<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ....... to .......
Commission File Number: 0-17995
CUSTOMTRACKS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-2216818
(State of Incorporation) (I.R.S. Employer
identification number)
13355 NOEL ROAD
SUITE 1555
DALLAS, TEXAS 75240-6604
(Address of Principal Executive Offices)
(972) 702-7055
(Registrant's Telephone Number, Including Area Code)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS REQUIRED
TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DURING
THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE REGISTRANT WAS
REQUIRED TO FILE SUCH REPORTS) AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS.
YES X NO
--- ---
INDICATE THE NUMBER OF SHARES OUTSTANDING OF EACH OF THE ISSUER'S CLASSES OF
COMMON STOCK, AS OF THE LATEST PRACTICABLE DATE.
CLASS OUTSTANDING AT OCTOBER 31, 1998
COMMON STOCK, PAR VALUE $.01 PER SHARE 14,902,609
<PAGE>
INDEX
PART I-FINANCIAL INFORMATION
Page
Number
------
ITEM 1. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets at September 30, 1998
and December 31, 1997 3
Condensed Consolidated Statements of Operations for the
three months and nine months ended September 30, 1998 and 1997 4
Condensed Consolidated Statements of Cash Flows for the
nine months ended September 30, 1998 and 1997 5
Notes to Condensed Consolidated Financial Statements 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS 9
PART II-OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS 12
ITEM 5. OTHER INFORMATION 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 12
2
<PAGE>
CUSTOMTRACKS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(In thousands)
September 30, 1998 December 31, 1997
------------------ -----------------
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 23,357 $ 15,163
Short-term marketable securities 16,053 1,010
Accounts receivable, net of allowance for doubtful
accounts of $757,000 in 1998 and $1,113,000 in 1997 14,935 31,559
Due from sale of businesses 1,884 --
Inventories 3,844 11,759
Prepaid expenses 436 801
------------ -----------
Total current assets 60,509 60,292
Property and equipment, at cost 7,826 28,907
Accumulated depreciation (4,997) (16,164)
------------ -----------
2,829 12,743
Intangible assets, net 3,423 6,746
Other assets 601 5,742
------------ -----------
$ 67,362 $ 85,523
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,861 $ 6,167
Accrued expenses 6,957 13,832
Deferred revenues 1,961 1,828
------------ -----------
Total current liabilities 11,779 21,827
Contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none issued -- --
Common stock, $.01 par value, 30,000,000 shares
authorized; 17,194,509 issued, 14,902,609
outstanding in 1998 and 17,024,563 issued, 16,944,563
outstanding in 1997 172 170
Additional paid-in capital 86,998 86,045
Treasury stock, at cost (11,314) (393)
Accumulated deficit (20,273) (22,126)
------------ -----------
Total stockholders' equity 55,583 63,696
------------ -----------
$ 67,362 $ 85,523
============ ===========
</TABLE>
See accompanying notes.
3
<PAGE>
CUSTOMTRACKS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended September 30 Ended September 30
-------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ----------
<S> <C> <C> <C> <C>
Sales $ 15,936 $ 30,185 $ 76,024 $ 83,215
Operating costs and expenses :
Cost of sales 8,953 19,363 43,774 52,511
Research and development 446 3,008 4,818 8,780
Marketing, general and administrative 5,776 9,603 24,892 31,726
-------- -------- -------- ---------
15,175 31,974 73,484 93,017
-------- -------- -------- ---------
Operating income (loss) 761 (1,789) 2,540 (9,802)
Investment income 582 159 1,154 894
Interest expense -- -- -- (65)
Loss from sale of businesses, net -- -- (1,561) --
-------- -------- -------- ---------
Income (loss) before income taxes 1,343 (1,630) 2,133 (8,973)
Provision for income taxes 76 37 280 2,713
-------- -------- -------- ---------
Net income (loss) $ 1,267 $ (1,667) $ 1,853 $ (11,686)
======== ======== ======== =========
Basic and diluted earnings (loss) per share $ 0.08 $ (0.11) $ 0.11 $ (0.79)
======== ======== ======== =========
Shares used in computing earnings (loss) per share:
Basic 14,903 14,723 16,134 14,723
======== ======== ======== =========
Diluted 14,951 14,723 16,157 14,723
======== ======== ======== =========
</TABLE>
See accompanying notes.
4
<PAGE>
CUSTOMTRACKS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Nine Months
Ended September 30
------------------------
1998 1997
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ 1,853 $ (11,686)
Adjustments to reconcile net income (loss) to net cash
provided (used) by operating activities:
Depreciation and amortization 2,844 3,831
Loss from sale of businesses, net 1,561 --
Stock based compensation 516 --
Deferred income taxes -- 3,404
Change in assets and liabilities:
Accounts receivable (2,327) (5,369)
Inventories (1,650) 43
Prepaid expenses 120 538
Intangibles and other assets 242 832
Accounts payable and accrued expenses (1,411) 2,395
Deferred income 133 (554)
---------- ---------
Net cash provided (used) by operating activities 1,881 (6,566)
Cash flows from investing activities:
Purchases of property and equipment (2,089) (1,559)
Proceeds from sale of TSG business, net of
cash conveyed 20,847 --
Proceeds from sale of Cotag business unit 2,636 --
Purchase of Cardkey Systems -- (1,868)
Purchases of marketable securities (16,053) (4,916)
Sales and maturities of marketable securities 1,010 10,854
Increase in other assets (397) (1,132)
Other (52) (66)
---------- ---------
Net cash provided by investing activities 5,902 1,313
Cash flows from financing activities:
Proceeds from issuance of common stock 340 --
Other 49 69
---------- ---------
Net cash provided by financing activities 389 69
Effect of exchange rate changes on cash and cash equivalents 22 147
---------- ---------
Increase (decrease) in cash and cash equivalents 8,194 (5,037)
Cash and cash equivalents, beginning of period 15,163 5,296
---------- ---------
Cash and cash equivalents, end of period $ 23,357 $ 259
========== =========
</TABLE>
See accompanying notes.
5
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying financial statements, which should be read in conjunction
with the audited consolidated financial statements included in the Company's
1997 Annual Report to Shareholders on Form 10-K, are unaudited but have been
prepared in the ordinary course of business for the purpose of providing
information with respect to the interim periods. The Condensed Consolidated
Balance Sheet at December 31, 1997 was derived from the audited Consolidated
Balance Sheet at that date which is not presented herein. Management of the
Company believes that all adjustments necessary for a fair presentation for such
periods have been included and are of a normal recurring nature except for the
special charges as explained in Notes 3, 4 and 5. The results of operations for
the nine-month period ended September 30, 1998 are not necessarily indicative of
the results to be expected for the full year.
In 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" ("SFAS
130") effective for years beginning after December 15, 1997. SFAS 130
establishes standards for reporting and display of comprehensive income and its
components in a full set of financial statements. The differences between net
income and comprehensive income were not significant for the three-month and
nine-month periods ended September 30, 1998.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities," which is required to be adopted in years beginning
after June 15, 1999. Because the Company does not currently use derivatives,
management does not anticipate that the adoption of the new Statement will have
a significant effect on earnings or the financial position of the Company.
Basic earnings per share is computed based on the weighted average number of
shares of common stock outstanding. Diluted earnings per share includes the
effect of dilutive employee stock options.
2. INVENTORIES
Inventories consist of the following:
September 30, 1998 December 31, 1997
------------------ -----------------
Raw materials $1,533,000 $ 4,956,000
Work in process 627,000 3,107,000
Finished goods 1,684,000 3,696,000
---------- -----------
$3,844,000 $11,759,000
========== ===========
3. DISPOSITION OF BUSINESSES
Transportation Systems Group
On June 11, 1998, the Company sold its Transportation Systems Group to
UNOVA, Inc. ("UNOVA"), effective as of May 31, 1998, for approximately
$33,250,000 and recorded a gain of $1,139,000 from the transaction. As
consideration for the sale, the Company received approximately $22,250,000 in
cash and 2,2ll,900 unregistered shares of the Company's Common Stock that were
previously purchased by UNOVA in late 1997 valued at approximately $11,000,000.
Included in UNOVA's purchase were the Company's manufacturing and technology
facility in Albuquerque, New Mexico, the Company's radio frequency
identification technologies and other intellectual properties, the brand name
Amtech, and all current operations associated with the transportation business.
6
<PAGE>
Cotag International
On July 7, 1998, the Company sold the net assets of its Cotag International
("Cotag") business unit to Metric Gruppen AB ("Metric") of Solna, Sweden,
effective as of June 30, 1998, for approximately $4,400,000 and recorded a
second quarter 1998 loss of $2,700,000 from the transaction, including a
$2,800,000 write-off of intangible assets. The Company received approximately
$2,700,000 in July 1998 with the remaining $1,700,000 to be received by January
1999. The Company may receive up to an estimated additional $1,400,000,
depending on the level and mix of Cotag revenues achieved in 1998 and 1999.
Included in Metric's purchase is the brand name and intellectual property
underlying Cotag's hands-free proximity technology, Cotag's manufacturing
facility in Cambridge, England, and the ongoing business of the unit.
4. SPECIAL OPERATING AND INCOME TAX CHARGES
In July 1997, the Company announced that it would withdraw from the
wireless LAN terminal market and seek buyers for its Interactive Data Group
("IDG"). Operating results include charges of $1,650,000 in the three months
and $3,725,000 in the nine months ended September 30, 1997 for employee
severance costs, winding up of operating activities and to reduce the assets of
the IDG to their estimated net realizable values. Allocation of the charges to
operating costs and expenses for the three months ended September 30, 1997 are
$800,000 in cost of sales, $200,000 in research and development expense and
$750,000 in marketing, general and administrative expense, offset by $100,000 in
sales. Allocation of the charges to operating costs and expenses for the nine
months ended September 30, 1997 are $1,800,000 in cost of sales, $300,000 in
research and development expense and $1,725,000 in marketing, general and
administrative expense, offset by $100,000 in sales. The IDG was sold in late
1997.
In the second quarter of 1997, in light of continued operating losses, the
Company determined that future taxable income in the U.S. was uncertain. As a
result, the provision for income taxes in the nine months ended September 30,
1997 includes $4,680,000, representing the effect of establishing a valuation
allowance for U.S. deferred tax assets, in accordance with the requirements of
Statement of Financial Accounting Standards No. 109 "Accounting for Income
Taxes."
5. MANAGEMENT CHANGE
On February 28, 1998, Mr. David P. Cook replaced the chairman, president
and chief executive officer of the Company. The provisions of the former
executive's severance agreement and various stock options resulted in a charge
in the first quarter 1998 of approximately $1,000,000, including a cash payment
of approximately $650,000, which is included in marketing, general and
administrative expenses for the nine month period ended September 30, 1998.
As previously disclosed, the Company and Mr. Cook have entered into certain
employment and option arrangements. The employment arrangement provides for a
three year term, beginning April 29, 1998. Mr. Cook will receive no salary
under the employment arrangement, although, as consideration for entering into
the employment arrangement, Mr. Cook received an option to acquire 4,254,627
shares of the Company's Common Stock. The option exercise price is $7.00 per
share, which was twice the closing price of the Company's Common Stock on April
28, 1998. The options have a five year term, vest quarterly over two years, and
are subject to accelerated vesting upon the occurrence of specified events.
7
<PAGE>
6. NEW BUSINESS
Upon the completion of the sale of the balance of its Electronic Security
Group (see Note 7), the Company will have exited the electronic identification
business, its remaining revenue-generating business. As previously announced,
the Company has entered the digital data distribution business, with a focus in
the music arena. In connection with its entry into the digital data distribution
business, the Company acquired Petabyte Corporation ("Petabyte"), a start-up
enterprise founded by Mr. Cook, the Company's current chairman and chief
executive officer. In consideration of the sale of Petabyte, the Company has
paid Mr. Cook $200,000 and has agreed to pay Mr. Cook four annual payments of
$200,000 each. The Company has the right to transfer the Petabyte enterprise to
Mr. Cook in consideration of the cancellation of any annual payments not yet
due. The Company is pursuing digital music content rights and, additionally, is
evaluating other music-related Internet business opportunities.
The Company has engaged the services of a law firm to assist in obtaining
exclusive or non-exclusive rights, or both, to certain music content rights. In
exchange for these services, a wholly-owned subsidiary of the Company has agreed
to issue options to acquire approximately 5% of the subsidiary's common stock,
which is convertible into Common Stock of the Company. The number of Common
Stock shares into which these options are convertible is based on a formula that
is dependent upon the value of the subsidiary, which is imputed from the market
value of the Company's Common Stock after subtracting the value of the Company's
other assets. The options vest over a two year period or may accelerate
depending upon the results of obtaining the exclusive or non-exclusive rights.
The Company may terminate the engagement at any time and, in most circumstances,
any options not vested would expire.
7. SUBSEQUENT EVENT
In November 1998, the Company signed a definitive agreement to sell the
balance of its Electronic Security Group ("ESG"), comprised of Cardkey European
Holdings Limited, Cardkey Systems Inc. and related entities, to Johnson
Controls, Inc., in an all-cash transaction valued at approximately $41,000,000,
with the final amount depending on the book value of the ESG's net assets. The
sale of the ESG is estimated to result in a fourth quarter net gain of
approximately $21,000,000 to $23,000,000, after accounting for the net book
value of the assets to be sold, the tax effects of the transaction and the
associated transaction costs. The transaction is scheduled to close by early
December, with an effective date of November 30, 1998, and is subject to the
approval of the companies' boards of directors and normal governmental
clearances.
8
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
At the beginning of 1998, the Company was organized into two market
oriented groups. The Electronic Security Group ("ESG"), which focuses on
products and services for electronic access control applications, includes
Cardkey European Holdings Limited, Cardkey Systems Inc. and related entities.
The Transportation Systems Group ("TSG"), which included Amtech Systems
Corporation, Amtech World Corporation and Amtech International S.A., developed
and provided high-frequency radio frequency identification solutions to the
transportation markets. These markets included electronic toll and traffic
management ("ETTM"), rail, airport, parking and access control, intermodal and
motor freight.
The Interactive Data Group ("IDG") business, consisting of WaveNet, Inc.
and WaveNet International, Inc. was sold in November 1997.
On June 11, 1998, the Company sold its Transportation Systems Group to
UNOVA, Inc. ("UNOVA"), effective as of May 31, 1998, for approximately
$33,250,000 and recorded a gain of $1,139,000 from the transaction. As
consideration for the sale, the Company received approximately $22,250,000 in
cash and 2,2ll,900 unregistered shares of the Company's Common Stock that were
previously purchased by UNOVA in late 1997 valued at approximately $11,000,000.
Included in UNOVA's purchase were the Company's manufacturing and technology
facility in Albuquerque, New Mexico, the Company's radio frequency
identification technologies and other intellectual properties, the brand name
Amtech, and all current operations associated with the transportation business.
On July 7, 1998, the Company sold the net assets of its Cotag International
("Cotag") business unit (formerly included in the ESG) to Metric Gruppen AB
("Metric") of Solna, Sweden, effective as of June 30, 1998, for approximately
$4,400,000 and recorded a second quarter 1998 loss of $2,700,000 from the
transaction, including a $2,800,000 write-off of intangible assets. The Company
received approximately $2,700,000 in July 1998 with the remaining $1,700,000 to
be received by January 1999. The Company may receive up to an estimated
additional $1,400,000, depending on the level and mix of Cotag revenues achieved
in 1998 and 1999. Included in Metric's purchase is the brand name and
intellectual property underlying Cotag's hands-free proximity technology,
Cotag's manufacturing facility in Cambridge, England, and the ongoing business
of the unit.
In November 1998, the Company signed a definitive agreement to sell the
balance of the ESG to Johnson Controls, Inc., in an all-cash transaction valued
at approximately $41,000,000, with the final amount depending on the book value
of the ESG's net assets. The sale of the ESG is estimated to result in a fourth
quarter net gain of approximately $21,000,000 to $23,000,000, after accounting
for the net book value of the assets to be sold, the tax effects of the
transaction and the associated transaction costs. The transaction is scheduled
to close by early December, with an effective date of November 30, 1998, and is
subject to the approval of the companies' boards of directors and normal
governmental clearances.
Upon the completion of the sale of the balance of the ESG, the Company
will have exited the electronic identification business, its remaining revenue-
generating business. As previously announced, the Company has entered the
digital data distribution business, with a focus in the music arena. In
connection with its entry into the digital data distribution business, the
Company acquired Petabyte Corporation ("Petabyte"), a start-up enterprise
founded by Mr. Cook, the Company's current chairman and chief executive
officer. In consideration of the sale of Petabyte, the Company has paid Mr. Cook
$200,000 and has agreed to pay Mr. Cook four annual payments of $200,000 each.
The Company has the right to transfer the Petabyte enterprise to Mr. Cook in
consideration of the cancellation of any annual payments not yet due. The
Company is pursuing digital music content rights and, additionally, is
evaluating other music-related Internet business opportunities.
The sales of TSG, Cotag and IDG impact the comparability of the Company's
1998 results with those of 1997.
RESULTS OF OPERATIONS
Sales for the three months and nine months ended September 30, 1998
decreased $14,249,000 or 47% and $7,191,000 or 9%, respectively, from the
comparable periods in 1997 primarily due to the disposition of the TSG and
Cotag. Sales for the ESG decreased from $16,951,000 in the third quarter of 1997
to $15,936,000 for the comparable period in 1998 primarily due to the sale of
Cotag, and increased from $47,652,000 in the first nine months of 1997 to
$50,151,000 for the comparable period in 1998 primarily in its U.S.-based
operations. The TSG's sales in the third quarter of 1997 were $13,122,000, and
decreased from $35,092,000 in the first nine months of 1997 to $25,873,000 for
the comparable period in 1998.
9
<PAGE>
Gross profit as a percentage of sales increased from 36% in 1997 to 44% in
1998 for the three month periods and from 37% in 1997 to 42% in 1998 for the
nine month periods. The increase in the three month and nine month periods is
primarily due to provisions in 1997 of $800,000 and $1,800,000, respectively, to
adjust certain IDG assets to their estimated net realizable values. Also
effecting the increase in the nine month period is an increase in TSG's gross
profit margin from 32% in 1997 to 39% in 1998. This increase is due in part to
improved gross profit margins on systems integration services work in the first
half of 1998, although revenues of $3,000,000 from the Florida Department of
Transportation electronic toll collection contract had no gross profit margin as
expected. Additionally, the TSG gross profit margin in 1998 increased as a
result of lower manufacturing costs due to higher sales volumes of Company-
manufactured products. The ESG's gross profit margin was 44% and 42% for the
three month and nine month periods in 1998, respectively, as compared to 42% in
both of the 1997 periods.
Research and development for the three months and nine months ended
September 30, 1998 decreased $2,562,000 or 85% and $3,962,000 or 45% from the
comparable periods in 1997, primarily due to the dispositions of the IDG in
November 1997, the TSG effective May 1998 and the Cotag business unit effective
June 1998. IDG expenditures were $194,000 and $899,000 for the three month and
nine month periods in 1997. The TSG expenditures were $2,018,000 in 1997 for the
three month period and decreased from $5,193,000 in 1997 to $2,688,000 in 1998
for the nine month periods. The ESG expenditures decreased from $796,000 in 1997
to $446,000 in 1998 for the three month periods and from $2,688,000 in 1997 to
$2,130,000 in 1998 for the nine month periods.
Marketing, general and administrative expenses for the three months and
nine months ended September 30, 1998 decreased $3,827,000 or 40% and $6,834,000
or 22% from the comparable periods in 1997, primarily due to the dispositions of
the IDG in November 1997, the TSG effective May 1998 and the Cotag business unit
effective June 1998. IDG expenditures were $786,000 and $3,143,000 for the three
month and nine month periods in 1997, including provisions of $750,000 and
$1,725,000, respectively, for employee severance costs, winding-up of operating
activities and adjusting certain assets to their estimated net realizable
values. TSG expenditures were $2,746,000 in 1997 for the three month period and
decreased from $9,420,000 in 1997 to $4,938,000 in 1998 for the nine month
periods. These expenditure reductions were partially offset during the nine
month period in 1998 by an expense charge of approximately $1,000,000 pursuant
to the provisions of the Company's former chairman, president and chief
executive officer's severance agreement and various stock options.
Investment income for the three months and nine months ended September 30,
1998 increased from $159,000 to $582,000 and increased from $894,000 to
$1,154,000, respectively. The increase for both periods is attributable to the
increase in invested cash and short-term marketable securities resulting from
the sale of the TSG and Cotag.
The income tax provision of $76,000 and $280,000 for the three months and
nine months ended September 30, 1998 consists primarily of state and foreign
income taxes. The Company has net operating loss carryforwards available in the
U.S. to offset a portion of its current tax expense. In the second quarter of
1997, in light of continued operating losses, the Company determined that future
taxable income in the U.S. was uncertain. As a result, the provision for income
taxes in the nine months ended September 30, 1997 includes $4,680,000,
representing the effect of establishing a valuation allowance for U.S. deferred
tax assets, in accordance with the requirements of Statement of Financial
Accounting Standards No. 109 "Accounting for Income Taxes."
As a result of the foregoing, the Company experienced net income of
$1,267,000 and $1,853,000 for the three months and nine months ended September
30, 1998 as compared to a net loss of $1,667,000 and $11,686,000 for the same
periods in 1997.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 1998, the Company's principal source of liquidity is its
net working capital position of $48,730,000 including cash and short-term
marketable securities of $39,410,000. After the sale of the ESG, as currently
anticipated, the Company should have approximately $80,000,000 in cash or
equivalents. Pending the utilization of funds in new businesses, the Company
plans to invest its cash in short-term high-grade commercial paper and U.S.
government and agency securities.
10
<PAGE>
THE YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Upon completion of
the sale of the balance of its Electronic Security Group, the Company will have
exited its remaining revenue-generating business. Management believes that the
Year 2000 Issue will not have a material impact on the Company.
BUSINESS CONSIDERATIONS
Successful development of a start-up enterprise, particularly Internet
related businesses, can be difficult and costly; there are no assurances of
ultimate success and a start-up enterprise involves risks and uncertainties,
including the following: (1) There are no assurances that the Company will be
able to successfully develop its targeted businesses, that it will be able to
compete effectively against similar or alternative digital data distribution
businesses, that it will gain market acceptance, that it will not be made
obsolete by further technological development, that it will be able to provide
or attract the necessary capital, or that it will not encounter other, and even
unanticipated, risks. (2) Use of the Internet by consumers, while growing, is
still at an early stage of development, and market acceptance of the Internet as
a medium for entertainment, commerce and information is still subject to a high
level of uncertainty. (3) The Company may decide to exit the digital data
distribution business at any time.
11
<PAGE>
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company held its annual meeting of shareholders on August 31, 1998.
At this meeting, the shareholders elected as directors of the Company, David P.
Cook, Michael E. Keane, James S. Marston, Jack L. Martin, Antonio R. Sanchez,
Jr., and Dr. Ben G. Streetman. The tabulation of votes with respect to the
election of directors is as follows:
Nominee Shares For Shares Withheld
------- ---------- ---------------
David P. Cook 12,463,111 182,995
Michael E. Keane 12,464,366 181,740
James S. Marston 12,462,236 183,870
Jack L. Martin 12,451,992 194,114
Antonio R. Sanchez, Jr. 12,411,019 235,087
Dr. Ben G. Streetman 12,451,699 194,407
The shareholders voted to amend the Company's Articles of Incorporation
to change the Company's name from Amtech Corporation to CustomTracks
Corporation. The tabulation of the votes with respect to the Company's name
change is as follows:
For 12,454,041
Against 152,122
Abstain 39,943
ITEM 5. OTHER INFORMATION
See Note 7, "SUBSEQUENT EVENT," to Condensed Consolidatd Financial
Statements regarding the pending sale of the balance of the Electronic Security
Group.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this
Quarterly Report on Form 10-Q.
DESCRIPTION OF EXHIBITS
-----------------------
* 3.1 Articles of Amendment to Articles of Incorporation of
Amtech Corporation d/b/a AMTC Corporation, dated August
31, 1998.
* 3.2 Restated Bylaws of CustomTracks Corporation, dated August
31, 1998.
*10.1 CustomTracks Corporation 1990 Stock Option Plan (Amended
and Restated as of August 1998).
*27.1 Financial Data Schedule.
*99.1 CustomTracks Corporation Press Release, dated November 9,
1998, pertaining to the proposed sale of Cardkey Systems.
(b) The Registrant filed Form 8-K on July 21, 1998 to report the July
7, 1998 sale of its Cotag International unit, which was effective
June 30, 1998, to Metric Gruppen AB. The report included a pro
forma condensed consolidated balance sheet as of March 31, 1998
and pro forma condensed consolidated statements of operations for
the year ended December 31, 1997 and the three months ended March
31, 1998.
- --------------------------------------------------------------------------------
*Filed herewith.
12
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CUSTOMTRACKS CORPORATION
(Registrant)
Date: November 16, 1998 By: /s/Steve M. York
----------------
Steve M. York
Senior Vice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
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<PAGE>
EXHIBIT 3.1
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
AMTECH CORPORATION
d/b/a AMTC CORPORATION
Pursuant to the provisions of Article 4.04 of the Texas Business
Corporation Act, as amended, the undersigned corporation adopts the following
Articles of Amendment to its Articles of Incorporation:
ARTICLE ONE
The name of the corporation is Amtech Corporation d/b/a AMTC Corporation.
ARTICLE TWO
The following amendment to the Articles of Incorporation was adopted by the
shareholders of the corporation on August 31, 1998. The amendment alters
Article I of the original Articles of Incorporation, and the full text of
Article I as amended is as follows:
"ARTICLE I
The name of the corporation is CustomTracks Corporation."
ARTICLE THREE
The number of shares of the corporation outstanding at the time of the
adoption of the above amendment was 14,902,609, and the number of shares
entitled to vote on the amendment was 14,902,609.
ARTICLE FOUR
The number of shares of the corporation voted for the above amendment were
12,454,041, and the number of shares voted against the amendment were 152,122.
Dated: August 31, 1998
AMTECH CORPORATION
d/b/a AMTC CORPORATION
By: /s/ Ronald A. Woessner
---------------------------------
Ronald A. Woessner, Secretary
<PAGE>
Exhibit 3.2
RESTATED BYLAWS
OF
CUSTOMTRACKS CORPORATION
AUGUST 31, 1998
<PAGE>
RESTATED BYLAWS
OF
CUSTOMTRACKS CORPORATION
ARTICLE I
Offices
1. Principal Office. The principal office of the Corporation shall be
located in the City of Dallas, County of Dallas, State of Texas. The
Corporation also may have offices at such other places, both within and without
the State of Texas, as the Board of Directors may from time to time determine or
the business of the Corporation may require.
2. Registered Office. The registered office of the Corporation, required
by the Texas Business Corporation Act (the "Act") to be maintained in the State
of Texas, may be, but need not be, the same as its principal place of business
in the State of Texas or the business office of a domestic or foreign
corporation authorized to transact business in the State of Texas. The address
of the registered office of the corporation may be changed from time to time by
resolution of the Board of Directors.
ARTICLE II
Shareholders
1. Time and Place of Meeting. Meetings of the shareholders shall be held
at such times and at such places, within or without the State of Texas, as shall
be determined by the Board of Directors.
2. Annual Meetings. Annual meetings of shareholders shall be held on
such date and at such time and place during the fourth month of each fiscal year
(beginning in 1988) as shall be determined by the Board of Directors of the
Corporation, at which they shall elect a Board of Directors and transact such
other business as may properly be brought before the meeting. The date of the
annual meeting of the shareholders may be a date or time different than that set
forth above if the Board of Directors so determines and so states in the notice
of the meeting or in a duly executed waiver thereof.
3. Special Meetings. Special meetings of the shareholders may be called
at any time by the President or the Board of Directors, and shall be called by
the President or the Secretary at the request in writing of a majority of the
Board of Directors or at the request in writing of the holders of not less than
ten percent (10%) of all the shares issued, outstanding and entitled to vote at
the meeting. Such request shall state the purpose or purposes of the proposed
meeting. Business transacted at special meetings shall be confined to the
purposes stated in the notice of the meeting.
<PAGE>
4. Notice. Written or printed notice stating the place, day and hour of
the meeting and, in case of a special meeting, the purpose or purposes for which
the meeting is called, shall be delivered not less than ten (10) nor more than
fifty (50) days before the date of the meeting, either personally or by mail, by
or at the discretion of the President, the Secretary, or the officer or person
calling the meeting, to each shareholder entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the United
States mail addressed to the shareholder at his address as it appears on the
share transfer records of the Corporation.
5. Closing of Share Transfer Records and Fixing Record Date. For the
purpose of determining shareholders entitled to notice of or to vote at any
meeting of shareholders or any adjournment thereof, or entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose (other than determining shareholders entitled to
consent to action by shareholders proposed to be taken without a meeting of
shareholders), the Board of Directors of the Corporation may provide that the
share transfer records shall be closed for a stated period but not to exceed, in
any case, sixty (60) days. If the share transfer records shall be closed for
the purpose of determining shareholders entitled to notice of or to vote at a
meeting of shareholders, such records shall be closed for at least ten (10) days
immediately preceding such meeting. In lieu of closing the share transfer
records, the Board of Directors may fix in advance a date as the record date for
any such determination of shareholders, such date in any case to be not more
than sixty (60) days and, in the case of a meeting of shareholders, not less
than ten (10) days, prior to the date on which the particular action requiring
such determination of shareholders is to be taken. If the share transfer
records are not closed and no record date is fixed for the determination of
shareholders entitled to notice of or to vote at a meeting of shareholders, or
shareholders entitled to receive payment of a dividend, the date on which notice
of the meeting is mailed or the date on which the resolution of the Board of
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
share transfer records and the stated period of closing has expired.
Unless a record date shall have previously been fixed or determined
pursuant to this section, whenever action by shareholders is proposed to be
taken by consent in writing without a meeting of shareholders, the Board of
Directors may fix a record date for the purpose of determining shareholders
entitled to consent to that action, which record date shall not precede, and
shall not be more than ten (10) days after, the date upon which the resolution
fixing the record date is adopted by the Board of Directors. If no record date
has been fixed by the Board of Directors and the prior action of the Board of
Directors is not required by this section, the record date for determining
shareholders entitled to consent to action in writing without a meeting shall be
the first date on which a signed written consent setting forth the action taken
or proposed to be taken is delivered to the Corporation by delivery to its
registered office, its principal place of business, or an officer or agent of
the Corporation having custody of the books in which proceedings of meetings of
shareholders are recorded. Delivery shall be by hand or by certified or
registered mail, return receipt requested. Delivery to the Corporation's
principal place of business shall be addressed to the President. If no record
date shall have been fixed by the Board of Directors and prior action of the
Board of Directors is required by this section, the record date for determining
shareholders entitled to consent to action in writing without a meeting shall be
at the close of business on the date on which the Board of Directors adopts a
resolution taking such prior action.
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<PAGE>
6. Voting List. The officer or agent of the Corporation having charge of
the stock transfer books for shares of the Corporation shall make, at least ten
(10) days before each meeting of the shareholders, a complete list of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of voting
shares held by each, which list, for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered office or principal place of
business of the Corporation and shall be subject to inspection by any
shareholder at any time during the usual business hours. Such list shall also
be produced and kept open at the time and place of the meeting and shall be
subject to the inspection of any shareholder during the whole time of the
meeting. The original stock transfer books shall be prima facie evidence as to
who are the shareholders entitled to examine such list or transfer books or to
vote at any meetings of shareholders.
7. Quorum. A quorum shall be present at all meetings of shareholders for
the transaction of business if the holders of a majority of the issued and
outstanding shares entitled to vote are represented at the meeting in person or
by proxy, unless otherwise provided in the Articles of Incorporation or the Act.
However, the shareholders represented in person or by proxy at a meeting of
shareholders at which a quorum is not present may adjourn the meeting until such
time and to such place as may be determined by a vote of the holders of a
majority of the shares represented in person or by proxy at that meeting. Once
a quorum is present at a meeting of shareholders, the shareholders represented
in person or by proxy at the meeting may conduct such business as may be
properly brought before the meeting until it is adjourned, and the subsequent
withdrawal from the meeting of any shareholder or the refusal of any shareholder
represented in person or by proxy to vote shall not affect the presence of a
quorum at the meeting.
8. Voting. With respect to any matter, other than the election of
directors or a matter for which the affirmative vote of the holders of a
specified portion of the shares entitled to vote is required by this section,
the affirmative vote of the holders of a majority of the shares entitled to vote
on that matter and represented in person or by proxy at a meeting of
shareholders at which a quorum is present shall be the act of the shareholders.
Directors shall be elected by a plurality of the votes cast by the
holders of shares entitled to vote in the election of directors at a meeting of
shareholders at which a quorum is present.
Each shareholder shall at every meeting of the shareholders be
entitled to one vote in person or by proxy for each share having voting power
held by such shareholder, except to the extent that the voting rights of the
shares of any class or classes are limited or denied by the Articles of
Incorporation. At each election for directors every shareholder shall be
entitled to vote, in person or by proxy, the number of shares owned by him for
as many persons as there are directors to be elected and for whose election he
has a right to vote. Cumulative voting is prohibited by the Articles of
Incorporation. Every proxy must be executed in writing by the shareholder. A
telegram, telex, cablegram, or similar transmission by the shareholder, or a
photographic, photostatic, facsimile, or similar reproduction of a writing
executed by the shareholder, shall be treated as an execution in writing for
purposes of this section. No proxy shall be valid after eleven (11) months from
the date of its execution unless otherwise provided therein. Each proxy shall be
revocable unless expressly provided therein to be irrevocable or unless
otherwise made irrevocable by law.
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<PAGE>
An irrevocable proxy, if noted conspicuously on the certificate
representing the shares that are subject to the irrevocable proxy, shall be
specifically enforceable against the holder of those shares or any successor or
transferee of the holder. Unless noted conspicuously on the certificate
representing the shares that are subject to the irrevocable proxy, an
irrevocable proxy, even though otherwise enforceable, is ineffective against a
transferee for value without actual knowledge of the existence of the
irrevocable proxy at the time of the transfer or against any subsequent
transferee (whether or not for value), but such an irrevocable proxy shall be
specifically enforceable against any other person who is not a transferee for
value from and after the time that the person acquires actual knowledge of the
existence of the irrevocable proxy.
Shares registered in the name of another corporation may be voted by
such officer, agent or proxy as the bylaws of such corporation may prescribe or,
in the absence of such provisions, as the board of directors of such corporation
may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by him, either in person or by proxy, without a transfer of such shares
into his name. Shares standing in the name of a trustee may be voted by him,
either in person or by proxy, but no trustee shall be entitled to vote shares
held by him without a transfer of such shares into his name as trustee.
Shares standing in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted by
such receiver without being transferred into his name, if such authority is
contained in an appropriate order of the court that appointed the receiver.
A shareholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the pledgee, and
thereafter the pledgee shall be entitled to vote the shares so transferred.
Shares of its own stock belonging to the Corporation or held by it in
a fiduciary capacity shall not be voted, directly or indirectly, at any meeting,
and shall not be counted in determining the total number of outstanding shares
at any given time.
9. Action by Unanimous Consent. Any action required to be taken at any
annual or special meeting of shareholders, or any action which may be taken at
any annual or special meeting of shareholders, may be taken without a meeting,
without prior notice, and without a vote, if a consent or consents in writing,
setting forth the action so taken, shall have been signed by the holder or
holders of all the shares entitled to vote with respect to the action that is
the subject of the consent.
Every written consent shall bear the date of signature of each
shareholder who signs the consent. No written consent shall be effective to
take the action that is the subject of the consent unless, within sixty (60)
days after the date of the earliest dated consent delivered to the corporation
in the manner required by this section, a consent or consents signed by the
holder or holders of shares having not less than the minimum number of votes
that would be necessary to take the action that is the subject of the consent
are delivered to the Corporation by delivery to its registered office, its
principal place of business, or an officer or agent of the corporation having
custody of the books in which proceedings of meetings of shareholders are
recorded. Delivery shall be by hand or certified or registered mail, return
receipt requested. Delivery to the Corporation's principal place of business
shall be addressed to the President.
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<PAGE>
A telegram, telex, cablegram, or similar transmission by a
shareholder, or a photographic, photostatic, facsimile, or similar reproduction
of a writing signed by a shareholder, shall be regarded as signed by the
shareholder for purposes of this section.
Prompt notice of the taking of any action by shareholders without a
meeting by less than unanimous written consent shall be given to those
shareholders who did not consent in writing to the action.
If any action by shareholders is taken by written consent, any
articles or documents filed with the Secretary of State of the State of Texas as
a result of the taking of the action shall state, in lieu of any statement
required by this section or by the Act concerning any vote of shareholders, that
written consent has been given in accordance with the provisions of this section
and that any written notice required by this section has been given.
10. Presence at Meetings by Means of Communication Equipment.
Shareholders may participate in and hold a meeting of such shareholders by means
of conference telephone or similar communications equipment by means of which
all persons participating in the meeting can hear each other, and participation
in a meeting pursuant to this section shall constitute presence in person at
such meeting, except where a person participates in the meeting for the express
purpose of objecting to the transaction of any business on the ground that the
meeting is not lawfully called or convened.
ARTICLE III
Directors
1. Number of Directors. The number of directors of the Corporation shall
be fixed from time to time by resolution of the Board of Directors. Until
otherwise fixed by resolution of the Board of Directors, the number of directors
shall be six. No decrease in the number of directors shall have the effect of
reducing the term of any incumbent director. Directors shall be elected at the
annual meeting of the holders of shares entitled to vote in the election of
directors, except as provided in Section 2 of this Article III, and each
director shall hold office until (i) his successor is elected and qualified,
(ii) he dies, (iii) he resigns, or (iv) he is removed. Directors need not be
residents of the State of Texas or shareholders of the Corporation.
2. Vacancies. Subject to other provisions of this section, any vacancy
occurring in the Board of Directors may be filled by the affirmative vote of a
majority of the remaining directors, though the remaining directors may
constitute less than a quorum of the Board of Directors as fixed by Section 10
of this Article III. A director elected to fill a vacancy shall be elected for
the unexpired term of his predecessor in office. Any directorship to be filled
by reason of an increase in the number of directors may be filled by unanimous
vote of the existing directors; provided, however, that the Board of Directors
may not fill more than two (2) such directorships during the period between any
two (2) successive annual meetings of shareholders. Any vacancy occurring in
the Board of Directors or any directorship to be filled by reason of an increase
in the number of directors may be filled by election at an annual or special
meeting of the shareholders called for that purpose. Shareholders holding a
majority of the issued and outstanding shares entitled to vote may, at any time,
terminate the term of office of all or any of the directors, with or without
cause, by a vote at any annual or special meeting, or by written consent, signed
by the holders of all of such shares, and filed with the secretary or, in his
absence, with any other officer. Such removal shall be effective immediately
upon such shareholder action even if successors are not elected simultaneously,
and
5
<PAGE>
the vacancies on the Board of Directors caused by such action shall be filled
only by election by the shareholders. Furthermore, the Board of Directors may,
by the vote or by the written consent of 66% or more of the entire Board of
Directors, terminate the term of office of any director who was within the
previous 90 day period an employee of the Corporation (or one or more of its
affiliates) but who is no longer an employee of the Corporation or of any of its
affiliates. Such removal shall be effective immediately upon such action by the
Board of Directors even if a successor is not elected simultaneously.
3. General Powers. The business of the Corporation shall be managed by
its Board of Directors, which may exercise all powers of the Corporation and do
all such lawful acts and things, as are not by the Act, the Articles of
Incorporation or these Bylaws directed or required to be exercised or done by
the shareholders.
4. Place of Meetings. The Board of Directors of the Corporation may hold
meetings, both regular and special, either within or without the State of Texas.
5. Annual Meetings. The first meeting of each newly elected Board of
Directors shall be held, without further notice, immediately following the
annual meeting of shareholders at which such directors were elected, provided a
quorum shall be present. In the event such meeting is not held immediately
following the annual meeting, the meeting may be held at such time and place as
shall be specified in a notice given as hereinafter provided for special
meetings of the Board of Directors, or as shall be specified in a written waiver
of notice signed by all of the directors.
6. Regular Meetings. Regular meetings of the Board of Directors shall be
held without special notice at such time and at such place as shall from time to
time be determined by the Board of Directors.
7. Special Meetings. Special meetings of the Board of Directors may be
called by or at the request of the President, and shall be called by the
Secretary on the written request of a majority of the incumbent directors. The
person or persons authorized to call special meetings of the Board of Directors
may fix the place for holding any special meeting of the Board of Directors
called by them.
8. Notice of Special Meetings. Notice of any special meetings shall be
given at least forty-eight (48) hours prior thereto if given either personally
(including written notice delivered personally or telephone notice) or by
telegram, and at least one hundred twenty (120) hours prior thereto if given by
written notice mailed to each director at the address of his business or
residence. If mailed, the notice shall be deemed to be delivered when deposited
in the United States mail addressed, in the above-specified manner, with postage
thereon prepaid. If notice be given by telegram, such notice shall be deemed to
be delivered when the telegram is delivered to the telegraph company. Neither
the business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice for such meeting.
9. Waiver of Notice. Any director may waive notice of any meeting, as
provided in Article IV, Section 2, of these Bylaws. The attendance of a
director at a meeting shall constitute a waiver of notice of such meeting,
except where a director attends a meeting for the express purpose of objecting
to the transaction of any business because the meeting is not lawfully called or
convened.
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10. Quorum and Voting. At all meetings of the Board of Directors, the
presence of a majority of the number of directors fixed by Article III, Section
1, of these Bylaws shall constitute a quorum for the transaction of business,
and the affirmative vote of at least a majority of the directors present at any
meeting at which there is a quorum shall be the act of the Board of Directors,
except as may be otherwise specifically provided by the Act, the Articles of
Incorporation or these Bylaws. If a quorum shall not be present at any meeting
of the Board of Directors, a majority of the directors present thereat may
adjourn the meeting from time to time without notice other than announcement at
the meeting, until a quorum shall be present.
11. Committees. The Board of Directors by resolution passed by a majority
of the full Board of Directors may designate an Executive Committee, to consist
of two or more directors, one of whom shall be designated as Chairman and shall
preside at all meetings of such Executive Committee and at least one of whom
shall be a person other than an officer or employee of the Corporation or its
subsidiaries. The Board of Directors may also designate one or more directors
to be alternate members of such Executive Committee, who may, subject to any
limitations imposed by the Board of Directors, replace absent or disqualified
members at any meeting of the Executive Committee. At any meeting of the
Executive Committee a majority of the members of the Executive Committee shall
constitute a quorum for the transaction of business, and the act of a majority
of the members present at any meeting at which a quorum is present shall be the
act of the Executive Committee. To the extent provided in the resolution of the
Board of Directors, the Executive Committee shall have and may exercise all of
the authority of the Board of Directors, and shall have power to authorize the
seal of the corporation to be affixed to all papers which may require it,
subject to the limitations set forth in the Act, the Articles of Incorporation
or these Bylaws; provided, however, that the Executive Committee shall not have
the authority to authorize the issuance of shares of stock of the Corporation or
to declare dividends with respect to shares of stock of the Corporation. The
designation of such Executive Committee and the delegation thereto of authority
shall not operate to relieve the Board of Directors, or any member thereof, of
any responsibility imposed upon it or him by law. Meetings of the Executive
Committee may be called and notices given in the same manner as calling and
giving notice of special meetings of the Board of Directors. Any member of the
Executive Committee may be removed, for or without cause, by the affirmative
vote of a majority of the full Board of Directors. If any permanent vacancy or
vacancies occur in the Executive Committee, such vacancy or vacancies shall be
filled by the affirmative vote of a majority of the full Board of Directors.
The Board of Directors by resolution passed by a majority of the full
Board of Directors may designate other committees, each committee to consist of
two or more directors, one of whom shall be designated as Chairman and shall
preside at all meetings of such committee. The Board of Directors may also
designate one or more directors to be alternate members of any committee, who
may, subject to any limitations imposed by the Board of Directors, replace
absent or disqualified members at any meeting of that committee. To the extent
provided in the resolution of the Board of Directors, the committees shall have
such power and authority and shall perform such functions as may be provided in
such resolution, subject to the limitations set forth in the Act, the Articles
of Incorporation or these Bylaws. At any meeting of the committee a majority of
the members of the committee shall constitute a quorum for the transaction of
business, and the act of a majority of the members present at any meeting at
which a quorum is present shall be the act of the committee. Such committee or
committees shall have such name or names as may be designated by the Board of
Directors.
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The Executive Committee and all other such committees shall keep
regular minutes of their proceedings and report the same to the Board of
Directors at the meeting of the Board of Directors next succeeding such action.
12. Compensation of Directors. Directors, as such, shall not receive any
stated salary for their services, but by resolution of the Board of Directors, a
fixed sum and expenses of attendance, if any, may be allowed for attendance at
each regular or special meeting of the Board of Directors. Nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor. Members
of any committee may, by resolution of the Board of Directors, be allowed like
compensation for attending meetings of such committee.
13. Action by Unanimous Written Consent. Any action required or permitted
to be taken at any meeting of the Board of Directors or of a committee
designated by the Board of Directors may be taken without a meeting if a written
consent, setting forth the action so taken, is signed by all the members of the
Board of Directors or the committee, as the case may be, and such consent shall
have the same force and effect as a unanimous vote at a meeting.
14. Presence at Meetings by Means of Communication Equipment. Members of
the Board of Directors of the Corporation or any committee designated by the
Board of Directors may participate in and hold a meeting of the Board of
Directors or such committee by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
section shall constitute presence in person at such meeting, except where a
person participates in the meeting for the express purpose of objecting to the
transaction of any business on the ground that the meeting is not lawfully
called or convened.
ARTICLE IV
Notices
1. Form of Notice. Whenever under the provisions of the Act, the
Articles of Incorporation or these Bylaws, notice is required to be given to any
director or shareholder, and no provision is made as to how such notice shall be
given, such notice shall be given in writing, by mail, postage prepaid,
addressed to such director or shareholder at such address as appears on the
books of the Corporation, provided that such notice as is required to be given
to any director also may be given either personally (including written notice
delivered personally or telephone notice) or by prepaid facsimile. Any notice
required or permitted to be given by mail shall be deemed to be given at the
time when the same is deposited in the United States mail addressed in the
above-specified manner, with postage thereon prepaid.
2. Waiver. Whenever any notice is required to be given to any director
or shareholder of the Corporation under the provisions of the Act, the Articles
of Incorporation or these Bylaws, a waiver thereof in writing signed by the
person or persons entitled to such notice, whether before or after the time
stated in such notice, shall be equivalent to the giving of such notice.
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<PAGE>
ARTICLE V
Officers
1. General. The elected officers of the Corporation shall be a
President, one or more Vice Presidents, with or without such descriptive titles
as the Board of Directors shall deem appropriate, a Secretary and a Treasurer.
The Board of Directors by resolution may also appoint one or more Assistant
Secretaries, Assistant Treasurers and such other officers and assistant officers
and agents as from time to time may appear to be necessary or advisable in the
conduct of the affairs of the Corporation. Any two or more offices may be held
by the same person.
2. Election. The Board of Directors at its first meeting after each
annual meeting of the shareholders shall elect and appoint the officers to fill
the positions designated in Section 1 of this Article V. The Board of Directors
may appoint such other officers and agents as it shall deem necessary and may
determine the salaries of all officers and agents from time to time. The
officers shall hold office until their successors are chosen and qualified. Any
officer elected or appointed by the Board of Directors may be removed, for or
without cause, at any time by a majority vote of the directors present at a
meeting of the Board of Directors at which a quorum is present, when in its
judgment the best interest of the Corporation will be served thereby, but such
removal shall be without prejudice to the contract rights, if any, of the
persons so removed. Election or appointment of an officer or agent shall not of
itself create contract rights. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise shall be filled by the
Board of Directors.
3. Chairman of the Board. The Chairman of the Board shall be chosen from
among the non-employee directors. He shall preside at all meetings of the Board
of Directors, unless he shall be absent or unless he shall, at his election,
designate the President to preside in his stead, and shall have such incidental
powers and duties as are related to the conduct of such meetings. The Chairman
of the Board shall also be an ex-officio member of all standing committees.
4. President. The President shall be the Chief Executive Officer of the
Corporation and shall be responsible for the operations and business affairs of
the Corporation. He shall preside at all meetings of the shareholders and of
the Board of Directors in the absence of the Chairman of the Board, unless he
shall be absent or unless he shall, at his election, designate another officer
to preside in his stead. He shall, in general, have supervisory power over all
of the other officers and the business activities of the Corporation, subject to
the direction of the Board of Directors. He shall have authority to execute
bonds, deeds and contracts in the name of the Corporation and to affix the
corporate seal thereto; to sign stock certificates; to cause the employment or
appointment of such employees and agents of the Corporation as the proper
conduct of operations may require, and to fix their compensation, subject to the
provisions of these Bylaws and such resolutions as may be adopted by the Board
of Directors from time-to-time; to remove or suspend any employee or agent who
shall have been employed or appointed under his authority or under authority of
an officer subordinate to him; to suspend for cause, pending final action by the
Board of Directors which shall have supervisory power over him, any officer
subordinate to him and, in general, to exercise all powers usually pertaining to
the office of the President of a corporation, except as otherwise provided in
these Bylaws. The President shall see that all orders and resolutions of the
Board of Directors and committees thereof are carried into effect.
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5. Vice Presidents. The Vice President or, if there be more than one,
the Vice Presidents, shall perform all such duties and services as shall be
assigned to or required of them from time to time by the Board of Directors, the
Executive Committee and any officer superior to him.
6. Secretary and Assistant Secretaries. The Secretary shall attend all
meetings of the Board of Directors and all meetings of the shareholders and
record all proceedings of the meetings of the shareholders of the Corporation
and of the Board of Directors in a book to be kept for that purpose, and shall
perform like duties for the Executive Committee when required. He shall give,
or cause to be given, notice of all meetings of the shareholders and meetings of
the Board of Directors. He shall have charge of the seal of the Corporation and
have authority to affix the same to any instrument requiring it, and when so
affixed, it shall be attested by his signature or by the signature of the
Treasurer, an Assistant Secretary or an Assistant Treasurer, which may be in
facsimile. He shall keep and account for all books, documents, papers and
records of the Corporation except those for which some other officer or agent is
properly accountable. He shall have authority to sign stock certificates, and
shall generally perform all the duties usually appertaining to the office of the
Secretary of a corporation.
Assistant Secretaries, in the order of their seniority unless
otherwise determined by the Board of Directors, shall assist the Secretary, and
in the absence or disability of the Secretary, perform the duties and exercise
the powers of the Secretary. They shall perform such other duties and have such
other powers as the Board of Directors may prescribe from time to time.
7. Treasurer and Assistant Treasurers. The Treasurer shall be the chief
financial officer of the Corporation and shall have active control of and shall
be responsible for all matters pertaining to the finances of the Corporation.
He shall have the care and custody of all monies, funds and securities of the
Corporation and shall deposit all monies and other valuable effects in the name
of and to the credit of the Corporation in such depositories as may be
designated by the Board of Directors. He shall cause to be recorded a statement
of all receipts and disbursements of the Corporation in order that proper
entries may be made in the books of account. He shall have the power to sign
stock certificates, to endorse for deposit or collection, or otherwise, all
checks, drafts, notes, bills of exchange, or other commercial paper payable to
the Corporation, and to give proper receipts or discharges for all payments to
the Corporation. He shall be responsible for all terms of credit granted by the
Corporation and for the collection of all of its accounts. If required by the
Board of Directors, the Treasurer shall give the Corporation a bond in such sum
and with such surety or sureties as shall be satisfactory to the Board of
Directors for the faithful performance of the duties of his office and for the
restoration to the Corporation, in case of his death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession or under his control belonging to the
Corporation.
Assistant Treasurers, in the order of their seniority unless otherwise
determined by the Board of Directors, shall assist the Treasurer, and in the
absence or disability of the Treasurer, perform the duties and exercise the
powers of the Treasurer. They shall perform such other duties and have such
other powers as the Board of Directors may prescribe from time to time.
8. Bonding. If required by the Board of Directors, all or certain of the
officers shall give the Corporation a bond in such form, in such sum and with
such surety or sureties as shall be satisfactory to the Board of Directors, for
the faithful performance of the duties of their office and for the restoration
to the
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Corporation, in case of their death, resignation, retirement or removal from
office, of all books, papers, vouchers, money and other property of whatever
kind in their possession or under their control belonging to the Corporation.
ARTICLE VI
Certificates Representing Shares
1. Form of Certificates. The Corporation shall deliver certificates
representing all shares to which shareholders are entitled. Certificates
representing shares of the Corporation shall be in such form as shall be
determined by the Board of Directors and shall be numbered consecutively and
entered in the books of the Corporation as they are issued. Each certificate
shall state on the face thereof that the Corporation is organized under the laws
of the State of Texas; the name of the registered holder; the number, class of
shares and the designation of the series, if any, which said certificate
represents; and either the par value of the shares or a statement that the
shares are without par value. Each certificate shall also set forth on the back
thereof, a full or summary statement of matters required by the Act or the
Articles of Incorporation to be described on certificates representing shares,
and shall contain a statement on the face thereof referring to the matters set
forth on the back thereof. Certificates shall be signed by the President and
the Secretary or any Assistant Secretary, and may be sealed with the seal of the
Corporation or a facsimile thereof. If any certificate is countersigned by a
transfer agent or registered by a registrar, either of which is other than the
Corporation or an employee of the Corporation, the signatures of the
Corporation's officers may be facsimiles. In case any officer or officers who
have signed, or whose facsimile signature or signatures have been used on such
certificate or certificates, shall cease to be such officer or officers of the
Corporation, whether because of death, resignation or otherwise, before such
certificate or certificates have been delivered by the Corporation or its
agents, such certificate or certificates may be adopted, nevertheless, by the
Corporation and issued and delivered as though the person or persons who signed
the certificate or certificates or whose facsimile signature or signatures have
been used thereon had not ceased to be such officer or officers of the
Corporation.
2. Restrictions on Transferability of Shares. In the event any
restriction on the transfer, or registration of the transfer, of shares shall be
imposed or agreed to by the Corporation, as permitted by law, each certificate
representing shares so restricted shall conspicuously set forth a full or
summary statement of the restriction on the face of the certificate, or shall
set forth such statement on the back of the certificate and conspicuously refer
to the same on the face of the certificate, or shall conspicuously state on the
face or back of the certificate that such restriction exists pursuant to a
specified document and that the Corporation will furnish to the holder of the
certificate without charge upon written request to the Corporation at its
principal place of business or registered office a copy of the specified
document.
3. Lost Certificates. The Corporation may direct that a new certificate
or certificates be issued in place of any certificate or certificates
theretofore issued by the Corporation alleged to have been lost or destroyed,
upon the making of an affidavit of that fact by the person claiming the
certificate to be lost or destroyed. When authorizing the issuance of a new
certificate or certificates, the Board of Directors, in its discretion and as a
condition precedent to the issuance thereof, may require the owner of the lost
or destroyed certificate or certificates, or his legal representative, to
advertise the same in such manner as it shall require and give the Corporation a
bond in such form, in such sum, and with such surety or sureties as the
Corporation may direct as indemnity against any claim that may be made against
the Corporation with respect to the certificate alleged to have been lost or
destroyed.
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4. Transfer of Shares. Shares of stock shall be transferable on the
books of the Corporation by the holder thereof in person or by his duly
authorized attorney. Subject to any restrictions on transfer set forth in the
Articles of Incorporation of the Corporation, these Bylaws or any agreement
among shareholders to which the Corporation is a party or has notice, upon
surrender to the Corporation or to the transfer agent of the Corporation of the
certificate representing shares duly endorsed or accompanied by proper evidence
of succession, assignment or authority to transfer, it shall be the duty of the
Corporation or the transfer agent of the Corporation to issue a new certificate
to the person entitled thereto, cancel the old certificate and record the
transaction upon its books.
5. Registered Shareholders. The Corporation shall be entitled to
recognize the holder of record of any share or shares of stock as the holder in
fact thereof and, accordingly, shall not be bound to recognize any equitable or
other claim to or interest in such share or shares on the part of any other
person, whether or not it shall have express or other notice thereof, except as
otherwise provided by law.
ARTICLE VII
Indemnification
1. Indemnity. Each person who was or is made a party or is threatened to
be made a party to or is otherwise involved in any action, suit, or proceeding,
whether civil, criminal, administrative, or investigative and including, without
limitation, any "proceeding" referred to in art. 2.02-1 of the Texas Business
Corporation Act (hereinafter a "proceeding"), by reason of the fact that he or
she, or a person of whom he or she is the legal representative, is or was a
director or officer of the Corporation or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust, or other enterprise, including service with
respect to an employee benefit plan (hereinafter an "Indemnitee"), whether the
basis of such proceeding is alleged action in an official capacity as a director
or officer or in any other capacity while serving as a director of officer shall
be indemnified and held harmless by the Corporation to the fullest extent
authorized by the Texas Business Corporation Act or other applicable law of the
State of Texas, as the same exists or may hereafter be amended (but, in the case
of any such amendment, only to the extent that such amendment permits the
Corporation to provide broader indemnification rights than permitted prior
thereto), against all expense, liability, and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties,
and amounts paid or to be paid in settlement) reasonably incurred or suffered by
such Indemnitee in connection therewith, and such indemnification shall continue
as to an Indemnitee who has ceased to be a director or officer and shall inure
to the benefit of the Indemnitee's heirs, executors, and administrators;
provided, however, that, except for a proceeding brought by an Indemnitee to
enforce his or her rights to indemnification, the Corporation shall indemnify
any such Indemnitee in connection with a proceeding (or part thereof) initiated
by such Indemnitee only if such proceeding (or part thereof) was authorized by
the Board of Directors of the Corporation. The right to indemnification
conferred in this Article VII shall be a contract right and shall include the
right to be paid by the Corporation the expenses incurred in defending any such
proceeding in advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that, if the Texas Business Corporation Act or
other applicable law of the State of Texas requires, an advancement of expenses
incurred by an Indemnitee in his or her capacity as a director of officer (and
not in any other capacity in which service was or is rendered by such
Indemnitee, including,
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without limitation, service to an employee benefit plan) shall be made only
upon delivery to the Corporation of an undertaking complying in all respects
with the requirements of the Texas Business Corporation Act or other applicable
law of the State of Texas (hereinafter an "undertaking"), by or on behalf of
such Indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right to
appeal (hereinafter a "final adjudication") that such Indemnitee is not entitled
to be indemnified for such expenses under this Article VII or otherwise. If the
Corporation makes an advancement of expenses to an Indemnitee, the Corporation
shall be subrogated to every right of recovery the Indemnitee may have against
any insurance carrier from whom the Corporation has purchased insurance for such
purpose.
2. Remedy. If a claim under this Article VII is not paid in full by the
Corporation within 60 days after a written claim has been received by the
Corporation, the Indemnitee may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim. If successful in whole
or in part in any such suit, or in a suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the Indemnitee
shall be entitled to be paid also the expense of prosecuting or defending such
suit, including, without limitation, any appeal. In (i) any suit brought by the
Indemnitee to enforce a right to indemnification (but not in a suit brought by
the Indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking the Corporation shall be
entitled to recover such expenses upon a final adjudication that, the Indemnitee
has not met the applicable standard of conduct set forth in the Texas Business
Corporation Act or other applicable law of the State of Texas. Neither the
failure of the Corporation (including its Board of Directors, independent legal
counsel, or its shareholders) to have made a determination prior to the
commencement of such suit that the Indemnitee met the applicable standard of
conduct set forth in the Texas Business Corporation Act or other applicable law
of the State of Texas, nor an actual determination by the Corporation (including
its Board of Directors, independent legal counsel, or its shareholders) that the
Indemnitee has not met such applicable standard of conduct, shall create a
presumption that the Indemnitee has not met the applicable standard of conduct
or, in the case of such a suit brought by the Indemnitee, be a defense to such
suit. In any suit brought by the Indemnitee to enforce a right to
indemnification or to an advancement of expenses or by the Corporation to
recover an advancement of expenses pursuant to the terms of an undertaking, the
burden of proving that the Indemnitee is not entitled to be indemnified, or to
such advancement of expenses, under this Article VII or otherwise, shall be on
the Corporation.
3. Employees and Agents. The Corporation may, to the extent authorized
from time to time by the Board of Directors, grant rights to indemnification and
to the advancement of expenses to any employee or agent of the Corporation to
the fullest extent of the provisions of this Article VII with respect to the
indemnification and advancement of expenses of directors and officers of the
Corporation.
4. Partial Indemnification; Interest.
(A) If it is determined pursuant to the provisions of the Texas Business
Corporation Act or other applicable law of the State of Texas, or by the court
before which such action was brought, that an Indemnitee is entitled to
indemnification as to some claims, issues, or matters, but not as to other
claims, issues, or matters, involved in any action, no matter by whom brought,
the person or persons making such determination (or the court) shall authorize
the reasonable proration of such expenses, judgments, penalties, fines, and
amounts incurred in settlement with respect to which indemnification is sought
by the Indemnitee, among such claims, issues, or matters as the person or
persons making such determination (or
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the court) shall deem appropriate in light of all of the circumstances of such
action.
(B) If it is determined pursuant to the provisions of the Texas Business
Corporation Act or other applicable law of the State of Texas, or by the court
before which such action was brought, that certain amounts incurred by the
Indemnitee are, for whatever reason, unreasonable in amount, the person or
persons making such determination (or the court) shall authorize indemnification
to be paid by the Corporation to the Indemnitee for only such amounts as the
person or persons making such determination (or the court) shall deem reasonable
in light of all of the circumstances of such action.
(C) To the extent deemed appropriate pursuant to the provisions of the
Texas Business Corporation Act or other applicable law of the State of Texas, or
by the court before which such action was brought, interest shall be paid by the
Corporation to the Indemnitee, at a reasonable interest rate, for amounts for
which the Corporation indemnifies the Indemnitee.
5. Nonexclusivity. The right to indemnification and advancement of
expenses provided to an Indemnitee pursuant to this Article VII shall not be
deemed exclusive of any other rights to which the Indemnitee may be entitled
under any charter provision, bylaw, agreement, resolution, vote of shareholders
or disinterested directors, or otherwise, including, without limitation, under
the Texas Business Corporation Act or other applicable law of the State of
Texas, as then in effect, both as to acts in his or her official capacity and as
to acts in any other capacity.
6. Insurance.
(A) The Corporation may purchase and maintain insurance on behalf of an
Indemnitee against any liability asserted against him or her or incurred by or
on behalf of him or her whether or not the Corporation would have the power to
indemnify him or her against such liability under the provisions of this Article
VII or under the Texas Business Corporation Act or other applicable law of the
State of Texas, as then in effect. The purchase and maintenance of such
insurance shall not in any way limit or affect the rights and obligations of the
Corporation or an Indemnitee under this Article VII and the adoption of this
Article VII by the Corporation shall not in any way limit or affect the rights
and obligations of the Corporation or of the other party or parties thereto
under any such policy or agreement of insurance.
(B) If the Indemnitee shall receive payment from any insurance carrier or
from the plaintiff in any action against the Indemnitee in respect of
indemnified amounts after payments on account of all or part of such indemnified
amounts have been made by the Corporation pursuant to this Article VII, the
Indemnitee shall promptly reimburse the Corporation for the amount, if any, by
which the sum of such payment by such insurance carrier or such plaintiff and
payments by the Corporation to the Indemnitee exceeds such indemnified amounts;
provided, however, that such portions, if any, of such insurance proceeds that
are required to be reimbursed to the insurance carrier under the terms of its
insurance policy, such as deductible or coinsurance payments, shall not be
deemed to be payments to the Indemnitee hereunder. In addition, upon payment of
indemnified amounts under this Article VII, the Corporation shall be subrogated
to the Indemnitee's rights against any insurance carrier in respect of such
indemnified amounts and the Indemnitee shall execute and deliver any and all
instruments and documents and perform any and all other acts and deeds that the
Corporation deems reasonably necessary or advisable to secure such rights.
7. Witness Expenses. Upon an Indemnitee's written request, the
Corporation shall pay (in advance or otherwise) or reimburse any and all
expenses reasonably incurred by the Indemnitee in
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connection with his or her appearance as a witness in any proceeding at a time
when he has not been formally named a defendant or respondent to such a
proceeding.
8. Contribution. If the indemnity provided for in this Article VII is
unavailable to an Indemnitee for any reason whatsoever, the Corporation, in lieu
of indemnifying the Indemnitee, shall contribute to the amount reasonably
incurred by or on behalf of the Indemnitee, whether for judgments, fines,
penalties, amounts incurred in settlement, or for expenses in connection with
any proceeding, no matter by whom brought, in such proportion as deemed fair and
reasonable, by the person or persons entitled to make the determination as to
whether the Indemnitee has met the requisite standard of conduct under the Texas
Business Corporation Act or other applicable law of the State of Texas, or by
the court before which such proceeding was brought, taking into account all of
the circumstances of such proceeding, in order to reflect (i) the relative
benefits received by the Corporation and the Indemnitee as a result of the event
or transaction giving cause to such proceeding; and (ii) the relative fault of
the Corporation (and its other directors, officers, employees, and agents) and
the Indemnitee in connection with such event or transaction.
9. Severability. If any provision of this Article VII shall be deemed
invalid or inoperative, or if a court of competent jurisdiction determines that
any of the provisions of this Article VII contravenes public policy, this
Article VII shall be construed so that the remaining provisions shall not be
affected, but shall remain in full force and effect, and any such provisions
that are invalid and inoperative or contravene public policy shall be deemed,
without further action or deed on the part of any person, to be modified,
amended, or limited, but only to the extent necessary to render the same valid
and enforceable, and the Corporation shall indemnify the Indemnitee as to
expenses, judgments, fines, and amounts incurred in settlement with respect to
any proceeding, no matter by whom brought, to the full extent permitted by any
applicable provision of this Article VII that shall not have been invalidated
and to the full extent otherwise permitted.
ARTICLE VIII
General Provisions
1. Dividends. Dividends upon the outstanding shares of the Corporation,
subject to the provisions of the Act, the Articles of Incorporation and any
agreements or obligations of the Corporation, if any, may be declared by the
Board of Directors at any regular or special meeting. Dividends may be declared
and paid in cash, in property, or in shares of the Corporation, provided that
all such declarations and payments of dividends shall be in strict compliance
with all applicable laws and the Articles of Incorporation. The Board may fix
in advance a record date for the purpose of determining shareholders entitled to
receive payment of any dividend, such record date to be not more than fifty (50)
days prior to the payment of such dividend. In the absence of any action by the
Board of Directors, the date upon which the Board of Directors adopts the
resolution declaring such dividend shall be the record date.
2. Reserves. There may be created by resolution of the Board of
Directors out of the earned surplus of the Corporation such reserve or reserves
as the Board of Directors from time to time, in its absolute discretion, deems
proper to provide for contingencies, or to equalize dividends, or to repair or
maintain any property of the Corporation, or for such other proper purposes as
the Board of Directors shall deem beneficial to the Corporation, and the Board
of Directors may modify or abolish any reserve in the same manner in which it
was created.
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3. Fiscal Year. The fiscal year of the Corporation shall be fixed by
resolution of the Board of Directors.
4. Seal. The Corporation shall have a seal which may be used by causing
it or a facsimile thereof to be impressed on, affixed to, or in any manner
reproduced upon, instruments of any nature required to be executed by its proper
officers.
5. Annual Statement. The Board of Directors shall present at each annual
meeting and when requested to do so by shareholders holding at least one third
(1/3) of the outstanding shares, a full and clear statement of the business and
condition of the Corporation.
6. Checks. All checks or demands for money and notes of the Corporation
shall be signed by such officer or officers or such other person or persons as
the Board of Directors may designate from time to time.
7. Voting Securities Owned by Corporation. Voting securities in any
other corporation held by this Corporation shall be voted by the President or
any Vice President, unless the Board of Directors confers authority to vote with
respect thereto, which may be general or confined to specific investments, upon
some other person or officer. Any person authorized to vote securities shall
have the power to appoint proxies with the general power of substitution.
8. Resignation. Any director, officer, employee or agent of the
Corporation may resign by giving written notice to the President or the
Secretary. The resignation shall take effect at the time specified therein, or
immediately if no time is specified therein. Unless specified in such notice,
the acceptance of such resignation shall not be necessary to make it effective.
ARTICLE IX
AMENDMENTS TO BYLAWS
These Bylaws may be altered, amended, modified or repealed, or new Bylaws
may be adopted at any meeting of the Board of Directors at which a quorum is
present by the affirmative vote of a majority of the directors present at such
meeting.
CERTIFICATE
The foregoing Bylaws were adopted by the Board of Directors of the
Corporation effective August 31, 1998.
/s/ Ronald A. Woessner
------------------------------
Ronald A. Woessner, Secretary
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EXHIBIT 10.1
CUSTOMTRACKS CORPORATION
1990 STOCK OPTION PLAN
(Amended and Restated as of August 1998)
1. Purpose. The purpose of the Plan is to benefit the Company and its
Subsidiaries by offering certain present and future Employees a favorable
opportunity to acquire shares of Stock of the Company over a period of years,
thereby giving such Employees a permanent stake in the growth and prosperity of
the Company, encouraging such Employees to continue their services with the
Company and its Subsidiaries, and motivating such Employees to devote their best
efforts to the business and profitability of the Company and its Subsidiaries.
2. Definitions. As used herein, the following definitions shall apply:
(a) An "Acquiring Person" shall mean any Person (including any "person" as
such term is used in Sections 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) that, together with all Affiliates
and Associates of such Person, is the beneficial owner (as the term "beneficial
owner" is defined under Rule 13d-3 or any successor rule or regulation
promulgated under the Exchange Act) of 10% or more of the outstanding Common
Stock. The term "Acquiring Person" shall not include the Company, any
subsidiary of the Company, any employee benefit plan of the Company or
subsidiary of the Company, any Person to the extent such Person is holding
Common Stock for or pursuant to the terms of any such plan, or Optionee or any
Affiliate or Associate of Optionee. For the purposes of this Plan, a Person who
becomes an Acquiring Person by acquiring beneficial ownership of 10% or more of
the Common Stock at any time after the date of this Agreement shall continue to
be an Acquiring Person whether or not such Person continues to be the beneficial
owner of 10% or more of the outstanding Common Stock.
(b) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Exchange Act in effect on the date of this Agreement.
(c) "Board" shall mean the Board of Directors of the Company.
(d) "Change of Control" shall mean the occurrence, with respect to an
Option held by Employees of a Subsidiary, at any time during the specified term
of such Option, of any of the following events:
(1) The Company is merged or consolidated or reorganized into or with
another Person and as a result of such merger, consolidation or
reorganization less than seventy-five percent (75%) of the
outstanding voting securities or other material capital interests
of the surviving, resulting or acquiring Person are owned in the
aggregate by Persons who were shareholders of the Company
immediately prior to such merger, consolidation or
reorganization;
<PAGE>
(2) The Company sells all or substantially all of its business or
assets to any other Person, less than seventy-five percent (75%)
of the outstanding voting securities or other material capital
interests of which are owned in the aggregate by Persons who were
shareholders of the Company, directly or indirectly, immediately
prior to such sale; or
(3) Any Person (or group of Persons acting in concert), other than
the Company, becomes the beneficial owner, directly or
indirectly, of thirty-five percent (35%) or more of the issued
and outstanding shares of voting securities of the Company.
(e) "Change of Control" shall mean the occurrence, with respect to an
Option held by Employees of the Company, at any time during the specified term
of such Option, of any of the following events:
(1) (a) Any Sale of the Company or (b) any Sale of any Material
Subsidiary for consideration valued at $300 million or more; or
(2) Any Acquiring Person has become the beneficial owner of
securities which, when added to any securities already owned by
such person, would represent in the aggregate 25% or more of the
then-outstanding securities of the Company that are entitled to
vote to elect any class of directors;
(3) If at any time, the Continuing Directors then serving on the
Board of Directors of the Company cease for any reason to
constitute at least a majority thereof; or
(4) Any occurrence that would be required to be reported in response
to Item 6(e) of Schedule 14A of Regulation 14A or any successor
rule or regulation promulgated under the Exchange Act.
(f) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(g) "Company" shall mean CustomTracks Corporation, a Texas corporation.
(h) A "Continuing Director" shall mean a director of the Company who (i)
is not an Acquiring Person or an Affiliate or Associate thereof, or a
representative of an Acquiring Person or nominated for election by an Acquiring
Person, and (ii) was either a member of the Board of Directors of the Company on
the date of this Agreement or subsequently became a director of the Company and
whose initial election or initial nomination for election by the Company's
shareholders was approved by a majority of the Continuing Directors then on the
Board of Directors of the Company.
(i) "Date of Grant" shall mean, with respect to each Option granted by the
Plan Administrator pursuant to the Plan, the date specified in Section 1 of the
Option Agreement relating to such Option.
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(j) "Director" shall mean any duly elected and qualified member of the
Board.
(k) "Disability" shall mean any medically determinable physical or mental
impairment that, in the opinion of the Plan Administrator, based upon medical
reports and other evidence satisfactory to the Plan Administrator, can
reasonably be expected to prevent an Employee from performing substantially all
of his customary duties of employment for a continuous period of not less than
twelve (12) months.
(l) "Employee" shall mean any salaried employee of the Company or any
Subsidiary, except a salaried employee who is serving as a Director.
(m) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" shall mean the closing price of the Stock as
quoted on NASDAQ/NMS on the last business day immediately preceding the date on
which the Option is granted or the date of exercise, as the case may be.
(o) A "Material Subsidiary" shall mean any majority-owned subsidiary of
the Company that is material to the business of the Company, taken as a whole,
and that is engaged in the digital data distribution business or other business
involving a concept primarily fostered by Mr. David P. Cook.
(p) "NASDAQ/NMS" shall mean the NASDAQ National Market System.
(q) "Option" shall mean any right to purchase Stock that has been granted
pursuant to the Plan.
(r) "Option Agreement" shall mean an agreement executed by an officer of
the Company and an Optionee evidencing the grant of an Option pursuant to the
Plan.
(s) "Optionee" shall mean any Employee who receives an Option or any
Person who acquires an Option by reason of the death of an Employee.
(t) A "Person" shall mean an individual, a corporation, a partnership, an
association, a joint-stock company, a trust, an incorporated organization, or a
government or political subdivision thereof and any other entity. A Person,
together with that Person's Affiliates and Associates, and any Persons acting as
a partnership, limited partnership, joint venture, association, syndicate, or
other group (whether or not formally organized), or otherwise acting jointly or
in concert or in a coordinated or consciously parallel manner (whether or not
pursuant to any express agreement), for the purpose of acquiring, holding,
voting, or disposing of securities of the Company with that Person, shall be
deemed a single "Person."
(u) "Plan" shall mean this CustomTracks Corporation 1990 Stock Option
Plan.
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(v) "Plan Administrator" shall mean the Board or, in the alternative, any
committee of Directors authorized by the Board to administer the Plan.
(w) "Resignation" shall mean the voluntary termination by an Employee of
his or her employment relationship with the Company or its Subsidiaries under
circumstances other than voluntary Retirement.
(x) "Retirement" shall mean the termination of an Employee's employment in
accordance with the requirements of a written retirement plan, policy or rule of
the Company or its Subsidiaries which has been duly adopted by the Board.
(y) "Rule 16b-3" shall mean Rule 16b-3 of the rules and regulations under
the Exchange Act as it may be amended from time-to-time and any successor
provision to Rule 16b-3 under the Exchange Act.
(z) A "Sale" occurs with respect to the Company or a Material Subsidiary,
as applicable, if it engages in a merger, consolidation, recapitalization,
reorganization, or sale, lease, license, transfer, or other effective
disposition of all or substantially all of the Company's or Material
Subsidiary's assets and the Company or its shareholders or Affiliates
immediately before such transaction beneficially own, immediately after or as a
result of such transaction, equity securities of the surviving or acquiring
corporation or such corporation's parent corporation possessing less than fifty
one percent (51%) of the voting power of the surviving or acquiring Person or
such Person's parent corporation, provided that a Sale shall not be deemed to
occur upon any public offering or series of such offerings of securities of the
Company or a Material Subsidiary that results in any such change in beneficial
ownership.
(aa) "Securities Act" shall mean the Securities Act of 1933, as amended.
(bb) "Stock" shall mean the $.01 par value Common Stock of the Company.
(cc) "Subsidiary" shall mean any corporation in an unbroken chain of
corporations beginning with the Company in which each of the corporations (other
than the last corporation) in the unbroken chain owns shares of capital stock
possessing fifty percent (50%) or more of the total combined voting power of all
classes of capital stock of one of the other corporations in such chain at the
date of grant of an Option.
3. Shares Subject to the Plan. Except as otherwise required by the
provisions of Section 9 hereof, the aggregate number of shares of Stock issuable
upon the exercise of Options granted pursuant to the Plan shall not exceed
345,045 shares. Such shares may either be authorized but unissued shares or
treasury shares.
The exercise price of each Option granted pursuant to the Plan shall be
determined by the Plan Administrator and, subject to the provisions of Section 9
hereof, shall be not less than the Fair Market Value, at the time the Option is
granted, of the shares of Stock subject to the Option.
4
<PAGE>
Subject to the limitations provided above, if an Option should expire or
become unexercisable for any reason without having been exercised in full, the
unpurchased shares of Stock that were subject thereto shall, unless the Plan
shall have terminated, be available for the grant of other Options under the
Plan.
4. Administration of the Plan. The following provisions shall govern the
administration of the Plan:
(a) The Plan shall be administered by the Plan Administrator.
(b) The Plan Administrator is authorized (but only to the extent not
contrary to the express provisions of the Plan) to interpret the Plan, to
prescribe, amend and rescind rules and regulations relating to the Plan and to
the Options granted under the Plan, to determine the form and content of Options
to be issued under the Plan (including the exercise price, the exercise period
and the exercise increments of each such Option) and to make such other
determinations and exercise such other powers and authority as may be necessary
or advisable for the administration of the Plan. Each Option granted pursuant to
the Plan shall be evidenced by the Option Agreement in such form as may be
determined by the Plan administrator.
(c) A majority of the members of the Plan Administrator eligible to act
shall constitute a quorum for purposes of acting with respect to the Plan, and
the action of a majority of the members present who are eligible to act at any
meeting at which a quorum is present shall be deemed the action of the Plan
Administrator.
(d) All decisions, determinations and interpretations of the Plan
Administrator with respect to the Plan and Option Agreements executed pursuant
thereto shall be final and conclusive on all persons affected thereby.
(e) Neither the Plan Administrator nor any member thereof shall be liable
for any act, omission, interpretation, construction or determination made in
connection with the Plan in good faith, and the members of the Plan
Administrator shall be entitled to indemnification and reimbursement by the
Company in respect of any claim, loss, damage or expense (including counsel
fees) arising therefrom to the full extent permitted by law. The members of the
Plan Administrator shall be named as insureds under any directors and officers
liability insurance coverage that may be in effect from time to time.
5. Eligibility. All Employees of' the Company and its Subsidiaries are
eligible to receive Options under the Plan. The Plan Administrator is authorized
to select from the Employees who are eligible to receive Options under the Plan
the particular Employees who will receive Options and to determine the number of
Options and the number of shares of Stock under each Option. In granting
Options, the Plan Administrator shall take into consideration the contribution
an Employee has made or may make to the success of the Company or its
Subsidiaries and such other factors as the Plan Administrator shall determine.
The Plan Administrator shall also have the authority to consult with and receive
recommendations from Directors and Employees of the Company and its Subsidiaries
with regard to these matters. In no event shall any Employee or his legal
representatives, heirs, legatees, distributees or successors
5
<PAGE>
have any right to participate in the Plan except to such extent, if any, as the
Plan Administrator shall determine.
6. Term of the Plan. The Plan shall continue in effect until terminated
pursuant to Section 15; provided, however, that all Options granted pursuant to
the Plan must be granted within 10 years from the effective date of the Plan.
7. Termination of Employment - Exercise Thereafter. In the event of
termination of an Optionee's employment due to death, Retirement, Resignation,
Disability or termination by the Company for any reason other than "cause" (such
five events each being a "Qualified Termination"), the Option may be exercised
by the Optionee or his estate, personal representative or beneficiary to the
full extent that the Optionee was entitled to exercise the same on the day
immediately prior to such termination (i) at any time within the one-year period
commencing on the day next following such termination if such termination is due
to death of the Optionee; (ii) at any time within the thirty-day period
commencing on the day next following the effective date of such termination if
such termination is due to the Resignation of the Optionee; or (iii) at any time
within the six-month period commencing on the day next following such
termination in the case of any other Qualified Termination. In the event that
the Optionee's employment is terminated for any reason other than a Qualified
Termination, the Option shall automatically expire simultaneously with such
termination. For purposes of this Section, "cause" shall mean (x) the failure,
in the sole opinion of the Company or the Subsidiary which employs Optionee, of
Optionee to adequately perform the duties assigned to Optionee (other than any
such failure resulting from Optionee's Disability); (y) the engagement by
Optionee in misconduct which, in the sole opinion of the Company or the
Subsidiary which employs Optionee, is or may have the effect of being materially
injurious to the Company or its Subsidiaries; or (z) the conviction of Optionee
of any felony or crime of moral turpitude.
8. Transferability. An Option granted pursuant to the Plan shall not be
transferable by the Optionee otherwise than by will or the laws of descent and
distribution, and the Option shall be exercisable, during the Optionee's
lifetime, only by Optionee or Optionee's legal representative or guardian. More
particularly (but without limiting the generality of the foregoing), an Option
may not be assigned, transferred (except as aforesaid), pledged or hypothecated
in any way (whether by operation of law or otherwise), and shall not be subject
to execution, attachment or similar process, without the prior written consent
of the Company. Any attempted assignment, contrary to the provisions hereof,
and the levy of any attachment or similar process upon the Option, which would
otherwise affect a change in the ownership of the Option, shall terminate the
Option.
9. Adjustment. The number of shares subject to the Plan and to Options
granted pursuant to the Plan shall be adjusted as follows: (a) in the event that
the outstanding Stock is changed by reason of a stock dividend, stock split,
recapitalization or combination of shares, the number of shares of Stock subject
to the Plan and to Options granted pursuant to the Plan shall be proportionately
adjusted; or (b) in the event of any merger, consolidation or reorganization of
the Company with any other corporation or corporations, there shall be
substituted for each share of Stock then subject to the Plan and to Options
granted pursuant to the Plan the number and kind of shares of stock or other
securities to which the holders of shares of Stock will be entitled
6
<PAGE>
pursuant to the transaction. In the event of any such adjustment, the purchase
price per share shall be proportionately adjusted.
10. Change of Control. Any Option previously granted under the Plan to an
Optionee who is an Employee on the date of a Change in Control shall become
exercisable in full on such date and, except in the case of a termination of
employment for cause in conjunction with or following the Change of Control, may
be exercised by the Optionee at any time during the remainder of the term of the
Option, without regard to any exercise increments established pursuant to any
applicable Option Agreement. In the case of a termination of employment for
cause in conjunction with or following a Change of Control, the Option may be
exercised by the Optionee at any time within a period of not less than six
months nor more than three (3) years (the length of which period shall be within
the discretion of the Plan Administrator and shall be evidenced conclusively by
the giving of appropriate and timely notice to the Optionee in accordance with
the terms of the applicable Option Agreement) after the date of such
termination.
11. Exercise of Option. An Option may be exercised by giving written
notice to the Company, attention of the Treasurer. The notice shall (i) state
the election to exercise the Option and the number of shares in respect of which
it is being exercised; (ii) be signed by the Optionee; and (iii) be accompanied
by the representation and covenant required under Section 12 hereof and any
other written representations, covenants, and undertakings that the Company may
prescribe to satisfy securities laws and regulations or other requirements. In
addition, the notice shall be accompanied by (a) cash in an amount equal to the
full purchase price of the shares to be purchased, a certified or bank cashier's
check payable to the order of the Company in an amount equal to the full
purchase price of the shares to be purchased, shares of Stock or a combination
of these methods of payment; or (b) if the shares to be purchased are covered by
an effective registration statement under the Securities Act, a written
statement signed by the Optionee that the exercise is a "cashless exercise"
through a brokerage firm in accordance with Section 220.3(e)(4) of Regulation T
issued by the Board of Governors of the Federal Reserve System ("Reg T")
pursuant to the Exchange Act, in which latter event the Company will use its
best efforts to comply with the requirements of Reg T. In the event that shares
of Stock are used as a method of payment, the per share value of Stock shall be
the Fair Market Value on the date of exercise. The certificate or certificates
for the shares as to which the Option shall have been so exercised shall be
registered in the name of the Optionee or his designee and shall be delivered to
or upon the written order of the Optionee. If applicable, the Company shall be
entitled to place the following legend (or a legend which is substantially
similar to the following legend) upon, and to issue appropriate stop transfer
instructions with respect to, the certificate or certificates representing the
shares issued upon exercise of the Option:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY
APPLICABLE STATE SECURITIES LAWS (THE "STATE LAWS"), AND SUCH SHARES MAY
NOT BE TRANSFERRED UNLESS (A) A REGISTRATION STATEMENT UNDER THE SECURITIES
ACT AND APPLICABLE STATE LAWS COVERING SUCH TRANSFER IS THEN IN EFFECT; OR
(B) AN OPINION OF
7
<PAGE>
COUNSEL, SATISFACTORY TO THE ISSUER, HAS BEEN FURNISHED STATING THAT SUCH
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND APPLICABLE STATE LAWS."
All shares of Stock issued as provided herein shall be duly and validly issued,
fully paid and non-assessable.
12. Securities Law Restrictions. The Company shall not be obligated to
issue any shares purchased upon exercise of an Option until, in the opinion of
the Company and its counsel, such issuance will not involve any violation of
applicable federal and state securities laws, the rules and regulations
promulgated thereunder and the requirements of any stock exchange upon which the
Stock may then be listed. Acceptance of an Option by an Optionee shall
constitute the Optionee's agreement that any shares of Stock purchased upon the
exercise of the Option shall be acquired for the Optionee's own account and not
with a view to distribution and that each notice of the exercise of any portion
of the Option shall be accompanied by a written representation and covenant
signed by the Optionee, in such form as may be specified by the Company,
confirming such agreement and containing such other provisions as may be
prescribed by the Company. The Company may, at its election, release an Optionee
from the Optionee's agreement to take for the Optionee's own account and not
with a view to distribution of the shares of Stock purchased upon exercise of
the Option, if in the opinion of the Company such covenant ceases to be
necessary for compliance with the applicable federal and state securities laws
(including the rules and regulations promulgated thereunder) and the
requirements of any stock exchange upon which the Stock may be then listed.
13. Listing or Registration of Stock. Each Option granted pursuant to the
Plan is subject to the requirement that, if at any time the Board shall
determine, in its discretion, that the listing, registration or qualification of
the shares of Stock subject to the Option upon any securities exchange or under
any state or federal law, or the consent or approval of any government
regulatory body, is necessary or desirable as a condition of, or in connection
with, the granting or exercise of the Option or the issue or purchase of shares
under the Option, the Option may not be exercised in whole or in part until such
listing, registration, qualification, consent or approval shall have been
effected or obtained free of any conditions not acceptable to the Board. The
Company shall be under no obligation to effect or obtain any such listing,
registration, qualification, consent or approval if the Board shall determine,
in its discretion, that such action would not be in the best interests of the
Company. The Company shall not be liable for damages due to a delay in the
delivery or issuance of any stock certificates for any reason whatsoever,
including, but not limited to, a delay caused by listing, registration or
qualification of the shares of Stock subject to an Option upon any securities
exchange or under any federal or state law or the effecting or obtaining of any
consent or approval of any governmental body with respect to the granting or
exercise of the Option or the issue or purchase of shares under the Option.
14. Modification of Options. At any time and from time to time the Plan
Administrator may execute an instrument providing for modification, extension,
or renewal of
8
<PAGE>
any outstanding Option, provided that no such modification, extension or renewal
shall (i) impair the Option in any respect without the consent of the holder of
the Option or (ii) conflict with the provisions of Rule 16b-3.
15. Amendment and Termination of the Plan. The Board may alter, suspend
or discontinue the Plan, except that no action of the Board may increase the
benefits accruing to Employees under the Plan, increase (other than as provided
in Section 9) the maximum number of shares permitted to be issued upon the
exercise of Options granted pursuant to the Plan or materially modify the
requirements as to eligibility for participation in the Plan unless such action
of the Board shall be subject to approval by the shareholders of the Company.
16. Shareholder Rights. The holder of an Option shall have none of the
rights of a shareholder with respect to the shares of Stock subject to the
Option until such shares shall have been issued to him upon the due exercise of
the Option.
17. Withholding of Taxes. The Plan Administrator may make such provisions
and take such -steps as it may deem necessary or appropriate for the
withholding of any taxes which the Company or any Subsidiary is required by any
law or regulation of any governmental authority, whether federal, state or
local, domestic or foreign, to withhold in connection with any Option,
including, but not limited to, the withholding of the issuance of all or any
portion of the shares of Stock subject to the Option until the Optionee
reimburses the Company or the applicable Subsidiary for the amount the Company
or the applicable Subsidiary is required to withhold with respect to such
taxes, canceling any portion of the issuance in an amount sufficient to
reimburse the Company or the applicable Subsidiary for the amount it is
required to so withhold, or taking any other action reasonably required to
satisfy the withholding obligation of the Company or the applicable Subsidiary.
18. Restrictions on Stock. The Plan Administrator may impose such
restrictions on the ownership and transfer of shares of Stock issued upon
exercise of Options granted pursuant to the Plan as it deems desirable and any
such restrictions shall be set forth in the Option Agreement evidencing the
Options; provided, however, that any such restrictions shall not be materially
more burdensome than the restrictions imposed upon the other outstanding,
unregistered shares of Stock.
19. Reservation of Stock. The Company during the term of the Plan will
reserve and keep available such number of shares of Stock as shall be
sufficient to satisfy the requirements of the Plan.
20. Continued Employment. Not Presumed. Nothing in the Plan or any
document describing it nor the grant of an Option shall give an Optionee the
right to continue in employment with the Company or any of its Subsidiaries or
affect the right of the Company or a Subsidiary to terminate the employment of
any Optionee with or without cause.
9
<PAGE>
AMENDED AND RESTATED as of August 31, 1998. The new definitions
incorporated in this Plan by virtue of this amendment and restatement shall
apply to Options outstanding on the date hereof, as well as Options hereinafter
granted under this Plan.
CUSTOMTRACKS CORPORATION
By: /s/ Ronald A. Woessner
---------------------------------
Ronald A. Woessner
Secretary
10
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JUL-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 23,357
<SECURITIES> 16,053
<RECEIVABLES> 17,576
<ALLOWANCES> 757
<INVENTORY> 3,844
<CURRENT-ASSETS> 60,509
<PP&E> 7,826
<DEPRECIATION> 4,997
<TOTAL-ASSETS> 67,362
<CURRENT-LIABILITIES> 11,779
<BONDS> 0
0
0
<COMMON> 172
<OTHER-SE> 55,411
<TOTAL-LIABILITY-AND-EQUITY> 67,362
<SALES> 10,113
<TOTAL-REVENUES> 15,936
<CGS> 5,213
<TOTAL-COSTS> 8,953
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 56
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,343
<INCOME-TAX> 76
<INCOME-CONTINUING> 1,267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,267
<EPS-PRIMARY> 0.08
<EPS-DILUTED> 0.08
</TABLE>
<PAGE>
Exhibit 99.1
NEWS RELEASE
FOR IMMEDIATE RELEASE
PAGE 1 OF 2
[LETTERHEAD OF CUSTOMTRACKS APPEARS HERE]
Contact: Beverly V. Fuortes (972) 702-7057 fax: (972) 702-7056
[email protected] www.stockprofiles.com/cust
CUSTOMTRACKS SELLS CARDKEY SYSTEMS TO JOHNSON CONTROLS, INC.
DALLAS November 9, 1998 CustomTracks Corporation (NASDAQ: CUST) announced
today that it has signed a definitive agreement to sell Cardkey Systems, a
leading provider of electronic security systems, to Johnson Controls, Inc.
(NYSE: JCI) in an all-cash transaction valued at approximately $41 million, with
the final amount depending on the book value of Cardkey Systems' net assets. The
transaction, which is scheduled to close within 30 days, with an effective date
of November 30, 1998, is subject to the approval of the two companies' boards of
directors and normal governmental clearances.
"Johnson Controls is a fine company and will be able to provide the marketing
and support resources required for Cardkey to reach its maximum potential," said
David P. Cook, chairman and chief executive officer of CustomTracks Corporation.
"This sale concludes our planned exit from the electronic identification
business. CustomTracks is continuing to pursue digital music content rights and,
additionally, is evaluating other music-related Internet business
opportunities."
Johnson Controls, Inc. is an international company and global market leader in
automotive systems and facility management and control, with headquarters in
Milwaukee and $12.6 billion in annual revenues. Cardkey has major operations
located in the United States and the United Kingdom and employs approximately
350 people.
Steve York, senior vice president and chief financial officer of CustomTracks,
commented, "We estimate that the sale of Cardkey Systems under the definitive
agreement would result in a fourth-quarter net gain of approximately $21 - 23
million, after accounting for the net book
- more -
<PAGE>
CustomTracks Sells Cardkey
PAGE 2 OF 2
value of the assets to be sold, the tax effects of the transaction, and the
associated transaction costs. After completion of the transaction, including
allowance for payment of transactional tax costs, we should have approximately
$80 million in cash or equivalents."
CustomTracks Corporation (NASDAQ: CUST) plans to develop music-related Internet
businesses. Prior to September 1, 1998, CustomTracks Corporation was known as
Amtech Corporation (NASDAQ: AMTC). CustomTracks' headquarters is in Dallas. For
further information about CustomTracks, visit the company's investor Web site at
www.stockprofiles.com/cust or contact investor relations at (972) 702-7057.
###
