<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
(AMENDMENT N0. 1)
(Mark One)
X ANNUAL REPORT PURSUANT TO Section 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 (Fee Required)
For the fiscal year ended June 30, 1996
OR
TRANSITION REPORT PURSUANT TO Section 13 OR 15(d) OF THE SECURITIES
----- EXCHANGE ACT OF 1934 (No Fee Required) For the transition period from
_____ to _____
Commission file number: 0-26222
ONTRAK SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 77-0074302
(State of incorporation) (IRS employer identification number)
1010 RINCON CIRCLE, SAN JOSE, CA 95131
(Address of principal executive offices and zip code)
(408) 577-1010
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of Exchange on which registered
- ------------------- ------------------------------------
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK, NO 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. [ ]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the Common Stock on August 31,
1996, as reported on the Nasdaq National Market, was approximately $56,900,302.
Shares of Common Stock held by each officer, director and holder of 5% or more
of the outstanding Common Stock have been excluded in that such persons may be
deemed to be affiliates. This determination of affiliate status is not
necessarily a conclusive determination for other purposes.
Outstanding shares of COMMON STOCK, NO PAR VALUE, as of August 31, 1996:
7,557,964
DOCUMENTS INCORPORATED BY REFERENCE
Parts of the registrant's Proxy Statement for its Annual Meeting of
Shareholders held on November 21, 1996 are incorporated by reference into
Part III of this Form 10-K Report.
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This Amendment to Form 10-K Report is filed to provide additional disclosure
concerning the biographies of the Company's directors and executive officers
in Item 10 and to file an additional agreement as an exhibit.
1
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ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The names and certain information about the executive officers and
directors of the Company are as follows:
NAME AGE POSITION
James W. Bagley 57 Chairman of the Board of Directors
and Chief Executive Officer
Jerauld J. Cutini 37 Executive Vice President, Strategic,
Marketing, Business Management and
Customer Service, Secretary
and Director
Patrick C. O'Connor 48 Vice President, Chief Financial
Officer and Assistant Secretary
Wilbur Krusell, Ph.D. 48 Executive Vice President, Process
Technology, and Chief Technical
Officer
Michael C. Child 41 Director
Richard J. Elkus, Jr. 61 Director
Gary Hultquist 53 Director
Mr. Bagley has served as Chairman of the Board and Chief Executive
Officer of the Company since June 1996. Prior to joining OnTrak, Mr. Bagley
was employed by Applied Materials, Inc., a semiconductor equipment company,
for 15 years in various management positions, most recently as Vice Chairman
of the Board of Directors. He joined Applied Materials in 1981 as Senior
Vice President, was Chief Operating Officer from 1987 through October 1995,
served as President from December 1987 to December 1993, and was appointed
Vice Chairman of the Board of Directors in December 1993. Mr. Bagley was
employed by Texas Instruments, a semiconductor manufacturer, before he joined
Applied Materials. Mr. Bagley is also a director of Tencor Instruments, a
semiconductor equipment company, Teradyne, Inc., a semiconductor equipment
company, and Kulicke and Soffa Industries, Inc., a semiconductor equipment
company.
Mr. Cutini joined the Company in August 1990 as Vice President of Sales.
He has served as a director of the Company since November 1990. He served as
the Company's Chief Financial Officer from November 1990 until September
1992. He became Secretary in September 1992, and became Executive Vice
President, Sales and Marketing in November 1994. From February 1989 to
August 1990, Mr. Cutini was Senior Sales Engineer for Applied Materials. From
September 1988 to February 1989, Mr. Cutini was Western Regional Sales
Manager for Solitec, Inc., a semiconductor equipment company. From May 1981
to September 1988, Mr. Cutini was employed by Silicon Valley Group, a
semiconductor equipment company, in various positions in sales, marketing,
and customer service.
Mr. O'Connor joined the Company in June 1992 and has served as
Vice-President, Chief Financial Officer and Assistant Secretary since
September 1992. He served as a director of the Company from September 1992 to
November 1994. Mr. O'Connor was an independent management consultant from
May 1991 through December 1994, when he became a full-time employee of the
Company. From 1979 to May 1991, Mr. O'Connor was employed by Silicon Valley
Group, in various positions, including Senior Vice President of Corporate
Development; Vice President, Operations; and Vice President of Customer
Services. From 1973 to 1979, Mr. O'Connor was the Chief Financial Officer or
Corporate Controller for the Semiconductor Equipment Division of Eaton
Corporation and its predecessors.
Dr. Krusell joined the Company in November 1992 as Vice President,
Process Technology, and Chief Technical Officer. From February 1992 to
October 1992, Dr. Krusell was employed by Watkins-Johnson Company, a
semiconductor equipment company, first as Manager, Single Wafer Process
Research and Development, and subsequently as Manager of CVD Research and
Development. From September 1990 to January 1992, Dr. Krusell was Director of
Process Development for Advantage Production Technology, Inc., a
semiconductor equipment company. From 1976 to September 1990, Dr. Krusell was
employed by MEMC, a manufacturer of silicon wafers, in various positions,
most recently as Wafer Process Manager.
Mr. Child has served as a director of the Company since November 1994.
Mr. Child has been employed by TA Associates, Inc., a venture capital firm,
or it predecessor, since July 1982, and has been a partner of affiliated
venture funds since January 1986. Mr. Child has been a Managing Director of
TA Associates, Inc. for more than the past 5 years. Mr. Child is also a
director of Ultratech Stepper, Inc., a semiconductor equipment company, and
Sonic Solutions, a professional audio company.
Mr. Elkus has served as a director of the Company since August 1996. He
has been Vice Chairman of the Board and Executive Vice President of Tencor
Instruments since February 1994. Mr. Elkus was one of the founders of
Prometrix Corporation, a semiconductor equipment company, which was acquired
by Tencor in February 1994. Mr. Elkus was the Chairman of the Board and Chief
Executive Officer of Prometrix from 1983 until February 1994.
Mr. Hultquist has served as a director of the Company since April 1995.
Since July 1996, Mr. Hultquist has served as Chairman of the Board and Chief
Executive Officer of Titanium Memory Systems, Inc., a development stage company
that has developed and is preparing to manufacture high performance titanium
substrates for the computer disk drive industry. Since September 1995, Mr.
Hultquist has served as Managing Director of Hultquist Capital, Inc., a
financial services and consulting firm which specializes in advising
technology-based companies. From April 1988 until September 1995, he served as
President and Chief Executive Officer of Bridgemere Capital, Inc., a
financial services and consulting company which specialized in advising
technology-based companies. Mr. Hultquist served as Chief Operating Officer
of Bridgemere from November 1986 until April 1988. Prior to joining
Bridgemere, Mr. Hultquist practiced law for 18 years, including service in
the US Army.
There are no family relationships among directors or executive officers
of the Company. The executive officers serve at the discretion of the Board
of Directors, until their successors are appointed.
The information required by this Item relating to compliance with Section
16(a) of the Exchange Act is incorporated by reference from the Company's
Proxy Statement for the 1996 Annual Meeting of Shareholders on page 23 under
the caption "SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE."
2
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to Report
on Form 10-K to be signed on its behalf by the undersigned, thereunto duly
authorized.
ONTRAK SYSTEMS, INC.
Dated: December 13, 1996 By: /s/ Patrick C. O'Connor
----------------------
Patrick C. O'Connor
Vice President-Finance
and Chief Financial
Officer
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints James W. Bagley and Patrick C. O'Connor, or
either of them, his true and lawful attorneys-in-fact 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 this Report
on Form 10-K, and to file the same, with all exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents, or either of them, or their or his
substitutes or substitute, may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this Amendment to Report on Form 10-K has been signed by the
following persons on behalf of the Registrant and in the capacities and on
the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ James W. Bagley* Chairman of the Board and December 13, 1996
- --------------------------- Chief Executive Officer
James W. Bagley
/s/ Patrick C. O'Connor Vice President - Finance and December 13, 1996
- --------------------------- Chief Financial Officer
Patrick C. O'Connor (Principal Financial and
Accounting Officer)
/s/ Michael C. Child* Director December 13, 1996
- ---------------------------
Michael C. Child
/s/ Jerauld J. Cutini* Director December 13, 1996
- ---------------------------
Jerauld J. Cutini
/s/ Gary Hultquist* Director December 13, 1996
- ---------------------------
Gary Hultquist
Director December __, 1996
- ---------------------------
Richard J. Elkus, Jr.
* By: /s/ Patrick C. O'Connor
------------------------
Patrick C. O'Connor
Attorney-in-fact
3
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EXHIBIT INDEX
Exhibit
Number Exhibit Description Reference
- ------ ------------------- ---------
3.1 Amended and Restated Articles of Incorporation
of the Registrant (2)
3.2 Bylaws of the Registrant, as amended (1)
4.1 Reference is made to Exhibits 3.1 and 3.2
4.2 Form of Common Stock Certificate (1)
10.1 Series A and Series B Preferred Stock Purchase
Agreement dated November 2, 1994, by and among the
Registrant and the persons named as Purchasers therein (1)
10.2 Business Loan Agreement dated November 17, 1993 between
the Registrant and Silicon Valley Bank, as modified (1)
10.3 Financing commitment letters to Registrant dated
January 5, 1995 and July 25, 1994 from Belvedere
Equipment Financing Corporation, and financing
commitment letter to Registrant dated September 1,
1993 from Oak Capital (1)
10.4 Equipment Financing Agreement (No. 93121003) dated
January 19, 1994 between the Registrant and University
National Bank & Trust Company (1)
10.5 Equipment Financing Agreement (No. 94071102) dated
October 25, 1994 between the Registrant and Orix
USA Corporation (1)
10.6 Equipment Financing Agreement (No. 94071104) dated
November 18, 1994 between the Registrant and
Bank of the West (1)
10.7 Equipment Financing Agreement (No. 94121402) dated
February 28, 1995 between the Registrant and Bay
Area Bank (1)
* 10.8 Purchase Agreement dated May 17, 1993, between the
Registrant and Intel Corporation (1)
4
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* 10.9 Equipment Purchase Agreement dated April 15, 1994,
between the Registrant and Motorola, Inc. (1)
*10.10 Contract between the Registrant and Transpacific
Technology GmbH for Siemens Microelectronics Center (1)
10.11 Form of International Representation Agreement
of the Registrant (1)
10.12 Form of Domestic Representation Agreement of
the Registrant (1)
10.13 Standard Lease Agreement dated January 28, 1994
between the Registrant and South Bay Tech Center (1)
10.14 Standard Industrial Sublease dated March 14, 1994
between the Registrant and Peripheral Computer Support,
Inc.; and Standard Lease Agreement dated October 7,
1994 between the Registrant and South Bay Tech Center (1)
10.15 Standard Lease Agreement dated April 20, 1992,
as amended on October 10, 1994, between the
Registrant and South Bay Tech Center (1)
10.16 Agreement for Financial Advisory Services dated
March 3, 1995 between the Registrant and Bridgemere
Capital, Inc. (1)
10.17 Form of Stock Purchase Warrant dated November 2,
1994 issued to certain affiliates of Bridgemere
Capital, Inc. (1)
10.18 Shareholders' Agreement dated November 2, 1994
by and among the Registrant and the undersigned
holders of capital stock of the Registrant (1)
10.19 Employment Agreement dated January 1, 1995
between the Registrant and Homayoun Talieh (1)
10.20 Form of Indemnification Agreement between the
Registrant and its directors and certain of its
officers and significant shareholders (1)
10.21 Amended and Restated 1992 Stock Option Plan and
forms of agreement thereunder (incorporated by
reference to Exhibits 4.3, 4.4 and 4.5 of Registrant's
Form S-8 Registration Statement (No. 33-95560)
filed with the Commission on August 9, 1995)
5
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10.22 1995 Employee Stock Purchase Plan and form of
subscription agreement thereunder (incorporated by
reference to Exhibit 4.6 of Registrant's Form S-8
Registration Statement (No. 33-95560) filed with
the Commission on August 9, 1995)
10.23 1995 Director Stock Option Plan and forms of
agreements thereunder (incorporated by reference
to Exhibit 4.7 of Registrant's Form S-8 Registration
Statement (No. 33-95560) filed with the
Commission on August 9, 1995)
10.24 401(k) Plan of the Registrant (1)
10.25 Cafeteria Plan of the Registrant (1)
10.26 Employee Profit Sharing Plan of the Registrant (1)
10.27 Common Stock Purchase Agreement dated April 30,
1992 between the Registrant and Patrick C. O'Connor (1)
10.28 Common Stock Purchase Agreement dated June 30, 1993
between the Registrant and Patrick C. O'Connor (1)
10.29 General Settlement Agreement, License and Mutual
General Release dated June 6, 1995 (1)
10.30 Employment Agreement dated June 9, 1995 between the
Registrant and Robert L. Piccioni (2)
10.31 Lease Agreement dated July 18, 1995 between the
Registrant and Orchard Investment Company Number 751 (2)
10.32 Loan Modification Agreement dated August 18, 1995 to the
Business Loan Agreement dated November 17, 1993 between
the Registrant and Silicon Valley Bank (2)
10.33 First Amendment to Lease dated November 30, 1995 to the
Lease Agreement dated July 18, 1995 between the
Registrant and Orchard Investment Company Number 751 (3)
10.34 Loan Modification Agreement dated November 15, 1995 to the
Business Loan Agreement dated November 17, 1993 between
the Registrant and Silicon Valley Bank (3)
10.35 Loan Modification Agreement dated January 19, 1996 to the
Business Loan Agreement dated November 17, 1993 between
the Registrant and Silicon Valley Bank, and related
Promissory Note and Collateral Assignment, Patent Mortgage
and Security Agreement (3)
6
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10.36 First Amendment to Lease dated March 29, 1996 to the
Lease Agreement dated October 7, 1994 between the
Registrant and South Bay Tech Center Associates (4)
10.37 Sublease Agreement and Consent of Master Lessor dated
March 31, 1996, relating to the Lease Agreement dated
April 20, 1992 between the Registrant and South Bay Tech
Center Associates (4)
10.38 International Distribution Agreement dated October 27,
1995 between the Registrant and Metron Technology BV (4)
10.39 Employment Agreement between the Company and
James W. Bagley (incorporated by reference to
Exhibit 10.39 to the Registrant's Form 8-K Report
dated May 20, 1996)
**10.40 Agreement for Financial Advisory Services dated
October 1, 1995 between the Registrant and
Hultquist Capital, LLC.
13.1 Annual Report to Shareholders (in lieu of an Annual Report
to Shareholders, the Registrant will provide a copy of its
Report on Form 10-K to each of its shareholders)
21.1 Subsidiaries of the Registrant (1)
23.1 Consent of Price Waterhouse LLP
24.1 Power of Attorney. Reference is made to page 41
of this Report
27 Financial Data Schedule
- --------------------------------------------------------------------------------
(1) Incorporated by reference to the Exhibits of corresponding number to
Registrant's Form SB-2 Registration Statement (No. 33-93260-LA) filed with
the Commission on June 7, 1995, as amended.
(2) Incorporated by reference to the Exhibits of corresponding number to
Registrant's Annual Report on Form 10-K for the fiscal year ended June 30,
1995.
(3) Incorporated by reference to the Exhibits of corresponding number to
Registrant's Quarterly Report on Form 10-Q for the quarter ended December
31, 1995.
(4) Incorporated by reference to the Exhibits of corresponding number to
Registrant's Quarterly Report on Form 10-Q for the quarter ended March 31,
1996.
* Confidential treatment has been requested for portions of each of these
agreements.
** Filed as an exhibit to the Amendment to Form 10-K Report dated
December 13, 1996.
7
<PAGE>
AGREEMENT FOR FINANCIAL ADVISORY SERVICES
Hultquist Capital, LLC, a California Limited Liability Company ("Hultquist
Capital"), and OnTrak Systems, Inc., a California corporation (the "Company"),
make the following agreement:
1. SERVICES. Hultquist Capital will perform (i) the Consulting and Financial
Advisory Services listed in Exhibit A hereto, and, (ii) solely in the discretion
of the Company, if and when requested by the Company, the Acquisition
Transaction Services listed in Exhibit A. The Company will cooperate with
Hultquist Capital in connection with this engagement and agrees to make
available to Hultquist Capital such documents and other information reasonably
required, which information shall be held in confidence by Hultquist Capital,
except as disclosure may be authorized in writing by the Company or as may be
required pursuant to legal process.
Hultquist Capital agrees that the personal services and attention of
Gary Hultquist are expected and required by the Company during this
engagement and any failure to provide such services and attention would
constitute a material breach of the Agreement and grounds for termination of
the Agreement for cause.
2. COMPENSATION. In consideration for the performance by Hultquist Capital of
the services described in paragraph 1 and Exhibit A, the Company hereby agrees
to pay Hultquist Capital fees as set forth in Exhibit B.
3. EXPENSES. Upon receipt of an invoice therefor, the Company will promptly
reimburse Hultquist Capital for its actual travel outside the Bay Area,
telephone, facsimile, printing and other reasonable out-of-pocket expenses
incurred during, and directly attributable to this engagement; however, any
expense item over $100 must be approved in advance by the Company and any
expenses remaining unpaid at the termination of this engagement shall be paid at
that time. Hultquist Capital will not accumulate over $500 in unapproved
expenses (items under $100) without the Company's prior approval.
<PAGE>
HULTQUIST CAPITAL/ONTRAK
AGREEMENT FOR FINANCIAL ADVISORY SERVICES
PAGE 2
4. TERM/TERMINATION. The term of this engagement shall be one year from the
date hereof; provided however, this engagement may be terminated by the Company
or Hultquist Capital at any time with or without cause, upon written advice to
that effect to the other party. If the Company terminates this engagement
without cause during the performance of Acquisition Transaction Services, the
Company shall pay Hultquist Capital a pro rata allocation of the scheduled
Success Fee upon any Closing of the Transaction which was the subject of such
services.
5. MISCELLANEOUS. This agreement contains the entire agreement between
Hultquist Capital and the Company concerning the subject matter hereof and
supersedes all prior understandings and agreements, if any. This Agreement will
be governed by, and construed in accordance with, the laws of the State of
California. Any waiver of any right or obligation hereunder must be in writing
and signed by the party to be charged therewith. Any and all disputes arising
out of this agreement shall be resolved by arbitration under the rules of the
American Arbitration Association, with the prevailing party entitled to
reimbursement of reasonable attorneys' fees.
Date: October 1, 1995 Date: October 1, 1995
HULTQUIST CAPITAL, LLC ONTRAK SYSTEMS, INC.
By________________________ By___________________________
Gary Hultquist Ken Smith
President Chief Executive Officer
<PAGE>
HULTQUIST CAPITAL/ONTRAK
ENGAGEMENT AGREEMENT
EXHIBIT A
Hultquist Capital will perform the following Services for the Company in
connection with this engagement:
A. CONSULTING AND FINANCIAL ADVISORY SERVICES (ONGOING/MONTHLY)
1. As requested, provide advice to Management concerning financial,
investor/shareholder and administrative matters.
2. Assist the Chief Financial Officer in preparing financial forecasts and on
other financial matters as requested.
3. Assist Management in corporate development activities, including the
identification and preliminary discussion and analysis of prospective
acquisitions of businesses, product lines and acquisitions or licenses of
technology.
B. ACQUISITION TRANSACTION SERVICES (IF AND WHEN REQUESTED BY THE COMPANY)
1. Familiarize itself with the management, business, operations, products,
intellectual property, marketing rights, prospects and financial condition of
acquisition prospects (hereafter "Prospects").
2. Advise and assist the Company in determining a valuation range for each
Prospect or proposed transaction, including licensing activities.
3. Advise and assist the Company in devising a procedure and approach to
solicitation of Prospects, handling of interested Prospects and preparing and
making presentations to Prospects as necessary.
4. Lead the Company's contacts and negotiations with Prospects and elicit
offers or acceptances to any offers made by the Company.
5. Assist the Company and its Board of Directors in analyzing and handling any
offers, and in devising a strategy and tactics in negotiating with Prospects.
6. Assist the Company and its attorney in negotiations with interested parties
to obtain a firm offer/agreement acceptable to the Company.
7. Assist in achieving a binding agreement and closing the transaction.
8. Conduct primary and secondary research related to the above.
<PAGE>
HULTQUIST CAPITAL/ONTRAK
ENGAGEMENT AGREEMENT
EXHIBIT B
In consideration of the services specified in paragraph 1 and Exhibit A of
this Agreement, the Company agrees to compensate Hultquist Capital as follows:
CONSULTING AND FINANCIAL ADVISORY SERVICES
Ten thousand dollars ($10,000) per month during the term hereof, which sum
shall not be credited to any Acquisition Transaction Closing Fees earned.
ACQUISITION TRANSACTION SERVICES
Upon the Closing of any Acquisition or License Transaction for which the Company
utilizes the services of Hultquist Capital, a Success Fee in the following
amounts, unless otherwise agreed:
Transaction Type Transaction Size Success Fee
- ---------------- ---------------- -----------
License or Purchase of
Technology, in the form
of Intellectual Property All $25,000
Acquisition of a business or
technology, via a purchase
of assets or stock, and any
associated intellectual
property All The greater of (i)
one-half of one per
cent (.005%) of the
consideration paid by
Company, or
(ii) $50,000.
