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DRAFT 03/18/99
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
(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)
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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 definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
As of February 26, 1999, there were 15,126,012 shares of CustomTracks
Corporation $0.01 par value common stock outstanding, 13,375,289 of which
having an aggregate market value of $107,002,312 were held by non-affiliates.
For purposes of the above statement, all directors and officers of the
Registrant are presumed to be affiliates.
Portions of the Proxy Statement for the Registrant's 1999 Annual Meeting of
Shareholders are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS.
Overview
At the beginning of 1998, CustomTracks Corporation, formerly Amtech
Corporation (the "Company"), was organized into two market-oriented groups.
The Electronic Security Group ("ESG"), which focused on products and services
for electronic access control applications, encompassed Cardkey European
Holdings Limited, Cardkey Systems, Inc., Cotag International ("Cotag") and
related entities. The Transportation Systems Group ("TSG"), which was
comprised of Amtech Systems Corporation, AMTC International S.A. (formerly
Amtech International S.A.) and Amtech World Corporation, developed and
provided high-frequency radio frequency identification solutions to the
transportation markets. These markets included electronic toll and traffic
management, rail, airport, parking and access control, intermodal and motor
freight.
On June 11, 1998, the Company sold the TSG to UNOVA, Inc. ("UNOVA"),
effective as of May 31, 1998, resulting in a pre-tax gain of $1,139,000. As
consideration for the sale, the Company received $22,350,000 in cash and
2,211,900 unregistered shares of the Company's common stock that were
previously purchased by UNOVA in late 1997. The shares were valued at
$10,921,000. 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 operations associated with the transportation business.
On July 7, 1998, the Company sold the net assets of Cotag to Metric Gruppen
AB ("Metric") of Solna, Sweden, effective as of June 30, 1998, resulting in a
pre-tax loss of $2,372,000, including a $2,800,000 write-off of intangible
assets. The Company received sales proceeds of $3,050,000 during 1998 and
$1,552,000 in February 1999. Depending on the level and mix of Cotag's
revenues achieved in 1999, the Company may receive up to an additional
$800,000. Included in Metric's purchase was 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.
On November 25, 1998, the Company sold the remaining portion of the ESG,
comprised of Cardkey European Holdings Limited, Cardkey Systems, Inc. and
related entities, to Johnson Controls, Inc., effective as of November 29,
1998, realizing cash proceeds of $44,715,000, including $3,752,000 received in
January 1999. The sale resulted in a pre-tax gain of $23,550,000 and included
all of the operations and net assets of the business.
As a result of these transactions, all of the Company's operations related
to this business segment were discontinued. See "New Business Initiatives" for
a description of the Company's new business initiatives.
The Company was incorporated in Texas in 1988. The Company's executive
offices are located at One Galleria Tower, 13355 Noel Road, Suite 1555,
Dallas, Texas 75240-6604 (telephone (972) 702-7055).
New Business Initiatives
Internet Transaction Payment System
The Company is exploring Internet related businesses, including a
transaction payment system for use by consumers when purchasing items over the
Internet. The system is expected to collect payments from consumers and
disburse the payments to participating vendors. The Company commenced
development of this system in 1999 using both internal and external resources,
and expects to introduce an operational payment system in the third quarter of
1999.
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The Company believes that the Internet payment system industry is immature,
fragmented and dynamic. No competitor has a dominant share of the market.
There are currently no significant barriers to entry. Many of the Company's
competitors and potential competitors in this arena are significantly larger
than the Company and have substantially more resources.
Customized Music
The Company also announced in February 1999 that its previously announced
plan to enter the customized compact disc business had been impacted by two
recent music industry developments. First, the Secure Digital Music
Initiative, an effort sponsored by the major music record companies to
establish standards for the digital distribution of protected music via the
Internet and other means, has delayed the Company's efforts to obtain music
content rights. Second, the availability of the handheld MP3 player will
likely impact customized compact disc pricing. The Company will evaluate its
customized compact disc strategy further as these developments evolve.
Other
In addition to developing the Internet transaction payment system, the
Company is also exploring additional Internet related businesses.
There is no assurance that the Company will be successful in the Internet
arena. See "ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" below for a description of certain
management assumptions, risks and uncertainties relating to the Company's
operations.
Employees
The Company had 15 employees as of February 28, 1999.
Research and Development; Patents and Trademarks
The Company's continuing operations incurred no research and development
expenses in 1998, 1997 or 1996. Research and development expenses related to
the Company's discontinued operations amounted to $4,931,000, $11,332,000 and
$10,314,000 in 1998, 1997 and 1996, respectively.
The Company is a licensee of one patent covering concepts the Company may
employ in implementing its Internet businesses. In addition, the Company has
filed for trademarks and service marks, as applicable, for "CustomTracks" and
other marks.
Customers
The Company had no revenues from continuing operations in 1998. During 1998,
no customer accounted for 10% or more of revenues of the Company's
discontinued operations.
Sales Backlog
The Company's backlog, calculated as the aggregate of sales prices of orders
received from customers, less revenue recognized, was zero at February 28,
1999, as compared with approximately $60,500,000 at February 28, 1998, all of
which related to the Company's discontinued operations.
Geographic Information
The Company's continuing corporate operations are based in the United
States, and corporate assets at December 31, 1998 are primarily comprised of
cash investments and marketable securities invested in U.S. corporate debt
securities.
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ITEM 2. PROPERTIES.
The Company leases approximately 6,910 square feet of space for its
corporate offices in Dallas, Texas, under a lease that expires in July 2003
and approximately 29,000 square feet of space for its proposed computing
center operations in Dallas, Texas, under a sublease which commences in May
1999 and expires in September 2004.
ITEM 3. LEGAL PROCEEDINGS.
None.
ITEM 4. SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED SHAREHOLDER MATTERS.
The Company's common stock trades on The Nasdaq Stock Market under the
symbol CUST. The following table shows the high and low sales prices by
quarter for 1998 and 1997. These prices do not include adjustments for retail
mark-ups, mark-downs or commissions.
<TABLE>
<CAPTION>
1998 1997
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Quarter Ended High Low High Low
------------- ------ ----- ----- -----
<S> <C> <C> <C> <C>
March 31......................................... $ 4.87 $3.25 $8.38 $5.63
June 30.......................................... $ 5.62 $3.37 $6.13 $4.00
September 30..................................... $ 7.00 $4.56 $5.13 $4.25
December 31...................................... $12.31 $3.50 $5.63 $3.69
</TABLE>
Effective November 3, 1997, UNOVA purchased 2,211,900 shares of the
Company's common stock for $10,000,000 in a private placement transaction. The
shares were issued in a transaction exempt from registration under the
Securities Act of 1933 by virtue of Section 4(2) thereof and Regulation D
thereunder. As partial consideration for the sale of the Company's TSG to
UNOVA in June 1998, these shares were returned to the Company. See "PART I,
ITEM 1. BUSINESS, Overview."
At February 26, 1999, there were 15,126,012 shares of common stock
outstanding held by 587 shareholders of record. On that date, the last
reported sales price of the common stock was $8.00.
The Company has not paid any cash dividends on its common stock during the
last two years and does not anticipate doing so in the forseeable future.
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ITEM 6. SELECTED FINANCIAL DATA.
The following table sets forth selected financial data regarding the
Company's results of operations and financial position for, and as of the end
of, each of the years in the five-year period ended December 31, 1998, which
are derived from the consolidated financial statements of the Company, which
have been audited. During 1998, the Company sold all of its operating
businesses and has reclassified their operating results as discontinued
operations. The consolidated financial statements and notes thereto as of
December 31, 1998 and 1997, and for the years ended December 31, 1998, 1997
and 1996, and the report of Ernst & Young LLP thereon are included elsewhere
in this Form 10-K. The selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations" and the consolidated financial statements and notes thereto
included elsewhere herein.
<TABLE>
<CAPTION>
Year Ended December 31,
--------------------------------------------
1998 1997 1996 1995 1994
------- -------- ------- ------- -------
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data
(1):
Corporate expenses (2).......... $(4,022) $ (2,931) $(3,012) $(2,246) $ (713)
Investment income, net.......... 1,956 1,068 2,793 2,127 2,104
------- -------- ------- ------- -------
Income (loss) from continuing
operations before income
taxes.......................... (2,066) (1,863) (219) (119) 1,391
Income taxes.................... 576 (8) (77) 43 (428)
------- -------- ------- ------- -------
Income (loss) from continuing
operations..................... (1,490) (1,871) (296) (76) 963
Discontinued operations (1)
Income (loss) from discontinued
operations, net of income
taxes (3) (4)................. 6,105 (12,089) (348) (4,011) 6,699
Gain (loss) on sale of
discontinued operations, net
of income taxes............... 21,651 (3,657) -- -- --
------- -------- ------- ------- -------
27,756 (15,746) (348) (4,011) 6,699
------- -------- ------- ------- -------
Net income (loss)............... $26,266 $(17,617) $ (644) $(4,087) $ 7,662
======= ======== ======= ======= =======
Basic and diluted earnings
(loss) per common share
Continuing operations.......... $ (0.09) $ (0.12) $ (0.02) $ (0.0l) $ 0.07
Discontinued operations........ 1.75 (1.05) (0.02) (0.27) 0.45
------- -------- ------- ------- -------
Net income (loss).............. $ 1.66 $ (1.17) $ (0.04) $ (0.28) $ 0.52
======= ======== ======= ======= =======
Shares used in computing
earnings (loss) per share
Basic.......................... 15,836 15,081 14,637 14,655 14,596
Diluted........................ 15,836 15,081 14,637 14,655 14,764
Cash dividends declared per
common share................... -- -- -- $ 0.02 $ 0.08
Balance Sheet Data:
Working capital................. $81,291 $ 63,648 $43,047 $49,349 $63,558
Total assets.................... 86,898 63,919 72,206 73,479 75,586
Total stockholders' equity...... 81,449 63,696 71,756 72,561 75,336
Stockholders' equity per share.. 5.40 3.76 4.87 4.97 5.16
</TABLE>
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(1) In 1995, the Company acquired Cotag International Limited, Cardkey
Systems, Inc., Cardkey Systems Limited and WaveNet International, Inc.
WaveNet International, Inc. was sold in 1997, while the remainder of these
businesses and the Company's Transportation Systems Group ("TSG") were
sold in 1998. The operating results of these businesses have been
reclassified as discontinued operations for all periods presented. See
Note 2 to consolidated financial statements included herein.
(2) Corporate expenses for the years 1995 through 1998 represent the costs
associated with a holding company function established as a result of the
Company's 1995 acquisitions. In 1994, substantially all of the Company's
expenses were related to operating the TSG. However, the estimated direct
costs incurred by the TSG associated with being a publicly-held company
have been presented as corporate expenses.
(3) In 1997, loss from discontinued operations includes a $5.7 million pre-tax
contract loss provision related to a multi-year implementation of an
electronic toll collection system by the TSG.
(4) In 1997, income taxes related to discontinued operations includes $4.7
million representing the effect of establishing a valuation allowance for
U.S. deferred tax assets.
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
Overview
Historically, the Company has operated in one industry segment, the
provision of systems and solutions for the intelligent transportation,
electronic security and other markets through the design, manufacturing,
installation and support of hardware and software products utilizing the
Company's wireless data and security technologies. The businesses comprising
this industry segment were sold during 1998 and 1997 and have been
reclassified as discontinued operations in the consolidated financial
statements. See Note 2 to the consolidated financial statements, "Discontinued
Operations," for additional discussion.
The Company is exploring Internet related businesses, including a
transaction payment system for use by consumers when purchasing items over the
Internet. The system is expected to collect payments from consumers and
disburse the payments to participating vendors. The Company commenced
development of this system in 1999 using both internal and external resources,
and expects to introduce an operational payment system in the third quarter of
1999.
Results of Operations
Continuing Operations
Corporate expenses
Corporate expenses decreased from $3,012,000 in 1996 to $2,931,000 in 1997
and increased to $4,022,000 in 1998. The change from 1997 to 1998 is primarily
attributable to an expense charge of approximately $1,000,000 incurred in
connection with the Company's former chairman, president and chief executive
officer's severance agreement and stock options. In 1996, corporate expenses
included $446,000 recognized by the Company relating to stock options granted
in December 1995 to certain of the Company's outside directors under a plan
that was approved by the shareholders on April 25, 1996.
Investment income, net
Investment income net of interest expense decreased from $2,793,000 in 1996
to $1,068,000 in 1997 and increased to $1,956,000 in 1998. The change from
1997 to 1998 is attributable to the increase in invested cash and marketable
securities resulting from the sale of the Company's businesses in 1998. The
decrease from 1996 to 1997 is primarily attributable to gains of $2,150,000
realized in 1996 from the sale of remaining U.S. corporate equity securities
in the Company's investment portfolio.
Income taxes
The income tax benefit on the loss from continuing operations in 1998 of
$576,000 is different from the U.S. statutory rate of 34%, primarily due to
unbenefitted U.S. losses and the nondeductible investment in a subsidiary. The
provision for income taxes on continuing operations in 1997 of $8,000 is
different from the U.S. statutory rate of 34%, primarily due to providing a
valuation allowance for all of the Company's U.S. deferred tax assets in light
of its continued operating losses. The provision for income taxes on
continuing operations in 1996 of $77,000 is different from the U.S. statutory
rate of 34%, primarily due to the effect of unbenefitted U.S. losses.
Loss from continuing operations
As a result of the foregoing, the Company experienced losses from continuing
operations of $296,000 in 1996, $1,871,000 in 1997 and $1,490,000 in 1998.
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Discontinued Operations
The Company sold its operating businesses realizing net after-tax gains of
$21,651,000 in 1998 and an after-tax loss of $3,657,000 in 1997. Net operating
results from discontinued operations was a loss of $348,000 and $12,089,000 in
1996 and 1997, respectively, and income of $6,105,000 in 1998.
Liquidity and Capital Resources
At December 31, 1998, the Company's principal source of liquidity is its net
working capital position of $81,291,000, including cash and marketable
securities of $81,221,000. The Company's cash position increased significantly
during 1998, with cash proceeds of $62,503,000 being realized from the sales
of the Company's businesses. The Company plans to continue to invest its
excess cash in short-term, high-grade U.S. corporate debt securities or U.S.
government and agency securities. In June 1998, the Company's number of
outstanding common shares was reduced when 2,211,900 shares were returned to
the Company as partial consideration for the sale of the Transportation
Systems Group to UNOVA, Inc.
The Company's new business initiative to create Internet related businesses
is expected to require significant investment. The Company currently expects
to invest $20,000,000 to $30,000,000 during 1999 on its Internet transaction
payment system for software development, marketing, expanded lease facilities,
communications, computers and related equipment to establish a computing
center and related personnel and start-up operating costs. Management believes
the Company's existing cash position will be sufficient to meet near-term
anticipated needs. The Company has no existing borrowings or credit facilities
and acquisitions, if any, would be financed by the most attractive alternative
available, which could be the utilization of cash or the issuance of debt or
equity securities.
Non-Employee Stock Options Granted in 1999
Proposed Director Stock Option Plan
In January 1999, certain non-employee directors were granted options to
purchase, in the aggregate, approximately 150,000 shares of the Company's
common stock, subject to approval of a new directors' stock option plan by the
Company's stockholders. The options have an exercise price of $10.65 per
share, which was 120% of the closing price of the common stock on the date of
grant. The options vest upon the approval of a new plan and expire at the end
of ten years. If the stockholders approve the new plan, currently under
Accounting Principles Board Opinion No. 25 ("APB 25") "Accounting for Stock
Issued to Employees," the excess, if any, of the closing price of the common
stock on the date of plan approval over the exercise price of $10.65 would be
charged to income for periods prior to the effective date of a new accounting
standard amending APB 25 as discussed below. The estimated fair value of these
options at the grant date using the Black-Scholes option valuation model is
approximately $965,000 or $6.43 per share.
New Business Initiatives
The Company entered into an agreement in February 1999 with Lante
Corporation ("Lante"), a third party software development firm, to assist the
Company with developing its new Internet transaction payment system. In
exchange for the services to be provided by Lante, the Company will pay cash
for work performed at discounted rates and will issue options to purchase
500,000 shares of the Company's common stock to Lante at an exercise price of
$7.62 per share, the closing price of the Company's common stock on the date
of the agreement. The options vest over three years and expire at the end of
ten years. The estimated fair value of these options at the grant date using
the Black-Scholes option valuation model is $2,865,000 or $5.73 per share.
Additionally, in February 1999, in exchange for a law firm's agreement to
assist the Company in marketing its Internet transaction payment system to
five major music companies, the Company agreed to issue the firm options to
purchase 20,000 shares of the Company's common stock at an exercise price of
$8.61 per share, representing the average closing price of the Company's
common stock for the twenty trading days centered around the date of the
agreement. The options will vest, if at all, on a pro rata basis when any or
all of the five
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targeted companies begin using the Company's Internet transaction payment
system. The options expire at the end of six years. The estimated fair value
of these options at the grant date using the Black-Scholes option valuation
model is $107,000 or $5.35 per share.
Accounting for Non-Employee Stock Options
The Financial Accounting Standards Board recently concluded its initial
deliberations on several practice issues under APB 25. The proposed effective
date of a new financial accounting standard setting forth these conclusions
would be its issuance date, which presently is expected to be in September
1999, but would apply to all stock option grants subsequent to December 15,
1998. A consequence of the application of the tentative conclusions would be
that outside directors that receive stock options would not be included under
the scope of APB 25 because they would no longer be considered employees.
Stock option grants to outside directors after December 15, 1998 would,
therefore, give rise to compensation expense, determined in accordance with
the following paragraph, and recognized over the vesting period for periods
subsequent to the effective date of the new accounting standard.
The accounting for equity instruments, such as the stock options discussed
in the paragraphs above, issued to non-employees for services rendered is
governed by Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" and Emerging Issues Task Force Issue No. 96-18
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services." These
pronouncements require the fair value of equity instruments given as
consideration for services rendered be recognized as a non-cash charge to
income over the shorter of the vesting or service period. The equity
instruments must be revalued on each subsequent reporting date until
performance is complete with a cumulative catch up adjustment recognized for
any changes in their fair value. As a result, the Company's future results of
operations could be materially impacted by a change in valuation of the stock
options discussed above, or other equity instruments granted in the future to
non-employees, as a result of future increases or decreases in the price of
the Company's common stock. However, the required accounting treatment will
have no impact on the Company's cash flows or total stockholders' equity.
Impact of the Year 2000
The Year 2000 Issue is primarily the result of computer programs being
written using two digits rather than four to define the applicable year. There
are no material Year 2000 compliance requirements confronting the Company
since it has no existing operating businesses. The Company's current financial
and administrative systems are fully compliant. Accordingly, the Company has
no ongoing remediation plans with respect to its current systems.
Software systems developed for use in connection with the Company's new
Internet related businesses will be designed and tested for Year 2000
compliance. The Company continues to assess the impact, if any, the Year 2000
Issue will have on its key vendors and development partners before the
inception of a relationship. If the Company's assessments of the impact of the
Year 2000 Issue prove to be incorrect, the Company's new Internet related
businesses may be materially affected.
New Financial Accounting Pronouncement
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 operating results or the financial position of
the Company.
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Risks and Uncertainties
The following is a "safe harbor" statement under the Private Securities
Litigation Reform Act of 1995: Certain matters discussed in this Annual Report
on Form 10-K contain statements that constitute forward-looking statements
within the meaning of Section 21E of the Securities Exchange Act of 1934, as
amended. The words "expect," "estimate," "anticipate," "predict," "believe,"
and similar expressions and variations thereof are intended to identify
forward-looking statements. Readers are cautioned that any such forward-
looking statements are not guarantees of future performance and involve risks
and uncertainties, and that actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
These risks and uncertainties include, but are not limited to, the following:
Product Development and Market Acceptance. The Company's growth depends on
the timely development and market acceptance of new products. Successful
development of a development stage 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:
. There are no assurances that the Company will be able to successfully and
timely develop new products for its targeted businesses, that it will be
able to compete effectively against similar or alternative 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.
. 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.
. The Company may decide to exit the Internet transaction payment business
at any time.
Competition and Technological Change. The Company will be competing with
larger companies that have access to greater capital, research and
development, marketing, distribution and other resources than the Company. In
addition, the Internet market is characterized by extensive research efforts
and rapid product development and technological change that could render the
Company's products obsolete or noncompetitive.
Intellectual Property Rights. The Company relies in part on patents, trade
secrets and proprietary technology to remain competitive. It may be necessary
to defend these rights or to defend against claims that the Company is
infringing the rights of others. Intellectual property litigation and
controversies are disruptive and expensive.
Lack of Standards. There are currently no generally accepted standards for
Internet payment systems. There is no assurance that the Internet transaction
payment system the Company is developing will become a generally accepted
standard or that it will be compatible with any standards that become
generally accepted.
Sales of Businesses. The Company disposed of its operating businesses in
1998 and 1997. In connection with those dispositions, the Company agreed to
provide customary indemnifications to the purchasers of those businesses for
breaches of representations and warranties, covenants and other specified
matters. Although the Company believes that it has adequately provided for
future costs associated with these indemnification obligations, indemnifiable
claims could exceed the Company's estimates.
Other Uncertainties. Other operating, financial or legal risks or
uncertainties are discussed in this Form 10-K in specific contexts and in the
Company's other periodic SEC filings. The Company is, of course, also subject
to general economic risks, dependence on key personnel and other risks and
uncertainties.
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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company does not believe that it faces material market risk with respect
to its cash investments and marketable securities, which totalled $81,221,000
and $13,593,000 at December 31, 1998 and 1997, respectively. These
investments, all of which mature within one year, consist of high-grade U.S.
corporate debt securities and certificates of deposits, and do not include
derivative financial instruments or derivative commodity instruments, as such
terms are defined by the Securities and Exchange Commission in applicable
regulations. The Company has not undertaken any additional actions to cover
interest rate market risk and is not a party to any interest rate market risk
management activities. A hypothetical ten percent change in market interest
rates over the next year would not materially impact the Company's operating
results or cash flows due to the short-term, high credit quality nature of the
Company's investments.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by this item begins on page F-1 hereof.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by this Item is incorporated by reference from the
section "MANAGEMENT--Directors and Executive Officers" in the Company's 1999
Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by this Item is incorporated by reference from the
section "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS" in the Company's
1999 Proxy Statement. Information in the section and subsection titled "REPORT
OF BOARD OF DIRECTORS ON ANNUAL COMPENSATION" and "Performance Graph,"
respectively, is not incorporated by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by this Item is incorporated by reference from the
section "SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS" in the Company's
1999 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by this Item is incorporated by reference from the
section "COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS--Transactions with
Management and Related Parties" in the Company's 1999 Proxy Statement.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)(1) Financial Statements
See Index to Consolidated Financial Statements on page F-1 hereof.
9
<PAGE>
(a)(2) Financial Statement Schedules
All schedules for which provision is made in the applicable accounting
regulations of the SEC have been omitted because of the absence of the
conditions under which they are required or because the information required
is included in the consolidated financial statements or notes thereto.
(a)(3) Exhibits
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
2.1 --Purchase and Sale Agreement, dated June 11, 1998, by and among
UNOVA, Inc., Intermec Technologies Corporation, Intermec
Technologies S.A., Amtech Corporation and Amtech International
S.A. (excluding certain exhibits and the schedules). Filed under
exhibit number 2.1 to the Company's Current Report on Form 8-K,
dated June 19, 1998, and incorporated herein by reference. The
Registrant agrees to furnish supplementally to the Commission
upon request a copy of any of the schedules and exhibits referred
to but not included in the Purchase and Sale Agreement filed with
the Commission.
2.2 --Sale and Purchase Agreement, dated July 6, 1998, by and among
Amtech Europe Limited, Metric Security Limited, AMTC Corporation
(trading name of Amtech Corporation) and Metric Gruppen AB
(including the schedules). Filed under exhibit number 2.1 to the
Company's Current Report on Form 8-K, dated July 21, 1998, and
incorporated herein by reference.
2.3 --Stock Purchase Agreement, dated November 9, 1998, by and between
Johnson Controls, Inc. and CustomTracks Corporation (excluding
the exhibits and schedules). Filed under exhibit number 2.1 to
the Company's Current Report on Form 8-K, dated December 10,
1998, and incorporated herein by reference. The Registrant agrees
to furnish supplementally to the Commission upon request a copy
of any of the schedules and exhibits referred to but not included
in the Stock Purchase Agreement filed with the Commission.
3.1 --Articles of Incorporation of the Company, together with all
amendments thereto. Filed under exhibit number 3.1 to the
Company's Annual Report on Form 10-K for the year ended December
31, 1997, and incorporated herein by reference. Articles of
Amendment to Articles of Incorporation of Amtech Corporation
d/b/a AMTC Corporation, dated August 31, 1998. Filed under
exhibit number 3.1 to the Company's Quarterly Report on Form 10-Q
for the quarterly period ended September 30, 1998, and
incorporated herein by reference.
3.2 --Restated Bylaws of the Company, dated August 31, 1998. Filed
under exhibit number 3.2 to the Company's Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 1998, and
incorporated herein by reference.
4.1 --Specimen certificate for common stock of the Company. Filed
under exhibit number 4.1 in the Company's Registration Statement
on Form S-1 (Commission No. 33-31209) and incorporated herein by
reference.
10.1* --1990 Stock Option Plan of the Company (amended and restated as
of November 1998).
10.2* --1992 Stock Option Plan of the Company (amended and restated as
of November 1998).
10.3 --401(k) Retirement Plan of the Company and related Adoption
Agreement. Filed under exhibit number 10.5 to the Company's
Annual Report on Form 10-K for the year ended December 31, 1996,
and incorporated herein by reference.
10.4* --1995 Long-Term Incentive Plan of the Company (amended and
restated as of November 1998).
10.5* --1996 Directors' Stock Option Plan of the Company (amended and
restated as of November 1998).
10.6 --1996 Employee Stock Purchase Plan of the Company. Filed under
Annex II in the Company's Proxy Statement for the Annual Meeting
of Shareholders held April 25, 1996, and incorporated herein by
reference.
10.7 --Director Retainer Plan. Filed under exhibit number 10.2 to the
Company's Quarterly Report on Form 10-Q for the quarterly period
ended June 30, 1993, and incorporated herein by reference.
10.8 --AMTC Corporation Stock Option Agreement, effective as of April
29, 1998, between David P. Cook and Amtech Corporation d/b/a AMTC
Corporation. Filed under exhibit number 10.1 to the Company's
Quarterly Report on Form 10-Q for the quarterly period ended June
30, 1998, and incorporated herein by reference.
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description
----------- -----------
<C> <S>
10.9 --Employment Agreement, effective as of April 29, 1998, between
David P. Cook and Amtech Corporation d/b/a AMTC Corporation.
Filed under exhibit number 10.2 to the Company's Quarterly Report
on Form 10-Q for the quarterly period ended June 30, 1998, and
incorporated herein by reference.
10.10 --Stock Purchase Agreement, dated May 14, 1998, between Amtech
Corporation and David P. Cook. Filed under exhibit number 10.5 to
the Company's Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998, and incorporated herein by
reference.
10.11 --Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Steve M. York. Filed under exhibit number 10.28
to the Company's Annual Report on Form 10-K for the year ended
December 31, 1996, and incorporated herein by reference.
10.12* --Severance Agreement, dated November 4, 1996, between Amtech
Corporation and Ronald A. Woessner.
10.13* --Sublease Agreement, dated February 12, 1999, between Fidelity
Corporate Real Estate, L.L.C. and CustomTracks Operating
Corporation.
23.1* --Consent of Independent Auditors.
24.1 --Power of Attorney (included on page 12 of this Annual Report on
Form 10-K).
27.1* --Financial Data Schedule.
</TABLE>
- --------
* Filed herewith
(b) Reports on Form 8-K
The Registrant filed Form 8-K on December 10, 1998 to report the November
25, 1998 sale of its electronic security products business, including Cardkey
Systems, Inc., Cardkey European Holdings Limited and Cardkey Systems Pacific
Pty. Limited, to Johnson Controls, Inc. The report included a pro forma
condensed consolidated balance sheet as of September 30, 1998 and pro forma
condensed consolidated statements of operations for the year ended December
31, 1997 and the nine months ended September 30, 1998.
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 March 30, 1999.
CustomTracks Corporation
/s/ Steve M. York
By: _________________________________
Steve M. York
Senior Vice President,
Chief Financial Officer and
Treasurer
11
<PAGE>
POWER OF ATTORNEY
We, the undersigned directors and officers of CustomTracks Corporation (the
"Company"), do hereby severally constitute and appoint David P. Cook and Steve
M. York, and each or either of them, our true and lawful attorneys and agents,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments to
the Company's Annual Report on Form 10-K for the year ended December 31, 1998,
and to file the same with all exhibits thereto, and all other documents in
connection therewith, with the SEC, granting unto said attorneys and agents,
and each or either of them, full power and authority to do and perform each
and every act and thing requisite and necessary to be done, as fully to all
intents and purposes as he might or could do in person, hereby ratifying and
confirming all that said attorneys and agents, and each of them, or his
substitute or substitutes, may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signatures Title Date
---------- ----- ----
<S> <C> <C>
/s/ David P. Cook Chairman, President, Chief March 30, 1999
______________________________________ Executive Officer and
(David P. Cook) Director (Principal
Executive Officer)
/s/ Steve M. York Senior Vice President, March 30, 1999
______________________________________ Chief Financial Officer
(Steve M. York) and Treasurer (Principal
Financial and Accounting
Officer)
/s/ Michael E. Keane Director March 30, 1999
______________________________________
(Michael E. Keane)
/s/ James S. Marston Director March 30, 1999
______________________________________
(James S. Marston)
/s/ Jack L. Martin Director March 30, 1999
______________________________________
(Jack L. Martin)
/s/ Antonio R. Sanchez, Jr. Director March 30, 1999
______________________________________
(Antonio R. Sanchez, Jr.)
/s/ Dr. Ben G. Streetman Director March 30, 1999
______________________________________
(Dr. Ben G. Streetman)
/s/ Mark Tebbe Director March 30, 1999
______________________________________
(Mark Tebbe)
</TABLE>
12
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................ F-2
Consolidated Balance Sheets at December 31, 1998 and 1997................. F-3
Consolidated Statements of Operations for the years ended December 31,
1998, 1997 and 1996...................................................... F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Net
Income (Loss) for the years ended December 31, 1998, 1997 and 1996....... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1998, 1997 and 1996...................................................... F-6
Notes to Consolidated Financial Statements................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
CustomTracks Corporation
We have audited the accompanying consolidated balance sheets of CustomTracks
Corporation, formerly Amtech Corporation, as of December 31, 1998 and 1997,
and the related consolidated statements of operations, stockholders' equity
and comprehensive net income (loss) and cash flows for each of the three years
in the period ended December 31, 1998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express
an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of CustomTracks
Corporation at December 31, 1998 and 1997, and the consolidated results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1998, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
Dallas, Texas
March 29, 1999
F-2
<PAGE>
CUSTOMTRACKS CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........................ $ 54,292,000 $ 12,583,000
Marketable securities............................ 26,929,000 1,010,000
Due from sale of discontinued operations......... 5,304,000 --
Net assets related to discontinued operations.... -- 50,271,000
Other current assets............................. 215,000 7,000
------------ ------------
Total current assets........................... 86,740,000 63,871,000
Property and equipment, net........................ 158,000 48,000
------------ ------------
$ 86,898,000 $ 63,919,000
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses............ $ 499,000 $ 196,000
Income taxes..................................... 1,075,000 27,000
Liabilities related to discontinued operations... 3,875,000 --
------------ ------------
Total current liabilities...................... 5,449,000 223,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none outstanding.................... -- --
Common stock, $0.01 par value, 30,000,000 shares
authorized; 17,384,437 issued, 15,092,537
outstanding in 1998 and 17,024,563 issued,
16,944,563 outstanding in 1997.................. 174,000 170,000
Additional capital............................... 88,449,000 86,045,000
Treasury stock, at cost; 2,291,900 shares in 1998
and 80,000 shares in 1997....................... (11,314,000) (393,000)
Retained earnings (accumulated deficit).......... 4,140,000 (22,126,000)
------------ ------------
Total stockholders' equity..................... 81,449,000 63,696,000
------------ ------------
$ 86,898,000 $ 63,919,000
============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CUSTOMTRACKS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Year ended December 31,
--------------------------------------
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Corporate expenses..................... $(4,022,000) $ (2,931,000) $(3,012,000)
Investment income, net................. 1,956,000 1,068,000 2,793,000
----------- ------------ -----------
Loss from continuing operations before
income taxes.......................... (2,066,000) (1,863,000) (219,000)
Income taxes........................... 576,000 (8,000) (77,000)
----------- ------------ -----------
Loss from continuing operations...... (1,490,000) (1,871,000) (296,000)
Discontinued operations:
Income (loss) from discontinued
operations, net of income taxes..... 6,105,000 (12,089,000) (348,000)
Gain (loss) on sale of discontinued
operations, net of income taxes..... 21,651,000 (3,657,000) --
----------- ------------ -----------
27,756,000 (15,746,000) (348,000)
----------- ------------ -----------
Net income (loss)...................... $26,266,000 $(17,617,000) $ (644,000)
=========== ============ ===========
Basic and diluted earnings (loss) per
common share:
Continuing operations................ $ (0.09) $ (0.12) $ (0.02)
Discontinued operations.............. 1.75 (1.05) (0.02)
----------- ------------ -----------
Net income (loss).................... $ 1.66 $ (1.17) $ (0.04)
=========== ============ ===========
Weighted average shares outstanding.... 15,835,654 15,080,669 14,636,605
=========== ============ ===========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CUSTOMTRACKS CORPORATION
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
AND COMPREHENSIVE NET INCOME (LOSS)
<TABLE>
<CAPTION>
Accumulated Retained
Common Stock other earnings Total
------------------- Additional comprehensive Treasury (accumulated stockholders'
Shares Amount capital income stock deficit) equity
---------- -------- ----------- ------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31,
1995................... 14,685,036 $147,000 $75,349,000 $ 1,323,000 $ (393,000) $ (3,865,000) $ 72,561,000
Exercise of stock
options for cash...... 117,627 1,000 112,000 -- -- -- 113,000
Tax benefit from
exercise of stock
options............... -- -- 35,000 -- -- -- 35,000
Stock option
compensation.......... -- -- 446,000 -- -- -- 446,000
Other.................. -- -- 568,000 -- -- -- 568,000
Comprehensive net loss:
Net loss............... -- -- -- -- -- (644,000) (644,000)
Reclassification
adjustment for gains
on sales of marketable
securities included in
net loss (net of tax
effect of $681,000)... -- -- -- (1,323,000) -- -- (1,323,000)
------------
Comprehensive net
loss.................. -- -- -- -- -- -- (1,967,000)
---------- -------- ----------- ----------- ------------ ------------ ------------
Balance, December 31,
1996................... 14,802,663 148,000 76,510,000 -- (393,000) (4,509,000) 71,756,000
Stock option
compensation.......... 10,000 -- 92,000 -- -- -- 92,000
Sale of common stock,
net of expenses....... 2,211,900 22,000 9,945,000 -- -- -- 9,967,000
Other.................. -- -- (502,000) -- -- -- (502,000)
Net loss and
comprehensive net
loss.................. -- -- -- -- -- (17,617,000) (17,617,000)
---------- -------- ----------- ----------- ------------ ------------ ------------
Balance, December 31,
1997................... 17,024,563 170,000 86,045,000 -- (393,000) (22,126,000) 63,696,000
Exercise of stock
options for cash...... 227,928 2,000 1,504,000 -- -- -- 1,506,000
Tax benefit from
exercise of stock
options............... -- -- 196,000 -- -- -- 196,000
Stock option
compensation.......... 131,946 2,000 715,000 -- -- -- 717,000
Treasury stock received
in sale of business
(2,211,900 shares).... -- -- -- -- (10,921,000) -- (10,921,000)
Other.................. -- -- (11,000) -- -- -- (11,000)
Net income and
comprehensive net
income................ -- -- -- -- -- 26,266,000 26,266,000
---------- -------- ----------- ----------- ------------ ------------ ------------
Balance, December 31,
1998................... 17,384,437 $174,000 $88,449,000 $ -- $(11,314,000) $ 4,140,000 $ 81,449,000
========== ======== =========== =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CUSTOMTRACKS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Year ended December 31,
---------------------------------------
1998 1997 1996
------------ ----------- ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Loss from continuing operations...... $ (1,490,000) $(1,871,000) $ (296,000)
Adjustments to reconcile loss from
continuing operations to net cash
provided (used) by operating
activities:
Depreciation and amortization........ 13,000 20,000 15,000
Deferred income taxes................ -- 380,000 --
Realized gain on sale of marketable
securities.......................... -- -- (2,150,000)
Stock option compensation............ 404,000 -- 446,000
Tax benefit from exercise of stock
options............................. -- -- 35,000
Changes in assets and liabilities,
excluding divestiture of
businesses:
Other current assets................ (208,000) 80,000 169,000
Current liabilities................. 1,351,000 (227,000) 52,000
------------ ----------- ------------
Net cash provided (used) by
continuing operations............... 70,000 (1,618,000) (1,729,000)
Net cash provided (used) by
discontinued operations............. 6,286,000 (4,339,000) (894,000)
------------ ----------- ------------
Net cash provided (used) by
operating activities.............. 6,356,000 (5,957,000) (2,623,000)
Cash flows from investing activities:
Purchases of property and equipment,
net................................. (110,000) (68,000) (52,000)
Purchases of marketable securities... (36,867,000) (4,916,000) (14,729,000)
Sales and maturities of marketable
securities.......................... 10,948,000 15,758,000 13,191,000
Investing activities of discontinued
operations:
Proceeds from sales of businesses,
net of cash sold.................... 62,503,000 1,225,000 --
Purchase of Cardkey Systems, net of
cash acquired....................... -- (1,868,000) (952,000)
Purchases of property and equipment,
net and other....................... (2,616,000) (3,780,000) (6,615,000)
------------ ----------- ------------
Net cash provided (used) by
investing activities.............. 33,858,000 6,351,000 (9,157,000)
Cash flows from financing activities:
Proceeds from exercise of stock
options............................. 1,506,000 -- 113,000
Proceeds from sale of common stock,
net of expenses..................... -- 9,967,000 --
------------ ----------- ------------
Net cash provided by financing
activities........................ 1,506,000 9,967,000 113,000
Effect of exchange rate changes on
cash and cash equivalents............ (11,000) 106,000 121,000
------------ ----------- ------------
Increase (decrease) in cash and cash
equivalents.......................... 41,709,000 10,467,000 (11,546,000)
Cash and cash equivalents, beginning
of year.............................. 12,583,000 2,116,000 13,662,000
------------ ----------- ------------
Cash and cash equivalents, end of
year................................. $ 54,292,000 $12,583,000 $ 2,116,000
============ =========== ============
Supplemental cash flow information:
Income taxes paid (net of refunds)... $ (391,000) $ (681,000) $ 765,000
Interest paid........................ $ -- $ 405,000 $ 113,000
Treasury stock received in sale of
business............................ $ 10,921,000 $ -- $ --
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation--The accompanying consolidated financial statements of
CustomTracks Corporation (formerly Amtech Corporation) include the accounts of
the Company and its majority-owned subsidiaries. Intercompany balances and
transactions have been eliminated. Investees in which the Company owns 50% or
less of the outstanding securities are accounted for using the equity method
of accounting.
During 1998, the Company sold all of its operating businesses and,
accordingly, the assets and liabilities, operating results and cash flows of
these businesses have been reclassified as discontinued operations in the
accompanying financial statements. The results of the discontinued operations
do not include any interest expense or allocation of corporate expenses.
The Company is exploring Internet related businesses and in 1999 began
developing a transaction payment system for use by consumers when purchasing
items over the Internet. The system is expected to collect payments from
consumers and disburse the payments to participating vendors. Successful
development of a development stage enterprise, particularly Internet related
businesses, is costly and highly competitive. The Company's internal growth
depends on the timely development and market acceptance of new products. A
start-up enterprise involves risks and uncertainties and there are no
assurances that the Company will be successful in its efforts. See Note 9 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
Cash investments and marketable securities--Cash investments with maturities
of three months or less when purchased are considered cash equivalents.
Marketable securities, which are available-for-sale and have stated maturities
of less than one year, are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
U.S. corporate debt securities....................... $26,929,000 $ --
Bank certificate of deposit.......................... -- 1,010,000
----------- ----------
$26,929,000 $1,010,000
=========== ==========
</TABLE>
Marketable securities are carried at amortized cost, which approximates fair
market value. The Company purchases cash investments and marketable securities
that are of high credit quality and limits the amount invested in any one
institution.
Property and equipment--Property and equipment are recorded at cost and
depreciated using the straight-line method over their estimated useful lives
ranging from three to five years.
Stock-based employee compensation--As permitted by Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," the
Company accounts for stock-based compensation plans under the provisions of
Accounting Principles Board Opinion No. 25, "Accounting for Stock Issued to
Employees." Compensation expense for employee stock options, if any, is
measured as the excess of the quoted market price of the Company's stock at
the date of grant over the amount an employee must pay to acquire the stock.
Earnings per share--Statement of Financial Accounting Standards No. 128,
"Earnings Per Share," became effective in the fourth quarter of 1997 and
requires two presentations of earnings per share - "basic" and "diluted."
Basic earnings per share is computed by dividing income available to common
stockholders by the weighted average number of common shares outstanding (the
denominator) for the period. The computation of diluted earnings per share is
similar to basic earnings per share, except that the denominator is increased
to include the number of additional common shares that would have been
outstanding if the potentially dilutive common shares had been issued.
F-7
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The amounts presented for basic and diluted loss per share from continuing
operations in the accompanying statements of operations have been computed by
dividing loss from continuing operations by the weighted-average number of
common shares outstanding. The two presentations are equal in amounts because
the assumed exercise of outstanding stock options would be antidilutive for
all periods presented. See Notes 4 and 9 for information regarding potentially
dilutive stock options.
Comprehensive income (loss)--In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive Income" ("SFAS 130"), which establishes standards for
the reporting and display of comprehensive income (loss) and its components.
The Company adopted SFAS 130 in 1998. In 1996, other comprehensive income or
loss consists of a reclassification adjustment for gains on sales of
marketable securities which were included in the net loss. There are no
components of other comprehensive income for the years ended December 31, 1998
and 1997.
Use of estimates--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Management
reviews its estimates on an ongoing basis, including those related to
discontinued operations and revises such estimates based upon currently
available facts and circumstances.
Significant accounting policies related to the Company's discontinued
operations are as follows:
Inventories--Inventories are stated at the lower of cost (first-in, first-
out) or market.
Intangible assets--Intangible assets, primarily goodwill, are amortized
using the straight-line method over their estimated useful lives ranging from
seven to fifteen years.
Capitalized software--At December 31, 1997, net assets related to
discontinued operations include approximately $3,200,000 for the costs to
acquire specialized software for use in new products. This asset began
amortizing over five years in 1998.
Revenue recognition--Generally, sales are recorded when products are shipped
or services are rendered. Sales under long-term contracts are recorded as
costs are incurred and include estimated profits calculated on the basis of
the relationship between costs incurred and total estimated costs (cost-to-
cost type of percentage-of-completion method of accounting). Revenues
recognized in excess of amounts billed to customers are included in accounts
receivable and amounted to approximately $6,260,000 at December 31, 1997. In
the period in which it is determined it is probable that a loss will result
from the performance of a contract, the entire amount of the estimated
ultimate loss is charged against income. In late 1997, the Company recorded a
pre-tax contract loss provision of $5,700,000 related to the Transportation
Systems Group's multi-year contract with a state agency to design, install and
maintain an electronic toll collection system.
2. DISCONTINUED OPERATIONS
Historically, the Company operated in one industry segment, the provision of
systems and solutions for the intelligent transportation, electronic security
and other markets through the design, manufacturing, installation and support
of hardware and software products utilizing the Company's wireless data and
security technologies. The businesses comprising this industry segment were
sold during 1998 and 1997 in four separate transactions as described below.
These businesses are presented as Discontinued Operations in the accompanying
financial statements.
F-8
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Transportation Systems Group
In June 1998, the Company 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. As consideration for the sale, the Company received $22,350,000 in
cash and 2,211,900 unregistered shares of the Company's common stock that were
previously purchased by UNOVA in late 1997. The shares were valued at
$10,921,000. 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 operations associated with the transportation business.
Cotag International
In July 1998, the Company sold the net assets of Cotag International
("Cotag") to Metric Gruppen AB ("Metric") of Solna, Sweden, effective as of
June 30, 1998, resulting in a pre-tax loss of $2,372,000, including a
$2,800,000 write-off of intangible assets. The Company received sales proceeds
of $3,050,000 during 1998 and $1,552,000 in February 1999. Depending on the
level and mix of Cotag's revenues achieved in 1999, the Company may receive up
to an additional $800,000, none of which has been reflected in the financial
statements as of December 31, 1998. Included in Metric's purchase was 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.
Cardkey Systems
In November 1998, the Company sold Cardkey Systems and related entities to
Johnson Controls, Inc., effective as of November 29, 1998, realizing cash
proceeds of $44,715,000, including $3,752,000 received in January 1999. The
sale resulted in a pre-tax gain of $23,550,000 and included all of the
operations and net assets of the business.
Interactive Data Group
The Company withdrew from the wireless LAN terminal market and sold its
Interactive Data Group in late 1997 for $1,225,000 in cash, resulting in a
pre-tax loss of $3,725,000.
The gain or loss on the sale of discontinued operations is summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
Gain (loss) on sale before income taxes........... $22,317,000 $(3,725,000)
Income taxes...................................... (666,000) 68,000
----------- -----------
Gain (loss) on sale of discontinued operations.... $21,651,000 $(3,657,000)
=========== ===========
</TABLE>
Summary operating results of the discontinued operations are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ ------------
<S> <C> <C> <C>
Revenues.......................... $87,224,000 $117,706,000 $116,508,000
Costs and expenses................ 80,396,000 126,848,000 116,644,000
----------- ------------ ------------
Income (loss) before income
taxes............................ 6,828,000 (9,142,000) (136,000)
Income taxes...................... (723,000) (2,947,000) (212,000)
----------- ------------ ------------
Income (loss) from discontinued
operations....................... $ 6,105,000 $(12,089,000) $ (348,000)
=========== ============ ============
</TABLE>
F-9
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Liabilities related to discontinued operations of $3,875,000 at December 31,
1998 consist primarily of accrued compensation paid in 1999 to certain
employees of the discontinued businesses and estimated future costs for
various indemnification issues associated with the disposal of these
businesses.
The net assets related to discontinued operations in the December 31, 1997
balance sheet include:
<TABLE>
<S> <C>
Cash........................................................ $ 2,580,000
Accounts receivable......................................... 31,056,000
Inventories................................................. 11,759,000
Other current assets........................................ 794,000
Property and equipment...................................... 12,695,000
Intangible assets........................................... 6,746,000
Other assets................................................ 5,742,000
Current liabilities......................................... (21,101,000)
------------
Net assets related to discontinued operations............... $ 50,271,000
============
</TABLE>
3. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Computer equipment and software.......................... $ 83,000 $ 37,000
Office equipment, furniture and fixtures................. 88,000 46,000
-------- --------
171,000 83,000
Less accumulated depreciation............................ (13,000) (35,000)
-------- --------
$158,000 $ 48,000
======== ========
</TABLE>
4. STOCKHOLDERS' EQUITY
Sale and Reacquisition of Stock
In November 1997, UNOVA purchased 2,211,900 shares of the Company's common
stock for $10,000,000 in a private placement transaction. As partial
consideration for the sale of the Company's Transportation Systems Group to
UNOVA in June 1998 (Note 2), these shares were returned to the Company.
Stock Options
The Company has non-qualified stock options outstanding to employees and
directors under various shareholder approved stock option plans. Options
granted under these plans are generally not less than the fair market value at
the date of grant, and subject to termination of employment generally expire
ten years from the date of grant. Employee options are generally exercisable
in annual installments over three to five years or are exercisable at rates of
45% in three years and the remaining 55% in five and one-half years, unless
accelerated due to the Company's common stock trading at appreciated price
targets. Grants to certain directors are exercisable within six months from
the date of the grant. At December 31, 1998, 870,495 shares were available for
future grants under the Company's stock option plans, excluding 15,000 shares
reserved for possible issuance as restricted stock in tandem with the exercise
of certain stock options outstanding. In 1998 and 1997, 58,000 and 5,000
shares of restricted stock, respectively, were issued pursuant to the plans.
In February 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
F-10
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
charge to income in 1998 of approximately $1,000,000, including a cash payment
of approximately $650,000, which is included in corporate expenses. The
Company and Mr. Cook have entered into an employment arrangement providing for
a three year term, beginning April 29, 1998. Mr. Cook will receive no salary;
however, 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.
The following is a summary of stock option transactions for 1998, 1997 and
1996:
<TABLE>
<CAPTION>
Weighted
Average
Exercise
Shares Price
--------- --------
<S> <C> <C>
Outstanding at December 31, 1995......................... 1,277,348 $7.69
Granted at market price................................ 330,750 $6.29
Cancelled.............................................. (128,650) $7.36
Exercised.............................................. (69,927) $4.98
---------
Outstanding at December 31, 1996......................... 1,409,521 $7.53
Granted at market price................................ 515,767 $4.48
Cancelled.............................................. (276,594) $7.09
Exercised.............................................. (5,000) $5.75
---------
Outstanding at December 31, 1997......................... 1,643,694 $6.65
Granted at market price................................ 178,625 $4.50
Granted at price exceeding market...................... 4,334,627 $7.01
Cancelled.............................................. (847,875) $6.46
Exercised.............................................. (301,874) $4.66
---------
Outstanding at December 31, 1998......................... 5,007,197 $6.98
=========
</TABLE>
Summarized information about stock options outstanding at December 31, 1998
is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
---------------------------------------------------------------------------------
Weighted
Range of Average Weighted Weighted
Exercise Number Remaining Average Number Average
Prices Outstanding Contractual Life Exercise Price Exercisable Exercise Price
-------- ----------- ---------------- -------------- ----------- --------------
<S> <C> <C> <C> <C> <C>
$ 3.56-
$ 6.88 476,320 4.8 $ 5.07 315,017 $ 5.18
$ 7.00-
$10.75 4,502,127 4.1 $ 7.11 1,215,339 $ 7.30
$16.50-
$25.40 28,750 4.6 $18.77 28,750 $18.77
--------- ---------
5,007,197 1,559,106
========= =========
</TABLE>
At December 31, 1997, 602,652 options were exercisable.
In December 1995, stock options were granted to certain of the Company's
outside directors under a plan that was approved by the shareholders on April
25, 1996. The Company recognized compensation expense of $446,000, which is
included in corporate expenses, based on the excess of the fair market value
of the Company's common stock on the date of plan approval, which was $9.00,
over the exercise price of the options of $5.13, which was fair market value
of the Company's common stock on the date of grant.
F-11
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The Company applies Accounting Principles Board Opinion No. 25 ("APB 25") in
accounting for its stock options. Accordingly, the Company does not record
compensation expenses for its employee stock option grants unless the market
price exceeds the exercise price on the date of grant. Effective January 1,
1996, Statement of Financial Accounting Standards No. 123 ("SFAS 123")
"Accounting for Stock-Based Compensation," encourages adoption of a fair-value
based method for valuing the cost of stock-based compensation; however, it
allows companies to continue to use the intrinsic value method under APB 25
and disclose pro forma results and earnings per share in accordance with SFAS
123. Under SFAS 123, compensation cost is measured at the grant date based
upon the value of the award and is recognized over the vesting period. As
required, the pro forma disclosures include only options granted since January
1, 1995. Because the Company's stock options have characteristics
significantly different from those of traded options and because changes in
the subjective input assumptions to the option valuation models can materially
affect their estimated fair value, in management's opinion, the existing
valuation methods do not necessarily provide a reliable single measure of the
fair value of its stock options. Had compensation cost for the Company's
stock-based compensation been determined consistent with SFAS 123, the
Company's net results and earnings per share would have been as follows:
<TABLE>
<CAPTION>
1998 1997 1996
----------- ------------ -----------
<S> <C> <C> <C>
Net income (loss):
As reported....................... $26,266,000 $(17,617,000) $ (644,000)
Pro forma......................... $25,019,000 $(17,923,000) $(1,112,000)
Basic and diluted earnings (loss)
per share:
As reported....................... $ 1.66 $ (1.17) $ (0.04)
Pro forma......................... $ 1.58 $ (1.19) $ (0.08)
</TABLE>
The Company used the Black-Scholes option pricing model to determine the
fair value of grants made during 1998, 1997 and 1996. The following weighted
average assumptions were applied in determining the pro forma compensation
cost:
<TABLE>
<CAPTION>
1998 1997 1996
----- ----- -----
<S> <C> <C> <C>
Risk-free interest rate................. 5.59% 5.85% 6.05%
Expected option life.................... 3.1 years 3.4 years 3.7 years
Expected stock price volatility......... 52% 55% 51%
Expected dividend yield................. -- -- --
Fair value of options:
Granted at market price............... $1.45 $1.84 $2.74
Granted at prices exceeding market.... $0.70 -- --
</TABLE>
5. INCOME TAXES
Components of income taxes related to continuing operations are as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- --------
<S> <C> <C> <C>
Federal income tax (provision) benefit:
Current..................................... $576,000 $ 372,000 $(77,000)
Deferred.................................... -- (380,000) --
-------- --------- --------
$576,000 $ (8,000) $(77,000)
======== ========= ========
</TABLE>
F-12
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
A reconciliation of the expected U.S. tax benefit to income taxes related to
continuing operations is as follows:
<TABLE>
<CAPTION>
1998 1997 1996
-------- --------- ---------
<S> <C> <C> <C>
Expected tax benefit at U.S. statutory
rate..................................... $702,000 $ 633,000 $ 74,000
Unbenefitted U.S. losses, net............. (64,000) (24,000) (151,000)
Investment in subsidiary.................. (68,000) -- --
Increase in valuation allowance, net...... -- (380,000) --
Unbenefitted (benefitted) tax credits..... 6,000 (237,000) --
-------- --------- ---------
$576,000 $ (8,000) $ (77,000)
======== ========= =========
</TABLE>
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Components of the
Company's deferred tax assets and liabilities as of December 31, 1998 and 1997
are as follows:
<TABLE>
<CAPTION>
1998 1997
----------- ------------
<S> <C> <C>
Deferred tax assets:
Nondeductible reserves.......................... $ 895,000 $ 3,796,000
Losses of foreign subsidiaries.................. -- 7,271,000
U.S. net operating loss carryforwards........... 16,000 3,021,000
Tax credit carryforwards........................ 607,000 2,193,000
Stock option compensation....................... 207,000 180,000
Other, net...................................... -- 303,000
----------- ------------
Total deferred tax assets..................... 1,725,000 16,764,000
Valuation allowance for deferred tax assets....... (1,725,000) (15,680,000)
----------- ------------
-- 1,084,000
Deferred tax liabilities:
Amortization of intangibles..................... -- 1,084,000
----------- ------------
Net deferred tax assets......................... $ -- $ --
=========== ============
</TABLE>
In 1997, in light of continued operating losses, future taxable income of
the Company was uncertain, and as a result, all of the Company's deferred tax
assets were fully reserved. During 1998, the Company sold all of its operating
businesses, resulting in the utilization or transfer of substantially all of
the Company's deferred tax assets. The Company continues to fully reserve its
deferred tax assets in 1998 due to the uncertainty of future taxable income
from the Company's new business initiatives. Tax credit carryforwards at
December 31, 1998 represent alternative minimum tax credits that do not
expire.
6. LEASE COMMITMENTS
The Company's continuing operations includes office rental expenses of
approximately $150,000 per year for 1998, 1997 and 1996. At December 31, 1998,
future minimum lease payments under noncancelable operating leases are
$185,000 annually through July 2003. In 1999, the Company entered into an
operating sublease for approximately 29,000 square feet of office space which
commences in May 1999. The sublease provides for minimum annual lease payments
of $466,000 through September 2004.
7. RELATED PARTY TRANSACTIONS
In June 1998, the Company sold its Transportation Systems Group to UNOVA. At
the time of the sale, UNOVA was a 13% shareholder of the Company and a member
of UNOVA's senior management was on the Company's Board of Directors. See Note
2.
F-13
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In May 1998, the Company acquired Petabyte Corporation ("Petabyte"), a
digital data distribution start-up enterprise founded by Mr. Cook, the
Company's chairman, president and chief executive officer. In consideration of
the sale of Petabyte, the Company paid Mr. Cook $200,000 and agreed to pay Mr.
Cook four annual payments of $200,000 each. In March 1999, the Company
returned to Mr. Cook title to a Petabyte patent covering certain digital data
distribution concepts, while retaining a use license to the patent for a
nominal one-time payment. As part of the return of the title, the Company's
future payments to Mr. Cook, totaling $800,000 have been eliminated.
8. EMPLOYEE BENEFIT PLANS
The Company has a retirement savings plan structured under Section 401(k) of
the Internal Revenue Code. The plan covers substantially all U.S. employees
meeting minimum service requirements. Under the plan, contributions are
voluntarily made by employees and the Company may provide matching
contributions based on the employees' contributions. The Company's continuing
operations includes approximately $16,000 per year in 1998, 1997 and 1996, for
matching contributions to this plan.
The Company has an employee stock purchase plan for substantially all
employees that meet minimum service requirements. The plan provides for the
purchase of up to 300,000 previously issued shares of the Company's common
stock. The employee contributes 85% of the purchase price through payroll
deduction with the difference paid by the Company. Since inception of the plan
in 1996, a total of 151,834 shares have been purchased including 50,789 and
85,152 shares purchased in 1998 and 1997, respectively.
9. SUBSEQUENT EVENTS
Proposed Director Stock Option Plan
In January 1999, certain non-employee directors were granted options to
purchase, in the aggregate, approximately 150,000 shares of the Company's
common stock, subject to approval of a new directors' stock option plan by the
Company's stockholders. The options have an exercise price of $10.65 per
share, which was 120% of the closing price of the common stock on the date of
grant. The options vest upon the approval of a new plan and expire at the end
of ten years. If the stockholders approve the new plan, currently under
Accounting Principles Board Opinion No. 25 ("APB 25") "Accounting for Stock
Issued to Employees," the excess, if any, of the closing price of the common
stock on the date of plan approval over the exercise price of $10.65 would be
charged to income for periods prior to the effective date of a new accounting
standard amending APB 25 as discussed below. The estimated fair value of these
options at the grant date using the Black-Scholes option valuation model is
approximately $965,000 or $6.43 per share.
New Business Initiatives
In January 1999, the Company's Board of Directors approved a significant
investment in a new Internet related business, a transaction payment system
for use by consumers when purchasing items over the Internet. The system is
expected to collect payments from consumers and disburse the payments to
participating vendors. The Company is developing this proprietary Internet
transaction payment system, using both internal and external resources. The
Company entered into an agreement in February 1999 with Lante Corporation
("Lante"), a third party software development firm, to assist in such
development effort. In exchange for the services to be provided by Lante, the
Company will pay cash for work performed at discounted rates and will issue
options to purchase 500,000 shares of the Company's common stock to Lante at
an exercise price of $7.62 per share, the closing price of the Company's
common stock on the date of the agreement. The options vest over three years
and expire at the end of ten years. The estimated fair value of these options
at the grant date using the Black-Scholes option valuation model is $2,865,000
or $5.73 per share.
F-14
<PAGE>
CUSTOMTRACKS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
In June 1998, the Company 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 agreed to issue options to acquire approximately 5% of the
subsidiary's common stock, which was convertible into common stock of the
Company. Based upon the lack of near-term prospects to obtain the targeted
music rights, the parties terminated this option arrangement. The Company has
paid the law firm $50,000 in exchange for the cancellation of the options to
have been issued, a portion of which had vested. Subsequently, in February
1999, in exchange for the law firm's agreement to assist the Company in
marketing its Internet transaction payment system to five major music
companies, the Company agreed to issue the firm options to purchase 20,000
shares of the Company's common stock at an exercise price of $8.61 per share,
representing the average closing price of the Company's common stock for the
twenty trading days centered around the date of the agreement. The options
will vest, if at all, on a pro rata basis when any or all of the five targeted
companies begin using the Company's Internet transaction payment system. The
options expire at the end of six years. The estimated fair value of these
options at the grant date using the Black-Scholes option valuation model is
$107,000 or $5.35 per share.
Accounting for Non-Employee Stock Options
The Financial Accounting Standards Board recently concluded its initial
deliberations on several practice issues under APB 25. The proposed effective
date of a new financial accounting standard setting forth these conclusions
would be its issuance date, which presently is expected to be in September
1999, but would apply to all stock option grants subsequent to December 15,
1998. A consequence of the application of the tentative conclusions would be
that outside directors that receive stock options would not be included under
the scope of APB 25 because they would no longer be considered employees.
Stock option grants to outside directors after December 15, 1998 would,
therefore, give rise to compensation expense, determined in accordance with
the following paragraph, and recognized over the vesting period for periods
subsequent to the effective date of the new accounting standard.
The accounting for equity instruments, such as the stock options discussed
in the paragraphs above, issued to non-employees for services rendered is
governed by Statement of Financial Accounting Standards No. 123 "Accounting
for Stock-Based Compensation" and Emerging Issues Task Force Issue No. 96-18
"Accounting for Equity Instruments That Are Issued to Other Than Employees for
Acquiring, or in Conjunction with Selling, Goods or Services." These
pronouncements require the fair value of equity instruments given as
consideration for services rendered be recognized as a non-cash charge to
income over the shorter of the vesting or service period. The equity
instruments must be revalued on each subsequent reporting date until
performance is complete with a cumulative catch up adjustment recognized for
any changes in their fair value. As a result, the Company's future results of
operations could be materially impacted by a change in valuation of the stock
options discussed above, or other equity instruments granted in the future to
non-employees, as a result of future increases or decreases in the price of
the Company's common stock. However, the required accounting treatment will
have no impact on the Company's cash flows or total stockholders' equity.
F-15
<PAGE>
EXHIBIT 10.1
CUSTOMTRACKS CORPORATION
1990 STOCK OPTION PLAN
(Amended and Restated as of November 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;
(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
<PAGE>
(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.
(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.
2
<PAGE>
(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.
(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
3
<PAGE>
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.
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.
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(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 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. (a) For those
Optionees who are not subject to the provisions of Subsection 7(b), in the event
of termination of the 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.
(b) For those Optionees who are senior officers of the Company, in the
event of termination of the 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
18 month 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 18 month period commencing on the
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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 purpose of this Section, "cause" shall
have the meaning given such term in the applicable severance agreement between
the Company and Optionee. If the officer and the Company are not parties to a
severance agreement that defines "cause", then "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.
(c) The determination as to whether the Optionee is subject to the
provisions of Subsection 7(a) or 7(b) will be determined in the sole opinion of
the Company.
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 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
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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 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
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<PAGE>
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 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.
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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.
AMENDED AND RESTATED as of November 18, 1998. The new provisions
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
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Exhibit 10.2
CUSTOMTRACKS CORPORATION
1992 STOCK OPTION PLAN
(Amended and Restated as of November 1998)
1. Purpose
The purpose of the CustomTracks Corporation 1992 Stock Option Plan
(hereinafter called the "Plan") is to advance the interests of CustomTracks
Corporation (hereinafter called the "Company") by strengthening the ability of
the Company to attract and retain personnel of high caliber through encouraging
a sense of proprietorship by means of stock ownership.
Certain options granted under this Plan are intended to qualify as
"incentive stock options" pursuant to Section 422 of the Internal Revenue Code
of 1986, as amended from time to time (the "Code"), while certain other options
granted under this Plan will constitute nonqualified options.
2. Definitions
As used in this Plan, and in any Option Agreement, as hereinafter defined,
the following terms shall have the following meanings, unless the context
otherwise requires:
(a) "Common Stock" shall mean the common stock of the Company, par value
$.01 per share, giving effect to the 3 shares for 2 shares stock split on the
record date of January 24, 1992 and the effective issuance date of February 13,
1992.
(b) "Date of Grant" shall mean the date on which a stock option is granted
pursuant to this Plan.
(c) "Disinterested Director" shall mean a director who is not, during the
one year prior to service as an administrator of this Plan, granted or awarded
an option pursuant to this Plan or any other plan of the Company or any of its
affiliates (except as provided in Section 4(b) or Section 4(c) of this Plan and
as may be permitted by Rule 16b-3 promulgated under the Exchange Act).
(d) "Effective Date" shall mean the first business day following the date
of the 1993 annual meeting of the shareholders of the Company.
(e) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(f) "External Director" shall mean a Director that is not an employee of
the Company.
(g) "Fair Market Value" shall mean the closing sale price (or average of
the quoted closing bid and asked prices if there is no closing sale price
reported) of the Common Stock on the date specified as reported by NASDAQ/NMS or
by the principal national stock exchange on which the Common Stock is then
listed. If there is no reported price information for such date, the Fair Market
Value will be determined by the reported price information for Common Stock on
the day nearest preceding such date.
(h) "Optionee" shall mean the person to whom an option is granted under
this Plan or who has obtained the right to exercise an option in accordance with
the provisions of this Plan.
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(i) "Plan Adoption Date" means the later of the date on which this Plan is
adopted by the Board of Directors of the Company and by the shareholders of the
Company in accordance with Rule 16b-3.
(j) "Qualifying External Director" shall mean an External Director who is
not a person, an employee or affiliate of a person, or a designee to the Board
of Directors of a person (in each case, other than a person that is a
strategic/business partner of the Company), that is required to file a statement
under Section 13(d) or 13(g) of the Exchange Act or the rules, regulations, and
interpretations of the Securities and Exchange Commission thereunder.
(k) "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.
(l) "Subsidiary" shall mean any now existing or hereafter organized or
acquired corporation of which more than fifty percent (50%) of the issued and
outstanding voting stock is owned or controlled directly or indirectly by the
Company or through one or more Subsidiaries of the Company and, in addition,
shall include Alcatel Amtech S.A. for so long as the Company directly or
indirectly owns more than forty percent (40%) of that company's issued and
outstanding stock and Wavelink Technologies, Inc. for so long as the Company
directly or indirectly owns or holds then exercisable rights to acquire more
than twenty percent (20%) of that company's issued and outstanding stock.
3. Shares Subject to this Plan
Except as otherwise provided by the provisions of Section 9 hereof, the
aggregate amount of Common Stock for which options may be granted under this
Plan shall not exceed 450,000 shares of Common Stock. Such shares may be
authorized and previously unissued shares or previously issued shares that have
been reacquired by the Company. Any shares of Common Stock subject to
unexercised portions of options granted under this Plan which shall have
terminated, been canceled, or expired may again be subject to the granting of
options under this Plan.
4. Administration
(a) Notwithstanding herein anything to the contrary, to the extent
necessary to comply with the requirements of Rule 16b-3, this Plan shall be
administered by the Board of Directors, if each member is a Disinterested
Director, or, at the option of the Board of Directors, a committee of two or
more Disinterested Directors appointed by the Board of Directors of the Company
(the group responsible for administering this Plan is referred to herein as the
"Committee"). Options may be granted under this Section 4(a) only by majority
agreement of the members of the Committee. Stock Option Agreements ("Option
Agreements"), in the form as approved by the Committee, and containing such
terms and conditions not inconsistent with the provisions of this Plan as shall
have been determined by the Committee, may be executed on behalf of the Company
by the President or any Vice President of the Company. The Committee shall have
complete authority to construe, interpret and administer (except with respect to
Section 4(b) and Section 4(c) of this Plan) the provisions of this Plan and the
provisions of the Option Agreements granted hereunder; to prescribe, amend and
rescind rules and regulations pertaining to this Plan; and to make all other
determinations necessary or deemed advisable in the administration of this Plan.
The determinations, interpretations and constructions made by the Committee
shall be final and conclusive.
(b) Members of the Committee shall be specified by the Board of Directors,
and shall consist solely of Disinterested Directors and as such shall not be
eligible to receive options to purchase Common Stock pursuant to Section 4(a) of
this Plan. Disinterested Directors may include External Directors and
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Internal Directors who are employed by the Company. Disinterested Directors
shall fall within one of the following categories: (i) External Director; (ii)
Internal Director/Chief Executive Officer; (iii) Internal Director/Vice
President of Research and Development; and (iv) Internal Director/Other. The
Committee can be comprised of Disinterested Directors from any one or all of the
named categories. External Directors who are appointed to the Committee may not
receive any options under this Plan, other than pursuant to Section 4(c).
Subject to the shareholders' approval, on the date a Disinterested Director is
initially appointed as a Committee member by the Board of Directors: (1) an
Internal Director/Chief Executive Officer shall automatically be granted
nonqualified options to purchase 35,000 shares of Common Stock, an Internal
Director/Vice President of Research and Development shall automatically be
granted nonqualified options to purchase 15,000 shares of Common Stock, and an
Internal Director/Other shall automatically be granted nonqualified options to
purchase 1,000 shares of Common Stock; and (2) provided the Company has
consolidated net income for the calendar year immediately preceding and so long
as the Disinterested Director continues to serve on the Committee, on each
annual anniversary date of a Disinterested Director's initial appointment of
membership to the Committee and the corresponding initial grant of options, an
Internal Director/Chief Executive Officer shall be granted nonqualified options
to purchase 15,000 shares of Common Stock, an Internal Director/Vice President
of Research and Development shall be granted nonqualified options to purchase
10,000 shares of Common Stock, and an Internal Director/Other shall be granted
nonqualified options to purchase 1,000 shares of Common Stock. Subsequently
appointed Committee Members shall receive option grants based upon the formula
applicable to their Disinterested Director category if the duties and
responsibilities of the position delineated within the category remain
substantially the same as those for the position on the date of the adoption of
this Plan.
(c) Subject to the provisions of this Subsection, on each date that a
Qualifying External Director is re-elected to the Board of Directors, such
Qualifying External Director shall be granted nonqualified options to purchase
2,500 shares of Common Stock. All options granted pursuant to this Section 4(c)
shall vest six months from the date of grant. No option grants shall be made to
a Qualifying External Director under this Subsection in a calendar year when
such Qualifying External Director received a 2,500 share option grant under
Subsection 6(a)(4) of the Company's 1995 Long-Term Incentive Plan or under
Section 6 of the Company's 1996 Directors' Stock Option Plan. No 2,500 share
option grants shall be made under this Subsection (i) after December 31, 1998,
to a Qualifying External Director that does not own at least 10,000 shares of
the Common Stock, in the case of those directors serving on the Company's Board
of Directors on December 14, 1995, or (ii) in the case of other Qualifying
External Directors (i.e., those not described in clause (i)), after the third
anniversary of their appointment or election to the Company's Board of Directors
if they do not own at least 10,000 shares of the Common Stock by such third
anniversary.
(d) The purchase price or prices for Common Stock subject to an option
granted under Section 4(b) or Section 4(c) shall be 100% of the Fair Market
Value of the Common Stock on the Date of Grant. Neither Section 4(b) nor Section
4(c) shall be amended more than once every six months, other than to comport
with changes in the Code or in the Employee Retirement Income Security Act of
1974, as amended or the rules promulgated thereunder.
(e) Options may be granted by the Committee prior to this Plan Adoption
Date, but shall be subject to approval of this Plan by the shareholders of the
Company.
5. Eligibility
Incentive stock options to purchase Common Stock may be granted under
Section 4(a) of this Plan to such employees of the Company or its Subsidiaries
(including any director who is also an employee of the Company or one of its
Subsidiaries) as shall be determined by the Committee. Nonqualified stock
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options to purchase Common Stock may be granted under Section 4(a) of this Plan
to such employees or directors of the Company or its Subsidiaries as shall be
determined by the Committee. The Committee shall determine which persons are to
be granted options under Section 4(a) of this Plan, the number of options, the
number of shares subject to each option, the exercise price or prices of each
option, the vesting and exercise period of each option, whether an option may be
exercised as to less than all of the Common Stock subject thereto, and such
other terms and conditions of each option, if any, as are not inconsistent with
the provisions of this Plan. In addition, the Committee may, in its sole
discretion, provide for vesting of stock options to accelerate upon a change in
control of the Company as defined in an applicable Agreement ("Change in
Control") and enable an employee to "put" the excess of the fair market value
over the exercise price of the options to the Company in the event of a Change
in Control. In connection with the granting of incentive stock options, the
aggregate Fair Market Value (determined at the Date of Grant of an incentive
stock option) of the shares with respect to which incentive stock options are
exercisable for the first time by an Optionee during any calendar year (under
all such plans of the Optionee's employer corporation and its parent and
subsidiary corporations as defined in Section 424 of the Code) shall not exceed
$100,000 or such other amount as from time to time provided in (S)422(d) of the
Code or any successor provision.
6. Exercise Price
The purchase price or prices for Common Stock subject to an option (the
"Exercise Price") granted pursuant to Section 4(a) of this Plan shall be
determined by the Committee at the Date of Grant; provided, however, that (a)
the Exercise Price for any option shall not be less than 100% of the Fair Market
Value of the Common Stock on the Date of Grant, and (b) if the Optionee owns
more than 10 percent of the total combined voting power of all classes of stock
of the Company or its parent or any of its subsidiaries, as more fully described
in (S)422(b)(6) of the Code or any successor provision (such shareholder is
referred to herein as a "10-Percent Stockholder"), the Exercise Price for any
incentive stock option granted to such Optionee shall not be less than 110% of
the Fair Market Value of the Common Stock on the Date of Grant.
7. Term of Stock Options and Limitations on Right to Exercise
No incentive stock option granted pursuant to Section 4(a) of this Plan
shall be exercisable (a) more than five years after the Date of Grant with
respect to a 10-Percent Stockholder, and (b) more than ten years after the Date
of Grant with respect to all persons other than 10-Percent Stockholders. No
nonqualified stock option granted pursuant to Section 4(a) of this Plan shall be
exercisable more than ten years after the Date of Grant. Nonqualified stock
options granted to members of the Committee pursuant to Section 4(b) or to
External Directors pursuant to Section 4(c) of this Plan shall be exercisable
for ten years, except that in the event of death or termination of such member
as a director and employee of the Company, such nonqualified stock options shall
only be exercisable for one year following the date of such member's death or
termination (or if shorter, the remaining term of the option). The Company shall
not be required to issue any fractional shares upon the exercise of any options
granted under this Plan. No Optionee nor his legal representatives, legatees or
distributees, as the case may be, will be, or will be deemed to be, a holder of
any shares subject to an option unless and until said option has been exercised
and the purchase price of the shares in respect of which the option has been
exercised has been paid. An option shall not be exercisable except by the
Optionee or by a person who has obtained the Optionee's rights under the option
by will or under the laws of descent and distribution.
8. Termination of Employment
The Committee shall determine at the Date of Grant what conditions shall
apply to the exercise of an option granted under Section 4(a) in the event an
Optionee shall cease to be employed by the Company
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or a Subsidiary for any reason. In the event of the death of an Optionee while
in the employ or while serving as a director of the Company or a Subsidiary, the
option theretofore granted to him shall be exercisable by the executor or
administrator of the Optionee's estate, or if the Optionee's estate is not in
administration, by the person or persons to whom the Optionee's right shall have
passed under the Optionee's will or under the laws of descent and distribution,
within the year next succeeding the date of death or such other period as may be
specified in the Option Agreement, but in no case later than the expiration date
of such option, and then only to the extent that the Optionee was entitled to
exercise such option at the date of his death. Neither this Plan nor any option
granted hereunder is intended to confer upon any Optionee any rights with
respect to continuance of employment or other utilization of his services by the
Company or by a Subsidiary, nor to interfere in any way with his right or that
of his employer to terminate his employment or other services at any time
(subject to the terms of any applicable contract).
9. Dilution or Other Adjustments
In the event that there is any change in the Common Stock subject to this
Plan or subject to options granted hereunder as the result of any stock dividend
on, dividend of or stock split or stock combination of, or any like change in,
stock of the same class or in the event of any change in the capital structure
of the Company, the Board of Directors or the Committee shall make such
adjustments with respect to options, or any provisions of this Plan, as it deems
appropriate to prevent dilution or enlargement of option rights.
10. Expiration and Termination of this Plan
Options may be granted at any time under Section 4(a) of this Plan and as
specified under Section 4(b) and Section 4(c) of this Plan prior to ten years
from this Plan Adoption Date, as long as the total number of shares which may be
issued pursuant to options granted under this Plan does not (except as provided
in Section 9 above) exceed the limitations of Section 3 above. This Plan may be
abandoned, suspended or terminated at any time by the Board of Directors of the
Company except with respect to any options then outstanding under this Plan.
11. Restrictions on Issuance of Shares
(a) The Company shall not be obligated to sell or issue any shares upon
the exercise of any option granted under this Plan unless:
(i) the shares with respect to which such option is being exercised
have been registered under applicable federal securities laws or are exempt
from such registration;
(ii) the prior approval of such sale or issuance has been obtained
from any state regulatory body having jurisdiction; and
(iii) in the event the Common Stock has been listed on any exchange,
the shares with respect to which such option is being exercised have been
duly listed on such exchange in accordance with the procedure specified
therefor.
The Company shall be under no obligation to effect or obtain any listing,
registration, qualification, consent or approval with respect to shares issuable
on any option.
If the shares to be issued upon the exercise of any option granted under
this Plan are intended to be issued by the Company in reliance upon the
exemptions from the registration requirements of applicable federal securities
laws, the Optionee, if so requested by the Company, shall furnish to the Company
such
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evidence and representations, including an opinion of counsel, satisfactory to
it, as the Company may reasonably request.
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 Common 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.
(b) No option granted pursuant to this Plan shall be transferable by the
Optionee other than by will or the laws of descent and distribution or pursuant
to a "qualified domestic relations order" as defined in the Code.
(c) Any Common Stock issued pursuant to the exercise of an option granted
pursuant to this Plan shall not be transferred until at least 6 months have
elapsed from the later of (i) the date of grant of such option or (ii) this Plan
Adoption Date to the date of disposition of the Common Stock underlying such
option.
(d) The Board of Directors or Committee may impose such other restrictions
on the ownership and transfer of shares issued pursuant to this Plan as it deems
desirable; any such restrictions shall be set forth in any Option Agreement
entered into hereunder.
12. Proceeds
The proceeds to be received by the Company upon exercise of any option
granted under this Plan may be used for any proper purposes.
13. Amendment of this Plan
Except as provided in Section 4(b) and Section 4(c) of this Plan, the Board
of Directors may amend this Plan from time to time in such respects as it may
deem advisable in its sole discretion or in order that the options granted
hereunder shall conform to any change in applicable laws, including tax laws, or
in regulations or rulings of administrative agencies or in order that options
granted or stock acquired upon exercise of such options may qualify for
simplified registration under applicable securities or other laws; provided,
however, that, to the extent required by Rule 16b-3 and the Securities and
Exchange Commission interpretations and releases thereunder, no amendment may be
made without the consent of shareholders which would materially (a) increase the
benefits accruing to participants under this Plan, (b) increase the number of
securities which may be issued under this Plan, other than in accordance with
Section 9 hereof, or (c) modify the requirements as to eligibility for
participation in this Plan.
14. Payment Upon Exercise
Upon the exercise of any option granted under this Plan, the Company may
make financing available to the Optionee for the purchase of the Common Stock
that may be acquired pursuant to the exercise of such option on such terms as
the Committee shall specify. An Optionee may pay the Exercise Price of the
shares of Common Stock as to which an option is being exercised by the delivery
of cash, a certified cashier's check or, at the Company's option, by the
delivery of shares of Common Stock having a Fair Market Value on the date
immediately preceding the exercise date equal to the exercise price.
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If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, as amended, any option granted under
this Plan may be exercised by a broker-dealer acting on behalf of an Optionee if
(a) the broker-dealer has received from the Optionee instructions signed by the
Optionee requesting the Company to deliver the shares of Common Stock subject to
such option to the broker-dealer on behalf of the Optionee and specifying the
account into which such shares should be deposited, (b) adequate provision has
been made with respect to the payment of any withholding taxes due upon such
exercise, and (c) 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.
15. Shareholders' Approval
This Plan is subject to approval by the shareholders of the Company and
will be submitted for approval to the shareholders of the Company.
16. Liability of the Company
Neither the Company, its directors, officers or employees, nor any
Subsidiary which is in existence or hereafter comes into existence, shall be
liable to any Optionee or other person if it is determined for any reason by the
Internal Revenue Service or any court having jurisdiction that any incentive
stock option granted hereunder does not qualify for tax treatment as an
incentive stock option under Section 422 of the Code.
AMENDED AND RESTATED as of November 18, 1998.
CUSTOMTRACKS CORPORATION
By: /s/ Ronald A. Woessner
--------------------------------
Its: Vice President
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Exhibit 10.4
CUSTOMTRACKS CORPORATION
1995 LONG-TERM INCENTIVE PLAN
(Amended and Restated as of November 1998)
Section 1. Purpose
The purpose of the CustomTracks Corporation 1995 Long-Term Incentive Plan
(hereinafter called the "Plan") is to advance the interests of CustomTracks
Corporation (hereinafter called the "Company") by strengthening the ability of
the Company to attract, on its behalf and on behalf of its Subsidiaries (as
hereinafter defined), and retain personnel of high caliber through encouraging a
sense of proprietorship by means of stock ownership.
Section 2. Definitions
"Award" shall mean a grant or award under Section 6 through 9, inclusive, of the
Plan, as evidenced in a written document delivered to a Participant as provided
in Section 10(b).
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time.
"Committee" shall mean a committee of the Board of Directors comprised of at
least two directors. Members of the Committee shall be selected by the Board of
Directors. To the extent necessary to comply with the requirements of Rule
16b-3, the Committee shall consist of two or more Disinterested Directors. Also,
if the requirements of (S)162(m) of the Code are intended to be met, the
Committee shall consist of two or more "outside directors" within the meaning of
(S)162(m) of the Code.
"Common Stock" shall mean the Common Stock of the Company, par value $.01 per
share.
"Date of Grant" shall mean the date on which an Award is made pursuant to this
Plan.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due the
Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean the
Participant's estate.
"Disinterested Director" shall mean a director who is not, during the one year
prior to service as an administrator of the Plan, granted or awarded an option
pursuant to the Plan or any other plan of the Company or any of its affiliates
(except for grants or awards pursuant to Section 6(a) of the Plan or as may be
permitted by Rule 16b-3 promulgated under the Exchange Act). Disinterested
Directors shall fall within one of the following categories: (i) External
Director; (ii) Internal Director/Chief Executive Officer; (iii) Internal
Director/Vice President of Research and Development; and (iv) Internal
Director/Other.
"Effective Date" shall mean the first business day following the date of the
1995 annual meeting of the shareholders of the Company.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.
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"External Director" shall mean a Director of the Company that is not an Internal
Director.
"Fair Market Value" shall mean the closing sale price (or average of the quoted
closing bid and asked prices if there is no closing sale price reported) of the
Common Stock on the date specified as reported by the Nasdaq National Market, or
by the principal national stock exchange on which the Common Stock is then
listed. If there is no reported price information for such date, the Fair
Market Value will be determined by the reported price information for Common
Stock on the day nearest preceding such date.
"Incentive Stock Option" shall mean a stock option granted under Section 6 that
is intended to meet the requirements of Section 422 of the Code (or any
successor provision).
"Internal Director" shall mean a Director of the Company who is an employee of
the Company or a Subsidiary.
"Nonqualified Stock Option" shall mean a stock option granted under Section 6
that is not intended to be an Incentive Stock Option.
"Option" shall mean an Incentive Stock Option or a Nonqualified Stock Option.
"Optionee" shall mean the person to whom an option is granted under the Plan or
who has obtained the right to exercise an option in accordance with the
provisions of the Plan.
"Participant" shall mean an individual who is selected by the Committee to
receive an Award under the Plan.
"Payment Value" shall mean the dollar amount assigned to a Performance Share
which shall be equal to the Fair Market Value of the Common Stock on the day of
the Committee's determination under Section 7(c) with respect to the applicable
Performance Cycle.
"Performance Cycle" or "Cycle" shall mean the period of years selected by the
Committee during which the performance is measured for the purpose of
determining the extent to which an award of Performance Shares has been earned.
"Performance Goals" shall mean the objectives established by the Committee for a
Performance Cycle, for the purpose of determining the extent to which
Performance Shares that have been contingently awarded for such Cycle are
earned.
"Performance Share" shall mean an award granted pursuant to Section 7 of the
Plan expressed as a share of Common Stock.
"Plan Adoption Date" means the later of the date on which the Plan is adopted by
the Board of Directors of the Company and by the shareholders of the Company in
accordance with Rule 16b-3.
"Qualifying External Director" shall mean an External Director who is not a
person, an employee or affiliate of a person, or a designee to the Board of
Directors of a person (in each case, other than a person that is a
strategic/business partner of the Company), that is required to file a statement
under Section 13(d) or 13(g) of the Exchange Act or the rules, regulations, and
interpretations of the Securities and Exchange Commission thereunder with
respect to ownership of the Common Stock.
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"Restricted Period" shall mean the period of years selected by the Committee
during which a grant of Restricted Stock or Restricted Stock Units may be
forfeited to the Company.
"Restricted Stock" shall mean shares of Common Stock contingently granted to a
Participant under Section 8 of the Plan.
"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.
"Stock Unit Award" shall mean an award of Common Stock or units granted under
Section 9.
"Subsidiary" shall mean any now existing or hereafter organized or acquired
corporation or other entity of which more than fifty percent (50%) of the issued
and outstanding voting stock or other economic interest is owned or controlled
directly or indirectly by the Company or through one or more Subsidiaries of the
Company and, in addition, shall include Alcatel Amtech S.A. for so long as the
Company directly or indirectly owns more than forty percent (40%) of that
company's issued and outstanding stock and WaveLink Technologies, Inc. for so
long as the Company directly or indirectly owns or holds then exercisable rights
to acquire more than twenty percent (20%) of that company's issued and
outstanding stock.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall have sole
and complete authority to adopt, alter and repeal such administrative rules,
guidelines and practices governing the operation of the Plan as it shall from
time to time deem advisable, and to construe, interpret, and administer the
terms and provisions of the Plan and the agreements thereunder. The
determinations and interpretations made by the Committee are final and
conclusive.
Section 4. Eligibility
All employees and non-employee consultants and advisors (other than members of
the Committee), in each case, who, in the opinion of the Committee, in each
case, have the capacity for contributing in a substantial measure to the
successful performance of the Company are eligible to receive Awards under the
Plan. In addition, External Directors are eligible to receive Awards of Options
pursuant to Section 6(a)(4).
Section 5. Maximum Amount Available for Awards
(a) The maximum number of shares of Common Stock in respect of which
Awards may be made under the Plan shall be a total of 1,000,000 shares of Common
Stock. Of that amount, the maximum number of shares of Common Stock in respect
of which Options may be granted under the Plan shall be 1,000,000 shares. In
addition, no Participant may be granted Options for more than 400,000 shares of
Common Stock in the aggregate during the term of the Plan. Shares of Common
Stock may be made available from the authorized but unissued shares of the
Company or from shares reacquired by the Company, including shares purchased in
the open market. In the event that (i) an Option is terminated unexercised as to
any shares of Common Stock covered thereby, or (ii) any Award in respect of
shares is cancelled or forfeited for any reason under the Plan without the
delivery of shares of Common Stock, such shares shall thereafter be again
available for award pursuant to the Plan.
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(b) In the event that the Committee shall determine that any stock
dividend, recapitalization, reorganization, merger, consolidation, split-up,
spin-off, combination, exchange of shares, warrants or rights offering to
purchase Common Stock at a price substantially below fair market value, or other
similar corporate event affects the Common Stock such that an adjustment is
required in order to preserve the benefits or potential benefits intended to be
made available under the Plan, then the Committee shall adjust appropriately any
or all of (1) the number and kind of shares which thereafter may be awarded or
optioned and sold under the Plan, (2) the number and kind of shares subject of
Awards, and (3) the grant, exercise or conversion price with respect to any of
the foregoing and/or, if deemed appropriate, make provision for cash payment to
a Participant or a person who has an outstanding Award; provided, however, that
the number of shares subject to any Option or other Award shall always be a
whole number.
Section 6. Stock Options
(a) Grant; Eligibility
(1) Subject to the provisions of the Plan, the Committee shall have
sole and complete authority to determine the Employees to whom Options
shall be granted, the number of shares to be covered by each Option, the
option price therefor and the conditions and limitations applicable to the
exercise of the Option.
(2) The Committee shall have the authority to grant Incentive Stock
Options, or to grant Nonqualified Stock Options, or to grant both types of
options. In the case of Incentive Stock Options, the terms and conditions
of such grants shall be subject to and comply with the Code and relevant
regulations. Incentive Stock Options to purchase Common Stock may be
granted to such employees of the Company or its Subsidiaries (including any
director who is also an employee of the Company or one of its Subsidiaries)
as shall be determined by the Committee. Nonqualified Stock Options to
purchase Common Stock may be granted to such Participants as shall be
determined by the Committee. Neither the Company nor any of its
Subsidiaries or any of their respective directors, officers or employees,
shall be liable to any Optionee or other person if it is determined for any
reason by the Internal Revenue Service or any court having jurisdiction
that any Incentive Stock Option granted hereunder does not qualify for tax
treatment as an Incentive Stock Option under the then applicable provisions
of the Code.
(3) On the date an Internal Director is first appointed, or
reappointed, as a Committee member by the Board of Directors: (1) an
Internal Director/Chief Executive Officer shall automatically be granted
nonqualified options to purchase 18,750 shares of Common Stock, an Internal
Director/Vice President of Research and Development shall automatically be
granted nonqualified options to purchase 12,500 shares of Common Stock, and
an Internal Director/Other shall automatically be granted nonqualified
options to purchase 1,250 shares of Common Stock; provided that, such
automatic option grants shall only be made if the Company has consolidated
net income for the calendar year immediately preceding the date of the
appointment. Subsequently appointed Internal Director Committee Members, if
any, shall receive option grants based upon the formula applicable to their
Disinterested Director category if the duties and responsibilities of their
category of position remain substantially the same as those for that
position on the date of the adoption of this Plan. All options granted
pursuant to this Subsection 6(a)(3) shall be fully vested at the date of
grant. No option grants shall be made to an Internal Director under this
Subsection in a calendar year when such Internal Director received an
option grant under Section 4(b) of the Company's 1992 Stock Option Plan.
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(4) Subject to the provisions of this Subsection, on each date that
a Qualifying External Director is re-elected to the Board of Directors,
such Qualifying External Director shall be granted nonqualified options to
purchase 2,500 shares of Common Stock. All options granted pursuant to this
Subsection 6(a)(4) shall vest six months from the date of grant. No option
grants shall be made to a Qualifying External Director under this
Subsection in a calendar year when such Qualifying External Director
received a 2,500 share option grant under Section 4(c) of the Company's
1992 Stock Option Plan or under Section 6 of the Company's 1996 Directors'
Stock Option Plan. No 2,500 share option grants shall be made under this
Subsection (i) after December 31, 1998, to a Qualifying External Director
that does not own at least 10,000 shares of the Common Stock, in the case
of those directors serving on the Company's Board of Directors on December
14, 1995, or (ii) in the case of other Qualifying External Directors (i.e.,
those not described in clause (i)), after the third anniversary of their
appointment or election to the Company's Board of Directors if they do not
own at least 10,000 shares of the Common Stock by such third anniversary.
(5) To the extent necessary to comply with Rule 16b-3, Subsections
6(a)(3) and 6(a)(4) shall not be amended more than once every six months,
other than to comport with changes in the Code or in the Employee
Retirement Income Security Act of 1974, as amended, or the rules
promulgated thereunder.
(b) The Committee shall, in its discretion, establish the exercise
price at the time each Option is granted, which in the case of Nonqualified
Stock Options shall not be less than 100% of the Fair Market Value of the
Common Stock on the Date of Grant, or in the case of grants of Incentive
Stock Options, shall not be less than 100% of the Fair Market Value of the
Common Stock on the Date of Grant or such greater amount as may be
prescribed by the Code.
(c) Exercise
(1) Each Option shall be exercisable at such times and subject to
such terms and conditions as the Committee may, in its sole discretion,
specify in the applicable grant or thereafter; provided, however, that in
no event may any Option granted hereunder be exercisable after the
expiration of ten years from the date of grant. The Committee may impose
such conditions with respect to the exercise of Options, including without
limitation, any relating to the application of federal or state securities
laws, as it may deem necessary or advisable.
(2) No shares shall be delivered pursuant to any exercise of an
Option until payment in full of the option price therefore is received by
the Company. Such payment may be made in cash, or its equivalent, or, if
and to the extent permitted by the Committee, by exchanging shares of
Common Stock owned by the Optionee (which are not the subject of any pledge
or other security interest), or by a combination of the foregoing, provided
that the combined value of all cash and cash equivalents and the Fair
Market Value of any such Common Stock so tendered to the Company, valued as
of the date of such tender, is at least equal to such option price.
If the shares to be purchased are covered by an effective
registration statement under the Securities Act of 1933, as amended, any
Option may be exercised by a broker-dealer acting on behalf of an Optionee
if (a) the broker-dealer has received from the Optionee instructions signed
by the Optionee requesting the Company to deliver the shares of Common
Stock subject to such option to the broker-dealer on behalf of the Optionee
and specifying the account into which such shares should be deposited, (b)
adequate provision has been made with respect to the payment of any
withholding taxes due upon such exercise, and (c) the broker-dealer and the
Optionee have
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otherwise complied with Section 220.3(e)(4) of Regulation T, 12 CFR Part
220, or any successor provision.
(3) The Company, in its sole discretion, may lend money to an
Optionee, guarantee a loan to an Optionee or otherwise assist an Optionee
to obtain the cash necessary to exercise all or any portion of an Option
granted under the Plan.
(4) The Company shall not be required to issue any fractional
shares upon the exercise of any Options granted under this Plan. No
Optionee nor an Optionee's legal representatives, legatees or distributees,
as the case may be, will be, or will be deemed to be, a holder of any
shares subject to an option unless and until said option has been exercised
and the purchase price of the shares in respect of which the option has
been exercised has been paid. Unless otherwise provided in the agreement
applicable thereto, an Option shall not be exercisable except by the
Optionee or by a person who has obtained the Optionee's rights under the
Option by will or under the laws of descent and distribution or pursuant to
a "qualified domestic relations order" as defined in the Code.
(5) Any Common Stock issued to a person subject to the provisions
of Section 16(b) of the Exchange Act, as interpreted by the rules,
regulations, and interpretations of the Securities and Exchange Commission
thereunder, pursuant to the exercise of an Option granted under this Plan
and intended to comply with the requirements of Rule 16b-3 shall not be
transferred until at least 6 months have elapsed from the later of (i) the
date of grant of such Option or (ii) the Plan Adoption Date to the date of
disposition of the Common Stock underlying such option.
(d) No Incentive Stock Options granted pursuant to this Section 6 shall
be exercisable (a) more than five years (or such other period of time as from
time-to-time provided in the-then applicable provisions of the Code governing
Incentive Stock Options) after the Date of Grant with respect to an Optionee who
owns 10-Percent or more of the outstanding Common Stock (within the meaning of
the Code), and (b) more than ten years after the Date of Grant with respect to
all other Optionees. No Nonqualified Stock Options shall be exercisable more
than ten years after the Date of Grant.
Section 7. Performance Shares
(a) The Committee shall have sole and complete authority to determine
the Employees who shall receive Performance Shares, the number of such shares
for each Performance Cycle, the Performance Goals on which each Award shall be
contingent, the duration of each Performance Cycle, and the value of each
Performance Share. There may be more than one Performance Cycle in existence at
any one time, and the duration of Performance Cycles may differ from each other.
(b) The Committee shall establish Performance Goals for each Cycle on
the basis of such criteria and to accomplish such objectives as the Committee
may from time-to-time select. During any Cycle, the Committee may adjust the
Performance Goals for such Cycle as it deems equitable in recognition of unusual
or non-recurring events affecting the Company, changes in applicable tax laws or
accounting principles, or such other factors as the Committee may determine.
(c) As soon as practicable after the end of a Performance Cycle, the
Committee shall determine the number of Performance Shares that have been earned
on the basis of performance in relation to the established Performance Goals.
Payment Values of earned Performance Shares shall be distributed to the
Participant or, if the Participant has died, to the Participant's Designated
Beneficiary, as soon as practicable after the expiration of the Performance
Cycle and the Committee's determination above. The
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Committee shall determine whether Payment Values are to be distributed in the
form of cash or shares of Common Stock.
(d) In the sole and complete discretion of the Committee, an Award
granted under this Section 7 may provide the Participant with dividends or
dividend equivalents (payable on a current or deferred basis) and cash payments
in lieu of or in addition to an Award.
Section 8. Restricted Stock
(a) Subject to the provisions of the Plan, the Committee shall have sole
and complete authority to determine the Employees to whom shares of Restricted
Stock shall be granted, the number of shares of Restricted Stock to be granted
to each Participant, the duration of the Restricted Period during which, and the
conditions under which, the Restricted Stock may be forfeited to the Company,
and the other terms and conditions of such awards. The Restricted Period may be
shortened, lengthened or waived by the Committee at any time in its discretion
with respect to one or more Participants or Awards outstanding, subject to the
provisions of any applicable agreement.
(b) Shares of Restricted Stock may not be sold, assigned, transferred,
pledged or otherwise encumbered, except as herein provided, during the
Restricted Period. Certificates issued in respect of shares of Restricted Stock
shall be registered in the name of the Participant and deposited by such
Participant, together with a stock power endorsed in blank, with the Company. At
the expiration of the Restricted Period, the Company shall deliver such
certificates to the Participant or the Participant's legal representative,
except to the extent such Restricted Stock have been forfeited to the Company
under the terms and conditions of the Award. Payment, if any, for Restricted
Stock Units shall be made to the Company in cash or shares of Common Stock, as
determined at the sole discretion of the Committee.
(c) In the sole and complete discretion of the Committee, an Award
granted under this Section 8 may provide the Participant with dividends or
dividend equivalents (payable on a current or deferred basis) and cash payments
in lieu of or in addition to an Award.
Section 9. Other Stock Based Awards
(a) In addition to granting Options, Performance Shares, and Restricted
Stock, the Committee shall have sole and complete authority to grant to
Participants Stock Unit Awards that can be in the form of Common Stock or units
(including restricted stock units), the value of which is based, in whole or in
part, on the value of Common Stock. Subject to the provisions of the Plan,
including Section 10(b) below, Stock Unit Awards shall be subject to such terms,
restrictions, conditions, vesting requirements and payment rules (all of which
are sometimes hereinafter collectively referred to as "rules") as the Committee
may determine in its sole and complete discretion at the time of grant. The
rules need not be identical for each Stock Unit Award.
(b) A Stock Unit Award may be granted subject to the following rules:
(1) Any shares of Common Stock that are part of a Stock Unit Award
may not be assigned, sold, transferred, pledged or otherwise encumbered
prior to the date on which the shares are issued or, if later, the date
provided by the Committee at the time of grant of the Stock Unit Award.
(2) Stock Unit Awards may provide for the payment of cash
consideration by the person to whom such Award is granted or provide that
the Award, and any Common Stock to be
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issued in connection therewith, if applicable, shall be delivered without
the payment of cash consideration, provided that for any Common Stock to be
purchased in connection with a Stock Unit Award the purchase price shall be
at least 50% of the Fair Market Value of such Common Stock on the date such
Award is granted.
(3) Stock Unit Awards may relate in whole or in part to certain
performance criteria established by the Committee at the time of grant.
(4) Stock Unit Awards may provide for deferred payment schedules
and/or vesting over a specified period of employment.
(5) In such circumstances as the Committee may deem advisable, the
Committee may waive or otherwise remove, in whole or in part, any
restriction or limitation to which a Stock Unit Award was made subject at
the time of grant.
(c) In the sole and complete discretion of the Committee, an Award
pursuant to this Section 9 may provide the Participant with dividends or
dividend equivalents (payable on a current or deferred basis) and cash payments
in lieu of or in addition to an Award.
Section 10. General Provisions
(a) The Company and its Subsidiaries shall have the right to deduct from
all amounts paid to a Participant in cash (whether under the Plan or otherwise)
any taxes required by law to be withheld in respect of Awards under the Plan. In
the case of payments of Awards in the form of Common Stock, the Employer may
require the Participant to pay to the Employer the amount of any taxes required
to be withheld with respect to such Common Stock. However, if permitted by the
Committee or under the terms of the applicable agreement, the Participant may
pay all or any portion of the taxes required to be withheld by the Employer or
paid by the Participant with respect to such Common Stock by electing to have
the Employer withhold shares of Common Stock, or by delivering previously owned
shares of Common Stock, having a Fair Market Value equal to the amount required
to be withheld or paid. The Participant must make the foregoing election on or
before the date that the amount of tax to be withheld is determined ("Tax
Date"). Any such election is irrevocable and subject to disapproval by the
Committee. If the Participant is subject to the short-swing profits recapture
provisions of Section 16(b) of the Exchange Act, then the applicable agreement
shall not provide the Participant an election, or, if it does, any such election
shall be subject to the restrictions imposed by Rule 16b-3.
(b) Each Award hereunder shall be evidenced in writing, delivered to the
Participant, and shall specify the terms and conditions thereof and any rules
applicable thereto, including but not limited to the effect on such Award of the
death, retirement, disability or other termination of employment of the
Participant and the effect thereon, if any, of a change in control of the
Company.
(c) Unless otherwise provided in the agreement applicable thereto, no
Award shall be assignable or transferable except by will or under the laws of
descent and distribution or pursuant to a "qualified domestic relations order"
as defined in the Code, and no right or interest of any Participant shall be
subject to any lien, obligation or liability of the Participant.
(d) No person shall have any claim or right to be granted an Award.
Further, the Company and its Subsidiaries expressly reserve the right at any
time to dismiss a Participant free from any liability, or any claim under the
Plan, except as provided herein or in any agreement entered into with respect to
an Award. Neither the Plan nor any Award granted hereunder is intended to confer
upon any Participant any rights
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<PAGE>
with respect to continuance of employment or other utilization of his or her
services by the Company or by a Subsidiary, nor to interfere in any way with his
or her right or that of his or her employer to terminate his or her employment
or other services at any time (subject to the terms of any applicable contract).
The conditions to apply to the exercise of an Award in the event an Participant
ceases to be employed by the Company or a Subsidiary for any reason shall be
determined by the Committee, and such conditions shall be specified in the
written agreement evidencing the award.
(e) Subject to the provisions of the applicable Award, no Participant or
Designated Beneficiary shall have any rights as a stockholder with respect to
any shares of Common Stock to be distributed under the Plan until he or she has
become the holder thereof. Notwithstanding the foregoing, in connection with
each grant of Restricted Stock or Stock Unit Award hereunder, the applicable
Award shall specify if and to what extent the Participant shall not be entitled
to the rights of a stockholder in respect of such Restricted Stock or Stock Unit
Award.
(f) The validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Texas (without giving effect to its conflicts of laws rules) and, to the extent
applicable, federal law.
(g) Subject to the approval of the stockholders of the Company, the Plan
shall be effective on April 21, 1995. No options or Awards may be granted under
the Plan after April 20, 2005; however, all previous Awards made that have not
expired under their original terms or will not then expire at the time the Plan
expires will remain outstanding.
(h) Restrictions on Issuance of Shares
(1) The Company shall not be obligated to sell or issue any Shares
upon the exercise or maturation of any Award granted under the Plan unless:
(i) the shares pertaining to such Award have been registered under
applicable federal and state securities laws or are exempt from such
registration; (ii) the prior approval of such sale or issuance has been
obtained from any state regulatory body having jurisdiction; and (iii) in
the event the Common Stock has been listed on any exchange, the shares
pertaining to such Award have been duly listed on such exchange in
accordance with the procedure specified therefor. The Company shall be
under no obligation to effect or obtain any listing, registration,
qualification, consent or approval with respect to shares pertaining to any
Award granted under the Plan. If the shares to be issued upon the exercise
or maturation of any Award granted under the Plan are intended to be issued
by the Company in reliance upon the exemptions from the registration
requirements of applicable federal and state securities laws, the recipient
of the Award, if so requested by the Company, shall furnish to the Company
such evidence and representations, including an opinion of counsel,
satisfactory to it, as the Company may reasonably request.
(2) 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 Common Stock pertaining to
any Award granted under the Plan 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.
(i) The Board of Directors or Committee may impose such other
restrictions on the ownership and transfer of shares issued pursuant to this
Plan as it deems desirable; any such restrictions shall be set forth in any
agreement referenced in Section 10(b).
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<PAGE>
(j) Except as provided in Section 6(a)(5) of the Plan, the Board of
Directors may amend, abandon, suspend or terminate the Plan or any portion
thereof at any time in such respects as it may deem advisable in its sole
discretion, provided that no amendment shall be made without stockholder
approval (including an increase in the maximum number of shares of Common Stock
in respect of which Awards may be made under the Plan) if such stockholder
approval is necessary to comply with any tax or regulatory requirement,
including for these purposes any approval requirement that is a prerequisite for
exemptive relief under Section 16(b) of the Act.
(k) In order to preserve a Participant's rights under an Award in the
event of a change in control of the Company, the Committee in its discretion
may, at the time an Award is made or any time thereafter, take one or more of
the following actions: (i) provide for the acceleration of any time period
relating to the exercise of the Award, (ii) provide for the purchase of the
Award upon the Participant's request for an amount of cash or other property
that could have been received upon the exercise or realization of the Award had
the Award been currently exercisable or payable, (iii) adjust the terms of the
Award in a manner determined by the Committee to reflect the change in control,
(iv) cause the Award to be assumed, or new rights substituted therefor, by
another entity, or (v) make such other provision as the Committee may consider
equitable and in the best interests of the Company.
AMENDED AND RESTATED as of November 18, 1998.
CUSTOMTRACKS CORPORATION
By: /s/ Ronald A. Woessner
------------------------------
Its: Vice President
------------------------------
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<PAGE>
Exhibit 10.5
CUSTOMTRACKS CORPORATION
1996 DIRECTORS' STOCK OPTION PLAN
(Amended and Restated as of November 1998)
Section 1. Purpose
The purpose of the CustomTracks Corporation 1996 Directors' Stock Option
Plan (hereinafter called the "Plan") is to advance the interests of CustomTracks
Corporation (hereinafter called the "Company") by strengthening the ability of
the Company to attract, on its behalf, and retain non-employee directors of high
caliber through encouraging a sense of proprietorship by means of stock
ownership.
Section 2. Definitions
"Adoption Date" shall mean December 14, 1995.
"Board of Directors" shall mean the Board of Directors of the Company.
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time.
"Committee" shall mean a committee of the Board of Directors comprised
of at least two directors. Members of the Committee shall be selected by the
Board of Directors. To the extent necessary to comply with the requirements of
Rule 16b-3, the Committee shall consist of two or more Disinterested Directors.
Also, if the requirements of (S)162(m) of the Code are intended to be met, the
Committee shall consist of two or more "outside directors" within the meaning of
(S)162(m) of the Code.
"Common Stock" shall mean the Common Stock of the Company, par value
$.01 per share.
"Date of Grant" shall mean the date on which an Option is granted under
the Plan.
"Designated Beneficiary" shall mean the beneficiary designated by the
Participant, in a manner determined by the Committee, to receive amounts due the
Participant in the event of the Participant's death. In the absence of an
effective designation by the Participant, Designated Beneficiary shall mean the
Participant's estate.
"Disinterested Director" shall mean a director who has not been, during
the one year prior to service as an administrator of the Plan, granted or
awarded an option pursuant to the Plan or any other plan of the Company or any
of its affiliates (except for grants or awards pursuant to Section 6(a) of the
Plan or as may be permitted by Rule 16b-3 promulgated under the Exchange Act).
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
"External Director" shall mean a Director of the Company who is not an
employee of the Company or a subsidiary.
"Fair Market Value" shall mean the closing sales price (or average of
the quoted closing bid and asked prices if there is no closing sales price
reported) of the Common Stock on the date specified as reported by the Nasdaq
Stock Market, or by the principal national stock exchange on which the Common
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Stock is then listed. If there is no reported price information for such date,
the Fair Market Value will be determined by the reported price information for
Common Stock on the day nearest preceding such date.
"Option" shall mean a Stock Option granted pursuant to Section 6.
"Optionee" shall mean the person to whom an option is granted under the
Plan or who has obtained the right to exercise an option in accordance with the
provisions of the Plan.
"Participant" shall mean a person who receives an award of Options under
the Plan.
"Qualifying External Director" shall mean an External Director who is
not a person, an employee or affiliate of a person, or a designee to the Board
of Directors of a person (in each case, other than a person that is a
strategic/business partner of the Company), that is required to file a statement
under Section 13(d) or 13(g) of the Exchange Act or the rules, regulations, and
interpretations of the Securities and Exchange Commission thereunder with
respect to ownership of the Common Stock.
"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.
Section 3. Administration
The Plan shall be administered by the Committee. The Committee shall
have sole and complete authority to adopt, alter and repeal such administrative
rules, guidelines and practices governing the operation of the Plan as it shall
from time to time deem advisable, and to construe, interpret, and administer the
terms and provisions of the Plan and the agreements thereunder. The
determinations and interpretations made by the Committee are final and
conclusive.
Section 4. Eligibility
All Qualifying External Directors shall be eligible to receive awards of
Options under the Plan.
Section 5. Maximum Amount Available for Awards
Subject to the provisions of Section 9, the maximum number of shares of
Common Stock in respect of which Options may be granted under the Plan shall be
225,000 shares of Common Stock. No Participant may be granted Options for more
than 50,000 shares of Common Stock in the aggregate during the term of the Plan.
Shares of Common Stock may be made available from authorized but unissued shares
of the Company or from shares reacquired by the Company, including shares
purchased in the open market. In the event that an Option is terminated
unexercised as to any shares of Common Stock covered thereby, such shares shall
thereafter be again available for award pursuant to the Plan.
Section 6. Stock Options
(a) During the term of the Plan, on the date that a Qualifying External
Director is first appointed or elected to the Board of Directors after the
Adoption Date, such director shall be granted nonqualified Options to purchase
25,000 shares of Common Stock. Each Qualifying External Director serving on the
Board of Directors on the Adoption Date shall be granted nonqualified Options to
purchase 22,500 shares of Common Stock, effective as of the Adoption Date. In
addition, subject to the provisions of the last two sentences of this
Subsection, on each subsequent date that a Qualifying External Director is re-
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<PAGE>
elected to the Board of Directors, such director shall be granted nonqualified
Options to purchase 2,500 shares of Common Stock. All options granted pursuant
to this Subsection shall vest six months from the date of grant, subject to the
provisions of Subsection 11(j). No 2,500 share Option grant shall be made to a
Qualifying External Director under this Subsection in a calendar year when such
director received an Option grant under Section 4(c) of the Company's 1992 Stock
Option Plan or under Subsection 6(a)(4) of the Company's 1995 Long-Term
Incentive Plan. No 2,500 share Option grant shall be made under this Subsection,
(i) after December 31, 1998, to a Qualifying External Director who does not own
at least 10,000 shares of the Common Stock (in the case of directors serving on
the Board of Directors on the Adoption Date) or (ii) after the third anniversary
of a director's initial appointment or election to the Board of Directors if
such director does not own at least 10,000 shares of the Common Stock by such
third anniversary (in the case of all other Qualifying External Directors).
(b) All Options granted under the Plan prior to shareholder approval of
the Plan shall be subject to the approval of the Plan by the shareholders of the
Company.
(c) The exercise price for Options granted hereunder shall be 100% of
the Fair Market Value of the Common Stock on the Date of Grant.
(d) Each Option shall be exercisable at such times and subject to such
terms and conditions as specified in the applicable grant; provided, however,
that in no event may any Option granted hereunder be exercisable after the
expiration of ten years from the Date of Grant. The Committee may impose such
conditions with respect to the exercise of Options, including without
limitation, any relating to the application of federal or state securities laws,
as it may deem necessary or advisable.
(e) No shares shall be delivered pursuant to any exercise of an Option
until payment in full of the option price therefor is received by the Company.
Such payment may be made in cash, or its equivalent, or, if and to the extent
permitted by the Committee, by exchanging shares of Common Stock owned by the
Optionee (which are not the subject of any pledge or other security interest),
or by a combination of the foregoing, provided that the combined value of all
cash and cash equivalents and the Fair Market Value of any such Common Stock so
tendered to the Company, valued as of the date of such tender, is at least equal
to such option price.
If the shares to be purchased are covered by an effective registration
statement under the Securities Act of 1933, any Option may be exercised by a
broker-dealer acting on behalf of an Optionee if (a) the broker-dealer has
received from the Optionee instructions signed by the Optionee requesting the
Company to deliver the shares of Common Stock subject to such option to the
broker-dealer on behalf of the Optionee and specifying the account into which
such shares should be deposited, (b) adequate provision has been made with
respect to the payment of any withholding taxes due upon such exercise, and (c)
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.
(f) The Company shall not be required to issue any fractional shares
upon the exercise of any Options granted under the Plan. No Optionee or such
Optionee's legal representatives, legatees or distributees, as the case may be,
will be, or will be deemed to be, a holder of any shares subject to an Option
unless and until said Option has been exercised and the purchase price of the
shares in respect of which the Option has been exercised has been paid. Unless
otherwise provided in the agreement applicable thereto, an Option shall not be
exercisable except by the Optionee or by a person who has obtained the
Optionee's rights under the Option by will or under the laws of descent and
distribution or pursuant to a "qualified domestic relations order" as defined in
the Code.
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Section 7. Plan Amendments
To the extent necessary to comply with Rule 16b-3, Subsections 6(a) and
6(c) shall not be amended more than once every six months, other than to comport
with changes in the Code or in the Employee Retirement Income Security Act of
1974, as amended, or the rules promulgated thereunder. Except as provided in the
immediately preceding sentence, the Board of Directors may amend, abandon,
suspend or terminate the Plan or any portion thereof at any time in such
respects as it may deem advisable in its sole discretion, provided that no
amendment shall be made without shareholder approval if such approval is
necessary to comply with any tax or regulatory requirement, including for these
purposes any approval requirement that is a prerequisite for exemptive relief
under Section 16(b) of the Exchange Act.
Section 8. Restrictions on Transfer of Common Stock
Without the Company's prior written consent, any Common Stock issued to
a person subject to the provisions of Section 16(b) of the Exchange Act, as
interpreted by the rules, regulations, and interpretations of the Securities and
Exchange Commission thereunder, pursuant to the exercise of an Option granted
under the Plan and intended to comply with the requirements of Rule 16b-3 shall
not be transferred until at least six months after the later of (i) the date of
grant of such Option or (ii) the date on which the Plan is approved by the
Company's shareholders in accordance with Rule 16b-3.
Section 9. Adjustment to Shares
In the event that the Committee shall determine that any stock dividend,
recapitalization, reorganization, merger, consolidation, split-up, spin-off,
combination, exchange of shares, warrants or rights offering to purchase Common
Stock at a price substantially below Fair Market Value, or other similar
corporate event affects the Common Stock such that an adjustment is required in
order to preserve the benefits or potential benefits intended to be made
available under the Plan, then the Committee shall adjust appropriately any or
all of (i) the number and kind of shares which thereafter may be optioned under
the Plan, (ii) the number and kind of shares subject of Options, and (iii) the
exercise price with respect to any of the foregoing and/or, if deemed
appropriate, make provision for cash payment to a Participant or a person who
has an outstanding Option; provided, however, that the number of shares subject
to any Option shall always be a whole number.
Section 10. Effective Date
Subject to the approval of the shareholders of the Company, the Plan
shall be effective as of the Adoption Date.
Section 11. General Provisions
(a) The Company shall have the right to deduct from all amounts paid to
a Participant in cash (whether under the Plan or otherwise) any taxes required
by law to be withheld in respect of Options under the Plan. However, if
permitted by the Committee or under the terms of the applicable agreement, the
Participant may pay all or any portion of the taxes required to be withheld by
the Company by electing to have the Company withhold shares of Common Stock, or
by delivering previously owned shares of Common Stock, having a Fair Market
Value equal to the amount required to be withheld or paid. The Participant must
make the foregoing election on or before the date that the amount of tax to be
withheld is determined ("Tax Date"). Any such election is irrevocable and
subject to disapproval by the Committee. If the Participant is subject to the
short-swing profits recapture provisions of Section 16(b) of the Exchange
4
<PAGE>
Act, then the applicable agreement shall not provide the Participant an election
option, or, if it does, any such election shall be subject to the restrictions
imposed by Rule 16b-3.
(b) Each Option hereunder shall be evidenced in writing, delivered to
the Participant, and shall specify the terms and conditions thereof and any
rules applicable thereto, including but not limited to, the effect on such
Option of the death, retirement, disability or other separation from
directorship of the Participant and the effect thereon, if any, of a change in
control of the Company.
(c) Unless otherwise provided in the agreement applicable thereto, no
Option shall be assignable or transferable except by will or under the laws of
descent and distribution or pursuant to a "qualified domestic relations order"
as defined in the Code, and no right or interest of any Participant shall be
subject to any lien, obligation or liability of the Participant.
(d) Neither the Plan nor any Option granted hereunder is intended to
confer upon any Participant any rights with respect to continuance of the
utilization of his or her services by the Company, nor to interfere in any way
with his or her right or that of the Company to terminate his or her services at
any time (subject to the terms of any applicable contract, law, regulation, and
the articles and bylaws of the Company). The conditions to apply to the exercise
of an Option in the event an Participant ceases to serve as a director of the
Company for any reason shall be determined by the Committee, and such conditions
shall be specified in the written agreement evidencing the award.
(e) Subject to the provisions of the applicable Option, no Participant
or Designated Beneficiary shall have any rights as a stockholder with respect to
any shares of Common Stock to be distributed under the Plan until he or she has
become the holder thereof.
(f) The validity, construction, interpretation, administration and
effect of the Plan and of its rules and regulations, and rights relating to the
Plan, shall be determined solely in accordance with the laws of the State of
Texas (without giving effect to its conflicts of laws rules) and, to the extent
applicable, federal law.
(g) No Options may be granted under the Plan after December 13, 2005;
however, all previous Options granted that have not expired under their original
terms or will not then expire at the time the Plan expires will remain
outstanding.
(h) Restrictions on Issuance of Shares
(1) The Company shall not be obligated to issue any shares upon the
exercise of any Option granted under the Plan unless: (i) the shares
pertaining to such Option have been registered under applicable
securities laws or are exempt from such registration; (ii) the prior
approval of such sale or issuance has been obtained from any state
regulatory body having jurisdiction; and (iii) in the event the Common
Stock has been listed on any exchange, the shares pertaining to such
Option have been duly listed on such exchange in accordance with the
procedure specified therefor. The Company shall be under no obligation
to effect or obtain any listing, registration, qualification, consent or
approval with respect to shares pertaining to any Option granted under
the Plan. If the shares to be issued upon the exercise of any Option
granted under the Plan are intended to be issued by the Company in
reliance upon the exemptions from the registration requirements of
applicable federal and state securities laws, the recipient of the
Option, if so requested by the Company, shall furnish to the Company
such evidence and representations, including an opinion of counsel,
satisfactory to it, as the Company may reasonably request.
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<PAGE>
(2) 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 Common Stock pertaining to any Option granted
under the Plan 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.
(i) The Committee may impose such other restrictions on the ownership
and transfer of shares issued pursuant to the Plan as it deems desirable; any
such restrictions shall be set forth in the agreement applicable thereto.
(j) The vesting of all Options granted hereunder shall automatically
accelerate upon a "change in control" of the Company.
IN WITNESS WHEREOF, the Company has caused this Plan to be executed on
its behalf as of the 18th day of November, 1998.
CUSTOMTRACKS CORPORATION
By: /s/ Ronald A. Woessner
-------------------------------
Title: Vice President
----------------------------
Date: November 18, 1998
-----------------------------
6
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Exhibit 10.12
Execution Version
SEVERANCE AGREEMENT
-------------------
THIS SEVERANCE AGREEMENT (this "Agreement"), dated November 4, 1996, is
entered into between Amtech Corporation, a Texas corporation, with its principal
executive offices in Dallas, Texas (the "Company"), and Ronald A. Woessner, an
individual currently residing in Coppell, Texas, who is currently employed as
Vice President and General Counsel of the Company ("Employee").
Recitals
--------
A. The Company and Employee have entered into an Employment Agreement,
dated October 19, 1994, as amended (the "Employment Agreement"), which expires
on the date specified in Section 2 thereof (the "Expiration Date").
B. In lieu of extending the term of the Employment Agreement or entering
into a new employment agreement, the Company and Employee desire to enter into
this Severance Agreement, which will supplement the Employment Agreement until
the Expiration Date and thereafter survive it.
C. In consideration of the Company's agreements herein, Employee is
willing to continue working for the Company or an Affiliate, as applicable, on
an "at-will" basis after the Expiration Date.
Terms and Conditions
--------------------
In consideration of the recitals and the agreements herein and other good
and valuable consideration, the parties agree as follows:
1. Definitions.
1.1 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 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, or any person to the extent such person is holding
Common Stock for or pursuant to the terms of any such plan. For the purposes of
this Agreement, 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.
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<PAGE>
1.2 "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.
1.3 The Company and its Affiliates shall have "Cause" to terminate
Employee's employment upon (1) the willful and continued failure by Employee to
substantially perform Employee's employment duties (other than any such failure
resulting from Employee's incapacity due to physical or mental illness), after
written demand for substantial performance is delivered by the Company or an
Affiliate, as applicable, that specifically identifies the manner in which the
Company or the Affiliate, as applicable, believes Employee has not substantially
performed Employee's duties; or (2) the willful engaging by Employee in
misconduct that is materially injurious to the Company or employing Affiliate,
as applicable; or (3) the conviction of Employee of any felony or crime of moral
turpitude; or (4) Employee attains the mandatory retirement age specified in any
applicable retirement plan of the Company or any succcessor-in-interest (but for
purposes of this clause (4), any such mandatory retirement age shall not be less
than age 65). For purposes of this definition no act, or failure to act, on
Employee's part shall be considered "willful" unless done, or omitted to be
done, by Employee not in good faith and without reasonable belief that
Employee's action or omission was in the best interest of the Company or the
applicable Affiliate(s), or both, as applicable. Notwithstanding the foregoing,
Employee shall not be deemed to have been terminated for Cause without the
following procedures having been adhered to: (a) reasonable written notice to
Employee, setting forth the reasons for the Company's or the Affiliate's
intention to terminate for Cause; (b) an opportunity for Employee, together with
Employee's counsel, to be heard before the Amtech Corporation Board of
Directors; and (c) delivery to Employee of a written Notice of Termination
finding that, in the good faith opinion of the Amtech Corporation Board of
Directors, Employee was guilty of conduct set forth above in clause (1), (2) or
(3) above, and specifying the particulars thereof in detail.
1.4 "Change in Control" shall mean the occurrence of any of the following
events:
(i) The Company is merged, consolidated or reorganized into or with
another corporation or other legal person, other than an Affiliate, and as
a result of such merger, consolidation or reorganization less than 51% of
the combined voting power to elect each class of directors of the then
outstanding securities of the remaining corporation or legal person or its
ultimate parent immediately after such transaction is owned, directly or
indirectly, in the aggregate by persons who were shareholders, directly or
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<PAGE>
indirectly, of the Company immediately prior to such merger, consolidation,
or reorganization;
(ii) The Company sells all or substantially all of its assets to any
other corporation or other legal person, other than an Affiliate, and as a
result of such sale less than 51% of the combined voting power to elect
each class of directors of the then outstanding securities of such
corporation or legal person or its ultimate parent immediately after such
transaction is owned, directly or indirectly, in the aggregate by persons
who were shareholders, directly or indirectly, of the Company immediately
prior to such sale;
(iii) Any Acquiring Person has become 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 securities which when
added to any securities already owned by such person would represent in the
aggregate 50% or more of the then outstanding securities of the Company
which are entitled to vote to elect any class of directors;
(iv) 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
(v) 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.
1.5 "Change in Control Payments" shall mean two times the higher of (i)
Employee's annual base salary in effect on the date of the Change in Control or
(ii) Employee's annual base salary in effect on the date of the Employee's
separation from employment following the Change in Control.
1.6 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.
1.7 "Disability" shall mean any medically determinable physical or mental
impairment that can reasonably be expected to prevent Employee from performing
substantially all of Employee's customary employment duties for at least six
months.
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<PAGE>
1.8 "Good Reason" shall mean the occurrence of any of the following
events:
(a) any material diminution in Employee's title and duties that has
not been cured within thirty days after notice of such noncompliance has
been given (within 30 days of the alleged material diminution) by Employee
to the Company or the employing Affiliate, as applicable. A change in title
or duties will not be considered to be a "material diminution" in title or
duties if, after such change, Employee is an officer of the Company;
Employee's reporting relationship does not change or Employee reports to
the Company's Chief Executive Officer or Chief Operating Officer; and a
substantial portion of Employee's duties are in Employee's field of
professional training or experience.
(b) a reduction of more than 10% in Employee's base salary (with
the 10% being cumulative over the term of Employee's employment, but any
percentage reduction that is actually made is made against the Employee's
then current base salary).
EXAMPLE: assume Employee's base salary is $100,000. The Company or
Affiliate, as applicable, is permitted to reduce Employee's base salary by
up to 10% ($10,000) without giving Employee "Good Reason" to terminate
employment. Any further salary reductions would constitute "Good Reason"
to terminate employment.
EXAMPLE: assume Employee's base salary is $100,000. Assume the Company or
Affiliate, as applicable, reduces Employee's base salary by 8% ($8,000).
Then, assume Employee's base salary is subsequently increased to $120,000.
The Company or Affiliate is entitled to reduce the $120,000 salary by up to
2% ($2,400) without giving Employee "Good Reason to terminate employment.
Any further salary reductions would constitute "Good Reason" to terminate
employment.
(c) any purported termination for Cause of Employee's employment
that is not effected pursuant to the procedural requirements of Subsection
1.3.
(d) the location of Employee's place of employment is moved more
than 50 miles from its current location.
(e) Employee becomes the subject of a Disability.
1.9 "Notice of Termination" shall mean a notice that shall indicate the
specific reasons for termination and shall set forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of Employee's
employment.
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<PAGE>
1.10 "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.
1.11 "Severance Payment" shall mean an amount equal to three months of
Employee's then-current monthly base salary for those Employees whose aggregate
period of employment with the Company or an Affiliate is a year or less. For
other Employees, the "Severance Payment" shall be an amount determined according
to the following formula:
M = 3 + [(Y-1) x 2]
M = the number of months of Employee's then-current monthly base salary
that the Company is required to pay to Employee as severance pay; provided
that, in no event shall the value of M exceed 18; provided further that,
from and after the Expiration Date if the event giving rise to the
Severance Payment occurs on or before the 180th day following a Change in
Control (with the day immediately following the day of the occurrence of
the Change in Control being day "1"), then the amount of the Severance
Payment shall be the greater of (i) the amount provided for under the
formula above or (ii) the amount provided for in Section 3 (as if Employee
had resigned from employment pursuant to Section 3); and provided further
that, if either of the events specified in Section 2(a) or 2(b) occurs
prior to the Expiration Date, then M shall be reduced by the number of
whole months of Employee's then-current monthly base salary, if any, that
the Company is required to pay to Employee under the Employment Agreement.
Y = number of years or partial years that Employee has been employed by the
Company or an Affiliate. For purpose of calculating "Y" with respect to
employment with an Affiliate of the Company only the years or partial years
during which the Affiliate was an "Affiliate" will be counted.
EXAMPLE: Assume Employee has been employed by the Company or an Affiliate
for an aggregate of 3-1/2 years. Then,
M = 3 + [(4-1) x 2];
M = 3 + [3 x 2];
M = 3 + 6
M = 9
Thus, Employee would be entitled to receive 9 months of the Employee's
then-current monthly base salary as a Severance Payment.
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<PAGE>
2. Severance Payment. From and after the date hereof, upon the occurrence of
either of the following events, and subject to receiving a release reasonably
satisfactory to the Company relating to employment matters, the Company will pay
to Employee the Severance Payment:
(a) Employee's employment with the Company and its Affiliates is
terminated by the Company or the employing Affiliate, as applicable, other
than for Cause; or
(b) Employee has Good Reason to terminate employment and actually
does so.
To terminate Employee's employment other than for Cause pursuant to 2(a),
the Company or the employing Affiliate, as applicable, shall give Employee
written notice of such termination. Such notice shall be effective 90 days
following the Employee's receipt thereof.
3. Change in Control Payment. From and after the Expiration Date, if Employee
resigns from employment with the Company and its Affiliates on or before the
180th day following a Change in Control (with the day immediately following the
day of the occurrence of the Change in Control being day "1"), the Company shall
pay to Employee the Change in Control Payment.
4. Mode of Payment. The Severance Payment and the Change in Control Payment
shall be paid in a lump sum (less applicable withholdings for taxes and other
withholdings required by applicable law) contemporaneously with the occurrence
of the applicable event. The Company's obligation to pay the Severance Payment
and the Change in Control Payment is absolute, and such payments shall not be
mitigated or offset by virtue of Employee obtaining new employment or failing to
seek new employment.
5. Confidential Information. Employee recognizes and acknowledges that
Employee will have access to confidential information of the Company and its
Affiliates, including, without limitation, customer information, lists of
suppliers and costs, information concerning the business and operations of the
Company and its Affiliates and proprietary data, information, concepts and ideas
(whether or not patentable or copyrightable) relating to the business of the
Company and its Affiliates. Employee agrees not to disclose such confidential
information (except as may be necessary in the performance of Employee's duties)
to any Person and not to use such confidential information (other than for the
conduct of the business of the Company and its Affiliates), either during the
duration of Employee's employment or within the three years immediately
following Employee's termination of employment, unless Employee has received the
written consent of the Company and its Affiliates, as applicable, or unless such
confidential information becomes public knowledge through no wrongful act of
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<PAGE>
Employee. Upon termination of Employee's employment for any reason, Employee
shall promptly deliver to the Company all drawings, manuals, letters, notebooks,
customer lists, documents, records, equipment, files, computer disks or tapes,
reports or any other materials relating to the business of the Company or any of
its Affiliates (and all copies) which are in Employee's possession or under
Employee's control. Additionally, the parties acknowledge that Employee has
previously executed an Assignment of Inventions and Confidential Information
Agreement, signed April 4, 1992, which shall survive Employee's separation from
employment in accordance with its terms.
6. Noncompetition. Employee agrees and covenants:
(a) For a period (the "Non-Competition Term") of 12 months after
Employee ceases to be employed by the Company or an Affiliate, as the case
may be, Employee will not compete directly or indirectly with the Company
or its Affiliates in the Designated Geographical Area in any business or
businesses conducted by the Company and its Affiliates and in connection
therewith will not furnish advice to, solicit or do business with any past
or current customer of the Company or an Affiliate involving such business
or businesses. For purposes of this Section 6, "Competition" shall
include, without limitation, any engagement in any business whether as
proprietor, partner, joint venturer, employee, agent, officer or holder of
more than five percent (5%) of any class of equity ownership of a business
enterprise, which is competitive with any business or businesses conducted
by the Company or an Affiliate.
(b) For purposes of this Section 6, "Designated Geographical Area"
shall mean and include the United States and any foreign jurisdiction in
which the Company or an Affiliate is actively conducting business, directly
or indirectly, at the time Employee ceases to be employed by the Company or
an Affiliate.
(c) The non-competition covenant of Employee contained in this
Section 6 (the "non-competition covenant") shall be construed as an
agreement independent of any other provision of this Agreement and the
existence of any claim or cause of action of Employee against the Company
or any Affiliate, whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by the Company or an Affiliate
of the non-competition covenant. The Company and its Affiliates shall be
entitled to seek equitable relief to enforce the non-competition covenant.
(d) Although the Company and Employee have in good faith used their
best efforts to make the non-competition covenant reasonable in both
geographic area and in duration,
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<PAGE>
and it is not anticipated, nor is it intended, by either party to this
Agreement that any court of competent jurisdiction will find it necessary
to reform the non-competition covenant to make it reasonable in both
geographic area and in duration, or otherwise, the Company and Employee
understand and agree that if a court of competent jurisdiction determines
it necessary to reform the non-competition covenant in order to make it
reasonable in either geographic area or duration, or otherwise, damages, if
any, for a breach of the non-competition covenant, as so reformed, will be
deemed to accrue to the Company or an Affiliate as and from the date of
such a breach only insofar as the damages for such breach related to an
action which accrued within the scope of the geographic area and duration
as so reformed.
7. Dispute Resolution. Employee and the Company agree to the alternate
dispute resolution provisions contained in Exhibit A attached hereto.
Specifically, if a dispute arises between the parties as to whether or not
Employee has "Good Reason" to terminate employment, Employee is not required to
resign from employment with the Company or an Affiliate, as applicable, to
"perfect" Employee's right to make a claim for the Severance Payment, although
Employee may resign from employment if Employee chooses. Such disputes shall be
resolved in accordance with the provisions of Exhibit A. If the dispute is
resolved in Employee's favor and it is determined that Employee has "Good
Reason" to terminate employment, then Employee will be required to terminate
employment and provide the required release in order to collect the Severance
Payment.
8. General.
8.1 The Employment Agreement shall continue to be effective in accordance
with its terms until the Expiration Date; until such Expiration Date the
provisions of this Agreement supplement the Employment Agreement, and until the
Expiration Date in the event of a conflict between this Agreement and the
Employment Agreement, the Employment Agreement shall govern. From and after the
Expiration Date, the provisions of Sections 5, 6, and 7 of this Agreement shall
supersede the analogous provisions in the Employment Agreement.
8.2 Except for the Employment Agreement, this Agreement embodies the
entire agreement between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof. This Agreement may be
amended only by an instrument in writing executed by both parties.
8.3 This Agreement will be binding upon and inure to the benefit of the
parties hereto and any successors in interest to the Company following a Change
in Control.
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<PAGE>
8.4 This Agreement shall be governed by and construed and enforced in
accordance with the laws of the State of Texas (excluding its conflict of laws
rules).
8.5 This Agreement may be executed in a number of identical counterparts,
each of which constitute collectively, one agreement; but, in making proof of
this Agreement, it shall not be necessary to produce or account for more than
one counterpart.
AMTECH CORPORATION
By: /s/ G. Russell Mortenson
-----------------------------------
G. Russell Mortenson,
President & Chief
Executive Officer
EMPLOYEE:
/s/Ronald A. Woessner
----------------------------------------
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<PAGE>
EXHIBIT A
---------
ALTERNATIVE DISPUTE RESOLUTION
------------------------------
A. Except as otherwise provided in this Exhibit A, Amtech Corporation, or
its employing subsidiary, as applicable (individually and collectively, the
"Company"), and the Employee consent and agree to the resolution, in the manner
provided for in this Exhibit A, of all claims or controversies brought by the
Employee ("Claims") for which a court otherwise would be authorized by law to
grant relief, in any way arising out of, relating to, or associated with (1) the
Employee's employment or termination from employment with the Company or any
adverse employment action by the Company, or (2) any other claims the Employee
may have against the Company, any benefit plans of the Company or any
fiduciaries, administrators, and affiliates of any benefit plan, or any of the
Company's officers, directors, employees, or agents in their capacity as such,
or (3) any issue concerning the formation, applicability, interpretation, or
enforceability of this Exhibit A.
The Employee acknowledges that the Claims intended to be covered by this
Exhibit A include (but are not limited to) claims or controversies under or
relating to the Employee's severance agreement (of which this Exhibit A is a
part); any federal, state, or local constitution, law, or regulation prohibiting
discrimination, harassment, or discharge; an alleged or actual contract; any
Company policy or benefit; entitlement to wages or other compensation; and, any
claim for personal, emotional, physical, economic, or other injury.
B. The only Claims otherwise within the definition of Claims that are not
covered by this Exhibit A are: (1) any administrative actions that the Employee
is permitted to pursue under applicable law that are not precluded by virtue of
the Employee having entered into this Exhibit A; (2) any Claim by the Employee
for workers' compensation benefits or unemployment compensation benefits; or (3)
any Claim by the Employee for benefits under a Company pension or benefit plan
that provides its own non-judicial dispute resolution procedure.
C. The Employee waives any right to assert a Claim, unless he or she
gives written notice of any Claim to Amtech Corporation by the earlier of (1)
the date that is one year after the day the Employee first has knowledge of the
event giving rise to the Claim or (2) the date upon which the applicable statute
of limitations expires.
A-1 _______
Initial
<PAGE>
D. Within 20 days of receipt of the notice of a Claim, THE COMPANY, IN
ITS SOLE DISCRETION, MAY ELECT TO SUBMIT ANY CLAIMS TO BINDING ARBITRATION IN
ACCORDANCE WITH THE PROVISIONS OF THIS EXHIBIT A. If the Company elects not to
submit a Claim to binding arbitration, then the Employee may initiate or
otherwise pursue the Claim by legal proceedings other than binding arbitration
(e.g., a lawsuit), except that IF THE EMPLOYEE INITIATES A LAWSUIT, HE OR SHE
HEREBY WAIVES THE RIGHT TO REQUEST OR OBTAIN A JURY TRIAL WITH RESPECT TO ANY
SUCH CLAIMS. The Employee agrees that if he or she initiates litigation in
violation of this Exhibit A, he or she will incur liability to the person(s)
sued, including the obligation to pay their legal fees and expenses. The sole
and exclusive venue of any lawsuit initiated by the Employee relating to any
Claims shall be Dallas County, Texas.
E. The arbitration will be conducted in accordance with the provisions of
this Exhibit A and the Employment Dispute Resolution 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
the Employment Dispute Resolution Rules of the AAA, except that the parties
agree that the arbitrator shall (1) be an attorney licensed in the state where
the arbitration is being conducted and (2) have expertise in the area of
employment law. The arbitration will be held in Dallas County, Texas.
F. Each party shall have the right to take one deposition of the other
party and any expert witness or other witness designated by the other party.
Additional deposition discovery may be taken only if the arbitrator so orders,
upon a showing of substantial need. The Employee understands that by agreeing to
submit Claims to arbitration he or she 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 he or she may otherwise have under federal
and state laws.
G. In the event any provision of this Exhibit A is found by an arbitrator
or court to be unenforceable, in whole or in part, the remaining provisions of
this Exhibit A shall nevertheless remain enforceable and the unenforceable
provisions shall, to the extent permitted under applicable law, be modified so
as to be enforceable to the maximum extent possible under applicable law.
H. EMPLOYEE ACKNOWLEDGES THAT HE OR SHE HAS CAREFULLY READ THIS EXHIBIT
A; THAT HE OR SHE UNDERSTANDS ITS TERMS; THAT ALL UNDERSTANDINGS BETWEEN THE
EMPLOYEE AND THE COMPANY RELATING TO THE SUBJECTS COVERED IN THIS EXHIBIT A ARE
CONTAINED IN THIS EXHIBIT A; AND, THAT HE OR SHE HAS ENTERED INTO THIS EXHIBIT A
VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE
COMPANY OTHER THAN THOSE CONTAINED IN THIS EXHIBIT A ITSELF OR THE EMPLOYMENT
AGREEMENT (TO WHICH THIS EXHIBIT A IS A PART).
A-2 _______
Initial
<PAGE>
Exhibit 10.13
SUBLEASE AGREEMENT
BETWEEN
FIDELITY CORPORATE REAL ESTATE, LLC, TENANT/SUBLESSOR
AND CUSTOMTRACKS OPERATING CORPORATION, SUBLESSEE
1. PARTIES
This Sublease ("Sublease") is entered into this 12th day of February, 1999 by
and between Fidelity Corporate Real Estate, LLC, as successor in interest to
Fidelity Properties, Inc. ("Tenant/Sublessor"), having an address at 7 Water
Street, Boston, Massachusetts 02109, and CustomTracks Operating Corporation,
a Delaware corporation ("Sublessee"), having an address at One Galleria
Tower, 13355 Noel Road, Suite 1555, Dallas, Texas 75240-6604, under the lease
dated February 8, 1994, as amended, entered into by The Southland
Corporation, as landlord ("Landlord"), and Fidelity Properties, Inc., as
Tenant, a copy of said lease with any Amendments thereto being attached
hereto and designated as Exhibit A and hereinafter called the "Lease".
2. PROVISIONS CONSTITUTING SUBLEASE
This Sublease is subject to all of the terms and conditions of the Lease in
Exhibit A, and Sublessee assumes and agrees to perform the obligations of
Tenant in said Lease, to the extent, but only to the extent, said terms and
conditions are applicable to the Sublease Premises (as hereinafter defined)
subleased pursuant to this Sublease. All of the terms and conditions of the
Lease in Exhibit A are incorporated herein as terms and conditions of this
Sublease (except as otherwise provided herein, with each reference therein as
modified in this Sublease Agreement to Landlord and Tenant to be deemed to
refer to Tenant/Sublessor and Sublessee) and along with all of the following
paragraphs set out in this Sublease, shall be the complete terms and
conditions of this Sublease. In the event of the termination of
Tenant/Sublessor's interest as Tenant under the Lease for any reason this
Sublease shall terminate simultaneously therewith. Sublessee shall not commit
or permit to be committed on the Sublease Premises any act or omission which
shall violate any term or condition of the Lease. Tenant/Sublessor hereby
covenants and agrees that it shall at all times satisfy and comply with all
of the terms and provisions of the Lease.
3. PREMISES
Tenant/Sublessor subleases to Sublessee and Sublessee subleases from
Tenant/Sublessor, the Sublease Premises described as a portion of the 23rd
floor consisting of approximately 29,131 rentable square feet (the "Sublease
Premises"), as shown on Exhibit B attached hereto, in the building known as
Cityplace Center (the "Building") located at 2711 N. Haskell, Dallas, Dallas
County, Texas, which constitutes a portion of the Premises covered by the
Lease. Sublessee shall also be entitled to Tenant/Sublessor's non-exclusive
rights to the use of eighty-seven (87) covered parking spaces in the parking
garage of the Building previously allotted to Tenant/Sublessor, at no
additional charge, and to the use of the cafeteria and conference facilities
in the Building, but only to the extent Tenant/Sublessor is entitled to the
use of the same pursuant to Section 4.15 of the Lease.
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4. TERM
The term (the "Term") of this Sublease shall commence on the earlier to occur
of (i) the date on which Sublessee commences its business operations in the
Sublease Premises (other than for construction and moving in) and (ii) May 1,
1999 (the "Commencement Date") and terminate on September 30, 2004 (the
"Expiration Date"), unless sooner terminated as hereinafter provided.
Notwithstanding the foregoing, Sublessee shall be given exclusive possession
of the Sublease Premises on the Effective Date for the purpose of
constructing leasehold improvements in the Sublease Premises. Such occupancy
by Sublessee prior to the Commencement Date shall be subject to all the terms
and conditions of this Sublease (other than the payment of Base Rental or
Expense Rent, the obligation for payment of which shall commence on the
Commencement Date).
5. BASE RENTAL
Commencing as of the Commencement Date, Sublessee shall pay to
Tenant/Sublessor without deduction, set-off, prior notice or demand, as "Base
Rental", in advance on the first (1st) day of each month in lawful money of
the United States of America and continuing through the Expiration Date, the
annual sum of $466,098.08 (i.e., $16.00 per rentable square foot) in equal
monthly amounts of $38,841.34 per month. Monthly rental for my partial month
shall be prorated on a daily basis. Rent shall be paid to Tenant/Sublessor at
7 Water Street, Boston, MA 02109, or at such other place or places as
Tenant/Sublessor may from time to time direct. Upon the execution of this
Sublease by the Sublessee, Tenant shall pay and deliver the first month's
rent with the Sublease.
6. BASE RENTAL ADJUSTMENTS
Sublessee shall pay its pro rata share of Expenses, as defined in Section 3.7
of the Lease, in excess of the Expenses for calendar year 1999 (which
Expenses for calendar year 1999 shall be grossed up to reflect full
occupancy), such amounts to be paid to Sublessor by the date Expense Rent is
due under Section 3.2 of the Lease, as amended. To the extent Landlord has
provided Tenant/Sublessor with such information, Sublessor shall provide
Sublessee with reasonable documentation of such Expenses. Sublessee's pro
rata share, for purposes of this Paragraph 6 and Paragraph 7 of this
Sublease, shall be a fraction the numerator of which is the number of
rentable square feet of the Sublease Premises and the denominator of which is
the number of rentable square feet of the Premises covered by the Lease. If
Sublessor receives a refund of Expense Rent from Landlord, Sublessor shall
promptly pay Sublessee its proportionate share of such refund insofar as such
refund relates to the Sublease Premises. Controllable Expenses shall be
subject to the cap set forth in Section 3.2 of the Lease, as amended.
7. ELECTRICITY
Commencing, as of the Effective Date and continuing for the Term, the
Sublessee shall pay its pro rata share of electrical charges payable by
Sublessor pursuant to Section 3.3 of the Lease, such amounts to be paid to
Sublessor by the date they are due under the Lease. To the extent landlord
provides Tenant/Sublessor with the same, Sublessor shall provide Sublessee
with reasonable back-up documentation of the amount due.
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<PAGE>
8. HEATING AND AIR-CONDITIONING
The Sublessee shall reimburse Sublessor for any after hours charge by the
Landlord to the Sublessor for after hours heat and air-conditioning used by
the Sublessee in the Sublease Premises. The charge to the Sublessee shall be
equal in amount to the actual amount charged to the Sublessor by the Landlord
for such after hours heat and air-conditioning, plus Sublessor's actual
administrative fee incurred in connection with such request by Sublessee, and
the same shall be due and payable by the Sublessee to the Sublessor within
ten (10) days of receipt of the invoice for the same.
9. LEASEHOLD IMPROVEMENTS
Sublessor agrees to pay Sublessee an allowance of up to $6.00 per rentable
square foot for demolition, construction (including taxes thereon), space
planning, and design and document fees, payment to be made within thirty (30)
days of Sublessor receiving the evidence and other documentation specified in
Section 4.2(d) of Addendum No. 1 of the Lease, but in any event no earlier
than the Commencement Date.
The Sublease Premises are being delivered to the Sublessee on an "as is,
where is" basis (excluding carpeting and doors which are currently installed
therein). Sublessee improvements will be the sole cost of the Sublessee,
except as provided in the preceding paragraph, and subject to the approval of
the Sublessor and any approvals required by the Lease. As part of the
Sublessee's improvements, Sublessee shall, at its sole cost and expense,
install a separate electric meter to measure Sublessee's consumption of
electricity in the Sublease Premises.
10. INSURANCE
Sublessee, regarding this Sublease, shall comply with Article VI - Risk
Management of the Lease except that the Sublessee shall name the Sublessor in
the Sublessee's insurance policies where Article VI provides that the
Sublessor is to name the Landlord.
11. SERVICE TO BE FURNISHED BY LANDLORD
Sublessee shall be entitled to the services to which Tenant/Sublessor is
entitled under Section 4.2 of the Lease insofar as they relate to the
Sublease Premises. Sublessor shall use reasonable efforts to cause the
Landlord to perform all of its obligations under the lease referred to in
Exhibit A for the benefit of Sublessee insofar as they relate to the Sublease
Premises. Should the Landlord fail to perform its obligations and said
failure affects the Sublessee, Sublessee shall give notice to Sublessor of
said failure. Should such failure continue ten (10) days after the date of
notice and the Landlord has not cured said failure or commenced to cure said
failure, Sublessee may without the consent of the Sublessor contact Landlord
regarding said failure. If Tenant/Sublessor receives a rental abatement
pursuant to the last paragraph of Section 4.2 of the Lease, then insofar as
such abatement relates to the Sublease Premises, the Sublessee shall be
entitled to a proportionate abatement of rent hereunder.
Notwithstanding anything to the contrary contained herein, the parties'
obligations hereunder are expressly conditioned on obtaining Landlord's
written consent to the subletting of the Premises on the terms and conditions
contained in this Sublease. Tenant/Sublessor shall furnish Landlord with a
3
<PAGE>
Consent to Sublease in the form attached as Exhibit C. This consent shall
apply only to this Sublease and shall not be deemed to be a consent to any
other Sublease.
The consent of the Landlord in the form required herein shall be a condition
precedent to the performance of the parties under this Sublease. If such
consent is not obtained within thirty (30) days after the date this Sublease
is executed by both Sublessee and Sublessor, the parties shall have no
further obligations under this Sublease. The term "Effective Date" as used
herein shall mean the later to occur of (i) the date on which Sublessor and
Sublessee have executed this Sublease, and (ii) the date on which Landlord
has given its written consent to this Sublease.
12. INDEMNITY
Sublessee shall perform and observe the terms and conditions to be performed
on the part of Tenant under the Lease with respect to the Sublease Premises,
except for the payment of rent and other charges, and shall indemnify Tenant
and Landlord against all claims, damages, costs and expenses arising out of
Sublessee's failure to perform any such terms or conditions, subject however
to all of the terms and conditions of this Sublease, provided, however, that
Sublessee shall be relieved of any obligation to indemnify Tenant or Landlord
to the extent of insurance proceeds actually received by them.
13. REMEDIES
If Sublessee shall default hereunder and not cure within the times permitted
for cure under the Lease, Tenant/Sublessor shall have all remedies against
Sublessee provided to Landlord under the Lease. If Sublessor shall default
hereunder and not cure within the times permitted for cure under the Lease,
Sublessee shall have all remedies against Sublessor provided to Tenant under
the Lease.
14. NOTICES
Notices required or desired to be given hereunder shall be in writing and
given either upon personal delivery or by nationally recognized overnight
courier, or by United States mail, certified mail, return receipt requested,
addressed to the parties at the addresses set forth above. Notices deposited
in the mail or otherwise given in the manner described above shall be
effective on receipt. Any party may change its address for notice by giving
notice in the manner hereinabove provided.
15. SIGNAGE
The cost of signage shall be the sole cost of the Sublessee and the approval
of the same shall be at the sole consent of the Sublessor which consent shall
not be unreasonably withheld or delayed. At the expiration of this Sublease,
Sublessee, at its expense shall remove the sign and repair the damage, if
any.
16. BROKERS
Sublessee shall defend, indemnify and hold Landlord and Tenant/Sublessor
harmless from all damages, judgments, liabilities and expenses (including
attorney's fees) arising from any claims or demands of any broker, agent or
finder with whom Tenant has dealt, other than Cawley International and the
Staubach Company, whose commission, if any, shall be the responsibility of
Tenant/Sublessor, for any commission or fee alleged to be due in connection
with its participation in
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the procurement of Sublessee or the negotiation with Sublessee of this
Sublease, other than a broker with whom either Landlord or Tenant/Sublessor
has signed a written agreement relating to this Sublease.
17. NONAPPLICABILITY OF PROVISIONS
It is expressly understood by and acknowledged by Sublessee, that Sublessee
shall have no rights under Section 2.6 "Cancellation Option", Section 3.9
"Atrium Refurbishment and Allowance," Section 3.10 "Refurbishment Allowance"
and Section 4.5(a) regarding a monument sign, Section 4.10 "Roof Rights",
Section 4.11, Section 4.12 "Emergency Backup", Section 4.2 "Construction
Allowance" (except for subparagraphs (b) and (d) of said Section 4.2), and
Article VI "Other Allowances" in Addendum No. 1 "Work Letter", Addendum No. 3
"Options to Extend", Addendum No. 4 "Expansion Options", and Addendum No. 5
"Right of First Offer" of the Lease. Sublessee expressly understands and
agrees that any rights of expansion, rights to extend or renew, rights to
tenant allowance (except as contained in Paragraph 9 of this Sublease), and
rights to rent credits and rent abatement are not applicable to Sublessee.
18. ASSIGNMENT AND SUBLET
Sublessee shall have no rights to assign or sublease all or part of the
Sublease Premises without the prior approval of Landlord and
Tenant/Sublessor, which in the case of Tenant/Sublessor shall be subject to
the terms and conditions of the Lease. For the purposes of this paragraph 20,
the term "part" in the preceding sentence shall mean consisting of no less
than fifty percent (50%) of the rentable square footage of the Sublease
Premises, of this paragraph 20, the term "part" in the preceding sentence
shall mean consisting of no less than fifty percent (50%) of the rentable
square footage of the Sublease Premises, Sublessee hereby acknowledging that
it shall have no rights whatsoever to sublease less than 50% of the Sublease
Premises in any one instance.
In the event Sublessee desires to assign this Sublease or sublet any portion
or all or the Sublease Premises, Sublessee shall notify Tenant/Sublandlord in
writing of Sublessee's intent to so assign this Sublease or sublet the
Sublease Premises and the proposed effective date of such subletting or
assignment, and shall request in such notification that Landlord and
Sublessor consent thereto. Except in the event of an assignment or subletting
to an Affiliate (defined hereinbelow), Sublessor may terminate this Sublease
in the case of a proposed assignment, or suspend this Sublease pro tanto for
the period and with respect to the space involved in the case of a proposed
subletting, by giving written notice of termination or suspension to
Sublessee within thirty (30) day after receipt of such notification, with
such termination or suspension to be effective as of the effective date of
such assignment or subletting. If Sublessor does not so terminate or suspend
within said thirty (30) days, Sublessor's consent shall not be unreasonably
withheld to an assignment or to a subletting, provided that the assignee or
subtenant shall use the Sublease Premises only for general office use, and
further provided, with respect to a subletting, that after such subletting
the initial Sublessee named herein occupies at least fifty (50%) percent of
the rentable floor area of the Sublease Premises.
If for any assignment or sublease consented to by Sublessor hereunder
Sublessee receives rent or other consideration, either initially or over the
term of the assignment or sublease, in excess of the rent called for
hereunder, or in case of sublease of part, in excess of such rent fairly
allocable to the part, after appropriate adjustments to assure that all other
payments called for hereunder are appropriately taken into account and after
deduction for reasonable expenses of Sublessee in connection with the
assignment or sublease, to pay to Sublessor as additional rent the excess of
each
5
<PAGE>
such payment of rent or other consideration received by Sublessee promptly
after its receipt. Notwithstanding anything to the contrary herein contained,
Sublessor's termination right pursuant to the second paragraph of this
Paragraph 18 shall have no applicability and Sublessor's consent shall not be
unreasonably withheld to an assignment or subletting to any entity
controlling, controlled by or under common control with Sublessee (an
"Affiliate"), provided that such Affiliate shall use the Sublease Premises
only for the use specified in Paragraph 21 below.
19. ALTERATIONS BY TENANT
All rights of approval and consent of Landlord under Section 4.4 of the Lease
shall also be deemed applicable to Tenant/Sublessor.
20. ESTOPPEL CERTIFICATES
Sublessor shall, upon the request of the Sublessee, and Sublessee shall, upon
request of Tenant/Sublessor or any mortgagee of Tenant/Sublessor, without
additional consideration, deliver an Estoppel Certificate, consisting of
reasonable statements required by Tenant/Sublessor, Sublessee or any
mortgagee, or any assignee of Sublessee's interest in this Sublease or the
Sublease Premises or Tenant/Sublessor's interest in the Sublease Premises,
which statements may include but shall not be limited to the following.
A. This Sublease is in full force and effect, with rental paid through the
requested date;
B. The Sublease has not been modified or amended;
C. Tenant/Sublessor is not in default and Tenant/Sublessor has fully
performed all of Tenant/Sublessor's obligations hereunder; and
D. Sublessee is not in default and Sublessee has fully performed all
Sublessee's obligations hereunder.
If Sublessee or Sublessor is unable to make any of the foregoing statements
because the same is untrue, Sublessee or Sublessor shall with specificity
state the reason why such statement is untrue. The requested party shall, if
requested by requesting party or any such mortgagee or assignee, deliver to
requesting party a fully executed instrument in form reasonably satisfactory
to the requesting party. The requested party agrees to furnish the Estoppel
Certificate to the requesting party within ten (10) days of the requesting
party's request for same.
21. USE OF SUBLEASE PREMISES
The Sublease Premises shall be used by Sublessee for office purposes.
The balance of this page has been intentionally left blank.
Signatures appear on the next page.
6
<PAGE>
IN WITNESS WHEREOF, the following parties have executed this Sublease as of the
date first written above.
TENANT/SUBLESSOR:
ATTEST: FIDELITY CORPORATE REAL ESTATE, LLC
By: Fidelity Corporate Real Estate, Inc.
By: By: /s/ Ronald C. Duff, President
------------------------------- -------------------------------------
Name:
-----------------------------------
SUBLESSEE:
ATTEST: CUSTOMTRACKS OPERATING CORPORATION
By: /s/ Darleen Harris By: /s/ Ronald A. Woessner
------------------------------- -------------------------------------
Name: Ronald A. Woessner
-----------------------------------
7
<PAGE>
EXHIBIT C
---------
CONSENT OF LESSOR
-----------------
The undersigned, being the current Landlord under the Lease, hereby: (a)
consents to the foregoing Sublease; and (b) acknowledges that there is no event
of default (nor any condition that with the giving of notice, or the passage of
time, or both, could result in an event of default) on the part of Tenant under
the Lease.
THE SOUTHLAND CORPORATION
By:
---------------------------------
Name:
Title:
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm in the headnote to the Selected
Financial Data included in this Annual Report (Form 10-K for the year ended
December 31, 1998 and to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-34451) pertaining to the 1988 Stock Option Plan, 1989
Stock Option Plan, 1990 Stock Option Plan, and the Original Stock Plan of Amtech
Corporation; the Registration Statement (Form S-8 No. 33-53010) pertaining to
the Amtech Corporation 1992 Stock Option Plan; the Registration Statements (Form
S-8 No. 33-65061 and Form S-8 No. 333-06507) pertaining to the Amtech
Corporation 1995 Long-Term Incentive Plan; the Registration Statement (Form S-8
No. 333-06503) pertaining to the Amtech Corporation 1996 Directors' Stock Option
Plan; the Registration Statement (Form S-8 No. 333-06505) pertaining to the
Amtech Corporation 401(k) Plan; and the Registration Statement (Form S-8 No.
333-06511) pertaining to the Amtech Corporation 1996 Employee Stock Purchase
Plan of our report dated March 29, 1999, with respect to the consolidated
financial statements of CustomTracks Corporation (formerly Amtech Corporation)
included in this Annual Report (Form 10-K) for the year ended December 31, 1998.
Dallas, Texas
March 29, 1999
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<PAGE>
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<PERIOD-START> OCT-01-1998
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