<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ....... to .......
Commission File Number: 0-17995
CUSTOMTRACKS CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Texas 75-2216818
(State of Incorporation) (I.R.S. Employer
Identification Number)
One Galleria Tower
13355 Noel Road
Suite 1555
Dallas, Texas 75240-6604
(Address of Principal Executive Offices)
(972) 702-7055
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports) and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1999
- -------------------------------------- ----------------------------
Common Stock, par value $.01 per share 15,277,929
<PAGE>
INDEX
PART I-FINANCIAL INFORMATION
Page
Number
------
Item 1. Financial Statements
Condensed Consolidated Balance Sheets at June 30, 1999
and December 31, 1998 3
Condensed Consolidated Statements of Operations for the
three months and six months ended June 30, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows for the
six months ended June 30, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations 8
Item 3. Quantitative and Qualitative Disclosures About Market Risk 10
PART II-OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
2
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CUSTOMTRACKS CORPORATION
(A Development Stage Company)
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, 1999 December 31, 1998
------------- -----------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 17,770 $ 54,292
Short-term marketable securities 41,659 26,929
Due from sale of discontinued operations -- 5,304
Other current assets 627 215
-------- --------
Total current assets 60,056 86,740
Long-term marketable securities 9,000 --
Property and equipment, net 13,241 158
-------- --------
$ 82,297 $ 86,898
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 5,097 $ 1,574
Liabilities related to discontinued operations 1,460 3,875
-------- --------
Total current liabilities 6,557 5,449
Commitments and contingencies
Stockholders' equity:
Preferred stock, $1 par value, 10,000,000 shares
authorized; none outstanding -- --
Common stock, $.01 par value, 30,000,000 shares 176 174
authorized; 17,559,829 issued, 15,267,929
outstanding in 1999 and 17,384,437 issued, 15,092,537
outstanding in 1998
Additional capital 97,523 88,449
Treasury stock, at cost (11,314) (11,314)
Retained earnings (deficit) (net of deficit accumulated during
the development stage of $14,785 in 1999) (10,645) 4,140
-------- --------
Total stockholders' equity 75,740 81,449
-------- --------
$ 82,297 $ 86,898
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
CUSTOMTRACKS CORPORATION
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Six Months
Ended June 30 Ended June 30
------------- -------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Research and development expenses:
Non-employee stock option compensation $ (7,059) $ -- $ (7,805) $ --
Other (4,275) -- (6,260) --
------- ------ ------- ------
(11,334) -- (14,065) --
Operating costs and general corporate expenses (2,500) (1,183) (3,275) (2,827)
Investment income 976 310 2,037 572
------- ------ ------- ------
Loss from continuing operations before income taxes (12,858) (873) (15,303) (2,255)
Income tax benefit 90 263 120 699
------- ------ ------- ------
Loss from continuing operations (12,768) (610) (15,183) (1,556)
Discontinued operations:
Income from discontinued operations, net of
income taxes -- 2,398 -- 3,703
Gain (loss) on sale of discontinued operations 398 (1,561) 398 (1,561)
------- ------ ------- ------
398 837 398 2,142
------- ------ ------- ------
Net income (loss) $ (12,370) $ 227 $ (14,785) $ 586
======= ====== ======= ======
Basic and diluted earnings (loss) per common share:
Continuing operations $ (0.84) $ (0.04) $ (1.00) $ (0.10)
Discontinued operations 0.03 0.05 0.03 0.13
------- ------ ------- ------
Net income (loss) $ (0.81) $ 0.01 $ (0.97) $ 0.03
======= ====== ======= ======
Weighted average shares outstanding 15,249 16,572 15,187 16,759
======= ====== ======= ======
</TABLE>
See accompanying notes.
4
<PAGE>
CUSTOMTRACKS CORPORATION
(A Development Stage Company)
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
Six Months
Ended June 30
-------------
1999 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Loss from continuing operations $ (15,183) $ (1,556)
Adjustments to reconcile loss from continuing operations
to net cash used by operating activities:
Depreciation and amortization 351 7
Non-employee stock option compensation 7,862 --
Employee stock option compensation 275 516
Changes in assets and liabilities, excluding divestiture of businesses:
Other current assets (412) (33)
Current liabilities 212 499
------- ------
Net cash used by continuing operations (6,895) (567)
Net cash provided (used) by discontinued operations (2,017) 1,350
------- ------
Net cash provided (used) by operating activities (8,912) 783
Cash flows from investing activities:
Purchases of property and equipment, net (10,123) (5)
Purchases of marketable securities (88,340) --
Sales and maturities of marketable securities 64,610 1,010
Investing activities of discontinued operations:
Proceeds from sales of businesses, net of cash sold 5,304 18,740
Purchases of property and equipment, net and other -- (1,974)
------- ------
Net cash provided (used) by investing activities (28,549) 17,771
Cash flows from financing activities:
Proceeds from exercise of stock options 950 315
------- ------
Net cash provided by financing activities 950 315
Effect of exchange rate changes on cash and cash equivalents (11) 6
------- ------
Increase (decrease) in cash and cash equivalents (36,522) 18,875
Cash and cash equivalents, beginning of period 54,292 12,583
------- ------
Cash and cash equivalents, end of period $ 17,770 $ 31,458
======= ======
</TABLE>
See accompanying notes.
5
<PAGE>
CUSTOMTRACKS CORPORATION
(A Development Stage Company)
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Basis of Presentation
The accompanying financial statements, which should be read in conjunction
with the audited consolidated financial statements included in the Company's
1998 Annual Report to Shareholders on Form 10-K, are unaudited but have been
prepared in the ordinary course of business for the purpose of providing
information with respect to the interim periods. The Condensed Consolidated
Balance Sheet at December 31, 1998 was derived from the audited Consolidated
Balance Sheet at that date which is not presented herein. Management of the
Company believes that all adjustments necessary for a fair presentation for such
periods have been included and are of a normal recurring nature, except for the
amortization of the fair value of stock options granted to non-employees as
explained in Note 3. The results of operations for the six-month period ended
June 30, 1999 are not necessarily indicative of the results to be expected for
the full year.
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.
Basic and diluted earnings per common share are both computed based on the
weighted average number of shares of common stock outstanding. The assumed
exercise of outstanding stock options would be antidilutive for all periods
presented.
2. New Business
The Company is developing ZixCharge, an Internet transaction system, and
ZixMail, a secure Internet messaging system, both of which utilize the Company's
digital signature and encryption technology. 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 current business endeavors. See Note 3 and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
3. Non-Employee Stock Options
Proposed Director Stock Option Plan
In January 1999, certain non-employee directors were granted immediately
vested 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 become effective upon the approval of a new plan and
expire at the end of ten years. If the stockholders approve the new plan,
in accordance with 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. On August 11, 1999, the Financial
Accounting Standards Board withdrew its proposal requiring stock options
granted to non-employee directors be valued using an option valuation model,
such as Black-Scholes. As a result, the Company will continue to account for
non-employee director options under APB 25.
6
<PAGE>
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 in developing software for its new Internet-related businesses. In
exchange for the services provided by Lante, the Company pays cash for work
performed at discounted rates and has issued 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. On the
date of grant, these options had an estimated fair value of $2,865,000 or $5.73
per share, using the Black-Scholes option valuation model. Accounting for these
options require that they 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. The Company's common stock price has increased
from $7.62 per share at the date of grant to $55.94 per share at June 30, 1999,
thereby increasing the estimated fair value of these options to $26,445,000 or
$52.89 per share as of June 30, 1999. The revalued amount for these options is
being amortized over the three year vesting period; accordingly, the Company's
results of operations for the three months and six months ended June 30, 1999
include a non-cash charge of $7,059,000 and $7,805,000, respectively, for
amortization of the fair value of these options. The Company's future results
of operations could be materially impacted by a change in valuation of the stock
options issued to Lante as a result of future increases or decreases in the
price of the Company's common stock. However, the required accounting treatment
has no impact on the Company's cash flows or total stockholders' equity.
7
<PAGE>
ITEM 2.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Overview
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 1997 and 1998 and have been reclassified as discontinued operations in
the consolidated financial statements.
In 1999, the Company has been developing a digital signature and encryption
technology (the "ZixIt technology") and is planning a series of product
releases that use this technology. ZixMail, a secure Internet-messaging system,
will be the first product that uses the ZixIt technology. ZixMail will enable
Internet users to send and receive encrypted and digitally signed email
communications without changing their existing email addresses. The ZixMail
software uses 1024-bit public key and Triple-DES encryption and can be exported
throughout the world except to Cuba, Iran, Iraq, Libya, North Korea, Serbia,
Sudan, and Syria. The Company expects that the ZixMail system will be available
for use by the end of August 1999.
The Company has also announced ZixCharge, another product that will use the
ZixIt technology. ZixCharge is an Internet transaction system, and will allow
consumers to purchase items over the Internet without divulging personal
information to Web merchants. The ZixCharge system is expected to be
operational by the end of September 1999.
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 its
new products. A start-up enterprise involves risks and uncertainties, and there
are no assurances that the Company will be successful in its current business
endeavors.
Results of Operations
Continuing Operations
Research and development expenses
The Company first incurred development expenses for its current
business endeavors in the first quarter of 1999. Non-employee stock option
compensation consists of a non-cash charge of $7,059,000 and $7,805,000 for the
three months and six months ended June 30, 1999, respectively, for amortization
of the fair value of stock options granted to a third party software development
firm that is assisting the Company with its development efforts. See Note 3 to
the Condensed Consolidated Financial Statements for additional discussion
regarding non-employee stock options. Other research and development expenses of
$4,275,000 and $6,260,000 for the three months and six months ended June 30,
1999, respectively, primarily consists of expenditures to third parties for
development of software for the Company's ZixMail and ZixCharge systems.
Operating costs and general corporate expenses
Operating costs and general corporate expenses for the three months
and six months ended June 30, 1999 increased $1,317,000 and $448,000 from the
prior year periods, respectively, primarily due to expenditures for marketing,
expanded lease facilities, personnel and start-up operating costs relating to
establishing the Company's Internet-related businesses. The increase was smaller
for the six month period because the first quarter of 1998 included 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.
8
<PAGE>
Investment income
Investment income for the three months and six months ended June 30,
1999 increased from $310,000 to $976,000 and increased from $572,000 to
$2,037,000, respectively. The increase for both periods is primarily due to the
increase in invested cash and marketable securities resulting from the sale of
the Company's businesses during 1998.
Income tax benefit
The income tax benefit on the loss from continuing operations of $90,000
and $120,000 for the three months and six months ended June 30, 1999 and
$263,000 and $699,000 for the comparable periods in 1998, respectively, is
different from the U.S. statutory rate of 34%, primarily due to unbenefitted
U.S. losses. The Company fully reserves its deferred tax assets due to the
uncertainty of future taxable income from the Company's new business
initiatives.
Loss from continuing operations
As a result of the foregoing, the Company experienced losses from
continuing operations of $12,768,000 and $15,183,000 for the three months and
six months ended June 30, 1999 as compared to $610,000 and $1,556,000 for the
same periods in 1998.
Discontinued Operations
The Company sold all of its operating businesses in 1998 and,
accordingly, their net operating income of $2,398,000 and $3,703,000 for the
three months and six months ended June 30, 1998, respectively, has been
reclassified as discontinued operations. Discontinued operations in 1998 also
include the net loss from the sales of the Company's Transportation Systems
Group and Cotag International. In the second quarter of 1999, the Company
recorded a gain of $398,000 primarily due to a reduction in estimated future
costs for various indemnification issues associated with the disposal of these
businesses.
Liquidity and Capital Resources
At June 30, 1999, the Company's principal source of liquidity is its cash
investments and marketable securities totaling $68,429,000. The Company plans
to continue to invest its excess cash in high-grade U.S. corporate debt
securities or U.S. government and agency securities.
The Company's new business initiative to create Internet related businesses
requires significant investment. The Company currently expects to invest
$15,000,000 to $25,000,000 during the second half of 1999 on ZixCharge and
ZixMail for software development, marketing, expanded lease facilities,
communications, computers and related equipment to expand its 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.
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
See Note 3 to the Condensed Consolidated Financial Statements regarding the
accounting for stock options granted to non-employees and their potential impact
on the Company's future operating results.
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
9
<PAGE>
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.
Risks and Uncertainties
Certain assumptions, risks and uncertainties that could affect the
Company's ability to be successful in its current business endeavors include:
(1) the ability of the Company to successfully develop its ZixMail and ZixCharge
systems and to marshal the personnel and technical resources to complete the
development of these products in a timely fashion; and (2) the ability of the
Company to gain market acceptance for its products. Also, see the Company's 1998
Annual Report to Shareholders on Form 10-K, "Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations, Risks and
Uncertainties", for other assumptions, risks and uncertainties.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For the period ended June 30, 1999, the Company did not experience any
material changes in market risk exposures that affect the quantitative and
qualitative disclosures presented in the Company's 1998 Annual Report to
Shareholders on Form 10-K.
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
The following is a list of exhibits filed as part of this
Quarterly Report on Form 10-Q.
Description of Exhibits
-----------------------
*10.1 Patent Purchase Agreement.
*10.2 Amendment to Assignment.
*10.3 Amendment to Employment Agreement.
*27.1 Financial Data Schedule.
b. No reports of the Registrant on Form 8-K have been filed with the
Securities and Exchange Commission during the three months ended
June 30, 1999.
*Filed herewith.
10
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this report to be signed on its behalf
by the undersigned thereunto duly authorized.
CUSTOMTRACKS CORPORATION
(Registrant)
Date: August 16, 1999 By: /s/Steve M. York
----------------
Steve M. York
Senior Vice President, Chief Financial
Officer, and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
11
<PAGE>
Exhibit 10.1
Execution Version
PATENT PURCHASE AGREEMENT
This Patent Purchase Agreement, dated as of March 22, 1999, is by and among
David P. Cook, an individual residing in Dallas, Texas ("Cook"), CustomTracks
Corporation, a Texas Corporation ("CustomTracks"), and Petabyte Corporation, a
Delaware corporation ("Petabyte"). Terms used herein with their initial letter
capitalized but not defined herein shall have the meaning given such terms in
that certain Stock Option Agreement, dated as of April 29, 1998, between Cook
and CustomTracks.
WHEREAS, Petabyte owns United States Patent Number 5,860,068, entitled
"Method and System for Custom Manufacture and Delivery of a Data Product" and a
related continuation application (collectively, the "Patent") and PCT
Application, filed December 3, 1998, for which the Patent is the "parent"
application (the "Foreign Patent Application").
WHEREAS, pursuant to that certain Assignment (herein so called), effective
May 14, 1998, by and between Cook, as assignor, and Petabyte, as assignee, Cook
transferred to Petabyte all right, title, and interest in and to the Patent
Rights (which includes the Patent and the Foreign Patent Application), the
Technology, and the Marks (as such terms are defined in the Assignment);
WHEREAS, pursuant to that certain Stock Purchase Agreement (herein so
called), entered into as of May 14, 1998, Cook sold to CustomTracks 100% of the
outstanding shares of Petabyte;
WHEREAS, Petabyte desires to transfer to Cook the Patent and the Foreign
Patent Application, while retaining a use license, on the terms and conditions
stated herein;
WHEREAS, the parties desire to amend the Assignment and Mr. Cook's
employment agreement, as set forth in the forms of amendments attached hereto
as Exhibit A and Exhibit B;
-----------------------
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Patent Transfer; Marks; Patent License. (a) Subject to the provisions of
- -- --------------------------------------
the following Subsection (b), Petabyte hereby irrevocably assigns, sells,
transfers, and conveys to Cook, Petabyte's entire right, title, and interest in
and to the Patent and the Foreign Patent Application, the same to be now held
and enjoyed by Cook for his own use and enjoyment, and for the use and enjoyment
of his successors, assigns, or other legal representatives, to the end of the
term or terms for which the Patent and any international patents that issue
under the Foreign Patent Application are granted or reissued, as fully and
entirely as the same would have been held and enjoyed by Petabyte if this
assignment and sale had not been made, together with all claims for damages by
reason of past infringement of said Patent and any such international patents,
with the
<PAGE>
right to sue for and collect the same for his own use and behalf and
for the use and behalf of his successors, assigns, and other legal
representatives.
Petabyte hereby reserves for the benefit of CustomTracks and its Affiliates,
and Cook hereby grants to CustomTracks and its Affiliates, a royalty bearing
(subject to the provisions of the following paragraph, worldwide, nonexclusive,
nontransferable, nonsublicensable license under the Patent and any international
patents that may issue under the Foreign Patent Application to make, have made,
use, sell, import, offer for sale, lease, or otherwise transfer any product,
apparatus, composition of matter and/or article of manufacture and to practice
or have practiced for the benefit of CustomTracks and its Affiliates any method
claimed in the Patent and such international patents. "Affiliate" shall have
the meaning given such term in that certain AMTC Corporation Stock Option
Agreement, effective as of April 29, 1998, between AMTC Corporation and Cook
(the "Option Agreement"). With the consent of Cook, an Affiliate of
CustomTracks shall continue to have the benefit of the license referred to in
this paragraph after it ceases to be an "Affiliate" (such Affiliates are
hereinafter referred to as "Former Affililates"); otherwise, the license shall
expire when the Affiliate in question ceases to be an "Affiliate," as defined.
This license that is reserved unto and conveyed to CustomTracks and its
Affiliates does not include the right to assert patent infringement claims under
the Patent or the international patents, which right is reserved unto and held
by Cook.
Section 4 of the Assignment establishes a royalty payment to be paid for
the use of Patent Rights, Technology, and Marks. Subject to the provisions of
the following sentence, Cook hereby waives the right to receive any royalties
under Section 4 of the Assignment. Cook's right to receive royalties shall
revive with respect to the use of the Patent Rights only and Cook shall be
entitled to receive the royalties set forth in Section 4 of the Assignment with
respect to the use of the Patent Rights only, as follows:
. With respect to the use of the Patent Rights by CustomTracks and its
Affiliates and Former Affiliates, upon Cook's separation from employment with
the Company and its Affiliates.
. With respect to the use by a Material Subsidiary of the Patent
Rights, a Change of Control occurs with respect to a Material Subsidiary and the
---
Material Subsidiary continues to have the license referred to in the preceding
paragraph.
(b) Upon Cook's request, Petabyte will return to Cook ownership of the
marks "CustomTracks" and "Petabyte," together with associated goodwill, if they
are not then being used in the conduct of the business of CustomTracks or an
Affiliate and there is no reasonably foreseeable use of them by CustomTracks or
an Affiliate.
2. Payments under Stock Purchase Agreement; Nominal Payment. The parties
--------------------------------------------------------
acknowledge that CustomTracks has paid to Cook $200,000 pursuant to the Stock
Purchase Agreement. The parties agree that the Future Payments (as defined in
the Stock Purchase Agreement) are hereby eliminated, and CustomTracks shall have
no obligation to make any such Future Payments. CustomTracks hereby agrees to
pay to a charity of Cook's choosing the amount of $50,000.
2
<PAGE>
3. Miscellaneous.
-------------
(a) Notices. All notices that are required or may be given pursuant to
-------
the terms of this Agreement shall be in writing and shall be sufficient in all
respects if given in writing and delivered personally or by a recognized
courier service or by registered or certified mail, postage prepaid, to the
parties at the following addresses:
If to: CustomTracks and Petabyte If to: David P. Cook
CustomTracks Corporation
13355 Noel Road 13355 Noel Road
Suite 1555 Suite 1555
Dallas, Texas 75240 Dallas, Texas 75240
Attn: General Counsel or to
Cook's residence
Notices shall be effective upon receipt. Any party to this Agreement may
change the address for purposes of giving notice under this Agreement by giving
notice of such change to the other party to this Agreement in accordance with
this Subsection 3(a).
(b) Attorneys' Fees and Costs. In the event that attorneys' fees or
-------------------------
other costs are incurred to secure performance of any of the obligations in this
Agreement provided for, or to establish damages for the breach thereof or
to obtain any other appropriate relief, whether by way of prosecution or
defense, the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs incurred therein.
(c) Further Assurances. Each party to this Agreement agrees to execute
------------------
any and all documents and to perform such other acts as may be necessary or
expedient to further the purposes of this Agreement and the transactions
contemplated by this Agreement.
(d) Counterparts. This Agreement may be executed in one or more
------------
counterparts for the convenience of the parties to this Agreement, all of
which together shall constitute one and the same instrument.
(e) Entire Agreement. This Agreement contains the entire understanding
----------------
of the parties relating to the subject matter contained in this Agreement and
supersedes all prior written or oral and all contemporaneous oral agreements
and understandings relating to the subject matter of this Agreement. This
Agreement cannot be modified or amended except in writing signed by the party
against whom enforcement is sought.
(f) Governing Law. This Agreement shall be governed by, and construed
-------------
and interpreted in accordance with, the substantive laws of the State of Texas
without giving effect to any conflict-of-laws rule or principle that might
result in the application of the laws of another jurisdiction.
3
<PAGE>
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
CUSTOMTRACKS CORPORATION
/s/ Ronald A. Woessner
----------------------
Its: V.P.
----------------
Date: July 23, 1999
----------------
PETABYTE CORPORATION
/s/ Ronald A. Woessner
----------------------
Its: V.P.
----------------
Date: July 23, 1999
----------------
/s/ David P. Cook
----------------------
David P. Cook
Date: July 23, 1999
4
<PAGE>
Exhibit A
---------
AMENDMENT TO ASSIGNMENT
This Amendment to Assignment, dated as of March 22, 1999, between David P.
Cook ("Cook") and Petabyte Corporation, a Texas corporation ("Petabyte") hereby
amends that certain Assignment, made and effective as of May 14, 1998 (the
"Assignment"), between Cook and Petabyte.
WHEREAS, Cook, Petabyte, and CustomTracks Corporation, a Texas corporation
("CustomTracks"), entered into that certain Patent Purchase Agreement (herein so
called), dated as of March 22, 1999;
WHEREAS, Section 5 of the Assignment conveys to Petabyte the specified
rights to Inventions (as defined) useful in the Business (as defined);
WHEREAS; CustomTracks is not currently actively pursuing the Business and,
under applicable law, CustomTracks is entitled to certain rights with respect to
inventions, copyrightable materials, and other intellectual property inspired by
Cook that arise during the course of Cook's employment with CustomTracks;
WHEREAS, in light of the foregoing, Section 5 of the Assignment is
superfluous and the parties desire to amend the Assignment as set forth herein;
In consideration of the premises and the mutual covenants contained herein
and in the Patent Purchase Agreement, the parties agree as follows:
1. The first sentence of Section 4 of the Assignment is deleted and the second
sentence thereof is amended in its entirety to read: "All manner of exploitation
of the Technology and Patent Rights shall be in Petabyte's discretion, subject
to the provisions of this Section 4.
2. The term "Patent Rights" for purposes only of Section 4 of the Assignment
shall mean:
"United States Patent Number 5,860,068, entitled 'Method and System for
Custom Manufacture and Delivery of a Data Product,' any continuation
applications related to such patent, and PCT Application, filed December 3,
1998, for which such United States patent is the 'parent' application."
As used elsewhere in the Assignment, the term "Patent Rights" shall have the
meaning given it in Section 2 of the Assignment.
A-1
<PAGE>
3. The parties acknowledge that under Subsection 1(a) of the Patent Purchase
Agreement Cook has waived, upon the terms and conditions stated therein, the
right to receive royalties under Section 4 of the Assignment.
4. Section 5 is hereby deleted from the Assignment.
5. Other than as set forth herein, the Assignment remains in full force and
effect as written.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
PETABYTE CORPORATION
-----------------------------------
Its: -----------------------------
Date: -----------------------------
-----------------------------------
David P. Cook
Date: -----------------------------
A-2
<PAGE>
Exhibit B
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement, dated as of March 22, 1999,
between David P. Cook ("Employee") and CustomTracks Corporation (formerly Amtech
Corporation), a Texas corporation (the "Company") hereby amends that certain
Employment Agreement, effective as of April 29, 1998 (the "Employment
Agreement"), between Employee and the Company.
WHEREAS, Employee and Petabyte Corporation, a Delaware corporation,
entered into that certain Amendment to Assignment (herein so called), dated as
of March 22, 1999, which, inter alia, deletes Section 5 of that certain
----- ----
Assignment, made and effective as of March 14, 1998;
WHEREAS, in light of the foregoing, the parties desire to amend the
Employment Agreement as provided herein;
In consideration of the premises and the mutual covenants contained
herein and in the Patent Purchase Agreement and the Amendment to Assignment, the
parties agree as follows:
1. Section 6 of the Employment Agreement is amended by adding the following
two sentences to the end thereof: "The parties agree that the ownership of
intellectual property that is created, conceived, developed, and the like by
Employee during the term of Employee's employment with the Company will be
governed by applicable law. Employee will render to the Company such assistance
as may be reasonably necessary to evidence and protect the ownership of its
intellectual property. If such assistance is required after Employee's
separation from employment with the Company, reasonable compensation will be
paid to Employee for such assistance.
2. Other than as set forth herein, the Employment Agreement remains in full
force and effect as written.
EXECUTED, on the dates set forth below, to be effective as of the date
first set forth above.
CUSTOMTRACKS CORPORATION
--------------------------------
Date:
---------------------------
--------------------------------
David P. Cook
Date:
---------------------------
B-1
<PAGE>
Exhibit 10.2
AMENDMENT TO ASSIGNMENT
This Amendment to Assignment, dated as of March 22, 1999, between David P.
Cook ("Cook") and Petabyte Corporation, a Texas corporation ("Petabyte") hereby
amends that certain Assignment, made and effective as of May 14, 1998 (the
"Assignment"), between Cook and Petabyte.
WHEREAS, Cook, Petabyte, and CustomTracks Corporation, a Texas corporation
("CustomTracks"), entered into that certain Patent Purchase Agreement (herein so
called), dated as of March 22, 1999;
WHEREAS, Section 5 of the Assignment conveys to Petabyte the specified
rights to Inventions (as defined) useful in the Business (as defined);
WHEREAS; CustomTracks is not currently actively pursuing the Business and,
under applicable law, CustomTracks is entitled to certain rights with respect to
inventions, copyrightable materials, and other intellectual property inspired by
Cook that arise during the course of Cook's employment with CustomTracks;
WHEREAS, in light of the foregoing, Section 5 of the Assignment is
superfluous and the parties desire to amend the Assignment as set forth herein;
In consideration of the premises and the mutual covenants contained herein
and in the Patent Purchase Agreement, the parties agree as follows:
1. The first sentence of Section 4 of the Assignment is deleted and the second
sentence thereof is amended in its entirety to read: "All manner of
exploitation of the Technology and Patent Rights shall be in Petabyte's
discretion, subject to the provisions of this Section 4.
2. The term "Patent Rights" for purposes only of Section 4 of the Assignment
shall mean:
"United States Patent Number 5,860,068, entitled 'Method and System for
Custom Manufacture and Delivery of a Data Product,' any continuation
applications related to such patent, and PCT Application, filed December 3,
1998, for which such United States patent is the 'parent' application."
As used elsewhere in the Assignment, the term "Patent Rights" shall have the
meaning given it in Section 2 of the Assignment.
3. The parties acknowledge that under Subsection 1(a) of the Patent Purchase
Agreement Cook has waived, upon the terms and conditions stated therein, the
right to receive royalties under Section 4 of the Assignment.
4. Section 5 is hereby deleted from the Assignment.
1
<PAGE>
5. Other than as set forth herein, the Assignment remains in full force and
effect as written.
IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement as of the date first above written.
PETABYTE CORPORATION
---------------------------
/s/ Ronald A. Woessner
---------------------------
Its: V.P.
-----------------------
Date: July 23, 1999
----------------------
/s/ David P. Cook
---------------------------
David P. Cook
Date: July 23, 1999
----------------------
2
<PAGE>
Exhibit 10.3
AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment to Employment Agreement, dated as of March 22, 1999, between
David P. Cook ("Employee") and CustomTracks Corporation (formerly Amtech
Corporation), a Texas corporation (the "Company") hereby amends that certain
Employment Agreement, effective as of April 29, 1998 (the "Employment
Agreement"),") between Employee and the Company.
WHEREAS, Employee and Petabyte Corporation, a Delaware corporation, entered
into that certain Amendment to Assignment (herein so called), dated as of March
22, 1999, which, inter alia, deletes Section 5 of that certain Assignment, made
----------
and effective as of March 14, 1998;
WHEREAS, in light of the foregoing, the parties desire to amend the
Employment Agreement as provided herein;
In consideration of the premises and the mutual covenants contained herein
and in the Patent Purchase Agreement and the Amendment to Assignment, the
parties agree as follows:
1. Section 6 of the Employment Agreement is amended by adding the following
two sentences to the end thereof: "The parties agree that the ownership of
intellectual property that is created, conceived, developed, and the like
by Employee during the term of Employee's employment with the Company will
be governed by applicable law. Employee will render to the Company such
assistance as may be reasonably necessary to evidence and protect the
ownership of its intellectual property. If such assistance is required
after Employee's separation from employment with the Company, reasonable
compensation will be paid to Employee for such assistance.
2. Other than as set forth herein, the Employment Agreement remains in full
force and effect as written.
EXECUTED, on the dates set forth below, to be effective as of the date
first set forth above.
CUSTOMTRACKS CORPORATION
/s/Ronald S. Woesser
------------------------
Date: July 23, 1999
-------------------
/s/David P. Cook
------------------------
David P. Cook
Date: July 23, 1999
-------------------
1
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