U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended MARCH 31, 1999
Commission File Number 0-24634
TRACK DATA CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE
(State or other jurisdiction of incorporation)
22-3181095
(I.R.S. Employer Identification No.)
56 PINE STREET
NEW YORK, NY 10005
(Address of principal executive offices)
(212) 943-4555
(Registrant's telephone number)
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 past 12 months (or 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: As of April 30, 1999 there were
15,108,779 shares of common stock outstanding.
<PAGE>
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PART I. FINANCIAL INFORMATION
- -------- ----------------------
Item 1. Financial Statements
---------------------
See pages 2-6
Item 2. Management's Discussion and Analysis of Financial
-----------------------------------------------------
Condition and Results of Operations
-------------------------------------
See pages 7-9
Item 3. Quantitative and Qualitative Disclosures About
--------------------------------------------------
Market Risk
------------
See page 9
PART ll. OTHER INFORMATION
- --------- ------------------
See page 10
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
<S> <C> <C>
MARCH 31, DECEMBER 31,
1999 1998
---------- ------------
Unaudited Derived
from
audited
financial
statements
ASSETS
CASH AND EQUIVALENTS $ 845,669 $ 883,580
ACCOUNTS RECEIVABLE - net 1,870,272 1,916,036
FIXED ASSETS - net 7,557,324 7,907,694
INVESTMENT IN AFFILIATE 1,107,285 1,067,285
EXCESS OF COST OVER NET ASSETS ACQUIRED 2,959,432 3,030,068
NET DEFERRED INCOME TAX ASSETS 450,000 450,000
OTHER ASSETS 2,463,931 3,336,357
----------- -----------
TOTAL $17,253,913 $18,591,020
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
LIABILITIES
Accounts payable and accrued expenses $ 4,435,117 $ 3,871,702
Note payable - bank 86,688 2,138,432
Notes payable - other 722,132 698,148
Capital lease obligations 2,715,601 2,952,177
Other liabilities 376,954 318,598
----------- -----------
Total liabilities 8,336,492 9,979,057
----------- -----------
STOCKHOLDERS' EQUITY
Common stock - $.01 par value; 30,000,000 shares authorized;
issued and outstanding - 14,897,649 shares in 1999 and
14,796,401 shares in 1998 148,977 147,964
Additional paid-in capital 16,539,634 16,199,808
Deficit (7,771,190) (7,735,809)
----------- -----------
Total stockholders' equity 8,917,421 8,611,963
----------- -----------
TOTAL $17,253,913 $18,591,020
=========== ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
----------- -----------
REVENUES $11,655,552 $11,815,660
----------- -----------
OPERATING COSTS AND EXPENSES:
Direct operating costs 7,041,603 6,506,173
Selling and administrative expenses 4,887,003 4,850,602
Gain on real property lease buy-out (300,000) -
Interest expense - net 102,326 142,752
----------- -----------
Total 11,730,932 11,499,527
----------- -----------
(LOSS) INCOME BEFORE EQUITY IN NET INCOME
OF AFFILIATE AND INCOME TAXES (75,380) 316,133
EQUITY IN NET INCOME OF AFFILIATE 40,000 56,000
----------- -----------
(LOSS) INCOME BEFORE INCOME TAXES (35,380) 372,133
INCOME TAXES - 145,291
----------- -----------
NET (LOSS) INCOME $ (35,380) $ 226,842
=========== ===========
BASIC AND DILUTED NET INCOME PER SHARE $.00 $.02
=== ====
WEIGHTED AVERAGE NUMBER OF SHARES OUTSTANDING 14,860,000 14,228,000
============ ===========
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(unaudited)
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
----------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) income $ (35,380) $ 226,842
Adjustments to reconcile net (loss) income to net cash provided
by operating activities:
Depreciation and amortization 962,649 953,987
Equity in net income of affiliate (40,000) (56,000)
Deferred income taxes - 20,000
Other (5,246) 3,827
Changes in operating assets and liabilities:
Accounts receivable 45,764 416,296
Other assets (205,021) (328,761)
Accounts payable and accrued expenses 563,415 190,483
Other liabilities 34,076 (582,725)
----------- ---------
Net cash provided by operating activities 1,320,257 843,949
----------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of fixed assets (193,304) (255,423)
Repayment of related party loans 10,107 112,857
Loans to related parties - (658)
Loans from (to) others 17,196 (25,683)
----------- ---------
Net cash used in investing activities (166,001) (168,907)
----------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Payments under capital lease obligations (468,750) (520,774)
Net payments on note payable - bank (2,051,744) (184,401)
Net borrowings (payments) on notes payable - other 13,877 (978)
Purchase of treasury stock (11,044) (270,013)
Proceeds from exercise of stock options 1,290,305 -
Net receipts on loans from employee savings program 33,720 22,639
----------- ---------
Net cash used in financing activities (1,193,636) (953,527)
----------- ---------
EFFECT OF EXCHANGE RATE DIFFERENCES ON CASH 1,469 (14,499)
----------- ---------
NET DECREASE IN CASH (37,911) (292,984)
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CASH AND EQUIVALENTS, BEGINNING OF PERIOD 883,580 579,214
----------- ---------
CASH AND EQUIVALENTS, END OF PERIOD $ 845,669 $ 286,230
=========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for:
Interest $ 91,829 $ 129,894
Income taxes 1,796 682,365
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING
AND FINANCING ACTIVITIES:
Equipment acquisitions financed by capital leases $ 232,173 $ 284,838
<FN>
See notes to condensed consolidated financial statements
</TABLE>
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(unaudited)
1. In the opinion of the Company, the accompanying unaudited condensed
consolidated financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary to present fairly the financial position as
of March 31, 1999, and the results of operations and of cash flows for the three
months ended March 31, 1999 and 1998. The results of operations for the three
months ended March 31, 1999 are not necessarily indicative of results that may
be expected for any other interim period or for the full year.
These financial statements should be read in conjunction with the financial
statements and notes thereto for the year ended December 31, 1998 included in
the Company's Annual Report on Form 10-K. The accounting policies used in
preparing these financial statements are the same as those described in the
December 31, 1998 financial statements.
2. During the three months ended March 31, 1999, the Company purchased and
retired 1,065 shares for $11,043.
3. In January 1999, the Company granted options to purchase 390,000 shares
of its common stock at $6.00 per share. Further, during the three months ended
March 31, 1999 options and underwriter warrants to purchase 102,313 shares were
exercised at prices of $2.00-$7.63, aggregating net proceeds to the Company of
$351,882.
4. In April 1999, the Company's Board of Directors proposed to increase the
authorized shares of common stock of the Company from 30,000,000 to 60,000,000.
The proposal received the vote of the Company's Chairman and principal
stockholder representing 77% of the votes. An Information Statement was mailed
to stockholders on or about May 5, 1999 and is expected to be effective by the
end of May, 1999.
5. There was no affect on earnings per share as a result of potential
dilutive shares.
6. On April 12, 1999, the Company began to offer online trading through its
myTrack service utilizing Track Securities Corporation ("TSC") as its broker
dealer. TSC is a broker-dealer owned and operated by Jack Spiegelman, a director
of the Company. The Company is licensing its myTrack trading system to a
subsidiary of TSC. The Company is receiving $2.25 per trade pursuant to the
agreement. In addition, TSC will pay to the Company a share of the marketing and
advertising costs incurred by the Company. Further, Mr. Spiegelman has a
five-year consulting agreement with the Company pursuant to which he is to be
paid an annual fee of the greater of $50,000 or 5% of the after-tax earnings, if
any, from trading activities. The Company intends to apply for a broker-dealer
license and, upon obtaining such license, will terminate the relationship with
TSC and transition the trading accounts from TSC to the Company's broker-dealer.
7. The Company charges all costs incurred to establish the technological
feasibility of a product or product enhancement to research and development
expense. Research and development expenses were $665,000 and $642,000 for the
three months ended March 31, 1999 and 1998, respectively.
8. Advertising costs, charged to operations when incurred, were
approximately $293,000 and $221,000 for the three months ended March 31, 1999
and 1998, respectively.
9. Segment Information
The Company operates in one business segment providing real-time financial
market data, fundamental research, news, charting, and analytical services to
institutional and individual investors through dedicated telecommunication lines
and the Internet.
The Company's revenues are derived from the following sources:
<TABLE>
<CAPTION>
<S> <C> <C>
1999 1998
Institutional and corporate $ 7,322,150 $ 7,436,885
Individual 4,333,402 4,378,775
----------- -----------
$11,655,552 $11,815,660
=========== ===========
</TABLE>
10. The Company owns 810,572 shares of Edgar Online, Inc., an Internet-based
supplier of business, financial and competitive intelligence derived from U.S.
Securities and Exchange Commission data. The Company carries its investment at
its cost of $10,000. On March 30, 1999, Edgar Online filed a registration
statement with the SEC for an initial public offering of its common stock. It is
anticipated that certain lockup provisions will apply to the shares in the event
the offering is consummated.
<PAGE>
TRACK DATA CORPORATION AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
GENERAL
The Company provides real-time financial market data, news, fundamental
research, charting and analytical services to institutional and individual
investors through dedicated telecommunication lines and the Internet. On April
12, 1999, the Company began to offer on-line trading through its myTrack
Internet-based personal investment service. myTrack is an Internet-based
software application that is not restricted by the limitations of an HTML
browser-based static system offered by virtually all of its well-known
competitors. myTrack delivers a continuous dynamic stream of live market data
and investors' real-time online trading activity. The system is always
connected and is an order of magnitude faster than competing browser-based
systems.
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
Revenues for the three months ended March 31, 1999 and 1998 were
$11,655,552 and $11,815,660, respectively. The revenue decline in 1999 is
principally due to a reduction in the number of customers in traditional direct
delivery services, as customers transition to the Internet with new lower priced
offerings such as myTrack.
Direct operating costs were $7,041,603 for the first three months of 1999
and $6,506,173 for the similar period in 1998. Direct operating costs as a
percentage of revenues was 60% in 1999 and 55% in 1998. The dollar and
percentage increase primarily reflects an increase in payroll, stock exchange
and database fees. Direct operating costs include direct payroll, direct
telecommunication costs, computer supplies, depreciation and equipment lease
expense and the amortization of software development costs.
Selling and administrative expenses were $4,887,003 and $4,850,602 in the
1999 and 1998 periods, respectively. Selling and administrative expenses as a
percentage of revenues was 42% in 1999 and 41% in 1998.
In 1999, the Company relocated certain of its personnel to other office
space and realized a gain on the landlord buy-out of the lease of approximately
$300,000.
Interest expense decreased to $102,326 in the 1999 period compared to
$142,752 in 1998 due to decreased borrowings.
As a result of the above mentioned factors, the Company realized a net loss
before equity in net income from an affiliate of $75,380 in the 1999 period
compared to net income of $316,133 in 1998.
The equity in net income from an affiliate was $40,000 and $56,000 in 1999
and 1998, respectively.
LIQUIDITY AND CAPITAL RESOURCES
During the three months ended March 31, 1999 and 1998, cash provided by
operating activities was $1,320,257 and $843,949, respectively. Cash flows used
in investing activities was $166,001 and $168,907 for the three months ended
March 31, 1999 and 1998, respectively. Cash used in financing activities was
$1,193,636 and $953,527 for the three months ended March 31, 1999 and 1998,
respectively. The increase in 1999 compared to 1998 is primarily due to a
repayment of bank loans in 1999, offset by receipts from the exercise of stock
options.
The Company has a line of credit with a bank. The line is collateralized by
the assets of the Company and is guaranteed by its principal stockholder.
Interest is charged at 1.75% above the bank's prime rate and is due on demand.
The Company may borrow up to 80% of eligible accounts receivable and is required
to maintain a compensating balance of 10% of the outstanding loans. The line of
credit is sufficient for the Company's cash requirements, however, the Company
plans to spend substantial amounts for advertising its myTrack Internet-based
market data system and online trading. The Company plans to seek additional
financing for such efforts. There are no major capital expenditures anticipated
beyond the normal replacement of equipment and additional equipment to meet
customer requirements.
The Company is in the process of reviewing its products, information
systems and critical suppliers to identify those that may be affected by the
year 2000 (Year 2000) issue. Most of the Company's products and networks are
substantially Year 2000 compliant already. There is presently certain data
provided to customers from mainframe hardware, which is in the process of moving
to a Year 2000 compliant server environment. This is substantially completed.
The Company has sought compliance statements from each of its significant
suppliers, most of which have provided positive assurances regarding their
compliance. The Company will continue to work with those who are not yet Year
2000 compliant. In the normal course of business, the Company is replacing
certain administrative systems and hardware. The new systems will be Year 2000
compliant and will cost approximately $500,000, most of which will be
capitalized as fixed assets. These costs are capitalized because they relate to
the implementation of new systems which include substantial new functionality
speed and scalability, in addition to being Year 2000 compliant. All historical
and future costs have been and will continue to be funded out of existing cash
and cash flows from operations.
The Company is considering certain contingency plans that are available in
the event of a Year 2000 failure. For example, if any of the direct lines that
are used by the Company's financial network were to fail, it is possible that
the Company could shift customers to its Internet-based products. In another
example, if one data provider fails, it is possible that there is another data
provider that provides substantially similar information that could be
integrated into the Company's data feed. The Company will continue to develop
potential solutions so that it is as prepared as possible in the event of a
failure.
Based upon currently available information, management has no reason to believe
that the Company will not meet its compliance goals and does not anticipate that
the cost of effecting Year 2000 compliance will have a material impact on the
Company's financial condition or results of operations. Nevertheless, achieving
Year 2000 compliance is dependent upon many factors, some of which are not
completely within the Company's control. Should either the Company's internal
systems or the internal systems of one or more of its critical vendors fail to
achieve Year 2000 compliance, the Company's business and its results of
operations could be adversely affected.
INFLATION AND SEASONALITY
To date, inflation has not had a significant impact on the Company's
operations. The Company's revenues are not affected by seasonality.
Disclosures in this Form 10-Q contain certain forward-looking statements,
including without limitation, statements concerning the Company's operations,
economic performance and financial condition, including in particular, Year 2000
information. These forward-looking statements are made pursuant to the safe
harbor provisions of the Private Securities Litigation Reform Act of 1995. The
words "believe," "expect," "anticipate" and other similar expressions generally
identify forward-looking statements. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of their
dates. These forward-looking statements are based largely on the Company's
current expectations and are subject to a number of risks and uncertainties,
including without limitation, changes in external market factors, changes in the
Company's business or growth strategy or an inability to execute its strategy
due to changes in its industry or the economy generally, the emergence of new or
growing competitors, various other competitive factors and other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission, including the Company's Forms 10-K, S-3 and
S-8. Actual results could differ materially from the results referred to in the
forward-looking statements. In light of these risks and uncertainties, there can
be no assurance that the results referred to in the forward-looking statements
contained in this Form 10-Q will in fact occur.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to interest rate change market risk with respect to its
credit facility with a financial institution which is priced based on the prime
rate of interest. Borrowings have not been material during the past year.
<PAGE>
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PART II. OTHER INFORMATION
- --------- ------------------
Item 1. Legal Proceedings. Not Applicable
------------------
Item 2. Changes in Securities. Not Applicable
-----------------------
Item 3. Defaults upon Senior Securities. Not Applicable
----------------------------------
Item 4. Submission of Matters to a Vote of Security Holders. Not Applicable
---------------------------------------------------
Item 5. Other Information. None
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Item 6. (a) Exhibits.
--------
10.11 Licensing Agreement dated April 2, 1999 between
TDC and Track Data Securities Corp.
10.12 Stock Option Agreement dated April 2, 1999 between
TDC and Track Securities Corp.
27 Financial Data Schedule
(b) There were no reports on Form 8-K filed during the first
quarter of 1999.
<PAGE>
SIGNATURES
Pursuant to the requirements 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.
TRACK DATA CORPORATION
/s/ 5/12/99
- ---------------------------- -------
Barry Hertz
Chairman of the Board
Chief Executive Officer
/s/ 5/12/99
- ---------------------------- -------
Martin Kaye
V.P. Finance
Principal Financial Officer
Exhibit 10.11
LICENSING AGREEMENT
This Licensing Agreement ("Agreement") is made and entered into as of April
2, 1999, by and between Track Data Corporation ("Data"), as licensor, and Track
Data Securities Corp. ("Securities"), as licensee.
RECITALS
A. Data, a corporation organized and existing under the laws of the State of
Delaware, owns and operates an Internet-based order entry/communication system
designed for use by broker dealers.
B. Securities, a corporation organized and existing under the laws of the
State of Delaware, is a wholly owned subsidiary of Track Securities Corp.
("TSC"), which operates as a retail broker and dealer in securities.
C. The parties are desirous of entering into an agreement whereby Data shall
license the use of the above referenced Internet-based order entry/communication
system to Securities for use by Securities and TSC.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual covenants contained in this
Agreement, and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1
GRANT OF LICENSE
----------------
1.1 SOFTWARE LICENSE. Data hereby grants Securities a non-exclusive
and non-transferable license to use the Data Internet-based order
entry/communication system ("Licensed Software"). The Licensed Software
consists of a GUI interface at the ultimate client end to input trading
information for execution of orders to purchase and/or sell securities. The
Licensed Software will also provide (incorporate) a check on the underlying
client account to determine whether specified criteria (including credit and/or
applicable regulatory approvals) are present to allow current execution of the
trade or whether further human intervention is necessary. The Licensed Software
will provide for a confirmation of receipt of each order and a confirmation of
each execution, subject to compliance (via the clearing firm provided for below)
with all securities-law-related requirements. The Licensed Software will also
incorporate an interface to a broker/dealer which clears and carries customer
accounts so as to enable said clearing firm to receive all appropriate
information for execution, clearance and settlement of all trades.
1.2 SCOPE AND TERM OF LICENSE. Securities shall have the right to
re-license the Licensed Software solely to TSC and only for so long as TSC
remains the sole owner of Securities throughout the term of the License. If,
at any time during the term of this Agreement, TSC should cease to be the sole
owner of Securities, for any reason, Securities shall not thereafter be
permitted to re-license the Licensed Software. TSC shall execute this Agreement
to acknowledge its agreement with the terms and conditions of this Agreement
including the restrictions on the use of the Licensed Software and its
obligation to pay the fees provided for herein to Data. TSC shall have no right
to re-license the Licensed Software or its use thereof.
ARTICLE 2
LICENSE FEES
------------
2.1 FEES. Securities shall make a per use payment to Data of twenty
five cents ($.25) for each inquiry made through the Licensed Software. For
each inquiry which results in a confirmed order, an additional fee of two
dollars ($2.00) shall be due and payable to Data.
2.2 PAYMENT. Securities shall report to Data the amount which will be
payable for each month within fifteen (15) days after the close of each month
within the term of this Agreement and agrees to make payment in full of such
amounts within thirty (30) days of the close of each relevant month. TSC shall
make similar and corresponding reports and payments to Data to the extent of its
re-license of the Licensed Software. In the event that TSC should fail to
report or pay to Data as required above, (i) TSC's re-license rights shall
immediately cease AND (ii) Securities guarantees payment in full of the
appropriate amounts to Data, including the costs of collection (including
attorneys fees and court costs). TSC will further pay to Data its share of
agreed upon advertising costs.
2.3 LATE CHARGES. Securities (and, as relevant, TSC) agrees to pay a
one percent (1%) per month late charge for each month or part thereof on any
undisputed invoice submitted to Securities by Data which is not paid within
thirty (30) days. No such late charge shall be assessed when Securities has, in
writing to Data, and within the thirty (30) day period, protested any invoice or
portion thereof, provided such protest is reasonably made and Securities has
paid the uncontested portion of any invoice within the thirty (30) day period.
2.4 YEAR 2000 CONVERSION.Data shall provide competent technical
personnel to assist Securities in planning the year 2000 conversion of the
Licensed Software.
2.5 BOOKS AND RECORDS. Securities (and, as relevant, TSC) shall make
its books and records available to representatives of Data during ordinary
business hours, to enable Data to determine the use of the Licensed Software and
the correct fees which are due to Data.
ARTICLE 3
TITLE AND CONFIDENTIAL OWNERSHIP RIGHTS
---------------------------------------
3.1 TITLE. Securities and TSC agree that the Licensed Software is
Data's proprietary information and trade secret, whether or not any portion
thereof is or may be copyrighted or patented. Ownership of all applicable
copyrights, trade secrets, patents and other intellectual property rights in the
Licensed Software shall remain vested in Data.
3.2 CONFIDENTIALITY. The Licensed Software is the confidential
property of Data and any unauthorized disclosure to any third parties is
prohibited. Securities and TSC agree to take all reasonable steps to protect
the Licensed Software and its documentation, and shall not market, disclose or
permit the use and/or utilization of the techniques, documentation or programs
contained within or associated with the Licensed Software, or any derivative
thereof, by any third party, except consultants hired by either Securities
and/or TSC. Securities and TSC warrant that any consultants hired by them shall
be subject to the same confidentiality obligations that Securities and TSC
assume hereunder. The obligations of this Article 3.2 shall survive beyond the
termination of this Agreement, but such obligations shall not apply to
information which: (i) was generally known to the public at the time of
receipt; (ii) becomes generally known to the public through no fault of
Securities and/or TSC; (iii) is learned by Securities and/or TSC from a third
party who is not in breach of an obligation of confidentiality to another; (iv)
was independently developed or known prior to disclosure by Securities and/or
TSC; or (v) is disclosed pursuant to court order after written notice of any
motion to compel disclosure or subpoena to Data.
3.3 DERIVATIVES AND MODIFICATIONS. Any derivative of the Licensed
Software and any other modifications thereto, are vested in Data. In the event
that Securities or TSC develop, without the assistance of Data, modifications or
derivatives that are an independent or new system, then Data will not have any
rights to those modifications, derivatives or new system.
ARTICLE 4
DOCUMENTATION
-------------
4.1 MANUALS. Documentation will be provided to Securities for the
Licensed Software.
4.2 COPYING AND MODIFICATION. TSC and Securities may copy, modify and
customize their documentation, provided that such copies retain any and all
"Confidential Materials" Notices set forth at the beginning of each piece of
Data's documentation. TSC and Securities agrees to treat any and all such
copies, whether modified or customized, as confidential materials subject to
Article 3.
ARTICLE 5
LIMITED WARRANTY
----------------
5.1 GRANT OF LICENSE. Data warrants that it has the right to grant the
software license contained in Article 2 and that it is not currently bound by
any other agreements, restrictions or obligations which do or would in any way
interfere or be inconsistent with this Agreement.
5.2 PERFORMANCE. Data warrants that, for a period of one (1) year
following the date of this Agreement that the Licensed Software will perform in
accordance with the functions, specifications and descriptions contained in the
related Data documentation. THIS WARRANTY DOES NOT EXTEND TO ANY CUSTOMIZATION,
MODIFICATION OR CONVERSION OF THE LICENSED SOFTWARE DONE BY Securities OR TSC.
ARTICLE 6
INDEMNIFICATION
---------------
6.1 INDEMNITY. Data shall indemnify, defend, and hold Securities
harmless from any claims, demands, liabilities, losses, damages, judgments,
including reasonable attorneys' fees, resulting from any claimed infringement or
violation of any copyright, patent, or other intellectual property right arising
out of the use of the Licensed Software. Data agrees, should Securities' or
TSC's use of the Licensed Software be enjoined by any court, to use its best
efforts to obtain, at no expense to Securities, the right to continue to use the
Licensed Software so enjoined.
ARTICLE 7
DISCLAIMER OF WARRANTIES
------------------------
7.1 DISCLAIMER. OTHER THAN THOSE WARRANTIES FOR THE LICENSED SOFTWARE
SET FORTH IN ARTICLE 5 OF THIS AGREEMENT, DATA SPECIFICALLY DISCLAIMS ALL
WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO, IMPLIED WARRANTIES
OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE.
ARTICLE 8
EXCLUSIVE REMEDIES
------------------
8.1 DEFECT IN MATERIALS OR WORKMANSHIP. Data will replace or repair
any item of the Licensed Software which is shown to be defective in material or
workmanship on the date of delivery, or which otherwise fails to perform in
accordance with the functions, specifications and descriptions contained in the
related Data documentation.
8.2 MANUALS. Data will replace or amend any page in any manual or
other document relating to the Licensed Software which is shown to contain any
error or inaccuracy, without additional charge.
8.3 TIME FOR CLAIMS. Securities agrees it will bring no claim against
Data under this Agreement for the Licensed Software more than one (1) year after
the date of this Agreement.
ARTICLE 9
DAMAGES
-------
"DATA" WILL NOT BE LIABLE FOR ANY LOSS OF PROFIT OR ANY OTHER COMMERCIAL
DAMAGE, INCLUDING BUT NOT LIMITED TO, SPECIAL, INCIDENTAL, CONSEQUENTIAL, OR
OTHER INDIRECT DAMAGES, UNDER ANY CAUSE OF ACTION ARISING OUT OF OR RELATING TO
THIS AGREEMENT, INCLUDING, WITHOUT LIMITATION, CLAIMS ARISING FOR MALFUNCTIONS
OR DEFECTS IN THE LICENSED SOFTWARE OR NON-DELIVERY OF THE LICENSED SOFTWARE
EVEN IF "Data" HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. IN NO EVENT
SHALL "DATA" LIABILITY FOR ANY CLAIM ARISING OUT OF THIS AGREEMENT EXCEED THE
AMOUNT PAID TO "DATA" BY "SECURITIES" UNDER THIS AGREEMENT.
ARTICLE 10
TERMINATION
-----------
10.1 WRITTEN NOTICE. Securities shall have the right upon ninety (90)
days written notice to Data to cancel this Agreement. Securities agrees that
upon written notice of cancellation to Data, all monies paid to Data are
non-refundable, and Securities further agrees to pay all outstanding invoices,
not otherwise in dispute as set forth in Article 2.2 above, within thirty (30)
days.
10.2 DEFAULT. Each party has the right to terminate this Agreement if
the other party breaches or is in default of any obligation hereunder and which
default is incapable of cure or which, capable of cure, has not been cured
within fifteen (15) days of receipt of notice of such default (or such
additional cure period as the non-defaulting party may authorize).
10.3 INSOLVENCY. Securities may terminate this Agreement by written
notice to Data and may regard Data as in default of this Agreement if Data
becomes insolvent, makes a general assignment for the benefit of creditors,
files a voluntary petition of bankruptcy, suffers or permits the appointment of
a receiver for its business or assets, or becomes subject to any proceeding
under any bankruptcy or insolvency law, whether domestic or foreign, which
proceeding is not dismissed within sixty (60) days from the initiation thereof,
or is wound up or liquidated, voluntarily or otherwise. In the event that any
of the above events occur, Data shall immediately notify Securities of its
occurrence. Data may terminate this Agreement immediately, upon written notice
to Securities, if it learns that Securities or TSC shall at any time during the
term of this Agreement should be subject to a Statutory Disqualification (as
that term is defined by the Securities Exchange Act of 1934, as amended from
time to time). Data's right to terminate because TSC should become subject to a
Statutory Disqualification will cease if Securities is no longer owned by TSC.
10.4 CESSATION OF USE UPON TERMINATION. Upon termination of this
Agreement for Securities' default as set forth in Article 10.2, Securities shall
immediately cease using the Licensed Software and shall destroy the Licensed
Software and any backup copies of the Licensed Software and all copies of the
documentation in possession of Securities. Termination of this Agreement will
not relieve Securities, TSC and their respective employees of their obligations
of confidentiality pursuant to Article 3.2 of this Agreement and payment of any
unpaid fees. Upon termination of this Agreement for Data's default as defined
in Article 10.2, Securities shall have the right to continued use and possession
of the Licensed Software and all copies of the documentation, provided
Securities fulfills the obligations of the Agreement with respect to
confidentiality.
ARTICLE 11
GOVERNING LAW
-------------
11.1 NEW YORK LAW. This Agreement shall be governed by and construed
in accordance with the laws of the State of New York without reference to the
place of execution of this Agreement or the residence of the parties.
ARTICLE 12
MISCELLANEOUS
-------------
12.1 DATA'S NAME AND/OR LOGO. Securities shall obtain the prior
written consent of Data prior to its use of Data's name and/or logo.
12.2 ENTIRE AGREEMENT. This Agreement, together with any exhibits and
attachments, contains the entire agreement between Data and Securities relating
to the rights granted and the responsibilities and duties assumed by the parties
hereunder. Any prior agreements, promises, negotiations or representations,
either oral or written, relating to the subject matter of this Agreement, not
expressly set forth herein, are of no force and effect.
12.3 AMENDMENT. This Agreement or any part or section of it may be
amended at any time by the mutual written consent of the duly authorized
representatives of Data and Securities. Any amendment shall not effect the
other terms and conditions of this Agreement, which shall remain in full force
and effect.
12.4 HEADINGS. The headings of articles and sections contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
12.5 SEVERABILITY. In the event any term or provision of this
Agreement is declared null and void by any court of competent jurisdiction, the
remainder of the provisions of this Agreement shall remain in full force and
effect.
12.6 WAIVER OF BREACH. Waiver of breach of any provision of this
Agreement shall not be deemed a waiver of any other breach of the same or
different provision. In addition, waiver of breach of any provision of this
Agreement shall not constitute a waiver of any future breach.
12.7 ASSIGNMENT. Neither Data nor Securities shall assign its rights
and duties or obligations under this Agreement without the express written
approval of the other unless such assignment is specifically provided for
herein. Any attempt at assignment in violation of this Article 12.7 shall be
void and of no force and effect.
12.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12.9 BINDING AGREEMENT. This Agreement shall be binding and inure to the
benefit of the parties hereto and their successors and permitted assigns.
12.10 NOTICES. Any notice required to be given pursuant to the terms and
provisions of this Agreement shall be in writing, postage pre-paid, and shall be
sent by certified or registered mail, return receipt requested, to the
appropriate address as set forth below or to such other addresses that the
parties may from time to time designate pursuant to this Article 12.10. Notice
shall be effective and deemed to have been given on the date indicated on the
return receipt of the delivery date.
To Data:
Track Data Corporation
95 Rockwell Place
Brooklyn, New York 11217
Attention: Marty Kaye, Vice President
with a copy to:
Robert P. Bramnik, Esquire
Wildman, Harrold, Allen & Dixon
225 West Wacker Drive; Suite 3000
Chicago, Illinois 60606
To Securities or to TSC:
Track Data Securities Corp.
[or] Track Securities Corporation
1800 Corporate Boulevard; Suite 303
Boca Raton, Florida 33431
Attention: Jack Spiegelman, President
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
TRACK DATA CORPORATION TRACK DATA SECURITIES CORP.
By: _____________________________ By: _____________________________
Its President Its President
TRACK SECURITIES CORPORATION
By: _____________________________
Its President
Exhibit 10.12
STOCK OPTION AGREEMENT
This STOCK OPTION AGREEMENT ("Agreement") is made and entered into as of
April 2, 1999 by and between Track Securities Corp. ("Securities"), as first
party and Track Data Corporation ("Data"), as second party.
RECITALS
A. Securities, a Florida corporation, engages in the business of a broker
and dealer in securities and is registered as such with the Securities and
Exchange Commission. Securities is willing to grant the option ("Option")
provided for in this Agreement, on the terms and conditions set forth herein,
for the consideration provided for below.
B. Data owns and operates an internet-based order entry/ communication
system which is currently licensed to Track Data Securities Corp. ("TDS"), a
Delaware corporation and wholly owned subsidiary of Securities. TDS has certain
limited rights to re-license said system to Securities. Data desires to acquire
the Option, on the terms and conditions provided for below.
AGREEMENTS
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. Adoption of Recitals. The parties hereto adopt the foregoing
----------------------
Recitals as an integral part of this Agreement and agree and affirm that
construction of this Agreement shall be guided thereby.
2. Grant of the Option.
----------------------
(a) Subject to the terms and conditions hereof, Securities hereby
grants to Data an option (exercisable as described below) to purchase from
Securities, one hundred percent (100%) of the shares of TDS now owned or
hereafter acquired by TDC (the "Shares"). The purchase price for the Shares to
be purchased by Data upon exercise of the Option (the "Option Price") shall be
ten thousand dollars ($10,000.00).
(b) The Option may be exercised by Data by giving written notice
thereof to Securities, stating that the Option is then being exercised; and
tendering full payment therefor in the form of a certified or bank cashier's
check payable to Securities (and/or its transferee(s), as the case may be) at
any time prior to the expiration date specified in sub-paragraph c, below.
Within three (3) business days of Securities' receipt of such notice and
payment, it shall cause delivery to Data, or its representatives, certificates
representing the Shares so purchased by Data, registered in the name of Data
or, to the extent provided below, its designee. During the Term of the Option,
all of the shares of TDS owned by Securities shall be delivered to and held by
an independent escrow agent as agreed by the parties of the shares; initially,
Oscar D. Folger, Esquire, of the Law Offices of Oscar Folger, New York, New
York, shall serve as the escrow agent.
(c) The Option shall expire, and be of no further force or effect,
if not exercised, in the manner set forth above, on or before the close of
business on August 31, 2005 ("expiration date"); unless such day is not a
business day in the State of New York, in which case the expiration date shall
be the last business day prior to August 31, 2005.
(d) Data may not transfer (i) its rights under this Agreement,
(ii) any right or interest in the Option or (iii) any right or interest in the
Shares except to an entity in which Data owns not less than a seventy five
Percent beneficial and record ownership interest.
(e) It is the intention of the parties pursuant to the foregoing
provisions of this Section 2 that, following Data's proper exercise of the
Option, Data shall own one hundred percent (100%) of all of the equity of TDS,
including all of the issued and outstanding shares of capital stock of TDS as
are then owned by Securities. Accordingly, during the term of this Agreement,
Securities hereby agrees that it shall not (i) hereafter cause or permit TDS
to issue any shares of capital stock to any person or entity (other than to
Data) without the written consent of Data or (ii) sell, assign, transfer or
otherwise dispose of any of the Shares to any person or entity, except upon
the prior written consent of Data, which consent may be given or withheld for
any reason or for no reason, in Data's sole discretion.
3. Employment Provisions Upon the direction of Data, Securities agrees to
----------------------
employ Barry Hertz, Marty Kaye and up to five additional designees of Data as
registered representatives of Securities and provide them with such support and
sponsorship as is necessary to obtain and maintain any necessary licenses and
registrations. Securities further agrees, at the direction of Data, to
maintain and support up to seven employees in its securities broker/dealer
operations.
4. Non Recourse. The parties expressly understand and agree that
-------------
nothing contained in this Agreement or in any other agreement or instrument
entered into by the parties in connection with this Agreement, shall be
construed as creating any liability with respect to Barry Hertz, Marty Kaye or
any other representative of Data to personally perform any covenant, express or
implied, herein or therein contained (except for their personal
undertakings hereunder) it being understood that all such liability (other than
any liability relating to such personal undertakings) is hereby expressly waived
by Securities, its representatives and on behalf of every other person now or
hereafter claiming any right hereunder or thereunder).
5. Payment for Option. As consideration for the Option granted hereby,
------------------
Data has paid to Securities the sum of one thousand dollars ($ 1,000.00).
By signing this Agreement, Securities acknowledges its receipt of such payment.
Representations and Warrantees.
--------------------------------
(a) Securities represents and warrants that:
(i) It is the sole record and beneficial owner and holder of any
and all equity interest(s) of TDS;
(ii) Except as provided herein, it has not assigned or transferred any
right or interest in TDS to any other person and has not granted any other
option in or to an equity interest in TDS to any other person.
(iii)Prior to the expiration of the term of this Agreement, as
provided in Section 2 (c) above, it shall cause TDS to operate in the manner in
which it has operated heretofore, conducting normal business operations; and
shall not permit or cause TDS to engage in any extraordinary transactions,
enter into any material contracts or effect any corporate reorganization,
except to the extent agreed to, in writing, by Data or, if applicable, her
designee. Notwithstanding the above, Securities' representatives may complete,
process and file any applications necessary for TDS to register and qualify
as a "broker dealer" to the extent provided under the Securities Act of 1934
and similar state law.
(iv) The current capitalization of TDS consists of 10,000 shares of
common stock, one dollar ($1.00) par value, all of which have been issued and
outstanding, and all of which are fully paid and nonassessable;
(v) Execution of this Agreement and consummation of the
transactions contemplated herein will not violate any law nor conflict with
its Articles of Incorporation, by-laws or with any contract or covenant to
which it is bound;
(vi) TDS is a domestic corporation in and is currently in good
standing in the State of Delaware.
(c) Data represents and warrants that:
(i) It is acquiring the Option and, upon exercise thereof (if
applicable), the Shares solely for its investment purposes and not for
purposes of resale or distribution;
(ii) The Shares, upon delivery, will bear a legend to the effect
that the Shares may not be sold or transferred except pursuant to effective
registration under the Securities Act of 1933 (or a valid exemption
therefrom) and compliance with any applicable state securities law;
(iii) Execution of this Agreement and consummation of the transactions
contemplated herein will not violate any law, nor conflict with any undertaking,
contract or covenant to which it is bound.
7. Miscellaneous.
-------------
(a) All notices required or permitted to be given hereunder shall be in
writing and may be delivered by hand, by facsimile, by nationally recognized
private courier, or by United States mail. Notices delivered by mail shall be
deemed given five (5) business days after being deposited in the United States
mail, postage prepaid, registered or certified mail. Notices delivered by hand
by facsimile, or by nationally recognized private carrier shall be deemed given
on the first business day following receipt; provided, however, that a notice
delivered by facsimile shall only be effective if such notice is also delivered
by hand, or deposited in the United States mail, postage prepaid, registered or
certified mail, on or before two (2) business days after its delivery by
facsimile. All notices shall be addressed as follows:
If to Securities:
Track Securities Corporation
1800 Corporate Boulevard; Suite 303
Boca Raton, Florida 33431
Attention: Jack Spiegelman, President
Fax: (561) 994-0445
If to Data:
Track Data Corporation
95 Rockwell Place
Brooklyn, New York 11217
Attention: Marty Kaye, Vice President
Fax: (718) 260-4375
with a copy to:
Wildman, Harrold, Allen & Dixon
225 South Wacker Drive; Suite 3000
Chicago, Illinois 60606
Attention: Robert P. Bramnik, Esq.
Fax: (312) 201-2555
and/or to such other respective addresses and/or addressees as may be designated
by notice given in accordance with the provisions of this Section 7(a).
(b) This Agreement constitutes the entire agreement between the
parties with respect to the subject matter hereof and shall be binding upon
and inure to the benefit of the parties and their legal representatives,
successors and assigns.
(c) This Agreement shall not be modified or amended except pursuant
to an instrument in writing executed and delivered on behalf of
each of the parties hereto.
(d) The failure in any one or more instances of a party to insist upon
performance of any of the terms, covenants or conditions of this Agreement or to
exercise any right or privilege conferred by this Agreement shall not be
construed as a waiver of any terms, covenants, conditions, rights or privileges,
and no waiver of any of the terms, covenants or conditions of this Agreement
shall be construed as a subsequent waiver of any such terms, covenants,
conditions, rights or privileges, but the same shall continue and remain in full
force and effect as if no such forbearance or waiver had occurred.
(e) This Agreement, and the rights and obligations of the parties shall
expire, and be of no further force or effect on the earlier of (i) the date on
which the Option is exercised and appropriate Shares are issued by Securities to
Data or, if appropriate, its designee or (ii) the expiration date provided for
in section 2 (c), above.
(f) The section or paragraph headings or titles herein are for convenience
only and shall not be deemed to be a part of this Agreement.
(g) This Agreement shall be governed and controlled as to validity,
enforcement, interpretation, construction, effect and in all other respects by
the internal laws of the State of New York applicable to contracts made in that
State.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first set forth above.
TRACK DATA CORPORATION TRACK SECURITIES CORP.
By: By:
------------------------ ------------------------
Its Vice President Its President
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<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
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<SECURITIES> 0
<RECEIVABLES> 1,870,272
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0
0
<COMMON> 148,977
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<TOTAL-LIABILITY-AND-EQUITY> 17,253,913
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<TOTAL-REVENUES> 11,655,552
<CGS> 7,041,603
<TOTAL-COSTS> 11,730,932
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