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As filed with the Securities and Exchange Commission on February 10, 2000
Registration No. 333-93445
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1/A
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)............................. 17,805,105 -- -- --(2)
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Common stock, par value $.0001 per
share, to be issued pursuant to
exercise of the rights............... 17,805,105 $1.00 $17,805,105 $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) Previously paid.
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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.
(17,805,105 RIGHTS TO PURCHASE COMMON STOCK)
17,805,105 SHARES OF COMMON STOCK
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We are distributing, at no cost, non-transferable rights to purchase our
common stock to:
- persons who own shares of common stock of H.T.E., Inc., our parent
company, on the record date of , 2000:
- persons who held HTE stock options on December 16, 1999 and who are also
employees or directors of HTE (or a subsidiary) as of February 1, 2000;
and
- persons who are employees of HTE (or a subsidiary) as of February 1,
2000.
You may purchase one share of our common stock for each right you are
issued for the price of $1.00 per share. You will be able to exercise your
rights only during a limited period. If you do not exercise your rights before
5:00 p.m., Eastern Standard Time, on , 2000, your rights will
expire. We may decide to extend the rights offering, in our discretion, for up
to days.
No public market currently exists for our common stock or the rights. We
intend to apply for quotation of our common stock on the Nasdaq SmallCap Market
or the Nasdaq National Market System under the symbol "DMND." The rights will
not be listed on Nasdaq or any securities exchange.
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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 Offering....... $17,805,105 $ 45,392 $17,759,713
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(1) DemandStar will engage the services of a licensed broker-dealer to act on
its behalf in 6 states for purposes of complying with the blue sky
securities laws of those states, and expects to pay such broker-dealer up to
5% of the aggregate subscription price of the shares sold by such
broker-dealer.
INVESTING IN OUR COMMON STOCK INVOLVES SUBSTANTIAL RISK. SEE "RISK FACTORS"
BEGINNING ON PAGE 6.
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.......................... 7
Forward-Looking Statements............ 26
The Offering.......................... 27
Use of Proceeds....................... 36
Dividend Policy....................... 37
Dilution.............................. 38
Capitalization........................ 39
Selected Financial Data............... 40
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 41
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Business.............................. 45
Management............................ 58
Executive Compensation................ 61
Related Party Transactions............ 71
Security Ownership of DemandStar...... 76
Description of Securities............. 76
Shares Eligible for Future Sale....... 86
Federal Income Tax Consequences....... 87
Legal Matters......................... 90
Available Information................. 90
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. DemandStar has not authorized any dealer, broker,
salesperson or 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 DemandStar. The information in this
prospectus is accurate only as of the date of this prospectus, regardless of the
time of delivery of this prospectus. DemandStar 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
DemandStar 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 DemandStar common stock effected in December 1999.
BUSINESS OF DEMANDSTAR
DemandStar 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. By allowing government agencies to become members in our online
network for free, we accept the responsibility of distributing various bid
requests and associated documents to vendors. This reduces administrative costs
of the member agencies. It also increases an agency's efficiency because it no
longer has to manage the distribution. The vendors pay a membership fee to get
the benefit of "real time" notification of new bid opportunities. The DemandStar
system handles all goods and services that agencies acquire through a mandatory
bid process. Typically, agencies use a mandatory bid process for procurement of
all goods and services above a certain dollar amount that are not an emergency
or sole-source procurement item or service, which amount is typically around
$5,000, but varies from agency to agency.
OUR HISTORY
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.
We have a limited operating history. We have a history of significant
losses, with a net loss of ($1,138,842) for the period from June 18, 1999 to
December 31, 1999. We anticipate that we will continue to incur significant
losses into the foreseeable future. In that 1999 was our first year of
operation, our accumulated deficit is the same as our net loss. Our auditors
have expressed a "going concern" opinion.
OUR BUSINESS MODEL
Our services are provided at no cost to participating governmental
agencies. Businesses that provide goods and services to agencies are provided
the opportunity to register with us as member vendors for an annual fee. These
services, which are included
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in a member vendor's annual fee and provided at no-cost to governmental
agencies, include the following:
- Membership management
- Notification, by e-mail and/or fax, of bid/request for proposal
opportunities to member vendors
- Web-enabled database of all procurement information from participating
agencies
In addition to the services listed above, vendors may request a "hard copy"
of bid information. In such case, the vendor is then charged a fee which varies
with the complexity of the document requested.
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
procurement systems, government agencies are able to save administrative costs
in bid notification and follow-up. Since regulations permit government agencies
to use other agencies' contracts instead of writing their own, they are able to
locate such other agencies' contracts more easily by searching our sites for
information about other existing contracts for similar goods and services.
Further, DemandStar 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 DemandStar only once for multiple agencies.
Member vendors receive "real time" bid notifications and are able to immediately
download the bid request or request for proposal at any time of day. Marketing
efforts have been primarily focused in Florida and, to date, we have over two
dozen contracts with agencies representing various cities, counties, school
districts, utility districts and aviation authorities primarily in Florida. We
also have contracts with an agency in each of Virginia and Minnesota, and we are
currently negotiating contracts with agencies in other states.
OUR GROWTH STRATEGY
Many governmental agencies have recognized the need to develop a
procurement presence on the Internet, but have not had the resources to do so
due to budgetary constraints. Our Internet-based procurement systems allow a
vendor to go to an agency's website and view outstanding bid information in a
uniform, easy-to-read manner. Our services address those budgetary concerns and
successfully serve 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 and internationally.
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."
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RELATIONSHIP BETWEEN HTE AND DEMANDSTAR
In the first quarter of fiscal 2000, HTE contributed $1,500,000 to
DemandStar to fund the costs of this rights offering, anticipated DemandStar
operating losses and for general corporate purposes. In exchange for this
investment, prior to the closing of the offering, DemandStar will issue to HTE
750,000 shares of Series A preferred stock. The 750,000 shares of Series A
preferred stock issued to HTE for $1,500,000 is convertible, at HTE's election,
into 750,000 shares of DemandStar common stock, and provides HTE
disproportionate voting rights and a liquidation preference to the other
DemandStar common shareholders. While no independent appraisal was done for the
Series A preferred stock issued to HTE, these preferences were taken into
consideration by DemandStar in establishing the fair market value at $2.00 per
share, or $1.00 more than the rights holders will pay for each share of
DemandStar common stock purchased.
Immediately following the closing of the rights offering, HTE will most
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.
The boards of directors of DemandStar and HTE are identical, with the
exception of one HTE board member, Joseph Loughry, who does not serve on the
DemandStar board. In addition, L.A. Gornto, Jr. is the only officer of
DemandStar who is also an officer of HTE.
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. The services agreement will also provide that HTE will
bill DemandStar 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, DemandStar and HTE entered
into an investment and distribution agreement with respect to HTE's $1,500,000
capital contribution to DemandStar 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 DemandStar common stock. In addition, on
December 21, 1999, DemandStar entered into a Conditional Series B Stock Purchase
Agreement with HTE, O. F. Ramos, L.A. Gornto, Jr., Bernard Markey and Edward
Moses, officers and directors of DemandStar, whereby HTE and the officers and
directors named above agreed, under certain conditions, to contribute an
aggregate of $2,000,000 to DemandStar in exchange for Series B preferred stock.
THE OFFERING
Description of the Rights
Offering..................... DemandStar is distributing the rights in this
offering to HTE which, in turn, is distributing
the rights to HTE shareholders, option holders,
directors and employees. At the closing of the
rights offering, HTE will purchase the
17,805,105 shares of DemandStar common stock
being
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registered in this offering for the price of
$1.00 per share. The aggregate purchase price
will be evidenced by a non-interest bearing
promissory note payable to DemandStar in the
principal amount of $17,805,105, which shall be
delivered and immediately thereafter repaid at
the closing of the offering from the proceeds
received from investors who exercise their
rights and purchase DemandStar common stock from
the shares purchased by HTE pursuant to the
non-interest bearing note. Immediately after the
closing of the offering, DemandStar will file a
post-effective amendment to this registration
statement to de-register any underlying shares
of common stock not subscribed for by rights
holders at closing. The note will provide that
such de-registered restricted shares shall be
redeemed by DemandStar in exchange for the then
outstanding balance due under the note.
Description of Eligible
Rights Holders............... Each holder of shares of HTE common stock on the
record date of , 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
subsidiary) as of February 1, 2000, will receive
one right for each share that he has such a
vested and/or unvested option to acquire.
Further, each person who is an employee of HTE
(or a subsidiary) as of February 1, 2000 will
receive 200 rights. Each right carries a basic
subscription privilege which entitles the holder
to purchase one share of DemandStar common
stock. We are offering up to 17,805,105 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 of DemandStar common
stock is $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.
How Rights Will be
Evidenced.................... Each holder will receive a subscription
certificate representing his rights.
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Purchase of Unsubscribed
Shares....................... In the event that not all of the rights are
exercised by the closing of the rights offering,
Messrs. Markey, North and Jordan, officers
and/or directors of DemandStar, have committed
to subscribe for a maximum aggregate of up to
450,000 shares from the pool of unsubscribed
rights available, if any. In addition, Messrs.
Markey, North, Ramos, Gornto and Moses, all
officers and/or directors of DemandStar, have
committed to purchase an aggregate of 901,223
shares based upon their current ownership of HTE
common stock and options. All such purchases of
unsubscribed shares will be made at closing and
for the price of $1.00 per share. Any shares
acquired by such officers and directors will be
restricted shares, subject to the requirements
and restrictions of Rule 144, unless such shares
are registered for resale in a subsequent
registration statement.
Number of Shares of Common
Stock to be Outstanding After
the Offering................. Immediately following this offering and assuming
maximum exercise of rights, we will have
shares of common stock outstanding.
We 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 have outstanding options for
the purchase of 1,500,000 shares in the
aggregate at an exercise price of $1.00 per
share. We 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.
Use of Proceeds.............. Fund anticipated operating losses, to provide
working capital and for other general corporate
purposes.
In this prospectus, the terms "DemandStar," "we," "us," and "our" refer to
DemandStar.com, Inc.
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HISTORICAL AND PRO FORMA FINANCIAL DATA
The following summary financial data should be read in conjunction with
DemandStar's financial statements and the related notes and "Management's
Discussion and Analysis of Financial Condition and Results of Operations"
included elsewhere in this prospectus. The financial information as of December
31, 1999, and for the period from June 18, 1999 to December 31, 1999, reflects
the financial position and results of operations of DemandStar. 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 December 31, 1999 audited balance sheet of DemandStar, as adjusted for
HTE's $1,500,000 investment in shares of Series A preferred stock. The following
summary financial information has been derived from and is qualified by
reference to DemandStar'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 DECEMBER 31, 1999
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STATEMENT OF OPERATIONS
DATA:
Revenue.................... $ 33,718 $ 132,135 $ 196,855
Operating loss............. (280,711) (270,359) (1,111,534)
Net loss................... (280,711) (270,359) (1,138,842)
Basic and diluted loss per
common share............. $ (0.91)
Weighted average number of
common shares
outstanding.............. 1,250,000
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DECEMBER 31, 1999
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PRO FORMA
ACTUAL AS ADJUSTED
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BALANCE SHEET DATA:
Cash........................................................ $ 127,733 $1,627,733
Working capital (deficit)................................... (301,640) 1,198,360
Total assets................................................ 1,311,391 2,811,391
Note payable to HTE......................................... 1,306,885 1,306,885
Series A preferred stock.................................... -- 1,500,000
Total shareholder's equity (deficit)........................ (326,304) 1,173,696
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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 included
elsewhere herein, 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 $1,409,201 for the year
ended December 31, 1999. We expect to continue to incur significant losses for
the foreseeable future. As of December 31, 1999, our accumulated deficit was
$1,138,842. 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.
BECAUSE WE HAVE A LIMITED OPERATING HISTORY, IT MAY BE DIFFICULT TO EVALUATE OUR
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. Before
investing in our common stock, you should consider the risks and difficulties we
may encounter as an early-stage company in the new and rapidly evolving
e-commerce market. These risks include our ability to:
- implement our business model;
- increase the efficiency and function of our services;
- anticipate and adapt to rapid changes in our markets;
- retain existing customers, attract new customers and maintain customer
satisfaction;
- introduce enhanced web sites, services, products and alliances; and
- minimize technical difficulties, system downtime and the effect of
Internet brownouts.
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If we do not successfully manage these risks, our business will suffer. We
cannot assure you that we will successfully address these risks or that our
business strategy will be successful.
WE EXPECT OUR OPERATING EXPENSES TO INCREASE.
Some of our expenses are fixed, including non-cancelable agreements,
equipment leases and real estate leases. These fixed costs are approximately
$2,000,000 in the short run. 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:
- 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, and
management and expansion of our employee base. 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.
OUR BUSINESS PLAN DEPENDS ON ACCEPTANCE OF OUR SERVICE BY GOVERNMENTAL AGENCIES.
In order to expand the number of vendor subscriptions for our service, from
which we anticipate deriving more than 85% of our revenue under our business
plan, our program
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must be accepted by governmental agencies. There are various factors which could
delay acceptance by or prevent agencies from contracting with us for our
service, including:
- political acceptance of the concept of governmental agencies contracting
with third parties to distribute public information, which has been
offered traditionally only by the governmental agencies, often without
charge;
- changes to state legislation authorizing government's contracting with
third parties to distribute public information;
- the high cost of implementing and maintaining Internet technology in a
budget-constrained environment;
- the risks associated with moving from older, established technologies to
rapidly evolving Internet technologies;
- the intense competition for qualified technical personnel;
- the lengthy and political appropriations process for obtaining funds to
acquire and implement new technology; and
- the concern governmental agencies may have over security and privacy of
information they view as part of the public trust.
Delays in the approval process, or failure to obtain such approvals, from
government agencies could harm our business, operating results and financial
condition.
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.
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, 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 a request for proposal.
Whether or not we are able to respond successfully to requests for proposals in
the future will significantly impact our business. We cannot guarantee that we
will win any bids in the future through the request for proposal process. We
also cannot guarantee that any winning bids will ultimately result in contracts
because after the winning bid is identified, negotiations then occur between the
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winning party and the agency. We cannot guarantee the success of those
negotiations. Our business, financial condition and operating results would be
harmed if we fail to obtain profitable future contracts through the request for
proposal 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 85% of our revenues for the year ended
December 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 to rely 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:
- the internal review process by the government agencies for bid
acceptance;
- changes to the bidding procedure by the government agencies;
- changes in government administrations;
- 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 contracts may be cancelled by either party upon 30 days' notice.
Further, our competitors or other third parties could bring lawsuits, seek
legislation or in other ways attempt to have our contracts voided by alleging
incorrect procurement processes or otherwise protesting our contracts. This
would harm our business, results of operations and financial condition.
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ENTRANCE OF POTENTIAL COMPETITORS INTO THE MARKETPLACE COULD HARM OUR ABILITY TO
MAINTAIN OR IMPROVE OUR POSITION IN THE MARKET.
We operate in a very competitive business environment. 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. Moreover, government entities providing data
to us are not subject to exclusive agreements with us. Thus data included in our
products and services also may be included in those of our potential
competitors. 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, any of which may harm our
business. Many of these factors are outside our control and include:
- the commencement, completion or termination of contracts during any
particular quarter;
- the introduction of new electronic government products and services by
our competitors;
- technical difficulties or system downtime affecting the Internet
generally or the operation of our electronic government products and
services;
- the amount and timing of operating costs and capital expenditures
relating to the expansion of our business operations and infrastructure;
and
- general economic and market conditions and economic conditions specific
to the Internet and e-commerce.
Because we have a limited operating history, it is difficult to forecast the
impact of these factors on our future revenues. Our long-term viability depends
on, among other things, a favorable impact of many of these factors on us. 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. Our fixed costs in the short
run are approximately $2,000,000. 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 your expectations. If this occurs, the price of our common stock may
decline.
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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 cannot assure you that these data sources will continue to be
available in the future. Government entities could terminate their contracts to
provide data. The loss or the unavailability of our data sources in the future,
or the loss of our right to distribute some of the data sources, would harm our
business, operating results and financial condition.
WE RELY ON THE TIMELINESS AND ACCURACY OF CONTENT PROVIDED TO US BY GOVERNMENT
ENTITIES.
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. In addition, we are
dependent upon the accuracy and reliability of government computer systems and
data collection for the content of our systems. If the information provided to
us is not timely, accurate or complete for any reason, our business, operating
results and financial condition would be harmed.
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 or key employees, particularly O. F. Ramos, our Chief
Executive Officer and President, Edward Jordan, our Chief Operating Officer, and
William Knox North, our Chief Technology Officer, would likely harm our
business.
We do not currently maintain any key-man life insurance on our executives
or key employees. Although we are parties to employment agreements with each of
Messrs. Ramos, Jordan and North, we cannot assure you that such individuals will
continue to perform under these agreements.
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.
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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 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 MAY NOT BE ABLE TO OBTAIN ADEQUATE ADDITIONAL CAPITAL ON ACCEPTABLE TERMS.
We anticipate that our current cash resources, combined with the net
proceeds from the commitment of DemandStar's officers and directors to exercise
their rights and their further commitment to purchase unsubscribed shares, 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 three or four months following the date of
this prospectus. Thus, unless we raise significant capital from the rights
offering, it will be necessary to raise additional capital through further debt
and/or equity financings for our operations. If adequate funds are not available
on acceptable terms, our ability to continue as a going concern will be
adversely affected.
Further, assuming we raise adequate capital in the rights offering, we
subsequently may need to raise additional capital 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, should such
opportunities arise.
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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, to 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.
OUR INABILITY TO MAINTAIN OR OBTAIN UPGRADES TO THE PRODUCTS AND SERVICES
SUPPLIED BY OUR THIRD-PARTY TECHNOLOGY AND SERVICE PROVIDERS MAY CAUSE, AMONG
OTHER THINGS, A DECLINE IN THE QUALITY OF SUCH PRODUCTS AND SERVICES.
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.
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
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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. If our customers cannot access our website because of network failures
at or near their location or because of more global failures or even slowdowns
in the Internet, our business would be adversely affected because of their
perception of a problem at our site. If the failure were at or near our site,
our business would be adversely affected. We have not experienced a global
failure. Some customers have reported temporary outages of a short duration
probably due to their own Internet connections. To date, our Internet connection
has not experienced significant disruption.
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
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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, whether real or perceived, 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. We are not aware of any past or current breaches in our
security, nor are we aware of any attempts to breach our security.
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
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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 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.
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THERE HAS BEEN NO PRIOR PUBLIC MARKET FOR OUR COMMON STOCK SO THE TRADING PRICE
MAY BE LESS THAN THE SUBSCRIPTION PRICE.
There has been no public market for our common stock. We intend to apply
for quotation of our common stock on the Nasdaq SmallCap Market or the Nasdaq
National Market System, but cannot assure you that an active public market will
develop. 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 DemandStar's
limited operating history, the subscription price is not necessarily indicative
of the market price of our common stock after the offering, which price may fall
below the subscription price. 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.
HTE'S VOTING CONTROL FOR THE FORSEEABLE FUTURE AFTER THIS OFFERING 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 DemandStar. As a result, HTE's directors and officers will be able to
control the outcome of substantially all matters submitted to our 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 DemandStar even if it would be beneficial to
our shareholders.
THE PRESENCE OF INTERLOCKING DIRECTORS AND OFFICERS BETWEEN HTE AND DEMANDSTAR
WILL CREATE POTENTIAL CONFLICTS OF INTEREST.
Some of 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 DemandStar, 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.
MANAGEMENT PERSONNEL SERVING BOTH HTE AND DEMANDSTAR MAY SUFFER COMPETITING
CLAIMS ON THEIR TIME WHICH MAY PLACE DEMANDS ON DEMANDSTAR'S RESOURCES.
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
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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.
THE TERMS OF THE HTE-DEMANDSTAR INTERCOMPANY AGREEMENTS WERE NEGOTIATED IN THE
CONTEXT OF A PARENT-SUBSIDIARY RELATIONSHIP AND MAY NOT BE ON AS FAVORABLE TERMS
AS THIRD-PARTY AGREEMENTS.
In contemplation of the rights offering, we have entered into, or will be
entering into, certain agreements with HTE including the investment distribution
agreement, 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.
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
DemandStar securities held by HTE do not constitute either 80% of the voting
power or the market value of DemandStar'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. 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. Such payments could materially adversely affect our
financial condition.
INVESTORS DO NOT KNOW THE IDENTITY OF ALL OF THE PERSONS WHO WILL SERVE AS
DIRECTORS.
We currently have four directors, who are also officers and/or directors of
HTE. DemandStar expects to propose the expansion of the board to add one or two
additional persons, at least one of which will be unaffiliated with HTE and
DemandStar. Therefore, investors do not know the identity of all the persons who
will serve on our board and be responsible for our affairs. We have not
currently identified any particular person whom we propose serve as an
additional director.
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 DemandStar by a third party.
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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.
YOU ARE UNLIKELY TO RECEIVE DIVIDENDS FOR THE FORESEEABLE FUTURE.
We have not paid 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. It is unlikely that an investor in our common stock will derive current
income from dividends resulting from ownership of our common stock. This means
that your potential for economic gain from ownership of our common stock depends
on an appreciation in value of our common stock and will only be realized upon a
sale of the stock at a price higher than your purchase price.
A SUBSTANTIAL AMOUNT OF OUR COMMON STOCK WILL BE ELIGIBLE FOR FUTURE SALE.
Upon the closing of this offering, there will be issued and outstanding
19,970,828 shares of our common stock, assuming all rights for the 17,805,105
shares offered under this prospectus are exercised. Of that amount outstanding,
17,805,105 shares that we are offering will be freely tradeable without
restriction, except for any shares purchased by "affiliates" of ours as defined
in Rule 144 under the Securities Act, and 2,165,723 shares will be "restricted
securities" as that term is in Rule 144. Such restricted securities will be
available for public sale only if registered under the Securities Act or if sold
in accordance with Rule 144. Under Rule 144, a person who is not our affiliate
and who has held restricted securities for a period of one year may sell a
limited number of shares to the public in ordinary brokerage transactions, and
after holding the securities for two years, may freely trade them. Under Rule
144, affiliates of ours holding restricted securities may only sell them after
holding them for one year and only within the parameters of Rule 144 governing
the timing, manner and volume of sales of such shares.
Following consummation of the rights offering, HTE will hold 1,250,000
shares of restricted DemandStar stock. HTE also has the right to acquire an
additional 1,250,000 shares of DemandStar stock pursuant to the conversion of
its Series A preferred stock and the exercise of its warrants. In addition,
Messrs. Ramos, Gornto, Markey and Moses have the right to acquire an aggregate
of 500,000 shares upon exercise of their warrants. The issued and outstanding
shares held by HTE will be available for resale under Rule 144 in June 2000. In
addition, DemandStar has entered into a registration rights agreement with HTE
which grants to HTE registration rights with respect to shares of DemandStar
common stock that it holds. These registration rights effectively allow HTE to
sell all of its
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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 DemandStar.
In addition, 4,000,000 shares of our common stock are reserved for issuance
under our 1999 Employee Incentive Compensation Plan. 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.
Sales under Rule 144 may have a depressive effect on the market price of
our common stock due to the potential increased number of publicly held
securities. The timing and amount of sales of common stock made pursuant to
other filed registration statements could also have a negative impact on the
market price of our common stock. Our outstanding stock options and warrants are
likely to be exercised, if at all, at a time when we otherwise could obtain a
price for the sale of our common stock that is higher than the exercise price
per share of such options or warrants. Any such exercise or the possibility of
such exercise may impede our efforts to obtain additional financing through the
sale of additional securities or make such financing more costly.
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
DemandStar common stock publicly. We intend to apply for quotation of the
DemandStar common stock on the Nasdaq SmallCap Market or the Nasdaq National
Market System. 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 or the Nasdaq National Market System 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;
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- announcements by us or our competitors of significant contracts,
acquisitions, 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.
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 NASDAQ.
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, it will initially be on the NASD OTC
Electronic Bulletin Board, or quoted on what is commonly known as the "pink
sheets," and there can be no assurance that it will be sustained. 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. We intend to file an
application to Nasdaq for quotation of our common stock on the Nasdaq SmallCap
Market or the Nasdaq National Market System. If our application is approved, the
continued trading of our common stock on Nasdaq will be conditioned upon
DemandStar 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 meet the following criteria:
- at least $4,000,000 in net tangible assets, or $50,000,000 in market
capitalization, or $750,000 of net income in 2 of the last 3 fiscal
years;
- a public float of at least 1,000,000 shares;
- a market value of the public float of at least $5,000,000;
- a minimum bid price of at least $4.00 per share;
- at least 300 round lot shareholders; and
- at least 3 registered and active market makers.
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Continued inclusion on the Nasdaq SmallCap Market requires the following:
- at least $2,000,000 in net tangible assets, or a $35,000,000 market
capitalization or $500,000 in net income in 2 of the last 3 fiscal years;
- a public float of at least 500,000 shares;
- a market value of the public float of at least $1,000,000;
- a minimum bid price of at least $1.00 per share; and
- at least 2 registered and active market makers.
The NASD requires that in order for a company's securities to be listed for
quotation on the Nasdaq National Market System, where that company does not have
a two-year operating history and does not have a pre-tax income of $1,000,000 in
the last fiscal year or two of the last three fiscal years, the company must
meet the following criteria:
- a market capitalization of at least $75,000,000 or total assets and total
revenue each of at least $75,000,000 for the most recently completed
fiscal year or two of the last three most recently completed fiscal
years;
- a public float of at least 1,100,000 shares;
- a market value of the public float of at least $20,000,000;
- a minimum bid price of at least $5.00 per share;
- at least 400 round lot shareholders; and
- at least 4 registered and active market makers.
For continued inclusion on Nasdaq National Market System, a company must
continue to maintain the criteria set forth in the above bullet points, except
that (1) the market capitalization (or each of total assets and revenues)
requirement is $50,000,000, and (2) the market value of the public float
requirement is $15,000,000.
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 STOCK MAY BE DEEMED "PENNY STOCK" WHICH MAY REDUCE TRADING ACTIVITY IN THE
SECONDARY MARKET.
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
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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, 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.
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 maximum
offering basis (assuming rights are exercised for 17,805,105 shares), the
dilution in the pro forma net tangible book value of the common stock from the
rights offering price will be $0.20 per share.
INVESTORS WILL EXPERIENCE FURTHER DILUTION UPON THE CONVERSION OF PREFERRED
STOCK AND THE EXERCISE OF OPTIONS AND WARRANTS.
We currently intend to finance a significant amount of the growth in the
DemandStar 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
19,970,828 shares of common stock outstanding, assuming maximum exercise of all
rights. We initially have 4,000,000 shares of common stock reserved for options
awarded or to be awarded under DemandStar's 1999 Employee Incentive Compensation
Plan. In addition, we 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.
Accordingly, immediately following the closing of the rights offering, we will
have 74,279,172 authorized but unissued and unreserved shares of common stock,
assuming maximum exercise of all rights. 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.
IF THE SHARES OF COMMON STOCK HELD BY HTE ARE DILUTED BELOW 35% OF THE
OUTSTANDING, INVESTORS MAY EXPERIENCE FURTHER 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 DemandStar common stock owned by HTE have been diluted
below 35% of
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DemandStar'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 DemandStar 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 DemandStar'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 constitute 35% of the total net
assets distributed to all holders of DemandStar 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 DemandStar common shareholdings below 35% of DemandStar's
outstanding common stock.
YOU SHOULD BE AWARE OF THE TAX EFFECTS OF THE RECEIPT AND EXERCISE OF RIGHTS.
In the case of a right transferred to a holder of HTE common stock in
respect of that stock, the fair market value of the right will be taxable as
follows:
(1) first, as a dividend, up to the amount of HTE's current and/or
accumulated earnings and profits, if any, attributable to the right;
(2) then, as a non-taxable reduction of the shareholder's basis in the
stock on which the right was distributed, up to the amount thereof; and
(3) finally, if there is any excess between one and two above, as gain
recognized as if the HTE common stock had been sold.
Such a right holder will not recognize any gain or loss on exercise of the
right.
In the case of a right transferred to a holder of an HTE stock option, who
is a director or employee of HTE (or a subsidiary) or to an employee of HTE (or
a subsidiary), no income or gain will be realized on receipt of the right, but
on exercise the rights holder will recognize ordinary income equal to the
excess, if any, of the fair market value, as of the exercise date, of the
DemandStar common stock received on the exercise of the right over the exercise
price for the right. Although it should be the better view that the rules in the
preceding paragraph apply to rights received with respect to HTE common stock in
the case of an HTE shareholder that also holds HTE stock options or is an
employee or director of HTE, it nevertheless is possible that the rules set
forth in this paragraph would apply to those rights.
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;
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- the elimination of the right to call special meetings of the shareholders
by shareholders other than holders of not less than 50% 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.
SUBSCRIBERS ACQUIRING 20% OR MORE OF OUR COMMON STOCK MAY NOT HAVE VOTING RIGHTS
UNDER FLORIDA'S CONTROL-SHARE ACQUISITIONS STATUTE.
Subscribers exercising rights to acquire 20% or more of DemandStar's common
stock may not have voting rights for these shares under Florida's Control-Share
Acquisitions Statute. 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. The statute applies
to Florida corporations having at least 100 shareholders, with their principal
business, offices or assets located in Florida, and either more than 10% of
their shareholders are Florida residents, more than 10% of the issued and
outstanding shares are held by Florida residents, 1,000 shareholders reside in
Florida.
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 statements. Such factors include, among other things, those
listed under "Risk Factors"
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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.
THE OFFERING
DemandStar is distributing no-cost rights to HTE which, in turn, is
distributing those 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 subsidiary) as of February 1,
2000; and
- persons who are employees of HTE (or a subsidiary) as of February 1,
2000.
Each holder of shares of HTE common stock on the record date of
, 2000 will receive one right for every share of HTE common stock
owned on that date. Investors should be aware that generally to be considered a
shareholder of HTE common stock as of the record date, an HTE shareholder would
have had to acquire HTE shares of common stock on or before two business days
before the record date since it takes three days (the third day being the
settlement date) to process an acquisition of publicly traded stock. 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 subsidiary)
as of February 1, 2000, will receive one right for each share that he has such a
vested option and/or unvested option to acquire. Each person who is an employee
of HTE (or a subsidiary) as of February 1, 2000 will receive 200 rights. Each
right will carry a basic subscription privilege which entitles the holder to
purchase one share of DemandStar common stock. No fractional rights or shares
will be issued. We are offering up to 17,805,105 shares in the aggregate.
At the closing of the rights offering, HTE will purchase the 17,805,105
shares of DemandStar common stock being registered in this offering for the
price of $1.00 per share. The aggregate purchase price will be evidenced by a
non-interest bearing promissory note payable to DemandStar in the principal
amount of $17,805,105, which shall be delivered and immediately thereafter
repaid at the closing of the offering from the proceeds received from investors
who exercise their rights and purchase DemandStar common stock from the shares
purchased by HTE pursuant to the non-interest bearing note.
Immediately after the closing of the offering, DemandStar will file a
post-effective amendment to this registration statement to de-register any
underlying shares of common stock not subscribed for by rights holders at
closing. The note will provide that such de-registered restricted shares shall
be redeemed by DemandStar in exchange for the then outstanding balance due under
the note.
PURPOSE OF THE OFFERING
HTE, which develops, markets, implements and supports fully integrated
enterprise-wide software applications designed specifically for public sector
organizations, including state, county and city governments and other municipal
agencies and for public and private utilities, is, through this rights offering,
spinning off its Internet-based subsidiary,
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DemandStar. The rights offering is essentially DemandStar's initial public
offering. The rights offering is different than a traditional initial public
offering in that it is initially directed only to HTE's shareholders, option
holders, directors and employees. This offering is also different than a typical
spin-off in that HTE shareholders, option holders and employees will be offered
a right to buy DemandStar common stock instead of DemandStar common stock being
issued only to HTE shareholders and without consideration. 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. DemandStar
believes that the rights offering has an advantage over a traditional initial
public offering because it gives DemandStar the opportunity to offer its common
stock to persons who already have an initial interest in DemandStar.
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 traditional businesses, which should increase DemandStar's
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 DemandStar.
SUBSCRIPTION PRIVILEGES
Each right grants to each HTE shareholder as of the record date of
, 2000 a subscription privilege which entitles him to purchase one
share of DemandStar common stock. Investors should be aware that generally to be
considered a shareholder of HTE common stock as of the record date, an HTE
shareholder would have had to acquire HTE shares of common stock on or before
two business days before the record date since it takes three days (the third
day being the settlement date) to process an acquisition of publicly traded
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
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employee or director of HTE (or a subsidiary) as of February 1, 2000, will
receive one right for each share that he has such a vested and/or unvested
option to acquire. Furthermore, each person who is an employee of HTE (or a
subsidiary) as of February 1, 2000 will receive 200 rights. We will send you
certificates representing shares that you purchase with your 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
DemandStar's common stock. Our board determined the subscription price based
upon, among other considerations, an independent valuation of our business by
Southeast Appraisal Associates, Inc. on December 12, 1999. In estimating the
fair market value of DemandStar's common stock, Southeast Appraisal Resource
Associates, Inc. employed a form of sales comparison approach, being revenue
multiples, and a discounted cash approach. Together with the independent
valuation conducted by Southeast Appraisal Resource Associates, Inc., 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.
PLAN OF DISTRIBUTION -- SUBSCRIPTION AGENT, SOLICITING AGENT/DEALER AND
INFORMATION AGENT
DemandStar is making this rights offering directly to eligible HTE
shareholders, option holders, employees and directors. For purposes of complying
with the blue sky securities laws of Delaware, Idaho, Illinois, Maryland, Oregon
and Utah, DemandStar will engage the services of a licensed broker-dealer(s) to
act as DemandStar's soliciting agent/dealer in those 6 states. DemandStar will
negotiate the fees that any such soliciting agent/dealer 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/dealer. Soliciting
fees will not be paid on any undesignated exercise rights.
DemandStar also expects to reimburse any soliciting agent/dealer for its
accountable expenses up to an agreed upon amount. DemandStar 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, DemandStar will reimburse the institutions' reasonable
out-of-pocket costs in distributing this prospectus and other materials to
beneficial owners of the stock.
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DemandStar 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 (x-535)
Facsimile: (212) 616-7610
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 DemandStar. The
subscription agent will be responsible for delivering stock certificates and
refunds to rights holders if the rights offering is terminated or if a
subscription certificate is rejected. Subscription proceeds will be held in the
escrow account. Subscribers may not withdraw funds from the escrow account.
Escrowed proceeds will be released to DemandStar on the date that the applicable
subscription certificate is accepted by DemandStar. DemandStar will pay the fees
and expenses of the subscription agent in connection with the rights offering.
DemandStar may also engage the services of an information agent to assist
DemandStar in the provision of information related to the offering to
prospective investors. In exchange for services provided by any such information
agent, DemandStar 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 for Subscription Certificates 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 DemandStar 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 DemandStar common stock
subscribed for under the subscription privilege.
DemandStar 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.
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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:
- check or bank draft drawn upon a U.S. bank payable to Continental Stock
Transfer & Trust Company, as subscription agent, or
- wire transfer of immediately available funds to the subscription agent.
For detailed wiring instructions, contact the Reorganization Department
at Continental Stock Transfer & Trust Company at (212) 509-4000 (x-535).
Any wire transfer of funds should clearly indicate the identity of the rights
holder who is paying the subscription price by the wire transfer. Evidence of
such wire transfer should be delivered to the subscription agent via facsimile
at (212) 616-7610. The subscription price will be deemed to have been received
by the subscription agent only upon:
- clearance of any uncertified check,
- receipt by the subscription agent of any certified check or bank draft
drawn upon a U.S. bank or
- receipt of good funds in the subscription agent's account designated
above.
- --------------------------------------------------------------------------------
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
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.
- --------------------------------------------------------------------------------
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, and 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
31
<PAGE> 35
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) 616-7610. 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. 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
32
<PAGE> 36
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.
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
subscription privilege; and
- to subscribe for shares of common stock until your 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
subscriptions not properly submitted or the acceptance of which would, in the
opinion of our counsel, be unlawful. Neither HTE, DemandStar, 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 DemandStar at (407) 975-0000, whereupon we may direct you to our
subscription agent or our information agent, if we have retained one.
33
<PAGE> 37
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
DemandStar 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.
- --------------------------------------------------------------------------------
THE INSTRUCTIONS ACCOMPANYING THE SUBSCRIPTION CERTIFICATE SHOULD BE READ
CAREFULLY AND FOLLOWED IN DETAIL. DO NOT SEND SUBSCRIPTION CERTIFICATES TO HTE
OR TO DEMANDSTAR. 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 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 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. The rights offering is not
conditioned upon DemandStar's receipt of subscriptions for any minimum number of
shares of DemandStar 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.
34
<PAGE> 38
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 DemandStar 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 DemandStar makes any
recommendation regarding whether rights holders should exercise their rights.
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 DemandStar 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 DemandStar common stock. Consequently, DemandStar may reject
subscriptions that relate to the exercise of rights by any holder of rights
outside the United States, and DemandStar may also reject subscriptions from
holders in jurisdictions within the United States and DemandStar may refuse to
distribute rights to any eligible subscriber if DemandStar or HTE should
determine that it may not lawfully issue securities to such subscribers.
DemandStar 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 military
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.
35
<PAGE> 39
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 DemandStar from the rights
offering depends on the number of shares purchased in the rights offering. No
assurance can be given as to the actual number of shares that will be purchased.
Regardless of the number of shares purchased, DemandStar has estimated that the
expenses for the offering will be approximately $412,780.
We estimate that the net proceeds we will receive from the rights offering,
assuming all rights are exercised, will be $17,346,933. Our calculation of net
proceeds is net of soliciting commissions and estimated offering expenses of
$412,780 payable by us. Assuming all rights are exercised in the offering,
DemandStar intends to use the net proceeds that it receives from the offering
and HTE's investment as follows over the next 12 months:
- to fund anticipated operating losses, including sales and marketing
expenses and payments due under intercompany relationships and agreements
with HTE (approximately $10,500,000), as follows:
- for working capital to hire additional employees and cover the
costs, including overhead, required to enable us to fulfill
existing demand for products and services and to create new
products and services (approximately $7,300,000);
- for working capital to enable us to expand into new geographic
markets by hiring of additional sales and marketing personnel,
attending trade shows, and developing additional marketing
materials (approximately $3,000,000); and
- for repayment of $200,000 on the HTE loan, which loan was used
for our operations and at December 31, 1999 had an outstanding
principal balance of $1,306,885, is accruing interest at 8% per
annum and has a maturity date of October 31, 2004).
- for capital expenditures for additional technology, infrastructure and
operating platforms (approximately $1,200,000).
- for general working capital and other general corporate purposes
(approximately $5,646,933).
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.
Even though the foregoing discussion pertains to the allocation of proceeds
over 12 months, management estimates that gross proceeds of $12,500,000 will be
sufficient to meet our capital needs for the next 18 months following the
closing of the rights offering.
This is not an underwritten offering and therefore no assurance can be
given as to the number of rights that will be exercised. Certain officers and
directors of DemandStar have committed to purchase a total of 901,223 shares and
up to an additional 450,000 shares from unsubscribed rights for minimum proceeds
in this offering of $1,351,223. These proceeds, plus $1,500,000 from the sale of
Series A preferred stock and the sale of
36
<PAGE> 40
$2,000,000 of Series B preferred stock will result in approximately $4,438,443
of net proceeds to DemandStar (after deducting estimated offering expenses of
$412,780). Such funds would be sufficient for DemandStar's operations for three
to four months under DemandStar's current growth plan. However, those proceeds
could be extended by scaling back DemandStar's growth plan and using those funds
to meet its existing contractual commitments for its products and for general
working capital and general corporate purposes. To continue operations beyond
that period of time, DemandStar would need to obtain additional equity and/or
debt financing. It currently has a line of credit from HTE in the amount of
$1,750,000, of which $443,115 remains available as of December 31, 1999. Other
possible sources of funds may include financial lending institutions, bridge
financing from institutional investors, and/or additional debt and/or equity
offerings. We currently have not identified alternative financing sources (other
than HTE's line of credit extended to DemandStar and the commitment of HTE and
certain officers and directors of DemandStar to purchase $2,000,000 of Series B
preferred stock if a minimum of 5,000,000 shares are not purchased in the
offering). We may not be able to obtain additional financing on favorable terms
or at all.
Pending the uses set forth above, 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.
DIVIDEND POLICY
DemandStar 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. DemandStar currently intends to retain future
earnings, if any, to finance the expansion of its business.
37
<PAGE> 41
DILUTION
As of December 31, 1999, DemandStar had a negative net tangible book value
available to common shareholders of approximately $(1,290,770), or approximately
$(1.03) per share of common stock. Net tangible book value per share of common
stock represents the amount of DemandStar's tangible assets less total
liabilities and preferred stock liquidation value, divided by 1,250,000 shares.
After giving effect to the sale of maximum number of shares offered hereby at
the subscription offering price of $1.00 per share, and the application by
DemandStar of the estimated gross proceeds, the pro forma net tangible book
value as of December 31, 1999, would have been $18,706,328 or $0.80 per share.
This represents an immediate increase in net tangible book value of $1.83 per
share to HTE as the sole existing shareholder and an immediate dilution of $0.20
per share to new investors purchasing shares in the offering. The following
table illustrates the per share dilution in net tangible book value per share to
new investors in the offering.
<TABLE>
<CAPTION>
MAXIMUM OFFERING
----------------
<S> <C>
Offering price per share.................................... $ 1.00
------
Net tangible book value per common share as of December
31, 1999, prior to the offering........................ (1.03)
Increase in net tangible book value per common share
resulting from the offering............................ 1.83
------
Pro Forma net tangible book value per common share as of
December 31, 1999, after the offering..................... $ 0.80
======
Dilution to new DemandStar common shareholders.............. $ 0.20
======
</TABLE>
38
<PAGE> 42
CAPITALIZATION
The following table sets forth the capitalization of DemandStar as of
December 31, 1999, on a pro forma basis to give effect to HTE's $1,500,000
investment. 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 related notes included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
DECEMBER 31, 1999
--------------------------
PRO FORMA
ACTUAL AS ADJUSTED
----------- -----------
<S> <C> <C>
Note payable to HTE..................................... $ 1,306,885 $ 1,306,885
----------- -----------
Series B preferred stock(1)............................. -- --
----------- -----------
Shareholders' equity:
Series A preferred stock(2)........................... -- 1,500,000
Common stock.......................................... 125 125
Additional paid-in capital............................ 812,413 812,413
Accumulated deficit................................... (1,138,842) (1,138,842)
----------- -----------
Total shareholders' equity......................... (326,304) 1,173,696
----------- -----------
Total capitalization............................... $ 980,581 $ 2,480,581
=========== ===========
</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 "Related Party
Transactions -- Investment and Distribution Agreement."
39
<PAGE> 43
SELECTED FINANCIAL DATA
The following selected financial data should be read in conjunction with
DemandStar's financial statements and the related 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 December 31, 1999, and for the period from June 18, 1999 to December 31,
1999, reflects the financial position and results of operations of DemandStar.
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 has been derived from and is
qualified by reference to DemandStar'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 DECEMBER 31, 1999
----------------- --------------- --------------------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue....................... $ 33,718 $ 132,135 $ 196,855
Operating expenses:
Marketing and advertising... 12,350 15,866 304,800
Research and development.... 125,010 136,279 136,100
General and
administrative........... 177,069 250,349 651,520
Depreciation and
amortization............. -- -- 215,969
--------- --------- -----------
Total operating
expenses............... 314,429 402,494 1,308,389
--------- --------- -----------
Operating loss................ (280,711) (270,359) (1,111,534)
Interest expense.............. -- -- 27,308
--------- --------- -----------
Loss before income tax
benefit..................... (280,711) (270,359) (1,138,842)
Income tax benefit............ -- -- --
--------- --------- -----------
Net loss................. $(280,711) $(270,359) $(1,138,842)
========= ========= ===========
Basic and diluted net loss per
common share................ $ (0.91)
===========
Weighted average number of
common shares outstanding... 1,250,000
===========
</TABLE>
<TABLE>
<CAPTION>
INFORMATION ON
DEMAND, INC.
(PREDECESSOR)
----------------- DEMANDSTAR.COM, INC.
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- --------------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash......................................... $ 17,564 $ 127,733
Working deficit.............................. (208,613) (301,640)
Total assets................................. 19,255 1,311,391
Note payable to HTE.......................... -- 1,306,885
Total shareholder's deficit.................. (208,613) (326,304)
</TABLE>
40
<PAGE> 44
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 related
notes, 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
DemandStar is a provider of Internet-based procurement systems for
government agencies. DemandStar'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
DemandStar been operating as a separate stand-alone company during the periods
presented.
DemandStar intends to enhance the features of its Internet business by
improving on its existing "user-friendly" systems, and the addition of new
features such as blueprint downloading capability. We believe that our operating
expenses will significantly increase as a result of the financial commitments
related to the development of marketing channels, system improvement 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 DemandStar in June of 1999 enabled DemandStar to accelerate the
growth and development of ideas, as well as increase sales and marketing
efforts.
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<PAGE> 45
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 DECEMBER 31, 1999
----------------- --------------- -----------------
<S> <C> <C> <C>
Revenue.......................... 100.0% 100.0% 100.0%
Operating expenses:
Marketing and advertising...... 36.6 12.0 154.8
Research and development....... 370.8 103.1 69.1
General and administrative..... 525.1 189.5 331.0
Depreciation and
amortization................ -- 0.0 109.7
------ ------ ------
Total operating expenses.... 932.5 304.6 664.6
------ ------ ------
Operating loss................... (832.5) (204.6) (564.6)
Interest expense................. -- -- 13.9
------ ------ ------
Loss before benefit for income
taxes.......................... (832.5) (204.6) (578.5)
Benefit for income taxes......... -- -- --
------ ------ ------
Net loss.................... (832.5)% (204.6)% (578.5)%
====== ====== ======
</TABLE>
REVENUES
Revenues include amounts received from vendors for registration fees and
bid document mailings. Total revenues increased by 876% to $328,990 for the year
ended December 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 2496% to $320,666 for the year ended December 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 DemandStar.
RESEARCH AND DEVELOPMENT EXPENSES. Research and development expenses
increased 118% to $272,379 for the year ended December 31, 1999, from $125,010
for the year ended December 31, 1998. In 1998, research and development was
focused on product development. During the year ended December 31, 1999, the
focus was on expanding our products' features and functionality and improving
the stability and scalability of DemandStar'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 409% to $901,869 for the year
ended December 31, 1999, from $177,069 for the year ended December 31, 1998. The
increase in general and administrative expenses is directly related to the
growth in the volume of revenues and
42
<PAGE> 46
expenses. This growth was necessary to support the general operations and
infrastructure of DemandStar.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization of $215,969
resulted from the acquisition of the Predecessor by DemandStar and the purchase
of miscellaneous equipment and leasehold improvements during the year ended
December 31, 1999. There were no comparable expenses in 1998.
LIQUIDITY AND CAPITAL RESOURCES
Prior to the purchase of the Predecessor by DemandStar 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 DemandStar's common stock for $800,000. In addition to the
stock purchase, HTE also loaned DemandStar $200,000 to purchase the business and
certain net assets of the Predecessor and $1,106,885 to fund operations, the
terms of which loan were evidenced by a five-year term promissory note payable
to HTE and dated October 31, 1999. As of December 31, 1999, the balance under
the note was $1,306,885. To address the funding needs of DemandStar, in December
1999, our board of directors authorized management to (1) 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, (2) execute an investment and
distribution agreement with HTE, and (3) execute a Conditional Series B Stock
Purchase Agreement with HTE and certain DemandStar 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 18 months
provided DemandStar receives at least $12,500,000 in gross proceeds from the
rights offering. Management also believes that DemandStar is dependent on the
proceeds of this offering to meet the cash required to continue to support
future operating expenses necessary to develop marketing channels and support
the technical infrastructure of DemandStar. If at least $12,500,000 is not
raised in the rights offering, DemandStar may be required to seek additional
capital through subsequent debt and/or equity financing. For example, if only
$4,438,443 of cash is available from the rights offering (assuming exercise of
rights by management of DemandStar and HTE's contingent contributions net of
estimated offering expenses), that amount will satisfy the cash requirements of
DemandStar for approximately three to four months under DemandStar's current
growth plan. However, these proceeds could be extended by scaling back
DemandStar's growth plan and using those funds to meet its existing contractual
commitments for its products and for working capital and general corporate
purposes. If offering proceeds are insufficient for DemandStar to fully
implement its business plan, DemandStar will be required to seek additional debt
and/or equity funding. We currently have not identified alternative financing
sources (other than HTE's line of credit extended to DemandStar and HTE's
commitment to purchase $2,000,000 of Series B preferred stock if a minimum of
5,000,000 shares are not purchased in the offering). Other possible sources of
funds may include financial lending institutions, bridge financing from
institutional investors and/or additional debt and/or equity offerings. If
DemandStar receives only the minimum proceeds from the rights offering, and
additional funding is not available, or is available only on disadvantageous
terms, DemandStar's ability to continue its business and operations will be
adversely affected.
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We anticipate spending approximately $25,500,000 in cash for the years 2000
and 2001 to develop and enhance products and services, expand marketing efforts
and hire additional resources. Based on current estimates, DemandStar expects to
receive approximately $13,000,000 in cash related to sales. This would result in
a deficit of $12,500,000 which, based on current estimates, must be obtained
through this rights offering or other methods, as the minimum amount needed to
remove the threat of a going concern.
Net cash used in operating activities totaled $54,534 and $923,018 for the
years ended December 31, 1998 and 1999, respectively. The increase in the net
cash used primarily resulted from the increased operations and loss experienced
in 1999.
Net cash used in investing activities (capital expenditures, cash paid for
acquisitions) totaled $1,119,354 in the year ended December 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 DemandStar.
Net cash provided by financing activities totaled $72,098 and $2,157,326
for the year ended December 31, 1998 and 1999, respectively. The cash provided
during 1998 reflects the capital contributed by the sole shareholder of the
Predecessor. The cash provided during 1999 includes contributions of the sole
shareholder of the Predecessor, along with the purchase of common stock by HTE
and funding under the note payable to 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 did not experience a problem with the Year 2000 rollover and believe
that our proprietary software and systems are Year 2000 compliant.
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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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. By allowing government agencies to become members in our online
network for free, we accept the responsibility of distributing various bid
requests and associated documents to vendors. This reduces administrative costs
of the member agencies. It also increases an agency's efficiency because it no
longer has to manage the distribution. The vendors pay a membership fee to get
the benefit of "real time" notification of new bid opportunities. The DemandStar
system handles all goods and services that agencies acquire through a mandatory
bid process. Typically, agencies use a mandatory bid process for procurement of
all goods and services above a certain dollar amount that are not an emergency
or sole-source procurement item or service, which amount is typically around
$5,000, but varies from agency to agency.
Our services are provided at no cost to participating governmental
agencies. Businesses that provide goods and services to agencies are provided
the opportunity to register with us as member vendors for an annual fee. These
services, which are included in a member vendor's annual fee and provided at
no-cost to governmental agencies, include the following:
- Membership management
- Notification, by e-mail and/or fax, of bid/request for proposal
opportunities to member vendors
- Web-enabled database of all procurement information from participating
agencies
In addition to the services listed above, vendors may request a "hard copy"
of bid information. In such case, the vendor is then charged a fee which varies
with the complexity of the document requested.
DemandStar began offering services to Florida governmental agencies in May
1998. DemandStar now serves over two dozen governmental agencies and over
thirty-five hundred 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, as well as internationally. We are also developing and intend to
deliver new products and services to our constituent governmental agencies and
vendors.
OUR HISTORY
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 Predecessor initially developed and marketed our "fax-on-demand"
system through which it delivered to vendors information on agencies' requests
for proposals (bid requests) by facsimile.
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Shortly thereafter, our Predecessor developed an Internet delivery system and
commenced marketing that system in June, 1998.
We have a limited operating history. We have a history of significant
losses, with a net loss of ($1,138,842) for the period from June 18, 1999 to
December 31, 1999. We anticipate that we will continue to incur significant
losses into the foreseeable future. In that 1999 was our first year of
operation, our accumulated deficit is the same as our net loss. Our auditors
have expressed a "going concern" opinion.
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.
DemandStar was developed in cooperation with several forward thinking
procurement agencies in order to address the deficiencies in their current
practices.
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, e.g.,
National Institute of Government Purchasing and Standard Industry Code, 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 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. The agency then advertises the bid/request for proposal opportunity in
several ways:
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- Notifying vendors on its 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/request for proposal
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. 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 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
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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 installed in homes and offices; the
decreasing cost of personal computers; 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 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.
- ---------------
(1) "Business-to-Business E-Commerce: The True Future of the 'Net?"eBusiness
World (visited June 3, 1999)http://ebusiness.dci.com/articles/9906031.htm.
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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 DEMANDSTAR METHOD
In cooperation with selected public procurement officials, DemandStar 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 DemandStar in
its markets, and an acceptance of DemandStar as an industry innovator in
governmental purchasing, enabling us to enter into contracts with over two dozen
governmental agencies.
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 procurement
systems, government agencies are able to save administrative costs in bid
notification and follow-up. Since regulations permit government agencies to use
other agencies' contracts instead of writing their own, they are able to locate
such other agency's contracts more easily by searching our sites for information
about other existing contracts for similar goods and services. Further,
DemandStar 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 DemandStar only once for multiple agencies.
Member vendors receive "real time" bid notifications and are able to immediately
download the bid request or request for proposal 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 also have contracts with an agency in each of Minnesota and Virginia, and are
also currently negotiating contracts with agencies in other states.
VENDOR SOLICITATION
When DemandStar signs a contract for services with a participating public
procurement agency, the governmental agency provides DemandStar with its vendor
lists from which DemandStar solicits vendors for purposes of receiving automatic
announce-
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ment of future bid opportunities. Vendors who choose not to join DemandStar's
network 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.
To date, approximately 20% of DemandStar's member vendors elect to
subscribe to multiple counties. This is significant in that as the total vendor
database grows, DemandStar 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 DemandStar 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.
When a participating agency enters a bid into the DemandStar 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 DemandStar's website and
takes the vendor directly to the subject bid information. Vendors registered
with DemandStar can download bid documents at no charge from DemandStar's
website. Vendors requesting hardcopies of the bid pay a per page duplication
cost plus shipping and handling.
WEB LINKING
Many agencies have recognized the need to develop a bid information page on
the Internet but because of budgetary constraints have not had the resources to
do so. DemandStar offers to develop, maintain and host the bid information page
of the agency's web site. The bids information page, which is a dynamically
generated page, is created by a query to DemandStar's web-enabled database. This
results in up-to-date bid information with no day-to-day intervention by
DemandStar staff. Informational technology staff from the agency are relieved of
the task of developing and maintaining such a dynamic web page and because the
links are directed to DemandStar'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 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 fax-on-demand installation costs
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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 fax-on-demand is desirable, the Internet is rapidly surpassing it.
DemandStar maintains a large-scale fax-on-demand system in its office. The
system allows DemandStar to offer an individual fax-on-demand telephone number
for every participating agency. Because the scripting is identical for every
agency, development and implementation time is minimal. DemandStar 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 fax-on-demand system, 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 fax-on-demand, 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.
Initially, a large majority of vendors used the fax-on-demand services to
obtain packages. Currently, over 50% of vendors use the Internet services
instead.
WEB-ENABLED DATABASE OF PROCUREMENT INFORMATION
Agency personnel enter all bid information into DemandStar'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 DemandStar 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 minimal 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 DemandStar as well as searching for new potential markets for their
goods and services.
Because the information displayed on both the agencies' and DemandStar's
site is derived from this web-enabled database, DemandStar can provide the
vendor with the most current and accurate bid information with little or no
intervention from DemandStar
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personnel. This will enable DemandStar to service a large number of client
agencies without an equally large number of DemandStar 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 upon request of a vendor. 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.
DemandStar offers document production and distribution services to its
client agencies. DemandStar 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 DemandStar an electronic copy of the bid
package. DemandStar then posts the bid package to both the agency's and
DemandStar'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 paying for hard copies.
Member vendors can download the packages at no cost. Non-member vendors pay a
download fee. An internal audit done by DemandStar revealed that the percentage
of packages downloaded versus hardcopies has been increasing. DemandStar expects
this trend to accelerate and is carefully balancing its acquisition of new
duplication equipment with estimated future demand. DemandStar 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 DemandStar staff in the case of a hard copy registration. In
either case, a confirmation notice is sent to the member 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 DemandStar website.
Vendors are advised via their services agreement that DemandStar 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,
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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.
DemandStar customer service representatives are available to answer vendor
questions through e-mail or toll-free telephone numbers.
DemandStar 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 DemandStar-sponsored program. Vendors
who attend are taught how to use the DemandStar 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. The seminar educates vendors on the ease-of-use of the systems
involved, regardless which procurement option such vendors choose. By explaining
the fax technique alternative at the seminar, DemandStar demonstrates that an
entry-level use of our system requires only a simple fax machine.
NEW PRODUCTS AND SERVICES
DemandStar continues to develop enhancements to its existing products and
services. Feedback from vendors and current and potential client agencies is
relayed to DemandStar'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. Before the
DemandStar system, pre-qualification required that the vendor complete a
lengthly paper resume which contained questions about previous projects,
capabilities and personnel. The agency would then collect, review and analyze
all pre-qualification documents. Our system allows vendors to pre-qualify online
and allows agencies to review and analyze the pre-qualification responses
online.
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
systems. Included in that time-frame is appropriate training for the users. 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
throughout Florida. We are currently negotiating contracts with agencies in
other states.
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Each of these agencies operates under a separate contract, which provides,
among other things, that DemandStar will be responsible for notifying vendors of
the agency's solicitation of bids, and that DemandStar 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 systems
network 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
DemandStar'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
intensely 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 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:
(1)
System integrators and enterprise resource planning companies, including
American Management Systems, SAP, Oracle and PeopleSoft.
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<PAGE> 58
(2)
Traditional government software solution providers (who also compete with
HTE), including J.D. Edwards, SCT and Tyler.
(3) Companies that publish catalogs and bids, including Thomas Publishing,
Ziff-Davis and F.W. Dodge Division of McGraw-Hill.
(4)
Traditional and Internet consulting companies, including Andersen
Consulting, IBM, USWeb, Razorfish, eForce, Viant, AppNet and Sapient.
(5)
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.).
(6)
Companies that set up Internet community sites and exchanges, including
VerticalNet, Tradex and fastxchange.
(7)
Companies that set up specialized and generalized request for
proposal/request for quote sites, including InternetRFP,
Governmentbids.com, RapidRegistration, Govcon.com, BidSite, Bidnet,
Compnet, Worldbid, RFQdata, Wiznet, Powersourcing and Vsource.
(8)
Smaller and regional software and/or consulting companies that may have
existing relationships with local governments.
It is difficult to determine the number of competitors in each of the above
categories because of the proliferation of software companies and Internet-based
e-commerce companies. However, we estimate that there are at least 12 large or
national competitors in each of categories (1) through (5) above, and many other
companies of varying sizes competing in each of categories (4) through (8).
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 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.
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
DemandStar operates a combination of fax-on-demand and Internet services.
While we anticipate having to maintain some fax-on-demand 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 DemandStar-issued user name and passwords. Having
all software centrally located eliminates the need for on-site installation
and/or service.
DemandStar 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 DemandStar 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 DemandStar's operations are housed in approximately 5200
square feet of office space in Maitland, Florida pursuant to a lease that
expires August 2001 and has a monthly fee of approximately $8,700. 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 February 7, 2000, DemandStar had 41 full-time and 3 part-time
employees. Of these, 8 are in development, 11 are in operations, 17 are in sales
and marketing, and 8 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, DemandStar has two sources of revenue. Approximately 85% 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 where we provide hard copies of the bid documents
instead of a download. 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.
DemandStar is investigating various pricing models for existing and future
services. We 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 DemandStar 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 DemandStar 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., a
privately-held company specializing in field data collection and consulting. 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., a publicly-held communications and semi conductor company, 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 and, pursuant to his part-time employment agreement, is only
committed to devote up to 200 hours annually to his DemandStar duties. 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 served in several capacities for Meridian Venture
Partners, a privately-held venture capital fund, from 1988 through September
1999. Specifically, he was an Associate for the fund from 1988 through 1993. He
then served as a Vice President of the fund from 1993 through 1995, and as a
General Partner of the fund from 1995 through September 1999.
Mr. L. A. Gornto, Jr. was appointed as Chief Financial Officer, Secretary,
director of DemandStar in November 1999 and has served as DemandStar's Executive
Vice President and General Counsel since its inception in June 1999. Mr. Gornto
is only committed to devote up to 200 hours annually to his DemandStar duties
pursuant to the terms of his part-time employment agreement with DemandStar. Mr.
Gornto joined HTE in January 1997 and serves as a director of HTE and as HTE's
Executive Vice President, Secretary
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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 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 DemandStar 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 DemandStar 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 DemandStar in November
1999 and serves as a part-time consultant to DemandStar. 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.
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<PAGE> 63
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 are made by the board of directors. Mr. Ramos, DemandStar's Chief
Executive Officer, participates in all discussions and decisions regarding
salaries and incentive compensation for all employees and consultants of
DemandStar, except that he is excluded from discussions regarding his own salary
and incentive compensation.
Within 120 days from the date of this prospectus, DemandStar'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 DemandStar's
independent auditors and to review the results and scope of the audit and other
services provided by DemandStar's independent auditors, DemandStar's accounting
procedures and the adequacy of DemandStar's internal controls. Currently, the
entire board performs the duties of an audit committee.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Markey, Chairman of the Board of DemandStar, serves on HTE's
Compensation Committee. In addition, Mr. Moses, a director of DemandStar, also
serves on HTE's Compensation Committee. Accordingly, an interlocking
relationship exists between Messrs. Markey and Moses, as board members of
DemandStar, 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 DemandStar and have
interests in certain transactions of DemandStar as described in "Related Party
Transactions -- Transactions Involving Management."
COMPENSATION OF DIRECTORS
To date, DemandStar has not paid compensation to any of its directors for
acting in such capacity. DemandStar 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. Beginning after the closing of the rights offering, directors who are
not full-time employees will receive $1,000 per board or committee meeting
attended and directors who are officers and full-time employees of DemandStar
will receive no additional compensation for service as directors. All directors
are eligible for option grants under DemandStar's 1999 Employee Incentive
Compensation Plan. During fiscal year 1999, DemandStar granted each of the four
directors an option to acquire 10,000 shares of DemandStar common stock. The
option has an exercise price of $1.00 per share and vests in equal thirds over a
three-year period. After the rights offering, we plan to appoint at least one
additional director who is not affiliated with DemandStar. Each such independent
director so elected will receive options to purchase 10,000 shares of DemandStar
common stock at a price per share equal to its fair market value on the date of
grant.
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EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation paid by (i) DemandStar to
its Chief Executive Officer during the fiscal year ended December 31, 1999, and
(ii) the Predecessor or DemandStar to its former President for services
performed on the Predecessor's or DemandStar'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 Officers").
Ronald Brown was the sole compensated executive officer of DemandStar during the
periods indicated in clause (ii) above. Mr. Brown no longer serves as an officer
of DemandStar.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION(1) COMPENSATION AWARDS
-------------------------------- ------------------------------
NAME AND PRINCIPAL OTHER RESTRICTED OPTIONS ALL OTHER
POSITION PERIOD/YEAR ENDED SALARY BONUS COMPENSATION STOCK AWDS. SARS(#) LTIP COMPENSATION
- ------------------ ----------------- ------- ------- ------------ ----------- --------- ---- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
O. F. Ramos............ 12/31/99 $40,000 $ -0- $ -0- -0- 1,000,000 -0- -0-
President and CEO
Ronald Brown........... 01/01/98-12/31/98 39,770 -0- -0- -0- -0- -0- $ -0-
Former 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(2) -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
Officers. The aggregate amount of such compensation for each 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.
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STOCK OPTION INFORMATION
The following table sets forth certain information with respect to stock
options granted in fiscal 1999 to the Named Executive Officers.
OPTION GRANTS IN YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------ POTENTIAL REALIZABLE
% OF TOTAL VALUE AT ASSUMED
OPTIONS ANNUAL RATES OF
NUMBER OF GRANTED STOCK PRICE
SECURITIES TO APPRECIATION FOR
UNDERLYING EMPLOYEES EXERCISE OPTION TERM(1)
OPTIONS IN FISCAL PRICE EXPIRATION ---------------------
NAME GRANTED YEAR PER SHARE DATE 5% 10%
- ---- ---------- ---------- --------- ---------- -------- ----------
<S> <C> <C> <C> <C> <C> <C>
O. F. Ramos.................................... 1,000,000(2) 71.4% $1.00 (3) $628,895 $1,593,742
President and CEO
Ronald Brown................................... -0- n/a -0- n/a -0- -0-
Former President
</TABLE>
- -------------------------
(1) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of stock price appreciation of 5% and 10%
compounded annually from the date the respective options were granted to
their expiration date based on the initial public offering price. These
assumptions are not intended to forecast future appreciation of our stock
price. The potential realizable value computation does not take into account
federal or state income tax consequences of option exercises or sales of
appreciated stock.
(2) Options to purchase 10,000 shares of DemandStar common stock were granted to
Mr. Ramos on November 1, 1999 in connection with his agreement to serve as a
member of the DemandStar board. Such options vest in equal thirds on
November 1, 2000, 2001 and 2002. Options to purchase 990,000 shares of
DemandStar were granted to Mr. Ramos pursuant to the terms of his employment
agreement with DemandStar effective November 1, 1999. Of such amount, (a)
400,000 qualified options vest in equal amounts of 100,000 on December 1,
1999, November 1, 2000, November 1, 2001 and November 1, 2002; (b) 90,000
non-qualified options vest in equal amounts of 22,500 on December 1, 1999,
November 1, 2000, November 1, 2001 and November 1, 2002; (c) 250,000
non-qualified options vest in nearly equal thirds on November 1, 2000,
November 1, 2001 and November 1, 2002 based upon and subject to the trading
price of DemandStar's common stock achieving certain levels ranging from $10
to $30 per share, but in any event the options will vest nine and one-half
years from the date of grant, subject to the optionee being employed by
DemandStar at that time; and (d) 250,000 non-qualified options vest in
nearly equal sixths at the end of six consecutive six-month periods based
upon DemandStar achieving certain performance criteria as determined by the
board for each such period, but in any event the options will vest nine
years from the date of grant, subject to the optionee being employed by
DemandStar at that time. All vested options remain unexercised as of the
date of this prospectus.
(3) The options expire 10 years from the date of grant.
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DemandStar 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 for further information
with respect to stock options granted subsequent to October 31, 1999.
EMPLOYMENT AGREEMENTS
EMPLOYMENT AGREEMENT WITH O. F. RAMOS. Effective November 1, 1999,
DemandStar entered into an employment agreement with O. F. Ramos, under which
Mr. Ramos serves as DemandStar'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,
DemandStar 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), DemandStar 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 DemandStar's 1999 Employee Incentive
Compensation Plan to purchase an aggregate of 990,000 shares of DemandStar
common stock at $1.00 per share, comprised of:
- 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;
- 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;
- 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 DemandStar's common stock achieving certain
levels ranging from $10 to $30 per share; however, in any event, all such
options which have not vested in accordance with such vesting schedule
will vest nine and one-half years from the date of grant, subject to the
optionee being employed by DemandStar at that time; and
- 250,000 non-qualified options which vest in nearly equal amounts at the
end of consecutive six-month periods based upon DemandStar achieving
certain performance criteria as determined by the board for each such
period; however, in any event, all such options which have not vested in
accordance with such vesting schedule will vest nine and one-half years
from the date of grant, subject to the optionee being employed by
DemandStar at that time.
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.
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The agreement contains confidentiality provisions and also prohibits the
executive from competing with DemandStar during the term of the agreement and
for two years thereafter. Upon resignation, DemandStar 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, DemandStar 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 DemandStar'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 DemandStar's 1999 Employee Incentive Compensation Plan, qualified
options to purchase an aggregate of 90,000 shares of DemandStar 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 DemandStar during the term of the
agreement and for two years thereafter.
EMPLOYMENT AGREEMENTS WITH MESSRS. JORDAN AND NORTH. In December 1999,
DemandStar 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 DemandStar's 1999 Employee Incentive Compensation Plan to purchase
an aggregate of 100,000 shares of DemandStar 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 DemandStar common stock at $1.00 per share, which options
vest in equal thirds over the next three years.
CONSULTING AGREEMENTS
CONSULTING AGREEMENT WITH EDWARD MOSES. On December 15, 1999, DemandStar
entered into a three-year consulting Agreement with Edward Moses, a director of
DemandStar, pursuant to which Mr. Moses provides consulting services with
respect to strategic planning, operations matters, growth and development
matters and other areas as requested by DemandStar. In exchange for these
services, DemandStar granted Mr. Moses options to purchase an aggregate of
90,000 shares of DemandStar 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, DemandStar
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
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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 DemandStar's Chief Executive Officer and other DemandStar
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, DemandStar 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
DemandStar 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 DemandStar's board of
directors. Individual distributions from the pool 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 DemandStar's 1999
Employee Incentive Compensation 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 (as defined) 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 Section 162(m) of the Internal Revenue
Code. Under these limitations, during any fiscal year the number of options,
stock appreciation rights, restricted shares of common stock, deferred shares of
common stock, shares as a bonus or in lieu of other DemandStar obligations, and
other stock-based Awards granted to any one participant may not exceed 1,000,000
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 which administers the Plan 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,
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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 DemandStar 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 DemandStar or a subsidiary for purposes of eligibility
for participation in the Plan. As of December 15, 1999, all executive officers,
directors, and employees of DemandStar 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 consisting of not less than three directors, each member of which
must be a "non-employee director" as defined under Rule 16b-3 of the Exchange
Act and an "outside director" for purposes of Section 162(m) of the Internal
Revenue Code. However, except as otherwise required to comply with Rule 16b-3 of
the Exchange Act, or Section 162(m) of the Internal Revenue 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 STOCK APPRECIATION RIGHTS. The committee or the board is
authorized to grant stock options, including both incentive stock options, which
can result in potentially favorable tax treatment to the participant, and
non-qualified stock options, and stock appreciation rights 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 stock appreciation
right. The exercise price per share subject to an option and the grant price of
an stock appreciation right are determined by the committee, but in the case of
an incentive stock option 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 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 stock appreciation right, the times at which each option
or stock appreciation right will be exercisable, and provisions requiring
forfeiture of unexercised options or stock appreciation rights at or following
termination of employment generally are fixed by the committee or the board,
except that no option or stock appreciation right
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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 stock appreciation
rights are determined by the committee or the board. stock appreciation rights
granted under the Plan may include "limited stock appreciation rights"
exercisable for a stated period of time following a change in control of
DemandStar, 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 DemandStar,
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
DemandStar 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 DemandStar
or any other factors designated by the 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
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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 DemandStar under Section 162(m) of the Internal Revenue Code.
For purposes of Section 162(m), the term "covered employee" means DemandStar's
chief executive officer and each other person whose compensation is required to
be disclosed in DemandStar's filings with the SEC by reason of that person being
among the four highest compensated officers of DemandStar as of the end of a
taxable year. If and to the extent required under Section 162(m), any power or
authority relating to a performance Award or annual incentive Award intended to
qualify under Section 162(m) 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 shareholder 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:
(1) the amount of any pools and the maximum amount of potential annual
incentive or performance Awards payable to each participant in the
pools, and
(2) 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 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
DemandStar's obligations under the Plan. The committee or the board may
condition any payment
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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 of the Exchange Act.
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 DemandStar plans, or other rights to payment
from DemandStar, 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 DemandStar, as defined in the Plan (including the cash settlement of
stock appreciation rights and "limited stock appreciation rights" 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 stock
appreciation rights (and other stock appreciation rights which so provide) may
be cashed out based on a defined "change in control price," which will be the
higher of:
(1) 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 DemandStar, or
(2) 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 DemandStar or
the sale of all or substantially all of the assets of DemandStar (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 Exchange Act, of more than 30% of either the then outstanding
shares of
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DemandStar's common stock or the combined voting power of DemandStar'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) DemandStar 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 Exchange Act) of a Controlling Interest or
(3) any employee benefit plan of DemandStar or its subsidiaries.
AMENDMENT AND TERMINATION. The board may amend, alter, suspend,
discontinue or terminate the Plan or the committee's authority to grant Awards
without further shareholder approval, except shareholder 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, shareholder 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.
Shareholder approval will not be deemed to be required under laws or
regulations, such as those relating to incentive stock options, that condition
favorable treatment of participants on such approval, although the board may, in
its discretion, seek shareholder 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 DemandStar has no further rights or obligations with
respect to outstanding Awards under the Plan.
OUTSTANDING OPTIONS. As of the date of this prospectus, DemandStar has
granted options to purchase a total of 1,500,000 shares of common stock under
the Plan, including:
- options to purchase 1,000,000 shares granted to Mr. Ramos, and
- options to purchase 100,000 shares granted to each of Messrs. Markey,
Gornto, Moses, Jordan, and North.
The exercise price of these options is equal to $1.00 per share. All
options expire ten years from the date of grant.
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RELATED PARTY TRANSACTIONS
TRANSACTIONS INVOLVING MANAGEMENT
LEGAL SERVICES. L. A. Gornto, Jr., DemandStar's General Counsel, has
performed certain legal services for DemandStar through his law firm, L. A.
Gornto, Jr., P.A., for which DemandStar paid approximately $28,500 from
DemandStar's inception through January 2000, and from which office rent,
secretarial and certain other expenses incurred by Mr. Gornto in providing such
services were paid.
CONDITIONAL PURCHASE OF SERIES B PREFERRED STOCK. HTE and Messrs. Gornto,
Markey, Moses and Ramos, officers and directors of DemandStar, have agreed,
pursuant to the terms of a Conditional Series B Stock Purchase Agreement, to
purchase in the aggregate 2,000,000 shares of DemandStar'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.
In conjunction with, and as an inducement to HTE and the individuals to commit
to the conditional purchase of Series B preferred stock, DemandStar, in January
2000, issued HTE and such individuals warrants entitling them to purchase an
aggregate of 1,000,000 shares of DemandStar common stock at an exercise price of
$2.00 per share. HTE received warrants to purchase 500,000 shares of DemandStar
common stock and each individual received warrants to purchase 125,000 shares of
DemandStar common stock. Such warrants are currently exercisable and will expire
January 1, 2002. 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
DemandStar's assets.
EMPLOYMENT AND CONSULTING AGREEMENTS WITH OFFICERS AND
DIRECTORS. DemandStar has entered into employment agreements with each of
Messrs. Ramos, Gornto, Markey, Jordan and North. In addition, DemandStar 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 DemandStar, have entered
into an agreement with DemandStar to subscribe for an aggregate of 901,223
shares of common stock, which amount reflects the total number of rights to
which they will be entitled. Pursuant to the same agreement, Messrs. Markey,
North and Jordan, officers and directors of DemandStar, have agreed to purchase
additional shares in the rights offering in an amount representing the lesser of
(a) an aggregate of 450,000 shares of common stock or (b) the number of shares
of unsubscribed common stock available on the closing date of the rights
offering.
TRANSACTIONS INVOLVING HTE
HTE has provided DemandStar with administrative and management services,
including payroll, consulting and legal.
HTE and DemandStar 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
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continuing relationship. These agreements are summarized below. Each of these
agreements has 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 DemandStar, HTE is obligated to
contribute to DemandStar $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. HTE contributed the $1,000,000
for 500,000 shares of Series A preferred stock in January 2000. In February
2000, HTE exercised its option to purchase the additional 250,000 shares of
Series A preferred stock for $500,000 in cash. Under the agreement, DemandStar
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 DemandStar
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 DemandStar'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 DemandStar 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 management consulting services. DemandStar will pay HTE 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.
Under the Services Agreement, HTE is charging DemandStar a monthly services fee
equal to 5% of DemandStar's operating expenses for general administrative
matters for DemandStar, plus expenses incurred by HTE for directed allocations
of HTE employees for specific projects (i.e., sales, the registration statement
for the rights offering, consulting services, etc.). For the period from June
18, 1999 to December 31, 1999, HTE charged DemandStar approximately $183,500 for
management and administrative services. That amount represents the accrued
monthly services fees for that period, plus expenses accrued to date for
directed allocations of time for various projects, including time devoted by HTE
employees to the registration statement for this rights offering, sales projects
and charges incurred for consulting services. As DemandStar increases its
infrastructure and hires additional staff, HTE expects to allocate less of its
resources to administrative and management services for DemandStar.
TAX SHARING AND INDEMNITY AGREEMENT. The tax sharing and indemnity
agreement, which is conditioned upon HTE and DemandStar being deemed part of a
consolidated tax 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
DemandStar's business for periods prior to and including the date on which
DemandStar ceases to be a member of HTE's consolidated tax group and with
respect to certain tax attributes of DemandStar after is no longer a member of
HTE's
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consolidated tax group. For periods ending on or before the last day of the
taxable year in which DemandStar 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,
DemandStar for the relevant periods of time that DemandStar 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). DemandStar is responsible for
reimbursing HTE for its share of those taxes, if any. DemandStar is also
responsible for filing returns and paying taxes relating to it for
periods that begin before and end after DemandStar ceases to be a part of
HTE's consolidated tax group. This agreement is intended to allocate the
tax liability between HTE and DemandStar as if they were separate taxable
entities. HTE and DemandStar 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
DemandStar and HTE have entered into provides for DemandStar's grant of rights
to HTE with respect to the registration under the Securities Act of the shares
of DemandStar common stock owned by HTE at the closing of the rights offering.
The registration rights agreement entitles HTE to demand DemandStar, 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
DemandStar, to file a registration statement under the Securities Act covering
the registration of DemandStar 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 DemandStar common stock held
by HTE having a fair market value of at least $3,000,000 at the time of the
request for registration and that DemandStar may be able to temporarily defer a
demand registration to the extent it conflicts with another public offering of
securities by DemandStar or would require DemandStar to disclose material
non-public information. HTE is also able to require DemandStar to include
DemandStar common stock held by HTE in a registration by DemandStar of its
securities so long as specified conditions are satisfied. The underwriters for
the offering, however, may limit or exclude from the offering DemandStar common
stock held by HTE.
DemandStar 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. DemandStar 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 DemandStar and related persons, as well as any
potential underwriter; and
- by DemandStar for the benefit of HTE and related persons, as well as any
potential underwriter.
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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 DemandStar. HTE's piggyback registration rights will terminate
when it is able to sell all of its DemandStar 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 DemandStar 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 DemandStar.
HTE LOAN. From DemandStar's inception through December 31, 1999, HTE
advanced DemandStar an aggregate of $1,306,885, which has been utilized
primarily to acquire the business and certain net assets from the Predecessor
and to finance DemandStar's operating losses. DemandStar'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, $1,306,885 of which represents the
advances previously made by HTE to DemandStar and $443,115 of which represents
the available amount remaining under the facility in the event DemandStar
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. Notwithstanding the foregoing, at the earlier
of (1) the maturity date of the note, or (2) the date of effectiveness of a
secondary public offering of DemandStar common stock yielding gross proceeds of
at least $10,000,000, the entire outstanding balance of the note shall be due
and payable. After taking into consideration DemandStar's cash on hand, all
other capital resources available and DemandStar's need for cash, DemandStar may
prepay all or a portion of the note from proceeds from the rights offering or
subsequently thereafter.
HTE PAYMENT FOR DEMANDSTAR REGISTERED COMMON STOCK. Upon the closing of
the rights offering, HTE will purchase the 17,805,105 shares of DemandStar
common stock being registered in this offering for the price of $1.00 per share.
The aggregate purchase price will be evidenced by a non-interest bearing
promissory note payable to DemandStar in the principal amount of $17,805,105,
which shall be delivered and immediately thereafter repaid at the closing of the
offering from the proceeds received from investors who exercise their rights and
purchase DemandStar common stock. Immediately after the closing of the offering,
DemandStar will file a post-effective amendment to this registration statement
to de-register any underlying shares of common stock not subscribed for by
rights holders at closing. The note will provide that such de-registered
restricted shares shall be redeemed by DemandStar in exchange for the then
outstanding balance due under the note from shares purchased by HTE pursuant to
the non-interest bearing note.
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EARN-OUT OBLIGATIONS. On June 18, 1999, DemandStar acquired the business
and certain net assets from the Predecessor for $1,000,000 in cash. DemandStar
agreed to pay up to an additional $2,000,000 in cash over a three-year period
beginning June 18, 1999, if DemandStar 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 DEMANDSTAR
The following table sets forth information known to DemandStar regarding
beneficial ownership of DemandStar common stock as of December 31, 1999, and as
adjusted to reflect the sale of common stock at a maximum number of shares for
(1) each executive officer and director of DemandStar who beneficially owns
shares; (2) each shareholder known to DemandStar to beneficially own 5% or more
of DemandStar's outstanding securities; and (3) all executive officers and
directors as a group.
<TABLE>
<CAPTION>
AMOUNT AND NATURE
OF BENEFICIAL BEFORE AFTER MAXIMUM
NAME OF BENEFICIAL OWNER OWNERSHIP OFFERING OFFERING(1)(2)
- ------------------------ -------------------- -------- --------------
<S> <C> <C> <C>
H.T.E., Inc........................... 1,250,000 100% 6.3%
1000 Business Center Dr
Lake Mary, FL 32746
All executive officers and -0- -0- 4.5%(3)
directors as a group..................
</TABLE>
- -------------------------
(1) After giving effect to the issuance of 17,805,105 shares of common stock
upon the closing of the rights offering.
(2) 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 (a) full conversion of the 750,000
shares of Series A preferred stock, and (b) full exercise of the warrants
granted to HTE to purchase 500,000 shares of DemandStar common stock, HTE
would beneficially own 2,500,000 shares of outstanding DemandStar common
stock. Assuming the HTE conversions/exercises discussed above plus (i) the
full exercise of the warrants granted to DemandStar employees and directors
to purchase 500,000 shares of DemandStar common stock and (ii) the full
exercise of the vested options to purchase 190,000 shares of DemandStar
common stock, total DemandStar common stock outstanding would be 21,910,828
shares assuming maximum exercise of all rights. Accordingly, the percentage
of HTE's beneficial ownership of DemandStar common stock outstanding after
the offering would be 11.4%, assuming maximum exercise of all rights.
(3) Does not reflect the agreement of certain officers and directors to purchase
an aggregate of up to 450,000 shares of DemandStar common stock from the
pool of unsubscribed rights at the closing. Assuming such purchase of
450,000 shares, the percentage of beneficial ownership of all executive
officers and directors as a group after the offering would be 6.8%, assuming
maximum exercise of rights.
DESCRIPTION OF SECURITIES
AUTHORIZED CAPITAL STOCK
Immediately following the consummation of the rights offering, DemandStar's
authorized capital stock will consist of 100,000,000 shares of DemandStar 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.
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Upon closing of the rights offering, DemandStar will have outstanding 750,000
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
19,970,828 shares of common stock, assuming maximum exercise of all rights. The
following summary description of DemandStar's capital stock and other securities
is qualified in its entirety by reference to DemandStar'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 DemandStar's outstanding common
stock. See "Dividend Policy." In addition, in the event of a liquidation,
dissolution or winding-up of DemandStar, the holders of common stock are
entitled to share equally and ratably in the net assets of DemandStar, if any,
remaining after paying all debts and liabilities of DemandStar 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 DemandStar with HTE as the holder of the Series A 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, except for
shareholders who have acquired their shares in a control-share acquisition under
Florida statutes. See "-- Anti-Takeover Effects of Florida Law and
Charter -- Florida Law," below. Holders of common stock 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.
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 DemandStar's Series A
preferred stock and the holders of Series B preferred stock, and shares of any
class or series of preferred stock which DemandStar may designate and issue in
the future.
PREFERRED STOCK
The DemandStar 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 DemandStar shareholders. The
issuance of preferred stock by the DemandStar board could adversely affect the
rights of holders of
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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 DemandStar and may discourage
bids for DemandStar common stock at a premium over its market price and may
adversely affect the market price of, and the voting and other rights of the
holders of, the DemandStar common stock. DemandStar 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.
SERIES A PREFERRED STOCK
The DemandStar 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.
Before the closing of the rights offering, as the sole shareholder of the
Series A preferred stock, HTE will be issued 750,000 shares of Series A
preferred stock for HTE's $1,500,000 investment. So long as HTE remains the sole
shareholder of the Series A preferred stock, upon the liquidation of DemandStar,
HTE generally shall be entitled to receive $2.00 per share (such price being
subject to adjustment) or a total liquidation preference of $1,500,000 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. 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 DemandStar, unless at the time the dividend or distribution is declared, the
percentage of the outstanding DemandStar common stock held by HTE ("HTE Actual
Percentage") is less than 35% ("HTE Minimum Percentage") of DemandStar's total
outstanding shares of common stock as a result of disposition of DemandStar
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 DemandStar 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 DemandStar common stock
are entitled to receive such amounts on an equal priority basis. For example, if
on the date of DemandStar's liquidation, HTE's DemandStar 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 DemandStar common stock,
then DemandStar 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 DemandStar common
stock,
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then the HTE Minimum Percentage will be reduced to the percentage equal to the
amount that HTE's remaining DemandStar common stock constitutes of all of
DemandStar's outstanding common stock.
Each share of the Series A preferred stock shall be convertible into one
share of fully paid non-assessable DemandStar 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 DemandStar's assets
or a merger of DemandStar in which DemandStar does not survive such merger. The
conversion price for such conversion shall be $2.00 per each share of DemandStar
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"):
- the issuance of DemandStar common stock as a dividend or distribution;
- the combination, subdivision or reclassification of DemandStar common
stock;
- the sale of DemandStar 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 DemandStar 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 DemandStar stockholders; or
- the distribution to all holders of DemandStar common stock of evidences
of DemandStar's indebtedness or assets, including securities, but
excluding cash dividends or distributions paid out of net income.
No fractional shares of DemandStar 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 DemandStar
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
DemandStar's voting capital stock, less the number of shares of DemandStar
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 DemandStar, as a group, (other than HTE and
its affiliated entities) own greater than 10% of DemandStar'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:
(1) the Ordinary Amount; or
(2) 10,000 votes plus that number of votes possessed by any person or group
owning in excess of 10% of the DemandStar outstanding common stock.
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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 DemandStar Series A preferred stock or DemandStar common stock) shall not
exceed 50% of all the DemandStar voting stock.
Cumulative voting for the election of directors is not provided for in
DemandStar'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.
SERIES B PREFERRED STOCK
The DemandStar 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
DemandStar, have agreed, pursuant to the terms of a Conditional Series B Stock
Purchase Agreement, to purchase in the aggregate 2,000,000 shares of
DemandStar'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. In conjunction with, and as an inducement to
HTE and the individuals to commit to the conditional purchase of Series B
preferred stock, DemandStar, in January 2000, issued HTE and such individuals
warrants entitling them to purchase an aggregate of 1,000,000 shares of
DemandStar common stock at an exercise price of $2.00 per share. HTE received
warrants to purchase 500,000 shares of DemandStar common stock and each
individual received warrants to purchase 125,000 shares of DemandStar common
stock. Such warrants are currently exercisable and will expire on January 1,
2002. 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 DemandStar's
assets.
With respect to dividend rights and rights upon dissolution, liquidation or
winding-up of DemandStar, 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
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dividends may be declared with respect to such securities if DemandStar 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 (1) the closing date of
the rights offering or (2) June 30, 2000, DemandStar 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.
RIGHTS
DemandStar is granting rights through HTE 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 subsidiary) as of February 1, 2000, and
to employees of HTE (or a subsidiary) as of February 1, 2000. The rights are
each exercisable for one share of DemandStar common stock at an exercise price
of $1.00 per share. Rights may not be transferred, in whole or in part, except
to spouses and lineal descendants of the rights holder. Unless extended, the
rights expire on , 2000.
WARRANTS
Currently, there are 1,000,000 warrants outstanding. Each warrant entitles
its holder to purchase one share of DemandStar common stock at an exercise price
of $2.00 per share, subject to adjustment in certain circumstances, for a period
of two years ending on January 1, 2002.
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 DemandStar 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
DemandStar'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 DemandStar'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 DemandStar to include their
registrable securities in future registration statements DemandStar files under
the Securities Act.
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ANTI-TAKEOVER EFFECTS OF FLORIDA LAW AND CHARTER
CHARTER
Certain provisions of DemandStar'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.
BOARD OF DIRECTORS
DemandStar'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 DemandStar will be fixed from time to time exclusively through
a resolution adopted by a majority of the total number of directors which
DemandStar 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 DemandStar 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 DemandStar'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 DemandStar 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 DemandStar 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 DemandStar 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
DemandStar.
SPECIAL MEETINGS OF SHAREHOLDERS
DemandStar'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 DemandStar, 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.
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WRITTEN CONSENT
Under DemandStar's articles, the shareholders of DemandStar 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.
ADVANCE NOTICE REQUIREMENTS FOR SHAREHOLDER PROPOSALS AND DIRECTOR NOMINATIONS
DemandStar'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 DemandStar not less than 120 days nor more than
180 days prior to the first anniversary of the date of DemandStar'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
DemandStar'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.
DemandStar'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, DemandStar 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 DemandStar by means of a proxy contest, tender offer,
merger or otherwise, and thereby protect the continuity of DemandStar'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 DemandStar'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 DemandStar directors; the filling of
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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 DemandStar 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.
FLORIDA LAW
DemandStar 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. DemandStar has
not elected to opt out of those provisions and has no intentions to do so.
CONTROL-SHARE ACQUISITION
Florida law prohibits the voting of shares in an issuing public 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. An issuing public corporation is
defined as having at least 100 shareholders, with its principal place of
business, principal office or substantial assets located in Florida and either
more than 10% of its shareholders reside in Florida, more than 10% of its shares
are owned by Florida residents, or 1,000 shareholders reside in Florida.
The DemandStar board has specifically determined that it does not approve
of the acquisition of 20% or more of the issued and outstanding common stock of
DemandStar by any person or entity except for HTE and certain officers and
directors of DemandStar who purchase shares pursuant to agreements approved by
the board prior to the date of this prospectus. Accordingly, it is management's
position that any such non-approved persons acquiring 20% or more of the common
stock pursuant to the rights offering would not have voting rights with respect
to shares acquired.
AFFILIATED TRANSACTIONS
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.
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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
DemandStar's articles provide that DemandStar 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:
(1) 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;
(2) deriving an improper personal benefit from a transaction;
(3) voting for or assenting to an unlawful distribution; and
(4) willful misconduct or a conscious disregard for the best interests of
DemandStar in a proceeding by or in the right of DemandStar 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.
DemandStar has entered into indemnification agreements with its officers
and directors containing provisions which may require DemandStar 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 expenses incurred as a result of any proceeding against them as to
which they could be indemnified. DemandStar 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 DemandStar for which
indemnification is being sought. DemandStar 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 DemandStar common stock is Continental
Stock Transfer & Trust Company.
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SHARES ELIGIBLE FOR FUTURE SALE
Prior to the rights offering, there has been no market for the DemandStar
common stock, and there can be no assurance that a significant public market for
the DemandStar common stock will develop or be sustained after this offering.
Future sales of substantial amounts of DemandStar 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 DemandStar's ability to raise capital through the sale of
its equity securities.
Upon completion of the rights offering, DemandStar will have outstanding
750,000 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 19,970,828 shares of common stock (assuming maximum exercise of
all rights and including 14,500 shares of DemandStar restricted common stock
granted to employees of DemandStar and HTE pursuant to HTE's Employee Incentive
Compensation Plan, 1,250,000 shares of common stock held by HTE, and 901,223
shares to be received by officers and directors of DemandStar upon exercise of
their rights). DemandStar also reserved 4,000,000 shares for options awarded or
to be awarded under the 1999 Employee Incentive Compensation Plan. In addition,
DemandStar also reserved 750,000 shares of common stock for issuance upon
conversion of the Series A preferred stock 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 DemandStar, 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, and the shares purchased by directors and
officers of DemandStar pursuant to exercise of their rights 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 DemandStar
or from an affiliate of DemandStar, and persons who are affiliates of DemandStar
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 199,708 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 DemandStar. Under Rule 144(k), a person who is not
deemed to have been an affiliate of DemandStar 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
86
<PAGE> 90
complying with the manner of sale, public information, volume limitation
or notice provisions of Rule 144.
DemandStar has entered into a registration rights agreement with HTE under
which HTE has demand and piggyback registration rights. 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 DemandStar'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 DemandStar to include their
registrable securities in future registration statements DemandStar files under
the Securities Act.
DemandStar 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 DemandStar, 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 exercise or lapse of a right and
of the acquisition, ownership and disposition 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, 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 will hold a right and the DemandStar common stock
acquired on exercise of a right 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 DemandStar stock as
part of a straddle, "synthetic security" or other integrated investment
(including a "conversion transaction").
Neither HTE nor DemandStar 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.
87
<PAGE> 91
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 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 recognized as
though there had been a sale or exchange of HTE common stock. HTE does not
anticipate having any accumulated earnings and profits through December 31,
1999; however, HTE cannot predict whether it will have current earnings and
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 of the Internal Revenue Code 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 DemandStar (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 DemandStar'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 DemandStar common stock acquired
on exercise will be equal to the sum of the price paid for the DemandStar 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 DemandStar 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.
88
<PAGE> 92
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 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 Internal Revenue Code applicable to investment
warrants would apply to the rights that person acquires as a 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 who is a
director or employee of HTE (or a subsidiary) or to an employee of HTE (or a
subsidiary) (each, a "Compensation Optionee") should be subject to the
provisions of Section 83 of the Internal Revenue Code, which apply to a transfer
of property in connection with the performance of services.
Pursuant to the rules of Section 83 of the Internal Revenue 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 DemandStar 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 DemandStar 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. DemandStar 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 DemandStar and is reasonable in amount, and
either the employee includes that amount in income or DemandStar timely
satisfies its reporting requirements with respect to that amount.
DEMANDSTAR COMMON STOCK
The Federal income tax rules generally applicable to common stock will
apply to the DemandStar 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 DemandStar (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 DemandStar common stock, and such a
distribution would be taxable as a dividend to the holders of DemandStar common
stock to the extent of DemandStar's current and accumulated earnings and
profits.
89
<PAGE> 93
INFORMATION REPORTING AND BACKUP WITHHOLDING
Information reporting by HTE and DemandStar to the Internal Revenue
Service, and the rules regarding backup withholding at a rate of 31%, will apply
in respect of rights distributed to Investor Optionees and in respect of
DemandStar common stock.
LEGAL MATTERS
The validity of the DemandStar 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
DemandStar 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, DemandStar 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, DemandStar's website and the website of the SEC referred
to above. Information on our website does not constitute a part of this
prospectus.
90
<PAGE> 94
DEMANDSTAR.COM, INC.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
DEMANDSTAR.COM, INC. FINANCIAL STATEMENTS
Report of Independent Certified Public Accountants..... F-2
Balance Sheets......................................... F-3
Statements of Operations............................... F-4
Statements of Shareholder's Deficit.................... F-5
Statements of Cash Flows............................... F-6
Notes to Financial Statements.......................... F-7
UNAUDITED PRO FORMA FINANCIAL INFORMATION
Introduction to Unaudited Pro Forma Combined Statement
of Operations......................................... F-17
Unaudited Pro Forma Combined Statement of Operations... F-18
</TABLE>
F-1
<PAGE> 95
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 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 December 31, 1999, and the related statements of
operations, shareholder's deficit and cash flows for the period from June 18,
1999, to December 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 December 31, 1999, and the results
of its operations and its cash flows for the period from June 18, 1999, to
December 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.
/s/ Arthur Andersen LLP
Orlando, Florida,
February 4, 2000
F-2
<PAGE> 96
THE PURCHASE METHOD OF ACCOUNTING WAS USED TO RECORD ASSETS ACQUIRED AND
LIABILITIES ASSUMED BY THE COMPANY. SUCH ACCOUNTING RESULTS IN INCREASED
AMORTIZATION 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 DECEMBER 31, 1999
----------------- --------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash....................................... $ 17,564 $ 127,733
Accounts receivable........................ 1,691 8,593
Prepaid assets............................. -- 92,844
--------- -----------
Total current assets..................... 19,255 229,170
--------- -----------
PROPERTY AND EQUIPMENT, NET
(NOTE 2)................................. -- 108,855
--------- -----------
OTHER ASSETS:
Deposits................................... -- 8,900
Intangible assets, net (Note 3)............ -- 964,466
--------- -----------
Total other assets....................... -- 973,366
--------- -----------
Total assets............................. $ 19,255 $ 1,311,391
========= ===========
LIABILITIES AND SHAREHOLDER'S DEFICIT
CURRENT LIABILITIES:
Accounts payable and accrued liabilities... $ 123,399 $ 191,558
Current portion of note payable (Note 7)... -- 200,000
Deferred revenue........................... 104,469 139,252
--------- -----------
Total current liabilities................ 227,868 530,810
--------- -----------
NOTE PAYABLE, LESS CURRENT PORTION (NOTE
7)....................................... -- 1,106,885
--------- -----------
COMMITMENTS AND CONTINGENCIES (NOTES 3 AND
8)
SHAREHOLDER'S DEFICIT (NOTE 4):
Common stock: $ .0001 par value,
100,000,000 shares authorized and
1,250,000 shares issued and outstanding
as of December 31, 1999.................. -- 125
Additional paid-in capital................. -- 812,413
Shareholder's capital...................... 72,098 --
Accumulated deficit........................ (280,711) (1,138,842)
--------- -----------
Total shareholder's deficit.............. (208,613) (326,304)
--------- -----------
Total liabilities and shareholder's
deficit............................... $ 19,255 $ 1,311,391
========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-3
<PAGE> 97
THE PURCHASE METHOD OF ACCOUNTING WAS USED TO RECORD ASSETS ACQUIRED AND
LIABILITIES ASSUMED BY THE COMPANY. SUCH ACCOUNTING RESULTS IN INCREASED
AMORTIZATION 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 DECEMBER 31, 1999
----------------- --------------- --------------------
<S> <C> <C> <C>
Revenue.......................... $ 33,718 $ 132,135 $ 196,855
Operating Expenses:
Marketing and advertising...... 12,350 15,866 304,800
Research and development....... 125,010 136,279 136,100
General and administrative..... 177,069 250,349 651,520
Depreciation and
amortization................ -- -- 215,969
--------- --------- -----------
Total operating expenses.... 314,429 402,494 1,308,389
--------- --------- -----------
Operating loss................... (280,711) (270,359) (1,111,534)
Interest expense................. -- -- 27,308
--------- --------- -----------
Loss before income tax benefit... (280,711) (270,359) (1,138,842)
--------- --------- -----------
Income tax benefit (Note 6)...... -- -- --
--------- --------- -----------
Net loss....................... $(280,711) $(270,359) $(1,138,842)
========= ========= ===========
Basic and diluted loss per common
share.......................... $ (0.91)
===========
Weighted average number of common
shares outstanding............. 1,250,000
===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-4
<PAGE> 98
DEMANDSTAR.COM, INC.
STATEMENTS OF SHAREHOLDER'S 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.................. 72,098 -- 72,098
Net loss.................................. -- (280,711) (280,711)
-------- --------- ---------
BALANCE, DECEMBER 31, 1998.................. 72,098 (280,711) (208,613)
Issuance of common stock.................. 50,441 -- 50,441
Net loss.................................. -- (270,359) (270,359)
-------- --------- ---------
BALANCE, JUNE 17, 1999...................... $122,539 $(551,070) $(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............. -- -- -- (1,138,842) (1,138,842)
Compensation from
stock options..... -- -- 12,538 -- 12,538
--------- ---- -------- ----------- -----------
BALANCE, DECEMBER 31,
1999................. 1,250,000 $125 $812,413 $(1,138,842) $ (326,304)
========= ==== ======== =========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-5
<PAGE> 99
THE PURCHASE METHOD OF ACCOUNTING WAS USED TO RECORD ASSETS ACQUIRED AND
LIABILITIES ASSUMED BY THE COMPANY. SUCH ACCOUNTING RESULTS IN INCREASED
AMORTIZATION 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 DECEMBER 31, 1999
----------------- --------------- --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.............................. $(280,711) $(270,359) $(1,138,842)
Adjustments to reconcile net loss to
net cash used in operating
activities:
Depreciation and amortization....... -- -- 215,969
Compensation from stock options..... -- -- 12,538
Changes in operating assets and
liabilities, net of effects from
acquisition:
Increase in accounts receivable... (1,691) (2,663) (8,593)
Increase in prepaid assets........ -- -- (92,844)
Increase in deposits.............. -- -- (8,900)
Increase in accounts payable and
accrued liabilities............ 123,399 146,634 191,558
Increase (decrease) in deferred
revenue........................ 104,469 66,232 (33,748)
--------- --------- -----------
Net cash used in operating
activities................... (54,534) (60,156) (862,862)
--------- --------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Cash paid for acquisition............. -- -- (1,000,000)
Capital expenditures.................. -- (3,064) (116,290)
--------- --------- -----------
Net cash used in investing
activities................... -- (3,064) (1,116,290)
--------- --------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Contributions of capital.............. 72,098 50,441 --
Proceeds from issuance of common
stock............................... -- -- 800,000
Borrowings under note payable......... -- -- 1,306,885
--------- --------- -----------
Net cash provided by financing
activities................... 72,098 50,441 2,106,885
--------- --------- -----------
Net increase (decrease) in cash....... 17,564 (12,779) 127,733
Cash, beginning of period............. -- 17,564 --
--------- --------- -----------
Cash, end of period................... $ 17,564 $ 4,785 $ 127,733
========= ========= ===========
SUPPLEMENTAL DISCLOSURE:
Cash paid for interest................ $ -- $ -- $ --
========= ========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
F-6
<PAGE> 100
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 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. No financial
statements of the Predecessor have been presented for 1997, as there was no
activity during 1997. 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 December 31, 1999, and for the
period from June 18, 1999, to December 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 (i)
file a registration statement with the U.S. Securities and Exchange Commission
on Form S-1 to
F-7
<PAGE> 101
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
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 4), and (iii) execute a Conditional Series B Stock
Purchase Agreement with HTE and certain Company employees and directors (See
Note 4). 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>
Computer equipment.......................................... 3-5
Leasehold improvements...................................... 2
Furniture and fixtures...................................... 7
</TABLE>
Depreciation and amortization expense related to property and equipment of
approximately $7,400 is included in depreciation and amortization expense in the
accompanying statement of operations for the period from June 18, 1999, to
December 31, 1999, of the Company. No depreciation expense was incurred by the
Predecessor in 1998 and 1999.
INTANGIBLE ASSETS
Intangible assets consisted of the following as of December 31, 1999:
<TABLE>
<CAPTION>
DESCRIPTION DECEMBER 31, 1999
- ----------- -----------------
<S> <C>
Customer lists and vendor database......................... $ 298,299
Goodwill................................................... 874,701
----------
1,173,000
Less: Accumulated amortization............................. 208,534
----------
$ 964,466
==========
</TABLE>
Intangible assets represent identifiable assets, such as customer lists and
vendor database, along with amounts paid in excess of the fair market value of
net assets purchased in the acquisition and is being amortized using the
straight-line method over a period of 36 months. Amortization expense related to
intangible assets of approximately $208,500 is included in depreciation and
amortization expense in the accompanying statement of operations for the period
from June 18, 1999, to December 31, 1999, of the Company. No amortization
expense was incurred by the Predecessor in 1998 and 1999.
F-8
<PAGE> 102
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
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.
Revenue for fax on demand and document fulfillment services is recognized
when the requested documents are provided to vendors.
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. The fair value of the note payable is
approximately $1,045,000. The fair value was estimated as the discounted amount
of future cash flows using a discount rate of 8%.
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
F-9
<PAGE> 103
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
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.
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 December 31, 1999, consisted of the following:
<TABLE>
<S> <C>
Computer equipment.......................................... $ 94,607
Leasehold improvements...................................... 20,382
Furniture and fixtures...................................... 1,301
--------
116,290
Less -- Accumulated depreciation............................ (7,435)
--------
$108,855
========
</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 in cash 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 intangible assets 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,
F-10
<PAGE> 104
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
to December 31, 1999, of the purchased business have been included in the
accompanying statement of operations of the Company for the same period and will
continue to be reflected going forward.
4. SHAREHOLDER'S DEFICIT
On December 22, 1999, the Company filed a registration statement with the
U.S. Securities and Exchange Commission on Form S-1 in contemplation of 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 of $.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 are undesignated. As of December 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.
5. STOCK COMPENSATION PLAN
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 Plan limits the
number of shares which may be issued pursuant to incentive stock options to
4,000,000 shares.
A summary of the status of the Company's outstanding stock options, each of
which is fixed with respect to number of shares and exercise price, including
employee stock options discussed above, as of December 31, 1999, and changes
during the period ending on that date is presented below:
<TABLE>
<CAPTION>
1999
----------------------------
WEIGHTED-AVERAGE
SHARES EXERCISE PRICE
--------- ----------------
<S> <C> <C>
Outstanding at inception.................. -- $ --
Granted................................. 1,400,000 1.00
Exercised............................... -- --
Forfeited............................... -- --
---------
Outstanding at end of year................ 1,400,000 $ 1.00
=========
Options exercisable at year end........... 190,000 $ 1.00
Weighted-average fair value of options
granted during the year................. $ 0.28
</TABLE>
F-11
<PAGE> 105
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
5. STOCK COMPENSATION PLAN (CONTINUED)
The following table summarizes information about fixed stock options
outstanding at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING OPTIONS EXERCISABLE
-------------------------------------------------- -------------------------------
NUMBER WEIGHTED- NUMBER
OUTSTANDING AT AVERAGE WEIGHTED- EXERCISABLE AT WEIGHTED-
DECEMBER 31, REMAINING AVERAGE DECEMBER 31, AVERAGE
EXERCISE PRICE 1999 CONTRACTUAL LIFE EXERCISE PRICE 1999 EXERCISE PRICE
- -------------- -------------- ---------------- -------------- -------------- --------------
<S> <C> <C> <C> <C> <C>
$1.00 1,400,000 9.9 $1.00 190,000 $1.00
</TABLE>
The fair value of options granted during the fiscal year ended December 31,
1999, reported below has been estimated at the date of grant using a
Black-Scholes option pricing model. The Black-Scholes option valuation model was
developed for use in estimating the fair value of traded options that have no
vesting restrictions and are fully transferrable. In addition, option valuation
models require the input of highly subjective assumptions, including the
expected stock price volatility. The Company's options have characteristics
significantly different from those of traded options, and changes in the
subjective assumptions can materially affect the fair value estimate. The fair
value of each option grant was estimated on the date of grant based on the
following weighted-average assumptions for options granted during 1999:
<TABLE>
<CAPTION>
STOCK OPTION PLAN
-------------------
FOR THE PERIOD FROM
JUNE 18, 1999 TO
DECEMBER 31, 1999
-------------------
<S> <C>
Weighted-average expected life (in years)................. 4.9
Weighted-average risk-free interest rate.................. 6.15%
Volatility -- employee.................................... 0%
Volatility -- non-employee................................ 60%
Dividend yield............................................ --
</TABLE>
The compensation from stock options of $12,538 was related to options
granted to a consultant. This expense is included in general and administrative
expenses in the statement of operations for the period from June 18, 1999, to
December 31, 1999. Had compensation cost related to employees for the Company's
stock-based compensation plans been determined based on the fair value at the
grant dates for awards under those plans consistent with the method under SFAS
No. 123, the Company's net income and earnings per share would have been reduced
to the pro forma amounts indicated below:
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JUNE 18, 1999 TO
DECEMBER 31, 1999
-------------------
<S> <C>
Net loss attributable to common shareholders:
As reported............................................. $(1,138,842)
Pro forma............................................... (1,195,778)
Basic and diluted earnings per share:
As reported............................................. $ (0.91)
Pro forma............................................... (0.96)
</TABLE>
F-12
<PAGE> 106
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
5. STOCK COMPENSATION PLAN (CONTINUED)
The effects of applying SFAS No. 123 on pro forma disclosures of net income
and earnings per share for fiscal 1999 are not likely to be representative of
the pro forma effects on net income and earnings per share in future years.
6. 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.
The provision for income taxes for the period from June 18, 1999, to
December 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 December 31, 1999:
<TABLE>
<CAPTION>
CURRENT NONCURRENT TOTAL
-------- ---------- ---------
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenues............................. $ 9,952 $ -- $ 9,952
Net operating loss (NOL) carryforwards........ -- 422,248 422,248
-------- --------- ---------
Total assets............................... 9,952 422,248 432,200
-------- --------- ---------
Valuation allowance............................. (9,952) (422,248) (432,200)
-------- --------- ---------
Net deferred tax assets.................... $ -- $ -- $ --
======== ========= =========
</TABLE>
The Company had NOL carryforwards as of December 31, 1999, of approximately
$1,093,000 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
December 31, 1999.
7. RELATED PARTY TRANSACTIONS
The Predecessor used office space owned by the shareholder for which rent
of approximately $6,300 and $4,200 was paid for the year ended December 31,
1998, and for the period from January 1, 1999 to June 17, 1999, respectively.
This rent charge is included in general and administrative expenses in the
accompanying statements of operations of the Predecessor. During the period from
June 18, 1999, to December 31,
F-13
<PAGE> 107
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
1999, the Company paid approximately $21,800 to a member of the board of
directors for legal services provided by the member to the Company, which is
included in general and administrative expenses in the accompanying statement 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 $52,000 for the period from June 18,
1999, to December 31, 1999, which is included in general and administrative
expenses in the accompanying statement of operations of the Company.
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 $131,500 for the period from June 18, 1999, to
December 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. 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 as of December 31, 1999, totaled
$1,306,885 with an available balance of $443,115. Interest at a rate of eight
percent, which totaled approximately $27,300, was charged by HTE and is included
in accounts payable and accrued liabilities in the accompanying balance sheet as
of December 31, 1999. 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
December 31, 1999:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
- ------------------------ ----------
<S> <C>
2000............................... $ 200,000
2001............................... 250,000
2002............................... 350,000
2003............................... 450,000
2004............................... 56,885
----------
$1,306,885
==========
</TABLE>
8. 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.
F-14
<PAGE> 108
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
Future aggregate minimum rental payments under these agreements are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING DECEMBER 31, AMOUNT
------------------------ --------
<S> <C>
2000........................................................ $185,918
2001........................................................ 126,740
2002........................................................ 32,551
2003........................................................ 7,106
2004........................................................ 2,690
--------
$355,005
========
</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 leases totaling approximately $79,700 for the period
from June 18, 1999, to December 31, 1999, which is included in general and
administrative expenses in the accompanying statement 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.
9. SUBSEQUENT EVENTS
In January 2000, HTE purchased 500,000 shares of Series A Preferred Stock
for $1,000,000. In February 2000, HTE exercised its option to purchase an
additional 250,000 shares of Series A Preferred Stock for $500,000 in cash. 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 conversion price for such conversion
shall be $2.00 per each share of DemandStar common stock received as a result of
such conversion. Upon liquidation of the Company, HTE, as sole shareholder of
the Series A Preferred Stock, generally shall be entitled to receive $2.00 per
share or a total liquidation preference of $1,500,000.
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.
F-15
<PAGE> 109
DEMANDSTAR.COM, INC.
NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 1999 AND 1998
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. In order to induce the Buyers to enter into the
conditional Series B Preferred Stock purchase agreement, the Company, in January
2000, issued 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 January 2000, an officer was granted qualified options under the
Company's 1999 Employee Incentive Compensation Plan to purchase an aggregate of
100,000 shares of the Company's common stock for $1.00 per share, which options
vest in equal amounts of 25,000 over four years.
In February 2000, HTE's board of directors granted, under its Employee
Incentive Compensation Plan, 100 shares of DemandStar common stock to each of
DemandStar's 41 employees (exclusive of officers and directors) and 104 of HTE's
management employees, for an aggregate of 14,500 shares.
F-16
<PAGE> 110
DEMANDSTAR.COM, INC.
INTRODUCTION TO UNAUDITED
PRO FORMA COMBINED STATEMENT OF OPERATIONS
The following unaudited pro forma combined statement of operations for the
year ended December 31, 1999, has been prepared to reflect the results of
operations of DemandStar.com Inc. ("DemandStar" or "the Company") as if the
acquisition of Information On Demand, Inc. ("IOD" or "the Predecessor") in June
1999 was completed on January 1, 1999.
The acquisition of IOD was treated under the purchase method of accounting
for financial reporting purposes. DemandStar purchased the business and certain
net assets of IOD for $1 million in cash. The Company could pay up to an
additional $2,000,000 in cash 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 intangible assets and $173,000 of deferred revenue for vendor
agreements. As a result of this acquisition, the Form of Services Agreement
("the Agreement") was initiated by H.T.E., Inc. (HTE) and DemandStar. The
Agreement states that HTE will provide to DemandStar management and
administrative services through its employees. These services include financial
reporting, accounting, auditing, tax, office services, payroll, human resources,
as well as management consulting services. Since no services were provided to
the Predecessor by HTE prior to the acquisition, no allocation of expenses has
been made related to the Agreement. The costs for these services are included in
the general and administrative expenses of the Predecessor since they were
performed internally by the employees of the Predecessor.
The Company believes that the assumptions used in preparing the unaudited
pro forma combined statement of operations contained herein provide a reasonable
basis on which to present the unaudited pro forma combined financial data. The
unaudited pro forma combined statement of operations is provided for
informational purposes only and should not be construed to be indicative of the
results of operations or financial position of the Company had the transaction
occurred on the date indicated and are not intended to project the Company's
results of operations for any future period. The unaudited pro forma combined
statement of operations should be read in conjunction with the separate
historical financial statements of the Company and IOD and in conjunction with
the related assumptions and notes to this unaudited pro forma combined statement
of operations. The historical financial statements of IOD for the period from
January 1, 1999, to June 17, 1999, were used in preparing the unaudited pro
forma combined statement of operations for the year ended December 31, 1999.
The unaudited pro forma combined statement of operations does not reflect
the expected increase in the level of expenses as a result of planned increases
to the marketing strategy, expansion of product features and functionality, or
increases in general and administrative expenses to support the Company's
growth. Such items are not reflected because they are not factually determinable
or estimable.
F-17
<PAGE> 111
DEMANDSTAR.COM, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INFORMATION ON
DEMAND, INC. DEMANDSTAR. ACQUISITION PRO FORMA
(PREDECESSOR) COM, INC. ADJUSTMENTS COMBINED
---------------- -------------- ------------ ------------
FOR THE PERIOD
FOR THE PERIOD FROM JUNE 18, FOR THE YEAR FOR THE YEAR
FROM JANUARY 1, 1999 TO ENDED ENDED
1999 TO JUNE 17, DECEMBER 31, DECEMBER 31, DECEMBER 31,
1999 1999 1999 1999
---------------- -------------- ------------ ------------
<S> <C> <C> <C> <C>
REVENUE......................... $ 132,135 $ 196,855 $ -- $ 328,990
OPERATING EXPENSES:
Marketing and advertising..... 15,866 304,800 -- 320,666
Research and development...... 136,279 136,100 -- 272,379
General and administrative.... 250,349 651,520 -- 901,869
Depreciation and
amortization............... -- 215,969 182,467(a) 398,436
--------- ----------- --------- -----------
Total operating
expenses............ 402,494 1,308,389 182,467 1,893,350
--------- ----------- --------- -----------
OPERATING LOSS.................. (270,359) (1,111,534) (182,467) (1,564,360)
INTEREST EXPENSE................ -- 27,308 18,209(b) 45,517
--------- ----------- --------- -----------
LOSS BEFORE INCOME TAX
BENEFIT....................... (270,359) (1,138,842) (200,676) (1,609,877)
INCOME TAX BENEFIT
(Note 6)...................... -- -- -- --
--------- ----------- --------- -----------
NET LOSS........................ $(270,359) $(1,138,842) $(200,676) $(1,609,877)
========= =========== ========= ===========
BASIC AND DILUTED LOSS PER
COMMON SHARE.................. $ (0.91) $ (1.29)
=========== ===========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES OUTSTANDING..... 1,250,000 1,250,000
=========== ===========
</TABLE>
- ---------------
(a) To reflect the increase in amortization expense related to the customer list
and vendor database and goodwill recorded under the purchase method of
accounting. The Company amortizes intangibles over 3 years.
(b) To reflect the additional interest expense on the note payable to H.T.E.,
Inc., for the $200,000 advance from H.T.E., Inc., assuming the funds were
advanced on January 1, 1999.
F-18
<PAGE> 112
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*
Blue sky fees and expenses (including legal)................ 40,000*
Miscellaneous............................................... 10,000*
--------
Total..................................................... $412,780*
========
</TABLE>
- -------------------------
* Estimated.
ITEM 14. INDEMNIFICATION OF OFFICERS AND DIRECTORS
The articles of incorporation and bylaws provide that DemandStar 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 DemandStar or any other person designated by the
board of directors which may include any person serving at the request of
DemandStar 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 DemandStar 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 DemandStar 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 DemandStar pursuant to the foregoing
provisions, DemandStar 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.
II-1
<PAGE> 113
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In June 1999, DemandStar issued 1,000 shares of common stock to HTE. In
December 1999, DemandStar 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.
In January 2000, DemandStar issued 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 were issued
pursuant to an exemption from registration provided by Section 4(2) of the
Securities Act.
In November 1999, December 1999 and January 2000, DemandStar issued stock
options to current and future officers and employees of DemandStar to purchase
an aggregate of 1,030,000, 370,000 and 100,000 shares of common stock,
respectively, 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.
In the first quarter of fiscal 2000, DemandStar issued to HTE 750,000
shares of Series A preferred stock. These securities were issued pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act.
In February 2000, HTE's board of directors granted, under its Employee
Incentive Compensation Plan, 100 shares of DemandStar common stock to each of
DemandStar's 41 employees (exclusive of officers and directors) and 104 of HTE's
management employees, for an aggregate of 14,500 shares. These securities will
be issued pursuant to an exemption 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 compensation benefit plans and contracts relating
to compensation in compliance with Rule 701.
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)Except where indicated, the following exhibits have been previously
filed as part of this Registration Statement:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <C> <S>
3.1 -- Amended and Restated Articles of Incorporation of DemandStar
3.2 -- Amended and Restated By-laws of DemandStar
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 -- Form of Subscription Agent Agreement between DemandStar 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 DemandStar and
HTE
10.2.1 -- Amended and Restated Investment and Distribution Agreement*
</TABLE>
II-2
<PAGE> 114
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
10.3 -- Form of Services Agreement between DemandStar and HTE*
10.4 -- Form of Tax Sharing and Indemnity Agreement between
DemandStar and HTE
10.5 -- Registration Rights Agreement between DemandStar 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 DemandStar and Edward Moses
10.12 -- Consulting Agreement between DemandStar and Ronald Brown
10.13 -- Form of Indemnification Agreement between DemandStar 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 B. Brown
10.17 -- Commitment to Exercise Rights between DemandStar and Messrs.
Ramos, Markey, Gornto, Moses, Jordan and North
10.17.1 -- Amended and Restated Commitment to Exercise Rights*
10.18 -- Office Lease between Concord Management, Ltd., CED
Construction Partners, Ltd. and Associated Housing
Development Partners V, Ltd., collectively the Landlord, and
HTE, as Tenant.*
10.19 -- Form of Promissory Note issued by HTE in favor of DemandStar
in the principal amount of $17,805,105*
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
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>
- -------------------------
* Filed herewith.
(b) No Financial Statements Schedules are filed a part of this registration
statement, other than Exhibit 27, the Financial Data Schedule.
II-3
<PAGE> 115
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.
(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.
II-4
<PAGE> 116
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-5
<PAGE> 117
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
registrant has duly caused this Amendment No. 1 to Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in Maitland,
Florida, on February 10, 2000.
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 AMENDMENT NO. 1 TO REGISTRATION STATEMENT HAS BEEN SIGNED BELOW BY THE
FOLLOWING PERSONS IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ O. F. RAMOS Chief Executive February 10, 2000
- --------------------------------------------------- Officer, President
O. F. Ramos and Director
(Principal
Executive Officer)
/s/ L. A. GORNTO, JR. Chief Financial February 10, 2000
- --------------------------------------------------- Officer (Principal
L. A. Gornto, Jr. Financial and
Accounting
Officer),
Executive Vice
President,
Secretary and
Director
* BERNARD B. MARKEY Chairman of the February 10, 2000
- --------------------------------------------------- Board
Bernard B. Markey
* EDWARD A. MOSES Director February 10, 2000
- ---------------------------------------------------
Edward A. Moses
*By: /s/ O. F. RAMOS
----------------------------------------------
O. F. Ramos
Attorney-in-Fact
*By: /s/ L. A. GORNTO, JR.
----------------------------------------------
L. A. Gornto, Jr.
Attorney-in-Fact
</TABLE>
II-6
<PAGE> 118
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
3.1 -- Amended and Restated Articles of Incorporation of DemandStar
3.2 -- Amended and Restated By-laws of DemandStar
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 -- Form of Subscription Agent Agreement between DemandStar 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 DemandStar and
HTE
10.2.1 -- Amended and Restated Investment and Distribution Agreement*
10.3 -- Form of Services Agreement between DemandStar and HTE*
10.4 -- Form of Tax Sharing and Indemnity Agreement between
DemandStar and HTE
10.5 -- Registration Rights Agreement between DemandStar 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 DemandStar and Edward Moses
10.12 -- Consulting Agreement between DemandStar and Ronald Brown
10.13 -- Form of Indemnification Agreement between DemandStar 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 Exercise Rights between DemandStar and Messrs.
Ramos, Markey, Gornto, Moses, North and Jordan
10.17.1 -- Amended and Restated Commitment to Exercise Rights*
10.18 -- Office Lease between Concord Management, Ltd., CED
Construction Partners, Ltd. and Associated Housing
Development Partners V, Ltd., collectively the Landlord, and
HTE, as Tenant.*
10.19 -- Form of Promissory Note issued by HTE in favor of DemandStar
in the principal amount of $17,805,105*
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
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*
</TABLE>
<PAGE> 119
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C> <C>
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>
- -------------------------
* Filed herewith.
Remainder previously filed.
<PAGE> 1
EXHIBIT 4.3
FORM OF
WARRANT AGREEMENT
To Purchase _________ Shares of Common Stock
Dated as of January 1, 2000
DEMANDSTAR.COM, INC.
a Florida Corporation
Issue Date: January 1, 2000
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
- 3 -
<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
- 4 -
<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
- 5 -
<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:
____________________________________
____________________________________
____________________________________
- 7 -
<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
FORM OF
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 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 subsidiary) as of February 1, 2000
("Eligible HTE Optionholders"), and (iii) employees of HTE (or a subsidiary) as
of February 1, 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
subsidiary) as of February 1, 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 subsidiary) as of
February 1, 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
<PAGE> 2
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 $1.00 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 one Right for each share of HTE common
stock he has a vested and/or unvested option to acquire; 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 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
2
<PAGE> 3
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. Wire instructions may be obtained from the Subscription
Agent's Reorganization Department at (212) 509-4000 (x-535).
(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.
3
<PAGE> 4
(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 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 by the
Company 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
4
<PAGE> 5
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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<PAGE> 6
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 (i) a fee of $2,500 for all services rendered by the
Subscription Agent in connection with the preparation of the Rights, (ii) a fee
of $10 per item processed by the Subscription Agent in connection with the
processing of the Rights, with an aggregate minimum of $2,500 with respect
thereto, and (iii) reimbursement of all reasonable out-of-pocket expenses
incurred by the Subscription Agent 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: Compliance 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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APPENDIX A
FORM OF SUBSCRIPTION CERTIFICATE
<PAGE> 1
EXHIBIT 5.1
OPINION AND CONSENT OF GREENBERG TRAURIG, P.A.
February 10, 2000
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 17,805,105 subscription rights (the "Rights"), with each Right
entitling the holder thereof to purchase one share of the Company's common
stock, par value $.0001 per share (the "Common Stock"). Pursuant to the
Registration Statement, the Company is registering a total of 17,805,105 Rights
and 17,805,105 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.
---------------------------
<PAGE> 1
EXHIBIT 10.2.1
AMENDED AND RESTATED
INVESTMENT AND DISTRIBUTION AGREEMENT
This AMENDED AND RESTATED INVESTMENT AND DISTRIBUTION AGREEMENT
("Agreement") is entered into as of February 3, 2000, 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. HTE and DSI entered into that certain Investment and
Distribution Agreement, dated as of December 21, 1999, and wish to amend and
restate such agreement pursuant to the terms hereof.
C. In consideration for HTE's $1,500,000 investment, DSI will
issue to HTE 750,000 shares of Series A Preferred Stock prior to the closing of
the 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 more fully described in DSI's registration statement
on Form S-1 filed with the Securities and Exchange Commission in December 1999,
as amended (the "Registration Statement"). The 750,000 shares of Series A
Preferred Stock includes 250,000 shares of Series A Preferred Stock which HTE
has an option to purchase for an aggregate of $500,000, with such option to
expire on June 30, 2000 (the "Option"). HTE will exercise such option in
February 2000.
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 vested and/or unvested stock options of HTE
who held such 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 February 1, 2000, shall receive, at no cost, one Right for
each share of HTE common stock which he has a right to acquire (pursuant to an
HTE stock option plan) as of the applicable record date.
F. Each HTE employee who is an employee of HTE (or a
wholly-owned subsidiary) as of February 1, 2000 will receive, at no cost, 200
Rights (all as described in the Registration Statement).
G. 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.
<PAGE> 2
"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, 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.
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"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 entered into by HTE and DSI
as of December 21, 1999.
"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.
"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 filed 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.
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(b) Form 8-A. DSI has filed 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 or the Nasdaq National
Market System. 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 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 was 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) DSI's
1,000 shares of common stock, which were split and exchanged for 1,250,000
shares of the Company's, par value $.0001, common stock, provided that HTE
first contributed to the Company $250 in order to meet stated capital
requirements under Florida law, which condition was met by HTE.
(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 19,225,883
shares of common stock pursuant to exercised Rights. 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
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3.1 EXECUTION AND DELIVERY OF CERTAIN AGREEMENTS. Prior to or
contemporaneously with the closing of the Rights Offering, DSI and HTE shall
execute and deliver, or shall have executed and delivered, 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.
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,
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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 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
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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; 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.
7
<PAGE> 8
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.
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
8
<PAGE> 9
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
9
<PAGE> 1
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. 333-93445) 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.
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 may, in its sole discretion,
provide such other services as DSI may request from each other from time to
time (all such services referred to herein as the "Services").
2. FEES AND EXPENSES.
(a) DSI (the "Requesting Party") will pay to HTE fees
("Fees") for the Services provided by HTE (the "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 Party's 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 Performing Party to
provide the Services.
(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.
<PAGE> 2
(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 Performing Party's obligation to provide Services
hereunder shall continue until either party gives one hundred twenty (120) days
advance written 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. 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:
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<PAGE> 3
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 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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<PAGE> 4
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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<PAGE> 1
EXHIBIT 10.17.1
AMENDED AND RESTATED
AGREEMENT OF COMMITMENT TO EXERCISE RIGHTS
THIS AGREEMENT is entered into this as of the 7th day of February,
2000 by and among DemandStar.com, Inc., a Florida corporation (the "Company")
and O. F. 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 entered into that certain
Agreement of Commitment to Exercise Rights, dated as of December 21, 1999 (the
"Commitment Agreement"); and
WHEREAS, the Purchasers will be issued rights pursuant to the Rights
Offering; and
WHEREAS, the Company and the Purchasers desire to amend and restate
the Commitment Agreement to clarify, among other things, that the Common Stock
to be issued to the Purchasers upon exercise of their Rights will not be
registered as part of the Rights Offering and will be issued pursuant to an
exemption from registration provided by Section 4(2) of the Securities Act of
1933, as amended (the "Securities Act").
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:
<PAGE> 2
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
(b) If upon closing of the Rights Offering a Purchaser does
not hold the number of shares and/or stock options set forth opposite his name
above, such Purchaser(s) hereby agree to purchase, on a pro rata basis from
unsubscribed shares of Common Stock underlying unexercised Rights, to the
extent available, an amount of shares of Common Stock equal to the difference
between (X) the amount of shares and options listed opposite his name above,
and (Y) the number of Rights which such Purchaser will be entitled to exercise
on the date of the closing of the Rights Offering (exclusive of any Rights
which may be exercised pursuant to subsection 2(c) below) .
(c) In addition to the commitment set forth in subsections
(a) and (b) above, 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.
(iv) Fourth, Jordan 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, less the Additional Shares acquired by North,
Jordan and Markey under clauses (i) through (iii) immediately above.
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<PAGE> 3
3. Mechanics of Payment for Shares.
(a) With respect to the shares acquired under subsections
2(a) and (b), 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) The Purchaser is an accredited investor as that term is
defined in Section 501(a) under Registration D promulgated by the Securities
and Exchange Commission under the Securities Act.
(b) 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.
(c) 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.
(d) 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.
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<PAGE> 4
(e) 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.
(f) 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.
(g) Rule 144. The Purchaser understands that he is an
"affiliate" of the Company as such term is defined in Rule 144 promulgated
under the Securities Act. The Purchaser also understands that the Common Stock
acquired by Purchaser will not be registered in the Rights Offering and for
resale purposes will be subject to the requirements and restrictions of Rule
144. Purchaser is familiar with Rule 144, promulgated under the Securities Act,
which, in substance, permits limited public sale of "restricted securities"
acquired, directly or indirectly from the issuer thereof, in a nonpublic
offering, subject to the satisfaction of certain conditions. Rule 144 requires,
among other things: (1) that the resale occur 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, in the case of an affiliate, or of a
nonaffiliate who has held the securities less than two years, (2) the
availability of certain public information about the Company, (3) the sale must
be made through a broker in an unsolicited "broker's transaction" or in
transactions directly with a market maker (as that term is defined under the
Exchange Act), and (4) the amount of securities being sold during any three
month period must not exceed the greater of (i) one percent (1%) of the then
issued and outstanding common stock of the Company or (ii) the average trading
volume of the common stock of the Company during the four weeks immediately
preceding the proposed sale.
(h) 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.
(i) 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.
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<PAGE> 5
(j) 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.
(k) 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 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
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<PAGE> 6
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.
-6-
<PAGE> 7
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and 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
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 10.18
OFFICE LEASE
(1551 SANDSPUR ROAD, MAITLAND, FLORIDA)
DATED: AUGUST 6, 1999
BY AND AMONG
CONCORD MANAGEMENT, LTD., CED CONSTRUCTION PARTNERS, LTD. AND
ASSOCIATED HOUSING DEVELOPMENT PARTNERS V, LTD. ("LANDLORD")
AND
H.T.E., INC. ("TENANT")
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE 1 PREMISES, TERM...............................................................................1
ARTICLE 2 COMMENCEMENT OF TERM.........................................................................1
ARTICLE 3 RENT.........................................................................................2
ARTICLE 4 USE..........................................................................................2
ARTICLE 5 REPAIRS; ALTERATIONS.........................................................................3
ARTICLE 6 FLOOR LOAD; NOISE............................................................................4
ARTICLE 7 LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES.........................................4
ARTICLE 8 INSURANCE....................................................................................5
ARTICLE 9 DAMAGE BY FIRE OR OTHER CAUSE................................................................6
ARTICLE 10 NO LIABILITY ON LANDLORD.....................................................................7
ARTICLE 11 MOVING OF HEAVY EQUIPMENT....................................................................7
ARTICLE 12 CONDEMNATION.................................................................................8
ARTICLE 13 ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING.......................................9
ARTICLE 14 BANKRUPTCY...................................................................................9
ARTICLE 15 DEFAULT BY TENANT - LANDLORD'S REMEDIES.....................................................10
ARTICLE 16 HOLDING OVER................................................................................13
ARTICLE 17 ASSIGNMENT AND SUBLETTING...................................................................13
ARTICLE 18 LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS............................................14
ARTICLE 19 COVENANT OF QUIET ENJOYMENT.................................................................14
ARTICLE 20 EXCAVATION..................................................................................14
ARTICLE 21 SERVICES AND EQUIPMENT......................................................................15
ARTICLE 22 SUBORDINATION...............................................................................15
ARTICLE 23 ESTOPPEL CERTIFICATE........................................................................16
ARTICLE 24 WAIVER OF TRIAL BY JURY.....................................................................17
ARTICLE 25 SURRENDER OF PREMISES.......................................................................17
ARTICLE 26 RULES AND REGULATION........................................................................17
ARTICLE 27 SUCCESSORS AND ASSIGNS......................................................................17
ARTICLE 28 NOTICES.....................................................................................18
ARTICLE 29 NO WAIVER...................................................................................18
ARTICLE 30 CAPTIONS....................................................................................19
ARTICLE 31 INABILITY TO PERFORM........................................................................19
ARTICLE 32 NO REPRESENTATION BY LANDLORD...............................................................19
ARTICLE 33 LIENS.......................................................................................20
ARTICLE 34 INDEMNIFICATION.............................................................................20
ARTICLE 35 CONTROL OF COMMON AREAS AND PARKING FACILITIES BY LANDLORD..................................21
ARTICLE 36 ENVIRONMENTAL MATTERS.......................................................................22
ARTICLE 37 SECURITY DEPOSIT............................................................................22
ARTICLE 38 ATTORNEY FEES...............................................................................23
</TABLE>
(i)
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE 39 TIME OF ESSENCE.............................................................................23
ARTICLE 40 LATE PAYMENTS...............................................................................23
ARTICLE 41 SEVERABILITY AND INTERPRETATION.............................................................23
ARTICLE 42 FLORIDA LAW.................................................................................24
ARTICLE 43 ENTIRE AGREEMENT............................................................................24
</TABLE>
(ii)
<PAGE> 4
OFFICE LEASE
INDENTURE OF LEASE made this 6th day August, 1999, between CONCORD
MANAGEMENT. LTD., CED CONSTRUCTION PARTNERS, LTD. and ASSOCIATED HOUSING
DEVELOPMENT PARTNERS V, LTD., having an office at 1551 Sandspur Road, Maitland,
Florida 32751 hereinafter referred to as "Landlord" and HTE, INC., a Florida
corporation, having an office at 1000 Business Center Drive, Lake Mary, Florida
32746, hereinafter referred to as "Tenant".
W I T N E S S E T H:
ARTICLE 1
PREMISES, TERM
Landlord hereby leases to Tenant, and Tenant hereby hires from
Landlord, the following space in the building in the City of Maitland, State of
Florida, known as and by the Street number 1551 Sandspur Road (hereinafter
called the "Building"); approximately Five Thousand Five Hundred Sixty-Four
(5,564) square feet (herein called the "Demised Premises") as shown on the
floor plan of the foregoing space attached hereto, incorporated herein and
identified as Schedule "A".
The Demised Premises are leased, together, with the appurtenances,
including, without limitation the right to use in common with others, the
driveways, parking areas, entrances, lobbies, elevators and other portions of
the Building and the property on which it is located which Landlord shall make
available for the use of the tenants, their employees, invitees and guests,
from time to time.
To Have And To Hold unto Tenant, its successors and permitted assigns,
for the term of two (2) years ("Term"); commencing on the Commencement Date, as
defined in Article 2 hereof, and ending, unless sooner terminated, on the first
(1st) day of the month during which the second (2nd) anniversary of the
Commencement Date occurs, yielding and paying the rents and additional rents
hereinafter set forth, all on the covenants, conditions and agreements
hereinbefore and hereinafter stated.
ARTICLE 2
COMMENCEMENT OF TERM
Section 2.01 The term of the Lease, and the payment of rent hereunder,
shall commence on the earlier to occur of (i) August 1, 1999, or (ii) the
Tenant shall enter upon and take possession of the Demised Premises, (herein
called the "Commencement Date").
<PAGE> 5
ARTICLE 3
RENT
Section 3.01 During the term of this Lease Tenant covenants and agrees
to pay Landlord a rent ("Rent") in lawful money of the United States, at an
annual rate of One Hundred Four Thousand Three Hundred Twenty-five No/100
Dollars ($104,325.00). Rent shall be payable in equal monthly installments of
Eight Thousand Six Hundred Ninety-three and 75/100 Dollars ($8,693.75), in
advance, on the first day of each month during the term of the Lease at the
office of Landlord, or such other place as Landlord may designate, without any
setoff or deduction whatsoever. The first installment shall be paid on the
execution of this Lease, except that in the event the Commencement Date shall
be a date other than the first day of a calendar month, Tenant shall, on the
Commencement Date, pay Landlord an amount equal to such proportion of an equal
monthly installment as the number of days from the Commencement Date to the end
of the calendar month in which the Commencement Date occurs bears to the total
number of days in said calendar month, and said payment shall represent the pro
rata rent from the Commencement Date to the end of such calendar month.
Section 3.02 In addition, Tenant shall be obligated to pay to Landlord
the Florida Sales and Use Tax or any other applicable tax on all Rent payable
hereunder, which shall be paid at the time of each monthly installment of Rent.
Section 3.03 All costs, charges and expenses which Tenant assumes,
agrees or is obligated to pay to Landlord pursuant to this Lease shall be
deemed additional rent, and, in the event of nonpayment, Landlord shall have
all the rights and remedies with respect thereto as is herein provided for in
case of nonpayment of the base minimum rent.
Section 3.04 Tenant covenants to pay the rent, additional rent and
adjustment of rent as in this Lease provided, when due.
ARTICLE 4
USE
Tenant shall use and occupy the Demised Premises for professional
office purposes only and for no other purpose.
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<PAGE> 6
ARTICLE 5
REPAIRS; ALTERATIONS
Section 5.01 Tenant shall take good care of the Demised Premises and
the fixtures and appurtenances therein and, at its sole cost and expense, make
all repairs thereto as and when needed to preserve them in good working order
and condition. All damage or injury to the Demised Premises and to its
fixtures, glass, appurtenances and equipment, or to the Building or to its
fixtures, glass, appurtenances and equipment, caused by Tenant moving property
in or out of the Building, or by installation or removal of furniture, fixtures
or other property, or resulting from fire, explosion, air-conditioning unit or
system, short circuits, flow or leakage of water, steam, illuminating gas,
sewer gas, sewerage or odors or by bursting or leaking of pipes or plumbing
works or gas, or from any other cause of any other kind or nature whatsoever,
due to carelessness, omission, neglect, improper conduct or other cause of
Tenant, its servants, employees, agents, visitors or licensees, shall be
repaired, restored or replaced promptly by Tenant, at its sole cost and expense
to the satisfaction of Landlord.
Section 5.02 Landlord shall, at its expense, make all repairs and
replacements, structural and otherwise, necessary or desirable in order to keep
in good order and repair the exterior of the Building and the public portions
of the Building and of the need for which Landlord may have knowledge
(including the public halls and stairways, plumbing, wiring and other Building
equipment for the general supply of water, heat, air-conditioning, gas and
electricity) except repairs hereinabove provided to be made by Tenant. Tenant
agrees to notify Landlord of the necessity for any repairs of which Tenant may
have knowledge and for which Landlord may be responsible under the provisions
of the preceding sentence.
Section 5.03 Tenant shall not store or place any materials or other
obstructions in the lobby or other public portions of the Building, or on the
sidewalk abutting the Building.
Section 5.04 Tenant shall not make or allow to be made any alterations
to the Demised Premises without first obtaining the prior written consent of
Landlord in each such instance, which consent may be given on such conditions
as Landlord may elect. Such conditions may include, but are not limited to,
review and approval of plans and specifications, and approval of materials to
be used. Landlord agrees not to unreasonably withhold Landlord's consent to any
alterations to the Demised Premises proposed by Tenant so long as such
alterations: (a) do not adversely affect the structural, mechanical,
electrical, plumbing, or other Building systems, (b)do not affect the exterior
appearance of the Building, and (c) are not visible from the common areas.
Section 5.05. All such work or repairs by Tenant and all alterations
to the Demised Premises by Tenant shall be in quality and class equal to the
existing building, and shall be effected in a good and workmanlike manner and
in compliance with all applicable laws. if Tenant fails to make such repairs or
replacements within thirty (30) days after written notice from Landlord to
Tenant, Landlord may, at its option, make repairs or replacements, and Tenant
- 3 -
<PAGE> 7
shall pay the cost thereof to the Landlord within ten (10) days of Landlord's
demand therefor, as additional rent.
Section 5.06 Any and all alterations to the Demised Premises shall
become the property of Landlord upon termination of this Lease (except for
movable equipment or furniture owned by Tenant). Upon termination of this
Lease, Landlord shall have the right to require Tenant to remove, at Tenant's
expense, such movable equipment or furniture owned by tenant from the Demised
Premises, and, further, the right to require Tenant to remove, at Tenant's
expense, any improvements installed on the Demised Premises by or on behalf of
Tenant and to restore the applicable portion of the Demised Premises to the
condition existing prior to such alterations. If Landlord so requires, and
Tenant fails to remove such improvements, Landlord may remove such improvements
at Tenant's cost, and Tenant shall pay Landlord on demand the cost of restoring
the Demised Premises to the condition existing prior to such alteration.
ARTICLE 6
FLOOR LOAD; NOISE
Section 6.01 Tenant shall not place a load upon any floor of the
Demised Premises which exceeds the load per square foot which such floor was
designed to carry or which is allowed by law.
Section 6.02 Business machines and mechanical equipment belonging to
Tenant which cause noise, vibration or any other nuisance that may be
transmitted to the structure or other portions of the Building or to the
Demised Premises to such a degree as to be objectionable to Landlord, or which
interfere with the use or enjoyment by other tenants of their premises or the
public portions of the Building, shall be placed and maintained by Tenant at
Tenant's cost and expense, in settings of cork, rubber or spring type vibration
eliminators sufficient to eliminate noise or vibration.
ARTICLE 7
LAWS, ORDINANCES, REQUIREMENTS OF PUBLIC AUTHORITIES
Section 7.01 Tenant shall, at its expense, comply with all laws,
orders, ordinances and regulations of Federal, State, County and Municipal
authorities and with any direction made pursuant to law of any public officer
or officers which shaft, with respect to the occupancy, use or manner of use of
the Demised Premises or to any abatement of nuisance, impose any violation,
order or duty upon Landlord or Tenant arising from Tenant's occupancy, use or
manner of use of the Demised Premises or any installations made therein by or
at Tenant's request or required by reason of a breach of any of Tenant's
covenants or agreements hereunder.
- 4 -
<PAGE> 8
Section 7.02 If Tenant receives written notice of any violation of
law, ordinance, rule, order or regulation applicable to the Demised Premises,
it shall give prompt notice thereof to Landlord.
ARTICLE 8
INSURANCE
Section 8.01 Tenant shall not do or permit to be done any act or thing
in or upon the Demised Premises which will invalidate or be in conflict with
the Certificate of Occupancy or the terms of the fire, boiler, sprinkler, water
damage or other insurance policies covering the Building and the fixtures and
property therein; and Tenant shall, at its own expense, comply with all rules,
orders, regulations, requirements and recommendations of the Southeastern
Underwriters Association or any other similar body having jurisdiction and of
the insurance companies that have issued policies with respect to the Building
or its contents, and Tenant shall not knowingly do or permit anything to be
done in or upon the Demised Premises, or bring or keep anything therein, or use
the Demised Premises, in a manner which increases the rate of insurance upon
the Building, or on any property or equipment located therein, over the rate in
effect at the commencement of the term of this Lease.
Section 8.02 If, by reason of any failure of Tenant to comply with the
provisions of this Lease, rate of fire, boiler, sprinkler, water damage or
other insurance (with extended coverage) on the Building, or on the property
and equipment of Landlord or any other tenant or subtenant in the Building,
shall be higher than it otherwise would be, Tenant shall reimburse Landlord and
the other tenants or subtenants in the Building which shall have been charged
because of such failure by Tenant, and Tenant shall make the reimbursement on
the first day of the month following such payment by Landlord or such other
tenants or subtenants. In any action or proceeding wherein Landlord and Tenant
are parties, a schedule or "make up" of any insurance rate for the Building or
Demised Premises issued by the Southeastern Underwriters Association, or other
body establishing fire insurance rates for said Building, shall be conclusive
evidence of the facts therein stated and of the several items and charges in
the insurance rates then applicable to the Building or Demised Premises.
Section 8.03 Tenant, at Tenant's own cost and expense, shall maintain
insurance protecting and indemnifying Landlord and Tenant against any and all
claims for injury or damage to persons or property or for the loss of life or
of property occurring upon; in or about the Demised Premises, and the public
portions of the Building used by Tenant, its employees, agents, contractors,
customers and invitees; such insurance to afford minimum protection during the
term of this Lease, of not less than $1,000,000/3,000,000 in respect of bodily
injury or death to any one person or in respect of any one occurrence or
accident, and not less than $250,000 for property damages.
Section 8.04 All such insurance shall be effected under valid and
enforceable policies (which may cover the Demised Premises and other
locations); shall be issued by insurers of
- 5 -
<PAGE> 9
recognized responsibility authorized to do business in the State of Florida,
and shall contain a provision whereby the insurer agrees not to cancel the
insurance without ten (10) days' prior written notice to Landlord.
Section 8.05 On or before the Commencement Date, Tenant shall furnish
Landlord with a certificate evidencing the aforesaid insurance coverage,
together with proof of payment of the premium thereof, and renewal certificates
shall be furnished to Landlord at least thirty (30) days prior to the
expiration date of each policy for which a certificate was therefore furnished,
together with proof of payment of the premium thereof.
ARTICLE 9
DAMAGE BY FIRE OR OTHER CAUSE
Section 9.01 If the Demised Premises shall be partially damaged by
fire or other cause without the fault or neglect of Tenant, Tenant's servants,
employees, agents, visitors or licensees, such damages shall be repaired by and
at the expense of Landlord and the Rent, until such repairs shall be made,
shall be abated according to the part of the Demised Premises which is usable
by Tenant. However, if such partial damage is due to the fault or neglect of
Tenant, Tenant's servants, employees, agents, visitors or licensees, without
prejudice to any other rights and remedies of Landlord and without prejudice to
the rights of subrogation of Landlord's insurer, the damages shall be repaired
by Landlord but there shall be no appointment or abatement of rent. No penalty
shall accrue for reasonable delay which may arise by reason of adjustment of
insurance on the part of Landlord and for reasonable delay on account of "labor
troubles", or any other cause beyond Landlord's control. Tenant shall give
immediate notice to Landlord in case of fire in the Demised Premises.
Notwithstanding the foregoing, if the Demised Premises are totally or
substantially damaged or are rendered wholly or substantially untenantable by
fire or other cause, and if Landlord shall decide not to restore or not to
rebuild the same, or if 50% or more of the Building shall be so damaged
(whether or not the Demised Premises have been damaged), or if the Building
shall be so damaged that Landlord shall decide to demolish it or to rebuild it
(whether or not the Demised Premises have been damaged), then, or in any of
such events, Landlord may, within ninety (90) days after such fire or other
cause, give Tenant a notice in writing of such decision (which notice shall be
given as in Article 29 hereof provided), and thereupon the term of this Lease
shall expire by lapse of time upon the third day after such notice is given,
and Tenant shall vacate the Demised Premises and surrender the same to
Landlord. If Tenant shall not be in default under this Lease, then upon the
termination of this Lease under the conditions provided for in the sentence
immediately preceding, Tenant's liability for rent shall cease as of the day
following the casualty. If the damage or destruction be due to the fault or
neglect of Tenant, the debris shall be removed by, and at the expense of,
Tenant and, if Tenant shall fail to remove same, such removal may be done by
Landlord at the expense of Tenant.
Section 9.02 No damages, compensation or claims shall be payable by
Landlord for inconvenience, loss of business or annoyance arising from any
repair or restoration of any portion of the Demised Premises or of the
Building. Landlord shall use its best efforts to effect
- 6 -
<PAGE> 10
such repairs promptly and in such manner as not unreasonably to interfere with
Tenant's occupancy.
ARTICLE 10
NO LIABILITY ON LANDLORD
Section 10.01 Landlord and its agents shall not be liable for any
damage to property of Tenant or of others entrusted to employees of the
Building, nor for the loss of, or damage to, any property of Tenant, by theft
or otherwise. Landlord and its agents shall not be liable for any injury or
damage to persons or property resulting from fire, explosion, falling plaster,
steam, gas, electricity, water, rain or snow or leaks from any part of the
Building or from the pipes, appliances or plumbing works or from the roof,
street or sub-surface or from any other place or by dampness or by any other
cause of whatsoever nature, unless caused by or due to the negligence of
Landlord, its agents, servants or employees; nor shall Landlord and its agents
be liable for any such damage caused by other tenants or persons in the
Building or caused by operations in construction of any private, public or
quasi-public work; nor shall Landlord be liable for any latent defect in the
Demised Premises or in the Building.
Section 10.02 Tenant shall reimburse and compensate Landlord, as
additional rent, within five (5) days after rendition of a statement, for all
expenditures made by, or damages or fines sustained or incurred by, Landlord
due to nonperformance or noncompliance with, or breach or failure to observe,
any term, covenant or condition of this Lease upon Tenant's part to be kept,
observed, performed or complied with.
Section 10.03 Tenant agrees that its sole remedies in cases where
Landlord's reasonableness in exercising its judgment or withholding its consent
or approval is applicable and in issue shall be only those in the nature of an
action for an injunction or specific performance, the right to money damages or
other remedies being hereby specifically waived.
Section 10.04 Tenant shall give immediate notice to Landlord in case
of accidents in the Demised Premises or in the Building or of defects therein
or in any fixtures or equipment.
ARTICLE 11
MOVING OF HEAVY EQUIPMENT
Tenant shall not move any safe, heavy equipment or bulky matter in or
out of the Building without Landlord's prior written consent, which consent
Landlord agrees not to unreasonably withhold. If the movement of such items
requires special handling, Tenant agrees to employ only persons holding a
Master Riggers License to do said work and all such work shall be done in full
compliance with County and Municipal requirements. All such movements shall be
made during hours which will least interfere with the normal operations of the
Building, and
- 7 -
<PAGE> 11
all damage caused by such movement shall be promptly be repaired by Tenant, at
Tenant's sole cost and expense.
ARTICLE 12
CONDEMNATION
Section 12.01 In the event that the whole of the Demised Premises
shall be condemned or taken in any manner for any public or quasi-public use,
this Lease and the term and estate hereby granted shall forthwith cease and
terminate as of the date of vesting of title. In the event that only a part of
the Demised Premises shall be so condemned or taken, then effective as of the
date of vesting of title, the Rent hereunder for such part shall be equitably
abated and this Lease shall continue as to such part not so taken. In the event
that only part of the Building shall be so condemned or taken, then (a) if
substantial structural alteration or reconstruction of the Building shall, in
the reasonable opinion of Landlord, be necessary or appropriate as a result of
such condemnation or taking (whether or not the Demised Premises be affected),
Landlord may, at its option, terminate this Lease and the term and estate
hereby granted as of the date of such vesting of title by notifying tenant in
writing of such termination within 60 days following the date on which Landlord
shall have received notice of vesting of title, or (b) if Landlord does not
elect to terminate this Lease, as aforesaid, this Lease shall be and remain
unaffected by such condemnation or taking, except that the Rent shall be abated
to the extent, if any, hereinbefore provided. In the event that only a part of
the Demised Premises shall be so condemned or taken and this Lease and the term
and estate hereby granted are not terminated as hereinbefore provided, Landlord
will, at its expense, restore with reasonable diligence the remaining
structural portions of the Demised Premises as nearly as practicable to the
same condition as it was in prior to such condemnation or taking.
Section 12.02 In the event of termination in any of the cases in this
Article provided, this Lease and the term and estate hereby granted shall
expire as of the date of such termination with the same effect as if that were
the date hereinbefore set for the expiration of the term of this Lease, and the
Rent hereunder shall be apportioned as of such date.
Section 12.03 In the event of any condemnation or taking of all or
part of the Building, Landlord shall be entitled to receive the entire award in
the condemnation proceeding, including any award made for the value of the
estate vested by this Lease in Tenant, and Tenant hereby expressly assigns to
Landlord any and all right, title and interest of Tenant now or hereafter
arising in or to any such award or any part thereof, and Tenant shall be
entitled to receive no part of such award.
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<PAGE> 12
ARTICLE 13
ENTRY, RIGHT TO CHANGE PUBLIC PORTIONS OF THE BUILDING
Section 13.01 Tenant shall permit Landlord to erect, use and maintain
pipes and conduits in and through the Demised Premises. Landlord or its agents
or designees shall have the right to enter the Demised Premises for the purpose
of making such repairs or alterations as Landlord shall desire, shall be
required or shall have the right to make by the provisions of this Lease and,
subject to the foregoing, shall also have the right to enter the Demised
Premises for the purpose of inspecting them or exhibiting them to prospective
purchasers or tenants of the Building or to prospective mortgagees or to
prospective assignees of any such mortgagees. Landlord shall be allowed to take
all material into and upon the Demised Premises that may be required for the
repairs or alterations above mentioned without the same constituting an
eviction of Tenant, in whole or in part, and the Rent reserved shall in no wise
abate while said repairs or alterations are being made by reason of loss or
interruption of the business of Tenant because of the prosecution of any such
work, provided Landlord diligently proceeds therewith in such manner as to
cause the least possible interference with the Tenant's use and enjoyment of
the Demised Premises.
Section 13.02 During the twelve (12) months prior to the expiration of
the Term of this Lease, Landlord may exhibit the Demised Premises to
prospective tenants.
Section 13.03 Landlord shall have the right at any time after the
completion of the Building, without thereby creating an actual or constructive
eviction or incurring any liability to Tenant therefor, to change the
arrangement or location of such of the following as are not contained within
the Demised Premises or any part thereof, entrances, passageways, doors and
doorways, corridors, stairs, toilets and other like public service portions of
the Building.
ARTICLE 14
BANKRUPTCY
Section 14.01 If there shall be filed against Tenant in any court,
pursuant to any statute either of the United States or of any state, a petition
in bankruptcy or insolvency or reorganization or the appointment of a receiver
or trustee of all or a portion of Tenant's property or if Tenant shall
voluntarily file any such petition then, and in that event, the Lease shall be
deemed canceled and terminated, subject to the right of the trustee, with the
court's approval, to timely assume the unexpired Lease, provided, however, such
trustee faithfully complies with the provisions of subsections (b), (c) and (d)
of Section 365 of the Bankruptcy Reform Act of 1978. If Tenant shall make an
assignment for the benefit of creditors or enter into an arrangement, this
Lease shall be deemed canceled and terminated, in which event neither Tenant
nor any person claiming through or under Tenant shall be entitled to acquire or
remain in possession of the Demised Premises and Landlord shall have no further
liability hereunder to Tenant and any such person, if in possession, shall
forthwith quit and surrender the Demised Premises.
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<PAGE> 13
Section 14.02 It is stipulated and agreed that in the event of the
termination of this Lease Pursuant to this Article, Landlord shall forthwith,
notwithstanding any other provisions of this Lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the Rent and additional rent reserved hereunder for the
unexpired portion of the term demised and the then fair and reasonable rental
value of the Demised Premises for the same period. In the computation of such
damages, the difference between any installment of Rent becoming due hereunder
after the date of termination and the fair and reasonable value of the Demised
Premises for the period for which such installment was Payable shall be
discounted to the date of termination at the rate of four percent (4%) per
annum. If the Demised Premises, or any part thereof, be re-let by the Landlord
for the unexpired term of said Lease, or any part thereof, before presentation
of proof of such liquidated damages to any court, commission or tribunal, the
amount of rent reserved upon such refitting shall be prima facie evidence as to
the fair and reasonable rental value for the part or the whole of the premises
so relet during the term of the re-letting. Nothing herein contained shall
limit or prejudice the right of the Landlord to prove for and obtain as
liquidated damages by reason of such termination, an amount equal to the
maximum allowed by any shift or rule of law in effect at the time when, and
governing the proceedings in which, such damages are to be proved, whether or
not such amount be greater, equal to, or less than the amount of the difference
referred to above.
ARTICLE 15
DEFAULT BY TENANT - LANDLORD'S REMEDIES
Section 15.01 The occurrence of any of the following shall constitute
a default (a "Default') hereunder by Tenant:
(a) The Rent payable under the Lease or any other sum of money due
hereunder is not paid when due, or within three (3) business days after receipt
of notice from Landlord that the Rent payment has not been received;
(b) Any petition is filed by or against Tenant under any section or
chapter of the National or Federal Bankruptcy Act or any other applicable
Federal or State bankruptcy, insolvency or other similar law, and, in the case
of a petition filed against Tenant, such petition is not dismissed within
thirty (30) days after the date of such filing;
(c) Tenant shall become insolvent or transfer property in fraud of
creditors;
(d) Tenant fails to remove any lien filed against the Premises or
the Building by reason of Tenant's actions within ten (10) days after receipt
of notice of any such filing;
(e) Tenant shall make an assignment for benefit of creditors;
(f) A receiver is appointed for any of Tenant's assets; or
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(g) Tenant fails to observe, perform and keep each and every of the
covenants, agreements, provisions, stipulations and conditions herein contained
to be observed, performed and kept by Tenant (other than payment of Rent) and
fails to cure such default within ten (10) days after receipt of notice from
Landlord requiring that Tenant remedy, correct, desist, comply or cure any
breach (or if any such breach would reasonably require more than ten (10) days
to rectify, unless Tenant commences rectification within the ten (10) days
after receipt of notice and thereafter promptly, effectively and continuously
proceeds with the rectification of the breach and, in all such events, cures
such breach no later than thirty (30) days after such notice).
Section 15.02 The occurrence of a Default, and failure by Tenant to
cure said Default within the period of time allowed for cure as set forth
above, if any, shall be an "Event of Default in which event Landlord shall have
the option to do and perform any one or more of the following in addition to,
and not in limitation of, any other remedy or right permitted it by law or by
this Lease:
(a) Terminate this Lease by written notice to Tenant, in which
event Tenant shall immediately surrender the Demised Premises to Landlord, but
if Tenant shall fail to do so, Landlord may, without further notice and without
prejudice for any other remedy Landlord may have for possession or arrearage in
Rent enter upon the Demised Premises and expel or remove Tenant and Tenant's
effects, without being liable to prosecution or any claim for damages therefor;
and Tenant agrees to indemnify Landlord for all loss and damage which Landlord
may suffer by reason of such termination, whether through inability to relet
the Demised Premises, or through decrease in Rent, or otherwise; and/or
(b) Declare the entire amount of Rent and other sums which would
become due and payable during the remainder of the Term, to be due and payable
immediately, in which event, Tenant agrees to pay the same at once, with
adjustment for the present value of same in accordance with Florida law,
together with all Rent therefore due, at Landlord's address as provided herein.
It is acknowledged that such payment shall not constitute a penalty or
forfeiture or liquidated damages, but shall merely constitute payment in
advance of the Rent for the remainder of the Term. Upon making such payment,
Tenant shall be entitled to receive from Landlord all rents received by
Landlord from other tenants on account of the Demised Promises during the Term,
less all costs, expenses and attorneys' fees of Landlord incurred in connection
with the recovery of possession and reletting of the Demised Premises, provided
that the monies to which Tenant shall so become entitled shall in no event
exceed the entire amount actually paid by Tenant to Landlord as an advance
payment of the Rent. The acceptance of such payment by Landlord shall not
constitute a waiver of any failure of Tenant thereafter occurring to comply
with any term, provision, condition or covenant of this Lease; and/or
(c) Enter the Demised Premises as the agent of Tenant, without
being liable to prosecution of any claim for damages therefor, and relet the
Demised Premises as the agent of Tenant and for the account of Tenant, without
advertisement and by private negotiations and for any term Landlord deems
proper, and receive the rent therefor, and Tenant shall pay Landlord any
deficiency that may arise by reason of such reletting on demand, but Tenant
shall not be
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entitled to any surplus so arising. Tenant shall reimburse Landlord for all
costs of reletting the Demised Premises including but not limited to
advertising expenses and commissions; and/or
(d) As agent of Tenant, do whatever Tenant is obligated to do by
the provisions of this Lease and may enter the Demised Premises, without being
liable to prosecution or any claims for damages therefor, in order to
accomplish this purpose. Tenant agrees to reimburse Landlord immediately upon
demand for any sums advanced by Landlord and any expenses which Landlord may
incur in thus effecting compliance with this Lease on behalf of Tenant, which
sums shall bear interest at the highest legal rate from the date paid or
advanced by Landlord. Tenant further agrees that Landlord shall not be liable
for any damages resulting to Tenant from such action, whether caused by the
negligence of Landlord or otherwise.
Section 15.03 Pursuit by Landlord of any of the foregoing remedies
shall not preclude the plus of general or special damages incurred, or of any
of the other remedies herein provided or any other remedies provided by law.
Section 15.04 No act or thing done by Landlord or Landlord's agents
during the Lease Term shall be deemed a termination of the Lease or an
acceptance of a surrender of the Demised Premises, and no agreement to
terminate the Lease or accept a surrender of the Demised Premises shall be
valid, unless the same be made in writing and executed by Landlord. Neither the
mention in this Lease of any particular remedy, nor the exercise by Landlord of
any particular remedy hereunder, at law or in equity, shall preclude Landlord
from any other remedy Landlord might have under this Lease, at law or in
equity. Any waiver of or redress for any violation of any covenant or condition
contained in this Lease, shall not prevent a subsequent act, which would have
originally constituted a violation, from having all the force and effect of an
original violation. If Tenant shall be in Default, and as a result thereof,
Landlord shall bring any action under this Lease, or place this Lease or any
amount payable by Tenant hereunder with an attorney concerning or for the
enforcement of any of Landlord's rights hereunder, then Tenant in each and any
such case shall pay Landlord its reasonable attorney's fees and costs incurred.
The receipt by Landlord of rent with knowledge of the breach of any covenant in
this Lease shall not be deemed a waiver of such breach.
Section 15.05 In the event such breach or threatened breach by Tenant
of any of the covenants or provisions of this Lease, Landlord shall have the
right of injunction and the right to invoke any remedy allowed at law or in
equity as if re-entry, summary proceedings and other remedies were not herein
provided for. Mention in this Lease of any particular remedy shall not preclude
Landlord from any other remedy, in law or in equity. The foregoing remedies and
rights of Landlord are cumulative.
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<PAGE> 16
ARTICLE 16
HOLDING OVER
If Tenant remains in possession after expiration of the Lease Term
hereof, with Landlord's acquiescence and without any distinct agreement between
the parties, Tenant shall be a tenant at will and such tenancy shall be subject
to all the provisions hereof, except that the monthly rental shall be one
hundred fifty percent (150%) of the equivalent of the then-current monthly
installment of Rent due hereunder for the entire holdover period and there
shall be no renewal of this Lease by operation of law. Nothing in this
Paragraph shall be construed as a consent by Landlord to the possession of
Premises by Tenant after the expiration of the Lease Term.
ARTICLE 17
ASSIGNMENT AND SUBLETTING
Tenant shall not sublet any part of the Demised Premises, nor assign
this Lease or any interest herein, without prior written consent of Landlord,
which consent shall not be unreasonably withheld, provided that any such sublet
or assignment must be for a use which Landlord, in its reasonable discretion,
does not consider to be injurious to the Demised Premises; provided, further,
no such consent shall serve to release Tenant's liability hereunder. Consent by
Landlord to one assignment or sublease shall not destroy or waive this
provision, and all later assignments and subleases shall likewise be made only
upon prior written consent of Landlord. No assignment or sublease may be
requested in the event Tenant is in default hereunder. Tenant shall provide
Landlord with any and all information reasonably requested by Landlord with
respect to such sublessee or assignee, including, but not limited to financial
information and certified, audited financial statements. Sublessee or assignees
shall become liable directly to Landlord for all obligations of Tenant
hereunder without relieving Tenant's liability. In the event Tenant notifies
Landlord of Tenant's intent to sublease or assign this Lease, Landlord shall
within thirty (30) days from receipt of such notice (i) consent to such
proposed subletting, or (ii) refuse such consent. In the event Landlord gives
its consent to any such assignment or sublease, any rent, rental or other cost
to the assignee or subtenant for all or any portion of the Premises over and
above the Rent payable by Tenant for such space shall be paid to Landlord as
additional rent. In the event this Lease is either terminated or a sublease or
assignment is made as herein provided, Tenant shall reimburse Landlord for all
of the necessary administrative, legal and accounting services required in
order to accomplish such termination, assignment or subletting in an amount not
more than Five Hundred Dollars ($500.00).
The sale or transfer of Tenant's voting stock (if a corporation) or
partnership interest (if a partnership) resulting in the transfer of control of
a majority of such stock or interest or the occupancy of the Premises by any
successor firm of the Tenant or by any firm into which or with which the Tenant
may become merged or consolidated shall be deemed an assignment of this Lease
requiring the prior written consent of Landlord in accordance with the
foregoing, provided,
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<PAGE> 17
such consent shall not be required if the purchaser shall agree to become an
additional guarantor of this Lease.
ARTICLE 18
LANDLORD'S RIGHT TO PERFORM TENANT'S OBLIGATIONS
If Tenant shall default in the observance or performance of any term
or covenant on its part to be observed or performed under or by virtue of any
of the terms or provisions in any Article of this Lease, Landlord, without
being under any obligation to do so and without thereby waiving such default,
may remedy such default for the account, and at the expense, of Tenant. If
Landlord makes any expenditures or incurs any obligations for the payment of
money in connection therewith, including, but not limited to, attorneys' fees
in instituting, prosecuting or defending any action or proceeding, such sums
paid or obligations incurred, with interest at the then maximum lawful rate,
and costs, shall be deemed to be additional rent hereunder and shall be paid to
it by Tenant on demand.
ARTICLE 19
COVENANT OF QUIET ENJOYMENT
Landlord covenants that upon Tenant paying the Rent and additional
rent and observing and performing all the terms, covenants and provisions of
this Lease on Tenant's part to be observed and performed, Tenant may Peaceably
and quietly enjoy the Demised Premises, subject, nevertheless, to the terms and
conditions of this Lease.
ARTICLE 20
EXCAVATION
In the event that any excavation or any construction should be made
for building or other purposes upon land adjacent to the Building, Tenant
shall, if necessary, afford to the person or persons causing or authorized to
cause such excavation or construction or other purpose license to enter upon
the Demised Premises for the purpose of doing such work as shall reasonably be
necessary to protect or preserve the Building, or any parts thereof, from
injury or damage and to support them by proper foundations, pinning and/or
underpinning, or otherwise.
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ARTICLE 21
SERVICES AND EQUIPMENT
Section 21.01 So long as Tenant is not in default under any of the
covenants of this Lease, Landlord shall at its cost and expense maintain and
keep in good order and repair the central air-conditioning, heating and
ventilating system installed by Landlord.
Section 21.02 Landlord reserves the right to interrupt, curtail or
suspend the services required to be furnished by Landlord under this Article 21
when the necessity therefor arises by reason of emergency, mechanical
breakdown, or when required by any law, order or regulation of any Federal,
State, County or Municipal authority, or for any other cause beyond the
reasonable control of Landlord. Landlord shall use due diligence to complete
all required repairs or other necessary work as quickly as possible so that
Tenant's inconvenience resulting therefrom may be for as short a period of time
as circumstances will permit. No diminution or abatement of rent or other
compensation shall or will be claimed by Tenant as a result therefrom, nor
shall this Lease, or any of the obligations of Tenant, be affected or reduced
by reason of such interruption, curtailment or suspension.
Section 21.03 Tenant shall reimburse Landlord for the cost to Landlord
of removal from the Demised Premises and the Building of any refuse and rubbish
of Tenant and Tenant shall pay all bills therefore when rendered.
ARTICLE 22
SUBORDINATION
Section 22.01 This lease is subject and subordinate to all mortgages
which may now or hereafter affect the land more particularly described in
Schedule B attached hereto (the "Land') and/or Building and to all renewals,
modifications. amendments, consolidations, replacements or extensions thereof.
This clause shall be self-operative and no further instrument of subordination
shall be required by any mortgages. In confirmation of such subordination,
Tenant shall promptly execute any certificate that Landlord may request. Tenant
hereby constitutes and appoints Landlord the Tenant's attorney-in-fact to
execute any such certificate or certificates for and on behalf of Tenant.
Section 22.02 At the option of the Landlord or any successor landlord
or the holder of any mortgage affecting the Demised Premises, Tenant agrees
that neither any foreclosure of a mortgage affecting the Demised Premises, nor
the institution of any suit, action, summary or other proceeding against the
Landlord herein or any successor landlord, or any foreclosure proceeding
brought by the holder of any such mortgage to recover possession of such
property, shall, by operation of law or otherwise, result in cancellation or
termination of this Lease or the obligations of the Tenant hereunder, and upon
the request of any such landlord, successor landlord, or the holder of such
mortgage, Tenant covenants and agrees to execute an instrument
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<PAGE> 19
in writing satisfactory to such successor landlord or to any successor to the
Landlord's interest in the Demised Premises, or to the holder of the such
mortgage or to the purchaser of the mortgaged premises in foreclosure, whereby
Tenant attorns to such successor in interest.
Section 22.03 In the event of any act or omission by the Landlord
which would give the Tenant the right to terminate this Lease or to claim a
partial or total eviction pursuant to the terms of this Lease, if any, the
Tenant will not exercise such right until:
(a) it has given written notice of such act or omission to the
holder of any mortgage whose name and address shall previously have been
furnished to Tenant, by delivering such notice of such act or omission
addressed to such holder at the last address so furnished; and
(b) a reasonable period for remedying such. act or omission shall
have elapsed following such giving of notice during which such parties, or any
of them, with reasonable diligence, following the giving of such notice, has
not commenced and continued to remedy such act or omission or to cause the same
to be remedied.
Section 22.04 If, in correction with obtaining financing for the Land
and/or Building, a banking, insurance or other recognized institutional lender
shall request reasonable modifications in this Lease as a condition to such
financing, Tenant will not unreasonably withhold, delay or defer its consent
thereto, provided that such modifications do not increase the obligations of
Tenant hereunder or materially adversely affect the leasehold interest hereby
created or Tenant's use and enjoyment of the Demised Premises.
ARTICLE 23
ESTOPPEL CERTIFICATE
Tenant agrees at any time, and from time to time, upon not less than
ten days' prior notice by Landlord, to execute, acknowledge and deliver to
Landlord, a statement in writing addressed to Landlord certifying that this
Lease is unmodified and in full force and effect (or, if there have been
modifications, that the same is in full force and effect as modified and
stating the modifications), stating the dates of which the Rent, additional
rental and other charges have been paid, and stating whether or not to the best
knowledge of the signer of such certificate, there exists any default by
Landlord in the performance of any covenant, agreement, term, provision or
conditions contained in this Lease, and, if so, specifying each such default,
it being intended that any such statement delivered pursuant hereto may be
relied upon by Landlord, by any holder or prospective holder of any mortgage
affecting the Land and/or Building or by any purchaser of the Land and/or
Building.
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ARTICLE 24
WAIVER OF TRIAL BY JURY
It is mutually agreed by and between Landlord and Tenant that the
respective parties hereto shall and they hereby do waive trial by jury in any
action, proceeding or counterclaim brought by either of the parties hereto
against the other on any matters arising out of or in any way connected with
this Lease, the relationship of Landlord and Tenant, and Tenant's use of or
occupancy of the Demised Premises. Tenant further agrees that it shall not
interpose any counterclaim or counterclaims in a summary proceeding or in any
action based upon non-payment of rent or any other payment required of Tenant
hereunder.
ARTICLE 25
SURRENDER OF PREMISES
Upon the expiration or other termination of the term of this Lease,
Tenant shall quit and surrender the Demised Premises in good order and
condition, ordinary wear and tear excepted, and shall remove all its property
therefrom, except as otherwise provided in this Lease. Tenant's obligation to
observe or perform this covenant shall survive the expiration or other
termination of the Term of this Lease.
ARTICLE 26
RULES AND REGULATION
Tenant agrees to comply with all reasonable rules and regulations
Landlord may adopt from time to time, for the operation and protection of the
Building, its tenants, visitors and occupants. The present rules and
regulations (if any), which Tenant hereby agrees to comply with, entitled
"Rules and Regulations" are attached hereto and are by this reference
incorporated herein. Any future rules and regulations shall become a part of
this Lease, and Tenant hereby agrees to comply with the same upon delivery of a
copy thereof to Tenant, providing the same are reasonable and do not deprive
Tenant of its rights established under this Lease.
ARTICLE 27
SUCCESSORS AND ASSIGNS
Section 27.01 The covenants, conditions and agreements contained in
the Lease shall bind and ensure to the benefit of the parties hereto and their
respective heirs, legal representatives, successors and permitted assigns.
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<PAGE> 21
Section 27.02 The term "Landlord" wherever used in this Lease shall be
limited to mean and include only the owner or owners at the time in question of
the Building or a mortgagee in possession, so that in the event of any sale,
assignment or transfer of the Building, such owner or mortgagee in possession
shall thereupon be released and discharged from all covenants, conditions and
agreements of Landlord hereunder; but such covenants, conditions and agreements
shall be binding upon each new owner or mortgagee in possession for the time
being of the Building, until sold, assigned or transferred.
ARTICLE 28
NOTICES
Any notice, request or demand permitted or required to be given by the
terms and provisions of this Lease, or by any law or governmental regulation,
either by Landlord to Tenant or by Tenant to Landlord, shall be in writing and
shall be sent by United States certified or registered mail, return receipt
requested, addressed to the address as set forth in the heading of this Lease.
Such notice shall be deemed given when mailed. Either party may, by notice as
aforesaid, designate a different address or addresses for notices, requests or
demands to it.
ARTICLE 29
NO WAIVER
The failure of Landlord to seek redress for violation of, or to insist
upon the .strict performance of, any covenant or condition of the Lease, or any
of the Rules and Regulations promulgated by Landlord, shall not prevent a
subsequent act, which would have originally constituted a violation, from
having all the force and effect of an original violation. The receipt by
Landlord of Rent or additional rent or any other charges payable hereunder with
knowledge of the breach of any covenant of this Lease shall not be deemed a
waiver of such breach. No provisions of this Lease shall be deemed to have been
waived by Landlord, unless such waiver be in writing signed by Landlord. No
payment by Tenant, or receipt by Landlord, of a lesser amount than the monthly
Rent herein stipulated shall be deemed to be other than on account of the
earliest stipulated Rent, nor shall any endorsement or statement on any check
or any letter accompanying any check or payment of rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice
to Landlord's right to recover the balance of such Rent or pursue any other
remedy in this Lease provided.
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ARTICLE 30
CAPTIONS
The captions of Articles in this Lease are inserted only as a matter
of convenience and for reference and they in no way define, limit or describe
the scope of this Lease or the intent of any provision thereof.
ARTICLE 31
INABILITY TO PERFORM
This Lease, and the obligation of Tenant to pay Rent or additional
rent hereunder and perform and comply with all of the other covenants and
agreements hereunder on the part of Tenant to be performed and complied with,
shall in no wise be affected, impaired or excused because of Landlord's delay
or failure to perform or comply with any of the covenants or provisions
hereunder on the part of Landlord to be performed or complied with, nor because
Landlord is unable to fulfill any of its obligations trader this Lease or to
supply or is delayed in supplying any service expressly or impliedly to be
supplied, or is unable to make, or is delayed in making, any repair, additions,
alterations or decorations, or is unable to supply or is delayed in supplying,
any equipment or fixtures, if Landlord is prevented or delayed from so doing by
reason of strike or labor troubles or any other cause whatsoever, including,
but not limited to, governmental pre-emption in connection with a National
Emergency or by reason of any rule, order or regulation of any department or
subdivision of any governmental agency or by reason of the conditions of supply
and demand which have been or are effected by war or other emergency.
ARTICLE 32
NO REPRESENTATION BY LANDLORD
Landlord or Landlord's agents have made no representations or promises
with respect to the Building, the Land or the Demised Premises except as herein
expressly set forth and no rights, easements or licenses arc acquired by
Tenant, by implication or otherwise, except as expressly set forth in the
provisions of this Lease. The taking possession of the Demised Premises by
Tenant shall be conclusive evidence, as against Tenant, that Tenant accepts the
Demised Premises and the Building and that same were in good, satisfactory
condition at the time such possession was so taken.
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<PAGE> 23
ARTICLE 33
LIENS
Section 33.01 Tenant agrees that Tenant will pay all charges of
contractors, subcontractors, mechanics, laborers, materialmen, and other items
of like character incurred by Tenant with respect to the Demised Premises, and
will indemnify Landlord against all expenses, costs and charges, including bond
premiums for release of liens and attorney's fees reasonably incurred in and
about the defense of any suit in discharging the said Demised Premises or any
part thereof from any liens, judgments, or encumbrances caused or suffered by
Tenant. In the event any such lien shall be made or filed, Tenant shall bond
against or discharge the same within ten (10) days after receipt of notice that
the same has been made or filed. It is understood and agreed between the
parties hereto that the expenses, costs and charges above referred to shall be
considered as rent due and shall be included in any lien for rent.
Section 33.02 The Tenant herein shall not have any authority to create
any liens for labor or material on the Landlord's interest in the land,
Building or the Demised Premises and all persons contracting with the Tenant
for the destruction or removal of any facilities or other improvements or for
the erection, installation, alteration, or repair of any facilities or other
improvements on or about the Demised Premises, and all materialmen,
contractors, mechanics, and laborers, are hereby charged with notice that they
must look only to the Tenant and the Tenant's interest in the Demised Premises
to secure the payment of any bill for work done, labor performed or material
furnished at the request or instruction of Tenant.
ARTICLE 34
INDEMNIFICATION
In consideration of the Demised Premises being leased to Tenant for
the above rental, Tenant agrees: that Tenant, at all times, will indemnify and
keep harmless Landlord from all losses, damages, liabilities, injuries and
expenses, which may arise or be claimed against Landlord and be in favor of any
persons, firms or corporations, for any injuries or damages to the person or
property of any persons, firms or corporations, consequent upon or arising from
the use or occupancy of the Demised Premises by Tenant, or consequent upon or
arising from any acts, omissions, neglect or fault of Tenant, its agents,
servants, employees, licensees, visitors, customers, patrons or invitees, or
consequent upon or arising from Tenant's failure to comply with any laws,
statutes, ordinances, codes or regulations as herein provided; that Landlord
shall not be liable to Tenant for any damages, losses or injuries to the
persons or property of Tenant which may be caused by the acts, neglect,
omissions or faults of any persons, firms or corporations, except when such
injury, loss or damage results from negligence of Landlord, his agents or
employees. All personal property placed or moved into the Demised Premises or
Building shall be at the risk of Tenant or the owner thereof, and Landlord
shall not be liable to Tenant for any damage to said personal property. Tenant
shall maintain at all times during the term of this Lease an insurance policy
or policies in an amount or amounts sufficient to
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<PAGE> 24
indemnify Landlord or pay Landlord's damages, if any, resulting from any
matters set forth hereinbefore in this Article 34.
In case Landlord shall be made a party to any litigation commenced
against Tenant, then Tenant shall save and hold Landlord harmless in connection
with such litigation and shall pay all costs, expenses and attorney's fees
incurred or paid by Landlord in connection therewith.
ARTICLE 35
CONTROL OF COMMON AREAS AND PARKING FACILITIES BY LANDLORD
All automobile parking areas, driveways, entrances and exits thereto,
common areas, and other facilities furnished by Landlord, including all parking
areas, truck way or ways, loading areas, pedestrian walkways and ramps,
landscaped areas, stairways, corridors and other areas and improvements
provided by Landlord for the general use, in common, of tenants, their offices,
agents, employees, servants, invitees, licensees, visitors, patrons and
customers, shall be at all times subject to the exclusive control and
management of Landlord, and Landlord shall have the right from time to time to
establish, modify and enforce reasonable rules and regulations with respect to
all facilities and areas and improvements; to police same; from time to time to
change the area, level and location and arrangement of parking areas and other
facilities hereinabove referred to; to restrict parking by and enforce parking
charges (by operation of meters or otherwise) to tenants, their officers,
agents, invitees, employees, servants, licensees, visitors, patrons and
customers; to close all or any portion of said areas or facilities to such
extent as may, in the opinion of Landlord's counsel, be legally sufficient to
prevent a dedication thereof or the accrual of any rights to any person or the
public therein; to close temporarily all or any portion of the public areas,
common areas or facilities; to discourage non-tenant parking; to charge a fee
for visitor and/or customer parking; and to do and perform such other acts in
and to said areas and improvements as, in the sole judgment of Landlord, the
Landlord shall determine to be advisable with a view to the improvement of the
convenience and use thereof by tests, their officers, agents, employees,
servants, invitees, visitors, patrons, licensees and customers. Landlord will
operate and maintain the common areas and other facilities referred to in such
reasonable manner as Landlord shall determine from time to time. Without
limiting the scope of such discretion, Landlord shall have the full right and
authority to designate a manager of the parking facilities and/or common areas
and other facilities who shall have full authority to make and enforce rules
and regulations regarding the use of the same or to employ all personnel and to
make and enforce all rules and regulations pertaining to and necessary, for the
proper operation and maintenance of the parking areas and/or common areas and
other facilities.
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ARTICLE 36
ENVIRONMENTAL MATTERS
Without Landlord's prior written consent, Tenant shall not receive,
store, or otherwise handle any substance, product, material or merchandise that
is explosive or highly flammable, toxic or hazardous. Tenant shall occupy the
Demised Premises, conduct its business and control its agents, employees,
invitees and visitors in such a manner as is lawful, reputable and will not
create any nuisance or otherwise interfere with, annoy or disturb any other
tenant in its normal business operations or Landlord in its management of the
Building. Tenant shall not commit or suffer to be committed, any waste on the
Demised Premises, nor shall Tenant permit the Demised Premises to be used in
any way that would. in the opinion of Landlord, be extra hazardous on account
of fire or otherwise that would in any way increase the premiums for or render
void the fire insurance on the Demised Premises or contents of the Building.
"Hazardous Substances," as used in this Lease shall mean pollutants,
contaminants, toxic or hazardous wastes, or any other substances, the removal
of which is required or the use of which is restricted, prohibited or penalized
by any "Environmental Law," which term shall mean any federal, state or local
law or ordinance relating to pollution or protection of the environment.
Tenant agrees to indemnify and hold Landlord harmless from all claims,
demands, actions, liabilities, costs, expenses, damages and obligations or any
nature including, without limitation, court costs and attorney's fees arising
from or as a result of the use of the Demised Premised by Tenant, its agents,
employees, contractors, invitees or licensees. The foregoing indemnification
shall survive the termination or expiration of this Lease.
ARTICLE 37
SECURITY DEPOSIT
Section 37.01 Upon execution of this Lease, Tenant shall pay the sum
of $8,900.00 to the Landlord (the "Security Deposit"), which Security Deposit
shall be held by Landlord in a interest bearing account and as security for the
performance by Tenant of Tenant's covenants and obligations under this Lease,
it being expressly understood that the Security Deposit shall not be considered
an advance payment of rental or a measure of Landlord's damages in case of
default by Tenant.
Section 37.02 Landlord may, from time to time without prejudice to any
other remedy, use the Security Deposit to the extent necessary to make good any
arrearages of Rent or to satisfy any other covenant or obligation of Tenant
hereunder. Following any such application of the Security Deposit, Tenant shall
pay Landlord on demand the amount so applied in order to restore the Security
Deposit to its original amount.
- 22 -
<PAGE> 26
Section 37.03 If Landlord transfers its interest in the Demised
Premises during the Term of this Lease, Landlord may assign the Security
Deposit to the transferee and thereafter Landlord shall have no further
liability for the return of such Security Deposit.
ARTICLE 38
ATTORNEY FEES
In the event of any dispute hereunder or of any action to interpret or
enforce this Lease, any provision hereof or any matter arising herefrom,
including the collection of Rent, the prevailing party shall be entitled to
recover its reasonable costs, fees and expenses, including, but not limited to,
witness fees, expert fees, consultant fees, attorney (in-house and outside
counsel), paralegal and legal assistant fees, costs and expenses, and other
professional fees, costs and expenses, in any action or declaratory action, in
any bankruptcy action, at pre-trial, at trial or on appeal.
ARTICLE 39
TIME OF ESSENCE
Time is of the essence of this Lease.
ARTICLE 40
LATE PAYMENTS
Section 40.01 Payments of Rent received after the fifth day of the
month may be assessed an additional five percent (5%) charge as a late payment
penalty and shall be assessed an additional two percent (2%) charge for each
mouth thereafter until paid in full. Acceptance by Landlord of a payment in an
amount less than that which is currently due shall in no way affect Landlord's
rights under this Lease and in no way be an accord and satisfaction.
Section 40.02 This provision does not prevent Landlord from declaring
the non-payment of Rent when due a Default hereunder.
ARTICLE 41
SEVERABILITY AND INTERPRETATION
Section 41.01 If any clause or provision of the Lease shall be deemed
illegal, invalid or unenforceable under present or future laws effective during
the Term, then and in that event, the
- 23 -
<PAGE> 27
remainder of this Lease shall not be affected by such illegality, invalidity or
unenforceability, and, in lieu of each clause or provision of this Lease that
is illegal, invalid or unenforceable, there shall be added as a part of this
Lease a clause or provision as similar in terms to such illegal, invalid or
unenforceable clause or provision as may be possible and be legal, valid and
enforceable. If such invalidity is, in the sole determination of Landlord,
essential to the rights of both parties, Landlord shall have the right to
terminate this Lease on thirty (30) days' written notice to Tenant.
Section 41.02 Should any of the provisions of this Lease require
judicial interpretation, it is agreed that the court interpreting or construing
the same shall not apply a presumption that the terms of any such provision
shall be more strictly construed against one party by reason of the rule of
construction that a document is to be construed most strictly against the party
who itself or through its agent prepared the same, it being agreed that the
agents of all parties have participated in the preparation of the stipulations
of this Lease.
ARTICLE 42
FLORIDA LAW
This Lease has been made under and shall be construed and interpreted
under and in accordance with the laws of the State of Florida.
ARTICLE 43
ENTIRE AGREEMENT
Section 43.01 This Lease contains the entire agreement between
Landlord and Tenant and any agreement hereafter made between Landlord and
Tenant shall be ineffective to change, modify, waive, release, discharge,
terminate or effect an abandonment of this Lease, in whole or in part, unless
such agreement is in writing and signed by the party against whom enforcement
of the change, modification, waiver, release, discharge, termination or the
effecting of the abandonment is sought.
Section 43.02 If any term or provision of this Lease shall, to any
extent be invalid or unenforceable, the remainder of this Lease shall not be
affected thereby and the balance of the term and provisions of this Lease shall
be valid and enforceable to the fullest extent either hereunder or as permitted
by law.
Section 43.03 This Lease shall be construed in accordance with the
laws of the State of Florida.
[SIGNATURE PAGES FOLLOW]
- 24 -
<PAGE> 28
IN WITNESS WHEREOF, Landlord and Tenant have respectively signed and
sealed this Lease as of the day and year first above written.
WITNESSES: LANDLORD:
CONCORD MANAGEMENT, LTD., a
Florida limited partnership
BY: CONCORD MANAGEMENT
COMPANY, INC., a Florida
corporation, its general
partner
By: /s/ Edward Kleiman
- ----------------------------- -----------------------------------
Edward Kleiman, President
Print Name:
------------------ (CORPORATE SEAL)
/s/ Tammy Romero
- -----------------------------
Print Name: Tammy Romero
CED CONSTRUCTION PARTNERS, LTD.,
a Florida limited partnership
BY: CED CONSTRUCTION, INC., a Florida
corporation, its general partner
- ----------------------------- By: /s/ Michael J. Sciarrino
-----------------------------------
Print Name: Michael J. Sciarrino, President
------------------
/s/ Vicky Sue Popejoy (CORPORATE SEAL)
- -----------------------------
Print Name: Vicky Sue Popejoy
- 25 -
<PAGE> 29
ASSOCIATED HOUSING
DEVELOPMENT PARTNERS V, LTD., a
Florida limited partnership
BY: FAMILY AFFORDABLE PARTNERS,
INC., a Florida corporation, its
Sole General Partner
By: /s/ Michael J. Sciarrino
- ----------------------------- -----------------------------------
Michael J. Sciarrino, President
Print Name:
------------------ (CORPORATE SEAL)
/s/ Vicky Sue Popejoy
- -----------------------------
Print Name: Vicky Sue Popejoy
WITNESSES: TENANT:
/s/ Lee Gormley By: /s/ Brian B. Heafy
- ----------------------------- -----------------------------------
Print Name: Lee Gormley Brian B. Heafy
Vice President, H.T.E., Inc.
/s/ Pam Kelly
- -----------------------------
Print Name: Pam Kelly
- 26 -
<PAGE> 1
EXHIBIT 10.19
FORM OF
PROMISSORY NOTE
DATE OF NOTE: ____________, 2000
PRINCIPAL AMOUNT: $17,805,105
MATURITY DATE: ____________, 2000
PAYMENT DATE: Shall be the Date of Note stated above.
INTEREST RATE: No interest shall accrue.
BORROWER: H.T.E., INC.
BORROWER'S ADDRESS: 1000 Business Center Drive, Lake Mary, Florida 32746
LENDER: DEMANDSTAR.COM, INC.
LENDER'S ADDRESS: 1551 Sandspur Road, Suite B, Maitland, Florida 32714
FOR VALUE RECEIVED, 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 at the Payment Date, according to the terms
set forth herein, as full payment for 17,805,105 shares of common stock, par
value $.0001 per share, of the Lender (the "Shares"), pursuant to the
Borrower's subscription for the Shares at a purchase price of $1.00 per Share.
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. At the Payment Date, the Borrower shall pay
the Lender the Principal Amount from the proceeds of the exercise of rights
pursuant to the Lender's rights offering declared effective by the Securities
and Exchange Commission on ___________, 2000 (the "Rights Offering"). Any
Shares not subscribed for by eligible rights holders on the Payment Date, which
is also the closing date of the rights offering, shall be redeemed by the
Lender at a price of $1.00 per Share. In such case, the outstanding balance
under this Note shall no longer be due and owing and this Note shall be deemed
paid in full.
<PAGE> 2
2. 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.
3. 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.
4. 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.
5. 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 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.
6. 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.
7. 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
-2-
<PAGE> 3
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.
8. 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.
9. 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.
10. 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.
-3-
<PAGE> 4
Executed in ___________, Georgia by the Borrower effective __________,
2000.
BORROWER:
H.T.E., INC.
By:
-----------------------------------
Name: L.A. Gornto, Jr.
Title: Executive Vice President
-4-
<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 Amendment No. 1 to Registration Statement on Form S-1.
/s/ Arthur Andersen LLP
Orlando, Florida,
February 4, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUN-18-1999
<PERIOD-END> DEC-31-1999
<EXCHANGE-RATE> 1
<CASH> 127,733
<SECURITIES> 0
<RECEIVABLES> 8,593
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 229,170
<PP&E> 108,855
<DEPRECIATION> 0
<TOTAL-ASSETS> 1,311,391
<CURRENT-LIABILITIES> 530,810
<BONDS> 0
0
0
<COMMON> 125
<OTHER-SE> (326,429)
<TOTAL-LIABILITY-AND-EQUITY> 1,311,391
<SALES> 0
<TOTAL-REVENUES> 196,855
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,308,389
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 27,308
<INCOME-PRETAX> (1,138,842)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,138,842)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,138,842)
<EPS-BASIC> (0.91)
<EPS-DILUTED> (0.91)
</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
February 1, 2000
- Employees of H.T.E., Inc. as of February 1, 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 Internet subsidiary, DemandStar.com, Inc. ("DemandStar"), 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 subsidiary) as of February 1,
2000, or (iii) an employee of HTE (or a subsidiary) as of February 1, 2000, you
will receive rights ("Rights") to purchase shares of DemandStar common stock.
Each Right entitles the holder thereof to purchase one share of DemandStar
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 DemandStar 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 subsidiary) as of February 1, 2000, will
receive one Right for each share of HTE common stock that he has a vested and/or
unvested option to acquire.
<PAGE> 2
Page 2
Each employee of HTE (or a subsidiary) as of February 1, 2000 will receive 200
Rights (which entitle such employee to subscribe for up to 200 shares of
DemandStar common stock).
There is currently no public market for the Rights or the DemandStar
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 intend to apply for quotation of our
common stock on the Nasdaq SmallCap Market or Nasdaq National Market System
under the symbol "DMND."
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. DemandStar'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
DemandStar 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, directors and employees to increase or decrease their
level of participation in our new business by varying their level of investment
in DemandStar following the Rights Offering.
The attached prospectus contains important information about the
Rights Offering and DemandStar's planned business. I encourage you to read it
carefully. You are not required to exercise your Rights.
<PAGE> 3
Page 3
Your Federal income tax consequences from receiving or exercising a
Right depend on whether or not you receive the Right as a result of owning HTE
common stock or as a result of your being (i) a holder of an HTE option who is a
director or employee of HTE (or a subsidiary thereof) or (ii) an employee of HTE
(or a subsidiary thereof). If you receive a Right as a result of your ownership
of HTE common stock, the fair market value of the Right will be taxable to you
(i) first, as a dividend, up to the amount of HTE's current and/or accumulated
earnings and profits, if any, attributable to the Right, (ii) then as a
is distributed, up to the amount thereof, and (iii) finally, if there is any
excess over the foregoing two amounts, as gain recognized as if you sold the HTE
common stock. In the foregoing circumstances, you will not recognize any gain or
loss on exercise of the Right. If you receive a Right as a result of being (i) a
holder of an HTE option who is a director or employee of HTE (or a subsidiary
thereof) or (ii) an employee of HTE (or a subsidiary thereof), you will not
realize any income or gain on the receipt of the Right, but on exercise of the
Right you will recognize ordinary income equal to the excess, if any, of the
fair market value, as of the exercise date, of the DemandStar common stock you
receive on exercise of the Right over the exercise price for the Right. If you
are an HTE shareholder and you either also hold HTE stock options and are an
employee of director of HTE (or a subsidiary thereof) or are an employee of HTE
(or a subsidiary there), it should be the better view that the rules in the
second and third sentences of this paragraph apply to the Rights you receive on
your HTE stock, but it nevertheless is possible that the rules set forth the
fourth sentence of this paragraph would apply to those Rights. Please read the
information set forth under the caption "Certain Federal Income Tax
Considerations" in the attached prospectus and consult your own tax adviser 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 DemandStar'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 ("DemandStar"), 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 subsidiary) as of
February 1, 2000, and (iii) employees of HTE (or a subsidiary) as of February
1, 2000 (i, ii and iii, collectively, the "Eligible Holders"), as described in
DemandStar'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 subsidiary) as of February 1, 2000, will receive one Right for each share of
HTE common stock that he has a vested and/or unvested option to acquire. Each
employee of HTE (or a subsidiary) as of February 1, 2000 will receive 200
Rights. Each Right carries a subscription privilege (the "Subscription
Privilege") which entitles the Eligible Holder to purchase one share of common
stock, par value $.0001 per share (the "Common Shares"), 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
DemandStar. An aggregate of up to 17,805,105 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 DemandStar (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, which wire
instructions may be obtained by contacting the Subscription Agent's
Reorganization Department at (212) 509-4000 (X-535).
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 DemandStar, 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: Reorganization Department
Telephone: (212) 509-4000 (X-535)
Facsimile: (212) 616-7610
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 DemandStar 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.
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<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 subsidiary) as of February 1, 2000, will receive one
Right for each share of HTE common stock that he has a vested and/or unvested
option to acquire. Each employee of HTE (or a subsidiary) as of February 1,
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 17,805,105 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
(X-210).
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 & TRUST COMPANY, OR ANY OTHER PERSON WHO IS DEEMED TO BE MAKING OR WHO
IS MAKING OFFERS OF RIGHTS OR COMMON STOCK 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 subsidiary of HTE
("DemandStar"), 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 subsidiary) as of
February 1, 2000, and (iii) employees of HTE (or a subsidiary) as of February
1, 2000, of non-transferable rights ("Rights") to subscribe for and purchase
shares of common stock, par value $.0001 per share, of DemandStar (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 one Right for each share of HTE
common stock you have a vested and/or unvested option to acquire. As an
eligible employee, you will receive 200 Rights. Each Right will entitle you to
subscribe for and purchase from DemandStar 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 DemandStar (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 YOUR ACCOUNT REPRESENTATIVE.
<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
- ----------------------------------
- ----------------------------------
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<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. ("DemandStar"), a 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 subsidiary) as of February 1, 2000, and (iii) employees of HTE (or a
subsidiary) as of February 1, 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 one Right for each share of HTE common stock
that you have a vested and/or unvested option to acquire. As an eligible HTE
employee, you will receive 200 Rights. Each Right will entitle you to subscribe
for and purchase from DemandStar 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 DemandStar (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 (X-535).
<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 & Trust Company.
- Wire transfer directed to Continental Stock Transfer & Trust
Company. (Call (212) 509-4000 (X-535) 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:
Continental Stock Transfer & Trust Company
Reorganization Department
2 Broadway, 19th Floor
New York, NY 10004
If you have any questions, call: Continental Stock Transfer & Trust
Company at (212) 509-4000 (X-535).
- ----------------------------------
(Signatures)
Please type or print name(s) below
- ------------------------------------
Date: ________________ , 2000
3
