (i)
when personally delivered or (ii) if mailed registered or certified
mail, postage prepaid, return receipt requested, on the date the
return receipt is executed or the letter refused by the addressee or
its agent or (iii) if sent by overnight courier which delivers only
upon the signed receipt of the addressee, on the date the receipt
acknowledgment is executed or refused by the addressee or its agent or
(iv) if sent by facsimile or other generally accepted means of
electronic transmission, on the date confirmation of transmission is
received (provided that a copy of any notice delivered pursuant to
this clause (iv) shall also be sent pursuant to clause (ii) or (iii)),
addressed as follows or sent by facsimile to the following number (or
to such other address or facsimile number for a party as it shall have
specified by like notice):
(i) if to HTE, to:
HTE, Inc.
1000 Business Center Drive
Lake Mary, Florida 32746
Attention: L.A. Gortno, Jr.,
Executive Vice President
(ii) if to the Company, to:
DemandStar.com., Inc.
1551 Sandspur Road
Suite B
Maitland, Florida 32714
Attention: O. F. Ramos, President and CEO
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(iii) if to a Holder of Registrable Securities, to
the name and address as the same appear in the security
transfer books of the Company, or to such other address as
either party (or other Holders of Registrable Securities)
may, from time to time, designate in a written notice in a
like manner.
(i) GOVERNING LAW. This agreement shall be governed by and
Construed in accordance with the laws of the state of florida, without
regard To the conflicts of laws principles thereof.
(j) ASSIGNMENT. Except as specifically provided herein, the
parties may not assign their rights under this Agreement. The Company
may not delegate its obligations under this Agreement.
(k) CONFLICTING AGREEMENTS. The Company shall not hereafter
grant any rights to any person to register securities of the Company,
the exercise of which would conflict with the rights granted to the
Holders of the Registrable Securities under this Agreement. The
Company shall not hereafter grant to any person demand registration
rights permitting it to exclude the Holders from including Registrable
Securities in a registration on behalf of such person on a basis more
favorable than that set forth in Section 2(d) hereof with respect to
the Holders.
IN WITNESS WHEREOF, HTE and the Company have caused this Agreement to
be duly executed by their authorized representative as of the date first above
written.
HTE, INC.
By: /s/ L. A. Gornto, Jr.
-------------------------------------
Name: L. A. Gornto, Jr.,
Title: Executive Vice President
DEMANDSTAR.COM, INC.
By: /s/ O. F. Ramos
-------------------------------------
Name: O. F. Ramos
Title: President and CEO
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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
November 1, 1999, by and between INFORMATION ON DEMAND, INC., a Florida
corporation (the "Company"), and O. F. RAMOS (hereinafter called the
"Executive").
R E C I T A L S
The Company and the Executive have agreed that the Executive shall be
employed by the Company pursuant to the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein. This Agreement having been duly authorized and
approved by the Company's Board of Directors (the "Board").
1.2 Duties of Executive. During the term of this Agreement, the
Executive shall serve as the Chief Executive Officer of the Company, and shall
diligently perform all reasonable and appropriate services as may be assigned to
him by the Board, and shall exercise such power and authority as may from time
to time be delegated to him by the Board and as provided by the Bylaws of the
Company. The Executive shall devote his full time and attention to the business
and affairs of the Company, render such services to the best of his ability, and
use his best efforts to promote the interests of the Company.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on November 1, 1999 (the
"Commencement Date") and shall expire on December 31, 2002, unless sooner
terminated in accordance with the terms and conditions hereof (the "Initial
Term").
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2.2 Renewal Terms. At the end of the Initial Term, this Agreement
shall automatically renew and continue until terminated by either of the parties
upon no less than sixty (60) days prior notice of termination to the other party
(the "Renewal Term").
2.3 Expiration Date. The date on which the term of this Agreement
shall expire (including the date on which any renewal term shall expire), is
sometimes referred to in this Agreement as the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive a base salary at the
annual rate of One Hundred Sixty Thousand Dollars ($160,000) (the "Base Salary")
during the term of this Agreement, with such Base Salary payable in installments
consistent with the Company's normal payroll schedule, subject to applicable
withholding and other taxes. The Base Salary also shall be reviewed, at least
annually, for merit and cost of living adjustment increases and may, by action
and in the discretion of the Board, be increased at any time or from time to
time.
3.2 Bonuses. During the term of this Agreement, beginning January 1,
2000, the Executive shall be eligible to receive quarterly bonuses up to 50% of
the then current quarterly Base Salary ("Incentive Compensation") based on
achieving goals set by the Board prior to each bonus period (the "Incentive
Compensation Plan"). The goals and bonus will be graduated in nature. Each
period for which Incentive Compensation is payable under the Incentive
Compensation Plan is sometimes hereinafter referred to as a Bonus Period.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, upon the submission of proper substantiation by the
Executive, and subject to such rules and guidelines as the Company may from time
to time adopt, the Company shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company. The Executive shall account to the
Company in writing for all expenses for which reimbursement is sought and shall
supply to the Company copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability, travel
and life insurance plans, and any and all other plans as are presently and
hereinafter offered by the Company to its executives, including savings,
pension, profit-sharing and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the Executive with
an office, secretarial help and such other facilities and services suitable to
his position and
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adequate for the performance of his duties hereunder. The Executive shall be
located at the Company's corporate/executive offices, presently at 1551 Sandspur
Road, Suite B, Maitland, Florida 32714, during the Initial Term and any Renewal
Term of this Agreement.
4.4 Stock Options. As of the effective date of this Agreement, the
Company is in the process of establishing an "Employee Incentive Compensation
Plan," under which "Qualified Stock Options" and "Non-Qualified Stock Options"
(as defined under the Internal Revenue Code) to purchase common stock of the
Company may be granted to its employees and others. The establishment date of
the Employee Incentive Compensation Plan shall be December 1, 1999, at which
time the Company shall grant to the Executive Qualified Stock Options and
Non-Qualified Stock Options as follows:
a. 400,000 Qualified Stock Options to vest:
i. 100,000 on December 1, 1999
ii. 100,000 on November 1, 2000
iii. 100,000 on November 1, 2001
iv. 100,000 on November 1, 2002
b. 90,000 Non-Qualified Stock Options to vest:
i. 22,500 on December 1, 1999
ii. 22,500 on November 1, 2000
iii. 22,500 on November 1, 2001
iv. 22,500 on November 1, 2002
c. 250,000 Non-Qualified Stock Options to vest,
subject to the Company's common stock price
achieving certain levels (assuming the
rights offering price of the Company's
common stock is $1.00 per share, if not, the
share price milestones shall be adjusted
proportionally):
i. 83,334 upon the Company's closing bid common
stock price being above $10 per share for
twenty out of any twenty-five consecutive
trading days during the first twelve months
after the Company's rights offering is
completed.
ii. 83,333 upon the Company's closing bid common
stock price being above $20 per share for
twenty out of any twenty-five consecutive
trading days during the first twenty-four
months after the Company's rights offering
is completed. In addition, assuming
achievement of the above $20/share price for
20 days goal, if the 83,334 options
referenced in c(i) above have not vested,
they will
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also vest.
iii. 83,333 upon the Company's closing bid common
stock price being above $30 per share for
twenty out of twenty-five consecutive
trading days during the first thirty-six
months after the Company's rights offering
is completed. In addition, assuming
achievement of the above $30/share price for
20 days goal, if either or both the 83,334
and 83,333 options referenced in c(i) and
c(ii), respectively, above have not vested,
they will also vest.
d. 250,000 Non-Qualified Stock Options to vest upon the
Company achieving up to three performance criteria
(i.e. revenues, number of counties or subscriber
businesses using internet system, profits, etc.)
determined by the Board at the beginning of each six
month period, beginning January 1, 2000, during the
Initial Term. If performance is below the goals but
above a minimum threshold set by the Board, a portion
of the options will vest. The Board may carry forward
unvested options to future periods. The number of
options available to vest at the end of each six month
period are:
i. 42,000 for six months ended 6/30/00
ii. 42,000 for six months ended 12/31/00
iii. 41,500 for six months ended 6/30/01
iv. 41,500 for six months ended 12/31/01
v. 41,500 for six months ended 6/30/02
vi. 41,500 for six months ended 12/31/02
Except as provided in this Agreement, the above described Qualified Stock
Options and Non-Qualified Stock Options shall be granted to the Executive
subject to all terms and conditions of the Employee Incentive Compensation Plan,
and any amendments or successor plan thereto and all rules of regulation of the
Securities and Exchange Commission applicable to stock option plans then in
effect; provided, however, that in the event of the Executive's termination
during the Initial Term without cause, the Executive shall have one (1) year
after the date of such termination within which to exercise all vested
Non-Qualified Stock Options.
4.5 Other Benefits. The Executive shall be entitled to five weeks
of vacation each calendar year during the term of this Agreement, to be taken at
such times as the Executive and the Company shall mutually determine and
provided that no vacation time shall interfere with the duties required to be
rendered by the Executive hereunder. During the calendar years 1999 and 2000,
the Executive will use his best efforts to not be out of the office on vacation
for a full calendar week other than for his honeymoon and between Christmas and
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New Years. The Executive shall receive such additional benefits, if any, as the
Board shall from time to time determine.
4.6 Relocation. The Executive shall receive a $50,000 relocation
expense allowance, including the cost of temporary housing until his permanent
residential relocation to the Maitland, Florida area by July 30, 2000. The
Company will pay vendors directly whenever applicable income tax law permits.
The Company will lease, in its name, temporary housing for the Executive. The
Company will pay directly to the Executive, after required tax withholdings, any
of the $50,000 relocation allowance not paid by the Company to such vendors.
5. Termination.
5.1 Termination for Cause. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Executive's
employment hereunder, for cause. For purposes of this Agreement, the term
"cause" shall mean: (a) an action or omission of the Executive which constitutes
a willful and intentional material breach of this Agreement which is not cured
within thirty (30) days after receipt by the Executive of written notice of
same, (b) fraud, embezzlement, misappropriation of funds or breach of trust in
connection with his services hereunder, (c) conviction of any crime which
involves dishonesty or a breach of trust, or (d) gross negligence in connection
with the performance of the Executive's duties hereunder. Any termination for
cause shall be made in writing to the Executive, which notice shall set forth in
detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Board regarding
the acts set forth in the notice of termination. Upon any termination pursuant
to this Section 5.1, the Company shall pay to the Executive his Base Salary to
the date of termination. The Company shall have no further liability hereunder
other than for: (i) reimbursement for reasonable business expenses incurred
prior to the date of termination, subject, however, to the provisions of Section
4.1, and (ii) payment of compensation for unused vacation days that have
accumulated during the calendar year in which such termination occurs.
5.2 Disability. The Company shall at all times have the right, upon
written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall become entitled to benefits under the
Company's Long Term Disability Plan as then in effect, or, if the Executive
shall as the result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of 180 days in
any 12-month period. The Company shall have sole discretion based upon competent
medical advice to determine whether the Executive continues to be disabled. Upon
any termination pursuant to this Section 5.2, the Company shall: (a) pay to the
Executive any unpaid Base Salary through the effective date of termination
specified in such notice, (b) pay to the Executive his accrued and declared but
unpaid Incentive Compensation, if any, for any Bonus Period ending on or before
the date of termination of the Executive's employment with the Company, and (c)
pay to the Executive (within forty-five (45) days after the end of the Bonus
Period in which such termination occurs) a prorata portion (based upon the
period ending on the date of termination of the Executive's employment
hereunder) of the Incentive
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Compensation, if any, for the Bonus Period in which such termination occurs, as
calculated pursuant to the Incentive Compensation Plan; provided that the goals
under the Incentive Compensation Plan for each period used in the calculation of
the Executive's Incentive Compensation, shall be based on: (i) the portion of
the Bonus Period through the end of the Bonus Period in which such termination
occurs and (ii) unaudited financial information prepared in accordance with
generally accepted accounting principles, applied consistently with prior
periods, as approved and reviewed by the Board. The Company shall have no
further liability hereunder other than for: (x) reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however to
the provisions of Section 4.1, and (y) payment of compensation for unused
vacation days that have accumulated during the calendar year in which such
termination occurs.
5.3 Death. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall: (a) pay to the estate of
the deceased Executive any unpaid Base Salary through the Executive's date of
death, (b) pay to the estate of the deceased Executive his accrued and declared
but unpaid Incentive Compensation, if any, for any Bonus Period ending on or
before the Executive's date of death, (c) pay to the estate of the deceased
Executive (within forty-five (45) days after the end of the Bonus Period in
which his death occurs) a prorata portion (based upon the period ending on the
date of death) of the Incentive Compensation, if any, for the Bonus Period in
which his death occurs, as calculated pursuant to the terms of the Incentive
Compensation Plan; provided that, the goals under the Incentive Compensation
Plan for each period used in the calculation of the Executive's Incentive
Compensation shall be based on: (i) the portion of the Bonus Period through the
end of the Bonus Period in which the Executive's death occurs, and (ii)
unaudited financial information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as approved and
reviewed by the Board. The Company shall have no further liability hereunder
other than for: (x) reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the provisions
of Section 4.1, and (y) payment of compensation for unused vacation days that
have accumulated during the calendar year in which such termination occurs.
5.4 Termination Without Cause. The Company shall have the right to
terminate the Executive's employment hereunder without cause: (i) during the
Initial Term with twelve (12) months advanced written notice to the Executive;
and (ii) during any Renewal Term with ninety (90) days advanced written notice
to the Executive. Upon any termination pursuant to this Section 5.4 that is not
a termination under any of Sections 5.1, 5.2, 5.3 or 5.6, the Company shall: (a)
pay to the Executive any unpaid Base Salary through the effective date of
termination specified in such notice, (b) pay to the Executive his accrued and
declared but unpaid Incentive Compensation, if any, for any Bonus Period ending
on or before the date of the termination of the Executive's employment with the
Company, and (c) pay to the Executive (within forty-five (45) days after the end
of the Bonus Period in which such termination occurs) a prorata portion (based
upon the period ending on the date of termination of the Executive's employment
hereunder) of the Incentive Compensation, if any, for the Bonus Period in which
such termination occurs, as calculated pursuant to the Incentive Compensation
Plan; provided that the goals under the Incentive Compensation Plan for each
period used in the calculation of the Executive's Incentive Compensation, shall
be based on: (i) the portion of the Bonus Period through the end of the Bonus
Period in which such termination occurs and (ii) unaudited financial information
prepared in accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the Board. The
Company shall have no further liability hereunder other than for: (x)
reimbursement for reasonable business expenses incurred prior to the date of
termination, subject, however to the provisions of Section 4.1 and (y) payment
of compensation for unused vacation days that have accumulated during the
calendar year in which such termination occurs.
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receiving under Sections 4.2 and 4.5 hereof, for a period of twelve (12) months
following the termination of the Executive's employment with the Company, or if
less, for the unexpired period of the Initial Term, in the manner and at such
times as the compensation or benefits otherwise would have been payable or
provided to the Executive. The Incentive Compensation and other benefits payable
under clause (d) of this Section 5.4 shall be equal to the amounts of such
compensation and benefits payable or provided to the Executive for the calendar
year immediately preceding the termination of Executive's employment hereunder.
In the event that the Company is unable to provide the Executive with a
continuation of any savings, pension, profit-sharing or deferred compensation
plans required hereunder by reason of the termination of the Executive's
employment pursuant to this Section 5.4, then the Company shall pay the
Executive cash equal to the value of the benefit that otherwise would have
accrued for the Executive's benefit under the plan, for the period during which
such benefits could not be provided under the plans, said cash payments to be
made within forty-five (45) days after the end of the year for which such
contributions would have been made or would have accrued. The Company's good
faith determination of the amount that would have been contributed or the value
of any benefits that would have accrued under any plan shall be binding and
conclusive on the Executive. Further, the vesting of the Executive's
Non-Qualified Stock Options described in Sections 4.4(b) and (d) which is
scheduled during the twelve months immediately following the Executive's
termination date shall be accelerated to the date of termination. The Company
shall have no further liability hereunder other than for: (i) reimbursement for
reasonable business expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (ii) payment of compensation for
unused vacation days that have accumulated during the calendar year in which
such termination occurs.
5.5 Change of Control. In the event of a "Change of Control" of the
Company, as defined in the Employee Incentive Compensation Plan, the following
shall occur:
a. The Non-Qualified Stock Options described in Section
4.4(c) will vest based on the value of the
transaction causing the Change of Control as follows:
(i) all unvested options vest if transaction value is
over $30/share, (ii) all but 1/3rd of options vest if
transaction value is >$20/share and
<$30/share, and (iii) all but 2/3rd of options vest
if transaction value is >$10/share and <$20/share.
b. The unvested options described in Section 4.4(d)
shall convert to the same vesting schedule for the
options described in Section 4.4(a) by equally
dividing the remaining unvested options among the
remaining vesting dates subsequent to the date of the
Change of Control, and then the option vesting shall
be accelerated one year for the options described
Sections 4.4(b) and (d).
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5.6 Resignation by Executive. After December 31, 2000, the
Executive shall at all times have the right, upon one hundred twenty (120) days
written notice to the Company, to terminate the Executive's employment
hereunder. Upon any termination pursuant to this Section 5.6, the Company shall:
(a) pay to the Executive any unpaid Base Salary through the effective date of
termination specified in such notice and (b) pay to the Executive his accrued
but unpaid Incentive Compensation, if any, for any Bonus Period ending on or
before the termination of Executive's employment with the Company. The Company
shall have no further liability hereunder other than for: (i) reimbursement for
reasonable business expenses incurred prior to the date of termination, subject,
however, to the provisions of Section 4.1, and (ii) payment of compensation for
unused vacation days that have accumulated during the calendar year in which
such termination occurs.
5.7 Survival. The provisions of this Article 5 shall survive the
termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. At all times while the Executive is employed
by the Company and for a two (2) year period after the termination of the
Executive's employment with the Company for any reason, the Executive shall not,
directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an employee, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company in the
United States, Canada or any foreign market where the Company markets and sells
software applications or its services (for this purpose, any business that
engages in the development and/or marketing of software applications in the
public sector marketplace shall be deemed to be in competition with the
Company); provided that such provision shall not apply to the Executive's
ownership of Common Stock of the Company or the acquisition by the Executive,
solely as an investment, of securities of any issuer that is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
that are listed or admitted for trading on any United States national securities
exchange or that are quoted on the National Association of Securities Dealers
Automated Quotations System, or any similar system or automated dissemination of
quotations of securities prices in common use, so long as the Executive does not
control, acquire a controlling interest in or become a member of a group which
exercises direct or indirect control or, more than five percent of any class of
capital stock of such corporation. Notwithstanding the above to the contrary,
Executive's ownership of common stock of HTE, Inc. and his serving as an officer
and director of HTE, Inc. shall not be considered engaging in competition with
the Company for purposes of this Section 6.1.
6.2 Nondisclosure. The Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any Confidential Information (as
hereinafter defined)
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pertaining to the business of the Company. Any Confidential Information or data
now or hereafter acquired by the Executive with respect to the business of the
Company (which shall include, but not be limited to, information concerning the
Company's financial condition, prospects, technology, customers, suppliers,
sources of leads and methods of doing business) shall be deemed a valuable,
special and unique asset of the Company that is received by the Executive in
confidence and as a fiduciary, and Executive shall remain a fiduciary to the
Company with respect to all of such information. For purposes of this Agreement,
"Confidential Information" means information disclosed to the Executive or known
by the Executive as a consequence of or through his employment by the Company
(including information conceived, originated, discovered or developed by the
Executive) prior to or after the date hereof, and not generally known, about the
Company or its business. Notwithstanding the foregoing, nothing herein shall be
deemed to restrict the Executive from disclosing Confidential Information to the
extent required by law.
6.3 Nonsolicitation of Employees and Clients. At all times while
the Executive is employed by the Company and for a two (2) year period after the
termination of the Executive's employment with the Company for any reason, for
the Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity: (a) employ
or attempt to employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former employee has
not been employed by the Company for a period in excess of six months, and/or
(b) call on or solicit any of the actual or targeted prospective clients of the
Company on behalf of any person or entity in connection with any business
competitive with the business of the Company, nor shall the Executive make known
the names and addresses of such clients or any information relating in any
manner to the Company's trade or business relationships with such customers,
other than in connection with the performance of Executive's duties under this
Agreement.
6.4 Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed or
created by Executive during the course of performing work for the Company or its
clients (collectively, the "Work Product") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
6.5 Books and Records. All books, records, and accounts relating in
any
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manner to the customers or clients of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
6.6 Definition of Company. Solely for purposes of this Section 6,
the term "Company" also shall include any existing or future subsidiaries of the
Company that are operating during the time periods described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company during
the periods described herein.
6.7 Acknowledgment by Executive. The Executive acknowledges and
confirms that the length of the term of the provisions of this Section 6 and the
geographical restrictions contained in Section 6.1 are fair and reasonable and
not the result of overreaching, duress or coercion of any kind. The Executive
further acknowledges and confirms that his full, uninhibited and faithful
observance of each of the covenants contained in this Section 6 will not cause
him any undue hardship, financial or otherwise, and that enforcement of each of
the covenants contained herein will not impair his ability to obtain employment
commensurate with his abilities and on terms fully acceptable to him or
otherwise to obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The Executive
acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause the Company serious injury or loss if he were to
use such ability and knowledge to the benefit of a competitor or were to compete
with the Company in violation of the terms of this Section 6.
6.8 Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Section 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Section 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.9 Extension of Time. If the Executive shall be in violation of
any provision of this Section 6, then each time limitation set forth in this
Section 6 shall be extended for a period of time equal to the period of time
during which such violation or violations occur. If the Company seeks injunctive
relief from such violation in any court, then the covenants set forth in this
Section 6 shall be extended for a period of time equal to the pendency of such
proceeding including all appeals by the Executive.
6.10 Survival. The provisions of this Section 6 shall survive the
termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may
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be virtually impossible to ascertain. As a result, the Executive recognizes and
hereby acknowledges that the Company shall be entitled to an injunction from any
court of competent jurisdiction enjoining and restraining any violation of any
or all of the covenants contained in Section 6 of this Agreement by the
Executive or any of his affiliates, associates, partners or agents, either
directly or indirectly, and that such right to injunction shall be cumulative
and in addition to whatever other remedies the Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate his rights or obligations hereunder, or any portion thereof, to any
other person.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may
not be modified in any way unless by a written instrument signed by both the
Company and the Executive.
11. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be personally delivered by courier, sent by
registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as evidenced
by the return receipt thereof, or three (3) days after deposit in the U.S. Mail.
Notice shall be sent: (a) if to the Company, addressed to 1551 Sandspur Road,
Suite B, Maitland, Florida 32714, Attention: Chairman of the Board, with a copy
of such notice addressed to L. A. Gornto, Jr., Esq., 149-F South Ridgewood
Avenue, Daytona Beach, FL 32114, and (b) if to the Executive, to his address as
reflected on the payroll records of the Company, or to such other address as
either party hereto may from time to time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any successor to the Company, whether by
merger, consolidation, sale of stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid,
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this Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or violation
of any term or provision of this Agreement shall not operate nor be construed as
a waiver of any subsequent breach or violation.
15. Damages. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY:
INFORMATION ON DEMAND, INC.
By: /s/ L.A. Gornto, Jr.
--------------------------------------
L. A. Gornto, Jr.
Executive Vice President
EXECUTIVE:
/s/ O. F. Ramos
------------------------------------------
O. F. Ramos
12
<PAGE> 1
EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
December 15, 1999, by and between INFORMATION ON DEMAND, INC., a Florida
corporation (the "Company"), and BERNARD B. MARKEY (hereinafter called the
"Executive").
R E C I T A L S
The Company and the Executive have agreed that the Executive shall be
employed by the Company pursuant to the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein. This Agreement having been duly authorized and
approved by the Company's Board of Directors (the "Board").
1.2 Duties of Executive. During the term of this Agreement, the
Executive shall serve, on a part-time basis, as a financial assistant to the
principal executive officers of the Company, which service shall include,
without limitation, consultation and assistance with respect to all financial
and business strategy matters of the Company and facilitation of relations
between the Company and the investment community and acting as a liaison with
respect thereto. The Executive shall diligently perform all reasonable and
appropriate services as may be assigned to him by the Board, and shall exercise
such power and authority as may from time to time be delegated to him by the
Board and as provided by the Bylaws of the Company. During each twelve month
period of this Agreement, the Executive shall devote up to 200 hours of his
time and attention to the business and affairs of the Company, render such
services to the best of his ability, and use his best efforts to promote the
interests of the Company; provided, however, that if the Executive is required
to devote in excess of 16 hours of time in any particular month, the Executive
shall receive, in addition to the compensation set forth in Section 3 hereof,
an amount equal to $1,000 per day ("Additional Compensation"). In the event
that the Company shall request the Executive to devote in excess of 16 hours of
time in any calendar month during the term of this Agreement, fulfillment of
such request shall be subject to the Executive's availability (determined in
his sole discretion).
<PAGE> 2
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on December 15, 1999 (the
"Commencement Date") and shall expire on December 31, 2002, unless sooner
terminated in accordance with the terms and conditions hereof (the "Initial
Term").
2.2 Renewal Terms. At the end of the Initial Term, this Agreement shall
automatically renew and continue until terminated by either of the parties upon
no less than sixty (60) days prior notice of termination to the other party (the
"Renewal Term").
2.3 Expiration Date. The date on which the term of this Agreement shall
expire (including the date on which any renewal term shall expire), is sometimes
referred to in this Agreement as the Expiration Date.
3. Compensation. The Executive shall receive a base salary at the annual
rate of Twelve Thousand Dollars ($12,000) (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments consistent with
the Company's normal payroll schedule, subject to applicable withholding and
other taxes. The Base Salary also shall be reviewed, at least annually, for
merit and cost of living adjustment increases and may, by action and in the
discretion of the Board, be increased at any time or from time to time.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, upon the submission of proper substantiation by the
Executive, and subject to such rules and guidelines as the Company may from time
to time adopt, the Company shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company. The Executive shall account to the
Company in writing for all expenses for which reimbursement is sought and shall
supply to the Company copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this Agreement
and subject to the Executive's eligibility under the terms of the Company's
benefit and other plans offered by the Company to its Executives generally, the
Executive shall be entitled to participate in all medical, dental,
hospitalization, accidental death and dismemberment, disability, travel and life
insurance plans, and any and all other plans as are presently and hereinafter
offered by the Company to its executives, including savings, pension,
profit-sharing and deferred compensation plans.
4.3 Working Facilities. If reasonably requested by the Executive, the
Company shall furnish the Executive with an office, secretarial help and such
other facilities and services suitable to his position and adequate for the
performance of his duties hereunder.
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<PAGE> 3
4.4 Stock Options. Effective in November 1999, the Company established
an "Employee Incentive Compensation Plan" under which "Qualified Stock Options"
and "Non-Qualified Stock Options " (as defined under the Internal Revenue Code)
to purchase common stock of the Company may be granted to its employees and
others. Effective December 15, 1999, the Company shall grant to the Executive
Qualified Stock Options to purchase an aggregate of 90,000 shares of common
stock of the Company at an exercise price of $1.00 per share; 22,500 of which
shall vest on December 15, 1999, and 67,500 of which shall vest in equal thirds
of 22,500 on November 1, 2000, November 1, 2001 and November 1, 2002.
Except as provided in this Agreement, the above described Qualified
Stock Options shall be granted to the Executive subject to all terms and
conditions of the Employee Incentive Compensation Plan, and any amendments or
successor plan thereto and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in effect.
4.5 Other Benefits. The Executive shall receive such additional
benefits, if any, as the Board shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Executive's
employment hereunder, for cause. For purposes of this Agreement, the term
"cause" shall mean: (a) an action or omission of the Executive which constitutes
a willful and intentional material breach of this Agreement which is not cured
within thirty (30) days after receipt by the Executive of written notice of
same, (b) fraud, embezzlement, misappropriation of funds or breach of trust in
connection with his services hereunder, (c) conviction of any crime which
involves dishonesty or a breach of trust, or (d) gross negligence in connection
with the performance of the Executive's duties hereunder. Any termination for
cause shall be made in writing to the Executive, which notice shall set forth in
detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Board regarding
the acts set forth in the notice of termination. Upon any termination pursuant
to this Section 5.1, the Company shall pay to the Executive any unpaid Base
Salary and Additional Compensation, if any, to the date of termination. The
Company shall have no further liability hereunder other than for reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 4.1.
5.2 Disability. The Company shall at all times have the right, upon
written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall become entitled to benefits under the
Company's Long Term Disability Plan as then in effect, or, if the Executive
shall as the result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of 180 days in
any 12-month period. The Company shall have sole discretion based upon competent
medical advice to determine whether the Executive continues to be disabled. Upon
any termination pursuant to this Section 5.2, the Company shall pay to the
Executive any unpaid Base Salary and Additional Compensation, if
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<PAGE> 4
any, through the effective date of termination specified in such notice. The
Company shall have no further liability hereunder other than for reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however to the provisions of Section 4.1.
5.3 Death. In the event of the death of the Executive during the term
of his employment hereunder, the Company shall pay to the estate of the deceased
Executive any unpaid Base Salary and Additional Compensation, if any, through
the Executive's date of death. The Company shall have no further liability
hereunder other than for reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the provisions
of Section 4.1.
5.4 Resignation by Executive. The Executive shall at all times have the
right, upon ninety (90) days written notice to the Company, to terminate the
Executive's employment hereunder. Upon any termination pursuant to this Section
5.4, the Company shall pay to the Executive any unpaid Base Salary and
Additional Compensation, if any, through the
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<PAGE> 5
effective date of termination specified in such notice. The Company shall have
no further liability hereunder other than for reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however,
to the provisions of Section 4.1.
5.5 Survival. The provisions of this Article 5 shall survive the
termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. At all times while the Executive is employed by the
Company and for a two (2) year period after the termination of the Executive's
employment with the Company for any reason, the Executive shall not, directly
or indirectly, engage in or have any interest in any sole proprietorship,
partnership, corporation or business or any other person or entity (whether as
an employee, officer, director, partner, agent, security holder, creditor,
consultant or otherwise) that directly or indirectly (or through any affiliated
entity) engages in a business directly or indirectly in competition with the
Company's business (as such business is described in the Company's prospectus
relating to its rights offering) in the United States, Canada or any foreign
market; provided that such provision shall not apply to (i) the Executive's
ownership of Common Stock of the Company or the acquisition by the Executive,
solely as an investment, of securities of any issuer that is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
that are listed or admitted for trading on any United States national
securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control or, more
than five percent of any class of capital stock of such corporation, (ii) the
Executive's service as an officer, director, consultant or agent of H.T.E.,
Inc., or (iii) investments made by any private equity fund in which the
Executive has a direct or indirect participation, provided that the Executive's
equity ownership in such equity fund does not exceed fifteen (15%) percent.
6.2 Nondisclosure. The Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of the Company. Any Confidential
Information or data now or hereafter acquired by the Executive with respect to
the business of the Company (which shall include, but not be limited to,
information concerning the Company's financial condition, prospects, technology,
customers, suppliers, sources of leads and methods of doing business) shall be
deemed a valuable, special and unique asset of the Company that is received by
the Executive in confidence and as a fiduciary, and Executive shall remain a
fiduciary to the Company with respect to all of such information. For purposes
of this Agreement, "Confidential Information" means information disclosed to the
Executive or known by the Executive as a consequence of or through his
employment by the Company (including information conceived, originated,
discovered or developed by the Executive) prior to or after the date hereof, and
not generally known, about the
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<PAGE> 6
Company or its business. Notwithstanding the foregoing, nothing herein shall be
deemed to restrict the Executive from disclosing Confidential Information to the
extent required by law.
6.3 Nonsolicitation of Employees and Clients. At all times while the
Executive is employed by the Company and for a two (2) year period after the
termination of the Executive's employment with the Company for any reason, for
the Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity: (a) employ
or attempt to employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former employee has
not been employed by the Company for a period in excess of six months, and/or
(b) call on or solicit any of the actual or targeted prospective clients of the
Company on behalf of any person or entity in connection with any business
competitive with the business of the Company, nor shall the Executive make known
the names and addresses of such clients or any information relating in any
manner to the Company's trade or business relationships with such customers,
other than in connection with the performance of Executive's duties under this
Agreement.
6.4 Ownership of Developments. All copyrights, patents, trade secrets,
or other intellectual property rights associated with any ideas, concepts,
techniques, inventions, processes, or works of authorship developed or created
by Executive during the course of performing work for the Company or its clients
(collectively, the "Work Product") shall belong exclusively to the Company and
shall, to the extent possible, be considered a work made by the Executive for
hire for the Company within the meaning of Title 17 of the United States Code.
To the extent the Work Product may not be considered work made by the Executive
for hire for the Company, the Executive agrees to assign, and automatically
assign at the time of creation of the Work Product, without any requirement of
further consideration, any right, title, or interest the Executive may have in
such Work Product. Upon the request of the Company, the Executive shall take
such further actions, including execution and delivery of instruments of
conveyance, as may be appropriate to give full and proper effect to such
assignment.
6.5 Books and Records. Except with respect to the Executive's service
as a director of the Company, all books, records, and accounts relating in any
manner to the customer or clients of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
6.6 Definition of Company. Solely for purposes of this Section 6, the
term "Company" also shall include any existing or future subsidiaries of the
Company that are operating during the time periods described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company during
the periods described herein.
6.7 Acknowledgment by Executive. The Executive acknowledges and
confirms that the length of the term of the provisions of this Section 6 and the
geographical restrictions
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<PAGE> 7
contained in Section 6.1 are fair and reasonable and not the result of
overreaching, duress or coercion of any kind. The Executive further acknowledges
and confirms that his full, uninhibited and faithful observance of each of the
covenants contained in this Section 6 will not cause him any undue hardship,
financial or otherwise, and that enforcement of each of the covenants contained
herein will not impair his ability to obtain employment commensurate with his
abilities and on terms fully acceptable to him or otherwise to obtain income
required for the comfortable support of him and his family and the satisfaction
of the needs of his creditors. The Executive acknowledges and confirms that his
special knowledge of the business of the Company is such as would cause the
Company serious injury or loss if he were to use such ability and knowledge to
the benefit of a competitor or were to compete with the Company in violation of
the terms of this Section 6.
6.8 Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Section 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Section 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.9 Extension of Time. If the Executive shall be in violation of any
provision of this Section 6, then each time limitation set forth in this Section
6 shall be extended for a period of time equal to the period of time during
which such violation or violations occur. If the Company seeks injunctive relief
from such violation in any court, then the covenants set forth in this Section 6
shall be extended for a period of time equal to the pendency of such proceeding
including all appeals by the Executive.
6.10 Survival. The provisions of this Section 6 shall survive the
termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. Assignment. Neither party shall have the right to assign or delegate
his rights or obligations hereunder, or any portion thereof, to any other
person.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
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<PAGE> 8
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may
not be modified in any way unless by a written instrument signed by both the
Company and the Executive.
11. Notices. All notices required or permitted to be given hereunder shall
be in writing and shall be personally delivered by courier, sent by registered
or certified mail, return receipt requested or sent by confirmed facsimile
transmission addressed as set forth herein. Notices personally delivered, sent
by facsimile or sent by overnight courier shall be deemed given on the date of
delivery and notices mailed in accordance with the foregoing shall be deemed
given upon the earlier of receipt by the addressee, as evidenced by the return
receipt thereof, or three (3) days after deposit in the U.S. Mail. Notice shall
be sent: (a) if to the Company, addressed to 1551 Sandspur Road, Suite B,
Maitland, Florida 32714, Attention: Chief Executive Officer, with a copy of such
notice addressed to L. A. Gornto, Jr., Esq., 149-F South Ridgewood Avenue,
Daytona Beach, FL 32114, and (b) if to the Executive, to his address as
reflected on the payroll records of the Company, or to such other address as
either party hereto may from time to time give notice of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the benefit of
and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any successor to the Company, whether by
merger, consolidation, sale of stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses or sections
contained in this Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, or section or sections had not been inserted. If
such invalidity is caused by length of time or size of area, or both, the
otherwise invalid provision will be considered to be reduced to a period or area
which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
15. Damages. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction
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<PAGE> 9
of any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
17. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
COMPANY:
INFORMATION ON DEMAND, INC.
By: /s/ O. F. Ramos
----------------------------------------------------
Name: O. F. Ramos
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ Bernard B. Markey
- --------------------------------------------------------
Bernard B. Markey
-9-
<PAGE> 1
EXHIBIT 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
December 15, 1999, by and between INFORMATION ON DEMAND, INC., a Florida
corporation (the "Company"), and L.A. GORNTO, JR. (hereinafter called the
"Executive").
R E C I T A L S
The Company and the Executive have agreed that the Executive shall be
employed by the Company pursuant to the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein. This Agreement having been duly authorized and
approved by the Company's Board of Directors (the "Board").
1.2 Duties of Executive. During the term of this Agreement, the
Executive shall serve, on a part-time basis, as Chief Financial Officer,
Executive Vice President, Secretary and General Legal Counsel to the Company,
which service shall include, without limitation, consultation and assistance
with respect to all legal, financial and business strategy matters of the
Company; provided, however, that at such time as the Company identifies and
employs a full-time Chief Financial Officer, the Executive shall relinquish his
duties as Chief Financial Officer, but continue to serve the Company in such
other above-described capacities. The Executive shall diligently perform all
reasonable and appropriate services as may be assigned to him by the Board, and
shall exercise such power and authority as may from time to time be delegated
to him by the Board and as provided by the Bylaws of the Company. During each
twelve month period of this Agreement, the Executive shall devote up to 200
hours of his time and attention to the business and affairs of the Company,
render such services to the best of his ability, and use his best efforts to
promote the interests of the Company; provided, however, that if the Executive
is required to devote in excess of 16 hours of time in any particular month,
the Executive shall receive, in addition to the compensation set forth in
Section 3 hereof, an amount equal to $1,000 per day ("Additional
Compensation"). In the event that the Company shall request the Executive to
devote in excess of 40 hours of time in any calendar month during the term of
this Agreement, fulfillment of such request shall be subject to the Executive's
availability (determined in his sole discretion) and the mutual agreement of
the Company and the Executive as to compensation therefor.
<PAGE> 2
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on December 15, 1999 (the
"Commencement Date") and shall expire on December 31, 2002, unless sooner
terminated in accordance with the terms and conditions hereof (the "Initial
Term").
2.2 Renewal Terms. At the end of the Initial Term, this Agreement shall
automatically renew and continue until terminated by either of the parties upon
no less than sixty (60) days prior notice of termination to the other party (the
"Renewal Term").
2.3 Expiration Date. The date on which the term of this Agreement shall
expire (including the date on which any renewal term shall expire), is sometimes
referred to in this Agreement as the Expiration Date.
3. Compensation. The Executive shall receive a base salary at the annual
rate of Twelve Thousand Dollars ($12,000) (the "Base Salary") during the term of
this Agreement, with such Base Salary payable in installments consistent with
the Company's normal payroll schedule, subject to applicable withholding and
other taxes. The Base Salary also shall be reviewed, at least annually, for
merit and cost of living adjustment increases and may, by action and in the
discretion of the Board, be increased at any time or from time to time.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, upon the submission of proper substantiation by the
Executive, and subject to such rules and guidelines as the Company may from time
to time adopt, the Company shall reimburse the Executive for all reasonable
expenses actually paid or incurred by the Executive in the course of and
pursuant to the business of the Company. The Executive shall account to the
Company in writing for all expenses for which reimbursement is sought and shall
supply to the Company copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this Agreement
and subject to the Executive's eligibility under the terms of the Company's
benefit and other plans offered by the Company to its Executives generally, the
Executive shall be entitled to participate in all medical, dental,
hospitalization, accidental death and dismemberment, disability, travel and life
insurance plans, and any and all other plans as are presently and hereinafter
offered by the Company to its executives, including savings, pension,
profit-sharing and deferred compensation plans.
4.3 Working Facilities. If reasonably requested by the Executive, the
Company shall furnish the Executive with an office, secretarial help and such
other facilities and services suitable to his position and adequate for the
performance of his duties hereunder.
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<PAGE> 3
4.4 Stock Options. Effective in November 1999, the Company established
an "Employee Incentive Compensation Plan," under which "Qualified Stock Options"
and "Non-Qualified Stock Options " (as defined under the Internal Revenue Code)
to purchase common stock of the Company may be granted to its employees and
others. Effective December 15, 1999, the Company shall grant to the Executive
Qualified Stock Options to purchase an aggregate of 90,000 shares of common
stock of the Company at an exercise price of $1.00 per share; 22,500 of which
shall vest on December 15, 1999, and 67,500 of which shall vest in equal thirds
of 22,500 on November 1, 2000, November 1, 2001 and November 1, 2002.
Except as provided in this Agreement, the above described Qualified
Stock Options shall be granted to the Executive subject to all terms and
conditions of the Employee Incentive Compensation Plan, and any amendments or
successor plan thereto and all rules of regulation of the Securities and
Exchange Commission applicable to stock option plans then in effect.
4.5 Other Benefits. The Executive shall receive such additional
benefits, if any, as the Board shall from time to time determine.
5. Termination.
5.1 Termination for Cause. The Company shall at all times have the
right, upon written notice to the Executive, to terminate the Executive's
employment hereunder, for cause. For purposes of this Agreement, the term
"cause" shall mean: (a) an action or omission of the Executive which constitutes
a willful and intentional material breach of this Agreement which is not cured
within thirty (30) days after receipt by the Executive of written notice of
same, (b) fraud, embezzlement, misappropriation of funds or breach of trust in
connection with his services hereunder, (c) conviction of any crime which
involves dishonesty or a breach of trust, or (d) gross negligence in connection
with the performance of the Executive's duties hereunder. Any termination for
cause shall be made in writing to the Executive, which notice shall set forth in
detail all acts or omissions upon which the Company is relying for such
termination. The Executive shall have the right to address the Board regarding
the acts set forth in the notice of termination. Upon any termination pursuant
to this Section 5.1, the Company shall pay to the Executive any unpaid Base
Salary and Additional Compensation, if any, to the date of termination. The
Company shall have no further liability hereunder other than for reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 4.1.
5.2 Disability. The Company shall at all times have the right, upon
written notice to the Executive, to terminate the Executive's employment
hereunder, if the Executive shall become entitled to benefits under the
Company's Long Term Disability Plan as then in effect, or, if the Executive
shall as the result of mental or physical incapacity, illness or disability,
become unable to perform his obligations hereunder for a period of 180 days in
any 12-month period. The Company shall have sole discretion based upon competent
medical advice to determine whether the Executive continues to be disabled. Upon
any termination pursuant to this Section 5.2, the Company shall pay to the
Executive any unpaid Base Salary and Additional Compensation, if
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any, through the effective date of termination specified in such notice. The
Company shall have no further liability hereunder other than for reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however to the provisions of Section 4.1.
5.3 Death. In the event of the death of the Executive during the term
of his employment hereunder, the Company shall pay to the estate of the deceased
Executive any unpaid Base Salary and Additional Compensation, if any, through
the Executive's date of death. The Company shall have no further liability
hereunder other than for reimbursement for reasonable business expenses incurred
prior to the date of the Executive's death, subject, however to the provisions
of Section 4.1.
5.4 Resignation by Executive. The Executive shall at all times have
the right, upon ninety (90) days written notice to the Company, to terminate
the Executive's employment hereunder. Upon any termination pursuant to this
Section 5.4, the Company shall pay to the Executive any unpaid Base Salary and
Additional Compensation, if any, through the
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effective date of termination specified in such notice. The Company shall have
no further liability hereunder other than for reimbursement for reasonable
business expenses incurred prior to the date of termination, subject, however,
to the provisions of Section 4.1.
5.5 Survival. The provisions of this Article 5 shall survive the
termination of this Agreement, as applicable.
6. Restrictive Covenants.
6.1 Non-competition. At all times while the Executive is employed by
the Company and for a two (2) year period after the termination of the
Executive's employment with the Company for any reason, the Executive shall not,
directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an employee, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in a business directly or indirectly in
competition with the Company's business (as such business is described in the
Company's prospectus relating to its rights offering) in the United States,
Canada or any foreign market; provided that such provision shall not apply to
(i) the Executive's ownership of Common Stock of the Company or the acquisition
by the Executive, solely as an investment, of securities of any issuer that is
registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934,
as amended, and that are listed or admitted for trading on any United States
national securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control or, more
than five percent of any class of capital stock of such corporation, or (ii) the
Executive's service as an officer, directly, consultant or agent of H.T.E., Inc.
6.2 Nondisclosure. The Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any other
person or persons, or misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of the Company. Any Confidential
Information or data now or hereafter acquired by the Executive with respect to
the business of the Company (which shall include, but not be limited to,
information concerning the Company's financial condition, prospects, technology,
customers, suppliers, sources of leads and methods of doing business) shall be
deemed a valuable, special and unique asset of the Company that is received by
the Executive in confidence and as a fiduciary, and Executive shall remain a
fiduciary to the Company with respect to all of such information. For purposes
of this Agreement, "Confidential Information" means information disclosed to the
Executive or known by the Executive as a consequence of or through his
employment by the Company (including information conceived, originated,
discovered or developed by the Executive) prior to or after the date hereof, and
not generally known, about the Company or its business. Notwithstanding the
foregoing, nothing herein shall be deemed to restrict the Executive from
disclosing Confidential Information to the extent required by law.
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6.3 Nonsolicitation of Employees and Clients. At all times while the
Executive is employed by the Company and for a two (2) year period after the
termination of the Executive's employment with the Company for any reason, for
the Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity: (a) employ
or attempt to employ or enter into any contractual arrangement with any employee
or former employee of the Company, unless such employee or former employee has
not been employed by the Company for a period in excess of six months, and/or
(b) call on or solicit any of the actual or targeted prospective clients of the
Company on behalf of any person or entity in connection with any business
competitive with the business of the Company, nor shall the Executive make known
the names and addresses of such clients or any information relating in any
manner to the Company's trade or business relationships with such customers,
other than in connection with the performance of Executive's duties under this
Agreement.
6.4 Ownership of Developments. All copyrights, patents, trade secrets,
or other intellectual property rights associated with any ideas, concepts,
techniques, inventions, processes, or works of authorship developed or created
by Executive during the course of performing work for the Company or its clients
(collectively, the "Work Product") shall belong exclusively to the Company and
shall, to the extent possible, be considered a work made by the Executive for
hire for the Company within the meaning of Title 17 of the United States Code.
To the extent the Work Product may not be considered work made by the Executive
for hire for the Company, the Executive agrees to assign, and automatically
assign at the time of creation of the Work Product, without any requirement of
further consideration, any right, title, or interest the Executive may have in
such Work Product. Upon the request of the Company, the Executive shall take
such further actions, including execution and delivery of instruments of
conveyance, as may be appropriate to give full and proper effect to such
assignment.
6.5 Books and Records. Except with respect to the Executive's service
as a director of the Company, all books, records, and accounts relating in any
manner to the customer or clients of the Company, whether prepared by the
Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request at any time.
6.6 Definition of Company. Solely for purposes of this Section 6, the
term "Company" also shall include any existing or future subsidiaries of the
Company that are operating during the time periods described herein and any
other entities that directly or indirectly, through one or more intermediaries,
control, are controlled by or are under common control with the Company during
the periods described herein.
6.7 Acknowledgment by Executive. The Executive acknowledges and
confirms that the length of the term of the provisions of this Section 6 and the
geographical restrictions contained in Section 6.1 are fair and reasonable and
not the result of overreaching, duress or coercion of any kind. The Executive
further acknowledges and confirms that his full, uninhibited and faithful
observance of each of the covenants contained in this Section 6 will not cause
him
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<PAGE> 7
any undue hardship, financial or otherwise, and that enforcement of each of the
covenants contained herein will not impair his ability to obtain employment
commensurate with his abilities and on terms fully acceptable to him or
otherwise to obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The Executive
acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause the Company serious injury or loss if he were to
use such ability and knowledge to the benefit of a competitor or were to compete
with the Company in violation of the terms of this Section 6.
6.8 Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Section 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Section 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.9 Extension of Time. If the Executive shall be in violation of any
provision of this Section 6, then each time limitation set forth in this Section
6 shall be extended for a period of time equal to the period of time during
which such violation or violations occur. If the Company seeks injunctive relief
from such violation in any court, then the covenants set forth in this Section 6
shall be extended for a period of time equal to the pendency of such proceeding
including all appeals by the Executive.
6.10 Survival. The provisions of this Section 6 shall survive the
termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the parties
hereto that a breach by the Executive of any of the covenants contained in
Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants contained
in Section 6 of this Agreement by the Executive or any of his affiliates,
associates, partners or agents, either directly or indirectly, and that such
right to injunction shall be cumulative and in addition to whatever other
remedies the Company may possess.
8. Assignment. Neither party shall have the right to assign or delegate
his rights or obligations hereunder, or any portion thereof, to any other
person.
9. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive
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<PAGE> 8
and the Company (or any of its affiliates) with respect to such subject matter.
This Agreement may not be modified in any way unless by a written instrument
signed by both the Company and the Executive.
11. Notices. All notices required or permitted to be given hereunder shall
be in writing and shall be personally delivered by courier, sent by registered
or certified mail, return receipt requested or sent by confirmed facsimile
transmission addressed as set forth herein. Notices personally delivered, sent
by facsimile or sent by overnight courier shall be deemed given on the date of
delivery and notices mailed in accordance with the foregoing shall be deemed
given upon the earlier of receipt by the addressee, as evidenced by the return
receipt thereof, or three (3) days after deposit in the U.S. Mail. Notice shall
be sent: (a) if to the Company, addressed to 1551 Sandspur Road, Suite B,
Maitland, Florida 32714, Attention: Chief Executive Officer, and (b) if to the
Executive, to his address as reflected on the payroll records of the Company, or
to such other address as either party hereto may from time to time give notice
of to the other.
12. Benefits; Binding Effect. This Agreement shall be for the benefit of
and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any successor to the Company, whether by
merger, consolidation, sale of stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words, phrases,
sentences, clauses or sections contained in this Agreement shall not affect the
enforceability of the remaining portions of this Agreement or any part thereof,
all of which are inserted conditionally on their being valid in law, and, in the
event that any one or more of the words, phrases, sentences, clauses or sections
contained in this Agreement shall be declared invalid, this Agreement shall be
construed as if such invalid word or words, phrase or phrases, sentence or
sentences, clause or clauses, or section or sections had not been inserted. If
such invalidity is caused by length of time or size of area, or both, the
otherwise invalid provision will be considered to be reduced to a period or area
which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or violation of
any term or provision of this Agreement shall not operate nor be construed as a
waiver of any subsequent breach or violation.
15. Damages. Nothing contained herein shall be construed to prevent the
Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any term
or provision of this Agreement. In the event that either party hereto brings
suit for the collection of any damages resulting from, or the injunction of any
action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs and attorneys' fees of the other.
16. Section Headings. The section headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
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<PAGE> 9
17. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of the date
first above written.
COMPANY:
INFORMATION ON DEMAND, INC.
By: /s/ O. F. Ramos
-----------------------------------------------------
Name: O.F. Ramos
Title: Chief Executive Officer and President
EXECUTIVE:
/s/ L. A. Gornto, Jr.
- ---------------------------------------------------------
L. A. Gornto, Jr.
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<PAGE> 1
EXHIBIT 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
December 17, 1999, by and between INFORMATION ON DEMAND, INC., a Florida
corporation (the "Company"), and EDWARD S. JORDAN (hereinafter called the
"Executive").
R E C I T A L S
The Executive and the Company have agreed that the Executive shall be
employed by the Company pursuant to the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement, the
Executive shall serve as Vice President and Chief Operating Officer of the
Company, and shall diligently perform all services as may be assigned to him by
the Board of Directors or the Chief Executive Officer of the Company,
consistent with Executive's position and experience, and shall exercise such
power and authority as may from time to time be delegated to him by the Board
or the Chief Executive Officer of the Company. The Executive shall devote his
full time and attention to the business and affairs of the Company, render such
services to the best of his ability, and use his best efforts to promote the
interests of the Company.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on January 1, 2000 (the
"Commencement Date") and shall expire on December 31, 2000, unless sooner
terminated in accordance with the terms and conditions hereof (the "Initial
Term").
2.2 Renewal Terms. At the end of the Initial Term, this
Agreement shall automatically renew for successive one year terms, subject to
earlier termination of this Agreement as provided herein.
2.3 Expiration Date. The date on which the term of this
Agreement shall expire (including the date on which any renewal term shall
expire), is sometimes referred to in this Agreement as the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive an initial base
salary at the annual rate of One Hundred Twenty Thousand Dollars ($120,000)
(the "Base Salary"), with such Base Salary payable in installments consistent
with the Company's normal payroll schedule, subject to applicable withholding
and other taxes. The Base Salary shall be reviewed, at least annually, for
merit increases and may, by action and in the discretion of the Board, be
increased at any time or from time to time.
3.2 Bonuses. During the term of this Agreement, beginning
January 1, 2000, the Executive shall be eligible to receive bonuses ("Incentive
Compensation") pursuant to the Information On Demand, Inc. Incentive
Compensation Bonus Program, as may be amended from time to time (the "Incentive
Compensation Plan") which shall
<PAGE> 2
in the aggregate be up to fifty percent (50%) of the Executive's Base Salary
based upon satisfaction of the individual and Company performance goals set in
accordance with the Incentive Compensation Plans. The goals and bonus will be
graduated in nature. Each period for which Incentive Compensation is payable
under the Incentive Compensation Plan is sometimes hereinafter referred to as a
Bonus Period.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, upon the submission of proper substantiation by the
Executive, and subject to such rules and guidelines as the Company may from
time to time adopt, the Company shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course of
and pursuant to the business of the Company. The Executive shall account to the
Company in writing for all expenses for which reimbursement is sought and shall
supply to the Company copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability, travel
and life insurance plans, and any and all other plans as are presently and
hereinafter offered by the Company to all of its executives, including savings,
retirement and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the Executive
with an office and such other facilities and services suitable to his position
and adequate for the performance of his duties hereunder. The Executive shall
be located at the Company's corporate/executive offices, presently at 1551
Sandspur Road, Suite B, Maitland, Florida 32714, during the Initial Term and
any Renewal Term of this Agreement.
4.4 Stock Options. The Executive shall be granted qualified
options (the "Stock Options") to purchase one hundred thousand (100,000) shares
of common stock (the "Common Stock") of the Company at a price per share of One
Dollar ($1.00), with the Common Stock subject to a vesting schedule of
Twenty-Five Thousand (25,000) shares as of each of the years ending 12/31/00,
12/31/01, 12/31/02 and 12/31/03, under (and therefore subject to all terms and
conditions of) the Company's 1999 Employee Incentive Compensation Plan as
amended, and any successor plan thereto (the "Executive Incentive Compensation
Plan") and all rules of regulation of the Securities and Exchange Commission
applicable to stock option plans then in effect.
4.5 Other Benefits. The Executive shall be entitled to five
weeks of vacation each calendar year during the term of this Agreement, to be
taken at such times as the Executive and the Company shall mutually determine
and provided that no vacation time shall materially interfere with the duties
required to be rendered by the Executive hereunder. During the calendar years
1999 and 2000, the Executive will use his best efforts to not be out of the
office on vacation for more than a full calendar week unless otherwise approved
in advance the Company's Chief Executive Officer. The Executive shall receive
such additional benefits, if any, as the Board shall from time to time
determine.
4.6 Relocation. The Executive shall receive up to $25,000 in
relocation expense allowance, including the cost of temporary housing until his
permanent residential relocation to the Maitland, Florida area. The Company
will pay vendors directly whenever applicable income tax law permits.
5. Termination.
5.1 Termination/Resignation. The Executive and the Company shall
each have the right at any time, upon sixty (60) days written notice to the
other party, to terminate the Executive's employment hereunder. Upon any
termination pursuant to this Section 5, the Company shall: (a) pay to the
Executive any unpaid Base Salary through
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the effective date of termination specified in such notice, (b) pay to the
Executive his accrued and declared but unpaid Incentive Compensation, if any,
for any Bonus Period ending on or before the termination of Executive's
employment with the Company, and (c) pay to the Executive (within forty-five
(45) days after the end of the Bonus Period in which such termination occurs) a
prorata portion (based upon the period ending on the date of termination of the
Executive's employment hereunder) of the Incentive Compensation, if any, for
the Bonus Period in which such termination occurs, as calculated pursuant to
the Incentive Compensation Plan; provided that the goals under the Incentive
Compensation Plan for each period used in the calculation of the Executive's
Incentive Compensation, shall be based on: (i) the portion of the Bonus Period
through the end of the Bonus Period in which such termination occurs and (ii)
unaudited financial information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as approved and
reviewed by the Board. The Company shall have no further liability hereunder
other than for reimbursement for reasonable business expenses incurred prior to
the date of termination, subject, however, to the provisions of Section 4.1.
Notwithstanding the above to the contrary, in the event of a "Change of
Control" as defined in Section 9 of the Company's 1999 Employees Incentive
Compensation Plan, the above stated sixty (60) day notice period shall
automatically change to twelve months (12) for any such written notice which
may be provided thereafter from the Company to the Executive.
5.2 Death. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall (a) pay to the estate of
the deceased Executive any unpaid Base Salary through the Executive's date of
death, (b) pay to the estate of the deceased Executive his accrued and declared
but unpaid Incentive Compensation, if any, for any Bonus Period ending on or
before the Executive's date of death, (c) pay to the estate of the deceased
Executive (within forty-five (45) days after the end of the Bonus Period in
which his death occurs) a prorata portion (based upon the period ending on the
date of death) of the Incentive Compensation, if any, for the Bonus Period in
which his death occurs, as calculated pursuant to the terms of the Incentive
Compensation Plan; provided that, the goals under the Incentive Compensation
Plan for each period used in the calculation of the Executive's Incentive
Compensation shall be based on: (i) the portion of the Bonus Period through the
end of the Bonus Period in which the Executive's death occurs, and (ii)
unaudited financial information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as approved and
reviewed by the Board. The Company shall have no further liability hereunder
other than for reimbursement for reasonable business expenses incurred prior to
the date of the Executive's death, subject, however to the provisions of
Section 4.1.
6. Restrictive Covenants.
6.1 Non-competition. At all times while the Executive is
employed by the Company and for a two (2) year period after the termination of
the Executive's employment with the Company for any reason, the Executive shall
not, directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an employee, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company in the
United States, Canada or any foreign market where the Company markets and sells
software applications or its services (for this purpose, any business that
engages in the development and/or marketing of software applications in the
public sector marketplace shall be deemed to be in competition with the
Company); provided that such provision shall not apply to the Executive's
ownership of Common Stock of the Company or the acquisition by the Executive,
solely as an investment, of securities of any issuer that is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
that are listed or admitted for trading on any United States national
securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group which exercises direct or indirect control or, more
than five percent (5%) of any class of capital stock of such corporation.
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<PAGE> 4
6.2 Nondisclosure. The Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any
other person or persons, or misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of the Company or hereafter
acquired by the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the Company's
financial condition, prospects, technology, customers, suppliers, sources of
leads and methods of doing business) shall be deemed a valuable, special and
unique asset of the Company that is received by the Executive in confidence and
as a fiduciary, and Executive shall remain a fiduciary to the Company with
respect to all of such information. For purposes of this Agreement,
"Confidential Information" means information disclosed to the Executive or
known by the Executive as a consequence of or through his employment by the
Company (including information conceived, originated, discovered or developed
by the Executive) prior to or after the date hereof, and not generally known,
about the Company or its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from disclosing Confidential
Information to the extent required by law.
6.3 Nonsolicitation of Employees and Clients. At all times while
the Executive is employed by the Company and for a two (2) year period after
the termination of the Executive's employment with the Company for any reason,
the Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity: (a) employ
or attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of six (6)
months, and/or (b) call on or solicit any of the actual or targeted prospective
clients of the Company on behalf of any person or entity in connection with any
business competitive with the business of the Company, nor shall the Executive
make known the names and addresses of such clients or any information relating
in any manner to the Company's trade or business relationships with such
customers, other than in connection with the performance of Executive's duties
under this Agreement.
6.4 Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed
or created by Executive during the course of performing work for the Company or
its clients (collectively, the "Work Product") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
6.5 Books and Records. All books, records, and accounts relating
in any manner to the customers or clients of the Company, whether prepared by
the Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request ion 6, the term "Company" also shall include any existing or
future subsidiaries of the Company that are operating during the time periods
described herein and any other entities that directly or indirectly, through
one or more intermediaries, control, are controlled by or are under common
control with the Company during the periods described herein.
6.7 Acknowledgment by Executive. The Executive acknowledges and
confirms that the length of the term of the provisions of this Section 6 and
the geographical restrictions contained in Section 6.1 are fair and reasonable
and not the result of overreaching, duress or coercion of any kind. The
Executive further acknowledges and confirms that his full, uninhibited and
faithful observance of each of the covenants contained in this Section 6 will
not cause his any undue hardship, financial or otherwise, and that enforcement
of each of the covenants contained herein will not impair his ability to obtain
employment commensurate with his abilities and on terms fully acceptable to him
or
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<PAGE> 5
otherwise to obtain income required for the comfortable support of him and his
family and the satisfaction of the needs of his creditors. The Executive
acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause the Company serious injury or loss if she were
to use such ability and knowledge to the benefit of a competitor or were to
compete with the Company in violation of the terms of this Section 6.
6.8 Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Section 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Section 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.9 Extension of Time. If the Company seeks injunctive relief
from such violation in any court, then the covenants set forth in this Section
6 shall be extended for a period of time equal to the shorter of: (i) the
pendency of such proceeding including all appeals by the Executive, or (ii) two
years.
6.10 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the covenants contained
in Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants
contained in Section 6 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other remedies the Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate its rights or obligations hereunder, or any portion thereof, to any
other person.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may
not be modified in any way unless by a written instrument signed by both the
Company and the Executive.
11. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be personally delivered by courier, sent by
registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as
evidenced by the return receipt thereof, or three (3) days after deposit in the
U.S. Mail. Notice shall be sent: (a) if to the Company, addressed to 1551
Sandspur Road, Suite B, Maitland, Florida 32714, Attention: Chief Executive
Officer, with a copy of such notice addressed to L. A. Gornto, Jr., Esq., 149-F
South Ridgewood Avenue, Daytona Beach, FL 32114, and (b) if to the Executive,
to his address as reflected on the payroll records of the Company, or to such
other address as either party hereto may from time to time give notice of to
the other.
12. Benefits; Binding Effect. This Agreement shall be for the benefit
of and binding upon the parties
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<PAGE> 6
hereto and their respective heirs, personal representatives, legal
representatives, successors and, where applicable, assigns, including, without
limitation, any successor to the Company, whether by merger, consolidation,
sale of stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
15. Damages. Nothing contained herein shall be construed to prevent
the Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any
term or provision of this Agreement. In the event that either party hereto
brings suit for the collection of any damages resulting from, or the injunction
of any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs his Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
16. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY: EXECUTIVE:
Information On Demand, Inc.
By: /s/ O. F. Ramos By: /s/ Edward S. Jordan
------------------------------------ --------------------
O. F. Ramos, Chief Executive Officer Edward S. Jordan
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<PAGE> 1
Exhibit 10.10
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
December 1, 1999, by and between INFORMATION ON DEMAND, INC., a Florida
corporation (the "Company"), and WILLIAM KNOX NORTH (hereinafter called the
"Executive").
R E C I T A L S
The Executive and the Company have agreed that the Executive shall be
employed by the Company pursuant to the terms and conditions hereinafter set
forth.
AGREEMENT
NOW, THEREFORE, in consideration of the premises and mutual covenants
set forth herein, the parties agree as follows:
1. Employment.
1.1 Employment and Term. The Company hereby agrees to employ the
Executive and the Executive hereby agrees to serve the Company on the terms and
conditions set forth herein.
1.2 Duties of Executive. During the term of this Agreement, the
Executive shall serve as Vice President and Chief Technology Officer of the
Company, and shall diligently perform all services as may be assigned to him by
the Board of Directors or the Chief Executive Officer of the Company,
consistent with Executive's position and experience, and shall exercise such
power and authority as may from time to time be delegated to him by the Board
or the Chief Executive Officer of the Company. The Executive shall devote his
full time and attention to the business and affairs of the Company, render such
services to the best of his ability, and use his best efforts to promote the
interests of the Company.
2. Term.
2.1 Initial Term. The initial term of this Agreement, and the
employment of the Executive hereunder, shall commence on December 1, 1999 (the
"Commencement Date") and shall expire on December 31, 2000, unless sooner
terminated in accordance with the terms and conditions hereof (the "Initial
Term").
2.2 Renewal Terms. At the end of the Initial Term, this
Agreement shall automatically renew for successive one year terms, subject to
earlier termination of this Agreement as provided herein.
2.3 Expiration Date. The date on which the term of this
Agreement shall expire (including the date on which any renewal term shall
expire), is sometimes referred to in this Agreement as the Expiration Date.
3. Compensation.
3.1 Base Salary. The Executive shall receive an initial base
salary at the annual rate of One Hundred Twenty Thousand Dollars ($120,000)
(the "Base Salary"), with such Base Salary payable in installments consistent
with the Company's normal payroll schedule, subject to applicable withholding
and other taxes. The Base Salary shall be reviewed, at least annually, for
merit increases and may, by action and in the discretion of the Board, be
increased at any time or from time to time.
3.2 Bonuses. During the term of this Agreement, beginning
January 1, 2000, the Executive
<PAGE> 2
shall be eligible to receive bonuses ("Incentive Compensation") pursuant to the
Information On Demand, Inc. Incentive Compensation Bonus Program, as may be
amended from time to time (the "Incentive Compensation Plan") which shall in
the aggregate be up to fifty percent (50%) of the Executive's Base Salary based
upon satisfaction of the individual and Company performance goals set in
accordance with the Incentive Compensation Plans. The goals and bonus will be
graduated in nature. Each period for which Incentive Compensation is payable
under the Incentive Compensation Plan is sometimes hereinafter referred to as a
Bonus Period.
4. Expense Reimbursement and Other Benefits.
4.1 Reimbursement of Expenses. During the term of Executive's
employment hereunder, upon the submission of proper substantiation by the
Executive, and subject to such rules and guidelines as the Company may from
time to time adopt, the Company shall reimburse the Executive for all
reasonable expenses actually paid or incurred by the Executive in the course of
and pursuant to the business of the Company. The Executive shall account to the
Company in writing for all expenses for which reimbursement is sought and shall
supply to the Company copies of all relevant invoices, receipts or other
evidence reasonably requested by the Company.
4.2 Compensation/Benefit Programs. During the term of this
Agreement, the Executive shall be entitled to participate in all medical,
dental, hospitalization, accidental death and dismemberment, disability, travel
and life insurance plans, and any and all other plans as are presently and
hereinafter offered by the Company to all of its executives, including savings,
retirement and deferred compensation plans.
4.3 Working Facilities. The Company shall furnish the Executive
with an office and such other facilities and services suitable to his position
and adequate for the performance of his duties hereunder. The Executive shall
be located at the Company's corporate/executive offices, presently at 1551
Sandspur Road, Suite B, Maitland, Florida 32714, during the Initial Term and
any Renewal Term of this Agreement.
4.4 Stock Options. The Executive shall be granted qualified
options (the "Stock Options") to purchase one hundred thousand (100,000) shares
of common stock (the "Common Stock") of the Company at a price per share of One
Dollar ($1.00), with the Common Stock subject to a vesting schedule of one
third (1/3) of such Common Stock as of each of the years ending 11/30/00,
11/30/01 and 11/30/02, under (and therefore subject to all terms and conditions
of) the Company's 1999 Employee Incentive Compensation Plan as amended, and any
successor plan thereto (the "Executive Incentive Compensation Plan") and all
rules of regulation of the Securities and Exchange Commission applicable to
stock option plans then in effect.
4.5 Other Benefits. The Executive shall be entitled to five
weeks of vacation each calendar year during the term of this Agreement, to be
taken at such times as the Executive and the Company shall mutually determine
and provided that no vacation time shall materially interfere with the duties
required to be rendered by the Executive hereunder. During the calendar years
1999 and 2000, the Executive will use his best efforts to not be out of the
office on vacation for more than a full calendar week unless otherwise approved
in advance the Company's Chief Executive Officer. The Executive shall receive
such additional benefits, if any, as the Board shall from time to time
determine. The Company shall purchase from the Executive his existing
________________ laptop computer at the current price of a comparably equipped
new laptop computer, which price shall not exceed $____________. The Executive
represents that his laptop computer will be in good working condition at the
time purchased by the Company.
4.6 Relocation. The Executive shall receive up to $20,000 in
relocation expense allowance, including the cost of temporary housing until his
permanent residential relocation to the Maitland, Florida area.
5. Termination.
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<PAGE> 3
5.1 Termination/Resignation. The Executive and the Company shall
each have the right at any time, upon sixty (60) days written notice to the
other party, to terminate the Executive's employment hereunder. Upon any
termination pursuant to this Section 5, the Company shall: (a) pay to the
Executive any unpaid Base Salary through the effective date of termination
specified in such notice, (b) pay to the Executive his accrued and declared but
unpaid Incentive Compensation, if any, for any Bonus Period ending on or before
the termination of Executive's employment with the Company, and (c) pay to the
Executive (within forty-five (45) days after the end of the Bonus Period in
which such termination occurs) a prorata portion (based upon the period ending
on the date of termination of the Executive's employment hereunder) of the
Incentive Compensation, if any, for the Bonus Period in which such termination
occurs, as calculated pursuant to the Incentive Compensation Plan; provided
that the goals under the Incentive Compensation Plan for each period used in
the calculation of the Executive's Incentive Compensation, shall be based on:
(i) the portion of the Bonus Period through the end of the Bonus Period in
which such termination occurs and (ii) unaudited financial information prepared
in accordance with generally accepted accounting principles, applied
consistently with prior periods, as approved and reviewed by the Board. The
Company shall have no further liability hereunder other than for reimbursement
for reasonable business expenses incurred prior to the date of termination,
subject, however, to the provisions of Section 4.1. Notwithstanding the above
to the contrary, in the event of a "Change of Control" as defined in Section 9
of the Company's 1999 Employees Incentive Compensation Plan, the above stated
sixty (60) day notice period shall automatically change to twelve months (12)
for any such written notice which may be provided thereafter from the Company
to the Executive.
5.2 Death. In the event of the death of the Executive during the
term of his employment hereunder, the Company shall (a) pay to the estate of
the deceased Executive any unpaid Base Salary through the Executive's date of
death, (b) pay to the estate of the deceased Executive his accrued and declared
but unpaid Incentive Compensation, if any, for any Bonus Period ending on or
before the Executive's date of death, (c) pay to the estate of the deceased
Executive (within forty-five (45) days after the end of the Bonus Period in
which his death occurs) a prorata portion (based upon the period ending on the
date of death) of the Incentive Compensation, if any, for the Bonus Period in
which his death occurs, as calculated pursuant to the terms of the Incentive
Compensation Plan; provided that, the goals under the Incentive Compensation
Plan for each period used in the calculation of the Executive's Incentive
Compensation shall be based on: (i) the portion of the Bonus Period through the
end of the Bonus Period in which the Executive's death occurs, and (ii)
unaudited financial information prepared in accordance with generally accepted
accounting principles, applied consistently with prior periods, as approved and
reviewed by the Board. The Company shall have no further liability hereunder
other than for reimbursement for reasonable business expenses incurred prior to
the date of the Executive's death, subject, however to the provisions of
Section 4.1.
6. Restrictive Covenants.
6.1 Non-competition. At all times while the Executive is
employed by the Company and for a two (2) year period after the termination of
the Executive's employment with the Company for any reason, the Executive shall
not, directly or indirectly, engage in or have any interest in any sole
proprietorship, partnership, corporation or business or any other person or
entity (whether as an employee, officer, director, partner, agent, security
holder, creditor, consultant or otherwise) that directly or indirectly (or
through any affiliated entity) engages in competition with the Company in the
United States, Canada or any foreign market where the Company markets and sells
software applications or its services (for this purpose, any business that
engages in the development and/or marketing of software applications in the
public sector marketplace shall be deemed to be in competition with the
Company); provided that such provision shall not apply to the Executive's
ownership of Common Stock of the Company or the acquisition by the Executive,
solely as an investment, of securities of any issuer that is registered under
Section 12(b) or 12(g) of the Securities Exchange Act of 1934, as amended, and
that are listed or admitted for trading on any United States national
securities exchange or that are quoted on the National Association of
Securities Dealers Automated Quotations System, or any similar system or
automated dissemination of quotations of securities prices in common use, so
long as the Executive does not control, acquire a controlling interest in or
become a member of a group
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<PAGE> 4
which exercises direct or indirect control or, more than five percent (5%) of
any class of capital stock of such corporation.
6.2 Nondisclosure. The Executive shall not at any time divulge,
communicate, use to the detriment of the Company or for the benefit of any
other person or persons, or misuse in any way, any Confidential Information (as
hereinafter defined) pertaining to the business of the Company or hereafter
acquired by the Executive with respect to the business of the Company (which
shall include, but not be limited to, information concerning the Company's
financial condition, prospects, technology, customers, suppliers, sources of
leads and methods of doing business) shall be deemed a valuable, special and
unique asset of the Company that is received by the Executive in confidence and
as a fiduciary, and Executive shall remain a fiduciary to the Company with
respect to all of such information. For purposes of this Agreement,
"Confidential Information" means information disclosed to the Executive or
known by the Executive as a consequence of or through his employment by the
Company (including information conceived, originated, discovered or developed
by the Executive) prior to or after the date hereof, and not generally known,
about the Company or its business. Notwithstanding the foregoing, nothing
herein shall be deemed to restrict the Executive from disclosing Confidential
Information to the extent required by law.
6.3 Nonsolicitation of Employees and Clients. At all times while
the Executive is employed by the Company and for a two (2) year period after
the termination of the Executive's employment with the Company for any reason,
the Executive shall not, directly or indirectly, for himself or for any other
person, firm, corporation, partnership, association or other entity: (a) employ
or attempt to employ or enter into any contractual arrangement with any
employee or former employee of the Company, unless such employee or former
employee has not been employed by the Company for a period in excess of six (6)
months, and/or (b) call on or solicit any of the actual or targeted prospective
clients of the Company on behalf of any person or entity in connection with any
business competitive with the business of the Company, nor shall the Executive
make known the names and addresses of such clients or any information relating
in any manner to the Company's trade or business relationships with such
customers, other than in connection with the performance of Executive's duties
under this Agreement.
6.4 Ownership of Developments. All copyrights, patents, trade
secrets, or other intellectual property rights associated with any ideas,
concepts, techniques, inventions, processes, or works of authorship developed
or created by Executive during the course of performing work for the Company or
its clients (collectively, the "Work Product") shall belong exclusively to the
Company and shall, to the extent possible, be considered a work made by the
Executive for hire for the Company within the meaning of Title 17 of the United
States Code. To the extent the Work Product may not be considered work made by
the Executive for hire for the Company, the Executive agrees to assign, and
automatically assign at the time of creation of the Work Product, without any
requirement of further consideration, any right, title, or interest the
Executive may have in such Work Product. Upon the request of the Company, the
Executive shall take such further actions, including execution and delivery of
instruments of conveyance, as may be appropriate to give full and proper effect
to such assignment.
6.5 Books and Records. All books, records, and accounts relating
in any manner to the customers or clients of the Company, whether prepared by
the Executive or otherwise coming into the Executive's possession, shall be the
exclusive property of the Company and shall be returned immediately to the
Company on termination of the Executive's employment hereunder or on the
Company's request ion 6, the term "Company" also shall include any existing or
future subsidiaries of the Company that are operating during the time periods
described herein and any other entities that directly or indirectly, through
one or more intermediaries, control, are controlled by or are under common
control with the Company during the periods described herein.
6.7 Acknowledgment by Executive. The Executive acknowledges and
confirms that the length of the term of the provisions of this Section 6 and
the geographical restrictions contained in Section 6.1 are fair and reasonable
and not the result of overreaching, duress or coercion of any kind. The
Executive further acknowledges and confirms that his full, uninhibited and
faithful observance of each of the covenants contained in this Section 6 will
not
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<PAGE> 5
cause his any undue hardship, financial or otherwise, and that enforcement of
each of the covenants contained herein will not impair his ability to obtain
employment commensurate with his abilities and on terms fully acceptable to him
or otherwise to obtain income required for the comfortable support of him and
his family and the satisfaction of the needs of his creditors. The Executive
acknowledges and confirms that his special knowledge of the business of the
Company is such as would cause the Company serious injury or loss if she were
to use such ability and knowledge to the benefit of a competitor or were to
compete with the Company in violation of the terms of this Section 6.
6.8 Reformation by Court. In the event that a court of competent
jurisdiction shall determine that any provision of this Section 6 is invalid or
more restrictive than permitted under the governing law of such jurisdiction,
then only as to enforcement of this Section 6 within the jurisdiction of such
court, such provision shall be interpreted and enforced as if it provided for
the maximum restriction permitted under such governing law.
6.9 Extension of Time. If the Company seeks injunctive relief
from such violation in any court, then the covenants set forth in this Section
6 shall be extended for a period of time equal to the shorter of: (i) the
pendency of such proceeding including all appeals by the Executive, or (ii) two
years.
6.10 Survival. The provisions of this Section 6 shall survive
the termination of this Agreement, as applicable.
7. Injunction. It is recognized and hereby acknowledged by the
parties hereto that a breach by the Executive of any of the covenants contained
in Section 6 of this Agreement will cause irreparable harm and damage to the
Company, the monetary amount of which may be virtually impossible to ascertain.
As a result, the Executive recognizes and hereby acknowledges that the Company
shall be entitled to an injunction from any court of competent jurisdiction
enjoining and restraining any violation of any or all of the covenants
contained in Section 6 of this Agreement by the Executive or any of his
affiliates, associates, partners or agents, either directly or indirectly, and
that such right to injunction shall be cumulative and in addition to whatever
other remedies the Company may possess.
8. Assignment. Neither party shall have the right to assign or
delegate its rights or obligations hereunder, or any portion thereof, to any
other person.
9. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
10. Entire Agreement. This Agreement constitutes the entire agreement
between the parties hereto with respect to the subject matter hereof and, upon
its effectiveness, shall supersede all prior agreements, understandings and
arrangements, both oral and written, between the Executive and the Company (or
any of its affiliates) with respect to such subject matter. This Agreement may
not be modified in any way unless by a written instrument signed by both the
Company and the Executive.
11. Notices. All notices required or permitted to be given hereunder
shall be in writing and shall be personally delivered by courier, sent by
registered or certified mail, return receipt requested or sent by confirmed
facsimile transmission addressed as set forth herein. Notices personally
delivered, sent by facsimile or sent by overnight courier shall be deemed given
on the date of delivery and notices mailed in accordance with the foregoing
shall be deemed given upon the earlier of receipt by the addressee, as
evidenced by the return receipt thereof, or three (3) days after deposit in the
U.S. Mail. Notice shall be sent: (a) if to the Company, addressed to 1551
Sandspur Road, Suite B, Maitland, Florida 32714, Attention: Chief Executive
Officer, with a copy of such notice addressed to L. A. Gornto, Jr., Esq., 149-F
South Ridgewood Avenue, Daytona Beach, FL 32114, and (b) if to the Executive,
to his address as reflected on the payroll records of the Company, or to such
other address as either party hereto may from time to time give notice of to
the other.
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<PAGE> 6
12. Benefits; Binding Effect. This Agreement shall be for the benefit
of and binding upon the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and, where applicable,
assigns, including, without limitation, any successor to the Company, whether
by merger, consolidation, sale of stock, sale of assets or otherwise.
13. Severability. The invalidity of any one or more of the words,
phrases, sentences, clauses or sections contained in this Agreement shall not
affect the enforceability of the remaining portions of this Agreement or any
part thereof, all of which are inserted conditionally on their being valid in
law, and, in the event that any one or more of the words, phrases, sentences,
clauses or sections contained in this Agreement shall be declared invalid, this
Agreement shall be construed as if such invalid word or words, phrase or
phrases, sentence or sentences, clause or clauses, or section or sections had
not been inserted. If such invalidity is caused by length of time or size of
area, or both, the otherwise invalid provision will be considered to be reduced
to a period or area which would cure such invalidity.
14. Waivers. The waiver by either party hereto of a breach or
violation of any term or provision of this Agreement shall not operate nor be
construed as a waiver of any subsequent breach or violation.
15. Damages. Nothing contained herein shall be construed to prevent
the Company or the Executive from seeking and recovering from the other damages
sustained by either or both of them as a result of its or his breach of any
term or provision of this Agreement. In the event that either party hereto
brings suit for the collection of any damages resulting from, or the injunction
of any action constituting, a breach of any of the terms or provisions of this
Agreement, then the party found to be at fault shall pay all reasonable court
costs his Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
16. No Third Party Beneficiary. Nothing expressed or implied in this
Agreement is intended, or shall be construed, to confer upon or give any person
other than the Company, the parties hereto and their respective heirs, personal
representatives, legal representatives, successors and assigns, any rights or
remedies under or by reason of this Agreement.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first above written.
COMPANY: EXECUTIVE:
Information On Demand, Inc.
By: /s/ O. F. Ramos By: /s/ William Knox North
------------------------------------ ----------------------
O. F. Ramos, Chief Executive Officer William Knox North
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<PAGE> 1
EXHIBIT 10.11
CONSULTING AGREEMENT
This CONSULTING AGREEMENT dated as of December 15, 1999 (the "Effective
Date") between EDWARD MOSES (the "Consultant"), with an address at 1281 Prince
Court, Heathrow, Florida 32746 and DEMANDSTAR.COM, INC., a Florida corporation
("DSI"), which has its principal office located at 1551 Sandspur Road, Suite B,
Maitland, Florida 32751
R E C I T A L S
A. DSI desires to retain Consultant to render consulting services with
respect to its Internet business; and
B. Consultant is willing to render such services on the terms and
conditions hereinafter provided.
P R O V I S I O N S
NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. ENGAGEMENT.
(a) DSI hereby engages and retains Consultant to render the
consulting services described in Section 2 hereof. Nothing contained in this
Agreement shall be deemed to create or evidence any partnership, joint venture
or employment arrangement by or between the parties, it being understood that
the relationship established hereunder is limited to that of Consultant as an
independent contractor acting for and on behalf of DSI as expressly set forth
herein.
(b) Without limiting Section 1(a), other than as specifically
required in connection with the performance of his duties as a director of DSI,
Consultant shall not be an agent for or have authority to act on behalf of or
contractually bind DSI, except for any specific transaction which DSI may
authorize Consultant to do in writing. In the absence of specific written
authorization, Consultant shall have no authority to enter into any
understanding, commitment or agreement on behalf of DSI or to otherwise bind DSI
in any manner. Consultant agrees not to hold himself itself out to others as
having any authority on behalf of or related to DSI, except as may be
specifically granted to Consultant.
2. SERVICES. For a period not to exceed three (3) years from the
Effective Date (the "Initial Term"), unless otherwise mutually extended in
writing by the Consultant and DSI, Consultant shall, at DSI's request from time
to time and at Consultant's reasonable convenience, consult with and advise DSI
with respect to corporate, business, marketing and promotional strategy
involving DSI's business, including, without limitation, its e-commerce
opportunities, financial strategies, strategic partners and Web sites.
Consultant shall perform the services required hereunder on a limited-time
basis, which shall not be more than one hundred (100) hours per year or more
than eight (8) hours per month. In the event that Consultant shall be required
to perform services in excess of eight (8) hours in any particular month,
Consultant shall receive additional compensation from DSI in an amount equal to
$1,000 per day. Consultant shall use his reasonable efforts, and devote
sufficient time as may be necessary, to become familiar with and knowledgeable
about DSI's products, services and business plans, and to render his services
with due regard for the prompt, efficient and economical operation of the
business of DSI. This Agreement expressly excludes the Consultant from providing
any and all capital formation and/or public relations services to
<PAGE> 2
DSI inclusive of, but not limited to (i) direct or indirect promotion of the
DSI's securities, and (ii) assistance in making of a market in the DSI's
securities.
In the event that DSI shall desire to engage the services of the
Consultant in excess of 100 hours in any annual period during the term of this
Agreement, such additional services may be provided by the Consultant subject to
the Consultant's availability (determined in his sole discretion) and the mutual
agreement of DSI and the Consultant as to compensation therefor.
3. PAYMENT FOR SERVICES AND EXPENSES. In full consideration for the
Consultant's willingness to enter into this Agreement and to perform the
services described herein, Consultant shall receive options (the "Options") to
purchase an aggregate of 90,000 shares of DSI's common stock, par value $.0001
per share (the "Common Stock"), at an exercise price of $1.00 per share. Options
to purchase 22,500 shares of Common Stock shall vest immediately upon the
execution of this Agreement and Options to purchase an aggregate of 67,500
shares of Common Stock shall vest in equal thirds on the first three anniversary
dates of the execution of this Agreement; provided, however, that vesting will
be accelerated in the event of a Change of Control (as defined in DSI's 1999
Employee Incentive Compensation Plan governing the Options) or if DSI terminates
this Agreement without cause (as defined in Section 7 of this Agreement). The
Options shall be evidenced by a separate stock option agreement and shall be
subject to the terms and conditions of such agreement and DSI's 1999 Employee
Incentive Compensation Plan.
4. NONEXCLUSIVITY OF THIS AGREEMENT. DSI understands and agrees that,
except as set forth in the next sentence, Consultant shall not be prevented or
barred from rendering services of any nature for or on behalf of any other
person, firm, corporation or entity, subject to Consultant's obligation to
maintain confidentiality of DSI's confidential information pursuant to Section 5
below. Consultant understands and agrees that DSI shall not be prevented or
barred from retaining other persons or entities to provide services of the same
nature or similar nature as those described herein or of any nature whatsoever.
5. CONFIDENTIALITY. During the term of this Agreement and for a period
of two (2) years thereafter, Consultant will not disclose to any other person,
firm or corporation, nor use for his own benefit, during or after the term of
this Agreement, any trade secrets or other confidential information of DSI which
is acquired by Consultant in the course of performing services hereunder. For
purposes of this Agreement, a "trade secret" is information not generally known
to the public which gives DSI an advantage over its competitors, including all
data, ideas, information, knowledge and papers pertaining to DSI's affairs,
including all products or services under development, production methods and
processes, subscriber or customer lists, marketing plans and information
involving DSI. Any information, which (i) at or prior to the time of disclosure
by DSI to Consultant was generally available to the public through no breach of
this Agreement, (ii) was available to the public on a nonconfidential basis
prior to its disclosure by DSI to Consultant or (iii) was made available to
Consultant from a third party (provided that Consultant did not know that such
party obtained or disseminated such information in breach of any legal
obligation to DSI) shall not be deemed confidential information of DSI for
purposes hereof. The Consultant shall also treat all information pertaining to
the affairs of all existing and future or prospective customers or strategic
partners of DSI as confidential trade secrets of such customers and partners.
6. REPRESENTATIONS AND WARRANTIES.
(a) DSI represents and warrants that (i) DSI is in good standing
under the laws of the State of Florida (ii) this Agreement has been authorized
by all necessary corporate action of DSI and constitutes a valid and binding
obligation of DSI enforceable in accordance with its terms and (iii) all Options
and all shares to be issued pursuant thereto have been duly authorized and all
shares issuable pursuant to the Options shall, upon tender of the exercise price
thereof, be fully paid and nonassessable.
(b) Consultant represents and warrants that: (i) this Agreement is
a valid and binding obligation of Consultant, enforceable in accordance with its
terms; (ii) it is not a party to any agreement or instrument which would prevent
it from entering this agreement or performing its obligations hereunder or
otherwise conflicts with this Agreement; and (iii) Consultant shall not offer or
make payment of any consideration
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<PAGE> 3
to brokers, dealers or others for purposes of inducing the purchase, making of a
market or recommendation for the purchase of DSI's securities.
7. TERMINATION. This Agreement may be terminated by either Consultant
or DSI at anytime on sixty (60) day's notice. This Agreement also may be
terminated by DSI for "cause," which shall be deemed to exist if the Consultant
materially breaches any of its material obligations under this Agreement,
provided that DSI shall first have given the Consultant written notice
specifying the facts constituting the material breach at least thirty (30) days
prior to the date of termination and the Consultant shall not have cured such
breach if it is capable of being cured.
8. CONSULTANT'S LIABILITY. In the absence of gross negligence or
willful misconduct on the part of the Consultant or the Consultant's breach of
any term of this Agreement, the Consultant shall not be liable to DSI or to any
officer, director, employee, shareholder or creditor of DSI, for any act or
omission in the course of or in connection with the rendering or providing of
services hereunder. Except in those cases where gross negligence or willful
misconduct of the Consultant or the breach by the Consultant of any terms of
this Agreement is alleged and proven, DSI agrees to defend, indemnify, and hold
the Consultant harmless from and against any and all reasonable costs, expenses
and liability (including reasonable attorney's fees paid in the defense of the
Consultant) which may in any way result from services rendered by the Consultant
pursuant to or in connection with this Agreement. This indemnification expressly
excludes any and all damages as a result of any actions or statements, on behalf
of DSI, made by the Consultant without the prior approval or authorization of
DSI.
9. DSI'S LIABILITY. The Consultant agrees to defend, indemnify, and
hold DSI harmless from and against any and all reasonable costs, expenses and
liability (including reasonable attorney's fees paid in defense of DSI) which
may in any way result pursuant to its gross negligence or willful misconduct or
in any connection with any actions taken or statements made, on behalf of DSI,
without the prior approval or authorization of DSI or which are otherwise in
violation of the term of this Agreement.
10. MISCELLANEOUS.
(a) No provision of this Agreement may be amended, modified,
waived or discharged unless such amendment, waiver, modification or discharge is
agreed to in writing and signed by each of the parties hereto or a duly
authorized representative thereto. No waiver by any party hereto at any time of
any breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time.
(b) If any provision of this Agreement shall be determined by
any court of competent jurisdiction to be unenforceable or invalid to any
extent, the remainder of this Agreement shall not be affected thereby, and this
Agreement shall be construed to the fullest extent possible as to give effect to
the intentions of the provision found unenforceable or invalid.
(c) This Agreement may not be assigned by Consultant without the
prior written consent of DSI.
(d) This Agreement shall be binding upon the parties hereto and
all permitted successors and assigns.
(e) All notices and other communications provided for hereunder
shall be in writing and shall be delivered to each party hereto by hand or sent
by reputable overnight courier, with receipt verified, or registered or
certified mail, return receipt requested, addressed to the addresses set forth
in the beginning of this Agreement, or at such other address as either party may
specify by notice to the other party given as aforesaid. Such notices shall be
deemed to be effective when the same shall be deposited, postage prepaid, in the
mail and/or when the same shall have been delivered by hand or overnight
courier, as the case may be. If any action or notice is to be taken or given on
or by a particular calendar day, and such calendar day is not a business day,
then such action or notice may be deferred until, or may be taken or given on,
the next business day.
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<PAGE> 4
(f) The validity, interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Florida without regard to its conflicts of law principles. Any
action or proceeding involving the parties hereto shall be adjudicated in a
Court located in Orange County, Florida. The parties hereto hereby irrevocably
consent to the jurisdiction and venue of such Courts.
(g) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
(h) All headings contained in this Agreement are for reference
purposes only and shall not in any way effect the meaning or interpretation of
any provision or provisions of this Agreement.
(i) This Agreement, and the documents to be delivered in connection
therewith, and the exhibits and schedules thereto, if any, set forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersede all prior and contemporaneous agreements, promises,
covenants, arrangements, understandings, communications, representations or
warranties, whether oral or written, by any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled. No agreements or representations,
whether written, oral, express or implied, with respect to the subject matter
hereof have been made by either party that are not set forth expressly in this
Agreement and the other documents to be delivered in connection herewith and
therewith.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the 15th day of December, 1999.
DEMANDSTAR.COM, INC.
By: /s/ O. F. Ramos
-----------------------------------------------
Name: O. F. Ramos
Title: President and Chief Executive Officer
/s/ Edward A. Moses
--------------------------------------------------
EDWARD A. MOSES
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<PAGE> 1
EXHIBIT 10.12
CONSULTING AGREEMENT
This AGREEMENT ("Agreement") dated as of December 7, 1999 (the
"Effective Date") between RONALD D. BROWN (the "Consultant") and Ibis
Information Services, Inc. ("Ibis"), both of which with an address at 195 Ibis
Road, Longwood, Florida 32779 and INFORMATION ON DEMAND, INC., a Florida
corporation ("IOD"), which has its principal office located at 1551 Sandspur
Road, Suite B, Maitland, Florida 32751
R E C I T A L S
WHEREAS, Consultant entered into an Employment Agreement with IOD as of
June 18, 1999 ("Employment Agreement") pursuant to which Consultant was employed
as President of IOD;
WHEREAS, Consultant informed the Board of Directors of IOD that he
wished to voluntarily resign effective December 7, 1999;
WHEREAS, the IOD Board of Directors accepted on December 7, 1999,
Consultant's resignation as President of IOD;
WHEREAS, IOD desires to retain Consultant immediately following his
resignation and termination of employment under the Employment Agreement to
render consulting services with respect to IOD's business; and
WHEREAS, Consultant is willing to render such services on the terms and
conditions hereinafter provided.
P R O V I S I O N S
NOW, THEREFORE, in consideration of the mutual agreements set forth in
this Agreement and for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. ENGAGEMENT.
(a) IOD hereby engages and retains Consultant to render the
consulting services described in Section 2 hereof. Nothing contained in this
Agreement shall be deemed to create or evidence any partnership, joint venture
or employment arrangement by or between the parties, it being understood that
the relationship established hereunder is limited to that of Consultant as an
independent contractor acting for and on behalf of IOD as expressly set forth
herein.
(b) Without limiting Section 1(a), Consultant shall not be an agent
for or have authority to act on behalf of or contractually bind IOD, except for
any specific transaction which IOD may authorize Consultant to do in writing. In
the absence of specific written authorization, Consultant shall have no
authority to enter into any understanding, commitment or agreement on behalf of
IOD or to otherwise bind IOD in any manner. Consultant agrees not to hold
himself itself out to others as having any authority on behalf of or related to
IOD, except as may be specifically granted to Consultant.
2. SERVICES. For the period ending one (1) year from the Effective Date
(the "Initial Term"), unless otherwise mutually extended in writing by the
Consultant and IOD, Consultant shall, at IOD's request from time to time,
consult with and advise IOD with respect to corporate, business, marketing and
promotional strategy involving IOD's business, including, without limitation,
its e-commerce opportunities, financial strategies, strategic partners and Web
sites. Consultant shall not be required, except as otherwise provided herein, to
devote any particular amount of time toward the performance of its duties
hereunder. Specifically, the Consultant agrees to: (i) participate in up to six
(6) business trips (not to exceed in the aggregate 12 travel days) with IOD
executives during the period from the Effective Date through March 31, 2000, in
regard to customer relations and other matters pertaining to existing IOD
customers/identified potential customers; (ii) up to forty (40) hours of in
person meetings at IOD's corporate office from the Effective Date through March
31, 2000; and (iii) up to ten (10) hours per month of telephone consulting with
O. F. Ramos and other IOD personnel designated by O. F. Ramos for the Initial
Term.
<PAGE> 2
3. PAYMENT FOR SERVICES AND EXPENSES. In full consideration for the
Consultant's willingness to enter into this Agreement and to perform the
services described herein, Consultant shall receive during the one year Initial
Term twenty-four (24) semi-monthly payments each in the amount of Six Thousand
Two Hundred Fifty Dollars ($6,250). In addition, IOD shall pay to the Consultant
an amount equal to the monthly premium cost of the family health insurance
coverage under the Consultant's COBRA election following his resignation of
employment. IOD shall reimburse Consultant for all reasonable business expenses
he may incur in renderings services hereunder to IOD, which expenses IOD has
requested Consultant to incur.
4. CONSULTANT'S RESIGNATION OF EMPLOYMENT. Effective with the
Consultant's execution of this Agreement, the Consultant hereby voluntarily
resigns his employment with IOD and as President of IOD pursuant to the terms of
the Employment Agreement. Except for payment of the Consultant's Base Salary
through the date of termination (December 7, 1999), COBRA payments and the
reimbursement of all business expenses incurred by Consultant for which he has
not received reimbursement from IOD, there shall be no other amounts due from
IOD to Consultant as a result of Consultant's employment with IOD pursuant to
the Employment Agreement or otherwise. IOD hereby accepts the Consultant's
resignation and termination of his employment pursuant to the Employment
Agreement effective with IOD's execution of this Agreement. Notwithstanding
Consultant's voluntary resignation of his employment under the Employment
Agreement, IOD, Consultant and Ibis agree that the effectiveness, terms and
conditions of the Contingent Purchase Price, as defined under the Agreement for
Sale and Purchase of Assets dated June 18, 1999, between IOD, the Consultant and
Ibis shall continue to be effective as provided in said agreement.
5. TERMINATION. This Agreement also may be terminated by IOD for cause,
which shall be deemed to exist if the Consultant materially breaches any of its
material obligations under this Agreement, provided that IOD shall first have
given the Consultant written notice specifying the facts constituting the
material breach at least ten (10) days prior to the date of termination and the
Consultant shall not have cured such breach if it is capable of being cured.
6. MISCELLANEOUS.
(a) No provision of this Agreement may be amended, modified, waived
or discharged unless such amendment, waiver, modification or discharge is agreed
to in writing and signed by each of the parties hereto or a duly authorized
representative thereto. No waiver by any party hereto at any time of any breach
by any other party hereto of, or compliance with, any condition or provision of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
(b) If any provision of this Agreement shall be determined by any
court of competent jurisdiction to be unenforceable or invalid to any extent,
the remainder of this Agreement shall not be affected thereby, and this
Agreement shall be construed to the fullest extent possible as to give effect to
the intentions of the provision found unenforceable or invalid.
(c) This Agreement may not be assigned by Consultant without the
prior written consent of IOD.
(d) This Agreement shall be binding upon the parties hereto and all
permitted successors and assigns.
(e) All notices and other communications provided for hereunder
shall be in writing and shall be delivered to each party hereto by hand or sent
by reputable overnight courier, with receipt verified, or registered or
certified mail, return receipt requested, addressed to the addresses set forth
in the beginning of this Agreement, or at such other address as either party may
specify by notice to the other party given as aforesaid. Such notices shall be
deemed to be effective when the same shall be deposited, postage prepaid, in the
mail and/or when the same shall have been delivered by hand or overnight
courier, as the case may be. If any action or notice is to be taken or given on
or by a particular calendar day, and such calendar day is not a business day,
then such action or notice may be deferred until,
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<PAGE> 3
or may be taken or given on, the next business day.
(f) The validity, interpretation, construction and performance of
this Agreement shall be governed by and construed in accordance with the laws of
the State of Florida without regard to its conflicts of law principles. Any
action or proceeding involving the parties hereto shall be adjudicated in a
Court located in Orange County, Florida. The parties hereto hereby irrevocably
consent to the jurisdiction and venue of such Courts.
(g) This Agreement may be executed in counterparts, each of which
shall be deemed to be an original but all of which together will constitute one
and the same instrument.
(h) All headings contained in this Agreement are for reference
purposes only and shall not in any way effect the meaning or interpretation of
any provision or provisions of this Agreement.
(i) This Agreement, and the documents to be delivered in connection
therewith, and the exhibits and schedules thereto, if any, set forth the entire
agreement of the parties hereto in respect of the subject matter contained
herein and supersede all prior and contemporaneous agreements, promises,
covenants, arrangements, understandings, communications, representations or
warranties, whether oral or written, by any party hereto; and any prior
agreement of the parties hereto in respect of the subject matter contained
herein is hereby terminated and canceled. No agreements or representations,
whether written, oral, express or implied, with respect to the subject matter
hereof have been made by either party that are not set forth expressly in this
Agreement and the other documents to be delivered in connection herewith and
therewith.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the 7th day of December, 1999.
INFORMATION ON DEMAND, INC.
By: /s/ L. A. Gornto, Jr.
-------------------------------------------
Name: L. A. Gornto, Jr.
Title: Executive Vice President
/s/ Ronald D. Brown
----------------------------------------------
RONALD D. BROWN, individually and as President
of Ibis Information Services, Inc.
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<PAGE> 1
EXHIBIT 10.13
FORM OF
INDEMNIFICATION AGREEMENT
This INDEMNIFICATION AGREEMENT, effective as of the 15th day of
December, 1999 (the "Agreement"), is made and entered into by and between
DEMANDSTAR.COM, INC., a Florida corporation (the "Company"), and _______________
(the "Indemnitee").
RECITALS
1. Competent and experienced persons are becoming increasingly
reluctant to serve publicly-held corporations as directors, officers, or in
other capacities unless they are provided with adequate protection through
liability insurance or adequate indemnification against inordinate risks of
claims and actions against them arising out of their service to the corporation;
and
2. The current unavailability, inadequacy, and extraordinary cost of
adequate insurance and the uncertainties relating to indemnification have
increased the difficulty of attracting and retaining such persons; and
3. The Board of Directors of the Company (the "Board") has determined
that the inability to attract and retain such persons is detrimental to the best
interests of the Company's shareholders and that the Company should act to
assure such persons that there will be increased certainty of such protection in
the future; and
4. Section 607.0850 of the Florida Business Corporation Act (the
"Act"), the Amended and Restated Articles of Incorporation of the Company (the
"Articles") and the Amended and Restated Bylaws of the Company (the "Bylaws")
empower the Company to indemnify its officers, directors, employees and agents
by agreement and to indemnify persons who serve, at the request of the Company,
as directors, officers, employees, or agents or other corporations or
enterprises, and Section 607.0850(7) of the Act, the Articles and the Bylaws
expressly provide that the indemnification provided therein is not exclusive;
and
5. It is reasonable, prudent and necessary for the Company
contractually to obligate itself to indemnify such persons to the fullest extent
permitted by applicable law so that they will serve or continue to serve the
Company free from undue concern that they will not be so indemnified; and
6. Indemnitee is willing to serve, or continue to serve and to take on
additional service for or on behalf of the Company on the condition that he be
so indemnified.
<PAGE> 2
AGREEMENT
NOW, THEREFORE, in consideration of the premises and the covenants
contained herein, the Company and Indemnitee do hereby covenant and agree as
follows:
1. Definitions. For purposes of this Agreement:
(a) "Change of Control" means a change in control of the
Company occurring after the Effective Date (as hereinafter defined) of a nature
that would be required to be reported in response to Item 1 of the Current
Report on Form 8-K (or in response to any similar item on any similar schedule
or form) promulgated under the Securities Exchange Act of 1934 (the "Act"),
whether or not the Company is then subject to such reporting requirement; and,
in addition, a Change of Control shall be deemed to have occurred if after the
Effective Date (i) any "person" (as such term is used in Sections 13(d) and
14(d) of the Act) is or becomes the "beneficial owner" (as defined in Rule 13d-3
under the Act), directly or indirectly, of securities of the Company
representing thirty percent (30%) or more of the combined voting power of the
Company's then outstanding securities without the prior approval of at least
two-thirds of the members of the Board of Directors in office immediately prior
to such person attaining such percentage; (ii) the Company is a party to a
merger, consolidation, sale of assets or other reorganization, or a proxy
contest, as a consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a majority
of the Board of Directors thereafter; or (iii) during any period of two
consecutive years, individuals who at the beginning of such period constituted
the Board of Directors (including for this purpose any new director whose
election or nomination for election by the Company's shareholders was approved
by a vote of at least two-thirds of the directors then still in office who were
directors at the beginning of such period) cease for any reason to constitute at
least a majority of the Board of Directors.
(b) "Corporate Status" describes the status of a person who is
or was a director, officer, employee, agent or fiduciary of the Company or of
any other corporation, partnership, joint venture, trust, employee benefit plan
or other enterprise which such person is or was serving at the request of the
Company.
(c) "Disinterested Director" means a director of the Company
who is not and was not a party to the Proceeding (as hereinafter defined) in
respect of which indemnification is sought by Indemnitee.
(d) "Effective Date" means the date first above written.
(e) "Expenses" shall include all reasonable attorneys' fees,
retainers, court costs, transcript costs, fees of experts, witness fees, travel
expenses, duplicating costs, printing and
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<PAGE> 3
binding costs, telephone charges, postage, delivery service fees, and all other
disbursements or expenses of the types customarily incurred in connection with
prosecuting, defending, preparing to prosecute or defend, investigating, or
being or preparing to be a witness in a proceeding.
(f) "Independent Counsel" means a law firm, or a member of a
law firm, that is experienced in matters of corporation law and neither
presently is, nor in the past five years has been, retained to represent: (i)
the Company or Indemnitee in any matter material to either such party, or (ii)
any other party to the Proceeding giving rise to a claim for indemnification
hereunder. Notwithstanding the foregoing, the term "Independent Counsel" shall
not include any person who, under the applicable standards of professional
conduct then prevailing, would have a conflict of interest in representing
either the Company or Indemnitee in an action to determine Indemnitee's rights
under this Agreement.
(g) "Proceeding" includes any action, suit, arbitration,
alternate dispute resolution mechanism, investigation, administrative hearing or
any other proceeding whether civil, criminal, administrative or investigative,
including any appeal thereof, whether or not initiated prior to the Effective
Date, except a proceeding initiated by an Indemnitee pursuant to Section 11 of
this Agreement to enforce his rights under this Agreement.
2. Agreement to Serve. Indemnitee agrees to serve as a director
and/or officer of the Company. Indemnitee may at any time and for any reason
resign from such position (subject to any other contractual obligation or any
obligation imposed by operation of law). The Company shall have no obligation
under this Agreement to continue Indemnitee in any position with the Company.
3. Indemnification - General. The Company shall indemnify, and
advance Expenses to Indemnitee as provided in this Agreement and to the fullest
extent permitted by applicable law in effect on the date hereof and to such
greater extent as applicable law may thereafter from time to time permit. The
rights of Indemnitee provided under the preceding sentence shall include, but
shall not be limited to, the rights set forth in the other sections of this
Agreement.
4. Third Party Actions. Indemnitee shall be entitled to the
rights of indemnification provided in this Section 4 if, by reason of his
Corporate Status, he is, or is threatened to be made, a party to any threatened,
pending or completed Proceeding, other than a Proceeding by or in the right of
the Company. Pursuant to this Section 4, Indemnitee shall be indemnified against
Expenses, judgments, penalties, fines and amounts paid in settlement actually
and reasonably incurred by him or on his behalf in connection with any such
Proceeding or any claim, issue or matter therein, if he acted in good faith and
in a manner he reasonably believed to be in or not opposed to the best interests
of the Company, and, with respect to any criminal Proceeding, had no reasonable
cause to believe his conduct was unlawful.
5. Derivative Actions. Indemnitee shall be entitled to the rights
of indemnification provided in this Section 5 if by reason of his Corporate
Status he is or is threatened to be made, a
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<PAGE> 4
party to any threatened, pending or completed Proceeding brought by or in the
right of the Company to procure a judgment in its favor. Pursuant to this
section, Indemnitee shall be indemnified against Expenses and amounts paid in
settlement not exceeding, in the judgment of the Company's Board of Directors,
the estimated expense of litigating the proceeding to conclusion, actually and
reasonably incurred by him or on his behalf in connection with such Proceeding
if he acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Company. Notwithstanding the foregoing, no
indemnification against such Expenses shall be made in respect of any claim,
issue or matter in such Proceeding as to which Indemnitee shall have been
adjudged to be liable to the Company if applicable law prohibits such
indemnification; provided, however, that, if applicable law so permits,
indemnification against Expenses shall nevertheless be made by the Company in
such event if and only to the extent that the Circuit Court of the State of
Florida, or the court in which such Proceeding shall have been brought or is
pending, shall determine.
6. Indemnification for Expenses of an Indemnitee. Notwithstanding
any other provision of this Agreement, to the extent that Indemnitee is, by
reason of his Corporate Status, a party to and is successful on the merits or
otherwise, in any Proceeding, he shall be indemnified against all Expenses
actually and reasonably incurred by him or on his behalf in connection
therewith. If Indemnitee is not wholly successful in such Proceeding but is
successful, on the merits or otherwise, as to one or more but less than all
claims, issues or matters in such Proceeding, the Company shall indemnify
Indemnitee against all Expenses actually and reasonably incurred by him or on
his behalf in connection with each successfully resolved claim, issue or matter.
For purposes of this Section 6 and without limitation, the termination of any
claim, issue or matter in such a Proceeding by dismissal, with or without
prejudice, shall be deemed to be a successful result as to such claim, issue or
matter.
7. Indemnification for Expenses of a Witness. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is by reason of
his Corporate Status, a witness in any Proceeding, he shall be indemnified
against all Expenses actually and reasonably incurred by him or on his behalf in
connection therewith.
8. Advancement of Expenses. The Company shall advance all
reasonable Expenses incurred by or on behalf of Indemnitee in connection with
any Proceeding within twenty (20) days after the receipt by the Company of a
statement or statements from Indemnitee requesting such advance or advances from
time to time, whether prior to or after final disposition of such Proceeding.
Such statement or statements shall reasonably evidence the Expenses incurred by
Indemnitee and shall include or be preceded or accompanied by an undertaking by
or on behalf of Indemnitee to repay any Expenses advanced if it shall ultimately
be determined that Indemnitee is not entitled to be indemnified against such
Expenses.
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<PAGE> 5
9. Indemnification Procedure.
(a) To obtain indemnification under this Agreement, Indemnitee
shall submit to the Secretary of the Company (or to such other officer as may be
designated by the Board of Directors) a written request, including therein or
therewith such documentation and information as is reasonably available to
Indemnitee and is reasonably necessary to determine whether and to what extent
Indemnitee is entitled to indemnification. The Secretary, or other designated
officer, of the Company shall, promptly upon receipt of such a request for
indemnification, advise the Board of Directors in writing that Indemnitee has
requested indemnification.
(b) Upon written request by Indemnitee for indemnification
pursuant to Section 9(a) hereof, a determination, if required by applicable law,
with respect to Indemnitee's entitlement thereto shall be made in the specific
case: (i) if a Change of Control (as herein defined) shall have occurred, by
Independent Counsel (as herein defined) (unless Indemnitee shall request that
such determination be made by the Board of Directors or the shareholders, in
which case by the person or persons or in the manner provided for in clauses
(ii) or (iii) of this Section 9(b)) in a written opinion to the Board of
Directors, a copy of which shall be delivered to Indemnitee; (ii) if a Change of
Control shall not have occurred, (A) by the Board of Directors by a majority
vote of a quorum consisting of Disinterested Directors or (B) if a quorum of the
Board of Directors consisting of Disinterested Directors is not obtainable or,
even if obtainable, such quorum of Disinterested Directors so directs, by
Independent Counsel in a written opinion to the Board of Directors, a copy of
which shall be delivered to Indemnitee or (C) if directed by the Directors, by
the shareholders of the Company; or (iii) as provided in Section 10(b) of this
Agreement; and, if it is so determined that Indemnitee is entitled to
indemnification, payment to or on behalf of Indemnitee shall be made within ten
(10) days after such determination. Indemnitee shall cooperate with the person,
persons or entity making such determination with respect to Indemnitee's
entitlement to indemnification, including providing to such person, persons or
entity upon reasonable advance request any documentation or information which is
not privileged or otherwise protected from disclosure and which is reasonably
available to Indemnitee and reasonably necessary to such determination. Any
Expenses incurred by Indemnitee in so cooperating with the person, persons or
entity making such determination shall be borne by the Company (irrespective of
the determination as to Indemnitee's entitlement to indemnification) and the
Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.
(c) In the event the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 9(b)
hereof, the Independent Counsel shall be selected as provided in this Section
9(c). If a Change of Control shall not have occurred, the Independent Counsel
shall be selected by the Board of Directors, and the Company shall give written
notice to Indemnitee advising him of the identity of the independent counsel so
selected. If a Change of Control shall have occurred, the Independent Counsel
shall be selected by Indemnitee (unless Indemnitee shall request that such
selection be made by the Board of Directors, in which event the preceding
sentence shall apply), and Indemnitee shall give written
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<PAGE> 6
notice to the Company advising it of the identity of the Independent Counsel so
selected. In either event, Indemnitee or the Company, as the case may be, may,
within seven (7) days after such written notice of selection shall have been
given, deliver to the Company or to Indemnitee, as the case may be, a written
objection to such selection. Such objection may be asserted only on the ground
that the Independent Counsel so selected does not meet the requirements of
"Independent Counsel" as defined in Section 1 of this Agreement, and the
objection shall set forth with particularity the factual basis of such
assertion. If such written objection is made, the Independent Counsel so
selected may not serve as Independent Counsel unless and until a court has
determined that such objection is without merit. If, within twenty (20) days
after submission by Indemnitee of a written request for indemnification pursuant
to Section 9(a) hereof, no Independent Counsel shall have been selected and not
objected to, either the Company or Indemnitee may petition the Circuit Court of
the State of Florida for the County of Orange for resolution of any objection
which shall have been made by the Company or Indemnitee to the other's selection
of Independent Counsel and/or for the appointment as Independent Counsel of a
person selected by the Court or by such other person as the Court shall
designate, and the person with respect to whom an objection is so resolved or
the person so appointed shall act as Independent Counsel under Section 9(b)
hereof. The Company shall pay any and all reasonable fees and expenses of
Independent Counsel incurred by such Independent Counsel in connection with
acting pursuant to Section 9(b) hereof, and the Company shall pay all reasonable
fees and Expenses incident to the procedures of this Section 9(c), regardless of
the manner in which such Independent Counsel was selected or appointed. Upon the
due commencement of any judicial Proceeding pursuant to Section 11(a) of this
Agreement, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
10. Presumptions and Effect of Certain Proceedings.
(a) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification hereunder, the
person or persons or entity making such determination shall presume that
Indemnitee is entitled to indemnification under this Agreement if Indemnitee has
submitted a request for indemnification in accordance with Section 9(a) of this
Agreement, and the Company shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
(b) If the person, persons or entity empowered or selected
under Section 9 of this Agreement to determine whether Indemnitee is entitled to
indemnification shall not have made a determination within sixty (60) days after
receipt by the Company of the request therefor, the requisite determination of
entitlement to indemnification shall be deemed to have been made and Indemnitee
shall be entitled to such indemnification, absent (i) a misstatement by
Indemnitee of a material fact, or an omission of a material fact necessary to
make Indemnitee's statement not materially misleading, in connection with the
request for indemnification, or (ii) a prohibition of such indemnification under
applicable law; provided, however, that such 60-day period may be
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<PAGE> 7
extended for a reasonable time, not to exceed an additional thirty (30) days, if
the person, persons or entity making the determination with respect to
entitlement to indemnification in good faith requires such additional time for
the obtaining or evaluating of documentation and/or information relating
thereto; and provided, further, that the foregoing provisions of this Section
10(b) shall not apply (i) if the determination of entitlement to indemnification
is to be made by the shareholders pursuant to Section 9(b) of this Agreement and
if (A) within fifteen (15) days after receipt by the Company of the request for
such determination the Board of Directors has resolved to submit such
determination to the shareholders for their consideration at an annual meeting
thereof to be held within seventy-five (75) days after such receipt and such
determination is made thereat or (B) a special meeting of shareholders is called
within fifteen (15) days after such receipt for the purpose of making such
determination, such meeting is held for such purpose within sixty (60) days
after having been so called and such determination is made thereat, or (ii) if
the determination of entitlement to indemnification is to be made by Independent
Counsel pursuant to Section 9(b) of this Agreement.
(c) The termination of any Proceeding or of any claim, issue
or matter therein, by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent, shall not (except as otherwise expressly
provided in this Agreement) of itself adversely affect the right of Indemnitee
to indemnification or create a presumption that Indemnitee did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Company or, with respect to any criminal Proceeding,
that Indemnitee had reasonable cause to believe that his conduct was unlawful.
11. Remedies of Indemnitee.
(a) In the event that (i) a determination is made pursuant to
Section 9 of this Agreement that Indemnitee is not entitled to indemnification
under this Agreement, (ii) advancement of Expenses is not timely made pursuant
to Section 8 of this Agreement, (iii) the determination of entitlement to
indemnification is to be made by Independent Counsel pursuant to Section 9(b) of
this Agreement and such determination shall not have been made and delivered in
a written opinion within ninety (90) days after receipt by the Company, of the
request for indemnification, (iv) payment of indemnification is not made
pursuant to Section 5 of this Agreement within ten (10) days after receipt by
the Company of a written request therefor, or (v) payment of indemnification is
not made within ten (10) days after a determination has been made that
Indemnitee is entitled to indemnification or such determination is deemed to
have been made pursuant to Sections 9 or 10 of this Agreement, Indemnitee shall
be entitled to an adjudication in an appropriate court of the State of Florida,
or in any other court of competent jurisdiction, of his entitlement to such
indemnification or advancement of expenses. Indemnitee shall commence such
proceeding seeking an adjudication within one hundred eighty (180) days
following the date on which Indemnitee first has the right to commence such
proceeding pursuant to this Section 11(a). The Company shall not oppose
Indemnitee's right to seek any such adjudication.
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<PAGE> 8
(b) In the event that a determination shall have been made
pursuant to Section 9 of this Agreement that Indemnitee is not entitled to
indemnification, any judicial Proceeding commenced pursuant to this Section 11
shall be conducted in all respects as a de novo trial on the merits and
Indemnitee shall not be prejudiced by reason of that adverse determination. If a
Change of Control shall have occurred, in any judicial Proceeding commenced
pursuant to this Section 11 the Company shall have the burden of proving that
Indemnitee is not entitled to indemnification or advancement of Expenses, as the
case may be.
(c) If a determination shall have been made or deemed to have
been made pursuant to Sections 9 or 10 of this Agreement that Indemnitee is
entitled to indemnification, the Company shall be bound by such determination in
any judicial Proceeding commenced pursuant to this Section 11, absent (i) a
misstatement by Indemnitee of a material fact, or an omission of a material fact
necessary to make Indemnitee's statement not materially misleading, in
connection with the request for indemnification, or (ii) a prohibition of such
indemnification under applicable law.
(d) The Company shall be precluded from asserting in any
judicial Proceeding commenced pursuant to this Section 11 that the procedures
and presumptions of this Agreement are not valid, binding and enforceable and
shall stipulate in any such court that the Company is bound by all the
provisions of this Agreement.
(e) In the event that Indemnitee, pursuant to this Section 11,
seeks a judicial adjudication to enforce his rights under, or to recover damages
for breach of, this Agreement, Indemnitee shall be entitled to recover from the
Company, and shall be indemnified by the Company against, any and all expenses
(of the types described in the definition of Expenses in Section 1 of this
Agreement) actually and reasonably incurred by him in such judicial
adjudication, but only if he prevails therein. If it shall be determined in said
judicial adjudication that Indemnitee is entitled to receive part but not all of
the indemnification or advancement of expenses sought, the expenses incurred by
Indemnitee in connection with such judicial adjudication shall be appropriately
prorated.
12. Non-Exclusivity: Survival of Rights; Insurance; Subrogation.
(a) The rights of indemnification and to receive advancement
of Expenses as provided by this Agreement shall not be deemed exclusive of any
other rights to which Indemnitee may at any time be entitled under applicable
law, the Articles of Incorporation, the Bylaws, any agreement, a vote of
shareholders or a resolution of directors, or otherwise. No amendment,
alteration or repeal of this Agreement or any provision hereof shall be
effective as to any Indemnitee with respect to any action taken or omitted by
such Indemnitee in his Corporate Status prior to such amendment, alteration or
repeal.
(b) To the extent that the Company maintains an insurance
policy or policies providing liability insurance for directors, officers,
employees, agents or fiduciaries of the
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<PAGE> 9
Company or of another corporation, partnership, joint venture, trust, employee
benefit plan or other enterprise which such person serves at the request of the
Company, Indemnitee shall be covered by such policy or policies in accordance
with its or their terms to the maximum extent of the coverage available for any
such director, officer, employee or agent under such policy or policies.
(c) In the event of any payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers required and take all
action necessary to secure such rights, including execution of such documents as
are necessary to enable the Company to bring suit to enforce such rights.
(d) The Company shall not be liable under this Agreement to
make any payment of amounts otherwise indemnifiable hereunder if and to the
extent that Indemnitee has otherwise actually received such payment under any
insurance policy, contract, agreement or otherwise.
(e) The Company may, to the fullest extent authorized by law,
create a trust fund, grant a security interest and/or use other means
(including, without limitation, letters of credit, surety bonds and other
similar arrangements) to ensure the payment of such amounts as may become
necessary to effect indemnification provided hereunder.
13. Duration of Agreement. This Agreement shall continue until and
terminate upon the later of: (a) ten (10) years after the date that Indemnitee
shall have ceased to serve as a director, officer, employee, agent or fiduciary
of the Company or of any other corporation, partnership, joint venture, trust,
employee benefit plan or other enterprise which Indemnitee served at the request
of the Company; or (b) the final termination of all pending Proceedings in
respect of which Indemnitee is granted rights of indemnification or advancement
of Expenses hereunder and of any Proceeding commenced by Indemnitee pursuant to
Section 11 of this Agreement relating thereto. This Agreement shall be binding
upon the Company and its successors and assigns and shall inure to the benefit
of Indemnitee and his heirs executors and administrators.
14. Severability. If any provision or provisions of this Agreement
shall be held to be invalid, illegal or unenforceable for any reason whatsoever:
(a) the validity, legality and enforceability of the remaining provisions of
this Agreement (including without limitation, each portion of any section of
this Agreement containing any such provision held to be invalid, illegal or
unenforceable, that is not itself invalid, illegal or unenforceable) shall not
in any way be affected or impaired thereby; and (b) to the fullest extent
possible, the provisions of this Agreement (including, without limitation, each
portion of any section of this Agreement containing any such provision held to
be invalid, illegal or unenforceable, that is not itself invalid, illegal or
unenforceable) shall be construed so as to give effect to the intent manifested
by the provision held invalid, illegal or unenforceable.
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<PAGE> 10
15. Exceptions to Indemnification Rights. Notwithstanding any
other provision of this Agreement, Indemnitee shall not be entitled to
indemnification or advancement of Expenses under this Agreement with respect to
any Proceeding, or any claim therein, brought or made by him against the
Company.
16. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
but all of which together shall constitute one and the same Agreement. Only one
such counterpart signed by the party against whom enforceability is sought needs
to be produced to evidence the existence of this Agreement.
17. Captions. The headings of the paragraphs of this Agreement are
inserted for convenience only and shall not be deemed to constitute part of this
Agreement or to affect the construction thereof.
18. Amendment and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provisions hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
19. Notice by Indemnitee. Indemnitee agrees promptly to notify the
Company in writing upon being served with any summons, citation, subpoena,
complaint, indictment, information or other document relating to any Proceeding
or matter which may be subject to indemnification or advancement of Expenses
covered hereunder.
20. Notices. All notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given if (i) delivered by hand and receipted for by the party to whom said
notice or other communication shall have been directed, or (ii) mailed by
certified mail, return receipt requested, with postage prepaid, and shall be
deemed delivered on the third business day after the date on which it is so
mailed:
(a) If to Indemnitee, to the address set forth immediately
following Indemnitee's signature hereinbelow;
(b) If to the Company, to: 1551 Sandspur Road, Suite B,
Maitland, Florida 32751. Attention: Corporate Secretary;
or to such other address as may have been furnished to Indemnitee by the Company
or to the Company by Indemnitee, as the case may be.
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<PAGE> 11
21. Governing Law. The parties agree that this Agreement shall be
governed by, and construed and enforced in accordance with, the laws of the
State of Florida, without reference to its choice of law principles.
22. Gender. Use of the masculine pronoun shall be deemed to
include usage of the feminine pronoun where appropriate.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first above written.
DEMANDSTAR.COM, INC.:
"Company"
By:
--------------------------------------------
Name: O. F. Ramos
Title: President and Chief Executive Officer
INDEMNITEE:
By:
--------------------------------------------
Name:
------------------------------------------
Address:
---------------------------------------
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<PAGE> 1
EXHIBIT 10.14
PROMISSORY NOTE
DATE OF NOTE: October 31, 1999
PRINCIPAL AMOUNT: ONE MILLION SEVEN HUNDRED FIFTY THOUSAND
U.S. DOLLARS AND NO CENTS ($1,750,000.00)
MATURITY DATE: October 31, 2004
PAYMENT DATE(S): Shall be the annual anniversary date of the
Date of Note, stated above through the
Maturity Date. If such annual anniversary
date shall fall upon a Saturday, Sunday or
nationally recognized holiday, such Payment
Date shall be the immediately following
working day.
INTEREST RATE: Eight Percent (8%) per annum
BORROWER: INFORMATION ON DEMAND, INC.
BORROWER'S ADDRESS: 1551 Sandspur Road, Suite B, Maitland,
Florida 32714
LENDER: HTE, INC.
LENDER'S ADDRESS: 1000 Business Center Drive, Lake Mary,
Florida 32746
FOR VALUE RECEIVED, the undersigned (the "BORROWER") does hereby
covenant and promise to pay to the order of the Lender or to its successors and
assigns, at the Lender's Address or at such other place as the Lender may
designate to the Borrower in writing from time to time, in legal tender of the
United States, the Principal Amount of this Note, with interest from the date
hereof computed at the Interest Rate on the unpaid balance of the Principal
Amount at the Payment Dates according to the terms set forth herein.
NOTWITHSTANDING ANY PROVISION OF THIS NOTE, LENDER DOES NOT INTEND TO
CHARGE AND BORROWER SHALL NOT BE REQUIRED TO PAY ANY AMOUNT OF INTEREST OR
OTHER CHARGES IN EXCESS OF THE MAXIMUM PERMITTED BY THE APPLICABLE LAW OF THE
STATE OF FLORIDA; IF ANY HIGHER RATE CEILING IS LAWFUL, THEN THAT HIGHER RATE
CEILING SHALL APPLY. ANY PAYMENT IN EXCESS OF SUCH MAXIMUM SHALL BE REFUNDED TO
BORROWER OR CREDITED AGAINST PRINCIPAL, AT THE OPTION OF LENDER.
1. REQUIRED PAYMENT. Payments shall be made by the Borrower to the
Lender in accordance with the following schedule:
<PAGE> 2
(a) Payment Dates. At each Anniversary Date, as such term is
defined above, the Borrower shall pay the Lender the amount provided in the
following schedule plus all accrued interest to be calculated in accordance
with SECTION 2 below.
1) Anniversary Date #1 October 31, 2000 $200,000.00 U.S. Dollars
2) Anniversary Date #2 October 31, 2001 $250,000.00 U.S. Dollars
3) Anniversary Date #3 October 31, 2002 $350,000.00 U.S. Dollars
4) Anniversary Date #4 October 31, 2003 $450,000.00 U.S. Dollars
5) Anniversary Date #5 October 31, 2004 $500,000.00 U.S. Dollars
(b) Repayment. At the earlier of (i) the Maturity Date or
(ii) the date of effectiveness of a secondary offering of common stock, par
value $.0001 per share, of the Borrower yielding gross proceeds to the Borrower
of at least $10,000,000, the entire remaining outstanding balance of the
Promissory Note shall be paid to the Lender.
2. INTEREST CALCULATION. Interest shall be calculated and accrued,
and payments shall be applied to any outstanding balance, according to the
terms of this Section.
(a) Interest Accrual Method. Beginning on the Date of Note,
the amount of interest will be calculated by the 360/360 day method (a daily
amount of interest is computed for a hypothetical year of 360 days; that amount
is multiplied by the actual number of days for which any principal is
outstanding hereunder). The Interest Rate shall be applied to the outstanding
balance (Principal Amount plus accrued interest) according to the
aforementioned method during the term of the Note.
(b) Payment Schedule. All payments received hereunder shall
be applied first to the payment of any expense or charges payable hereunder or
under any other loan documents executed in connection with this Note, then to
interest due and payable, with the balance applied to principal, or in such
other order as Lender shall determine at its option.
3. DEFAULT. The occurrence of any one or more of the following
conditions shall each and all constitute a default under this Note:
(a) the failure to pay or perform any obligation, liability
or indebtedness of the Borrower to Lender, or to any affiliate or subsidiary of
the Lender, whether under this Note or any other agreement between the Lender
and the Borrower, as and when due (whether upon demand, at maturity or by
acceleration);
(b) the failure to pay or perform any other obligation,
liability or indebtedness of the Borrower to any other party;
(c) the commencement of a proceeding against the Borrower for
dissolution or liquidation, the voluntary or involuntary termination or
dissolution of the Borrower or the merger or consolidation of the Borrower with
or into another entity;
(d) the insolvency of, the business failure of, the
appointment of a custodian, trustee, liquidator or receiver for or for any of
the property of, the assignment for the benefit of creditors by, or the filing
of a petition under bankruptcy, insolvency or debtor's relief law or the filing
of a petition for any adjustment of indebtedness, composition or extension by
or against the Borrower;
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<PAGE> 3
(e) the entry of a judgment against the Borrower which Lender
deems to be of a material nature, in Lender's sole discretion;
(f) the seizure or forfeiture of, or the issuance of any writ
of possession, garnishment or attachment, or any turnover order for any
property of the Borrower;
(g) the determination by Lender that a material adverse
change has occurred in the financial condition of the Borrower; or
(h) the failure of Borrower's business to comply with any law
or regulation controlling its operation.
4. OPPORTUNITY TO CURE. Except as provided for in this paragraph,
or as otherwise provided for in writing by the Lender to the Borrower, pursuant
to the terms of this Note allowing for its amendment, the Borrower shall not be
afforded an opportunity to cure its Default. In the event that: (i) the
Borrower shall fail to pay any interest or principal due at any Payment Date,
the Borrower shall be afforded ten (10) business days to cure such default
beginning at the Payment Date upon which such interest was due; and (ii) in the
case that the Borrower is otherwise in default of this Note, then the Borrower
shall have thirty (30) days to cure such default.
5. REMEDIES UPON DEFAULT. Whenever there is a default under this
Note (a) the entire balance outstanding hereunder and all other obligations of
the Borrower to Lender (however acquired or evidenced) shall, at the option of
Lender, become immediately due and payable and any obligation of Lender to
permit further borrowing under this Note shall immediately cease and terminate,
and/or (b) to the extent permitted by law, the Rate of interest on the unpaid
principal shall be increased at Lender's discretion up to the maximum rate
allowed by law, or if none, 18% per annum (the "DEFAULT RATE"). The provisions
herein for a Default Rate shall not be deemed to extend the time for any
payment hereunder or to constitute a "grace period" giving the Borrower a right
to cure any default. At Lender's option, any accrued and unpaid interest, fees
or charges may, for purposes of computing and accruing interest on a daily
basis after the due date of the Note or any installment thereof, be deemed to
be a part of the principal balance, and interest shall accrue on a daily
compounded basis after such date at the Default Rate provided in this Note
until the entire outstanding balance of principal and interest is paid in full.
Upon a default under this Note, Lender is hereby authorized at any time, at its
option and without notice or demand, to set off and charge against any deposit
accounts of the Borrower (as well as any money, instruments, securities,
documents, chattel paper, credits, claims, demands, income and any other
property, rights and interests of the Borrower), which at any time shall come
into the possession or custody or under the control of Lender or any of its
agents, affiliates or correspondents, any and all obligations due hereunder.
Additionally, Lender shall have all rights and remedies available at law or in
equity. Any judgment rendered on this Note shall bear interest at the highest
rate of interest permitted pursuant to Chapter 687, Florida Statutes.
6. LATE PAYMENT, ETC. A payment which is not received on the due
date shall be deemed late. Further, if any payment shall not be paid when due,
then the entire principal balance and accrued and unpaid interest thereon shall
become due and payable at once or thereafter, at the option of the Lender,
without notice to or demand upon the Borrower. Failure to exercise these
options shall not constitute a waiver of the right to exercise the same in the
event of any subsequent default.
7. DELINQUENCY CHARGE. To the extent permitted by law, a
delinquency charge may be imposed in an amount not to exceed four percent (4%)
of any payment that is more than fifteen days late.
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<PAGE> 4
8. COSTS OF COLLECTION. The Borrower agrees that it shall pay all
costs, expenses and reasonable attorneys' fees, incurred by the Lender in
connection with any aspect of this Note, including any default as well as any
proceedings which may involve this Note or any other document relating hereto
including, but not limited to, arbitration, litigation, bankruptcy proceedings,
etc. The undersigned specifically agrees that in the event of any bankruptcy of
the Borrower, the Lender shall be entitled to recover all its expenses and
reasonable attorneys' fees incurred by the Lender in regard to any bankruptcy
proceeding.
9. AMENDMENTS TO NOTE. This Note may not be changed orally, but
only by an agreement in writing, signed by the party against whom enforcement
of any waiver, change, modification or discharge is sought.
10. WAIVERS, CONSENTS AND COVENANTS. Borrower or any other party
hereto:
(a) waives presentment, demand, protest, notice of demand,
notice of intent to accelerate, notice of acceleration of maturity, notice of
protest, notice of nonpayment, notice of dishonor, and any other notice
required to be given under the law to the Borrower in connection with the
delivery, acceptance, performance, default or enforcement of this Note, any
endorsement or guaranty of this Note, or any other documents executed in
connection with this Note or any other note or other loan documents executed in
connection with any obligation of Borrower, or an affiliate of the Borrower, to
the Lender;
(b) consents to all delays, extensions, renewals or other
modifications of this Note or waivers of any term hereof, or release or
discharge by Lender of the Borrower, or the failure to act on the part of
Lender, and agrees that no such action, failure to act or failure to exercise
any right or remedy by Lender shall in any way affect or impair the obligations
of the Borrower or be construed as a waiver by Lender of, or otherwise affect,
any of Lender's rights under this Note; and
(c) agrees to pay, on demand, all costs and expenses of
collection or defense of this Note and/or the enforcement or defense of
Lender's rights with respect to, or the administration, supervision,
preservation, or protection of, or realization upon, any property securing
payment hereof, including, without limitation; reasonable attorney's and
paralegal's fees, including fees related to any suit, mediation or arbitration
proceeding, out of court payment agreement, trial, appeal, bankruptcy
proceedings or other proceeding, in such amount as may be determined reasonable
by any arbitrator or court, whichever is applicable.
11. INDEMNIFICATION. The Borrower agrees to promptly pay, indemnify
and hold Lender harmless from all state and federal taxes and fees of any kind
and other liabilities with respect to or resulting from the execution and/or
delivery of this Note.
12. PREPAYMENTS. The Borrower may prepay any or all of the amounts
owed by the Borrower to the Lender. All prepayments of principal shall be
applied in the inverse order of maturity, or in such other order as Lender
shall determine in its sole discretion.
13. NON-WAIVER. The failure at any time of Lender to exercise any of
its options or any other rights hereunder shall not constitute a waiver
thereof, nor shall it be a bar to the exercise of any of its options or rights
at a later date. All rights and remedies of Lender shall be cumulative and may
be pursued singly, successively or together, at the option of Lender. The
acceptance by Lender of any partial payment shall not constitute a waiver of
any default or of any of Lender's rights under this Note. No waiver of any of
its rights hereunder, and no modification or amendment of this Note, shall be
deemed to be made by Lender
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<PAGE> 5
unless the same shall be in writing, duly signed on behalf of Lender; each such
waiver shall apply only with respect to the specific instance involved, and
shall in no way impair the rights of Lender or the obligations of the Borrower
to Lender in any other respect at any other time.
14. APPLICABLE LAW, VENUE AND JURISDICTION. This Note and the rights
and obligations of Borrower and Lender shall be governed by and interpreted in
accordance with the law of the State of Florida. In any dispute in connection
with or to enforce this Note, the Borrower, irrevocably consents to and confers
personal jurisdiction on the Ninth Judicial Circuit in Orange County, Florida
and expressly waive any objections as to venue in such court.
15. PARTIAL INVALIDITY. The unenforceability or invalidity of any
provision of this Note shall not affect the enforceability or validity of any
other provision herein and the invalidity or unenforceability of any provision
of this Note to any person or circumstance shall not affect the enforceability
or validity of such provision as it may apply to other persons or
circumstances.
16. BINDING EFFECT. This Note shall be binding upon and inure to the
benefit of the Borrower and Lender and their respective successors, assigns,
heirs and personal representatives, provided, however, that no obligations of
the Borrower hereunder can be assigned without prior written consent of Lender.
17. CONTROLLING DOCUMENT. To the extent that this Note conflicts
with or is in any way incompatible with any other document related specifically
to the loan evidenced by this Note, this Note shall control over any other such
document, and if this Note does not address an issue, then each other such
document shall control to the extent that it deals most specifically with an
issue.
18. WAIVER OF TRIAL BY JURY/ARBITRATION. ALL PARTIES HERETO
EXPRESSLY WAIVE THEIR RIGHTS TO A TRIAL BY JURY REGARDING ANY CONTROVERSY OR
CLAIM BETWEEN OR AMONG THE PARTIES HERETO INCLUDING BUT NOT LIMITED TO THOSE
ARISING OUT OF OR RELATING TO THIS INSTRUMENT, AGREEMENT OR DOCUMENT OR ANY
RELATED INSTRUMENTS, AGREEMENTS OR DOCUMENTS, INCLUDING ANY CLAIM BASED ON OR
ARISING FROM AN ALLEGED TORT.
Borrower represents to Lender that the proceeds of this loan are to be used
primarily for business, commercial or agricultural purposes. Borrower
acknowledges having read and understood, and agrees to be bound by, all terms
and conditions of this Note and hereby executes this Note under seal as of the
date here above written.
NOTICE OF FINAL AGREEMENT. THIS WRITTEN PROMISSORY NOTE REPRESENTS THE FINAL
AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR,
CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES.
THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES.
By signing hereto, the undersigned acknowledge that they understand
the terms of the Note and do hereby agree to be bound by the Note by attaching
their signature(s) hereto.
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<PAGE> 6
Executed in Atlanta, Georgia by Borrower effective October 31, 1999.
BORROWER:
INFORMATION ON DEMAND, INC.
By: /s/ L. A. Gornto, Jr.
-----------------------------------
Name: L.A. Gornto, Jr.
Title: Executive Vice President
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<PAGE> 1
EXHIBIT 10.15
CONDITIONAL SERIES B STOCK PURCHASE AGREEMENT
THIS CONDITIONAL SERIES B STOCK PURCHASE AGREEMENT (this "Agreement"),
dated as of December 21, 1999, by and between DEMANDSTAR.COM, INC., a Florida
corporation (the "Company") and H.T.E., INC., a Florida corporation ("HTE"),
O.F. RAMOS, L.A. GORNTO, BERNARD B. MARKEY AND EDWARD A. MOSES (HTE and each
individual, individually and collectively, the "Purchaser").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue rights to purchase its common
stock, par value $.0001 per share (the "Common Stock"), pursuant to a
registration statement on Form S-1 filed with the Securities and Exchange
Commission in December 1999 (the "Rights Offering");
WHEREAS, in the event that at least $5,000,000 in rights (the
"Threshold Amount") are not exercised in the aggregate pursuant to the Rights
Offering, the Company will require additional financing; and
WHEREAS, in the event that the Threshold Amount is not raised and the
Company requests (the "Purchase Notice") that the Purchaser provide additional
financing, the Purchaser desires to provide the Company such required
additional financing in the manner and amount, and pursuant to the terms and
conditions, set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein, the parties hereto do hereby agree as follows:
1. Purchase and Sale of Stock. In the event that the Threshold
Amount is not raised in the Rights Offering and the Company's Board of
Directors determines that delivery of the Purchase Notice is in the best
interests of the Company, the Company hereby agrees to sell and transfer to the
Purchaser, and the Purchaser hereby agrees to purchase and accept from the
Company in the aggregate, 2,000,000 shares of the Company's Series B Preferred
Stock, par value $.01 per share (the "Purchased Shares"), for an aggregate
purchase price of $2,000,000 (the "Purchase Price"). Of the aggregate 2,000,000
Purchased Shares, HTE agrees to purchase 1,000,000 shares for $1,000,000, and
each individual Purchaser agrees to purchase 250,000 shares each for $250,000
each. The terms of the Series B Preferred Stock are set forth in the Company's
Amended and Restated Articles of Incorporation filed with the Secretary of
State of Florida on or about the date hereof.
2. Payment of Purchase Price; Transfer of Stock; Other
Consideration. (a) Upon receipt of payment from the Purchaser by the Company of
the full Purchase Price, the Company shall promptly make, or cause to be made,
delivery to the Purchaser stock certificates representing the Purchased Shares,
either duly endorsed for transfer or newly issued in each Purchaser's name,
with all applicable tax stamps affixed.
(b) As an inducement to the Purchaser to execute this Agreement, the
Company shall issue the Purchaser warrants entitling the Purchaser to purchase
an aggregate of 1,000,000 shares of Common Stock at an exercise price of $2.00
per share. The Company shall issue to HTE warrants to
<PAGE> 2
purchase 500,000 shares of Common Stock for $1,000,000, and to each individual
Purchaser warrants to purchase 125,000 shares of Common Stock for $250,000
each. The terms of the warrants are set forth in a warrant agreement entered
into between the Company and each Purchaser, substantially in the form attached
hereto as Exhibit B.
3. Representations and Warranties. Each Purchaser hereby severally
represents, warrants and covenants to the Company that, in connection herewith:
(a) Review and Evaluation of Information regarding the
Company. The Purchaser has had an opportunity to examine the governing
instruments and the material disclosure and other documents and records of the
Company. The Purchaser has had an opportunity to ask questions and receive
answers from the Company and from representatives of the Company concerning the
Company's financial condition and business and to obtain such other information
that he has deemed necessary to make a fully informed decision.
(b) Purchaser's Financial Experience. The Purchaser is
sufficiently experienced in financial and business matters to be capable of
evaluating the merits and risks of its/his investment in the Purchased Shares.
The Purchaser is familiar with the nature and risks attending investments.
(c) Suitability of Investment. The Purchaser understands that
the Purchased Shares are speculative investments and involve a high degree of
risk, including but not limited to: there is no guarantee of success of the
business of the Company; he may not receive any return (economic or otherwise)
on his investment, and management and the majority shareholders of the Company
have extreme latitude and generally, the sole discretion, to determine the
financial picture, operations and potential dissolution of the Company. The
Purchaser has evaluated the merits and risks of the Purchaser's proposed
investment in the Purchased Shares, including those risks particular to the
Purchaser's personal situation, and he has determined that this investment is
suitable for the Purchaser. The Purchaser has adequate financial resources for
an investment of this character, and, at this time, the Purchaser could bear a
complete loss of his investment. Further, the Purchaser will continue to have,
after making his investment in the Purchased Shares, adequate means of
providing for his current needs, the needs of those dependent on him, and
possible personal contingencies.
(d) Investment Intent. The Purchaser is purchasing the
Purchased Shares for investment purposes only and for his own account, and has
no present commitment, agreement or intention to sell, distribute or otherwise
dispose of any of them or to enter into any such commitment or agreement.
(e) Unregistered Securities; Limitations on Disposition. The
Purchaser understands that the Purchased Shares are "restricted securities"
under the Securities Act of 1933, as amended (the "Act") and are being sold
without registration under federal or any state securities laws ("Securities
Laws") by reason of specific exemptions from registration and that the Company
is relying on the information given herein in its determination of whether such
specific exemptions are available. The Purchaser understands that because the
Purchased Shares have not been and will not be registered under the Securities
Laws, they cannot be sold unless and until they are subsequently registered or
an exemption from registration is available. The Purchaser acknowledges and
understands that the Company is under no obligation to register the Purchased
Shares. The
2
<PAGE> 3
Purchaser acknowledges and understands that the certificates evidencing the
Purchased Shares will bear a restrictive legend to the effect of this
subsection 2(e). The Purchaser represents that he can afford to hold the
Purchased Shares for an indefinite period of time. The Purchaser understands
that a public market for the Purchased Shares may never exist.
(f) Rule 144. The Purchaser is familiar with the provisions
of Rule 144 promulgated under the Act, which, in substance, permits limited
public resale of "restricted securities" acquired, directly or indirectly, from
the issuer thereof, in a nonpublic offering subject to the satisfaction of
certain conditions. The Purchased Shares may be resold in certain limited
circumstances subject to the provisions of Rule 144, which requires among other
things: (i) the availability of certain public information about the Company;
(ii) the resale occurring not less than one year after the party has purchased,
and made full payment for, within the meaning of Rule 144, the securities to be
sold; and (iii) in the case of an affiliate, or of a non-affiliate who has held
the securities less than two years, the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as defined in the Securities Exchange Act of 1934) and the amount of
securities being sold during any three month period not exceeding the specified
limitation therein, if applicable.
(g) Non-Reliance Regarding Tax Consequences. The Purchaser is
not relying on the Company or any representation contained herein with respect
to the tax or economic effect of his investment in the Purchased Shares. The
Purchaser has reviewed with the Purchaser's own tax advisors the federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. The Purchaser is relying solely on
such advisors and not on any statements or representations of the Company or
any of its representatives. The Purchaser understands that it/he shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement. The
Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code"), taxes as ordinary income the difference between the
purchase price for the Purchased Shares and the fair market value of the
Purchased Shares as of the date any restrictions on the Purchased Shares lapse.
(h) Prohibitions on Cancellation, Termination, Revocation,
Transferability, and Assignment. The Purchaser hereby acknowledges and agrees
that, except as may be specifically provided herein or by applicable law, it is
not entitled to cancel, terminate, or revoke this Agreement. The Purchaser
further agrees that it may not transfer or assign its rights or obligations
under this Agreement without the written consent of the Company.
(i) Authority to Enter into Agreement. The Purchaser has the
full right, power and authority to execute and deliver this Agreement and
perform his obligations hereunder, and when executed and delivered, this
Agreement will constitute a valid and legally binding obligation of such
Purchaser.
(j) Legends. Each certificate representing the Purchased
Shares may be endorsed with the following legends:
The securities represented by this certificate have
been acquired for investment and have not been
registered under the
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<PAGE> 4
Securities Act of 1933, as amended, or qualified
under the laws of any state. Such shares may not be
sold or transferred in the absence of such
registration or such qualification unless the
transfer is in accordance with Rule 144 or similar
rule or unless the corporation receives an opinion
of counsel reasonably acceptable to it stating that
such sale or transfer is exempt from the
registration and prospectus delivery requirements of
said act and any applicable state securities laws.
Copies of the agreement covering the purchase of
these shares and restricting their transfer may be
obtained at no cost by written request made by the
holder of record of this certificate to the
secretary of the corporation at the principal
executive offices of the corporation.
4. Representations and Warranties of the Company. The Company
hereby represents, warrants and covenants to the Purchaser that, in connection
herewith:
(a) Ownership of Shares. The Company is the sole beneficial
and record owner of the Purchased Shares and that the Company has good, clear
and marketable title to the Purchased Shares, free of any liens, claims,
contractual restrictions, pledges, security interests or other encumbrances.
(b) Authority to Enter into Agreement. The Company has the
full right, power and authority to execute and deliver this Agreement and
perform his obligations hereunder.
5. Indemnification.
(a) The Company shall indemnify the Purchaser and hold him
harmless, upon demand, from and against any losses, damages, expenses or
liabilities, including without limitation reasonable attorneys' fees and
expenses, which the Purchaser may sustain, suffer or incur arising from or in
connection with the Company's breach of any covenant, representation, warranty,
agreement, obligation or undertaking hereunder. This indemnity shall survive
the closing of the transactions hereunder.
(b) The Purchaser shall indemnify the Company and hold him
harmless, upon demand, from and against any losses, damages, expenses or
liabilities, including without limitation reasonable attorneys' fees and
expenses, which the Company may sustain, suffer or incur arising from or in
connection with the Purchaser's breach of any covenant, representation,
warranty, agreement, obligation or undertaking hereunder. This indemnity shall
survive the closing of the transactions hereunder.
6. Governing Law; Jurisdiction. This Agreement will be governed by,
construed and enforced in accordance with the laws of the State of Florida.
7. Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes and terminates
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<PAGE> 5
any prior communication, agreement or understanding, whether written or oral.
This Agreement may be modified only by a writing signed by all parties.
8. Notices. Whenever notice is provided for in this Agreement, it
shall be given in writing and hand delivered, or mailed by registered or
certified mail, return receipt requested, or sent by telecopier to 1551
Sandspur Road, Suite B, Maitland, Florida 32714, in the case of the Company,
and at the addresses set forth in the records of the Company, in the case of
the Purchaser. The date of delivery shall be the date received if delivered by
hand or sent by telecopier, or within three (3) days of mailing, if mailed. Any
party may change the address to which notice shall be delivered or mailed by
notice duly given.
9. Benefits. This Agreement shall inure to the benefit of, and be
binding upon, the parties hereto and their respective heirs, beneficiaries,
legal representatives, successors, and assigns (including successive as well
immediate successors to and assigns of said parties).
10. Severability. In the event that any of the provisions of this
Agreement, or portions thereof, are held to be unenforceable or invalid by any
court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
11. Section Headings. The section headings contained herein are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
12. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and the year first set forth above.
THE COMPANY:
DEMANDSTAR.COM, INC.
By: /s/ O. F. Ramos
-----------------------------------
Name: O. F. RAMOS
Title: PRESIDENT AND
CHIEF EXECUTIVE OFFICER
{Signatures continued on following page}
5
<PAGE> 6
PURCHASER:
H.T.E., INC.
By: /s/ L. A. Gornto, Jr.
--------------------------------------
Name: L. A. GORNTO, JR.
Title: EXECUTIVE VICE PRESIDENT
/s/ O. F. Ramos
--------------------------------------
O. F. RAMOS
/s/ L. A. Gornto, Jr.
--------------------------------------
L. A. GORNTO, JR.
/s/ Bernard Markey
--------------------------------------
BERNARD MARKEY
/s/ Edward A. Moses
--------------------------------------
EDWARD A. MOSES
6
<PAGE> 1
EXHIBIT 10.16
AGREEMENT
FOR
SALE AND PURCHASE OF ASSETS
DATED AS OF JUNE 18, 1999
BY AND AMONG
INFORMATION ON DEMAND, INC.,
HTE - IOD, INC.
AND
RONALD D. BROWN
<PAGE> 2
AGREEMENT FOR SALE AND PURCHASE OF ASSETS
This AGREEMENT FOR SALE AND PURCHASE OF ASSETS (this "Agreement"),
made by and among INFORMATION ON DEMAND, INC., a Florida corporation
(hereinafter referred to as "Seller"); HTE-IOD, INC., a Florida corporation
(hereinafter referred to as "Buyer"); and RONALD D. BROWN, as the sole
shareholder of Seller (hereinafter referred to as "Shareholder"):
The undersigned parties hereby undertake and agree as follows:
1. Agreement to Sell and Purchase. Except for the Excluded Property
(as hereinafter defined), Seller agrees to sell and Buyer agrees to purchase
all of the tangible and intangible property included in the description of
property hereinafter, including, but not limited to, the following described
items of property (collectively the "Property") as of the date of Closing, upon
the terms and conditions hereinafter set forth:
a. All licensed and unlicensed computer program materials and
software, including, but not limited to, the source and object codes,
documentation, development environment, development tools (the assignments or
consents for the transfer of such development tools and of any other Property
to Buyer, together with the amounts required by such third parties to effect
such transfers, as listed on the "Schedule of Third Party Assignments" attached
hereto as Schedule "A-1", which Seller shall obtain within fifteen (15) days
after Closing at Buyer's direction and reasonable cost and expense up to a
maximum of $5,000), enhancements, and all works in progress on such computer
program materials and software comprising, applicable or relating in any manner
to the software applications described below (hereinafter, collectively
referred to as the "Computer Products"), and also including, but not limited
to, such Computer Products listed or described on the "Schedule of Computer
Products" attached as Schedule "A" hereto. For purposes of this Agreement,
"Applications" shall mean the following computer programs in both source code
and object code form.
b. All copyrights and patents, at common law or granted,
filed, or in process with any governmental agency which relate in any manner to
the Computer Products or any services, products or items in which Seller has an
ownership interest, including, but not limited to, such copyrights and
unlicensed computer programs which are listed or described on the "Schedule of
Copyrights and Patents" attached as Schedule "B" hereto.
c. The customer list and the sales/service prospect list of
Seller, including all names, addresses, phone numbers, names of principal
contact persons, past correspondence, files and current status reports related
to any product or service or sales prospects of Seller which are listed or
described on the "Schedule of Customers and Sales/Service Prospects" attached
as Schedule "C" hereto.
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d. All customer contracts and agreements and purchase orders
for licensing any of the Computer Products and for any software modifications,
software designs, software development, training, conversions, software
maintenance support and all other services and products provided by Seller,
including, but not limited to, the customer contracts and agreements and
purchase orders which are listed on the "Schedule of Contracts and Agreements
for Sales and Services" attached as Schedule "D" hereto.
e. The name "Information On Demand" and all trademarks,
service marks, internet domain names and logos or other corporate
identification of the Seller and for all of its products or services,
including, but not limited to, the names, marks, logos and other corporate
identifications which are shown on the "Schedule of Trade Names and Trade
Marks" attached as Schedule "E" hereto.
f. The interests or rights of Seller in any leases or rental
agreements giving Seller possession or use of any real or personal property
which are shown on the "Schedule of Leases and Rental Agreements" attached as
Schedule "F" hereto.
g. The interests and rights, including without limitation the
right to enforce, but, except as specifically provided below, not the
obligations, of Seller in any employment contracts, confidentially,
intellectual property rights assignments agreements or noncompete or
nondisclosure agreements, or any other contracts or agreements not otherwise
described or included herein relating or pertaining in any manner whatsoever to
the Property or to the Seller's business, including, but not limited to the
contracts or agreements which are shown on the "Schedule of Other Contracts and
Agreements" attached as Schedule "G" hereto; provided, however, that Buyer
reserves the right to reject, in its sole discretion, and not include in this
purchase transaction, certain of such other contracts or agreements listed on
"Schedule of Specifically Excluded Other Contracts and Agreements" attached as
Schedule "G-1" hereto.
h. All inventories of any product or item held for sale to
customers, manuals, brochures, other advertising materials, office supplies, or
any other items of purchased, produced, or developed materials used in relation
to or in the conduct of Seller's business, including, but not limited to, such
inventories or items which are shown on the "Schedule of Inventories" attached
as Schedule "H" hereto; and all purchase orders and commitments made by Seller
to suppliers of Seller's business and relating to the Property outstanding as
of the Closing date and which have heretofore been made available to Buyer and
listed on Schedule "H".
i. All computer and related equipment, furniture and
fixtures, office equipment and other tangible personal property of Seller,
including, but not limited to, such items of tangible personal property which
are shown on the "Schedule of Tangible Personal Property" attached as Schedule
"I" hereto.
j. All good will, business opportunities and all other assets
of the Seller, except the excluded assets described below.
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<PAGE> 4
2. Excluded Assets. The following items of property shall not be
sold by the Seller or acquired by the Buyer hereunder and are excluded from the
definition of Property (the "Excluded Assets"): (i) cash and cash equivalents
on hand or on deposit; (ii) amounts due from Seller's employees; (iii) accounts
receivables of Seller listed on a printout of Seller's accounts receivable and
existing as of the Closing date for which all of Seller's deliverables,
commitments, services or products whatsoever have been fully completed,
performed or provided to the customer by Seller as of the Closing date and such
accounts receivable are then legally payable to Seller, as set forth on the
"Schedule of Seller's Accounts Receivable" attached hereto as Schedule "X" and
made a part hereof; (iv) the corporate record book and financial books and
records of Seller excluding the books and records to be transferred hereunder,
and (v) the Seller's tax refunds and credits, utility deposits, investments,
prepaid insurance premiums and insurance claims and insurance proceeds, if any.
3. Purchase Price. The total purchase price, as hereinafter
provided, shall be $3,000,000. In consideration of Seller's and Shareholder's
performance under this Agreement and the transfer and delivery of the Property
to the Buyer, the Buyer shall pay, complete or otherwise undertake the
following:
a. Buyer shall pay the initial or fixed component of the
purchase price ("Initial Purchase Price") in the amount of One Million Dollars
($1,000,000) in cash at the Closing (as hereinafter defined). Buyer has
advanced to Seller Fifty Thousand Dollars ($50,000) of the Initial Purchase
Price, for which credit toward the payment of the Initial Purchase Price shall
be given to Buyer at Closing, and if the Closing does not occur, Seller and
Shareholder shall be jointly and severally obligated to Buyer to repay such
advance within ten (10) days of Buyer's demand. Notwithstanding the foregoing
to the contrary, at the Closing, One Hundred Thousand Dollars ($100,000) of the
Initial Purchase Price shall be retained by the Buyer in escrow for ninety (90)
days after Closing as security for any breach or violation by Seller or
Shareholder of any of Seller's or Shareholder's representations, warranties or
other provisions of this Agreement. To the extent not required as security for
any breach or violation by Seller or Shareholder of any of Seller's or
Shareholder's representations, warranties or other provisions of this
Agreement, such retained escrow funds shall be delivered by the Buyer to the
Seller at the end of the 90 days escrow period, plus all interest earned
thereon.
b. Buyer shall pay, in the aggregate, up to Two Million
Dollars ($2,000,000) in three payments over the three (3) year period following
the Closing ("Contingent Purchase Price"). The amount and payment of the
Contingent Purchase Price shall determined by and conditioned upon certain
operating profit and software development objectives being achieved after
Closing through Buyer's continued business operations of the the Property and
Seller's business purchased hereunder, as more fully described and provided in
Paragraph 4 of this Agreement.
c. As the transferee, assignee, sublessee or otherwise,
assume or undertake
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<PAGE> 5
certain of Seller's obligations or responsibilities as specifically provided
hereunder pertaining to the contracts, leases, rental agreements and other
agreements listed or described in Schedules "D", "F" and "G" attached hereto.
Notwithstanding anything in this Agreement to the contrary, no obligation,
liability or responsibility of Seller will be imposed upon Buyer on or after
the Closing unless the contract or agreement describing such obligation,
liability or responsibility is listed or described on Schedules "D", "F" or
"G."
d. For purposes of complying with the requirements of Section
1060 of the Internal Revenue Code of 1986, as amended, a schedule allocating
the Purchase Price to be paid by Buyer to the Seller and among each class of
the Property (the "Purchase Price Allocation Schedule") shall be attached
hereto as Schedule W. Each of Seller and Buyer shall prepare its federal, state
and local income tax (if any) returns for all current and future tax reporting
periods and file Form 8594 (and corresponding state, local and foreign forms)
with respect to the transfer of the Property to Buyer in a manner consistent
with the Purchase Price Allocation Schedule. If any governmental entity
challenges such allocation, the party first receiving notice of such challenge
shall give the other party prompt notice of such challenge, and the Seller and
Buyer shall cooperate in good faith in responding to such challenge, in order
to preserve the effectiveness of the Purchase Price Allocation Schedule.
Neither the Seller nor the Buyer shall report the allocation of the Purchase
Price in a manner inconsistent with the Purchase Price Allocation Schedule.
4. Contingent Purchase Price. Buyer shall pay to Seller, with no
minimum commitment by Buyer, the Contingent Purchase Price, as follows:
a. The Contingent Purchase Price shall be divided into three
equal parts of Six Hundred Sixty-Six Thousand Six Hundred Sixty-Seven Dollars
($666,667), which each such part shall be referred to as an "Annual Contingent
Purchase Price Payment". The payment by Buyer to Seller of each Annual
Contingent Purchase Price Payment shall be conditioned upon Buyer achieving an
Operating Profit (as hereinafter defined) in the fiscal year applicable for
such payment of Four Hundred Seventy-Six Thousand Seven Hundred Seventy-One
Dollars ($476,771), Five Million Seven Hundred Nineteen Thousand Four Hundred
Twelve Dollars ($5,719,412) and Ten Million One Hundred Forty-Four Thousand One
Hundred Eleven Dollars ($10,144,111), for the years ended June 30, 2000, June
30, 2001 and June 30, 2002, respectively (each referred to as the "Annual
Operating Profit Objective"). "Operating Profit" shall be defined as pre-tax
net income of Buyer determined in accordance with generally accepted accounting
principles applied on a consistent basis. In the event Buyer engages after the
Closing in business activities which are not substantially similar to the
business activities conducted by Seller prior to the Closing (the
"Non-Operating Profit Activities"), then Operating Profit shall not include any
revenues or expenses directly associated with such Non-Operating Profit
Activities. The Operating Profit for each of the above stated three years
ending after the Closing shall be determined by the independent public
accounting firm, Arthur Andersen & Co., or such other independent accounting
firm then engaged by Buyer's parent, HTE, Inc., to provide public
accounting/auditing services, within sixty (60) days after the close of each
such annual period.
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<PAGE> 6
The determination of the Operating Profit by such accounting firm shall be
final and binding upon the parties hereto. The payment of an Annual Contingent
Purchase Price Payment shall be made by Buyer to Seller within seven (7) days
after the determination that the Operating Profit for such fiscal year equals
or exceeds the Annual Operating Profit Objective for such year. In the event an
Annual Operating Profit Objective for any fiscal year is not achieved, then the
applicable Annual Contingent Purchase Price Payment for such year shall not be
due or payable by the Buyer; provided, however, that such unearned and unpaid
Annual Contingent Purchase Price Payment shall become payable upon the
cumulative and aggregate Operating Profit from July 1, 1999 through the end of
either of the fiscal years ended June 30, 2001 or June 30, 2002 equaling or
exceeding the cumulative and aggregate Annual Operating Profit Objectives from
July 1, 1999, through such year end date. The payment of the Contingent
Purchase Price shall not be conditioned upon the Buyer's continued employment
of Shareholder after the Closing.
5. Unearned Maintenance and Support Revenue. As of the Closing
date, a comprehensive description and amount of Seller's unearned maintenance
and support fees or revenue under its customer maintenance and support
contracts, if any ("Unearned Maintenance Fees") shall be mutually determined in
good faith by the parties using a straight-line or monthly prorated method,
which shall be shown on Schedule "J" attached hereto and made a part hereof.
Buyer shall receive a credit for the Unearned Maintenance Fees (the "Unearned
Maintenance Fees Revenue Credit"), which shall be applied: (i) one-third toward
the payment of the first Annual Contingent Purchase Price Payment; (ii)
one-third toward the payment of the second Annual Contingent Purchase Price
Payment and (iii) one-third toward the payment of the third Annual Contingent
Purchase Price Payment. Seller agrees that between the date hereof and the
Closing date, Seller shall not enter into any maintenance contracts with
customers without the Buyer's express prior written consent. In addition, with
respect to such customer maintenance contracts, Seller and Shareholder hereby
represent and warrant to Buyer that within the 90 days immediately preceding
the date of this Agreement, Seller has not executed or otherwise entered into
with a customer any renewed maintenance contract for a renewal term greater
than one year.
6. Other Deferred or Unearned Revenue. As of the date of Closing, a
comprehensive description of all prepaid customer development work or service
orders, including, without limitation, an estimated amount of person hours
required to fully perform such remaining services or work ("Person Hours"), and
amount of Seller's Other Deferred Revenue (defined herein), if any, shall be
mutually determined in good faith by the parties based on objective and
reasonable standards and factors, and shall be shown on Schedule "K" attached
hereto. Any dispute between the parties over such amount shall be resolved in
accordance with the Revenue Dispute Procedure set forth in Paragraph 37 of this
Agreement. Buyer shall receive a credit (the "Other Deferred Revenue Credit")
which shall be applied: (i) one-third toward the payment of the first Annual
Contingent Purchase Price Payment; (ii) one-third toward the payment of the
second Annual Contingent Purchase Price Payment and (iii) one-third toward the
payment of the third Annual Contingent Purchase Price Payment. For purposes
hereof, "Other Deferred Revenue" shall mean any customer fees or revenue amount
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<PAGE> 7
billed and/or collected by Seller under any license, development, service or
other nonmaintenance nonsupport contracts for which the product or service
applicable to such billing or collection has not been fully provided or
completed (including, without limitation, the expiration of a license from the
Seller) by Seller as of the date of Closing. In the event (i) Buyer reasonably
expends more Person Hours after the Closing than agreed to and represented by
Seller on Schedule "K" or described in the Other Deferred Revenue or (ii) Buyer
otherwise reasonably incurs reasonable direct costs in fulfilling the requisite
performance owed to the customer in excess of 80% of the amount of the Other
Deferred Revenue Credit, then Buyer shall be entitled to deduct such excess
costs from any payment otherwise due to Seller, including any funds then held
in escrow or the Contingent Purchase Price.
7. Works-in-Progress and Customer Commitments. As of the date of
Closing, a comprehensive description and analysis, including an estimated
amount of Person Hours remaining to complete, and amount of Seller's customer
works-in-progress and commitments, together with the amount of fees or other
payments Seller is legally entitled to receive from its customers for
completion of such works-in-progress or commitments after the Closing date
("Seller Customer Commitments"), which shall be mutually determined in good
faith by the parties based on objective and reasonable standards and factors,
and which shall be shown on Schedule "L" attached hereto. As provided in this
Agreement, accounts or other receivables due from Seller's customers for which
all of Seller's deliverables, services or products have been fully provided or
completed prior to the date of Closing by Seller shall be retained by Seller.
Such definition of Seller's accounts receivables shall include any unbilled
amounts due from Seller's customers for the fully completed portion of any
works-in-progress or commitments as of the date of Closing. In the event (i)
Buyer reasonably expends more Person Hours after the Closing than represented
by Seller on Schedule "L" or described in the Seller Customer Commitments or
(ii) Buyer otherwise reasonably incurs direct costs in excess of 80% of the
amount of the Seller Customer Commitments ("Work-In-Progress Credit"), then
Buyer shall be entitled to deduct such excess costs from any payment otherwise
due to Seller hereunder, including any funds then held in escrow or the
Contingent Purchase Price. Any payments received by Buyer after the Closing
from customers which are entirely applicable to the portion of the above
described completed part of the works-in-progress retained by Seller shall be
remitted to Seller within thirty (30) days of Buyer's receipt thereof.
8. Closing.
a. Date and Place of Closing. This transaction shall be
closed on or before June 24, 1999 (the "Closing"), or on such other date as
mutually agreed upon, at Buyer's offices, 1000 Business Center Drive, Lake
Mary, Florida 32746, or at such other place as mutually agreed upon; provided,
however, that Buyer shall have the right to request the consent of Seller and
the Shareholder to a ten-day extension, which consent shall not be unreasonably
withheld.
b. Conditions of Closing. The Closing shall be conditioned
upon the following:
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(i) the Buyer and Shareholder entering into an
Employment Agreement in substantially the form attached hereto as Exhibit "N",
as provided for in Paragraph 13 of this Agreement;
(ii) the representations and warranties of Seller and
the Shareholder as set forth in this Agreement being true and correct in all
material respects at and as of the date of this Agreement and as of the date of
Closing (as though made at and as of that time) and the respective obligations
of Seller and the Shareholder shall have been performed or complied with in all
material respects as required by this Agreement to be performed or complied
with at or prior to the Closing Date, and Seller and the Shareholder delivering
to Buyer an executed certificate to such effect, dated the date of Closing, in
form and substance reasonably acceptable to Buyer and its attorney; in
connection with Seller's delivery of the certificate referred to in the
foregoing sentence, Seller and the Shareholder may from time to time update and
deliver revised schedules (the "Updated Schedules") showing changes from the
schedules being delivered on the date hereof as may be necessary to reflect
developments occurring in the period between the date hereof and the Closing
date and other information required to be disclosed pursuant to this Agreement;
provided, however, that Buyer may accept the Updated Schedules and proceed with
Closing or reject the Updated Schedules and terminate this Agreement in its
sole but reasonable discretion; and provided further, that no claim may be made
by Buyer with respect to the Updated Schedules if Buyer elects to accept the
Updated Schedules and close the transactions contemplated hereby; provided
further, however, that as a condition to acceptance of any Updated Schedule(s)
and of its election to close the transactions contemplated hereby, Buyer may
require acceptable resolution in its sole but reasonable discretion of any
matter disclosed in an Updated Schedule prior to Closing;
(iii) [Intentionally Omitted];
(iv) Seller shall have delivered to Buyer (A)
state-certified copies of the Articles of Incorporation of Seller and copies of
the Bylaws of Seller as in effect immediately prior to the Closing, (ii) copies
of resolutions adopted by Seller's Board of Directors and by Seller's
Shareholder authorizing the transactions contemplated by this Agreement, and
(C) a certificate of legal existence of Seller issued by the Secretary of State
of the State of Florida and each other state in which it is qualified to do
business as of a date not more than ten days prior to the Closing date, and all
of such documents (except for the certificate of legal existence) shall be
certified as of the Closing date by a duly authorized officer of Seller as
being true, correct and complete;
(v) between the date of this Agreement and the
Closing date, there shall not have been any occurrence or event known to Seller
or Shareholder which, individually or in the aggregate, has resulted in or
which Seller or Shareholder reasonably expects will result in an effect or
change which is materially adverse to the results of
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<PAGE> 9
operations, financial condition or prospects of the Seller's business or the
ability of Buyer to use the Property, and Seller and Shareholder delivering to
Buyer an executed certificate to such effect, dated the Closing date;
(vi) each of the parties receiving the opinions of
counsel from the other party's counsel, dated the Closing date, in form and
substance reasonably satisfactory to such other party;
(vii) each of the parties executing and delivering the
respective collateral documents to which it is a party, including, without
limitation, the bill of sale, the various assignments and assumption agreements
transferring the Property;
(viii) Buyer's receipt of all required approvals,
consents and authorizations of state and federal regulatory authorities, if
any,
(ix) receipt of all required consents of third
parties, if any; and
(x) all other conditions to the Closing of the
Seller, Shareholder and the Buyer provided under this Agreement have been fully
satisfied, including without limitation, the termination of all existing
security interests and financing statements affecting the Property.
c. Due Diligence. Buyer shall have the right to request, and
Seller shall have the obligation to supply, up to Closing continuing
information concerning the Seller, including, but not limited to: (i) resumes
of all personnel; (ii) employee compensation schedules; (iii) copies of all
employment, non-compete or non-disclosure agreements; (iv) employee benefit
plans; (v) annual financial statements and supporting schedules for the past
three years; (vi) customer lists; (vii) copies of all customer contracts
(licensing and support); (viii) copies of all lease, rental or similar
contracts; (ix) copies of all insurance policies or contracts; (x) copies of
all other contracts or agreements; (xi) copies of all loans or other debt
instruments; (xii) the Seller's Articles of Incorporation, Bylaws and corporate
minutes; (xiii) copies of aged accounts receivable and accounts payable; (xiv)
copies of current detail amortization schedules of intangible assets and
depreciation schedules for tangible assets, including a complete description of
each asset item shown thereon; (xv) copies of all sales brochures and
advertisements; (xvi) copies of standard licensing, support and other customer
agreements or contracts; (xvii) description of products and services sold;
(xviii) description of any product enhancements underway or planned; (xix)
description of any development programs underway or planned; (xx) copies of any
patents, copyrights, trademark, tradename or applications therefore; (xxi)
copies of Federal and state income tax returns as filed for the fiscal years
ended on or before December 31, 1998, together with all supporting schedules;
(xxii) copies of all payroll tax information and supporting payment
documentation for the past two (2) years; (xxiii) description of any
threatened, pending or ongoing arbitration, civil, legal, regulatory or
governmental proceedings, if any, whatsoever involving Seller, together
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with the case or file number, court or agency and the names and addresses of
all other parties involved therein; (xxiv) copies of any judgments, orders,
findings or decrees of any court, governmental entity, arbitrator or mediator,
if any, in which Seller is named or involved; (xxv) copies of bills of sale
and/or purchase documents for all of Seller's material assets; and (xxvi) such
other information, copies, or items as might be reasonably requested by Buyer
relating to the Property or the business of Seller.
d. Transfer of Possession. Possession of the Property shall
be transferred to Buyer as of the date of Closing or as of the opening of
business following the date of Closing, as the situation may require.
e. Transfer of Title. Title to the Property shall be
transferred by Seller and the Shareholder, as the case by, to Buyer at the time
of Closing as follows:
(i) Tangible personal property shall be transferred
by bill of sale absolute, free and clear of all liens, encumbrances and claims
whatsoever, except as to any obligation or encumbrance, if any, to be assumed,
or taken subject to, by Buyer as specifically provided for hereunder;
(ii) Intangible personal property shall be transferred
by an absolute assignment or other legally required or appropriate document of
conveyance, free and clear of all liens, encumbrances and claims whatsoever,
except as to any obligation or encumbrance, if any, to be assumed, or taken
subject to, by Buyer as specifically provided for hereunder; and
(iii) Leasehold interests shall be transferred by
assignment or sublease, free and clear of all obligations and encumbrances
whatsoever, except as to any obligation or encumbrance, if any, to be assumed,
or taken subject to, by Buyer as specifically provided for hereunder.
f. Prorations. Property taxes for 1999, rent, utilities,
prepaid items, etc., if any, shall be prorated between Seller and Buyer through
the last day preceding the date of Closing. In addition, the Seller shall
receive credit toward the payment of Work-In-Progress Credit and any other
amount due to Buyer hereunder. Buyer shall have the option of taking over any
existing policies of insurance, if assumable, in which event premiums shall be
prorated. Taxes shall be prorated based on the most recent tax bill issued by
the taxing authority with due allowance made for the maximum allowable
discount. Any tax proration based on an estimate may, at the request of either
Buyer or Seller, be subsequently adjusted when the tax bill is issued.
g. [Intentionally Omitted].
9. [Intentionally Omitted].
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<PAGE> 11
10. Change of Corporate Name. Within fifteen (15) days after the
date of Closing, the Seller shall cease using the corporate name "Information
on Demand, Inc.", and shall adopt non-conflicting and non-confusing corporate
and trade names for its corporate existence and the conduct of its continued
business operations, if any, and shall deliver to Buyer a copy of its amended
articles of incorporation as filed with, and certified by, the Secretary of
State of the State of Florida so changing its corporate name from Information
on Demand, Inc., to such other name reasonably acceptable to Buyer.
11. [Intentionally Omitted].
12. Employment for Seller's Employees. Effective as of the date of
Closing, selected employees of Seller as listed on Schedule "R" will be offered
employment with Buyer (the "HTE Employment Opportunity"). Job descriptions,
compensation, etc. will be negotiated with each of Seller's employees. Those
employees of Seller who accept employment with Buyer will be entitled to
participate in Buyer's employee benefits programs.
13. Employment of Shareholder. Effective as of the date of Closing,
the Shareholder shall enter into with Buyer a five (5) year employment,
confidentiality and noncompete agreement (the "Employment Agreement"), in
substantially the form attached as Exhibit "N" hereto, pursuant to which the
Shareholder will agree to certain covenants and restrictions and will provide
services, in an executive employee capacity, to Buyer in regard to the
continued business operations of the Property and Seller's business purchased
hereunder. Buyer shall pay to the Shareholder pursuant to the Employment
Agreement the following: (i) an annual base salary of $150,000, and (ii) an
annual performance bonus up to a maximum of $75,000. In addition, the
Employment Agreement will include reasonable and customary provisions for such
agreements, including confidentiality, nondisclosure, non-compete, works for
hire and non-solicitation provisions.
14. Opinions of Counsel.
a. Seller. At the Closing, the Buyer shall receive a
favorable opinion, dated the date of the Closing, from Seller's outside legal
counsel, substantially stating and covering the following matters:
(i) The Seller is a corporation incorporated and
organized under the laws of the State of Florida, and its status is active;
(ii) The Seller has the corporate power to conduct
its business and to execute and deliver this Agreement and all other agreements
or instruments pertaining thereto;
(iii) The Seller, and the shareholder of Seller, have
authorized the execution, delivery and performance of this Agreement and all
other agreements or
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<PAGE> 12
instruments pertaining hereto;
(iv) This Agreement and all other agreements or
instruments pertaining thereto are valid and binding upon and enforceable
against the Seller under the laws of Florida and the Federal law of the United
States;
(v) [Intentionally Omitted];
(vi) The execution, delivery and performance by the
Seller and the Shareholder of this Agreement and all other documents pertaining
thereto, will not (i) violate the articles of incorporation, as may be amended,
or bylaws of the Seller; or, (ii) to counsel's knowledge, (A) violate any
statute, law, rule or regulation of the State of Florida or the United States
applicable to the Seller and/or the Shareholder or any order, writ, judgement
or decree of any court or any public or governmental agency or authority
applicable to the Seller or the Shareholder; (B) violate, conflict with or
constitute a default (or an event which, with the giving of notice or lapse of
time or both, constitutes or would constitute a default) under any material
agreement or instrument to which the Seller or the Shareholder is a party or by
which they or their assets, including the Property, are bound and of which
agreement or instrument counsel is aware; or (B) result in the creation of a
mortgage, security interest or other encumbrance upon the Property; and
(vii) To counsel's knowledge, there is no action, suit,
proceeding, inquiry or investigation before or by any court, public board or
body or governmental agency pending or overtly threatened in writing against
the Seller or the Shareholder or any of the properties of the Seller or
Shareholder, including the Property.
b. Buyer. At the Closing, the Seller shall receive a favorable
opinion, dated the date of the Closing, from Buyer's counsel, substantially
covering the following matters:
(i) The Buyer is a corporation incorporated and
organized under the laws of the State of Florida, and its status is active;
(ii) The Buyer has the corporate power to conduct
its business and to execute and deliver this Agreement and all other agreements
or instruments pertaining thereto;
(iii) The Buyer has authorized the execution, delivery
and performance of this Agreement and all other agreements or instruments
pertaining thereto;
(iv) This Agreement and all other agreements or
instruments pertaining hereto are valid and binding upon and enforceable
against the Buyer under the laws of Florida and the Federal law of the United
States; and
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(v) The execution, delivery and performance by the
Buyer of this Agreement and all other documents pertaining thereto, will not
(i) violate the articles of incorporation, as amended, or bylaws of the Buyer,
or (ii) to counsel's knowledge (A) violate any statute, law, rule or regulation
of the State of Florida or the United States applicable to the Buyer or any
order, writ, judgement or decree of any court or any public or governmental
agency or authority applicable to Buyer; (B) violate, conflict with or
constitute a default (or an event which, with the giving of notice or lapse of
time or both, constitutes or would constitute a default) under any material
agreement or instrument to which Buyer is a party or by which it or its assets
are bound and of which agreement or instrument counsel is aware. Seller
acknowledges and agrees that Buyer's counsel may rely on a certificate from a
responsible officer of the Buyer covering factual matters upon which counsel
may base its opinion as to the matters set forth in its opinion.
15. Debts of Seller. In lieu of compliance with the provisions of
any law or statute relating to bulk transfers or otherwise, it is agreed as
follows:
a. At Closing, Seller shall furnish to Buyer a list of the
Seller's then existing business creditors on the "Schedule of Existing
Creditors" attached as Schedule "U" hereto, which schedule shall be separately
signed and sworn to by Seller and shall contain the names and business
addresses of all such creditors and showing the amounts owed to each of them,
and also the names and addresses of all persons who are known by Seller to
assert claims against it, even though such claims are disputed or, if there are
no such creditors or claimants, an affidavit that none exist.
b. In the event Seller defaults or otherwise fails to repay or
otherwise satisfy any or all of such indebtedness in a timely manner, or as
otherwise legally or contractually required, then any amount of cash otherwise
due hereunder to Seller or the Shareholder may, at the Buyer's option and upon
the expiration of thirty (30) days from the date which Buyer delivers advance
written notice thereof to Seller and the Shareholder and during which 30 day
period Buyer has not received evidence satisfactory in its sole discretion to
demonstrate that Seller and/or the Shareholder has paid off or otherwise
satisfied such outstanding amount, be applied instead, insofar as necessary, to
the payment of such delinquent indebtedness of Seller as shown on the above
described Schedule "U" or as otherwise reasonably shown to be an indebtedness
of Seller, and the balance of such funds, if any, due hereunder shall be
disbursed to Seller or the Shareholder, as the situation may require. If any
such debts are in dispute, the necessary sums shall be withheld from
distribution until the dispute is settled or adjudicated. Buyer shall be
authorized, but not required, to make appropriate inquiries of any of such
listed creditors from time to time to ascertain whether such indebtedness is
being liquidated in a timely manner by the Seller. Neither Seller nor the
Shareholder shall have any cause of action, or claim, against Buyer for any
amount paid hereunder in good faith to any of such creditors. Notwithstanding
any provision hereof to the contrary, Buyer shall assume only such obligations
or other liabilities expressly recognized and agreed to in Paragraph 3(c).
16. Seller's and Shareholder's Representations and Warranties.
Seller and the
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Shareholder each represent and warrant to Buyer as follows (referenced
Schedules not attached hereto upon execution hereof shall be delivered on or
before Closing):
a. Corporate Existence. Seller is now and on the date of
Closing will be a corporation duly organized and validly existing and in good
standing under the laws of the State of Florida. Seller has all requisite
corporate power and authority to own, operate and/or lease the Property, as the
case may be, and to carry on its business in all states or jurisdictions as now
being conducted.
b. Authorization. The execution, delivery, and performance of
this Agreement have been duly authorized and approved by the board of directors
and Shareholder of Seller, and this Agreement constitutes a valid and binding
agreement of Seller and the Shareholder in accordance with its terms.
c. Financial Statements. Attached hereto as Schedule "O" are
Seller's balance sheet as of December 31, 1998 and income statement and other
financial information for the twelve months ended December 31, 1998 ("Financial
Statements"). The Financial Statements are prepared in accordance with the
books and records of Seller and are true, correct, and complete and fairly
present the financial condition of Seller at the date of such Financial
Statements and the results of its operations for the period then ended. Except
as described in this Agreement, since the date of the Financial Statements
there has been no material adverse change in the financial condition of Seller.
d. Title to Property. Except as described in Schedule "P"
attached hereto, or in Schedule A-1 wherein Seller shall list all requisite
assignments and consents necessary to transfer the development tools and other
Property as further described in Subparagraph 1(a) hereof, Seller holds good
and marketable title to the Property, free and clear of restrictions on or
conditions to transfer or assignment, and free and clear of liens, pledges,
charges, encumbrances or adverse rights of third parties. Except as described
in Schedule "P" of this Agreement, Seller holds valid and enforceable
intellectual property rights to the Property that may be asserted, and to
Seller's and the Shareholder's knowledge are sufficient, to prevent any third
party other than the Seller from reproducing, transmitting, distributing,
selling, licensing, leasing or otherwise conveying or exploiting for commercial
purposes, or preparing derivative works of, the source code or object code
contained in the Property. Except as described in Schedule "P", the Computer
Products do not contain any copyrighted material, including source code or
portions of source code, created by any third party other than past or current
employees of, or consultants to, the Seller ("Contributors"). Except as
described in Schedule "P", none of the Contributors has any valid claim to
ownership or joint ownership of any copyright in or to any portion of the
Property. Except as described in Schedule "P", the execution and delivery of
this Agreement and the other documents to be delivered by Seller and the
Shareholder to Buyer in this transaction, upon delivery of the Initial Purchase
Price, will vest at the Closing all of the Seller's right, title and interest
in and to the Property in Buyer and Buyer will be vested with good and
marketable right, title and interest in and to the Property, in each case free
and clear of any liens, security
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interests, mortgages, charges, encumbrances and adverse rights of every kind,
nature and description.
e. Adverse Circumstances. Except as otherwise set forth on
the "Schedule of Other Adverse Circumstances" attached as Schedule "V" hereto,
to the Seller's and the Shareholder's knowledge, there are no developments or
circumstances, existing or threatened, of a special or unusual nature that may
be materially adverse to the Property or Seller's business.
f. Transfer Not Subject to Encumbrances or Third-Party
Approval. The execution, delivery and performance of this Agreement by Seller
and the Shareholder, and the consummation of the contemplated transactions,
will not (i) contravene any provision of the articles of incorporation or
bylaws of Seller, (ii) result in the creation or imposition of any valid lien,
charge, or encumbrance on any of the Property, or (iii) require the
authorization, consent, or approval of any third party, including any
governmental entity, subdivision or regulatory body, except that the prior
written consent of the other party to the agreements listed on Schedule "A-1"
attached hereto is required for the assignment thereof by Seller to Buyer.
g. Labor Agreements and Disputes. Seller is neither a party
to, nor otherwise subject to any collective bargaining or other agreement
governing the wages, hours, and terms of employment of Seller's employees.
Neither Seller nor the Shareholder is aware of any labor dispute or labor
trouble involving employees of Seller, nor has there been any such dispute or
trouble during the two years preceding the date of this Agreement.
h. ERISA and Related Matters. Schedule "Q" sets forth a
description of all "Employee Welfare Benefit Plans" and "Employee Pension
Benefit Plans" (as defined in ss.ss. 3(1) and 3(2), respectively, of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")),
existing on the date hereof that are or have been maintained or contributed to
by the Seller. Except as listed on Schedule "Q", the Seller does not maintain
any retirement or deferred compensation plan, savings, incentive, stock option
or stock purchase plan, unemployment compensation plan, vacation pay, severance
pay, bonus or benefit arrangement, insurance or hospitalization program or any
other fringe benefit arrangement for any employee, consultant or agent of the
Corporation, whether pursuant to contract, arrangement, custom or informal
understanding, which does not constitute an "Employee Benefit Plan" (as defined
in ss. 3(3) of ERISA), for which the Seller may have any ongoing material
liability after Closing. The Seller does not maintain nor has it ever
contributed to any Multiemployer Plan as defined by ss. 3(37) of ERISA. The
Seller does not currently maintain any Employee Pension Benefit Plan subject to
Title IV of ERISA. There have been no "prohibited transactions" (as described
in ss. 406 of ERISA or ss. 4975 of the Code) with respect to any Employee
Pension Benefit Plan or Employee Welfare Benefit Plan maintained by the Seller
as to which the Seller has been party. As to any employee pension benefit plan
listed on Schedule "Q" and subject to Title IV of ERISA, there have been no
reportable events (as such term is defined in ss. 4043 of ERISA).
i. Noncancelable Contracts. At the time of Closing, there
will be no material
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leases, employment contracts, contracts for services or maintenance, or other
similar contracts existing or relating to or connected with the operation of
Seller's business not cancelable within 90 days, except those Agreements listed
on Schedules "D", "F" and "G."
j. Compliance with Laws. To the Seller's and the Shareholder's
knowledge, Seller is in compliance in all material respects with all federal,
state and local laws, regulations and ordinances and all orders, judgments and
decrees of any court or governmental authority applicable to, binding upon or
affecting any of the Property or any aspect of the Seller's business. Seller
has not been charged with violating, or, to the knowledge of Seller, threatened
with a charge of violating, or under investigation with respect to a possible
violation of any provision of any federal, state or local law, regulation or
ordinance relating to the Property or any aspect of the Seller's business.
k. Noninfringement; Litigation. There is no claim, litigation,
proceeding, or investigation pending or, to the best knowledge of Seller and
the Shareholder, threatened against Seller or the Shareholder that might result
in any material adverse change in the business or condition of Property being
conveyed under this Agreement. The Computer Products do not: (i) infringe any
copyright, or to the best knowledge of Seller and the Shareholder after
reasonable inquiry, induce or contribute to the infringement of any copyright
of any third party; (ii) to the best knowledge of Seller and the Shareholder
after reasonable inquiry, infringe, induce or contribute to the infringement of
any patent, trademark, tradename or other intellectual property right (other
than copyright) of any third party; (iii) to the best knowledge of Seller and
the Shareholder after reasonable inquiry, misappropriate any trade secret,
know-how, process, proprietary information or other right of any third party.
Neither Seller nor the Shareholder has received notice of, or has any knowledge
of, any complaint, assertion, threat or allegation that would contradict the
foregoing.
l. Good Standing. Except as set forth on the "Schedule of
Other Adverse Circumstances" on Schedule "V" hereto, all contracts, leases and
other agreements to be assigned or transferred to Buyer hereunder are in good
standing and are not in default and neither Seller nor the Shareholder knows of
any facts or circumstances which, after any satisfaction or expiration of
applicable notice or opportunity to cure provided for therein may or could
constitute an event of default. Except as set forth on Schedule "V", the
consent of all persons whose consent to such transfer or assignment is required
has been or will be secured by Seller on or prior to the date of Closing.
m. Accurate and True Information. The originals or copies of
the contracts, leases, agreements and all other documents or papers, including
Seller's financial statements and other information (except as otherwise
described in Subparagraph 16(c) hereof), which have been or will be furnished
to Buyer for examination prior to Closing are genuine, complete and accurate in
all material respects.
n. Payment of Seller's Debts. All creditors of Seller have
been or will be
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paid in a timely manner, or as otherwise legally or contractually required.
o. Timely Filing of Tax Returns. Seller shall complete and
timely file all tax returns and other governmental filings and reports legally
required by virtue of the business operation up to the date of transfer of
possession hereunder, and shall pay all taxes and other items shown to be due
by such returns, filings or reports, including, but not limited to, income
taxes, sales taxes, unemployment compensation taxes, social security taxes and
withholding taxes.
p. No Conflict. Neither Seller nor the Shareholder has entered
into any other contract to sell, mortgage or otherwise transfer, assign or
encumber the Property or any portion thereof. In addition, Seller will, up to
the time of Closing, operate and maintain the businesses in which the Property
is used in the regular course and will not violate the terms of any mortgage,
lease, or any other contract connected with the business or pertaining to the
Property.
q. Working Order, Condition and Performance of Certain Items
of Property. Subject to the representations and warranties as to title
contained hereinabove, Buyer shall accept the conveyance of all of the Property
that is tangible personal property "AS IS" and "WITH ALL FAULTS," with no other
warranties whatsoever including, without limitation, warranties as to
condition, merchantability or fitness for a particular purpose. The Computer
Products will functionally perform or operate as of the date of Closing,
including without limitation the ability to operate accurately for "Year 2000"
purposes, and thereafter substantially in accordance with the documentation for
such Computer Products provided and other representations made by Seller or the
Shareholder to the Buyer; provided, however, that to the extent any of the
Computer Products do not so perform and operate, the Buyer may deduct or offset
from any amounts owed to Buyer hereunder or otherwise seek indemnification from
Seller and/or the Shareholder, as further provided herein, the amount(s) equal
to such damage or loss. The Computer Products do not contain any virus, timer,
clock, counter, or other design or routine intended to limit access to or usage
of the Computer Products except to the extent expressly reflected in design
documentation for such products provided to Buyer.
r. Access to Premises and Information. At reasonable times
prior to the Closing, Seller will provide Buyer and its representatives with
reasonable access to its premises during business hours to review, examine,
inspect, study, copy and audit the assets, titles, contracts, books, personnel
files, records and financial and operating data of Seller and timely furnish
such additional information concerning Seller's business as Buyer from time to
time may request so that Buyer can conduct its due diligence investigation;
provided, however, that no such review, examination, inspection, study, copy or
audit by Buyer or its representatives shall be deemed to be a waiver by Buyer
of, or a release of Seller or the Shareholder from, any representations,
warranties, covenants, conditions, liabilities or obligations as set forth in
this Agreement. Each of Buyer, Seller and the Shareholder acknowledge that
certain of the information and material provided by each to the other during
the course of this transaction is privileged and confidential. Each of Buyer,
Seller and the Shareholder agree to respect the
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confidential nature of this information and material and not to disclose such
information or give such material to any unrelated third party. As to
documents, confidential information shall include any document which is clearly
marked or identified by a party as "confidential." Promptly following the
Closing date, Seller shall deliver to Buyer all materials remaining in its
employees, agents or representatives possession containing any such
confidential information, including, without limitation, information relating
specifically to source code, system and user documentation and other
documentation relating to the Computer Products, and all copies, extracts and
transcriptions thereof.
s. No Future Liens. At no time after Closing shall Buyer or
the Property be subject to a lien, encumbrance or charge arising out of or
relating to Seller's use or ownership of such Property prior to the Closing.
t. Accuracy of Representations and Warranties. None of the
representations or warranties of Seller or the Shareholder herein contains or
will contain any untrue statement of a material fact or omit or will omit or
misstate a material fact necessary in order to make statements in this
Agreement not misleading. Neither Seller nor the Shareholder knows of any fact
that has resulted, or that in the reasonable judgment of Seller and the
Shareholder may result, in a material change in the business (the basis of
which occurred prior to Closing), operations or Property of Seller that has not
been set forth in this Agreement or otherwise disclosed in writing to Buyer. In
addition, neither Seller nor the Shareholder have made any written or oral
customer commitments or promises which have not been disclosed in writing by
Seller to Buyer prior to Closing.
u. No Rights to Third Parties. Neither Seller nor the
Shareholder has: (a) sold, licensed, transferred, pledged or assigned the
Computer Products to, or otherwise provided for the escrow of source code of
the Computer Products for the benefit of, any third party, except as
specifically listed on the "Schedule of Third Party Holders of Source Code"
attached hereto as Schedule "T", or (b) granted any third party the right to
sublicense any Computer Products to any other third party, or (c) granted any
third party ownership rights in or to the Computer Products or any enhancements
of or revisions to the Computer Products, except pursuant to written
agreements, each of which is listed on Schedule "D". Except as set forth on
Schedule "T" attached hereto, after the Closing, other than the Buyer there
will be no person or entity who has the source code, or copies thereof, to the
Computer Products.
v. No Undisclosed Agreements. Neither Seller nor the
Shareholder has contracted or committed to provide development work or
customization work (or special features or functionality) with respect to any
Computer Products (including releases, versions, updates or enhancements to
Computer Products or additional products), except as provided in the agreements
listed on Schedule "D", which lists all such agreements for (i) Computer
Products that have not been fully and completely developed, customized,
shipped, delivered, and/or installed, for new Computer Product features or
enhancements that have not been developed, customized, shipped, delivered, or
installed, or (ii) development or customization services or any
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<PAGE> 19
other commitments of Seller to a customer which have not been fully and
completely performed by Seller. Seller has provided Buyer with originals or
copies of all such agreements. Seller has not made any written or oral
performance, licensing, or programming commitments to customer(s) which are not
disclosed in writing by Seller to Buyer on Schedule "D" or otherwise on or
prior to the Closing date.
w. Warranties and Warranty Claims. Other than as set forth in
the agreements listed on Schedule "D", Seller has not made any written or other
binding warranty or representation with respect to any of the Computer
Products, or any product that embodies or utilizes any of it or them. All
pending warranty claims by Seller's customers with respect to the Computer
Products are described on the "Schedule of Pending Warranty Claims" attached
hereto as Schedule "S". Seller has heretofore provided Buyer with access to
complete copies of all unresolved written customer complaints and all written
summaries of those oral customer complaints in Seller's possession relating to
the Products and any products not currently sold by Seller's business but as to
which ongoing service, support or other responsibilities is provided or owed by
the Seller's business.
17. Buyer's Representations and Warranties. Buyer represents and
warrants that Buyer is a corporation organized and existing under the laws of
the State of Florida, is active, and in good standing in all material respects,
and has the power and legal authority to enter into and carry out the
provisions of this Agreement. The execution and delivery by Buyer to Seller and
the Shareholder of this Agreement has been duly authorized by Buyer's board of
directors and is made in compliance with all requirements which may be imposed
by Buyer's articles of incorporation and bylaws, and this Agreement is a
legally binding contract of Buyer. The execution, delivery and performance of
this Agreement by Buyer, and the consummation of the contemplated transactions,
will not contravene any provision of the articles of incorporation or bylaws of
Buyer or require the authorization, consent, or approval of any third party,
including any governmental subdivision or regulatory agency.
18. Employee Wages and Benefits; Other Liabilities. Seller shall be
solely responsible for the salaries and other benefits due and payable to
Seller's employees. In the event Buyer decides to employ a person who was
previously employed by Seller, Buyer shall negotiate with and enter into a new
employment arrangement with such person under which Buyer's entire
responsibility for salaries, vacation time, and other employee benefits, if
any, for such person shall be provided for therein. As between Seller, the
Shareholder and Buyer, Seller and the Shareholder shall have sole
responsibility and joint and several liability for the defense of, and will
hold Buyer harmless from, any damages or loss resulting from, any claims that
may arise at any time against Seller, the Shareholder or Buyer in connection
with the Property or the operation of the business as a result of an act,
transaction, event or anything occurring prior to the date of Closing.
19. Indemnification and Hold Harmless and Right of Set-off of Buyer.
Notwithstanding anything herein to the contrary, the Seller and the
Shareholder, jointly and
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<PAGE> 20
severally, agree to defend, hold harmless and indemnify the Buyer and its
affiliates, and their respective employees, directors, officers, agents,
representatives, successors and assigns (the "Buyer Indemnified Parties"), on
an after tax basis, from and for all claims, demands, actions, damages,
liabilities and losses (including court costs, reasonable attorneys' fees and
other expenses, whether or not suit is filed, and including such costs, fees
and expenses in any trial court and on any appeal) ("Adverse Consequences")
that may accrue, arise, be made against or sustained by any of the Buyer
Indemnified Parties following the date of Closing for the following
circumstances: (i) the failure of the Computer Products to functionally perform
substantially in accordance with the representations and documentation provided
by Seller and/or the Shareholder to Buyer on or prior to the Closing; (ii) as a
result of any commitment or promise made on behalf of Seller to any customer or
potential customer of Seller which is not disclosed in writing to Buyer on or
prior to Closing; or (iii) as a result of any breach of any of Seller's or the
Shareholder's representations, covenants or warranties set forth herein or any
other provision of this Agreement; provided, however, that: (A) the Shareholder
shall not have any obligation to indemnify Buyer Indemnified Parties hereunder
until Buyer Indemnified Parties have suffered by reason of all such breaches in
excess of a $15,000 aggregate threshold (at which point the Shareholder will be
obligated to indemnify the Buyer Indemnified Party or Buyer Indemnified Parties
from and against all such Adverse Consequences relating back to the first
dollar), provided, however, that the representations and warranties set forth
herein shall be interpreted for the purpose of determining a breach thereof
within the indemnification provisions set forth herein, including without
limitation the threshold described in this clause (a), as if the word
"material" or other like materiality or qualifying provision was not included
in such representation or warranty; and (b) the aggregate amount of
indemnification payments that may be required from the Shareholder shall not
exceed the aggregate amount of all amounts received by Seller and the
Shareholder hereunder, including without limitation the Initial Purchase Price
and Contingent Purchase Price. Buyer and its affiliates shall have the right to
set-off any obligations and/or indemnification owing from Seller and/or the
Shareholder under this Agreement against any payments or other obligations
which may otherwise be owing to Seller and/or the Shareholder from Buyer and
its affiliates hereunder; provided, however, that such right of set-off shall
not apply to any Base Salary due from Buyer and/or its affiliates to
Shareholder under the Employment Agreement entered into between Buyer and
Shareholder
20. Indemnification and Hold Harmless of Seller and Shareholder.
Notwithstanding anything herein to the contrary, the Buyer hereby agrees to
defend, hold harmless and indemnify the Seller and the Shareholder, and each of
them, and their respective employees, directors, officers, agents,
representatives, successors and assigns (the "Seller Indemnified Parties"), on
an after tax basis, from and for all Adverse Consequences that may accrue,
arise, be made against or sustained by any of the Seller Indemnified Parties
following the date of Closing as a result of any breach of any of Buyer's
representations, covenants or warranties set forth herein or any other
provision of this Agreement.
21. Third Party Claims.
19
<PAGE> 21
a. If any third party makes a claim for which any party
claiming indemnification under Paragraphs 19 or 20 hereof (an "Indemnified
Party") from the indemnifying party (an "Indemnitor"), the Indemnified Party
shall as soon as practicable notify Indemnitor of the details of the claim
("Claim Notice"); provided, however, that no delay on the part of the
Indemnified Party in notifying any Indemnitor shall relieve the Indemnitor from
any obligation hereunder unless (and then solely to the extent) the Indemnitor
thereby is prejudiced.
b. After receiving a Claim Notice, Indemnitor may elect, by
written notice to the Indemnified Party, to assume the defense of such claim by
using counsel selected by Indemnitor, acting reasonably, so long as (i)
Indemnitor notifies Indemnified Party in writing within fifteen (15) days after
Indemnified Party has given notice of such third party claim that Indemnitor
will indemnify (without reservation) Indemnified Party from and against the
entirety of any Adverse Consequences Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by such claim,
(ii) Indemnitor provides Indemnified Party with evidence reasonably acceptable
to Indemnified Party that Indemnitor will have the financial resources to
defend against such claim and fulfill its indemnification obligations
hereunder, (iii) such claim involves only money damages and does not seek an
injunction or other equitable relief, (iv) settlement of, or an adverse
judgment with respect to, the claim is not, in the good faith judgment of
Indemnified Party, likely to establish a precedential custom or practice
materially adverse to the continuing business interests of Indemnified Party,
and (v) Indemnitor conducts the defense of such claim actively and diligently.
c. So long as Indemnitor is conducting the defense of such
claim in accordance with the subparagraph (b) above, (i) Indemnified Party may
retain separate co-counsel at its sole cost and expense and participate in the
defense of such claim, (ii) Indemnified Party will not consent to the entry of
any judgment or enter into any settlement with respect to such claim without
the prior written consent of Indemnitor (not to be withheld unreasonably), and
(iii) Indemnitor will not consent to the entry of any judgment or enter into
any settlement with respect to such claim without the prior written consent of
Indemnified Party (not to be withheld unreasonably).
d. In the event any of the conditions in the subparagraph (b)
above is or becomes unsatisfied, however, (i) Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any settlement
with respect to, such claim in any manner it reasonably may deem appropriate
(and Indemnified Party need not consult with, or obtain any consent from, any
Indemnitor in connection therewith), and (ii) Indemnitor will remain
responsible for any Adverse Consequences Indemnified Party may suffer resulting
from, arising out of, relating to, in the nature of, or caused by such claim to
the fullest extent provided in this Paragraph 21.
22. News Release. Except for any press release by Buyer made in
conjunction with the execution of the letter of intent in respect of this
transaction, on or before the Closing date, neither Seller, the Shareholder nor
Buyer shall (nor shall any party permit any of its respective
20
<PAGE> 22
affiliates to), without prior consultation with the other party and the other
party's review and consent to any public announcement concerning the
transactions contemplated hereby (which consent shall not be unreasonably
withheld), issue any press release or make any public announcement with respect
to the transactions contemplated hereby except such disclosures as may be
required by law. During such period each party shall, to the extent
practicable, allow the other party reasonable time to review and comment on
such release or announcement in advance of its issuance and use reasonable
efforts in good faith to reflect the reasonable and good faith comments of such
other party; provided, however, that neither party shall be prevented from
making any disclosure required by law at the time so required; provided
further, that Seller and the Shareholder hereby consent in advance to Buyer's
press release concerning the transactions contemplated hereby upon execution of
this Agreement by the parties. In addition, Seller and the Shareholder will
assist Buyer in communicating the benefits of the transactions contemplated
hereby to customers and assist Buyer in maintaining its relationships with
existing and prospective customers of the business purchased by Buyer hereby.
23. Restrictive Covenants.
a. Restricted Activities of Seller and the Shareholder. At no
time after the Closing will Seller or the Shareholder represent to any third
party that Seller or the Shareholder still owns or operates the Seller's
business operated by Seller immediately prior to Closing (the "Business") or
the Property as conveyed to Buyer hereunder or is the successor in interest of
the Business or the Property. In addition, for the period beginning on the
Closing date and continuing for the three (3) years thereafter during which the
Contingent Purchase Price shall be determine (the "Seller Restricted Period"),
Seller shall not, and for the period beginning on the Closing date and
continuing until the later of (i) the Seller Restricted Period, or (ii) two (2)
years after the termination of the respective Employment Agreement, as further
described therein, neither Shareholder shall (the "Shareholder Restricted
Period"), directly or indirectly, alone or as a partner, joint venturer,
officer, director, member, employee, consultant, agent, independent contractor
or shareholder of or lender to, or otherwise:
(i) engage in or own any interest (except as a
passive investor of less than five percent (5%) of total debt and equity of a
publicly traded company) in, any business or other activity whose products or
services compete with the Business, or the Computer Products (or any upgrades,
enhancements, or other releases, modifications or customizations thereof) or
otherwise which enterprise is the same as or similar to the line of business of
the Buyer (its predecessors or affiliates) (a "Competitive Business");
provided, however, that it is expressly agreed by the parties hereto that the
Shareholder may engage in, be employed by or own an interest in any business or
other activity whose products or services are not similar to or otherwise
compete with the Computer Products (or any upgrades, enhancements, or other
releases, modifications or customizations thereof); provided further, however,
that a Shareholder may request in writing from Buyer its prior consent with
respect to such Shareholder's activity and Buyer shall promptly provide to such
Shareholder a written response thereto stating whether or not it considers such
activity to violate any of the restrictive covenants set forth herein and, if
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<PAGE> 23
still in force, in the Employment Agreement. In giving its consent to such
Shareholder's activity as contemplated in the immediately preceding sentence,
Buyer may request that such Shareholder provide a written undertaken to Buyer
(A) reaffirming his intention and obligation to abide by all the restrictive
covenant provisions of this Section 23 (and any other similar existing
restrictive covenants in an Employment Agreement), and (B) representing and
warranting that he has disclosed to any entity which is employing him the
existence and binding nature of restrictive covenant provisions of this Section
23 on or before the date of such written notice; and
(ii) divert, induce, or attempt to divert or induce
any existing or prospective business or customer(s) of Buyer (including Parent
or any other affiliates of Buyer) as it relates to the operation of the
Business or the Computer Products (or any upgrades, enhancements, or other
releases, modifications or customizations thereof) to any other person or
entity, by direct or indirect inducement or otherwise, in any Competitive
Business or the Property.
b. Restriction on Employee Solicitation. During the later of
the Seller Restricted Period and Shareholder Restricted Period, neither Seller
nor the Shareholder(s) shall solicit, or attempt to solicit, any person for
employment who was an employee of Seller with respect to the Business or the
Property as of the Closing date or who is at that time already employed by
Buyer or any of its affiliates, or otherwise directly or indirectly induce or
seek to induce such person to leave his or her employment with Buyer.
c. During the Shareholder Restricted Period, no Shareholder
shall, directly or indirectly, in any way utilize, disclose, copy, reproduce or
retain, or attempt to utilize, disclose, copy, reproduce or retain, in its
possession the proprietary rights, records or other information transferred or
otherwise relating to the Business or the Property transferred hereby,
including, but not limited to any customer lists, all of which shall be deemed
confidential information, except information which has been publicly disclosed
by Buyer or by a third party not in violation of any applicable law or
agreement, or is lawfully required to be disclosed by any governmental agency
or applicable law; provided, however, that the Shareholder(s) shall be allowed
reasonable access to review and copy such records for purposes of litigation
and tax audits and tax preparation, but with respect to any litigation brought
by a Shareholder against or adverse to Buyer or any of its affiliates, such
access shall be only to the extent required under laws and rules of procedure
and discovery applicable to such proceeding.
d. Scope of Restriction.
(i) The provisions of this Paragraph 23 constitute a
series of separate covenants for each county, state (including the District of
Columbia) and country in which Buyer or an affiliate of Buyer transacts
business.
(ii) In the event that any other provision of this
Paragraph 23 or the application of any such provision shall be held to be
prohibited or unenforceable in any jurisdiction, such provision shall, as to
such jurisdiction, be ineffective to the extent of such
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<PAGE> 24
prohibition or unenforceability. The remaining provisions of this covenant to
refrain from competition shall remain in full force and effect, and any such
prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction. The parties
shall use their best efforts to replace the provision that is contrary to law
with a legal one approximating to the extent possible the original intent of
the parties.
(iii) For purposes of this Paragraph 23, "Buyer" also
shall include any existing or future affiliates or subsidiaries or
successors-in-interest of Buyer, including without limitation, successors by
merger or consolidation as Buyer.
e. Ancillary Agreement. The parties acknowledge that their
agreements in this Paragraph 23 are ancillary to an otherwise enforceable
agreement.
f. Reasonably Necessary. Seller, the Shareholder and Buyer
agree that there exist legitimate business interests which justify the need for
the restrictive covenants set forth in this Paragraph 23, including, without
limitation, (i) the Property is valuable, confidential business information and
is the basis of the bargain between the parties hereto, (ii) substantial
relationships with the specific prospective and existing customers of Buyer and
of Seller are associated with, and are a significant part of, the Property
being acquired hereby, and (iii) there exists significant customer goodwill
associated with (A) the ongoing Business by way of the Computer Products, the
trademarks and other intellectual property being conveyed by Seller and/or the
Shareholder hereby and (B) the areas where the Buyer, and the Business of the
Seller, transacts business. Seller, Shareholder and Buyer agree that the
restrictive covenants set forth in this Paragraph 23 have been drafted so as to
reflect the parties intent that such covenants be upheld by a court
interpreting such provisions, including, without limitation, under Florida
Statute 542.335(1)(d)(3).
24. Ordinary Course of Business. From the date hereof until the
Closing, Seller and the Shareholder covenants and agrees (i) to conduct the
Business only in, and Seller shall not take any action except in, the ordinary
course, consistent with past practices, and (ii) to use, and the Shareholder
shall cause Seller to use, Seller's best commercially reasonable efforts to
preserve intact Seller's business organizations, to keep available the services
of its current management/officers, employees and consultants, and to preserve
its present relationships with customers, suppliers and other persons with
which it has significant business relations.
25. Brokerage. Each party hereto warrants to the other that it has
not dealt with any brokers or incurred any brokerage fees or other commissions
in connection with this transaction, and agrees to hold the other harmless
from, and indemnify the other for, any claims for any such fees or commissions.
26. Specific Performance. Upon default hereunder the non-defaulting
party shall be entitled to make claim for specific performance of the terms of
this Agreement, in which event the defaulting party shall waive the defense
that there is an adequate remedy at law or in money damages.
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<PAGE> 25
27. Attorneys' Fees; Costs. In any action to enforce the provisions
of this Agreement, the prevailing party shall be entitled to recover all
reasonable attorneys' fees, court costs and other expenses incurred in
connection therewith, including such fees and costs in the trial court and on
any appeal.
28. Assignment. Except for an assignment or transfer between Buyer
and its affiliates, including without limitation, Parent, and except for an
assignment of Seller's royalty rights hereunder to the Shareholder, neither
this Agreement nor any right, privilege, obligation or duty hereunder is
assignable or may be delegated without the written consent of the other party.
29. Notices. All notices provided for herein shall be deemed to have
been properly made if deposited in the U.S. mail, postage prepaid, and
certified, to the following addresses:
a. If to Seller or the Shareholder:
Ronald D. Brown
Post Office Box 600
Winter Park, Florida 32790-0600
with a copy to:
Nancy S. Freeman, Esq.
Winderweedle, Haines, Ward & Woodman, P.A.
Post Office Box 880
Winter Park, Florida 32790-0880
b. If to Buyer:
HTE-IOD, Inc.
Attention: Chief Financial Officer
1000 Business Center Drive
Lake Mary, Florida 32746
with copy to:
L. A. Gornto, Jr., Esq.
149-F South Ridgewood Avenue
Daytona Beach, Florida 32114
Any such notice shall be deemed given as of the date delivered, if served
personally, or as of the date deposited in any post office box regularly
maintained by the United States Postal Service, if mailed.
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<PAGE> 26
30. Additional Items. Each party agrees to execute and deliver in
proper form any additional items or documents that may appear after Closing to
be necessary to fully accomplish the purposes and objectives of the parties to
this Agreement.
31. Paragraph Headings. The paragraph headings given throughout this
Agreement have been inserted only as a matter of convenience and for ease of
reference, and in no way define, limit or describe the scope of this Agreement
or the intent of any provision thereof.
32. Governing Law. This Agreement and the rights of the parties
shall be governed by and construed or enforced in accordance with the laws of
the State of Florida, without giving effect to principles of conflicts of laws.
33. Gender. All pronouns and any variations thereof shall be deemed
to refer to the masculine, feminine and neuter, singular or plural, as the
identity of the person or persons may require.
34. Survival of Representations and Warranties; Disclosure and
Accommodation.
a. Each of the representations and warranties made by the
Shareholder contained in subparagraphs 16(h), (j), (o), (s) and (w) shall
survive the Closing date and continue in full force and effect until the
expiration of any applicable statute of limitations, at which time the
respective representation or warranty shall expire. Each of the representations
and warranties made by the Shareholder contained in subparagraphs 16(q) and (k)
shall survive the Closing and continue for so long as royalties are paid by
Buyer hereunder. All other of the representations and warranties made by the
Shareholder shall survive the Closing Date and continue in full force and
effect for a period of three (3) years thereafter. Each representation,
warranty, covenant and agreement of the parties contained in this Agreement is
independent of each other representation, warranty, covenant and agreement.
Each of the representations and warranties of Buyer shall expire at the
Closing. The covenants and agreements of the parties contained in this
Agreement shall survive until fully performed. Notwithstanding any knowledge of
facts determined or determinable by any party by investigation, each party
shall have the right to fully rely on the representations, warranties,
covenants and agreements of the other parties contained in this Agreement or in
any other documents or papers delivered in connection herewith.
b. Matters disclosed on a Schedule herein shall be deemed to
be adequate disclosure for purposes of disclosing information only with respect
to the particular section of this Agreement to which such Schedule relates,
except to the extent that such matters are also disclosed on, or
cross-referenced to, another Schedule. To the extent that a matter is
disclosed, but a material circumstance related thereto is not ascertainable
from the information disclosed on the Schedule concerning such matter by review
of the specific agreements, documents or other information identified on the
Schedule and made available for review, it shall not be deemed to
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<PAGE> 27
be adequate disclosure of such material circumstance.
35. Counterparts. This Agreement may be executed in counterparts,
all of which together shall comprise one and the same instrument.
36. Effect of Agreement. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the successors and assigns of the parties.
37. Dispute Resolution. If any dispute, claim, question or
disagreement (a "Disputed Matter") arises between any of the parties hereto
which relates to this Agreement or a breach of this Agreement, the parties
shall use their best efforts to settle such Disputed Matter. If the parties
cannot reach a mutually agreeable solution to such Disputed Matter within
twenty (20) days of one party sending the other party written notice of such
Disputed Matter (the "Resolution Period"), the Disputed Matter shall be
submitted to arbitration as hereinafter provided.
38. Arbitration. After the Resolution Period has expired, upon the
demand of any party to this Agreement, any controversy or claim arising out of
or relating to this Agreement, or any breach thereof, including, without
limitation, any claim that this Agreement or any portion thereof is invalid,
illegal or otherwise voidable, shall be submitted to arbitration before and in
accordance with the rules of the American Arbitration Association and judgment
upon the award may be entered in any court having jurisdiction thereof.
Notwithstanding the foregoing to the contrary, either party shall have the
right to seek and obtain any provisional remedy, including, without limitation,
a temporary restraining order, injunctive relief, or other equitable relief,
from any court of competent jurisdiction, as may be necessary in such party's
sole subjective judgment, to protect its interests during the pendency of such
arbitration. The prevailing party to said arbitration shall be entitled to an
award of reasonable attorneys' fees. The situs of the arbitration proceedings
shall be the regional office of the American Arbitration Association which is
located nearest to Lake Mary, Florida, or such other office of the American
Arbitration Association as the parties hereto shall mutually agree.
39. Events of Termination. This Agreement may be terminated by
written notice of termination at any time before the Closing Date only as
follows:
a. Mutual Consent. By mutual written consent of Seller, the
Shareholder and Buyer; or
b. Breach. By Seller/the Shareholder or Buyer if the other
party(ies) or its affiliates shall have (a) breached or otherwise materially
misstated any representation or warranty contained herein which would result in
the failure of such party to satisfy the conditions to Closing set forth in
Paragraph 8(b), or (b) breached any covenant, undertaking or restriction
contained herein which would result in the failure of such party to satisfy the
conditions to Closing set forth in Paragraph 8(b).
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<PAGE> 28
40. Entire Agreement. This Agreement contains the entire agreement
and understanding between the parties. There are no oral understandings, terms,
or conditions, and neither party has relied upon any representations, express
or implied, not contained in this Agreement. All prior understandings, terms,
conditions, or negotiations are deemed merged in this Agreement. This Agreement
shall not be changed or supplemented orally.
Executed as of the 18th day of June, 1999, effective as of the date
and year first above written.
Signed, sealed and delivered
in the presence of:
HTE -IOD, INC.
/s/ By: /s/ L.A. Gornto, Jr.
- ----------------------------- ------------------------------------------
Witness as to Buyer L. A. Gornto, Jr., Executive Vice President
(Corporate Seal)
INFORMATION ON DEMAND, INC.
/s/ By: /s/ Ronald D. Brown
- ----------------------------- -----------------------------------------
Witness as to Seller Ronald D. Brown, President
(Corporate Seal)
SHAREHOLDER:
/s/ /s/ Ronald D. Brown
- ----------------------------- ---------------------------------------------
Witness as to Shareholder Ronald D. Brown, in his individual capacity
<PAGE> 1
EXHIBIT 10.17
AGREEMENT OF COMMITMENT TO EXERCISE RIGHTS
THIS AGREEMENT is entered into this as of the 21st day of December
1999 by and among DemandStar.com, Inc., a Florida corporation (the "Company")
and O. R. Ramos ("Ramos"), L. A. Gornto, Jr. ("Gornto"), Bernard B. Markey
("Markey"), William Knox North ("North"), Edward S. Jordan ("Jordan") and
Edward A. Moses ("Moses") (each of Ramos, Gornto, Markey, North, Jordan and
Moses a "Purchaser" and collectively the "Purchasers").
RECITALS:
WHEREAS, the Company proposes to issue rights to purchase its common
stock, par value $.0001 per share (the "Common Stock"), pursuant to a
registration statement on Form S-1 filed with the Securities and Exchange
Commission in December 1999 (the "Rights Offering"); and
WHEREAS, the Company and the Purchasers are entering into this
Agreement to provide for a minimum subscription amount for the Rights Offering.
NOW THEREFORE, in consideration of the mutual covenants and agreements
set forth herein, the parties hereto do hereby agree as follows:
1. Recitals. The foregoing Recitals are true and correct and are
incorporated herein by this reference.
2. Commitment to Exercise Rights and Subscribe for Shares.
(a) Each Purchaser represents that as of the date hereof he
holds H.T.E., Inc. shares and/or stock options which would entitle him to
rights (pursuant to the Rights Offering) to purchase Common Stock in the
following amounts and agrees on his own behalf that he shall exercise his
rights to subscribe for the total number of shares of Common Stock set forth
opposite his name below:
Purchaser Shares of Common Stock
--------- ----------------------
Ramos 407,424 shares
Markey 62,267 shares
Gornto 344,000 shares
North 75,032 shares
Moses 12,500 shares
<PAGE> 2
(b) Each Purchaser further agrees on his own behalf that
effective on the closing date of the Rights Offering (the "Closing Date"), he
shall exercise rights to subscribe for the total number of additional shares of
Common Stock ("Additional Shares") set forth opposite such Purchaser's name
below, and in the order of priority below, in the event not all shares of
Common Stock are subscribed for in the Rights Offering:
(i) First, North shall acquire the lesser of: (X) 150,000
Additional Shares or (Y) the number of shares of unsubscribed Common Stock
available on the Closing Date.
(ii) Second, Jordan shall acquire the lesser of: (X) 100,000
Additional Shares or (Y) the number of shares of unsubscribed Common Stock
available on the Closing Date, less the Additional Shares acquired by North.
(iii) Third, Markey shall acquire the lesser of: (X) 50,000
Additional Shares or (Y) the number of shares of unsubscribed Common Stock
available on the Closing Date, less the Additional Shares acquired by North and
Jordan.
3. Mechanics of Payment for Shares.
(a) With respect to the shares acquired under Section 2(a),
above, the Purchasers shall exercise and pay for such shares in accordance with
the terms of the Rights Offering.
(b) With respect to the purchase of Additional Shares under
Section 2(b), above, on the Closing Date, the Company shall notify the
applicable Purchasers of the number of Additional Shares that they are
obligated to purchase under subsections 2(b)(i), (ii) and (iii). Within three
(3) business days of such notice (which shall be transmitted by facsimile and
shall be deemed received on the date sent), the Purchasers acquiring Additional
Shares shall deliver the full amount of the subscription price to the Company
by wire (pursuant to wiring instructions provided by the Company) or other good
funding mechanism approved by the Company.
4. Representations and Warranties. Each Purchaser hereby
severally represents, warrants and covenants to the Company that, in connection
herewith:
(a) Review and Evaluation of Information regarding the
Company. The Purchaser has had an opportunity to examine the governing
instruments and the material disclosure and other documents and records of the
Company. The Purchaser has had an opportunity to ask questions and receive
answers from the Company and from representatives of the Company concerning the
Company's financial condition and business and to obtain such other information
that he has deemed necessary to make a fully informed decision.
(b) Purchaser's Financial Experience. The Purchaser is
sufficiently experienced in financial and business matters to be capable of
evaluating the merits and risks of its/his investment in the Common Stock. The
Purchaser is familiar with the nature and risks attending investments.
-2-
<PAGE> 3
(c) Suitability of Investment. The Purchaser understands that
the shares of Common Stock are speculative investments and involve a high
degree of risk, including but not limited to: there is no guarantee of success
of the business of the Company; he may not receive any return (economic or
otherwise) on his investment, and management and the majority shareholders of
the Company have extreme latitude and generally, the sole discretion, to
determine the financial picture, operations and potential dissolution of the
Company. The Purchaser has evaluated the merits and risks of the Purchaser's
proposed investment in the Common Stock, including those risks particular to
the Purchaser's personal situation, and he has determined that this investment
is suitable for the Purchaser. The Purchaser has adequate financial resources
for an investment of this character, and, at this time, the Purchaser could
bear a complete loss of his investment. Further, the Purchaser will continue to
have, after making his investment in the Common Stock, adequate means of
providing for his current needs, the needs of those dependent on him, and
possible personal contingencies.
(d) Investment Intent. The Purchaser is purchasing the Common
Stock for investment purposes only and for his own account, and has no present
commitment, agreement or intention to sell, distribute or otherwise dispose of
any of them or to enter into any such commitment or agreement.
(e) No Public Market for the Common Stock. The Purchaser
understands that there is currently no public market for the Common Stock and
that even if a public market were to exist, there is no certainty that a public
market could be sustained or that the Common Stock could be easily liquidated.
(f) Rule 144. The Purchaser understands that he is an
"affiliate" of the Company as such term is defined in Rule 144 promulgated
under the Act. The Purchaser also understands that although the Common Stock
acquired by Purchaser in the Rights Offering will be registered pursuant to a
Form S-1 registration statement, the Common Stock acquired by Purchaser will be
deemed "control shares" and therefore for resale purposes will be subject to
the requirements and restrictions of Rule 144 (except the holding period),
unless such shares are again registered for resale in a subsequent registration
statement. Purchaser is familiar with the provisions of Rule 144 promulgated
under the Act, which, in substance, permits "affiliates" to sell unrestricted
securities pursuant to certain volume limitations and other requirements under
Rule 144 (except for the holding period, which does not apply to unrestricted
securities.)
(g) Non-Reliance Regarding Tax Consequences. The Purchaser is
not relying on the Company or any representation contained herein with respect
to the tax or economic effect of his investment in the Common Stock. The
Purchaser has reviewed with the Purchaser's own tax advisors the federal,
state, local and foreign tax consequences of this investment and the
transactions contemplated by this Agreement. The Purchaser is relying solely on
such advisors and not on any statements or representations of the Company or
any of its representatives. The Purchaser understands that he shall be
responsible for the Purchaser's own tax liability that may arise as a result of
this investment or the transactions contemplated by this Agreement. The
Purchaser understands that Section 83 of the Internal Revenue Code of 1986, as
amended (the "Code"), taxes as ordinary income the difference between the
purchase price for the Common Stock and the fair market value of the Common
Stock as of the date any restrictions on the Common Stock lapse.
-3-
<PAGE> 4
(h) Prohibitions on Cancellation, Termination, Revocation,
Transferability, and Assignment. The Purchaser hereby acknowledges and agrees
that, except as may be specifically provided herein or by applicable law, he is
not entitled to cancel, terminate, or revoke this Agreement. The Purchaser
further agrees that he may not transfer or assign its rights or obligations
under this Agreement without the written consent of the Company.
(i) Authority to Enter into Agreement. The Purchaser has the
full right, power and authority to execute and deliver this Agreement and
perform his obligations hereunder, and when executed and delivered, this
Agreement will constitute a valid and legally binding obligation of such
Purchaser.
(j) Legends. Each certificate representing the Common Stock
may be endorsed with the following legends:
The securities represented by this
certificate have been acquired for
investment and have not been registered
under the Securities Act of 1933, as
amended, or qualified under the laws of
any state. Such shares may not be sold or
transferred in the absence of such
registration or such qualification unless
the transfer is in accordance with Rule
144 or similar rule or unless the
corporation receives an opinion of
counsel reasonably acceptable to it
stating that such sale or transfer is
exempt from the registration and
prospectus delivery requirements of said
act and any applicable state securities
laws. Copies of the agreement covering
the purchase of these shares and
restricting their transfer may be
obtained at no cost by written request
made by the holder of record of this
certificate to the secretary of the
corporation at the principal executive
offices of the corporation.
5. Representations and Warranties of the Company. The Company
hereby represents, warrants and covenants to the Purchaser that, in connection
herewith:
(a) Ownership of Shares. The Company is the sole beneficial
and record owner of the Common Stock and that the Company has good, clear and
marketable title to the Common Stock, free of any liens, claims, contractual
restrictions, pledges, security interests or other encumbrances.
(b) Authority to Enter into Agreement. The Company has the
full right, power and authority to execute and deliver this Agreement and
perform his obligations hereunder.
6. Indemnification.
(a) The Company shall indemnify the Purchaser and hold him
harmless, upon demand, from and against any losses, damages, expenses or
liabilities, including without limitation
-4-
<PAGE> 5
reasonable attorneys' fees and expenses, which the Purchaser may sustain,
suffer or incur arising from or in connection with the Company's breach of any
covenant, representation, warranty, agreement, obligation or undertaking
hereunder. This indemnity shall survive the closing of the transactions
hereunder.
(b) The Purchaser shall indemnify the Company and hold him
harmless, upon demand, from and against any losses, damages, expenses or
liabilities, including without limitation reasonable attorneys' fees and
expenses, which the Company may sustain, suffer or incur arising from or in
connection with the Purchaser's breach of any covenant, representation,
warranty, agreement, obligation or undertaking hereunder. This indemnity shall
survive the closing of the transactions hereunder.
7. Governing Law; Jurisdiction. This Agreement will be governed
by, construed and enforced in accordance with the laws of the State of Florida.
8. Entire Agreement; Amendment. This Agreement constitutes the
entire agreement between the parties hereto with respect to the subject matter
hereof and supersedes and terminates any prior communication, agreement or
understanding, whether written or oral. This Agreement may be modified only by
a writing signed by all parties.
9. Notices. Except in instances where notice is otherwise
provided for in this Agreement, notices required to be given under this
Agreement shall be given in writing and hand delivered, or mailed by registered
or certified mail, return receipt requested, or sent by telecopier to 1551
Sandspur Road, Suite B, Maitland, Florida 32714, in the case of the Company,
and at the addresses set forth in the records of the Company, in the case of
the Purchaser. The date of delivery shall be the date received if delivered by
hand or sent by telecopier or facsimile, or within three (3) days of mailing,
if mailed. Any party may change the address to which notice shall be delivered
or mailed by notice duly given.
10. Benefits. This Agreement shall inure to the benefit of, and
be binding upon, the parties hereto and their respective heirs, beneficiaries,
legal representatives, successors, and assigns (including successive as well
immediate successors to and assigns of said parties).
11. Severability. In the event that any of the provisions of
this Agreement, or portions thereof, are held to be unenforceable or invalid by
any court of competent jurisdiction, the validity and enforceability of the
remaining provisions, or portions thereof, shall not be affected thereby.
12. Section Headings. The section headings contained herein are
for reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
13. Execution in Counterparts. This Agreement may be executed in
several counterparts, each of which shall be an original and all of which
together shall constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and the year first set forth above.
-5-
<PAGE> 6
THE COMPANY:
DEMANDSTAR.COM, INC.
By: /s/ O. F. RAMOS
-------------------------------------
Name: O. F. RAMOS
Title: PRESIDENT AND
CHIEF EXECUTIVE OFFICER
{Signatures continued on following page}
-6-
<PAGE> 7
PURCHASERS:
/s/ O. F. RAMOS
-------------------------------------
O. F. RAMOS
/s/ L. A. GORNTO, JR.
-------------------------------------
L. A. GORNTO, JR.
/s/ BERNARD B. MARKEY
-------------------------------------
BERNARD B. MARKEY
/s/ EDWARD A. MOSES
-------------------------------------
EDWARD A. MOSES
/s/ WILLIAM KNOX NORTH
-------------------------------------
WILLIAM KNOX NORTH
/s/ EDWARD S. JORDAN
-------------------------------------
EDWARD S. JORDAN
-7-
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
As independent certified public accountants, we hereby consent to the use of
our report (and to all references to our Firm) included in or made a part of
this registration statement on Form S-1.
/s/ Arthur Andersen LLP
Orlando, Florida,
December 21, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-18-1999
<PERIOD-END> OCT-31-1999
<CASH> 41,253
<SECURITIES> 0
<RECEIVABLES> 6,715
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 47,968
<PP&E> 83,304
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,169,805
<CURRENT-LIABILITIES> 418,397
<BONDS> 0
0
0
<COMMON> 125
<OTHER-SE> 214,208
<TOTAL-LIABILITY-AND-EQUITY> 1,169,805
<SALES> 0
<TOTAL-REVENUES> 128,583
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 700,150
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 14,100
<INCOME-PRETAX> (585,667)
<INCOME-TAX> 0
<INCOME-CONTINUING> (585,667)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (585,667)
<EPS-BASIC> (0.47)
<EPS-DILUTED> (0.47)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
FORM OF LETTER TO H.T.E. SHAREHOLDERS, OPTION HOLDERS,
EMPLOYEES AND DIRECTORS
[H.T.E. Letterhead and Phone]
___________, 2000
To: - Shareholders of H.T.E., Inc. on __________, 2000
- Option Holders of H.T.E., Inc. Common Stock
as of December 16, 1999 who are also
Employees or Directors of H.T.E. as of
___________, 2000
- Employees of H.T.E., Inc. as of ________, 2000
Dear Shareholders, Optionees, Employees and Directors:
I am pleased to send you the attached prospectus (and subscription
instructions) concerning a rights offering ("Rights Offering") and spin-off of
our wholly-owned Internet subsidiary, DemandStar.com, Inc. ("DSI"), which is an
early-stage company. As either (i) a holder of HTE, Inc. ("HTE") common stock,
(ii) a holder of options to purchase HTE common stock as of December 16, 1999
who is also an employee or director of HTE (or a wholly-owned subsidiary) as of
five days prior to the effective date of DSI's prospectus, or (iii) an employee
of HTE (or a wholly-owned subsidiary) as of five day's prior to the effective
date of DSI's prospectus, you will receive rights ("Rights") to purchase shares
of DSI common stock. Each Right entitles the holder thereof to purchase one
share of DSI common stock.
Each holder of HTE common stock at the close of business on
_____________, 2000 (the record date for the distribution of the Rights) will
receive one Right for every one share of HTE common stock he owns on that date
(for example, if you own 500 shares of HTE common stock, you can purchase up to
500 shares of DSI common stock). Each holder of options to purchase HTE common
stock as of the close of business on December 16, 1999 who is also an employee
or director of HTE (or a wholly-owned subsidiary) as of five days prior to the
effective date of DSI's prospectus, will receive (i) one Right for each share
of HTE common stock that he has a vested option to acquire, and (ii) with
respect to each share of HTE common stock that he has an unvested option to
acquire, three-quarters (3/4) of a Right and an option (an "DSI Option") to
purchase
<PAGE> 2
Page 2
one-quarter (1/4) of a share of DSI common stock. Each employee of HTE (or a
wholly-owned subsidiary) as of five days prior to the effective date of DSI's
prospectus will receive 200 Rights (which entitle such employee to subscribe
for up to 200 shares of DSI common stock). Each DSI Option will vest in the
same manner as the associated unvested HTE option and shall be subject to the
same terms and conditions as such unvested HTE option.
There is currently no public market for the Rights or the DSI common
stock. The Rights are not transferable, except to immediate family members
(spouses and lineal descendants only), and therefore no public market for the
Rights is expected to develop. We have applied for quotation of our common
stock on the Nasdaq SmallCap Market under the symbol "___" and for trading
privileges on the ________ Stock Exchange under the same "___" symbol.
The Rights are set to expire at 5:00 P.M., EST, on ___________, 2000,
unless we extend the expiration date by up to 10 days. Accordingly, if you wish
to take advantage of your Rights, you will need to exercise them before that
time. The Rights Offering is expected to close on or about ____________, 2000.
DemandStar.com, Inc. is a provider of Internet-based procurement
systems for government agencies. DSI's procurement systems enable governments
to purchase necessary goods and services more efficiently and at lower
administrative costs while at the same time providing valuable services to
businesses selling to government agencies. Our goal is to make the DSI Network
a leading provider of a complete Internet-based procurement solution that both
government agencies and their vendors will utilize as their primary source for
the purchase and sale of required goods and services.
We are very excited about the opportunity ahead of us in the new and
rapidly growing internet medium. By conducting the Rights Offering, HTE will
create a separate publicly traded internet company. This will separate HTE's
internet business with its own unique market opportunity and risk/reward
profile from HTE's other businesses. This transaction will enable HTE
shareholders, optionees and employees to increase or decrease their level of
participation in our new business by varying their level of investment in DSI
following the Rights Offering.
The attached prospectus contains important information about the
Rights Offering and DSI's planned business. I encourage you to read it
carefully. You are not required to exercise your Rights.
<PAGE> 3
Page 3
Generally, holders of Rights, whether corporate or non-corporate, will
not recognize gain or loss upon the exercise of their Rights. A holder of
Rights receiving shares of DSI common stock upon exercise of his Rights will
acquire a tax basis in such shares equal to the sum of the exercise price paid
pursuant to the Rights Offering and the tax basis (if any) of the Rights.
Please read the information set forth under the caption "Certain Federal Income
Tax Considerations" in the attached prospectus and consult your own tax advisor
with respect to the income tax consequences to holders of Rights in the Rights
Offering.
If you have any questions concerning the Rights Offering, you should
contact us at the above number, whereupon we may direct you to DSI's
information agent if it has retained one.
Thank you for your consideration.
Sincerely,
H.T.E., Inc.
[Name; Title]
<PAGE> 1
EXHIBIT 99.2
FORM OF
INSTRUCTIONS FOR SUBSCRIPTION CERTIFICATES
INSTRUCTIONS AS TO USE OF DEMANDSTAR.COM, INC.
SUBSCRIPTION CERTIFICATES
CONSULT THE SUBSCRIPTION AGENT, YOUR BANK OR YOUR BROKER
AS TO ANY QUESTIONS
The following instructions relate to a rights offering (the "Rights
Offering") by DemandStar.com, Inc., a Florida corporation ("DSI"), a
wholly-owned subsidiary of H.T.E., Inc. ("HTE"), to (i) holders of HTE's common
stock as of __________, 2000, (ii) holders of HTE stock options as of December
16, 1999 who are also employees or directors of HTE (or a wholly-owned
subsidiary) as of ____________, 2000, and (iii) employees of HTE (or a
wholly-owned subsidiary) as of ______________, 2000 (i, ii and iii,
collectively, the "Eligible Holders"), as described in DSI's prospectus dated
______________, 2000 (the "Prospectus"). Each holder of HTE common stock as of
__________, 2000 will receive one non-transferable subscription right
(individually, a "Right" and, collectively, the "Rights") for each share of HTE
common stock held. Each holder of HTE stock options as of December 16, 1999, who
is also an employee or director of HTE (or a wholly-owned subsidiary) as of
___________, 2000, will receive (A) one Right for each share of HTE common stock
that he has a vested option to acquire, and (B) with respect to each HTE share
that he has an unvested option to acquire, 3/4 of a Right and an option to
purchase 1/4 of a share of common stock, par value $.0001 per share, of DSI (the
"Common Shares"). Each employee of HTE (or a wholly-owned subsidiary) as of
_____________, 2000 will receive 200 Rights. Each Right carries a subscription
privilege (the "Subscription Privilege") which entitles the Eligible Holder to
purchase one Common Share at the subscription price of $1.00 per share (the
"Subscription Price"). No fractional Rights, fractional Common Shares or cash in
lieu thereof will be distributed or paid by DSI. An aggregate of up to
19,225,883 Common Shares will be distributed in connection with the Rights
Offering.
The Rights will expire at 5:00 p.m., Eastern Standard Time, on
_____________, 2000, unless extended by DSI (as it may be extended, the
"Expiration Time"). The number of Rights to which you are entitled is printed on
the face of your subscription certificate (the "Subscription Certificate"). You
should indicate your wishes with regard to the exercise of your Rights by
completing the appropriate section on the back of your Subscription Certificate
and returning the Subscription Certificate to the Subscription Agent in the
envelope provided.
YOUR SUBSCRIPTION CERTIFICATE MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, OR GUARANTEED DELIVERY REQUIREMENTS WITH RESPECT TO YOUR SUBSCRIPTION
CERTIFICATES MUST BE COMPLIED WITH, AND PAYMENT OF THE SUBSCRIPTION PRICE
INCLUDING FINAL CLEARANCE OF ANY CHECKS, MUST BE RECEIVED BY THE SUBSCRIPTION
AGENT, ON OR PRIOR TO THE EXPIRATION TIME. YOU MAY NOT REVOKE ANY EXERCISE OF A
RIGHT.
1. SUBSCRIPTION PRIVILEGES; EXERCISE.
To exercise Rights, complete the reverse side of your Subscription
Certificate and send your properly completed and executed Subscription
Certificate, together with payment in full of the Subscription Price for all
Common Shares subscribed for pursuant to the Subscription Privileges, to the
Subscription Agent. FACSIMILE DELIVERY OF THE SUBSCRIPTION CERTIFICATE WILL NOT
CONSTITUTE VALID DELIVERY. Payment of the Subscription Price must be made (a) in
U.S. dollars for the full number of Common Shares being subscribed for by check
or bank draft drawn upon a U.S. bank or postal telegraphic or express money
order payable to Continental Stock Transfer and Trust Company, as Subscription
Agent; or (b) by wire transfer of same day funds to
<PAGE> 2
the account maintained by the Subscription Agent for such purpose at
the_______________ Bank, Account No. ____________ (DemandStar.com, Inc.); ABA
No. _____________.
ACCEPTANCE OF PAYMENTS.
Payment of the Subscription Price will be deemed to have been received
by the Subscription Agent only upon the (a) clearance of any uncertified check,
(b) receipt by the Subscription Agent of any certified check or bank draft drawn
upon a U.S. bank or postal, telegraphic or express money order, or (c) receipt
of good funds in the Subscription Agent's account designated above. IF PAYING BY
UNCERTIFIED PERSONAL CHECK, PLEASE NOTE THAT THE FUNDS PAID THEREBY MAY TAKE AT
LEAST FIVE (5) BUSINESS DAYS TO CLEAR. ACCORDINGLY, RIGHTS HOLDERS WHO WISH TO
PAY THE SUBSCRIPTION PRICE BY MEANS OF AN UNCERTIFIED PERSONAL CHECK ARE URGED
TO MAKE PAYMENTS SUFFICIENTLY IN ADVANCE OF THE EXPIRATION TIME TO ENSURE THAT
SUCH PAYMENT IS RECEIVED AND CLEARED BY SUCH TIME AND ARE URGED, IN THE
ALTERNATIVE, TO CONSIDER PAYMENT BY MEANS OF A CERTIFIED OR CASHIER'S CHECK,
BANK DRAFT OR MONEY ORDER OR WIRE TRANSFER OF FUNDS.
EXERCISE THROUGH BANK OR BROKER; PROCEDURES FOR GUARANTEED DELIVERY.
You may make arrangements for the delivery of funds on your behalf and
request a bank or broker to exercise the Rights represented by the Subscription
Certificate on your behalf.
Alternatively, you may cause a written guarantee substantially in the
form attached to these instructions (the "Notice of Guaranteed Delivery") from a
member firm of a registered national securities exchange or a member of the
National Association of Securities Dealers, Inc. or a commercial bank or trust
company having an office or correspondent in the United States, to be received
by the Subscription Agent at or prior to the Expiration Time, guaranteeing
delivery of your properly completed and executed Subscription Certificate within
three New York Stock Exchange trading days following the date of the Notice of
Guaranteed Delivery, together with payment in full of the applicable
Subscription Price. If this procedure is followed, your Subscription
Certificates must be received by the Subscription Agent within three (3) New
York Stock Exchange trading days of the Notice of Guaranteed Delivery.
Additional copies of the Notice of Guaranteed Delivery may be obtained upon
request from the Subscription Agent at the address, or by calling the telephone
number, indicated below.
Bankers, brokers and other nominee holders of Rights who exercise the
Subscription Privilege on behalf of beneficial owners of Rights will be required
to certify to the Subscription Agent and DSI, as to: (1) the names of the
beneficial owners on whose behalf they are acting; (2) the nominee holder's
authority to so act; (3) the aggregate number of Rights being exercised on
behalf of each beneficial owner; and (4) the aggregate number of Common Shares
that are being subscribed for pursuant to the Subscription Privileges of each
beneficial owner of Rights on whose behalf such nominee holder is acting.
CONTACTING THE SUBSCRIPTION AGENT.
The address, telephone and facsimile numbers of the Subscription Agent
are as follows:
Continental Stock Transfer & Trust Company
2 Broadway, 19th Floor
New York, NY 10004
Att:
Telephone: (212) 509-4000
Facsimile: (212) 509-5150
2
<PAGE> 3
PARTIAL EXERCISES; EFFECT OF OVERPAYMENT AND UNDERPAYMENT.
If you exercise less than all of the Rights evidenced by your
Subscription Certificate by so indicating in Section 1 of your Subscription
Certificate, the Subscription Agent will issue to you a new Subscription
Certificate evidencing the unexercised Rights. If you choose to have a new
Subscription Certificate sent to you, however, you may not receive any such new
Subscription Certificate in sufficient time to permit you to exercise the Rights
evidenced thereby.
If you have not specified the number of Common Shares being subscribed
for pursuant to the Subscription Privilege, you will be deemed to have exercised
such Subscription Privilege with respect to the maximum whole number of Common
Shares that may be acquired for the Subscription Price payment delivered after
allowances for the Subscription Price of any specified Common Shares. If you do
not specify the number of Common Shares being subscribed for, or you do not
forward full payment of the Subscription Price for the number of Rights you
indicate are being exercised or if the payment you deliver exceeds the required
Subscription Price, the payment delivered will be applied, until depleted, to
subscribe for Common Shares in the following order: (1) to subscribe for the
number of Common Shares indicated, if any, pursuant to the Subscription
Privilege; and (2) to subscribe for Common Shares until the Subscription
Privilege has been fully exercised with respect to all of the Rights represented
by your Subscription Certificate.
2. DELIVERY OF STOCK CERTIFICATES, ETC.
The following delivery and payment will be made to the address shown on
the face of your Subscription Certificate:
SUBSCRIPTION PRIVILEGE. As soon as practical after the
Expiration Time, the Subscription Agent will mail to each
Eligible Holder who validly exercises the Subscription
Privilege certificates representing Common Shares purchased
pursuant to the Subscription Privilege.
3. EXECUTION.
(A) EXECUTION BY REGISTERED HOLDER. The signature on the
Subscription Certificate must correspond with the name of the registered
Eligible Holder exactly as it appears on the face of the Subscription
Certificate without any alteration or change whatsoever. Persons who sign the
Subscription Certificate in a representative or other fiduciary capacity must
indicate their capacity when signing and, unless waived by the Subscription
Agent in its sole and absolute discretion, must certify to the Subscription
Agent and DSI as to their authority to so act.
(B) EXECUTION BY PERSON OTHER THAN REGISTERED HOLDER. If the
Subscription Certificate is executed by a person other than the Eligible Holder
named on the face of the Subscription Certificate, proper evidence of authority
of the person executing the Subscription Certificate must accompany the same
unless, for good cause, the Subscription Agent dispenses with proof of
authority.
4. METHOD OF DELIVERY.
The method of delivery of Subscription Certificates and payment of the
Subscription Price to the Subscription Agent will be at the election and risk of
the Eligible Holder, but, if sent by mail, it is recommended that they be sent
by registered mail, properly insured, with return receipt requested, and that a
sufficient number of days be allowed to ensure delivery to the Subscription
Agent and the clearance of any checks sent in payment of the Subscription Price
prior to the Expiration Time.
3
<PAGE> 1
EXHIBIT 99.3
FORM OF
NOTICE OF GUARANTEED DELIVERY
FOR SUBSCRIPTION CERTIFICATES ISSUED BY
DEMANDSTAR.COM, INC.
-----------------------------------------------------------------------
This form, or one substantially equivalent hereto, must be used to
exercise Rights pursuant to the Rights Offering described in the Prospectus
dated ____________, 2000 (the "Prospectus"), of DemandStar.com, Inc., a Florida
corporation ("DSI"), if a holder of Rights cannot deliver the subscription
certificate(s) evidencing the Rights (the "Subscription Certificate(s)") to the
Subscription Agent listed below (the "Subscription Agent"), at or prior to 5:00
p.m. Eastern Standard Time, on __________, 2000, unless extended (the
"Expiration Time"). Such form must be delivered by hand or sent by facsimile
transmission or mail to the Subscription Agent, and must be received by the
Subscription Agent on or prior to the Expiration Time. See "The Rights
Offering--Exercise of Rights" and "--Guaranteed Delivery Procedures" in the
Prospectus. Payment of the Subscription Price of $1.00 for each share of common
stock, par value $.0001 per share, of DSI (the "Common Shares") subscribed for
upon exercise of such Rights must be received by the Subscription Agent in the
manner specified in the Prospectus at or prior to the Expiration Time, even if
the Subscription Certificate evidencing such Rights is being delivered pursuant
to the procedure for guaranteed delivery thereof. The Subscription Certificate
evidencing such Rights must be received by the Subscription Agent within three
(3) New York Stock Exchange trading days after the Expiration Time.
The Subscription Agent is:
Continental Stock Transfer & Trust Company
By Hand, Courier or Mail:
Continental Stock Transfer & Trust Company
[____________ Department]
2 Broadway, 19th Floor
New York, N.Y. 10004
By Facsimile Transmission:
(Eligible Institutions Only)
(212) 509-5150
To Confirm Receipt of Facsimile Only:
(212) ___-____
For inquiries, information or requests for additional information, call
the Subscription Agent at (212) 509-4000.
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA A TELECOPY OR FACSIMILE NUMBER OTHER THAN AS
SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby represents that he, she or it is the holder of
Subscription Certificate(s) representing __________ Rights and that such
Subscription Certificate(s) cannot be delivered to the Subscription Agent at or
before the Expiration Time. Upon the terms and subject to the conditions set
forth in the Prospectus, receipt of which is hereby acknowledged, the
undersigned hereby elects to irrevocably exercise one or more Rights evidenced
by the Subscription Certificate to subscribe for Common Shares as indicated
below:
(a) Number of Common Shares subscribed for pursuant to the SUBSCRIPTION
PRIVILEGE.
Number of shares subscribed for: ______ at $1.00 per share equals
$_____.
(b) Total Subscription Price: $__________.
The undersigned understands that payment in full of the Subscription
Price, as computed above, of $____ for each Common Share subscribed for pursuant
to the Subscription Privilege must be received by the Subscription Agent at or
before the Expiration Time and represents that such payment either (check the
appropriate box):
- is being delivered to the Subscription Agent herewith; or
- has been delivered separately to the Subscription Agent, and is or
was delivered in the manner set forth below (check appropriate box
and complete information relating thereto):
- wire transfer of funds
name of transferor institution _________________________
date of transfer _______________________________________
confirmation number (if available)______________________
- uncertified check (Payment of uncertified check will not be
deemed to have been received by the Subscription Agent until
such check has cleared. Holders paying by such means are urged
to make payment sufficiently in advance of the Expiration Time
to ensure that such payment clears by such date.)
- certified check
- bank draft (cashier's check)
- postal, telegraphic or money order
If by certified check, bank draft or money order, please
provide the following information:
name of maker __________________________________________
date of check, draft or money order ____________________
check, draft or money order number _____________________
bank on which check is drawn or issuer of
money order ____________________________________________
- ----------------------------------- ------------------------------------
Signature(s) Address(es)
2
<PAGE> 3
- ----------------------------------- -------------------------------------
Name(s) Area Code and Telephone Number(s)
- ----------------------------------------------
Subscription Certificate No(s). (if available)
GUARANTEE OF DELIVERY
The undersigned, a member firm of a registered national securities exchange or
member of the National Association of Securities Dealers, Inc., commercial bank
or trust company having an office or correspondent in the United States or
another "Eligible Guarantor Institution" within the meaning of Rule 17Ad-15
under the Securities Exchange Act of 1934, hereby guarantees that the
undersigned will deliver to the Subscription Agent the certificates representing
the Rights being exercised hereby, with any required signatures and any other
required documents, all within three (3) New York Stock Exchange trading days
after the date hereof.
- ------------------------------------ ------------------------------------
Name of Firm Date
- ------------------------------------ ------------------------------------
Address Authorized Signature
- ------------------------------------ ------------------------------------
Zip Code Title
- ------------------------------------ ------------------------------------
Telephone Number Name (Please print or type)
The institution which completes this form must communicate the guarantee to the
Subscription Agent and must deliver the Subscription Certificates to the
Subscription Agent within the time period shown herein. Failure to do so could
result in a financial loss to such institution.
3
<PAGE> 1
EXHIBIT 99.4
FORM OF
LETTER TO BROKERS
DEMANDSTAR.COM, INC.
To Securities Dealers, Commercial Banks,
Brokers, Trust Companies and Other Nominees:
We are sending you this letter in connection with our offering (the
"Rights Offering") of non-transferable rights ("Rights") to purchase shares of
our common stock, par value $.0001 per share (the "Common Shares"). We have
described the Rights and the Rights Offering in the enclosed prospectus and
evidenced the Rights by a subscription certificate registered in your name or
the name of your nominee.
Each holder of common stock of H.T.E., Inc. ("HTE") as of __________,
2000 will receive one Right for each share of HTE common stock held. Each holder
of HTE stock options as of December 16, 1999, who is also an employee or
director of HTE (or a wholly-owned subsidiary) as of ______________, 2000, will
receive (A) one Right for each share of HTE common stock that he has a vested
option to acquire, and (B) with respect to each HTE share that he has an
unvested option to acquire, 3/4 of a Right and an option to purchase 1/4 of a
Common Share. Each employee of HTE (or a wholly-owned subsidiary) as of
______________, 2000 will receive 200 Rights. Each Right carries a subscription
privilege (the "Subscription Privilege") which entitles the Eligible Holder to
purchase one Common Share at the subscription price of $1.00 per share (the
"Subscription Price"). No fractional Rights, fractional Common Shares or cash in
lieu thereof will be distributed or paid. An aggregate of up to 19,225,883
Common Shares will be distributed in connection with the Rights Offering.
We are asking you to contact your eligible clients for whom you hold
HTE common stock registered in your name or in the name of your nominee to
obtain instructions with respect to the Rights. We have enclosed several copies
of the following documents for you to use:
1. A form letter which may be sent to your eligible clients for whose
accounts you hold HTE common stock registered in your name or the name of your
nominee, with space provided for obtaining the clients' instructions with regard
to the Rights;
2. The Prospectus;
3. A Subscription Certificate (if your shares are registered in your
name);
4. The Instructions as to Use of Subscription Certificates;
5. A Notice of Guaranteed Delivery;
6. A Nominee Holder Certification Form; and
7. A return envelope addressed to Continental Stock Transfer and Trust
Company, the Subscription Agent.
We request that you act promptly. The Rights will expire at 5:00 p.m.
Eastern Standard Time on _________, 2000, unless extended by us (the "Expiration
Time").
TO EXERCISE RIGHTS, PROPERLY COMPLETED AND EXECUTED SUBSCRIPTION
CERTIFICATE(S) (UNLESS THE GUARANTEED DELIVERY PROCEDURES ARE COMPLIED WITH) AND
<PAGE> 2
PAYMENT IN FULL FOR ALL RIGHTS EXERCISED MUST BE DELIVERED TO THE SUBSCRIPTION
AGENT AS INDICATED IN THE PROSPECTUS AND THE INSTRUCTIONS PRIOR TO THE
EXPIRATION TIME.
In the case of Rights that are held of record through Depository Trust
Company ("D.C."), you may exercise the Subscription Privilege by instructing
D.C. to transfer Rights from the D.C. account of the Rights holder to the D.C.
account of Continental Stock Transfer and Trust Company, the Subscription Agent,
together with payment of the Subscription Price for each Common Share subscribed
for pursuant to the Subscription Privilege.
You may obtain additional copies of the enclosed materials and may
request assistance or information from the Subscription Agent at (212) 509-4000.
Very truly yours,
DEMANDSTAR.COM, INC.
O.F. Ramos
President and Chief Executive Officer
YOU ARE NOT AN AGENT OF DEMANDSTAR.COM, INC., CONTINENTAL STOCK
TRANSFER AND TRUST COMPANY, OR ANY OTHER PERSON WHO IS DEEMED TO BE MAKING OR
WHO IS MAKING OFFERS OF SERIES A PREFERRED SHARES IN THE RIGHTS OFFERING, AND
YOU ARE NOT AUTHORIZED TO MAKE ANY STATEMENTS ON BEHALF OF ANY OF THEM, EXCEPT
FOR STATEMENTS EXPRESSLY MADE IN THE PROSPECTUS.
2
<PAGE> 1
EXHIBIT 99.5
FORM OF
BROKER LETTER TO CLIENTS
To Our Clients:
We are sending this letter because we hold shares of H.T.E., Inc.
("HTE") common stock for you. DemandStar.com, Inc., a wholly-owned subsidiary of
HTE ("DSI"), has commenced an offering to (i) HTE shareholders of record on
___________, 2000 (the "Record Date"), (ii) HTE optionholders as of December 16,
1999 who are also employees or directors of HTE (or a wholly-owned subsidiary)
as of ___________, 2000, and (iii) employees of HTE (or a wholly-owned
subsidiary) as of ______________, 2000, of non-transferable rights ("Rights") to
subscribe for and purchase shares of common stock, par value $.0001 per share,
of DSI (the "Common Shares").
As described in the enclosed Prospectus, (i) as an eligible shareholder
of HTE, you will receive one Right for each share of HTE common stock carried by
us in your account as of the Record Date, and/or (ii) as an eligible HTE
optionholder, you will receive (A) one Right for each share of HTE common stock
you have a vested option to acquire, and (B) with respect to each HTE share that
you have an unvested option to acquire, 3/4 of a Right and an option to purchase
1/4 of a Common Share. As an eligible employee, you will receive 200 Rights.
Each Right will entitle you to subscribe for and purchase from DSI one Common
Share (the "Subscription Privilege") at $1.00 per share (the "Subscription
Price").
We have enclosed your copy of the (1) Prospectus and (2) Instructions
as to Use of Subscription Certificates. The materials enclosed are being
forwarded to you as the beneficial owner of common stock carried by us in your
account but not registered in your name. Exercises of Rights may be made only by
us as the registered holder of Rights and pursuant to your instructions.
Accordingly, we request instructions as to whether you wish us to elect to
subscribe for any Common Shares to which you are entitled pursuant to the terms
and conditions set forth in the enclosed Prospectus and Instructions.
You should forward your instructions to us as promptly as possible to
permit us to exercise Rights on your behalf in accordance with the terms of the
Rights Offering. The Rights Offering will expire at 5:00 p.m. Eastern Standard
Time on _________, 2000, unless extended by DSI (the "Expiration Time"). Any
exercise of the Subscription may not be revoked.
If you wish to have us, on your behalf, exercise Rights to purchase any
Common Shares to which you are entitled, please so instruct us by completing,
executing and returning to us the instruction form on the reverse side of this
letter. IF WE DO NOT RECEIVE COMPLETE WRITTEN INSTRUCTIONS, WE WILL NOT EXERCISE
YOUR RIGHTS, AND YOUR RIGHTS WILL EXPIRE WITHOUT VALUE.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE OFFERING SHOULD
BE DIRECTED TO CONTINENTAL STOCK TRANSFER & TRUST COMPANY.
<PAGE> 2
BENEFICIAL OWNERS ELECTION FORM
INSTRUCTIONS TO BROKER
The undersigned acknowledge(s) receipt of your letter and the enclosed
materials referred to therein relating to the offering of non-transferable
rights ("Rights") to purchase shares of common stock, par value $.0001 per
share, of DemandStar.com, Inc. (the "Common Shares").
This will instruct you whether to exercise Rights to purchase the
Common Shares pursuant to the terms and subject to the conditions set forth in
the Prospectus and the related Instructions as to Use of Subscription
Certificates.
1. Please DO NOT EXERCISE RIGHTS for Common Shares.
2. Please EXERCISE RIGHTS for Common Shares as set forth below:
Subscription: _________________ x $1.00 per share = $_____________
(number of shares)
Total Payment Required = $ ________________
Payment Enclosed: $________________________
Please deduct payment from the following account maintained by you as
follows:
Type of Account ____________________ Account No. ______________
Amount to be Deducted: $______________
Signature(s)
Please type or print name(s) below
Date: ___________________, 2000
- ----------------------------------
- ----------------------------------
2
<PAGE> 1
EXHIBIT 99.6
FORM OF
LETTER TO INTERNATIONAL SHAREHOLDERS
SPECIAL NOTICE TO HOLDERS OF COMMON STOCK OF H.T.E., INC. OR HOLDERS
OF STOCK OPTIONS OF H.T.E., INC. WHOSE ADDRESSES ARE OUTSIDE THE UNITED STATES
Dear Shareholder/Optionholder/Employee:
Enclosed you will find materials relating to the offering (the "Rights
Offering") by DemandStar.com, Inc. ("DSI"), a wholly-owned subsidiary of H.T.E.,
Inc. ("HTE"), to (i) holders of record of HTE's common stock as of the close of
business ___________, 2000 (the "Record Date"), (ii) holders of HTE stock
options as of December 16, 1999 who are also employees or directors of HTE (or a
wholly-owned subsidiary) as of ____________, 2000, and (iii) employees of HTE
(or a wholly-owned subsidiary) as of _____________, 2000, of non-transferable
rights ("Rights") to purchase shares of common stock, par value $.0001 per share
(the "Common Shares"). As an eligible HTE shareholder, you will receive one
Right for each share of HTE common stock held on the Record Date. As an eligible
HTE optionholder, you will receive (A) one Right for each share of HTE common
stock that you have a vested option to acquire, and (B) with respect to each
share of HTE common stock that you have an unvested option to acquire, 3/4 of a
Right and an option to purchase 1/4 of a Common Share. As an eligible HTE
employee, you will receive 200 Rights. Each Right will entitle you to subscribe
for and purchase from DSI one Common Share (the "Subscription Privilege") at a
subscription price of $1.00 per share (the "Subscription Price").
If you wish to exercise any or all of these Rights, you must so
instruct Continental Stock Transfer and Trust Company, the Subscription Agent,
by completing, executing and returning to the Subscription Agent the
International Holder Subscription Form on the reverse side of this letter by
5:00 p.m., Eastern Standard Time in the United States, on ___________, 2000
unless extended by DSI (the "Expiration Time"). Rights not exercised by such
time will expire without value.
ANY QUESTIONS OR REQUESTS FOR ASSISTANCE CONCERNING THE RIGHTS
OFFERING SHOULD BE DIRECTED TO THE SUBSCRIPTION AGENT, AT (212) 509-4000.
<PAGE> 2
INTERNATIONAL HOLDER SUBSCRIPTION FORM
The undersigned acknowledge(s) receipt of the special notice and the
enclosed materials referred to therein relating to the offering of
non-transferable rights ("Rights") to purchase shares of common stock, par value
$.0001 per share (the "Common Shares"), of DemandStar.com, Inc.
This will instruct you whether I wish to exercise Rights to purchase
the Common Shares distributed with respect to my shares of HTE common stock
and/or my HTE stock options, pursuant to the terms and subject to the conditions
set forth in the Prospectus and the related instructions as to Use of
Subscription Certificates.
1. I do NOT wish to exercise rights for Common Shares.
2. I wish to EXERCISE RIGHTS for Common Shares as set forth below:
Subscription:__________________ x $1.00 per share = $_____________
(number of shares)
Payment in the following amount is enclosed: $____________________
Method of Payment (check one):
- Uncertified Check. (Please note that funds paid by uncertified
personal check may take at least five business days to clear.
Accordingly, registered holders who wish to pay the
Subscription Price by means of an uncertified personal check
are urged to make payment sufficiently in advance of the
Expiration Time to ensure that such payment is received and
clears by such date, and are urged to consider payment by
means of certified or cashier's check, money order or wire
transfer of funds.)
- Certified Check or Bank Check drawn on a U.S. bank or Money
Order payable to Continental Stock Transfer and Trust Company.
- Wire transfer directed to Continental Stock Transfer and Trust
Company. (Call (212) 509-4000 for wire instructions).
If the amount enclosed or transmitted is not sufficient to pay the
Subscription Price for all Common Shares that are stated to be subscribed for,
or if the number of Common Shares being subscribed for is not specified, the
number of Common Shares subscribed for will be assumed to be the maximum number
that could be subscribed for upon payment of such amount. If the amount enclosed
or transmitted exceeds the aggregate Subscription Price for all Common Shares
that the undersigned has the right to purchase pursuant to the Subscription
Privilege (the "Subscription Excess"), the Subscription Agent shall return the
Subscription Excess to the subscriber without interest or deduction.
Please mail or deliver check or money order or wire transfer payable to
Continental Stock Transfer and Trust Company for the aggregate Subscription
Price due to the Subscription Agent at the address below:
2
<PAGE> 3
By Hand, Regular Mail or Overnight Courier:
American Stock Transfer and Trust Company
[__________ Department]
2 Broadway, 19th Floor
New York, NY 10004
If you have any questions, call: Continental Stock Transfer and Trust
Company at (212) 509-4000.
- ----------------------------------
(Signatures)
Please type or print name(s) below
- ------------------------------------
Date: ________________ , 2000
3
<PAGE> 1
EXHIBIT 99.7
FORM OF
NOMINEE HOLDER CERTIFICATION
DEMANDSTAR.COM, INC.
NOMINEE HOLDER CERTIFICATION
The undersigned, a bank, broker, or other nominee holder of rights
("Rights"), in order to purchase shares of common stock, par value $.0001 per
share (the "Common Shares"), of DemandStar.com, Inc. ("DSI") pursuant to the
rights offering described and provided for in DSI's prospectus dated
___________, 2000 (the "Prospectus"), hereby certifies to DSI and to Continental
Stock Transfer and Trust Company, as Subscription Agent for such rights
offering, that (1) the undersigned has subscribed for, on behalf of the
beneficial owners thereof (which may include the undersigned), the number of
Common Shares specified below for the Subscription Privilege (as defined in the
Prospectus) and (2) each such beneficial owner's Subscription Privilege has been
exercised in full.
Number of Common Shares subscribed for pursuant to the Subscription
Privilege: _________________
--------------------------------------------
Name of bank, broker or other nominee holder
Address:
--------------------------------------------
--------------------------------------------
By:
-----------------------------------------
Name:
Title:
Dated: ____________________, 2000
