<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 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)
One Galleria Tower
13355 Noel Road, Suite 1555
Dallas, Texas 75240-6604
(Address of Principal Executive Offices)
(972) 702-7055
(Registrant's Telephone Number, Including Area Code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None Not Applicable
(Title of Class) (Name of Exchange on Which Registered)
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
Common Stock
$0.01 Par Value
(Title of Class)
----------------
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in any amendment to this Form 10-K. [_]
As of March 31, 1999, there were 15,203,837 shares of CustomTracks Corporation
("CustomTracks") $0.01 par value common stock outstanding, 13,370,623 of which
having an aggregate market value of $200,559,345 were held by non-affiliates.
For purposes of the above statement, all directors and officers of the
Registrant are presumed to be affiliates.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
MANAGEMENT
Directors and Executive Officers
The following table sets forth, as of March 31, 1999, the names of the
directors and executive officers of CustomTracks and their respective ages and
positions with CustomTracks.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<C> <C> <S>
David P. Cook(1)(3)........... 47 Director, Chairman, President and Chief
Executive Officer
Michael E. Keane(2)(4)........ 43 Director
James S. Marston(1)(4)........ 66 Director
Jack L. Martin(2)(4).......... 45 Director
Antonio R. Sanchez, Jr.(1)(3). 56 Director
Dr. Ben G. Streetman(2)(3).... 60 Director
Mark A. Tebbe................. 37 Director
Ronald A. Woessner............ 42 Vice President, General Counsel and
Secretary
Steve M. York................. 48 Senior Vice President, Chief Financial
Officer and Treasurer
</TABLE>
- --------
(1) Member of the Executive Committee.
(2) Member of the Audit Committee.
(3) Member of the Nominating Committee.
(4) Member of the Compensation and Stock Option Committee.
David P. Cook became a director of CustomTracks in December 1995 and was
appointed Chairman, President and Chief Executive Officer in April 1998. He
most recently served as Chairman and Chief Executive Officer of ARBImetrics
Corporation, a Dallas-based investment company that he founded. Mr. Cook
previously served as a director of CustomTracks from 1984 until 1990, serving
as Chairman of the Executive Committee until 1990. Mr. Cook founded
Blockbuster Entertainment Corporation and was its Chief Executive Officer from
its inception until 1987. Prior to that, he was Chairman of Cook Data
Services, Inc., a software company that he also founded.
Michael E. Keane became a director of CustomTracks in November 1997. Mr.
Keane has been Senior Vice President and Chief Financial Officer of UNOVA,
Inc. ("UNOVA") since November 1997. UNOVA comprises the former industrial
technology businesses spun off from Western Atlas, Inc. in October 1997, where
Mr. Keane was also Senior Vice President and Chief Financial Officer from
October 1996 until October 1997 and Vice President and Treasurer from March
1994 until October 1996. Prior to that, he was Corporate Director, Pensions
and Insurance, for Litton Industries, Inc. from February 1991 until March
1994.
James S. Marston became a director of CustomTracks in September 1991. From
September 1987 through February 1998, Mr. Marston served as a Senior, or
Executive, Vice President and the Chief Information Officer of APL Limited,
one of the largest U.S.-based intermodal shipping companies. Between 1986 and
1987, Mr. Marston served as President of AMR Technical Training Division, AMR
Corporation.
1
<PAGE>
Jack L. Martin became a director in August 1998. Mr. Martin is Chairman and
founder of Public Strategies, Inc., one of the nation's premiere international
strategic communications firms, which specializes in advising Fortune 500
companies. Mr. Martin currently serves as a director for the Scott and White
Memorial Hospital and Scott, Sherwood and Brindley Foundation, the Caesar
Kleberg Foundation and KLRU-TV. For many years, Mr. Martin served on former
U.S. Senator Bentsen's staff and held the position of Executive Assistant to
the Senator. He served on the Board of Regents of the Texas State University
System from 1985 to 1991 and was elected Chairman in 1988. Mr. Martin served
as the chair of the Texas National Research Laboratory Commission, the Texas
state agency responsible for overseeing the National Superconducting Super
Collider project.
Antonio R. Sanchez, Jr. was one of the early investors in CustomTracks in
1987 and became a director of CustomTracks in February 1993. Presently, Mr.
Sanchez is Chairman and Chief Executive Officer of Sanchez Oil & Gas
Corporation. Mr. Sanchez also holds interests in banking, real estate
development, industrial parks and various other investments. Mr. Sanchez
serves as a director of International Bank of Commerce ("IBC") and as a
director and stockholder of IBC's publicly-traded holding company,
International Bancshares Corporation. Mr. Sanchez is also a member of the
University of Texas Board of Regents.
Dr. Ben G. Streetman became a director in July 1998. Dr. Streetman is Dean
of the College of Engineering at the University of Texas at Austin and holds
the Dula D. Cockrell Centennial Chair in Engineering. He is a Professor of
Electrical and Computer Engineering and was the founding director of the
Microelectronics Research Center from 1984 until 1996. He is also a member of
the Board of Directors for National Instruments and Global Marine.
Mark A. Tebbe became a director in March 1999. Mr. Tebbe is President and
Chief Executive Officer of Lante Corporation, a leading, privately-held,
Internet commerce solutions and consulting firm. He has authored numerous
industry-related articles and columns and is currently a contributing editor
to InfoWorld, providing a weekly industry column entitled "Behind the Lines."
He is also affiliated with several technology, software and charity boards,
including COMDEX Conference, Chicago Software Association, Guru, Inc., Saranac
and Bionomics.
Ronald A. Woessner joined CustomTracks in April 1992 as General Counsel. He
was appointed Vice President in December 1993. He was previously a corporate
and securities attorney with the Dallas-based law firm of Johnson & Gibbs,
P.C.
Steve M. York joined CustomTracks in April 1990 as Vice President, Chief
Financial Officer and Treasurer. He was appointed Senior Vice President in
April 1994. Mr. York, a Certified Public Accountant, previously held various
financial management positions with commercial operating companies and was
employed by Arthur Young & Co. (now Ernst & Young LLP).
Each director serves until the next annual meeting of stockholders, and
until the director's successor is duly elected and qualified, unless earlier
removed in accordance with CustomTracks' bylaws. Officers serve at the
discretion of the Board of Directors.
See "ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS" for a
description of transactions between CustomTracks and certain directors and
executive officers of CustomTracks.
Section 16(a) Beneficial Ownership Reporting Compliance
During 1998, Mr. York and former executive officers John Wilson and Michael
Wolpert failed to timely file one Form 4. In each case, the filing related to
one exercise of stock options held by them, which exercise was exempt from
Section 16(b) of the Securities and Exchange Act of 1934 by virtue of Rule
16b-3 thereunder. Also during 1998, Mr. Sanchez failed to timely file one Form
4 with respect to four open market purchases made by him during a single
month. In all cases, the filings were promptly made as soon as the oversight
was discovered.
2
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
Compensation Of Directors And Executive Officers
Summary Compensation Table
The following table sets forth the compensation paid to the named
CustomTracks' executive officers for services rendered to CustomTracks for the
periods indicated. Immediately following the table are summaries of existing
employment-related contracts with these executive officers.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term Compensation
----------------------------------
Annual Compensation Awards Payouts
----------------------------- ----------------------- -------
Number of
Other Restricted Securities
Name and Principal Annual Stock Underlying LTIP All Other
Position Year Salary Bonus Compensation Award Options Payouts Compensation(9)
- ------------------ ---- -------- ------- ------------ ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David P. Cook(1) 1998 $ -- $ -- $ 3,750(1) $ -- 4,254,627 -- $ --
President, Chief 1997 -- -- 15,000(1) -- 2,500 -- --
Executive Officer and 1996 -- -- 15,000(1) -- 2,500 -- --
Chairman of the Board
Stuart M. Evans(2) 1998 104,953 31,486 418,948(2) 68,430(5) -- -- 371
Former President, 1997 209,042 -- -- -- -- -- 1,376
Electronic Security 1996 180,550 46,958 -- 34,500 15,000(5) -- --
Group
G. Russell Mortenson(3) 1998 50,000 -- 654,327(3) -- -- -- --
Former President, Chief 1997 300,000 -- -- -- 221,838(6) -- 2,574
Executive Officer and 1996 300,000 58,536 -- 172,500 80,000(7) -- 1,440
Chairman of the Board
Ronald A. Woessner 1998 150,000 50,000 -- -- 38,625 -- 5,156
Vice President, General 1997 130,000 9,100 -- -- 20,000 -- 1,820
Counsel and Secretary 1996 120,000 21,291 -- -- 5,000 -- 1,715
Michael H. Wolpert(4) 1998 175,083 60,379 1,468,600(4) 43,750(8) -- -- 2,106
Former President, 1997 170,500 34,807 -- -- 20,000(8) -- 4,077
Cardkey Systems 1996 155,000 55,425 -- -- 10,000 -- 1,875
Steve M. York 1998 193,000 50,000 -- 93,750(8) -- -- 2,800
Senior Vice President, 1997 193,000 -- -- -- 25,000(8) -- 2,000
Chief Financial Officer 1996 175,000 43,162 -- 67,275 30,000(7) -- 1,440
and Treasurer
</TABLE>
- --------
(1) In February 1998, Mr. Cook became Chairman, President and Chief Executive
Officer of CustomTracks. See "Employment and Severance Contracts with
Certain Executive Officers" below for a description of the employment
arrangement with Mr. Cook. "Other Annual Compensation" and option awards
for 1997 and 1996 represent director fees and director options paid or
given prior to Mr. Cook's employment.
(2) In June 1998, in connection with the sale of a CustomTracks' subsidiary,
Mr. Evans' employment with CustomTracks ceased. "Other Annual
Compensation" for 1998 represents a cash severance payment to Mr. Evans.
Mr. Evans' compensation was paid in U.K. pound sterling and has been
translated to U.S. dollars at the applicable average rate.
(3) Mr. Mortenson's employment with CustomTracks ceased in February 1998.
"Other Annual Compensation" for 1998 represents a cash severance payment
paid to Mr. Mortenson.
(4) In November 1998, in connection with the sale of Cardkey Systems and
related entities ("Cardkey"), Mr. Wolpert's employment with CustomTracks
ceased. "Other Annual Compensation" for 1998 represents a cash incentive
payment to Mr. Wolpert for his successful efforts in concluding the sale
of Cardkey.
3
<PAGE>
(5) The "Number of Securities Underlying Options" as originally reported in
CustomTracks' 1997 Proxy Statement for Mr. Evans included 15,000 shares
which were "restricted shares" issuable for no additional consideration
when a like number of option shares were exercised and held for the
requisite period. In 1998, when the corresponding options were exercised,
these "restricted shares" were issued. They are now reflected in the table
under "Restricted Stock Award" for 1998, and the number of shares
reflected in the table under "Number of Securities Underlying Options" for
1996 has been correspondingly reduced by the number of "restricted shares"
issued.
(6) The number of shares that may be received under 1997 option grants
includes 73,946 shares that represent "restricted shares" issuable for no
additional consideration if and when a like number of option shares are
exercised and held for the requisite period.
(7) The number of shares that may be received under 1996 option grants
includes 40,000 and 15,000 shares for Messrs. Mortenson and York,
respectively, which represent "restricted shares" issuable for no
additional consideration if and when a like number of option shares are
exercised and held for the requisite period.
(8) The "Number of Securities Underlying Options" as originally reported in
CustomTracks' 1998 Proxy Statement for Messrs. Wolpert and York included
10,000 and 25,000 shares, respectively, which were "restricted shares"
issuable for no additional consideration when a like number of option
shares were exercised and held for the requisite period. In 1998, when the
corresponding options were exercised, these "restricted shares" were
issued. They are now reflected in the table under "Restricted Stock Award"
for 1998, and the number of shares reflected in the table under "Number of
Securities Underlying Options" for 1997 has been correspondingly reduced
by the number of "restricted shares" issued. The "restricted shares" can
be forfeited to CustomTracks if, during the three years following their
issuance, (i) the recipient fails to hold the shares received upon
exercise of the related stock option for the requisite period or (ii) the
recipient's employment is terminated for cause or the recipient separates
from employment with CustomTracks under certain other circumstances. The
"restricted share" awards provide for, with the consent of the Board of
Directors, lapsing of restrictions if the recipient's employment is
terminated other than for cause or if the recipient separates from
employment with CustomTracks under certain other circumstances.
(9) Represents CustomTracks' contributions to CustomTracks' 401(k) Retirement
Plan or CustomTracks' Employee Stock Purchase Plan.
Employment and Severance Contracts with Certain Executive Officers
CustomTracks and Mr. Cook are parties to an employment agreement, dated
April 29, 1998, which expires April 28, 2001. In consideration of the
employment agreement, CustomTracks issued to Mr. Cook options to acquire
4,254,627 shares of CustomTracks' common stock at an exercise price of $7.00
per share (twice the closing price of CustomTracks' common stock on the day
preceding the date of agreement). The options have a five-year term and vest
quarterly over two years. The options will vest immediately in the event of
(i) a change of control of CustomTracks, (ii) a change of control of any
material CustomTracks subsidiary that is engaged in the Internet transaction
payment business or other business involving a concept primarily fostered by
Mr. Cook or (iii) Mr. Cook's employment is terminated other than for cause.
Mr. Cook will receive no salary under the employment arrangement.
CustomTracks and Mr. Woessner are parties to a severance agreement, which,
per the severance agreement formula (which is based on years of service), as
of March 31, 1999, provides for the payment to him of 17 months of his base
salary in the event he has good reason (as defined) to resign his employment
or if his employment is terminated other than for cause. The severance
agreement also provides for the payment to Mr. Woessner of two times his
annual base salary in the event his employment terminates after a change in
control (as defined) of CustomTracks. The severance agreement also contains
confidentiality and non- competition provisions.
CustomTracks and Mr. York are parties to a severance agreement, which, per
the severance agreement formula (which is based on years of service), as of
March 31, 1999, provides for the payment to him of 18 months of his base
salary in the event he has good reason (as defined) to resign his employment
or if his
4
<PAGE>
employment is terminated other than for cause. The severance agreement also
provides for the payment to Mr. York of three times his annual base salary in
the event his employment terminates after a change in control (as defined) of
CustomTracks. The severance agreement also contains confidentiality and non-
competition provisions.
Option Grants Table
The following table sets forth information relating to stock option grants
made by CustomTracks to the named executive officers during the year ended
December 31, 1998.
OPTION GRANTS IN 1998
<TABLE>
<CAPTION>
Potential Realizable
Value at Assumed
Annual Rates of
Stock Price
Appreciation for
Individual Grants Option Term
--------------------------------------------- -----------------------
Number of % of Total
Securities Options
Underlying Granted to Exercise
Options Employees Price Per Expiration
Name Granted in 1998 Share Date 5% 10%
---- ---------- ---------- --------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
David P. Cook(1)........ 4,254,627 96.02% $7.00 04/29/2003 $ -- (1) $ -- (1)
Stuart M. Evans(2)...... -- -- -- -- -- --
G. Russell Mortenson(2). -- -- -- -- -- --
Ronald A. Woessner...... 38,625(3) 0.87 3.56 04/28/2008 86,443 219,313
Michael H. Wolpert(2)... -- -- -- -- -- --
Steve M. York........... -- -- -- -- -- --
</TABLE>
- --------
(1) See "Employment and Severance Contracts with Certain Executive Officers"
for a description of the employment arrangement with Mr. Cook. The
"Potential Realizable Value at Assumed Annual Rates of Stock Price
Appreciation for Option Term"is zero since the exercise price per share of
$7.00 is greater than the fair market value of CustomTracks' common stock
at the time of grant of $3.50 plus the assumed stock price appreciation.
(2) Separated from employment with CustomTracks during 1998.
(3) The options vest ratably and become exercisable over three years. In the
event of a change in control (as defined) of CustomTracks or a material
CustomTracks' subsidiary under specified circumstances, the options become
immediately exercisable.
5
<PAGE>
Aggregated Option Exercises and Year-End Option Value Table
The following table sets forth information relating to the exercises of
stock options by CustomTracks' executive officers named below during the year
ended December 31, 1998, and the value of unexercised stock options as of
December 31, 1998.
AGGREGATED OPTION EXERCISES IN 1998 AND
DECEMBER 31, 1998 OPTION VALUES
<TABLE>
<CAPTION>
Number of Securities
Underlying Unexercised Value of Unexercised
Option Exercises Options at In-the-Money Options at
During 1998 December 31, 1998 December 31, 1998
-------------------- ------------------------- -------------------------
Number of
Shares
Acquired Value
Name on Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David P. Cook(1)........ -- $ -- 1,093,656 3,190,971 $4,079,107 $11,766,705
Stuart M. Evans(2)...... 15,000 -- 34,000 -- 97,375 --
G. Russell Mortenson(2). 73,946 277,297 -- -- -- --
Ronald A. Woessner...... -- -- 34,337 65,663 114,682 394,970
Michael H. Wolpert(2)... 60,000 254,840 -- -- -- --
Steve M. York........... 25,000 -- 61,035 28,765 182,487 91,097
</TABLE>
- --------
(1) See "Employment and Severance Contracts with Certain Executive Officers"
for a description of the employment arrangement with Mr. Cook.
(2) Separated from employment with CustomTracks during 1998.
Compensation of Directors
For serving on CustomTracks' Board of Directors and related committees, a
"Qualifying External Director" currently receives an annual fee of $15,000.
Also, under the terms of CustomTracks' 1996 Directors' Stock Option Plan (the
"1996 Plan"), each Qualifying External Director also receives an automatic
one-time grant of options to acquire 25,000 shares of CustomTracks' common
stock at the time of initial election or appointment to the Board. A
Qualifying External Director is a non-employee director who does not, directly
or indirectly, beneficially own, or is not an employee, affiliate, or designee
to the Board of Directors of a person (other than a person that is a
strategic/business partner of CustomTracks) that directly or indirectly
beneficially owns, more than five percent of CustomTracks' common stock. In
addition, except as discussed below, under the 1996 Plan, a Qualifying
External Director receives an automatic one-time grant of 2,500 options
annually while continuing to serve on the Board of Directors.
Under share ownership guidelines adopted by the Board of Directors,
CustomTracks' non-employee directors are encouraged to own at least 10,000
shares of CustomTracks' common stock. Non-employee directors who do not
achieve these share ownership amounts by the specified dates are not eligible
to receive the annually recurring 2,500 share option grants discussed above.
The Board of Directors has adopted the CustomTracks Corporation 1999
Directors' Stock Option Plan (the "1999 Plan"), which is subject to the
approval of the stockholders of CustomTracks at the 1999 Annual Meeting of
Stockholders. If approved by the stockholders, the 1999 Plan will replace the
1996 Plan and the annual $15,000 retainer fee for participating directors.
6
<PAGE>
Compensation Committee Interlocks and Insider Participation
The entire Board of Directors established CustomTracks' compensation
policies in 1998. Mr. Cook, CustomTracks' President and Chief Executive
Officer, participated in deliberations of CustomTracks' Board of Directors
concerning executive compensation during the year ended December 31, 1998. Mr.
Martin, a director of CustomTracks, is Chairman of Public Strategies, Inc., a
firm engaged by CustomTracks to assist in the marketing of its Internet
transaction payment system. Mr. Keane, a director of CustomTracks, is Senior
Vice President and Chief Financial Officer of UNOVA, Inc., the purchaser of
CustomTracks' Transportation Systems Group. Mr. Sanchez, a director of
CustomTracks, is a director of the International Bank of Commerce, Laredo,
Texas, with which CustomTracks had a banking relationship. See "ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS."
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information concerning beneficial
ownership of CustomTracks' common stock as of March 31, 1999, by (i) each
person who is known by CustomTracks to own beneficially more than five percent
of the outstanding shares of common stock, (ii) each director and executive
officer of CustomTracks and (iii) all directors and executive officers as a
group.
<TABLE>
<CAPTION>
Amount and Nature
of Beneficial Ownership(1)
--------------------------------------
Percentage of Total
Number of Shares Shares Outstanding(2)
---------------- ---------------------
<S> <C> <C>
David P. Cook(3)........................ 2,246,312 12.94%
Michael E. Keane(4)..................... 27,500 *
James S. Marston(4)..................... 37,500 *
Jack L. Martin(4)....................... 25,000 *
Antonio R. Sanchez, Jr.(5).............. 1,624,212 10.66%
Dr. Ben G. Streetman(4)................. 27,500 *
Mark A. Tebbe........................... 7,500 *
Ronald A. Woessner(6)................... 90,281 *
Steve M. York(7)........................ 150,467 *
Dimensional Fund Advisors, Inc.
1299 Ocean Avenue
11th Floor
Santa Monica, California 90401......... 958,424 6.30%
Mitsubishi Corporation
6-3, Marunouchi, 2-Chome
Chiyoda-Ku, Tokyo
Japan.................................. 822,823 5.41%
White Rock Capital, Inc.
3131 Turtle Creek Boulevard
Suite 800
Dallas, Texas 75219.................... 938,500 6.17%
All directors and executive officers as
a group(8)............................. 4,236,272 24.06%
</TABLE>
- --------
*Denotes ownership of less than 1%.
(1) Except as otherwise noted, each person has sole voting and investment
power over the common stock shown as beneficially owned, subject to
community property laws where applicable.
(2) Shares of common stock that were not outstanding but could be acquired
upon exercise of an option within 60 days of March 31, 1999, are deemed
outstanding for the purpose of computing the percentage of outstanding
shares beneficially owned by a particular person. However, such shares are
not deemed to be outstanding for the purpose of computing the percentage
of outstanding shares beneficially owned by any other person.
7
<PAGE>
(3) Includes 2,157,312 shares that Mr. Cook has the right to acquire under
outstanding stock options that are currently exercisable or that become
exercisable within 60 days of March 31, 1999.
(4) This individual has the right to acquire these shares under outstanding
stock options that are currently exercisable or that become exercisable
within 60 days of March 31, 1999.
(5) Includes 131,251 shares that are owned by family members of Mr. Sanchez or
by trusts for which Mr. Sanchez serves as trustee or is a beneficiary. Of
such 131,251 shares, (i) 9,375 shares are held by family members of Mr.
Sanchez; (ii) 82,500 shares, over which Mr. Sanchez exercises voting,
investment and disposition power, are held in trusts for which Mr. Sanchez
acts as trustee for the benefit of other persons and (iii) 39,376 shares,
over which Mr. Sanchez does not have voting, investment or disposition
powers, are held in a trust for the benefit of Mr. Sanchez and certain of
his family members. Also, includes 35,000 shares that Mr. Sanchez has the
right to acquire under outstanding stock options that are currently
exercisable or that become exercisable within 60 days of March 31, 1999.
(6) Includes 2,500 shares that are held in a trust for which Mr. Woessner acts
as trustee for the benefit of another person and 47,211 shares that Mr.
Woessner has the right to acquire under outstanding stock options that are
currently exercisable or that become exercisable within 60 days of March
31, 1999.
(7) Includes 46,035 shares that Mr. York has the right to acquire under
outstanding stock options that are currently exercisable or that become
exercisable within 60 days of March 31, 1999 and 51,700 shares that are
subject to forfeiture to CustomTracks under certain circumstances.
(8) Includes all shares as to which the directors and executive officers
disclaim beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In May 1998, CustomTracks acquired Petabyte Corporation ("Petabyte"), a
digital data distribution start-up enterprise founded by Mr. Cook. In
consideration of the sale of Petabyte, CustomTracks paid Mr. Cook $200,000 and
agreed to pay Mr. Cook four annual payments of $200,000 each. Effective March
1999, CustomTracks returned title to a Petabyte patent covering certain
digital data distribution concepts to Mr. Cook, while retaining a use license
to the patent for a nominal payment. In connection with the return of the
patent, CustomTracks' future payments to Mr. Cook, totaling $800,000, have
been eliminated.
In February 1999, CustomTracks entered into an agreement with Lante
Corporation ("Lante"), a privately-held Internet commerce solutions and
consulting firm, to assist CustomTracks in the development of CustomTracks'
Internet transaction payment system. Mr. Tebbe, who was subsequently elected a
director of CustomTracks, is President and Chief Executive Officer of Lante
and its majority shareholder. In exchange for the services to be provided by
Lante, CustomTracks will pay cash for work performed at discounted rates and
has issued options to purchase 500,000 shares of CustomTracks' common stock to
Lante at an exercise price of $7.62 per share, the closing price of
CustomTracks' common stock on the date of the agreement. The options vest over
three years and expire at the end of ten years.
In April 1999, CustomTracks entered into an agreement with Public
Strategies, Inc. ("PSI"), an international strategic communications firm, to
assist in the marketing of CustomTracks' Internet transaction payment system.
Mr. Martin, a director of CustomTracks, is Chairman of PSI. In exchange for
the services to be performed by PSI, CustomTracks will pay PSI a monthly
retainer of $75,000.
Mr. Sanchez, a director of CustomTracks, is a director of the International
Bank of Commerce, Laredo, Texas ("IBC"), and a director and stockholder of
IBC's publicly-traded holding company, International Bancshares Corporation.
CustomTracks formerly had a banking relationship with IBC and maintained a
checking account and short-term investments with IBC, which terminated in June
1998. The average month-end balance during 1998 of such checking account and
short-term investments was approximately $1,074,000.
Mr. York is indebted to CustomTracks in the principal amount of $251,425,
which amount represents money loaned by CustomTracks to fund the exercise of
retention incentive options. Mr. York's indebtedness is represented by
promissory notes that bear interest at the rate of 6.61%, 5.61% and 4.66% per
annum. All notes
8
<PAGE>
are secured by the shares issued upon exercise of the retention incentive
options. The notes of Mr. York are due in May 2000, December 2001 and
September 2002 (unless becoming due earlier under certain circumstances
described in the notes).
On June 11, 1998, CustomTracks sold its Transportation Systems Group to
UNOVA, Inc. ("UNOVA"), effective as of May 31, 1998, resulting in a pre-tax
gain of $1,139,000. Mr. Keane, a director of CustomTracks, is Senior Vice
President and Chief Financial Officer of UNOVA. As consideration for the sale,
CustomTracks received $22,350,000 in cash and 2,211,900 unregistered shares of
CustomTracks' common stock that were previously purchased by UNOVA in late
1997. The shares were valued at $10,921,000.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
<TABLE>
<CAPTION>
Exhibit No. Description
- ----------- -----------
<S> <C>
10.1* --Registration Rights Agreement, effective as of February 2, 1999, by and between CustomTracks
Corporation and Lante Corporation.
10.2* --Stock Option Agreement, effective as of February 2, 1999, by and between CustomTracks
Corporation and Lante Corporation.
</TABLE>
- --------
* Filed herewith.
9
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Dallas, State of Texas, on April 28, 1999.
CUSTOMTRACKS CORPORATION
/s/ Steve M. York
By: _________________________________
Steve M. York
Senior Vice President, Chief
Financial Officer,
and Treasurer
10
<PAGE>
EXHIBIT 10.1
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), effective as of
February 2, 1999, is made by and between CustomTracks Corporation, a Texas
corporation (the "Company"), and Lante Corporation, an Illinois corporation (the
"Holder"). Terms used herein with their initial letter capitalized but not
defined herein will have the meaning given such terms in the Option (as defined
below), unless the context otherwise requires.
WITNESSETH:
WHEREAS, the Company and the Holder have entered into a Stock Option
Agreement as of the date hereof whereby the Holder has been granted an option
(the "Option") to acquire up to 500,000 shares of the Company's common stock,
$.01 par value per share (the "Common Stock");
WHEREAS, the Company desires to grant the Holder certain registration
rights with respect to such shares of Common Stock issuable under the Option in
accordance with the terms and conditions set forth herein;
NOW, THEREFORE, the Company and the Holder agree as follows:
1. Shares. As used herein, the term "Shares" shall mean the shares
------
of Common Stock issuable upon the exercise of the Option.
2. Registration. Upon its receipt of a written notice from the
------------
Holder at any time following the thirtieth day preceding each of the Vesting
Dates, the Company shall prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement on Form S-3 (or such successor
or other form as the SEC may stipulate or require) under the Securities Act of
1933, as amended (the "Securities Act") covering the Shares that vest on the
upcoming Vesting Date in question or shall have vested any time previously
(other than Shares that have vested as a result of an Acceleration Notice and
which would not otherwise have been scheduled to vest on the upcoming Vesting
Date or previously). The Company shall use its commercially reasonable efforts
to cause such registration statement to become effective as promptly as
practicable after receipt of the written notice. The Company shall also file
such post-effective amendments to such registration statement in order for it to
remain effective without lapse until the earlier of (i) 90 days following the
date the registration statement is declared effective or (ii) all the Shares so
registered have been sold, subject to the two immediately following sentences.
Upon request of the Holder and subject to the consent of the Company (which
consent is not to be unreasonably withheld), the effectiveness of the
registration statement will be extended for up to an additional 30 days. If,
during the effectiveness of the registration statement, the Holder determines
that it no longer desires to sell any (or further) Shares at that time, the
Holder will so advise the Company so that the Company can withdraw the
registration statement. The Holder
1
<PAGE>
shall be entitled to make three registration requests under this Section 2. The
---------
Holder shall pay the expenses described in Section 4 for each registration
---------
pursuant to this Section 2.
---------
3. Registration Procedures. If, and whenever, the Company is required by
-----------------------
Section 2 to effect the registration of Shares under the Securities Act, the
- ---------
Company will as expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective for the period set forth in Section 2
---------
(the "Effective Period");
(b) prepare and file with the SEC such amendments to such registration
statement and supplements to the prospectus contained therein as may be
necessary to keep such registration statement effective for the Effective Period
as may be reasonably necessary to effect the sale of such securities;
(c) furnish to the Holder and to the underwriters of the securities
being registered, such reasonable number of copies of the registration
statement, preliminary prospectus, final prospectus and such other documents as
the Holder and such underwriters may reasonably request in order to facilitate
the public offering of such securities;
(d) use commercially reasonable efforts to register or qualify the
Shares covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holder may reasonably request in
writing within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified or subject itself to taxation in a jurisdiction where it had not
previously been subject to taxation, or take any other action that would subject
the Company to service of process in a lawsuit other than one arising out of the
registration of the Shares;
(e) notify the Holder, promptly after it shall receive notice thereof,
of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Holder promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of the
Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Holder (and concurred in by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of Shares by the
Holder;
(h) prepare and promptly file with the SEC and promptly notify the
Holder of the filing of such amendment or supplement to such registration
statement or prospectus as may
2
<PAGE>
be necessary to correct any statements or omissions if, at any time when a
prospectus relating to such securities is required to be delivered under the
Securities Act, any event shall have occurred as the result of which any such
prospectus or any other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material fact necessary to
make the statements therein, in the light of the circumstances in which they
were made, not misleading; and
(i) advise the Holder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
4. Expenses. Subject to the limitation stated in the next sentence, all
--------
fees, costs, and expenses of and incidental to such registration and public
offering of the Shares in connection therewith shall be borne by the Holder,
including any commissions and transfer taxes in respect of the sale of its
Shares. The Holder's liability for the fees and expenses of the Company's
professional advisors in connection with the registration of each S-3 and the
public offering of the Shares in connection therewith shall be limited to
$12,500 (in 1999 dollars) per S-3.
5. Indemnification.
---------------
(a) The Company will indemnify and hold harmless the Holder, its
directors, officers, employees, and agents, any underwriter (as defined in the
Securities Act) for the Holder and any person controlling the Holder or such
underwriter from and against, and will reimburse such persons with respect to,
any and all loss, damage, liability, cost and expense to which such persons may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by or on behalf of the Holder in writing specifically for use in the preparation
thereof. The Company will not be subject to any liability for any settlement
made without its consent, which consent shall not be unreasonably withheld.
(b) The Holder will indemnify and hold harmless the Company, its
directors, officers, employees, and agents, any underwriter for the Company and
any person controlling the Company or such underwriter from and against, and
will reimburse such persons with respect to, any and all loss, damage,
liability, cost and expense to which such persons may become subject under the
Securities Act or otherwise, insofar as such losses, damages, liabilities, costs
or expenses are caused by any untrue statement or alleged untrue statement of
any material fact contained in such registration statement, any prospectus
contained therein or any amendment or
3
<PAGE>
supplement thereto, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in conformity with written
information furnished by or on behalf of the Holder specifically for use in the
preparation thereof. The Holder will not be subject to any liability for any
settlement made without its consent, which consent shall not be unreasonably
withheld.
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of Subsection (a) or (b) of this Section 5 of notice of the
---------
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
Subsection (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party,
except to the extent that such omission materially and adversely affects the
indemnifying party's ability to defend against or compromise such claim. In
case such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any action include both the
- -------- -------
indemnified party and the indemnifying party and there is a conflict of interest
that would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to an indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said Subsection (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than out-of-pocket costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
6. Miscellaneous.
-------------
(a) Any notice to be given to the Company under the terms of this
Agreement shall be in writing, addressed to the Company at its principal
executive offices, Attn: Chief Financial Officer; and any notice to be given to
the Optionee shall be addressed to the Optionee at its address set forth in the
Engagement Letter. A party may specify a different address for receiving notice
by giving written notice thereof to the other parties. Any such notice shall be
deemed to have been duly given upon receipt.
4
<PAGE>
(b) The Optionee may not Transfer this Agreement or its rights and
privileges hereunder, except in connection with a Transfer of the Option.
Subject to the preceding sentence, this Agreement shall be binding upon and
inure to the benefit of the assignees, representatives, executors, successors or
beneficiaries of the parties hereto.
(c) The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of Texas and the United States, as
applicable, without reference to the conflict of laws provisions thereof.
(d) If any provision of this Agreement is declared or found to be
illegal, unenforceable or void, in whole or in part, then the parties shall be
relieved of all obligations arising under such provision, but only to the extent
that it is illegal, unenforceable or void, it being the intent and agreement of
the parties that this Agreement shall be deemed amended by modifying such
provision to the extent necessary to make it legal and enforceable while
preserving its intent or, if that is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same
objectives.
(e) All section titles and captions in this Agreement are for
convenience only, shall not be deemed part of this Agreement, and in no way
shall define, limit, extend or describe the scope or intent of any provisions of
this Agreement.
(f) The parties shall execute all documents, provide all information,
and take or refrain from taking all actions as may be necessary or appropriate
to achieve the purposes of this Agreement.
(g) This Agreement constitutes the entire agreement among the parties
hereto pertaining to the subject matter hereof and supersedes all prior written
and prior or contemporaneous oral agreements and understandings pertaining
hereto.
(h) No failure by any party to insist upon the strict performance of
any covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any such breach or any other covenant, duty, agreement or condition.
(i) This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart.
5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below, to be effective as of the date first above written.
CUSTOMTRACKS CORPORATION
By: /s/ Ronald A. Woessner
------------------------------
Ronald A. Woessner
Its: Vice President
----------------------------
Date: April 15, 1999
----------------------------
LANTE CORPORATION
By: /s/ Pete Georgiadis
----------------------------
Its: COO
----------------------------
Date: 4/16/99
----------------------------
6
<PAGE>
EXHIBIT 10.2
THIS AGREEMENT CONTAINS AN ARBITRATION PROVISION
CUSTOMTRACKS CORPORATION
STOCK OPTION AGREEMENT
THIS AGREEMENT (the "Agreement"), effective as of February 2, 1999, is made
and entered into by and between CustomTracks Corporation, a Texas corporation
(the "Company"), and Lante Corporation, an Illinois corporation (the
"Optionee").
WITNESSETH:
WHEREAS, the Company and the Optionee have entered into an engagement
letter, dated as of February 2, 1999 (the "Engagement Letter"), whereby, inter
-----
alia, the Company engaged the Optionee to provide the consulting services stated
- ----
therein and agreed to issue this Option (the "Option"); and
------
WHEREAS, the parties hereto desire to evidence in writing the terms and
conditions of the Option and to enter into a Registration Rights Agreement
(herein so called), a form of which is attached hereto as Exhibit A.
---------
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and agreements contained herein and in the Engagement Letter, and as
an inducement to the Optionee to promote the success of the business of the
Company, the parties hereby agree as follows:
1. Grant of Option; Expiration of Option. Effective as of the date first set
-------------------------------------
forth above (the "Award Date"), the Company hereby grants to the Optionee, upon
the terms set forth in this Agreement, a nonqualified option (the "Option"), to
acquire 500,000 shares of the Company Common Stock, $.01 par value per share
(the "Company Common Stock"). The exercise price of the Option is $7.625 per
share, which was the closing price of the Company Common Stock on the Award
Date. The Option may be exercised from time-to-time with respect to any vested
shares of Company Common Stock as to which the Option has not been exercised
until the tenth anniversary of the Award Date. On the tenth anniversary of the
Award Date, the Option will expire with respect to all vested shares as to which
the Option has not been exercised.
2. Vesting. The Option shall vest according to the following schedule: 50% on
-------
February 2, 2000; 25% on February 2, 2001; and 25% on February 2, 2002 (each
date is hereinafter a "Vesting Date" and the three dates collectively are the
"Vesting Dates"); provided, however, that the vesting of the Option may be
-----------------
accelerated in the sole discretion of the Company by giving written notice (the
"Acceleration Notice") of the same to the Optionee. Except as noted in the
provisos to this sentence, vesting under the Option is not subject to any
conditions (including
1
<PAGE>
Optionee's continued engagement to provide consulting services), other than the
passage of time; provided, however, that (a) if Optionee resigns or abandons the
-----------------
engagement under the Engagement Letter or (b) if the Company terminates the
engagement because the Optionee fails (including willful failures) to
substantially perform its obligations under the Engagement Letter (and, in the
case of a failure capable of being cured, such failure is not cured within 60
days of Optionee's receipt of written notice thereof, signed by the chief
executive officer of the Company, which specifies the failure in reasonable
detail), this Option shall cease to vest as of the day of resignation,
abandonment, or termination, as applicable, and the Optionee shall have 365 days
from the day in question to exercise the vested portion of the Option; and
provided, further, that the Company shall be entitled to assert as a defense
- -----------------
against the vesting and enforcement of the Option such defenses that may be
available under applicable law. If the Optionee and the Company dispute whether
or not vesting has ceased because of the alleged occurrence of one of more of
the events specified in (a) or (b) above, then the matter shall be settled via
binding arbitration as specified in Section 12.
3. Exercise. To exercise the Option with respect to the Company Common Stock,
--------
the Optionee shall provide written notice (the "Company Exercise Notice") to the
Company at its principal executive office to the attention of the Company's
chief financial officer. The notice must: (i) state the number of shares of
Company Common Stock being purchased; (ii) be signed by the Optionee; and (iii)
be accompanied by payment of the aggregate exercise price for all shares of
Company Common Stock being purchased (unless the Optionee has provided for
payment through a broker-dealer or other means as permitted under this
Agreement). The Option may be exercised with respect to vested shares of
Company Common Stock from time-to-time, i.e., there is no obligation to exercise
----
all vested shares at one time.
4. Payment of Exercise Price. At the time of exercise, the Optionee shall pay
-------------------------
to the Company the exercise price per share of Company Common Stock times the
number of vested shares of Company Common Stock as to which the Option is being
exercised. The Optionee shall make such payment by delivering cash, certified
check, or wire transfer, or other payment mechanism mutually agreeable to the
Company and the Optionee. If the Option is exercised in full, the Optionee
shall surrender this Agreement to the Company for cancellation. If the Option
is exercised in part, the Optionee shall surrender this Agreement to the Company
so that the Company may make appropriate notation hereon or cancel this
Agreement and issue a new agreement representing the unexercised portion of the
Option.
Subject to Section 8, the Company shall promptly issue and deliver a
certificate representing the number of shares of Company Common Stock as to
which the Option has been exercised after the Company receives a notice of
exercise and upon receipt by the Company of the aggregate exercise price. If
the shares of Company Common Stock to be issued upon the exercise of the Option
are covered by an effective registration statement under the Securities Act of
1933, as amended, the Option may be exercised by a broker-dealer acting on
behalf of the Optionee if (i) the broker-dealer has received from the Optionee
or the Company a fully- and duly-endorsed agreement evidencing the Option, (ii)
the Optionee has delivered its signed instructions to the broker-dealer and the
Company directing the Company to deliver the shares of Company Common Stock to
be issued upon exercise of the Option to the broker-dealer on behalf
2
<PAGE>
of the Optionee and specifying the account into which such shares should be
deposited, (iii) the broker-dealer delivers, or has agreed to deliver, to the
Company the aggregate exercise price in accordance with the first paragraph of
this Section 4, and (iv) the broker-dealer and the Optionee have otherwise
complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part 220, or any
successor provision. The Company agrees to deliver the underlying stock
certificates, free and clear of any restrictive legends, registered as
designated by the Optionee or the broker-dealer, in time to permit normal-way
settlement of a simultaneous exercise of the Option and sale of the underlying
Company Common Stock.
5. Accredited Investor Status. The Optionee represents and warrants that it
--------------------------
is an "accredited investor" as such term is defined in Regulation D under the
Securities Act of 1933, as amended.
6. Preservation of Rights. The number of shares of Company Common Stock
----------------------
subject to the Option and the exercise price therefor set forth in Section 1
shall be subject to appropriate adjustment, reasonably satisfactory to the
Optionee and the Company, to preserve the relative rights of Optionee and the
Company under this Agreement in the event of any change or exchange of Company
Common Stock for a different number or kind of securities, any of which results
from one or more stock splits, reverse stock splits, or stock dividends. If a
Change of Control (as defined below) with respect to the Company occurs, and, as
a part of such Change of Control, shares of stock, other securities, cash or
property shall be issuable or deliverable in exchange for Company Common Stock,
then the Optionee shall be entitled to purchase or receive (in lieu of the
shares of Company Common Stock that the Optionee would otherwise be entitled to
purchase or receive hereunder), the number of shares of stock, other securities,
cash or property to which that number of shares of Company Common Stock would
have been entitled in connection with such Change of Control (and, at an
aggregate exercise price equal to the aggregate exercise price hereunder that
would have been payable if that number of shares of Company Common Stock had
been purchased on the exercise of the Option immediately before the consummation
of the Change of Control).
7. Who May Exercise. Without the Company's consent, except as provided in the
----------------
immediately following sentence, the Option shall be exercisable only by the
Optionee and the Optionee shall not, directly or indirectly, sell, transfer,
pledge, encumber or hypothecate ("Transfer") the Option or the rights and
privileges pertaining thereto. It is understood and agreed by the parties that
(i) a merger, consolidation, or share exchange involving the Optionee, or (ii)
any sale of substantially all of the Optionee's assets, or (iii) any liquidation
or dissolution of the Optionee in connection with an event stated in clause (i)
or (ii) is not a "Transfer" of the Option or the rights and privileges
pertaining thereto if the successor, surviving, acquiring, or recipient entity,
as applicable, receives the entire Option and agrees in writing to perform, or
by operation of law is obligated to perform, the obligations under the
Engagement Letter. The Option is not liable for or subject to, in whole or in
part, the debts, contracts, liabilities or torts of the Optionee, nor shall it
be subject to garnishment, attachment, execution, levy or other legal or
equitable process.
8. Certain Legal Restrictions. Except as provided in the Registration Rights
--------------------------
Agreement, the Company shall not have any obligation to the Optionee, express or
implied, to list, register or
3
<PAGE>
otherwise qualify any of the Optionee's shares of Company Common Stock. If the
shares of stock issuable upon the exercise of the Option have not been
registered under the Securities Act of 1933, as amended, and applicable state
securities laws, the Company shall not be liable for refusing to issue any
shares if the Company cannot obtain authority from the appropriate regulatory
bodies deemed by the Company to be necessary to lawfully issue such shares. The
Company shall not be obligated to sell or issue any shares of Company Common
Stock upon the exercise of the Option unless, in the opinion of counsel for the
Company, the issuance and delivery of such shares shall comply with all relevant
provisions of law and other legal requirements including, without limitation,
any applicable federal or state securities laws and the requirements of any
stock exchange or inter-dealer quotation system on which shares of the Company
Common Stock may then be listed or quoted. If the Optionee desires to exercise
the Option with respect to shares that have not been registered under the
Securities Act of 1933, as amended, and applicable state securities laws, the
Optionee shall notify the Company of its desire to do so, thus affording the
Company the opportunity to analyze the securities laws implications of such
exercise. As a condition to the exercise of the Option or the issuance by the
Company of any shares of Company Common Stock to the Optionee, the Company may
require the Optionee to make such representations and warranties, covenants and
agreements as may be necessary to assure compliance with applicable federal and
state securities laws. The shares of Company Common Stock issued upon the
exercise of the Option may not be transferred except in accordance with
applicable federal or state securities laws. At the Company's election, if the
shares of stock issuable upon the exercise of the Option have not been
registered under the Securities Act of 1933, as amended, and applicable state
securities laws, the certificate evidencing shares of Company Common Stock
issued to the Optionee may be legended as follows:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR UNDER THE
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION AND MAY NOT
BE OFFERED FOR SALE, SOLD, ASSIGNED, TRANSFERRED, PLEDGED OR OTHERWISE
DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REQUIREMENTS OF SUCH ACT AND THE
APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION.
9. Termination. The Option shall automatically terminate if the Optionee (i)
-----------
becomes insolvent; (ii) fails to pay its debts generally as they become due;
(iii) voluntarily seeks, consents to, or acquiesces in the benefit or benefits
of the Bankruptcy Code of the United States of America or any other applicable
liquidation, conservatorship, bankruptcy, moratorium, rearrangement,
receivership, insolvency, reorganization, suspension of payments, or similar
debtor relief law from time-to-time in effect affecting the rights of creditors
generally ("Debtor Relief Law"); or (iv) becomes a party to (or is made the
subject of) any proceeding provided for by any Debtor Relief Law, other than as
a creditor or claimant (unless, in the event such proceeding is involuntary, the
petition instituting same is dismissed within 60 days of the filing of same).
4
<PAGE>
10. Definitions.
-----------
The following terms as used in this Agreement shall have the stated
meanings:
Affiliate and Associate. "Affiliate" and "Associate" shall have the
-----------------------
respective meanings ascribed to such terms in Rule 12b-2 of the General Rules
and Regulations under the Securities Exchange Act of 1934, as in effect on the
date of this Agreement
"Change of Control" shall mean a merger, consolidation, sale of shares, or
-----------------
similar transaction involving the Company, on the one hand, and one or more
persons (that are not Affiliates or Associates of the Company), on the other
hand, pursuant to which the shareholders of the Company 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(s) or such person(s)'
parent corporation; provided that, a Change of Control shall not be deemed to
--------------
occur upon any public offering or series of such offerings of securities of the
Company that results in any such change in beneficial ownership.
11. Registration Rights. The Optionee shall have the registration rights set
-------------------
forth in the Registration Rights Agreement attached as Exhibit A hereto.
---------
12. Arbitration. The parties agree to the resolution by binding arbitration
-----------
of all claims, demands, causes of action, disputes, controversies, or other
matters in question ("claims") arising under this Agreement or the Registration
Rights Agreement, whether sounding in contract, tort, or otherwise and whether
provided by statute or common law. The claims shall be submitted to arbitration
and finally settled under the applicable rules of the American Arbitration
Association ("AAA") in effect at the time the written notice of the claim is
received. An arbitrator shall be selected in the manner provided for in such
rules of the AAA, except that the parties agree that the arbitrator shall be an
attorney licensed in the state where the arbitration is being conducted. If any
party refuses to honor its obligations under this agreement to arbitrate the
other party may compel arbitration in either federal or state court. The
arbitrator will have exclusive authority to resolve any dispute relating to the
interpretation, applicability, enforceability, or formation of this agreement to
arbitrate, including, but not limited to, any claim that all or part of this
Agreement or the Registration Rights Agreement is void or voidable and any claim
that an issue is not subject to arbitration. The arbitrator shall have the
authority to award injunctive and other equitable relief. The arbitration will
be held in Dallas County, Texas. The arbitrator shall issue a written decision
that identifies the factual findings and principles of law upon which any award
is based. The award and findings of such arbitrator shall be conclusive and
binding upon the parties, and judgment upon such award may be entered in any
court of competent jurisdiction. Any and all of the arbitrator's orders,
decisions, and awards may be enforceable in, and judgment upon any award
rendered by the arbitrator may be confirmed and entered by, any federal or state
court having jurisdiction. Each party shall pay all costs and expenses of its
advisors. The costs and expenses of the arbitration proceedings will be paid by
the non-prevailing party or as the arbitrator otherwise determines. Discovery
will be permitted to the extent directed by the
5
<PAGE>
arbitrator. Each party understands that by agreeing to submit claims to
arbitration it gives up the right to seek a trial by court or jury and the right
to an appeal from any errors of the court and forgoes any and all related rights
it may otherwise have under federal and state laws.
13. Miscellaneous.
-------------
(a) The granting of the Option herein shall impose no obligation upon the
Optionee to exercise the Option or any part thereof. Nothing herein contained
shall affect the right of the Company or the Optionee to terminate the
engagement set forth in the Engagement Letter at any time, with or without
cause.
(b) Neither the Optionee nor any person claiming under or through the
Optionee shall be or shall have any of the rights or privileges of a shareholder
of the Company in respect of any of the shares issuable upon the exercise of the
Option herein unless and until certificates representing such shares shall have
been issued and delivered to the Optionee or such Optionee's agent.
(c) Any notice to be given to the Company under the terms of this
Agreement or any delivery of the Option herein to the Company shall be in
writing, addressed to the Company at its principal executive offices, Attn:
Chief Financial Officer; and any notice to be given to the Optionee shall be
addressed to the Optionee at its address set forth in the Engagement Letter. A
party may specify a different address for receiving notice by giving written
notice thereof to the other parties. Any such notice shall be deemed to have
been duly given upon receipt.
(d) Subject to Section 7, this Agreement shall be binding upon and inure
to the benefit of the assignees, representatives, executors, successors or
beneficiaries of the parties hereto.
(e) The interpretation, performance and enforcement of this Agreement
shall be governed by the laws of the State of Texas and the United States, as
applicable, without reference to the conflict of laws provisions thereof.
(f) If any provision of this Agreement is declared or found to be illegal,
unenforceable or void, in whole or in part, then the parties shall be relieved
of all obligations arising under such provision, but only to the extent that it
is illegal, unenforceable or void, it being the intent and agreement of the
parties that this Agreement shall be deemed amended by modifying such provision
to the extent necessary to make it legal and enforceable while preserving its
intent or, if that is not possible, by substituting therefor another provision
that is legal and enforceable and achieves the same objectives.
(g) All section titles and captions in this Agreement are for convenience
only, shall not be deemed part of this Agreement, and in no way shall define,
limit, extend or describe the scope or intent of any provisions of this
Agreement.
6
<PAGE>
(h) The parties shall execute all documents, provide all information, and
take or refrain from taking all actions as may be necessary or appropriate to
achieve the purposes of this Agreement.
(i) This Agreement, the Engagement Letter, and the Registration Rights
Agreement constitute the entire agreement among the parties hereto pertaining to
the subject matter hereof and thereof and supersede all prior written and prior
or contemporaneous oral agreements and understandings pertaining hereto and
thereto.
(j) No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any such breach or any other covenant, duty, agreement or condition.
(k) This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
dates set forth below, to be effective as of the date first above written.
COMPANY:
CUSTOMTRACKS CORPORATION
By: \s\ Ronald A. Woessner
--------------------------------
Ronald A. Woessner
Its: Vice President
--------------------------------
Date: April 15, 1999
------------------------------
OPTIONEE:
LANTE CORPORATION
By: \s\ Pete Georgiadis
--------------------------------
Its: COO
--------------------------------
Date: 4/16/99
------------------------------
7
<PAGE>
EXHIBIT A
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (this "Agreement"), effective as of
February 2, 1999, is made by and between CustomTracks Corporation, a Texas
corporation (the "Company"), and Lante Corporation, an Illinois corporation (the
"Holder"). Terms used herein with their initial letter capitalized but not
defined herein will have the meaning given such terms in the Option (as defined
below), unless the context otherwise requires.
WITNESSETH:
WHEREAS, the Company and the Holder have entered into a Stock Option
Agreement as of the date hereof whereby the Holder has been granted an option
(the "Option") to acquire up to 500,000 shares of the Company's common stock,
$.01 par value per share (the "Common Stock");
WHEREAS, the Company desires to grant the Holder certain registration
rights with respect to such shares of Common Stock issuable under the Option in
accordance with the terms and conditions set forth herein;
NOW, THEREFORE, the Company and the Holder agree as follows:
1. Shares. As used herein, the term "Shares" shall mean the shares
------
of Common Stock issuable upon the exercise of the Option.
2. Registration. Upon its receipt of a written notice from the
------------
Holder at any time following the thirtieth day preceding each of the Vesting
Dates, the Company shall prepare and file with the Securities and Exchange
Commission (the "SEC") a registration statement on Form S-3 (or such successor
or other form as the SEC may stipulate or require) under the Securities Act of
1933, as amended (the "Securities Act") covering the Shares that vest on the
upcoming Vesting Date in question or shall have vested any time previously
(other than Shares that have vested as a result of an Acceleration Notice and
which would not otherwise have been scheduled to vest on the upcoming Vesting
Date or previously). The Company shall use its commercially reasonable efforts
to cause such registration statement to become effective as promptly as
practicable after receipt of the written notice. The Company shall also file
such post-effective amendments to such registration statement in order for it to
remain effective without lapse until the earlier of (i) 90 days following the
date the registration statement is declared effective or (ii) all the Shares so
registered have been sold, subject to the two immediately following sentences.
Upon request of the Holder and subject to the consent of the Company (which
consent is not to be unreasonably withheld), the effectiveness of the
registration statement will be extended for up to an additional 30 days. If,
during the effectiveness of the registration statement, the Holder
A-1
<PAGE>
determines that it no longer desires to sell any (or further) Shares at that
time, the Holder will so advise the Company so that the Company can withdraw the
registration statement. The Holder shall be entitled to make three registration
requests under this Section 2. The Holder shall pay the expenses described in
---------
Section 4 for each registration pursuant to this Section 2.
- --------- ---------
3. Registration Procedures. If, and whenever, the Company is
-----------------------
required by Section 2 to effect the registration of Shares under the Securities
---------
Act , the Company will as expeditiously as possible:
(a) prepare and file with the SEC a registration statement with
respect to such securities, and use its best efforts to cause such registration
statement to become and remain effective for the period set forth in Section 2
---------
(the "Effective Period");
(b) prepare and file with the SEC such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for the Effective
Period as may be reasonably necessary to effect the sale of such securities;
(c) furnish to the Holder and to the underwriters of the
securities being registered, such reasonable number of copies of the
registration statement, preliminary prospectus, final prospectus and such other
documents as the Holder and such underwriters may reasonably request in order to
facilitate the public offering of such securities;
(d) use commercially reasonable efforts to register or qualify
the Shares covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as the Holder may reasonably request in
writing within twenty (20) days following the original filing of such
registration statement, except that the Company shall not for any purpose be
required to execute a general consent to service of process or to qualify to do
business as a foreign corporation in any jurisdiction wherein it is not so
qualified or subject itself to taxation in a jurisdiction where it had not
previously been subject to taxation, or take any other action that would subject
the Company to service of process in a lawsuit other than one arising out of the
registration of the Shares;
(e) notify the Holder, promptly after it shall receive notice
thereof, of the time when such registration statement has become effective or a
supplement to any prospectus forming a part of such registration statement has
been filed;
(f) notify the Holder promptly of any request by the SEC for the
amending or supplementing of such registration statement or prospectus or for
additional information;
(g) prepare and file with the SEC, promptly upon the request of
the Holder, any amendments or supplements to such registration statement or
prospectus which, in the opinion of counsel for the Holder (and concurred in by
counsel for the Company), is required under the Securities Act or the rules and
regulations thereunder in connection with the distribution of Shares by the
Holder;
A-2
<PAGE>
(h) prepare and promptly file with the SEC and promptly notify
the Holder of the filing of such amendment or supplement to such registration
statement or prospectus as may be necessary to correct any statements or
omissions if, at any time when a prospectus relating to such securities is
required to be delivered under the Securities Act, any event shall have occurred
as the result of which any such prospectus or any other prospectus as then in
effect would include an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of the
circumstances in which they were made, not misleading; and
(i) advise the Holder, promptly after it shall receive notice or
obtain knowledge thereof, of the issuance of any stop order by the SEC
suspending the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose and promptly use its best efforts
to prevent the issuance of any stop order or to obtain its withdrawal if such
stop order should be issued.
4. Expenses. Subject to the limitation stated in the next sentence,
--------
all fees, costs, and expenses of and incidental to such registration and public
offering of the Shares in connection therewith shall be borne by the Holder,
including any commissions and transfer taxes in respect of the sale of its
Shares. The Holder's liability for the fees and expenses of the Company's
professional advisors in connection with the registration of each S-3 and the
public offering of the Shares in connection therewith shall be limited to
$12,500 (in 1999 dollars) per S-3.
5. Indemnification.
---------------
(a) The Company will indemnify and hold harmless the Holder, its
directors, officers, employees, and agents, any underwriter (as defined in the
Securities Act) for the Holder and any person controlling the Holder or such
underwriter from and against, and will reimburse such persons with respect to,
any and all loss, damage, liability, cost and expense to which such persons may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading; provided, however, that the Company will not be liable in any
such case to the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission so made in conformity with information furnished
by or on behalf of the Holder in writing specifically for use in the preparation
thereof. The Company will not be subject to any liability for any settlement
made without its consent, which consent shall not be unreasonably withheld.
(b) The Holder will indemnify and hold harmless the Company, its
directors, officers, employees, and agents, any underwriter for the Company and
any person controlling the Company or such underwriter from and against, and
will reimburse such persons with respect to,
A-3
<PAGE>
any and all loss, damage, liability, cost and expense to which such persons may
become subject under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such registration
statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were made,
not misleading, in each case to the extent, but only to the extent, that such
untrue statement or alleged untrue statement or omission or alleged omission was
so made in reliance upon and in conformity with written information furnished by
or on behalf of the Holder specifically for use in the preparation thereof. The
Holder will not be subject to any liability for any settlement made without its
consent, which consent shall not be unreasonably withheld.
(c) Promptly after receipt by an indemnified party pursuant to
the provisions of Subsection (a) or (b) of this Section 5 of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions such indemnified party will, if a claim thereof is to be
made against the indemnifying party pursuant to the provisions of said
Subsection (a) or (b), promptly notify the indemnifying party of the
commencement thereof; but the omission to so notify the indemnifying party will
not relieve it from any liability that it may have to any indemnified party,
except to the extent that such omission materially and adversely affects the
indemnifying party's ability to defend against or compromise such claim. In case
such action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party shall
have the right to participate in, and, to the extent that it may wish, jointly
with any other indemnifying party similarly notified, to assume the defense
thereof, with counsel reasonably satisfactory to such indemnified party;
provided, however, that if the defendants in any action include both the
- -------- -------
indemnified party and the indemnifying party and there is a conflict of interest
that would prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the right to
select separate counsel to participate in the defense of such action on behalf
of such indemnified party or parties. After notice from the indemnifying party
to an indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of said Subsection (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof other than out-of-pocket costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the provisions
of the preceding sentence, (ii) the indemnifying party shall not have employed
counsel reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the commencement
of the action or (iii) the indemnifying party has authorized the employment of
counsel for the indemnified party at the expense of the indemnifying party.
6. Miscellaneous.
-------------
(a) Any notice to be given to the Company under the terms of
this Agreement shall be in writing, addressed to the Company at its principal
executive offices, Attn: Chief Financial Officer; and any notice to be given to
the Optionee shall be addressed to the Optionee
A-4
<PAGE>
at its address set forth in the Engagement Letter. A party may specify a
different address for receiving notice by giving written notice thereof to the
other parties. Any such notice shall be deemed to have been duly given upon
receipt.
(b) The Optionee may not Transfer this Agreement or its rights
and privileges hereunder, except in connection with a Transfer of the Option.
Subject to the preceding sentence, this Agreement shall be binding upon and
inure to the benefit of the assignees, representatives, executors, successors or
beneficiaries of the parties hereto.
(c) The interpretation, performance and enforcement of this
Agreement shall be governed by the laws of the State of Texas and the United
States, as applicable, without reference to the conflict of laws provisions
thereof.
(d) If any provision of this Agreement is declared or found to
be illegal, unenforceable or void, in whole or in part, then the parties shall
be relieved of all obligations arising under such provision, but only to the
extent that it is illegal, unenforceable or void, it being the intent and
agreement of the parties that this Agreement shall be deemed amended by
modifying such provision to the extent necessary to make it legal and
enforceable while preserving its intent or, if that is not possible, by
substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
(e) All section titles and captions in this Agreement are for
convenience only, shall not be deemed part of this Agreement, and in no way
shall define, limit, extend or describe the scope or intent of any provisions of
this Agreement.
(f) The parties shall execute all documents, provide all
information, and take or refrain from taking all actions as may be necessary or
appropriate to achieve the purposes of this Agreement.
(g) This Agreement constitutes the entire agreement among the
parties hereto pertaining to the subject matter hereof and supersedes all prior
written and prior or contemporaneous oral agreements and understandings
pertaining hereto.
(h) No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute a waiver of any such breach or any other covenant, duty, agreement or
condition.
(i) This Agreement may be executed in counterparts, all of which
together shall constitute one agreement binding on the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart.
A-5
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement on the
dates set forth below, to be effective as of the date first above written.
CUSTOMTRACKS CORPORATION
By:
-------------------------------------
Its:
-------------------------------------
Date:
-------------------------------------
LANTE CORPORATION
By:
-------------------------------------
Its:
-------------------------------------
Date:
-------------------------------------
A-6
